For several years, activist groups have been campaigning against the Agreement on Trade Related Aspects of Intellectual Property (Trips), claiming that patents undermine "public health objectives". The presumption is that by strengthening patent protection on pharmaceuticals, Trips raises prices and undermines public health.

Their objective is either to destroy Trips altogether or to encourage countries to use the compulsory licensing provisions in Trips to reduce the price of certain drugs. But their arguments are naïve, based on a static conception of economic activity and a misconceived view of the problems of poverty.

Opponents of patents typically argue that they create monopolies and thereby harm consumers. However, the legal recognition of intellectual property does not create a monopoly. A monopoly is created the moment there is an invention. That invention can be commercially exploited, without necessarily divulging the details to the public.

In many countries, including India, there has been a tradition of handing down professional knowledge through families. That knowledge was never in the public domain. Emperor Shah Jahan, who built the Taj Mahal, had the architect's arm chopped off, so that he could not build another Taj Mahal.

That was also an attempt to protect intellectual property intellectual property that was not in the public domain. Today, such forms of intellectual property are called trade secrets or undisclosed information, often protected through common law, which beats amputation.

The fact that an invention can be cheaply copied is no argument against intellectual property. In many cases, huge fixed costs will have gone into the invention. Without the incentive of IP protection the invention would not have been produced, so it hardly seems just that the rules should be changed after the investment has been made.

The monopoly argument is also a red herring. In the real world (outside that of economics textbooks), there are almost no instances either of monopolies or of perfect competition. Take the pharmaceutical industry. For practically every new drug that is on patent, there are substitute drugs that are off patent and cheaper, with minor differences in therapeutic and side effects.

There are numerous antibiotics that are effective against anthrax, but a spat emerged over Cipro because it was the only drug licensed by the US government specifically for use against anthrax. In the slightly longer run, supply-side adjustments and additional investments ensure that price increases remain in check.

Trips does not preclude the use of sensible competition policy but neither does it prevent the use of discriminatory and essentially counterproductive competition policy. Sensible competition policy measures should focus on conduct (for example, collusive behaviour), not on market structure or performance. In a dynamic market, market shares will break down unless there are barriers to entry, so the focus should be on firms attempting to create artificial barriers to entry. Performance (measured by prices, or profitability) will be commensurate with the efficiency of market participants.

Unfortunately, Trips does not adequately discipline the use of structure or performance-based policies. For example, price controls are allowed. In many developing countries, the most important barrier to entry is government-administered licensing, which prevents markets from functioning effectively. The mindset is something like the following: begin by licensing pharmaceuticals. This leads to shortages and would lead to price increases. To prevent price increases, introduce price controls. This constrains future investments. So the vicious cycle goes on.

By permitting such measures against supposed "monopolies", Trips fails to recognise the dynamism of the market. It says almost nothing about parallel imports. And it has very loose provisions on compulsory licensing, leaving a lot of discretion to governments. This needs disciplining.

From an Indian perspective, the moral is simple: if you have the intellect, you will want to protect it. Trips is part of the global tapestry of intellectual property protection that India and Indians now embrace. Although it is far from perfect (it is a relatively new agreement), Trips has the very significant merit of enabling all members of the WTO to benefit from fair, non-discriminatory, reciprocal protection of intellectual property. On this issue, WTO ambassadors should listen to the inventors, not the activists.

Debroy is Director of Research at the Rajiv Ghandi Institute for Contemporary Studies in Delhi.