China's Disc Pirates Thrive Despite Crackdown Pledge

CHINA may have declared war to stamp out copyright piracy a year ago. But all over Beijing, counterfeit compact discs, videos, and computer software still sell for a song.

"CD, CD-ROM?" asked a young hawker who gave his name as Wang, pulling open a bag full of CDs for under $2 and software discs for $5. "The police are watching carefully now. But I still give you, very cheap."

Whether its a video of "Apollo 13" or a CD of music by Luciano Pavarotti, Beijing shoppers don't have to look far for a wide range of music, movies, and software, almost all pirated and in violation of a one-year-old agreement between the United States and China to protect American intellectual property rights.

This week, a team of American negotiators, headed by assistant US trade representative Lee Sands and accompanied by American music, video and software executives, returns to Beijing to demand tighter enforcement of the deal that narrowly averted a billion-dollar trade war a year ago.

Once again, the US is vowing to impose tariffs of up to 100 percent on Chinese imports if China continues to ignore its pledge to close more than 30 illegal CD factories, including some reportedly controlled by the Chinese military.

American officials admit China has made some progress in curbing retail sales of pirated discs but contend that millions of dollars of illegal copies are still being exported, hurting other American markets overseas. The officials say industry losses from pirated products are now far higher than the $860 million estimated at agreement time last year.

"We will enforce US trade laws and take decisive action if China does not meet its obligations," says US Trade Representative Mickey Kantor. "We will not wait forever."

"The idea that copyrights and trademarks are property is only starting to sink in among officials here," says a Western diplomat. "China still has a long way to go on enforcement and appropriating resources for that."

The new trade confrontation is set against the backdrop of already tense relations between Beijing and Washington. Possibly this week, China is expected to launch a new round of military exercises aimed at intimidating Taiwan. China, which claims Taiwan is a rebel province, fears the island's campaign for international recognition will lead to a declaration of independence.

The latest round of war games, which some analysts had expected to begin this week, are aimed at undermining business confidence in Taiwan and reducing support for President Lee Teng-hui, the front-runner in recent polls.

Washington has tried to play down the possibility of a military confrontation with China over Taiwan. Taiwan has also sought recently to calm its war of words with China in anticipation of new Chinese military maneuvers.

Beijing and Washington are also at odds over Chinese human rights abuses of dissidents and China's continuing nuclear testing program in defiance of an international moratorium. The US has threatened China with economic sanctions amid reports that China sold equipment related to nuclear weapons development to Pakistan (see story, Page 3). But the Clinton administration has reportedly decided to waive the penalty under pressure from American multinational corporations doing business in China. In another conciliatory gesture, President Clinton has lifted a ban on sales of telecommunications satellites imposed after the military massacre during 1989 pro-democracy demonstrations.

"Some steps have been taken to lower the temperature," said a Chinese political analyst and government advisor. "But Sino-US relations could slide further in the coming months."

But Washington's anti-piracy crusade is an issue that enjoys the backing of a powerful business lobby in the US. Last week, Chinese anti-piracy officials launched a high-profile raid of computer software merchants in Beijing to show a new resolve in combatting counterfeiting.

During the last year, China claims it has destroyed more than 3 million pirated CDs and hundreds of thousands of video cassettes, software discs, and books. A force of 3,000 inspectors has been monitoring the market while thousands of patent and copyright cases have been handled in Chinese courts, the government says.

Chinese trade experts also contend that the US inflates the size of its trade deficit with China, a main concern behind American complaints over patent and copyright piracy.

Still, Western analysts say China's public relations efforts can't mask its failure to comply with the specifics of last year's deal, including licensing and verifying compact disc factories, adding electronic identification codes to make it easier to identify fake discs, and bolstering copyright laws.