WASHINGTON — U.S. Trade Representative Susan Schwab said she would file two cases against China with the World Trade Organization today, seeking to crack down on what many lawmakers view as inadequate protection of intellectual property rights.
These are the first intellectual property cases the U.S. has brought against China. They come two months after similar actions targeting illegal government subsidies in that country. Such WTO cases, which might lead to retaliatory tariffs, can take years to be resolved.
One of the cases addresses China's legal protocols for protecting and enforcing copyrights and trademarks, and the other focuses on barriers to trade in books, music, videos and movies.
"This is more than a handbag here or logo item there," Schwab said during a news conference here Monday. "It is often theft on a grand scale."
Combined with a Commerce Department decision last month to allow countervailing duty actions against China, the WTO cases represent a harder line in U.S.-China trade relations. The U.S. last year had a record $232.5 billion trade deficit with China, which has become an economic and political hot-button issue as many claim the country's policies give it an unfair advantage on the open marketplace.
"There is no trade war per se with between China and the United States," Schwab said. "We have a strong and growing trade relationship. Therefore it should not surprise anyone that there are frictions in this relationship."
The case on legal protocols, which would affect a wide swath of products, including apparel and accessories, rests on three basic points: thresholds, enforcement at the border and the lack of protection while goods undergo censorship approval in China.
To illustrate the threshold issue, Schwab displayed a table with 500 DVDs, CDs and books, all counterfeit and from China. If Chinese officials raided a business and found 500 counterfeit goods they could potentially send those involved to jail. But if 499 fakes were discovered, the officials would only seize the goods and impose administrative fines.
"The thresholds create a safe harbor for the pirates, and the pirates are only too willing to take shelter there," Schwab said.On the other counts, Schwab said fake goods seized at the border can still be sold in China if the infringing logos were removed and that pirates do not wait for government censors before they start selling their illegal wares.
Lyle Vander Schaaf, a Washington-based intellectual property law expert, said China has taken steps to improve its intellectual property rights protections, but hasn't been able to keep up with demand in its marketplace.
"The problem has gotten worse rather than better and the Bush administration has been sitting back, rather patiently, trying to work with China and the problem hasn't gotten better," Vander Schaaf said. "If they didn't do it now, when would they?"
The case will give the administration more leverage in negotiations with China, he said. But given the breadth of the problem, intellectual property rights should continue to be a concern.
"It's going to be years before China gets to where the developed world wants them to be," Vander Schaaf said.
Stephanie Lester, vice president of international trade at the Retail Industry Leaders Association, a Washington lobbying group, said: "There's been so much pent-up pressure with China, you're just seeing some of the steam being released."
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