U.S., China Near Brink as Piracy Talks Break Off

Pushing their commercial relations toward a brink, U.S. and Chinese negotiators broke off talks Saturday without reaching an agreement to end Chinese piracy of compact discs and other copyrighted material.

The Chinese delegation was invited to resume the talks in the United States this week. U.S. Trade Representative Mickey Kantor said in Washington that, if an agreement is not reached by Saturday, the Clinton Administration will make good on its threat to impose tariffs doubling the price of some Chinese goods.

Negotiators had hoped to reach a settlement before the Chinese New Year on Tuesday. A Chinese spokesman said last week that the issues that divide the two sides are “not very big.” And after seven days of talks, both sides claimed some progress had been made.

But Kantor took a noticeably harder approach Saturday, telling reporters, “We made progress, but not enough to satisfy the U.S. government. . . . We want a detailed agreement.

“There are important areas to be addressed. If they are not addressed,” he said, trade sanctions he threatened four weeks ago will be imposed. These would place 100% tariffs, which are import taxes, on a long list of Chinese goods sold in the United States. The value of the products ranges from $1 billion to well over $2 billion, Kantor said.

After the U.S. ultimatum was issued Dec. 31, the Chinese government made its own tariff threats against American products, raising the specter of a trade war with colossal stakes.

The U.S. Trade Representative’s Office and industry representatives claim that China is the world’s leading violator of intellectual property rights. At least 29 factories produce counterfeit versions of American compact discs, laser video discs, computer software and other products, costing U.S. producers more than $1 billion a year, they say.

“They are well known to Chinese authorities and could be shut down at any time,” Kantor said of the factories.

Even as Kantor cited some headway on an agreement on identifying piracy and training those who would enforce Chinese laws against it, he highlighted new instances of such theft. He said one of the U.S. negotiators, visiting a Chinese store, bought what he thought was a bottle of shampoo made by Procter & Gamble, only to find that the bottle contained lye, sold under a pirated Procter & Gamble label.

“It is somewhat stunning,” Kantor said. He also complained that “the Chinese government is not even willing to address the problem of its ministries using pirated software” in their computers.

On Saturday, a Chinese official quoted by the government’s New China News Agency blamed U.S. negotiators for the setback in the talks.

“The U.S. side constantly escalated their bargaining and, when the talks were about to end, they raised many new issues totally beyond the scope of intellectual property, which led to the failure of the talks,” the unnamed official said.

Despite the looming deadline and the tough talk Saturday, officials hoped an agreement can be reached to avoid a trade war. The United States is China’s biggest market.

The United States has been represented at the talks by Deputy Assistant U.S. Trade Representative Lee Sands. But the Chinese have been pushing to raise the level of talks to the ministerial or Cabinet level.

Kantor said he would be willing to meet with Wu Yi, China’s foreign trade minister, who one source close to the talks said had been invited to Washington.

Last-minute negotiations are a trademark of Chinese diplomacy. U.S. officials, with strong support from the American business community on this issue, have said they are willing to negotiate right up to the trade sanction deadline.

The principal complaint by the U.S. government has been China’s failure to enforce anti-piracy laws.

In an obvious effort to impress the U.S. negotiators, China on Saturday announced a new crackdown on counterfeit-disc factories, most of which are located in south China’s Guangdong province.

The State Copyright Administration, in a decree reported in the People’s Daily, said firms publishing foreign recordings must re-register starting Wednesday and show valid contracts with copyright owners or face fines and other punishment.

Beijing sent top investigators to Guangdong province two weeks ago and called for a sweeping nationwide anti-piracy campaign.

Kantor has also complained that the United States has been unable to gain “unimpeded access” to Chinese courts to challenge theft of U.S. copyrighted material.

Tempest reported from Beijing and Gerstenzang from Washington.