A Modest Proposal for Freer Trade

A Modest Proposal for Freer Trade

Benjamin Ross: A Modest Proposal for Freer Trade

Last week the government cracked down loudly on the sale of so-called “counterfeit” apparel. But why is “counterfeiting” apparel against the law at all?

No one would question the need for legal protection of trademarks that identify products; someone who picks up a bottle marked Guinness has a legitimate expectation that Coors Light will not be inside. But the function of logos on the outside of clothing is different. The information they convey is the brand name itself, largely independent of the item they adorn, and that information is transmitted from, not to the buyer.

This suggests a small thought experiment. Why not protect trademarks only on the inside of apparel and let the market work its magic on the outside? Buyers would gain economically by exercise of an option they do not now (legally, at least) have–to buy the prestige associated with the display of a brand name without paying ransom to some large corporation. Those who want a handbag made by Louis Vuitton, rather than one with his name on it, suffer only the very minor inconvenience of opening the clasp and looking inside before making the purchase.

No injury would be done to the legitimate interests of trademark owners. While the rationale for protection of trademarks is disputed among legal scholars, all agree that the value of a trademark lies entirely in its attachment to traded goods and services, and not in the mark itself. This differs from books, music and paintings, which have value in themselves and are protected to encourage their production. Helly Hansen’s initials are not art; Mr. Hansen’s heirs, in the eyes of the law if not always of their customers, are in the clothing business and not the trademark business.

If the purpose of international trade agreements was truly free trade, this modest proposal to remove a barrier to commerce would surely be on the agenda. Not only would wealth be transferred from trademark owners to consumers, but overall economic efficiency would rise as consumers buy the prestige associated with a brand name without being forced to pay for unwanted quality.

Few readers of this blog will be surprised to learn that the “intellectual property” provisions of trade agreements work in precisely the opposite direction. Free trade, our thought-experiment shows, may be the slogan, but corporate profits are the goal.