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U.S. Lodges Piracy Complaints Against China

The United States is turning to the World Trade Organization (WTO) to settle two trade disputes with China involving intellectual property (IP) rights. China tops the U.S.'s Priority Watch List for IP theft.

The first case involves China's laws for protecting and enforcing the country's copyright laws. The other case cites China's trade barriers to books, videos and movies.

"Piracy and counterfeiting levels in China remain unacceptably high," U.S. Trade Representative (USTR) Susan C. Schwab said in a statement. "Inadequate protection of intellectual property rights in China costs U.S. firms and workers billions of dollars each year, and in the case of many products, it also poses a serious risk of harm to consumers in China, the United States and around the world."

The U.S. contends Chinese laws create a safe harbor for wholesalers and retailers who distribute and sell counterfeit products. Although China recently lowered its threshold for criminal copyright prosecution, Schwab said the lower standards still permit large-scale piracy and counterfeiting.

The second case focuses on the rules for disposal of infringing goods seized by Chinese customs authorities. The USTR claims the permit goods to be released into commerce following the removal of fake labels or other infringing features, when WTO rules dictate that these goods normally should be kept out of the marketplace altogether.

Schwab said the U.S. and China have made progress on a number issues involving IP, but "we have not been able to agree on several important changes to China's legal regime that we believe are required by China’s WTO commitments.

Commerce Secretary Carlos M. Gutierrez also praised the efforts of China IP negotiations through the U.S.-China Joint Commission on Commerce and Trade (JCCT) and the newly formed U.S.-China Strategic Economic Dialogue.

"Despite this progress, the United States and China have been unable to reach an agreement on certain critical issues," Gutierrez said in a statement. "Therefore the United States is utilizing available dispute settlement tools, including WTO consultations, to resolve them as we do in any mature trading relationship."

Turning to the WTO to resolve the issues brought praise from Congress and U.S. trade groups.

"Late is better than never," U.S. Sen. Charles Schumer (D-N.Y.) said in a statement. "China has no excuse to allow American intellectual property to be ripped off without consequences. I hope this is just the beginning of a much stronger Administration stance on China's non-stop violations of free trade rules."

U.S. Sen. Chuck Grassley (R-Iowa) said the action is necessary because China continues to "refuse to play by the rules."

"Intellectual property drives a big part of our economy. We need to defend U.S. companies against abuse and hold our trading partners to the commitments they made in joining the WTO."

Mitch Bainwol, chairman and CEO of the Recording Industry Association of America, said music piracy in China continues to be "pervasive in China and takes place virtually without meaningful consequence."