US, China Trade Clash Worsens

If China fails to enforce anti-piracy laws more strictly, the US could slap sanctions on more than $1 billion in Chinese products

IN the pattern of past trade clashes between China and the United States, the stand-off over copyright piracy is going down to the wire.

Last weekend, the two economic powers exchanged retaliatory threats as Washington gave Beijing one month to more strictly enforce anti-piracy laws or face punitive tariffs on the bulk of its sales to the US market.

American warnings of imminent trade sanctions grew out of US frustrations with 18 fruitless months of negotiations during which China failed to curtail piracy that officials in Washington say costs US companies more than $800 million yearly in lost sales through unauthorized copying of films, books, software, and other copyrights.

US trade representative Mickey Kantor says $2.8 billion of Chinese exports were on a preliminary target list, including textiles, furniture, ceramics, apparel, toys, athletic shoes, and electronics. If Beijing fails to take action, Mr. Kantor says, sanctions could be slapped on more than $1 billion in Chinese products, higher than the initial estimate of losses. After hearings are held on the proposed list in Washington later this month, the Clinton administration will make a final decision by Feb. 4.

Calling Washington's move ``barbarous,'' the Chinese Ministry of Foreign Trade and Economic Cooperation (MOFTEC) said it would strike back by doubling tariffs on game players and cards, cassette tapes, compact discs, cigarettes, alcoholic beverages, and cosmetics - some of the fast-growth sectors in the Chinese consumer-products market.

In other wide-ranging moves, Beijing said it will suspend imports of films, television programs, video tapes, and laser discs. It also will hold up requests by US companies to establish holding companies in China.

Also targeted for suspension would be negotiations with American automakers trying to break into the potentially large Chinese market, applications from US audiovisual manufacturers for branch offices and from American chemical and pharmaceutical producers for Chinese government patent protection, and applications for trade ties with American trade industry groups, including the US International Federation of Phonographic Industry, International Intellectual Property Alliance and Business Software Alliance.

China is already livid at the US for frustrating its high-profile push to become a founding member of the new World Trade Organization (WTO), formerly known as the General Agreement on Tariffs and Trade (GATT) forum. Beijing was also stung when American negotiators walked out of negotiations on the copyright issue in mid-December and broke off talks.

Warning that ``a full-fledged trade war'' will inevitably inflect losses not only on China but also on the US, a biting commentary in the official New China News Agency on Sunday said, ``Retaliation and trade sanctions are the old tricks often resorted to by Washington in settling its trade disputes with other countries.

``The real motive behind this US bluster is to exert pressure and force on the other side to make concessions conforming to its desires,'' the news agency said.

Although the US and China were able to resolve past trade disputes with last-minute deals, the issue of intellectual property rights is proving particularly intractable.

Angry over the lack of Chinese concessions since President Clinton delinked trade and human rights concerns in May, American negotiators are digging in on the issue of copyright infringement and demanding major Chinese compromises to avert sanctions.

The US has proposed a final negotiating round for mid-January and says China has put forth some new talking points. Still, Western diplomats and Chinese analysts say Beijing will be hard-pressed to take the sensitive decisions necessary to placate American concerns, even with such a key market at stake. (The US is China's major overseas market with a record $32.4 billion in exports during the first 10 months of 1994.)

``Since Clinton ended the linkage between trade and human rights, trade issues like GATT and copyright protection are now the major points of contention between the US and China,'' says a Chinese political observer, referring to Mr. Clinton's decision against using trade retaliation for Chinese abuses of human rights.

American officials admit that China has tightened up its intellectual property rights laws since negotiations began in 1992, but enforcement remains lax, particularly in shutting down more than 20 factories, some believed to have military connections, producing 75 million pirated compact and laser discs annually. ``It's a failure of will, not a failure of ability,'' said Mr. Kantor, who also wants better access for US films and other goods.

Accusing the US of internal meddling, Beijing insists it has made more progress toward ending piracy in the last decade than many developing countries have made in years. A system of copyright protection is now in place, and hundreds of counterfeiters have been arrested and punished during the last two years.

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