[Congressional Record Volume 141, Number 36 (Monday, February 27, 1995)]
[Senate]
[Page S3226]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


 INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT AGREEMENT WITH THE PEOPLE'S 
                           REPUBLIC OF CHINA

 Mr. THOMAS. Mr. President, as the chairman of the Subcommittee on East 
Asian and Pacific Affairs, I am pleased to report to my colleagues that 
early yesterday the United States signed an Intellectual Property 
Rights Enforcement Agreement with the People's Republic of China.
  Since 1992, the People's Republic of China has failed to live up to 
its obligation under the memorandum of understanding on intellectual 
property rights. Factories throughout China, especially in such 
southern and eastern provinces as Guangdong, continue to mass-produce 
pirated versions of American computer software, compact discs, CD-
ROM's, and video and audio cassettes mostly for sale abroad. The United 
States Trade Representative estimates that piracy of audio-visual works 
runs close to 100 percent, while piracy of other technological items 
such as computer software runs around 94 to 100 percent. In addition, 
piracy of trademarks is rampant. This piracy is much more than a minor 
nuisance. The sale of these pirated items has cost U.S. businesses more 
than $1 billion, a sum which threatens to increase exponentially as the 
number of pirated products swells. It endangers Americans jobs, as well 
as our primacy in software innovation.
  While we understand that enforcing IPR in such a large country can be 
difficult, such an argument in relation to the People's Republic of 
China is somewhat specious in light of the fact that production is 
tolerated, if not actively encouraged in some instances, by Chinese 
municipal and provincial governments as well as the central authorities 
in Beijing. The United States Trade Representative has complained 
repeatedly about the problem and United States-China negotiators have 
been meeting for more than a year and a half in an effort to resolve 
it.
  Still, the Chinese refused to stem the manufacture of these goods. 
Consequently, the United States Trade Representative proposed to impose 
punitive tariffs on about $1 billion worth of Chinese goods if a 
satisfactory accord was not reached by February 26. The two sides 
negotiated right up to and past the deadline, and in the early hours 
Sunday reached a consensus.
  The agreement has three principle goals: to take immediate steps to 
stem piracy of IPR material, to make long-term changes to ensure 
effective enforcement of IPR in the future, and to provide United 
States IPR holders with greater access to the Chinese market. As for 
the first goal, Beijing has pledged to implement a 6-month special 
enforcement period beginning March 1 during which time the Government 
will increase resources to target the 29 CD and laser disc factories 
known to be engaging in pirated production, and confiscate and destroy 
illegally produced output and the machinery used to produce it. Beijing 
has already signaled its willingness to work with us on this front; 
during the negotiations, the authorities shut down seven of the illegal 
factories including two of the most notorious--the Shenfei Laser 
Optical Systems Co. plant in Shenzhen, and a factory in Zhuhai. In 
addition, Beijing has proposed to tighten its customs practices to stem 
the exportation of illegal products.
  As for long-term changes, the Chinese Government has pledged to 
ensure that Government ministries cease using pirated software--
apparently pirated Microsoft products are very popular, even within the 
Trade Ministry. Furthermore, the Government will establish an effective 
IPR enforcement structure consisting of IPR conference working groups 
at the central, provincial, and local level to coordinate enforcement 
efforts, and to ensure that the laws are strictly enforced. Similarly, 
it will remodel its customs enforcement system after that of the United 
States. Lastly, China would create a title verification system, and 
would ensure that United States right holders have access to effective 
and meaningful judicial relief in cases of infringements.
  Finally the People's Republic of China has pledged to enhance access 
to its markets for United States right holders. It will place no quotas 
on the importation of U.S. audio-visual products, and will allow U.S. 
record companies--subject to certain censorship concerns--to market 
their entire catalog. Finally, United States companies will be 
permitted to enter into joint ventures for the production and 
reproduction of their products in the People's Republic of China.
  Mr. President, although I fully supported the position of the United 
States Trade Representative and would have fully supported the 
imposition of sanctions, ultimately imposing sanctions on the Chinese 
would have been a Pyrrhic victory. ``When two dragons fight, the 
grasses are trampled''; a trade war would have had disastrous effects 
on countless U.S. businesses, as well as overall Sino-American 
relations. I'm glad that we have avoided that outcome, and am pleased 
with the resulting agreement. I would like to commend Charlene 
Barshefsky, Deputy U.S. Trade Representative, for her hard work.
  On March 8, our subcommittee will conduct a hearing on IPR in China 
and the Enforcement Agreement. I hope to learn about the agreement in 
detail from the United States Trade Representative's office, and to 
hear from representatives of private industry on their view of the 
accord. While the agreement is an important step forward, the true test 
will lie in its implementation; and we intend that the subcommittee 
will closely monitor compliance with the agreement over the coming 
months.


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