China, US Accept Mixed Verdict in Piracy Dispute

25 March 2009

China and the US have officially accepted a WTO ruling in a piracy dispute that Washington launched against Beijing nearly two years ago. Speaking at a meeting of the WTO’s Dispute Settlement Body on 20 March, both countries indicated that they would not appeal the decision.
 
The final ruling in the case, which was released in late January, found that some aspects of China’s laws governing intellectual property protections are inconsistent with world trade rules (see Bridges Weekly, 28 January 2009, https://www.ictsd.org/bridges-news/bridges/news/ruling-in-us-china-piracy-dispute-raises-controversy). But Washington’s claim that Beijing sets too high of a bar for punishing copyright infringements with criminal prosecution could not be substantiated, the dispute panel concluded. 
 
The announcement of the mixed verdict drew claims of satisfaction from both sides.
 
“Today, the membership of the WTO agreed that China must bring its intellectual property rights enforcement regime into conformity with its WTO obligations,” newly confirmed US Trade Representative Ron Kirk said in a statement.
 
“China has consistently repeated its intentions to abide by WTO rules. In that spirit, I look forward to China’s prompt compliance with the WTO’s rulings in this dispute,” added Kirk, who promised US lawmakers earlier this month that he would take a strong stance on enforcing trade law (see Bridges Weekly, 11 March 2009, https://www.ictsd.org/bridges-news/bridges/news/kirk-pledging-strict-enforcement-looks-set-to-take-top-us-trade-job).
But Beijing insisted that the WTO had ruled largely in its favour. Yao Jin, a spokesman for China’s Ministry of Commerce said that the ruling “rebutted the great majority of the US side’s claims and broadly vindicated China’s intellectual property system,” Reuters reported.
 
The announcement of the verdict marked the end of a dispute that has been closely followed by US film, music, publishing and software companies, who claim that Chinese piracy costs them billions of dollars each year.
 
In its initial request for consultations in April 2007, the US cited three specific complaints (see Bridges Weekly, 18 April 2007, https://www.ictsd.org/bridges-news/bridges/news/us-files-wto-complaints-against-china-over-counterfeiting-trade-barriers).
 
The WTO affirmed two of those claims but rejected the third.
 
The WTO upheld the US allegation that Beijing was wrong to deny copyright protections to materials like music and DVDs that had not been approved by Chinese censors. The WTO said that that provision contravened WTO’s the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement), as well as Article 5(1) of the Berne Convention, which requires countries to grant foreign authors the same protections that they bestow on domestic authors.
 
The global trade body also backed Washington’s charge that China’s rules governing the disposal of trademark-infringing imports are inconsistent with Article 46 of the TRIPS Agreement, which states that, other than in “exceptional cases,” countries cannot simply remove the infringing logos from counterfeit goods, then release those goods into the market.
 
But the WTO did not agree with one of Washington’s most serious allegations: that Beijing sets too high of a bar for punishing copyright infringements with criminal prosecution. This laxness, the US had argued, has permitted large-scale trade in pirated movies and music. But the WTO was not convinced; “the United States has not established that the criminal thresholds are inconsistent with China's obligations,” the final report said.
 
Following the acceptance of the ruling, the main question that remains is how China will bring its IP laws into compliance with the WTO ruling.
 
“China will be examining the report carefully and will advise the [Dispute Settlement Body] of its intention in respect of the implementation,” Beijing said in a statement before the WTO court on Friday.
 
ICTSD reporting; “China, US trade barbs over WTO piracy case,” REUTERS, 20 March 2009.

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