[Congressional Record Volume 140, Number 45 (Thursday, April 21, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 21, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                       ``SPECIAL 301'' TRADE LAW

 Mr. BAUCUS. Mr. President, on April 30, U.S. Trade 
Representative Mickey Kantor is scheduled under our ``Special 301'' 
trade law to release the USTR's annual list of priority foreign 
countries, whose toleration of piracy or barriers to market access are 
the worst.
  Intellectual property products have three broad types: Copyrighted 
works; patented products, and trademarked goods. The industries which 
produce them are among our most successful exporters. American film and 
TV has a $3.5 billion trade surplus each year. American pharmaceuticals 
have a $1 billion surplus. Our computer software is the world's best, 
and American trademarks get instant recognition worldwide.
  Few industries are this successful. Unfortunately, the piracy 
industry is one of them. Pirates all over the world copy, mass-produce, 
and sell U.S. intellectual property work like films, videos, sound 
recordings, books, pharmaceuticals, Reebok shoes, agrichemicals, Mickey 
Mouse T-shirts, CD's, and computer software--you name it. The annual 
cost to the United States was estimated at up to $61 billion several 
years ago, and is likely much higher today.
  Market access barriers to American creative works are also a problem. 
And still a third issue is weak legal regimes. These are problems not 
only in developing countries, but in our industrial rivals.
  The European Union's egregious broadcast quota is one glaring 
example.
  The Japanese Education Ministry's conference last year, aimed at 
weakening copyright protection for software programs and thus allowing 
Japanese computer companies to copy superior American works, is 
another.
  Special 301 requires the USTR, every year, to compile a list of 
countries which allow the most egregious piracy of U.S. intellectual 
property; are least open to intellectual property exports; and have the 
weakest legal protections for intellectual property rights. The worst 
of these are designated ``priority foreign countries.''
  USTR also places countries which allow lesser degrees of piracy on a 
``Priority Watch List'' and also a plain, ordinary ``Watch List''. 
Appearing on a list warns the listed country that we are aware of its 
misbehavior, and consequences will follow if it does not act.


                       the record of special 301

  Special 301 is a law that works. When we choose our top priorities, 
set deadlines and back them up with the prospect of trade retaliation, 
we get results.
  One example is Thailand. For years, Bangkok pirates laughed at us. 
You could not buy a legitimate American CD or videotape anywhere in the 
country. In 1992, the Bush administration named Thailand a priority 
foreign country. And last year, when we made clear to the Thai 
Government that we had reached the point of retaliation, the Thais 
acted. Within a few weeks, pirate CD's and videos were off the street. 
We still need to see more in software, but we have made a good start.
  Also last year, Paraguay shut down an audiocassette piracy industry 
that supplied virtually all South America with counterfeit goods after 
it was placed on the Watch List. Taiwan, under threat of retaliation, 
agreed to stop piracy of CD's and American television programs.
  And just a month ago, Brazil, at long last, agreed to pass acceptable 
intellectual property laws.


                     the people's republic of china

  In 1991, we had a similar success. The Bush administration named the 
People's Republic of China as a priority foreign country, and the 
threat of retaliation forced the Chinese to adopt modern copyright, 
patent and trademark laws.
  Unfortunately, that particular success is turning sour. While China 
adopted good laws, it has done nothing to enforce them.
  Today, 26 pirate CD factories are operating in China, with a 
production capacity of 50 million CD's a year. They are not only 
causing American artists to lose money--and it's a lot of money, $827 
million last year, more than double the estimate of $415 million in 
losses for 1992--but are beginning to compete with our legitimate 
industries in other Asian markets and even Latin America.
  China could obviously shut these pirate factories down immediately. 
It could also, as we have continuously suggested, adopt criminal 
penalties for copyright violation. And it could establish a credible 
investigation and enforcement task force. It has done none of those 
things, and shows no intention of doing so in the near future.
  This situation is intolerable. The credibility of Special 301, and by 
extension, all our trade laws, depends on following through. We cannot 
allow a country to adopt laws to stop piracy and then happily ignore 
them. And if a country as big as China can go into full-scale piracy, 
our efforts in all the other countries, no matter how successful, will 
become meaningless.
  China must be named a priority foreign country once again. If it will 
not shut down the pirates, China must face trade sanctions. It is that 
simple.


                   special 301 and the uruguay round

  Finally, of course, the future of Special 301 is closely linked to 
the Uruguay round of the GATT. It is my view, and Ambassador Kantor has 
endorsed this view at Finance Committee hearings, that the United 
States reserves all its rights to use laws like Special 301 after the 
Uruguay round goes into effect.
  In most cases, the situation will not change. However, the United 
States has made some concessions which may make use of Special 301 
somewhat more difficult. The round grants developing countries, for 
example, long phase-in periods to pass modern pharmaceutical patent 
laws. During these phase-in periods, we will have to be creative.
  The implementing bill must contain provisions that make sure Special 
301 can be used to seek full enforcement of GATT commitments and speed 
up the phase-in of new and stronger laws. It must also contain measures 
to require careful monitoring of countries' application of the GATT 
standards, and mandate U.S. action if they are not met. We should 
consider use of all the tools at our disposal, such as withdrawing or 
suspending foreign aid to countries which allow piracy of American 
works.
  One option which I support is strengthening the intellectual property 
qualified of the Generalized System of Preferences.
  The GSP, which grants duty-free treatment to many developing country 
exports, should require beneficiaries to adopt Uruguay round standards 
of intellectual property law immediately. Denial of benefits under the 
Caribbean Basin Initiative or the Andean Trade Preference Act is also a 
possibility. We have other options as well, and should explore them as 
we develop implementing legislation.

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