US-China Deal on Piracy Warms Up Ties - for Now

In an pact that averts a damaging trade war with the United States, China has agreed to a tough, new clampdown on copyright piracy of American music, films, and computer software.

The new deal with China includes "serious and important steps" to curb intellectual piracy, US trade representative Charlene Barshefsky told a Beijing press conference yesterday.

Amid continued strains and suspicions overshadowing the often-prickly relations between the two economic rivals, the compromise didn't come easily.

After a new round of trade brinkmanship and last-ditch negotiations that overshot a mid-Monday deadline, Chinese and American trade negotiators worked out a plan calling for the closing of counterfeiting factories, police investigations of intellectual-property violations, verification of Chinese enforcement, closer border inspections to stop export of illicit goods, and greater market access for such US products as films and computer software.

"We believe the 1995 [US-China trade] agreement laid the foundation for fundamental change in Chinese enforcement of intellectual-property rights," Ms. Barshefsky said. "Now Chinese actions have animated this system through concrete and tangible actions. China has begun to demonstrate its vigilance through actions taken in the last three months."

Washington had threatened to slap punitive 100 percent tariffs on $2 billion in Chinese textiles, electronics, and other imports if rampant copyright violations weren't controlled. China said it would retaliate against American businessmen here and block US films, television shows, and other imports.

The talks were a replay of last year's trade standoff. In February 1995, the US backed off from similar threats when Beijing pledged to stamp out copyright pirates and closed down several counterfeiting compact-disc factories exporting overseas. But tensions erupted anew when Beijing ignored a July deadline to shut all pirate companies and failed to move against large manufacturers of counterfeit products, the US charged.

Before the 11th-hour talks began last Thursday, the US gave China a detailed list of 31 plants that Washington says provide most of the illicit compact and laser discs now being exported to Southeast Asian and other markets. Many of the active illegal copiers are known to be controlled by powerful provincial governments or the Chinese military.

Almost 90 percent of the 40 million compact discs produced in China last year were pirated, according to the International Federation of the Phonographic Industry, a music-industry trade organization. American companies estimate that Chinese piracy and exporting costs them $2.3 billion in lost earnings.

China has already closed 15 factories, Barshefsky said. She predicted that other closures would follow, including an undetermined number of "underground" unregistered factories. American officials had insisted on a long-term monitoring mechanism after a number of plants closed during last year's dispute quietly reopened later.

Some analysts say that it will be difficult for China to curtail piracy in the near future. Provincial governments enjoy a measure of autonomy from Beijing, and officials at offending factories have powerful connections.

"What do we expect them to do? The Chinese economy is decentralized. They can't control everything," says John Copper, a China specialist at Rhodes College in Memphis, Tenn.

Other problems remain

The new trade pact will likely ease tensions with China during the US presidential election year. But Washington and Beijing still confront a number of thorny problems clouding their relations. They remain at odds over human rights, nuclear-weapons proliferation, and Taiwan.

In trade, the US is upset with China's ballooning surplus, which topped $33 billion in 1995. The US also is pushing for further Chinese economic changes before allowing Beijing to enter the new World Trade Organization.

During the current trade talks, China decided to stand up to the US and oppose opening up its market to more American music, films, and television programs. Wrapped in a conservative political climate, Beijing says that opening China to joint ventures for books and other products would infringe on the country's ideological sovereignty.

Still, analysts point to efforts toward better understanding. US national security adviser Anthony Lake is expected to visit China in July when Chinese Defense Minister Chi Haotian will travel to the US. "What we're seeing ... is a lot more serious efforts to look at and understand the other side," says Robert Sutter, a China specialist at the Congressional Research Service. He says that the US recognizes it must pursue "a long, drawn-out, but necessary American involvement with China."

China claimed some success

During the talks, Beijing heralded its successes in cracking down on pirates. Chinese authorities have seized stashes of pirated discs, revoked business licenses of two compact-disc plants, closed six illegal assembly lines, intercepted exports, and tightened controls over distribution of counterfeit books. Earlier, China ordered its huge police force to begin investigations of compact-disc factories, many of which operate in the southern province of Guangdong. China has said that no new compact-disc factories will be authorized, and unregistered factories will be closed.