China Pressed Over Piracy

The U.S. asked global trade regulators Wednesday to force China to prove that it was cracking down on rampant piracy, which is robbing American movie studios and high-tech firms of a significant amount of sales each year.

The request to the World Trade Organization, backed by Japan and Switzerland, would require Chinese officials to turn over evidence of legal action aimed at stopping unauthorized copying of movies, software and other goods. Analysts said the U.S. could use the information to pursue action against China in the Geneva-based WTO.

U.S., European and Japanese firms maintain that piracy cost them at least $60 billion in 2003, according to the U.S. government. Illegal copying is particularly painful for California’s entertainment and technology industries.

The Motion Picture Assn. of America says that its members lose $280 million in revenue a year from movie piracy in China, where bootlegged copies of new releases are sold on the streets before they appear in theaters.

The request to the WTO comes as U.S. Trade Representative Rob Portman faces increased pressure from the U.S. business community and Congress over the lopsided trade relationship with the fast-growing Asian economy.

The U.S. is using a process established under a special WTO agreement for the regulation of intellectual property trade. The U.S. said it expected a response from China within three months.

“If China believes that it is doing enough to protect intellectual property, then it should view this process as a chance to prove its case,” Portman said Wednesday in a statement from Geneva.

If China isn’t able to support claims that it is fighting piracy, the U.S. probably will ask the WTO to force Chinese officials to improve their enforcement record or face sanctions, said Gary Hufbauer, a China trade expert at the Institute for International Economics in Washington.

But Hufbauer warned that it could take time for the case to reach that point, given legal complexities and the lack of transparency in the Chinese judicial system.

“We are building up toward some sort of target retaliation on this issue two years down the line,” he said.

U.S. multinationals, which have pushed piracy to the top of their list of grievances with China, want results as quickly as possible.

Although officials in Beijing have strengthened anti-piracy laws, the penalties are often “so light they just amount to a cost of doing business for those who infringe,” said John Greenagel, a spokesman for the Semiconductor Industry Assn. in San Jose. He said local officials might also be reluctant to crack down on violators because they were an important source of revenue.

In a report issued by Portman’s office this year, industry sources estimated that inadequate enforcement of intellectual property laws in China resulted in infringement levels of more than 90% for “virtually every form of intellectual property.”

Last year, U.S. Customs officials confiscated $134 million in fake Chinese goods, representing 67% of the counterfeit goods seized at border crossings.

Chinese officials have made some progress in fighting piracy. The Motion Picture Assn. said last week that a recent agreement with Chinese officials led to a sharp drop in sales of counterfeit new releases in the cities of Shanghai, Guangzhou and Shenzhen in the last three months. But the availability of pirated movies increased in Beijing, the Chinese capital, during that period.

China is “a rapidly growing and important economy,” said Dan Glickman, the former U.S. Agriculture secretary who heads the Motion Picture Assn. “They should not be taking advantage for free of other people’s intellectual property.”