Statement at the launch of the World Intellectual Property Report 2013
Speech by Ms Arancha González, Executive Director, International Trade Centre
Delivered on 14 November 2013 at the launch of the World Intellectual Property Report 2013: Brands – Reputation and Image in the Global Marketplace, Geneva, Switzerland
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Ladies and Gentlemen
Let me start by thanking Francis Gurry for having invited the International Trade Centre to participate in the launch of the World Intellectual Property Report 2013. And let me also congratulate WIPO for having chosen the topic of branding as the focus of the Report.
Why invite the ITC to WIPO to talk about branding? The ITC provides business solutions to SMEs to allow them to bring their products to export markets. To brand a product or a service is to provide an important quality assurance stamp. It is a means to capture greater market value. It is a means to increase exports and through that draw greater benefits from international trade. And this is why this is an area where the ITC has been increasingly involved.
This report presents a compelling case for why policymakers should pay increased attention to branding, and I look forward to the debate that it will stimulate on how economic and development goals can be supported through applying the instruments and techniques of branding.
Much has been written about branding within business publications. There is not an airport or train station in the world you can pass through without seeing the latest book of tips and tricks on branding. However, analysing the linkage between branding and intellectual property has not been sufficiently addressed. This report brings an important contribution to bridging the legal and commercial agendas.
As the report indicates, to date, there has been limited research on the policy implications and the economy wide impacts of branding. The evidence presented suggests that this important form of intellectual property is central to stimulating investment in innovation and in supporting the growth of higher value-added goods and services. At the ITC, we believe that branding is a powerful tool that developing countries can use to increase value capture. And here I will focus on the link between branding and development.
I would like to address some of the findings in the report from the perspective of ITC’s mandate: helping small and medium sized enterprises from developing and least developed nations benefit from international trade. ITC has been working for 50 years with SMEs from developing countries to help them access the opportunities of international trade, and in so doing create jobs and alleviate poverty. ITC helps these countries to capture a higher share of the value they create in international trade through marketing of branded goods and services and moving up the value chain.Does branding matter?
An important question to ask is: are brands merely a store of wealth or do they contribute to the creation of wealth? Does it make sense to focus effort on branding as a tool for development? The Report we have before us today provides evidence that branding is key to generating higher economic returns.
Firstly we see that low income countries are fast playing catch up in their investments in branding: taking advertising expenditure as one measure, the report points out “Branding investments are growing as a percentage of GDP in middle- and low-income economies”. Those economies that we label today as ‘emerging’ realised early on in their development trajectory that building recognisable brands would be key to building and sustaining a position in international markets. A typical example is the case of China, which is outlined in the report as “By 2001, China’s trademark office had become the top recipient of trademark filings, a position China was not to gain in patent filings until 2011.”
The implication would appear to be that trademark registrations are a good indicator of economic and trade development, eventually resulting in the emergence of powerful new brands. I only have to say “Samsung”, “Embraer” and “Lenovo” to make the point. The Report indicates that 17 of the world’s top 100 most valuable brands in 2013 were from emerging market countries – mostly China. It notes that the average brand value of companies based in middle-income economies has grown faster than brand value of companies in high-income economies. In fact, the average value of the top 500 brands in companies based in middle-income economies grew by more than 98 percent between 2009 and 2013, while the brand value of companies in high-income economies has grown by 61 percent.
The report also explains how economists evaluate the benefits of branding. Brands reduce search costs. The trust generated by a brand means that consumers need to spend less time and resources in the search for alternatives. In fact brands play an important role in bridging asymmetries of information between producers and consumers. By lowering search costs, trademarks create incentives for companies to invest in higher quality goods and services. Producers will be confident that consumers are able to identify higher quality offerings in the marketplace and not confuse them with lower quality ones.
These “information asymmetries” have their parallel in the trade between nations, and are a potentially significant barrier to the international promotion of goods and services, particularly those from poor countries. Many of the least developed countries are also the most remote or isolated – single island states or land locked countries that have historically found themselves far from economic trade lanes. Geographical distance or other trading barriers result in a lack of familiarity with the country, its culture, standards and its goods and services.
The rise of the Internet and the use of virtual markets create a unique opportunity to redress the isolation of producers in the world’s poorest countries. “Search” on the Internet is one of the first and most ubiquitous applications: it is easy and typically costs nothing. However, the Internet does not immediately provide a “level playing field”. The asymmetries still apply: brands from developed countries generate a following on the Internet which reinforces their dominance in international markets. Addressing this imbalance will require producers from the developing world to develop and support their own brands, and build presence in digital channels.
As countries develop they also need to shift production toward higher value product and service segments. In order to do so, they must also innovate. Branding has a role in facilitating innovation: the report tells us that branding complements innovation and that there evidence that branding is one of the most important mechanisms for firms to secure returns on investments in R&D. Accordingly, firms that invest more in innovation also invest more in branding.
The data presented shows that trademark protection is even more common than patenting among innovative firms, and that middle income countries are catching up with wealthier countries in their propensity to register trademarks.
As the balance of many economies shift toward services, branding becomes an even greater priority. Services, by their intangible nature, require an even greater effort to win the confidence of a potential buyer. When the service provider is in another country the issue of confidence is even more acute. Building a service brand implies careful long term management of reputation: a significant challenge for remote service providers working in a different cultural context.
The ITC recently worked with the Information Technology sector of Bangladesh: helping local suppliers overcome negative perceptions toward the country among potential international buyers. United under a brand of “Bangladesh Next!” a group of Bangladeshi SME IT services providers were successfully guided in their promotional activities toward professional purchasers of IT services. Branding created trust and trust translated into new business relations.
For branding to be sustainable in the long term, the issue of ownership is key. As the Bangladeshi case shows, the groups of producers need to have a common interest and share in the value created. And here I would like to mention the IP instrument of Geographical Indications (GI), which is receiving increasing attention from development actors. By favouring collective ownership of reputation based assets related to a defined origin, producers are united in the mission to improve long term adherence to quality standards.
The number of GI initiatives around the development world is multiplying. And this probably points to the greater value that these producers can capture through this form of collective branding. Now, for Geographical Indications to have value, there must be customers willing to pay for them. For that to be the case, brands need to be developed in which the international consumer expresses confidence.
ITC has built a set of tools and techniques to support branding initiatives, namely:
- How to align the various interest groups from the public and private sector toward a shared objective for the brand
- The evaluation of opportunities for branded goods and services and developing a related marketing strategy
- The design and implementation of branding programs for groups of producers, or branding at a national or sector level
WIPO is a very important partner for ITC in this mission, through complementing our trade development capabilities with those of intellectual property.
ITC has had a long standing collaboration with WIPO. In the last decade we began to work together on protecting and promoting the arts and crafts sectors of developing countries in Africa, the Caribbean, Latin America and Asia.
We are also working to connect the IP and branding agendas. In a current project we are working together to brand the spices of Zanzibar: creating a trade mark and designs for exotic spices under an origin branded label. Our objective is to help Zanzibar producers shift to higher value production, increasing the profitability of spices and eventually other sectors, and ultimately the island itself as an attractive tourism and investment destination. We estimate that the value addition through branding of spices can be up to 30 times the current commodity traded value.
We welcome this report and congratulate the authors on having raised key questions about policy. We support the recognition that more needs to be done: not only in the domain of research, analysis and policy formulation but also in practical aspects of building supporting structures and techniques that can contribute to higher value capture through branding by least developed countries. ITC is committed to continue to work with WIPO and with our clients to be an enabler in realising the positive economic externalities of building branding into production and supply chains.
I thank you for your attention.