Pushed on patents, China shoves back
By Chris Buckley International Herald Tribune
Friday, January 14, 2005
BEIJING Donald Evans ended his fourth and final visit to Beijing as U.S. commerce secretary on Thursday with the same insistent demand he brought on his previous visits as secretary over the past three years: that China strengthen its protection of copyrights and patents.
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The commerce chief's chiding of Chinese commercial practices and calls for a "level playing field" in trade have been a mantra of his visits to Beijing. This time, though, the courteous reception he has always received from his Chinese hosts was mingled with signals of a more assertive China, impatient to have its own trade concerns addressed.
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Those signals included a jocular but public swipe from Bo Xilai, the commerce minister of China, who before television cameras on Wednesday awarded Evans a score of seven out of 10 for his tenure - a grudging mark of approval in China. Bo stressed his disappointment that the United States has refused to formally recognize China as a market economy.
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Evans, who served as commerce chief in President George W. Bush's first term and steps down this month, told Chinese officials and American business people here on Thursday that China is not doing enough to stamp out the unlicensed reproduction of trademarks, software, industrial designs, drugs and other patented products.
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The issue is "straining our trading relationship," the secretary said in remarks prepared for a speech on Thursday. "It's time for China's leaders to forcefully confront the problem posed by IPR theft," he said, referring to intellectual property rights. "Let's start putting people in jail."
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U.S. trade officials, lawyers and businessmen generally agree that message has not fallen entirely on deaf ears and that China has developed an impressive arsenal of laws and rules to fight industrial piracy. But they also mostly say those weapons are rarely used and piracy remains as widespread in China as it was four years ago, if not more so.
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"The facts are that piracy and counterfeiting in China continue to increase," Evans said in an interview. He raised the example of QQ, a minicar made by the Chinese company Chery Automobile. GM Daewoo, the South Korean operation of General Motors , complains the car is a clone of its Chevrolet Spark design. Late last year, GM Daewoo announced it was suing Chery over the apparent copy. The similarity between the two cars "defies innocent explanation," Evans said at a news conference on Thursday.
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Estimates vary wildly as to how much of China's industrial production involves unlawful copies of patents, trademarks and copyright.
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China's Development Research Center, a government policy research institute, estimated in 2003 that the value of pirated goods made in China was $19 billion to $24 billion a year.
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Chinese officials said they were fighting commercial piracy more vigorously than ever. They also said the United States must accept that China is a huge, developing country where any change takes time.
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"China's intellectual property protection doesn't have as long a history as the United States'," Jin Xu, the deputy head of the American affairs division of China's Ministry of Commerce, said in an interview. "But we've been making the fastest progress in the world."
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China's current crackdown on counterfeit goods is "unprecedentedly severe," the Chinese official said, citing a set of rules recently issued by China's highest court that he said makes it easier to prosecute people who make and sell pirated goods.
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But American trade officials and lawyers complained that the new judicial rules were vague and difficult to implement. "Everyone is disappointed, because we were expecting something stronger," James Zimmerman, a trade lawyer with Squire, Sanders & Dempsey in Beijing, said in an interview.
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The main shortcomings of the new rules are that they fail to specify penalties for exporting counterfeited goods, leave vague the way in which the value of counterfeited goods are valued, and do not set additional punishments for repeat offenders, Zimmerman said.
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Compared to the rising volume of business in China in recent years, he added, enforcement of patent and copyright protections has actually worsened in recent years. "They just don't have the resources," Zimmerman said of the Chinese government's efforts. He cited the example of China's Trademark Office, which has a backlog of 20,000 cases of disputed trademark registrations and is still dealing with complaints lodged in 1999.
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As in previous visits, Evans and his staff stopped short of explicitly threatening to lodge a complaint against China's commercial piracy with the World Trade Organization - a step that some U.S. trade organizations have said must be considered - but held open the possibility of eventually doing so.
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"Without trying to raise speculation, there comes a point where we have to exercise our rights," Grant Aldonas, the under secretary of commerce in charge of international trade, said in an interview in Beijing.
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While tactfully acknowledging these complaints and threats, Chinese trade officials were also anxious to stress their belief that the United States must pay more heed to China's trade concerns. "The U.S. must understand China's importance to the United States' own economic development," said Jin, the trade official. "It shouldn't neglect us. We need more dialogue between us as equals."
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Jin said China's priority was to win formal U.S. recognition as a "market economy," and he said senior Chinese leaders, including the prime minister Wen Jiabao, would raise the demand with Evans.
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"We want it as soon as possible," Jin said. Formal status as a "market economy" would make it easier for Chinese businesses to fight antidumping complaints brought to U.S. trade offices by U.S. manufacturers, because it would mean China's pricing system is assumed to reflect competitive market conditions.
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Evans said that it was up to China to become a truly market economy and that the United States would not be rushed into any decision. He also brushed aside reporters' questions about the score given to him by the Chinese commerce minister.
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"I'd be very pleased if China reduced piracy and counterfeiting by 70 percent," he said at the news conference.
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