Reactions to US China IP Complaints

Here are the respective blurbs from the USTR on China's lack of protection and enforcement of copyrights and trademarks as well as its market access restrictions on IP-intensive goods from the US. (The official filings should appear on the WTO site soon.) Industry groups such as the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) voiced their strong approval of this action. On the other hand, China expressed its--you guessed it--"strong dissatisfaction" over the US complaints. A top Chinese IP official expressed dismay in this manner, though again USTR Susan Schwab was critical of what she believed was a limited approach as noted previously:

China's top intellectual property rights (IPR) official lashed out on Tuesday at the United States' WTO complaint over alleged "copyright piracy" in China.

"It's not a sensible move for the US government to file such complaint," said Tian Lipu, commissioner of the Intellectual Property Office, at a national meeting of IPR officials in Nanchang, capital of east China's Jiangxi Province.

"By doing so, the United States had ignored the Chinese government's immense efforts and great achievements in strengthening IPR protection and tightening enforcement of its copyright laws," Tian said.

Tian cited a new judicial interpretation issued by the Supreme People's Court last week that lowered the threshold for prosecuting manufacturers and vendors of counterfeit intellectual property products.

The new rules state that anyone who manufactures 500 or more counterfeit copies (discs) of computer software, music, movies, TV shows and other audio-video products can be prosecuted and faces a prison term of up to three years.

The Ministry of Commerce (MOFCOM) was understandably displeased, saying the action was "not wise":

"China expressed great regret and strong dissatisfaction at the decision of the United States to file WTO cases against China over intellectual property rights and access to the Chinese publication market," a spokesman for the Commerce Ministry said in Beijing Tuesday.

Wang Xinpei, the spokesman, said the US move runs against the consensus reached by leaders of the two countries on developing bilateral trade relations and appropriately handling trade problems.

"Such a move would seriously damage the cooperative relations established in the fields, and would have negative impact on bilateral trade," Wang said.

Meanwhile, the NY Times urged in an editorial that cooler heads prevail:

If the answer is a methodical working through of some of the difficult issues raised by a large and growing trade relationship, this could still prove to be a productive effort. But if these complaints add up to the hesitant first steps toward an all-out trade war with China, everyone will lose, including American workers, whom the White House and lawmakers say they are trying to protect...

What must be avoided are the kinds of misunderstandings — intensified by growing anti-China sentiment in this country — that lead to tit-for-tat tariff reprisals until things spin out of control. A trade war would do more harm to American business than to China’s subsidies. What would happen to Boeing if the steel used in its jets became more expensive? The last thing a country with a record trade deficit can afford is to hurt its exporters.

The administration’s decision to get tough on China appears to be intended in part to soothe Congress’s antitrade passions long enough to win approval of a new free-trade deal with South Korea that would be good for U.S. consumers and exporters. But the White House would do better if it educated Americans about free trade’s benefits, which include cheaper clothes, televisions and cars, which hold down inflation. According to the Progressive Policy Institute, a Democratic research group, foreign manufacturers invest more in America than American manufacturers invest abroad.

It doesn’t feel that way to workers, who know that their wages have stagnated and hear every day that overseas competition is to blame and that little has been done to help displaced workers. But China didn’t break the piggy bank. President Bush and Congress did, with ill-conceived tax cuts for the wealthy and the war in Iraq.

What the Times op-ed does not mention is that the Bush administration may be taking these measures not only to get the Korea FTA deal done, but also to obtain renewal of Bush's fast-track authority which expires at midyear to send trade bills to Congress without modification for an up/down vote. The irony is that to get approval of trade-friendly fast-track authority, Bush needs to please Congress with all sorts of actions that counter the free-trade spirit. These are interesting times. So far, I have been surprised that China has not taken stronger-armed actions against the US, like hinting that it will unload Treasuries if the US does not let up. Unfortunately for free-trade advocates, this action is far from the end of US actions against China. The biggie--China's perceived undervaluation of the yuan--has not been touched upon yet, though expect action on that front in the coming months. I should shortly make a comprehensive post detailing current and pending US actions against China on the trade front. As they say, watch this space.