Do the Intellectual Property Rights of Importers Matter for Promoting Australian Exports? Ruhul Salim, Nasser Al Mawali and Amirul Islam* Abstract This article provides the first empirical evi- dence on the effects of intellectual property rights (IPRs) and threat of imitation on Australia’s export flows. Using data from all of Australia’s trading partners over the period 1995–2010, an augmented gravity model is estimated in the context of an unbalanced panel. The empirical findings show that level of IPRs of importing countries and threat of imitation posed by the importing countries is both sensitive to Australian bilateral trade flows. These results therefore support the widely accepted positive nexus between the importance of IPRs and bilateral trade flows. 1. Introduction The issue of intellectual property right (IPR) protection is gaining worldwide importance as economies move increasingly towards knowledge-based activities (Fink and Braga 1999). Furthermore, the attention paid by trade economists to IPR issues has recently increased, especially after the inclusion of the ‘Agreement on Trade-Related Aspects of Intellectual Property Rights’ in the system of the World Trade Organization (Qui and Yu 2010). Indeed, for the last two decades, the nature of linkages between IPRs and international trade flows has been a source of much debate and controversy (Lerner 2009; Awokuse and Yin 2010). The debate is stimulated by the mixed empirical results of the effects of level of IPRs on trade flows (Ivus 2010). The tension over strengthening IPRs stems from the fact that knowledge is non-rival in consumption (Arrow 1962) and hence should be available freely. However, to produce such goods in the first place, sufficient incentives need to be given to the innovators by way of intellectual property protection. As IPR-related laws differ across countries, it is of considerable interest from policy perspective to learn how changing the IPR policies across countries or harmonising them through multilateral initia- tives affect the cross-country flow of goods and services that are embedded with invisible intellectual property element. Although there are a number of studies that have analysed the links between their protection and economic welfare, economic growth, innovations, foreign direct investment (FDI) and technology trans- fer, 1 little empirical work has been done to directly investigate the relationship between * Salim: Department of Economics, Curtin University, Western Australia 6845 Australia; Al Mawali: Department of Economics, Sultan Qaboos University, Muscat 123 Oman; Islam: Department of Economics, University of Chittagong, Chittagong 4331 Bangladesh. Corresponding author: Salim, email <ruhul.salim@cbs.curtin.edu.au>. We are grateful to the anonymous referees and one of the editors of this journal, Paul Jensen, for valuable comments and suggestions, which tremendously improved the quality and presentation of the article. However, only the authors are responsible for any remaining error. The Australian Economic Review, vol. 47, no. 3, pp. 279–89 ° C 2014 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Published by Wiley Publishing Asia Pty Ltd