In order to effectively combat the growing problem of Chinese copyright piracy, the U.S. must demand stiffer penalties, such as prison time, from the Chinese government for Chinese piraters and utilize proactive, transparent policies to foster Chinese cooperation in the future.

Trade in goods with China rose from $ 5 billion in 1980 to $ 231 billion in 2004. William H. Cooper with the Foreign Affairs, Defense, and Trade Division of the Library of Congress Research Services reports that the United States' largest bilateral trade deficit is with China, which in 2004 was $ 162 billion. This is more than twice the deficit with Japan, which is the second largest at $ 75.2 billion. U.S. Customs and Border Protection reported that of the over $ 155 million in intellectual property rights seizures made in fiscal year 2006, 81 percent were of goods from China. In dealing with China's high rate of intellectual property theft and production of counterfeit goods, perhaps the biggest problem facing the United States is the apathy the Chinese government displays in recognizing and addressing the problem. Despite a long history of intellectual property rights protection agreements with China, theft in that country continues to grow. Although China is a member of the   World Trade Organization ("WTO") and has created laws that provide intellectual property protection, experts say that China is falling dangerously short with its lack of enforcement. Besides being a WTO member, China must comply with TRIPS Agreement requirements for intellectual property protection.However, even though tens of thousands of intellectual property rights enforcement actions are reportedly carried out each year in China, these actions are typically enforced by administrative-type agencies that impose penalties deemed "non-deterrent," which often do not include stiff fines or prison sentences.

For example, one Guangdong Province factory has been raided by authorities three times in two and one half years for producing counterfeit windshields with the Volvo, BMW, Audi, or DaimlerChrysler brand names. his factory remains open and continues to produce these counterfeit windshields and sell them in the global market. A recent interpretation of intellectual property criminal infringement by the Supreme People's Court and Supreme People's Procuratorate seemed to make progress towards punishing more offenders criminally by decreasing the value threshold required to substantiate an infringement. However, in actuality, the interpretation lessened penalties for repeat offenders and now allows the value of goods to be determined based on their street rather than legitimate value. Other problems plague increased intellectual property rights enforcement in China, such as the lack of coordinated efforts, the presence of extensive internal corruption, and the concept of local protectionism. These social and cultural barriers present huge hurdles to those seeking increased intellectual property rights protection and enforcement in China.

The specific examples provided by this article provided valuable insight into the types of IPR issues faced by Chinese and U.S. authorities and the Chinese approach to these infractions. Furthermore, the analysis of the recent legal developments in China illuminate the frustrating gray areas of copyright law and its enforcement. These examples help reinforce the opinion that criminal penalties are necessary in order to effectively implement copyright law.

In order to understand the shortcomings of the current U.S. approach to copyright enforcement in China, we must first investigate the social, political, economic, and technological factors that have led to such widespread piracy and then evaluate the effectiveness of U.S. copyright policy in combating these factors. China became a WTO member, and subsequently signed onto to the TRIPs agreement, in 2001. Although they entered into the pact voluntarily and therefore subscribed to the international minimums of copyright enforcement, their relatively nascent copyright culture, administrations, and economy prevented the Chinese from immediately halting the problem. The incredible discrepancy between the prices of pirated and copyright materials enticed consumers to a much greater degree than those in Western nations. Moreover, the ineffective and localized communist bureaucracy, juxtaposed by  the enormous area and population of China, presented more obstacles for appropriate enforcement of copyrights. The explosion of technology during the 80s and 90s presents a similar problem as consumers find new ways to pirate DVDs, software, and videogames by the second. Although this rapid technological development is not unique to China, it's timing cannot go unnoticed. Unfortunately for Chinese IPR supporters and U.S. companies, the aforementioned factors occurred at a time of rapid politcal and economic growth and deregulation, which served to exacerbate the already enormous load of piracy. Furthermore, intellectual property is a Western idea, foreign to China's rich ancient history and Communism, so its not hard to see why the Chinese culture was slow to react to their foreign trade partners pleas.

The author suggests that IPR policy should not simply focus on the positivistic and empirical effects of copright, but also the underlying cultural issues. Therefore, the U.S. policy of envoking special 301, which they did with the Chinese on three occassions, should be changed to accomodate the other factors influencing foreign piracy. The sustained levels of piracy suggest these policy do not work and that perhaps the U.S. should implement a bottom-up approach. As domestic copyright industries mature, they fragment and tend to resist copyright protection until they have become sustainable industries on their own. Therefore, the U.S. should aid the Chinese companies and help demonstrate the benefits of a strong IPR protection policy.

 

The author mentions some important points on the sustainability and effectiveness of U.S. copyright policy. He is right to suggest that our current policy isn't working and we should try something new. While a bottom-up policy makes sense, I believe the true responsibility lies upon the Chinese government to crack down harder on piraters with prison sentences. Due to the Clinton Administration's dedication to free trade in the 90's, it seems we missed our chance to actually impose meaningful sanctions on the Chinese before their importance to the economic community grew to today's level. We have less levarage today, diminishing the threat of trade sanctions even more. Therefore a policy that incorporates Eastern sensibilites of copyright law might achieve more effective resulsts in today's climate.

In the early 1990s, China became home to the largest concentration of pirate CD plants the world had known. Largely financed and operated by Taiwanese syndicates, China amassed more than 26 CD plants at a time when one plant would have had sufficient capacity to meet all of China’s legitimate needs. These 26 plants produced pirate CD’s around the clock, almost entirely for export. In 1996, this came to a grinding halt. Faced with the imposition of U.S. sanctions to the tune of approximately $1 billion a year, the Chinese authorities took swift action, shutting down half of the plants, impounding the equipment, and introducing a new licensing regime for the remaining plants to create more of a deterrence for future piracy. This plan worked, and continues to work. To this day, we have not seen the resurrection of an export based pirate industry in China. However Simply, and transparently, put, piracy in China for all categories of copyrighted materials exceeds 90 percent. In the music sector, piracy hovers at approximately 95 percent.

Many Chinese officials have undertaken sincere efforts to address this, particularly within the Ministry of Culture and within Customs, but they lack both the necessary manpower, and legal support, to get the job done. As a consequence, Chinese officials can, and have seized over two hundred million pirate CDs over the past two years -- a truly staggering sum, but have not had any impact on piracy in China due to the fact that there are no criminal prosecutions. This failure is exacerbated by some legal impediments to bringing criminal copyright cases, but it is primarily the consequence of the lack of will on the part of relevant Chinese officials to pursue these cases criminally. Rampant piracy led to an estimated loss of $600 million for the recording industry alone last year, with losses for U.S. repertoire amounting to about $48 million per annum. Until China modifies its legal system to facilitate criminal copyright enforcement, and directs all parts of the enforcement structure to deal with copyright matters as a priority matter, China will not be in a position to meet its TRIPS obligations to provide effective enforcement. Criminal penalties in particular are required by TRIPS as an essential element of an effective enforcement regime, and these, as a practical matter, are simply lacking in China at the moment.

This testimony by Hillary Rosen, the Chairman and CEO of the RIAA, identifies several of the major factors preventing the lare scale Chinese compliance with the TRIPs agreement. Although her testimony somewhat contradicts that of other sources, it's important to note the differing views of the head of the RIAA and a Chinese judge. Regardless, Ms. Rosen brings up the valid point that without the threat of criminal action, there is not enough deterrent to prevent future copyright infringement. Her examples of previous Chinese cooperations and crackdowns suggest that a policy of criminal prosectution combined with a genuine will to enforce the IPR's explicit in the TRIPs agreement can succesfully enforce U.S. copyright matters abroad.

Treasury Secretary Henry Paulson fittingly captured the importance of China U.S. relations in the globalized 21st century: "the prosperity of the United States and China is tied together in the global economy, and how we work together on a host of bilateral and multilateral issues will have a significant impact on the health of the global economy." One of the most important factors to prevent the erosion of this prosperity is the unfair trade practices of China abroad. China's unwillingness to enforce IPR and address other acts of counterfeiting is a vital concern that some see as evidence that China is not a responsible stakeholder in its economic relations with the rest of the world, especially the United States. Although the Chinese government often claim that IPR protection is a challenge of means, rather than will, their success in combating counterfeit Beijing 2008 Olympics merchandise suggests otherwise. 55 percent of companies associated with the American Chamber of Commerce in China reported they were negatively affected by IPR violations and 41 percent said counterfeits of their products had increased since China's accession to the WTO. Unfortunately, other pertinent problems facing the Chinese, like a per capita GDP 15% of the U.S. level, allows the Chinese to eschew IPR in the short term, albeit at the expense of its long-term credibility. A bad reputation can have long term affects on future investment and growth prospects while systematic IPR violations create doubt and hesitancy in companies seeking to do business in China. Chinese leaders need to treat these issues and WTO dispute resolution seriously and as legitimate avenues of action, they did join the WTO voluntarily.

 

The U.S.-China economic relationship is vital to world prosperity and the aforementioned issues will help smooth the path on the road to this prosperity. The Heritage foundation views are important for my paper for they point out the long term implications of China's myopic IPR enforcement policy. It adds leverage to the argument that while the U.S. attempts to enforce their copyrights abroad are selfish in nature, the developing nations would be smart to enforce these rules to ensure the future business of other companies.

As the Deputy Assistant Secretary of the Department of Commerce, Henry Levine's statement to the "Congressional -Executive Commission on China sheds light on the efforts and intentions of the U.S. government on helping the Chinese attack on IPR infringement. As bilateral merchandise trade reached nearly $150 billion by 2002, U.S. commerce has started to feel the effect of large scale Chinese piracy of its goods. Indeed, American manufacturers complain about rampant piracy of intellectual piracy and trade barriers. Despite China's commitments to cracking down, rampant piracy, fake CDs, DVDs, and pharmaceuticals cost the U.S. an estimated $20-$25 billion annually. In fact, the Business Software Alliance estimates that software piracy rates in China exceed 90%. In response, the U.S. continues to evaluate and monitor China's IPR apparatus through the annual Special 301 process, and has begun certain proactive measures to stem the piracy. The Department of Commerce has organized a series of seminars with Chinese officials conveying US views on how best to increase criminal enforcement of IPR violators.

Mr. Levine's statements illustrate the influence U.S. corporations have over foreign trade policy and the ways in which they seek to protect their goods in foreign markets. This approach differs greatly from the view and approach of the Chinese culture towards copyright infringement and the spirit behind ownership and may explain some of the chasm between U.S. and Chinese policy and enforcement. Mr. Levine's statements will help illustrate not only the scale of the Chinese piracy but also other means by which the U.S. government seeks to proactively aid the Chinese government besides trade sanction threats and lobbying for further WTO compliance.

Excerpts from this book address intellectual property rights and their protection, compliance, and enforcement in China. After China's entry into the World Trade Organization, which subsequently extended the TRIPs agreement to its borders, China has seen mixed results on its attempts to enforce the standards and statutes outlined in the TRIPs agreement. According to the authors, China's IP law currently offers protection consistent with the minimum requirement of TRIPs. However, the authors suggest that in order to elimanate some of the shortcomings of the TRIPs framework, Article 7 of TRIPS and its role must be enhanced in order to restore balance: "the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. However, the landscape of international intellectual property is changing, and the authors point out the diverging trend of multilateral institutions leaning towards securing the access of developing countries to protected content and material on reasonable terms while bilateral trade agreements continue to enforce strict copyright rules in favor of the developed nation. However, we must take TRIPs on facevalue and should be viewed as part of the broader strategy of priority setting, education, and institutional capacity building, regulaory adaptation, FDI marketing, and patent mining. Nevertheless, piracy and counterfeiting are still significant threats to right holders. The Chinese policy of administrative enforcement of copyright law often impedes its very goal due to longstanding local protectionism and cronyism as well as the internal bureaucratic rivalries that prevent the creation of a comprehesive IP strategy.  However, the Chinese have instituted judicial review of these administrative decisions, increases in the maximum fines available for IP infringements, and lower thresholds for criminal liability. Although change has come at a sluggish pace and Chinese IP enforcement will never rival that of many Western nations, China has made considerable steps in order to comply with TRIPs legislation.

 

The general opinion seems to agree that China has come a long way in IPR enforcement, but it still has a long way to go. As the broader themes of this paper come together, this article will serve to point on many of the drawbacks of the Chinese system and what can  be done to change this as well as the steps taken by China to meet the minimum requirements of the TRIPs agreement. While enforcement is still an issue, this authors make clear that we must be patient due to the extenuating circumstances of China's robust economy coupled with a lagging administrative stucture and status as a developig nation.

Global piracy poses a huge threat to the growing $20 billion IP Trade. Accordingly, the U.S. government created the Trade-RElated Aspects of Intellectual Property Rights (TRIPS) in 1995 during the Uruguay rounds of trade negotions to establish standards of protection, rules of enforcement, and a mechanism  for WTO dispute settlement.  However, IP piracy has continue to grow as have the economic losses, especially in the computer software industry where worldwide financial losses to business software piracy reached approximately $11 billion in 2001. In fact, these losses have become so sever the some business will no longer release software indeveloping countries like China.The TRIPS agreement created international minimum standards for various forms of IP, includiing copyrights and related rights, patents, and trade secrets. Moreover TRIPS acts as the dispute settlement arm of the WTO to provide third party authority over inter-country disputes. However, the realist perspective of international relations views the broad legal standards of TRIPS, instead of narrow rules, to be purposefully ambiguous to make it difficult for dispute settlement panels to pin down piracy vialators. For example, the lack of genuine enforement rights in TRIPs helped establish in the U.S. the Omnibus Trade Act, often referred to as "Special 301", requiring the U.S. Trade Representative to annually review the IP practices of trading partners to determine whether sanctions are needed. Special 301 is often invoked not only as a method to ensure full compliance  with TRIPS, but also to secure the continued development of IP protectiion in non-WTO nations. Moreover, if the U.S. perceives TRIPS to no longer provide adequate protection of its copyrights abroad, Special 301 functionally provides the right to opt out of TRIPS and the WTO.

 

The article attempts to broaden the current understanding of TRIPS's ineffectual treatment of software piracy. It suggests that the US's unilateral, hardline approach towards copyright enforcement, via special 301, may work in the short term in implementing IP standards in developing countries, but in the long run may undermine its relations with other WTO members. Since the U.S. has used special 301 on a few occasions to threaten sanctions against China, this journal article is important because it illustrates the implications of this U.S. policy. Perhaps as China's economy and world stature continue to grow, the U.S.'s hardline approach will be met with more resistance as the Chinese leverage at trade bargaining tables continues to increase. However, its safe to assume the U.S. will not go so far to opt out of the WTO, but it remains to be seen how the U.S. will balance its multilateral and unilateral approach to IPR enforcement.

Much like their respective copyright histories, the U.S. response to piracy in China is markedly different than that in Russia. During the last year of the Quing Dynasty, 1910, the Chinese government enacted its first comprehensive  copyright law, although it was short-lived and barely enforced. THe rise of the Communist Party after World War II spelled a dramatic change as China closed its doors to foreign influence and banished any Western idea of copyright that lasted until  its adoption of the Open Door Policy in the 1970s. Following U.S. pressure for more protective IPR's China enacted the Copyright Law of the People's Republic of China i 1990, granting private rights to authors although still sticking to its socialist principles. However, there was limited protection for foreign works and over subsequent years, sustained pressure and threats of trade sanctions by the U.S. continually beefed of the Chinese laws. Overall, the U.S. placed China on the priority country list under Special 301 and threateed trade sanctions on three separate occasions in the 90's.

 

The U.S.' notably more aggressive response to Chinese piracy in comparison to Russian piracy illustrates not only the importance of the Chinese market for American goods but also the rampant and blatant copyright infringement in China that the U.S. goverment as attempted to chip away at over the years. This article identifies what tools and sanctions the U.S. government can use in order to enforce its trade agreements. This is important for it will help me further contextualize the role Chinese piracy has played in U.S. foreign trade agreements and the degree to which the United States will go to protect its largest exports, its media and culture. However, its important to note that while the threat of U.S. trade sanctions was often an effective, short term solution to the Chinese piracy problems, eventually these measures deteriorated until further sanctions were threatened. We can therefore see the necessity for foreign cooperation in to enforce international trade agreements and copyright laws.

This article documents China's promise to step up its efforts to punish violators of intellectual property rights outline in the agreement on Trade Related Aspects of Intellectual Proprety Rights (TRIPs). China unveiled an outline of a new enforcement policy of IPR's, eaded by the deputy director of its National Copyright Administration's copyright management bureau, Xu Chao. Their response comes after multiple please by the U.S. for the Chinese to further crackdown on IPR infringement, despite Chinese claims of significant progress. China's law stipulates a maximum of seven years i prison for copyrigh violators. However, the Chinese still do not meet international IPR protection standards. The aforementioned outline promulgated the Chinese goal to increase its self directed IPR levels within 5 years. Furthermore, the Chinese plan to fully ramp up their efforts, similar to international levels, by 2020.

This article will help illustrate some of the causes of the rampant Chinese piracy of U.S. IPR. There exists both a punitive and a cultural defecit between the two countries. The lack of genuine enforcement of IPR domestically has enfuriated U.S. copyright officials and trade czars for decades. There seems to exist a chasm between the two countries as to the moral reprehensibility of copyright ifringement, illustrated by the Chinese complancency with their progress, that may help contextualize much of the discrepancy in policy goals between the two countries. This article will serve as background support and evidence to my larger goal of first proving the enforcement of international copyright law and then documenting the trade agreements put in place to accomplish this very task.

This article draws on theories of globalization, technology, and the struggles between trade agreements and copyright objectives to place international piracy into a global context. The author, Shujen Wang, examines the the role of Hollywood in shaping trade agreements and piracy policy as well as the interconnectedness of unilateral and multilateral solutions. Specifically, Wang documents the General Agreement on Tarrifs and Trade (GATT) which led to the creation of the WTO, the growth of U.S. trade policy from the WTO's agreement on trade-related aspects of intellectual property rights (TRIPS), and the Digital Millenium Copyright Act (DMCA). While analyzing the importance and role international piracy and copyright law play within the framework of these multinational trade agreements, Wang illustrates the necessity for copyright protection via the importance of the copyright industry in the U.S. economy. Moreover, Wang tracks the way techological developments like VCR's and DVD's have changed the moral landscape of the pirating industry and Hollywood's lobbying efforts to push for protect copyrights internationally.

This article incorporates many of the essential themes of my topic, including techology's ability to alter and push the boundaries of domestic and international copyright statutes, international piracy's role in shaping trade agreements, and the U.S.' ability to use these trade agreements to open up markets and ensure strict copyright protection for its goods. Furthermore, the article cites the specific legislation, trade organizations, and trade agreements that have been instrumental in shaping the two-pronged U.S. approach to copyright protection. Specifically with the passage of the Permanent Normal Trade Relations act with China in 1999. Overall, this article provides valuable insight into constrcting a fraework that encapsulates the complexity of Chinese piracy and how it has affected our bargaining and trade agreements and policies.