US targets Chinese piracy of US goods

Liu Tong is polite to a fault, speaks perfect English, majored in American studies, has loads of American friends he loves to phone - and duplicates Japanese and American high-tech goods for a living.

Mr. Liu buys unusual, specialized technology - a machine to make film subtitles is a recent project, for example. He disassembles the machine, duplicates the parts, and rebuilds a Chinese version. The process, called "reverse engineering," is the more serious side of a long-running feud between the US and China over intellectual property rights violations - one that includes mass production of pirated DVDs of movies, music, and software.

Now, as Chinese president Hu Jintao prepares to visit the US next month to discuss what Bush administration officials term "our $250 billion relationship," Washington seems to be backing away from a trade war over currency valuation that would slap an epic 27.5 percent tariff on Chinese exports.

Instead, US Commerce Secretary Carlos Gutierrez indicated here Wednesday that the White House will focus on a more diffuse and difficult problem: intellectual property rights (IPR).

"Not currency valuation ... but intellectual property rights violations are the main threat to US industry" argues Stephen Green, senior economist for the London-based Standard Charter Bank in Shanghai, China. "It is the taking of emerging technology, the sophisticated technology that resides in the products of large Western firms, that can do the most harm in the long term."

For nearly a decade, complaints about IPR violations have been a mantra by US trade officials coming to China. Little is done, apart from occasional bonfires of illegal DVDs by Chinese police.

But as the US trade deficit with China climbed to $202 billion last year, protectionist sentiment has built in Washington. Talk of a lack of access to Chinese markets, unfair and obscure business rules that penalize foreign companies, and the recent bill, introduced by Sens. Lindsey Graham (R) of South Carolina and Charles Schumer (D) of New York, which would impose a 27.5 percent tariff on Chinese imports - have seized Beijing's attention. Some 67 senators agreed to pass the bill, despite opposition by the White House. After high-level meetings last week with Vice-Premier Wu Yi and Commerce Minister Bo Xilai, Sens. Schumer and Graham agreed to delay the vote.

Secretary Gutierrez says that while China is the world's No. 2 buyer of personal computers, it ranks No. 25 in software purchasing - a result of widespread use of "pirated software" in China. In a talk to an American business audience, he noted that if China cut the use of pirated software to 80 percent from 90 percent of all software, the country would gain $6.5 billion in tax revenue.

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