U.S. Vows Tariffs if China Fails to Curb Piracy of Software
The United States may impose punitive tariffs against China if the Asian nation does not take more effective steps to restrict piracy of computer software, a high-ranking U.S. trade official said Friday in Beijing.
The threat was the latest salvo in a growing U.S.-China trade dispute stemming in part from American complaints of barriers in gaining access to Chinese markets. The U.S. trade deficit with China has been mushrooming and may soon be second only to the deficit that America runs with Japan.
Although a Chinese copyright law protecting intellectual property rights will take effect June 1, it is unclear whether regulations under the new law will be tough enough to seriously address the problem of software piracy, Assistant U.S. Trade Rep. Joseph Massey said at a news conference at the U.S. Embassy.
Unauthorized software copying costs American companies “upward of $400 million” annually in lost sales in China, according to U.S. private-sector estimates, Massey said.
If China does not take effective steps against such piracy, it could face retaliation against a variety of goods under terms of the “Special 301 Provision” of the 1988 Trade Act, Massey said. “You could expect to see sales from China fall at a level commensurate with the damage that American software producers and other copyright owners are suffering,” he said.
“The computer software issue is the big issue in intellectual property,” Massey added. “The size of the predation is enormous. The significance of the area for the U.S. economy and U.S. technology is very high. . . . If the problem of piracy of computer software doesn’t get fixed, we’ll obviously have to take some action to fix it. . . . If retaliate we must, I suspect retaliate we would. Let’s hope that we can open the market and improve the protection, instead of doing that.”
Massey noted the ballooning U.S. trade deficit with China, stemming partly from “increased difficulty of access to the market.”
In 1989, U.S. exports to China were valued at $5.8 billion, while imports were $12 billion, leaving a $6.2-billion deficit. Last year, exports to China fell to $4.8 billion while imports from China rose to $15.2 billion, giving the United States a $10.4-billion deficit. That was third largest in the world, exceeded only by the deficits with Japan and Taiwan.
The deficit with China “is going to go up” this year, Massey predicted, noting that some observers believe that it will surpass the deficit with Taiwan to rank second only to the deficit with Japan.
Massey noted that the growing trade deficit will be an issue, in addition to human rights questions, when Congress considers the annual renewal of China’s low-tariff trading status as a “most favored nation.” Last year, debate centered primarily on the question of whether renewal of most favored nation status should be denied until there is an easing of political repression in China.
“I can assure you that Congress is very sensitive to the size of the deficit,” Massey said. “Our own view is we need to focus on the barriers in this market rather than the deficit per se.”
In action not directly connected to Massey’s visit, the Ministry of Foreign Economic Relations and Trade issued regulations last week that for the first time require Chinese textile producers to cooperate with enforcement of textile quotas agreed to between China and foreign governments.
U.S. Customs has repeatedly complained that in an effort to circumvent textile quotas, many Chinese garment exports are disguised with labels claiming manufacture in some other country.
Under the new regulations, authorities “will not allow Chinese textile products with labels of other countries . . . to pass customs,” the official China Daily reported Friday. The rules also ban any other business deals aimed at avoiding quota agreements by pretending that textiles originate in a third country, the newspaper reported.
