Saturday, April 14, 2007

The United States has finally begun to take action against decades of rampant piracy of U.S. intellectual property in China. This piracy has long proliferated under the noses of authoritarians who otherwise rule that nation with an iron fist.

In fact, China’s Communist political dictatorship has devised a brilliant scheme to rob American entrepreneurs and artists blind. First, it sets up huge barriers to drastically limit the amount of legitimate American movies, music and software that can legally enter China. Then it averts its gaze as the locals illegally duplicate billions of dollars’ worth of American DVDs, CDs and software programs, which are then sold for a tiny fraction of their legal value. Indeed, according to a 2005 report by the U.S. Trade Representative, more than 90 percent of “virtually every form of intellectual property” is pirated in China.

After decades of broken promises and more than five years into China’s membership in the World Trade Organization (WTO), Ambassador Susan Schwab, the U.S. Trade Representative, recently told the Chinese that the United States had finally had enough of China’s lying and bait-and-switch tactics. Not in so many words, of course. In announcing that “the United States is taking two important steps in our wide-ranging efforts to crack down on the intellectual property violators in China,” Mrs. Schwab characterized the long-overdue action as “the normal way for maturing trade partners — and members of the WTO — to compartmentalize differences.”

At a subsequent news conference in Beijing, a Chinese Commerce Ministry apparatchik bitterly complained: “Doing this seriously damages the cooperative relations that the two sides have built.” Internally, it is axiomatic that the Chinese dictatorship has major problems with the rule of law. However, with its admission to the WTO, China agreed it would follow the international rules-based trading system. Much of what the WTO does is settle disputes.

The several disputes include: for the U.S. film industry, the never-changing fact that more than 90 percent of DVDs sold in China were illegal copies, which are consistently available on the street corners of Beijing long before Wal-Mart sells them in America; for the Bush administration, the evolving consequences of the 2006 elections, which turned control of Congress over to protectionist Democrats incensed over last year’s record-shattering trade deficits of $232 billion with China and $765 billion overall. And there’s China’s utter chutzpah. Not only were the pirates stealing America blind in Shanghai, but they were also exporting their pirated products to the United States at record levels.

At Monday’s press conference announcing the WTO consultations over China’s piracy and its market barriers to movies, music and books, Mrs. Schwab revealed that 80 percent of counterfeit products seized at U.S. borders were made in China. It’s no secret, however, that a study commissioned by the Motion Picture Association and released last year on worldwide film piracy found China to be the largest piracy offender (at 90 percent), well ahead of Russia and Thailand (both at 79 percent). Worldwide, the study said, the film industry lost $18.2 billion to piracy in 2005. The U.S. movie industry alone lost $6.1 billion. Much of that was piracy of hard goods, such as DVDs and VHS tapes, while another $2.3 billion was lost to illegal downloads on the Internet. For a tightfisted government with trade barriers on movies, music and other forms of made-in-America cultural entertainment, that’s a lot of American-movie watching.

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