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USJI Voice Vol.16

TPP and Domestic Regulation in Japan: The Example of Copyright Extension

2016.05.30
Dr. Stephen J. Turnbull
University of Tsukuba

Introduction to the TPP

What is “TPP”? The acronym stands for the Trans-Pacific Partnership, which is a next-generation regional free trade agreement (FTA) among 12 nations on the Pacific Ocean, including the United States and Japan, but significantly, not China ― yet.
Readers of USJI Voice will be already familiar with the idea of a regional free-trade agreement, and I will assume that the arguments for free trade are well-known, and for the purpose of this essay, accepted.

Next Generation Free Trade Agreements

But what does “next-generation” mean? Here is one aspect of “next generation” FTA: this agreement doesn’t merely state a new set of rules, it also provides a framework to “ESTABLISH an Agreement to address future trade and investment opportunities” and “EXPAND their partnership by encouraging the accession of other States” (quoted from the Preamble of the TPP document). Thus, the TPP members can negotiate with China as a group to encourage trade, and to bring China into the FTA itself. Of course, China will have to bring something to the table! So it is in the national interest of Japan (one of Japan’s many interests) to reduce trade barriers all around within TPP, in order to improve its own and the TPP’s negotiating position with respect to China.

Another important “next-generation” characteristic of TPP is that it intrudes into what had been considered domestic matters. In Japan, one important group that opposed TPP for this reason is the Japan Medical Association. TPP proposes to unify regulations on health and safety standards and require recognition of qualifications acquired in other members. Of course Japanese physicians have had the most say in health policy, and admission of foreign professionals strikes at the heart of professional self-government. Surely these
should be the province of each country? Yet they do inhibit trade. Striking a balance is very difficult.

Cultural attitudes toward “risk” and “quality of life” are difficult to evaluate, and the debates are often phrased in “scientific” terms on one side vs. claims of “national sovereignty” and “different cultural values” on the other, a very difficult conflict to disentangle. To simplify the analysis, in this article I look at intellectual property (IP), where the issue of “differential burden” has long since been addressed by treaties (starting with the Berne Convention of 1886) requiring equal treatment of IP rights established in foreign countries with those established domestically, and “cultural issues” are much less important.

TPP, Copyright, and Japan

Among the TPP’s effects on IP, its provisions on copyright are especially intrusive, because they require that members extend copyright terms to the American standard (including existing works), which is life of the author plus 70 years. Further, members must criminalize circumvention of access controls which prevent copying and replay on unauthorized devices ― despite the fact that America itself provides for ” fair use” (including backup copies) of copyrighted works. This means that, if a work is distributed with copy protection enabled, exercising your right (in many countries) to make a backup copy is a crime punishable by imprisonment if you don’t get explicit permission from the copyright holder!

How does this affect Japan? As a technological and cultural leader, Japan may benefit from strengthening intellectual property protection. However, at present, the economic effects of copyright are controversial among economists. Most believe that they do encourage creation of new works, but some argue that copyright (and patents) simply create monopolies for innovations that would occur anyway, and furthermore actually inhibit future innovations. The one thing both free-market and socialist economists both agree on is that extending the copyright of an existing work is purely restraint of trade, enriching the copyright holder at the expense of the rest of the world.

Also, in the area of creative works, Japan values individual originality, but social creation is embedded in popular culture. Consider: comedians and singers welcome imitation, and even parody, by “mono-mane” artists. Japan is the country that invented “kara-oke,” allowing anyone to perform with the same orchestra as the original artist. Many manga include substantial sections of fan artwork imitating the characters, and sometimes story lines. Fans sometimes combine characters from different series, and even different authors (though competing authors are rarely featured in commercially published manga). While it’s difficult to put a commercial value on such cultural attributes, even copyright law recognizes the value they produce, in the form of joint works and edited collections.

While as yet the creative possibilities of imitation are generally unrealized (with the possible exception of mono-mane), as digital technology for editing various media becomes widely disseminated, there is enormous potential in combining existing works in a “mashup” or collage. It’s not clear how much economic value from mashups is lost due to copyright, but one thing is clear: the cost of negotiating for permission to use each small piece of a work in a mashup of dozens or hundreds of small excerpts is prohibitive.

To give an idea of the potential value, so-called open source software, such as the Linux operating system which powers companies like Google, Yahoo!, and Amazon, and the Apache webserver used by many universities and companies, is precisely such a “mashup” of small programs from many sources.  Almost all open source software was created by volunteers or academic researchers. But “open source” is not defined by price or by the content or function of the program: it is determined by the terms of distribution, which say that any user may copy and redistribute the software without restriction or royalty payment.

Of course it makes it very difficult to charge much in the market for such products. So without revenue, how is it possible for this software to hold its own against products from Microsoft, IBM, and Apple? Part of it is that programming is fun: people do it for a hobby, not for money. But far more important is that once a good program is released, it becomes a building block for more complex systems. It is because the collection of open source software is a mashup, which anyone can copy, whole or just parts, and improve, that costs of building systems from open source are surprisingly low and surprisingly high quality.

Note that in the last paragraph of the three famous software-producing companies none is Japanese. This is not the place to explain that (and it holds more generally; except for the computer game industry, Japan has only a mediocre global reputation in software). But it’s a strong contrast with other fields, where frequently in recent years Japan has developed breakthrough innovations (and the closely related scientific breakthroughs that lead to Nobel Prizes). Of course, Japan leads the world in “kaizen,” the practice of accumulating small improvements and innovations until the product displays a qualitative difference with rivals. Add to those factors Japan’s cultural inclination to social creation, and the low costs of high-quality open-source software. The surprising conclusion is that deliberately avoiding intellectual property protection and basing its software industry on open source principles may be one path to leadership in this industry for Japan.

It’s a blue-sky idea, but in the artistic arena it is not out of the question that Japan could lead in the creation of a “mashup industry,” which could produce as much value as manga, anime, and Mickey Mouse!

Considering both Japan’s historical benefits from trade, and its continuing strength in its export industries, it seems that participation in TPP was the right decision. Nevertheless, in the case of strengthening intellectual property protection, a strong case can be made that Japan should oppose the trend. Of course, TPP is a “done deal,” the treaty has been signed and awaits approval, but not modification, by national legislatures. Yet, as mentioned above, TPP is not just a set of rules, but a constitution with provision for amending them. In the future Japan’s policymakers should consider taking the lead in rolling back the extreme provisions in copyright, and a reconsideration of other intellectual property provisions of TPP.

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