US Delegation to Tackle Copyright Piracy in China

ON a busy Beijing street corner, Zhen Wen pulled two Beatles compact discs out of a full box and shoved them at two passing foreigners.

``Good, good,'' urged the woman, in halting English. ``Cheap music. Two dollars.''

Street vendors peddling counterfeit CDs are merely the tip of the iceberg of Chinese piracy that costs United States companies and artists an estimated $1 billion annually and is rankling relations between the two economic giants.

That note of discord is one trade flash point slated for discussion during a US trade delegation's tour of Beijing, Shanghai, and Guangzhou in China and Hong Kong, starting Saturday. Led by Commerce Secretary Ron Brown, the Clinton administration's trade team will also include 24 executives of top US companies scrambling for a niche in China's booming economy.

Coming after President Clinton's controversial decision to extend China's low-tariff trading status in June, the US initiative is aimed at cultivating growing commercial ties with China and jawboning Beijing on issues clouding the $40 billion two-way trade.

``A lot of trade issues that were set aside in the past and overshadowed by the [trading status] debate are now coming into focus,'' says a Chinese policy adviser. ``China and the [US] are awakening from illusions. Resolving the other trade issues will be crucial to the future.''

Already, the new Clinton policy to delink China's most-favored-nation (MFN) trading status from improvements in human rights is paying dividends.

In an aggressive bid for sales in the booming Chinese aviation sector, the Boeing Company announced this month a $600 million plan to make airplane components and service jet aircraft.

In 1993, China became the second-largest market for the company. It bought two-thirds of its aircraft purchases from Boeing. This year, China is expected to buy a similar number from Boeing, which plans to transfer construction of 737 tail wings from a Kansas plant to facilities of the Xian Aircraft Company.

To further boost US competitiveness against Japan and some European nations, Washington is also changing tack from its past refusal to offer soft financing to win contracts and says it is ready to help US firms land business in China's energy, telecommunications, and transport sectors.

China is one of 10 big developing markets, mostly in Asia, targeted for US investment and export growth.

But future deals will pivot on easing simmering commercial conflicts over market access and protection of intellectual property rights. Progress on these issues will determine whether China prevails in its campaign to rejoin the world trade arena when the General Agreement on Tariffs and Trade evolves into the World Trade Organization in January.

After two rounds of talks this summer, China and current GATT members, notably the US, remain at odds over Western demands that Beijing regularize trade rules and the issue of whether China joins the world trade forum under the special terms of a developing country. Reentering with developing-nation status would give Beijing more leeway in tightening up patent and copyright protections in line with international standards and removing controls on foreign investments.

Angry over widespread Chinese piracy and demanding immediate remedies, the US argues that China is already a formidable trade competitor and does not need the shelter of developing-nation provisions.

In the meantime, the US has reportedly threatened to impose trade sanctions on China unless it shuts down counterfeiters. Washington also has demanded that China shut down its 26 official CD and CD-ROM factories. US companies such as Walt Disney and Microsoft have sued Chinese firms in China for piracy.

Over the past few months, China has stepped up actions against violators of intellectual property rights, although US officials describe the moves as ``selective.''

Insisting that it will take time to rein in the piracy, Chinese officials are rankled over US opposition to Beijing's effort to rejoin GATT.

``The demands put forward by one Western power are unacceptable,'' Vice Premier Li Lanqing said in an interview with pro-Beijing Hong Kong newspaper Ta Kung Pao. ``If China has to pay so high a price, why should we try to resume our status as a contracting party? We won't seek reentry at any cost.''

Paralleling its aggressive quest for business expansion, the US also insists it will continue to press for human rights changes. But international human rights activists contend that strengthening business ties will not restore the leverage the US wielded before the June MFN decision.

They cite the dismissal from his job in a Chrysler plant in China of a Chinese religious activist trying to organize a Tiananmen Square Christian memorial service.