Top U.S. Official Warns China on Piracy

November 14, 2006 Updated: November 14, 2006

BEIJING—Rampant Chinese counterfeiting is eroding American support for expanding bilateral trade, U.S. Commerce Secretary Carlos Gutierrez said on Tuesday, warning that China was violating its WTO promises.

Gutierrez told business executives in Beijing that illegal copying of medicine and other kinds of intellectual property (IP) was a threat to consumers' health.

“Another victim of widespread IP theft in China is American support for expanding our trade relationship,” he said, adding that protectionist forces in the U.S. were pressing the issue.

“They point to the lack of robust IP protection in China as a top reason why we should put protectionist policies in place.”

The warning from the top U.S. commerce official comes at a time when Washington is considering complaining to the World Trade Organisation about China's enforcement of patents and copyright.

“Allowing criminal operations to exist safe from prosecution because of unreasonable legal thresholds does not fulfil China's WTO commitment,” said Gutierrez.

Piracy was losing U.S. industry about $2.3 billion a year from revenues for films, music and digital goods, Gutierrez said. On Beijing streets, pirate DVDs cost about $1, much cheaper than legitimate copies sold in wealthy countries.

U.S. customs had been ramping up seizures of counterfeit DVDs, golf clubs, fashion bags and other copycat goods coming to the United States.

In 2005, U.S. customs made 8,000 seizures valued at $93 million, but this year customs had made over 14,000 seizures valued at over $156 million, Gutierrez said.

“There are more infringing goods from China than from all (other) countries combined,” he said.

He praised China's leaders for stepping up punishment of counterfeiters, but said, “The reality of course is we are still behind the criminals and pirates”.

Chinese officials say their country has made extraordinary progress in fighting pirates, but have also said it is unrealistic to expect the problem to rapidly disappear.

Chinese Commerce Minister Bo Xilai said last week that taking his country to the WTO over commercial piracy would be “senseless” and have an “extremely negative impact”.

Staunching China's appetite for pirate products would ultimately depend on opening the country's market to more legitimate films and other goods, Gutierrez said.

Currently, China limits the number of foreign films that can be shown in cinemas to about 20 a year and their release is often delayed, allowing pirate DVDs to swamp the market.

“Market access is the key factor,” said Gutierrez.