Copyright Term Extension Economic Effect on the New Zealand Economy

Abstract

This paper reviews an estimate of the economic effect on the New Zealand economy of copyright term extension which was recently released by the New Zealand Government but which was tabled as part of the Trans Pacific Partnership (TPP) negotiations on the IP Chapter. The estimate is that the average cost to New Zealand from the obligation under TPP to extend New Zealand’s copyright period from 50 to 70 years would average around $55 million per year. Our review of this estimate suggests it is clearly incorrect, and indeed seriously over-estimates costs. As we demonstrate, the expert report by Henry Ergas on which it was based made major errors. First it focused only on the well-known social costs of copyright while completely excluding the equally well-known social benefits from copyright, thus ensuring, given that New Zealand is a net importer of copyrighted goods, that term extension would be found to have a negative impact. Second it made serious errors in its calculations of the costs of copyright, leading to an enormous overestimation of the costs of term extension, as much as 77 times higher than a correctly performed analysis that follows Ergas' general procedure generates. Finally the New Zealand Government exacerbated these misleadingly high costs by assuming, completely out of thin air, a cost of term extension for film and television that was not estimated by Ergas, and then compounded this unfounded claim by including in its cost estimate “range” a high value from the Ergas report that was contingent on a particular legal result that was known to have not occurred by the time the government came up with its range. Finally, when converting Ergas’ present value results into a yearly value, the government inappropriately used a discount rate inconsistent with that used by Ergas, a decision that increased the estimated costs from what they would have been had a consistent discount rate been used, as was appropriate.