[Congressional Record Volume 142, Number 87 (Thursday, June 13, 1996)]
[Senate]
[Pages S6245-S6246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   SENATE RESOLUTION 262--RELATIVE TO THE PEOPLE'S REPUBLIC OF CHINA

  Mrs. BOXER (for herself and Mr. Gregg) submitted the following 
resolution; which was referred to the Committee on Finance:

                              S. Res. 262

       Whereas violations by the People's Republic of China of 
     United States intellectual property rights cost the United 
     States economy an estimated $2,300,000,000 in 1995;
       Whereas in 1991, 1992, and 1994, the office of the United 
     States Trade Representatives initiated special section 301 
     investigations of the People's Republic of China's 
     intellectual property rights violations, but did not impose 
     sanctions;
       Whereas in 1995 the People's Republic of China entered into 
     an agreement with the United States that called for the 
     closing of, or cessation of illegal activities in, factories 
     that were pirating American videotapes, computer software, 
     CD-ROMs, compact disks, and laser disks;
       Whereas despite the terms of the 1995 Intellectual Property 
     Rights Agreement, piracy of intellectual property rights has 
     continued in the People's Republic of China;
       Whereas while United States officials report that officials 
     of the People's Republic of China have recently raided and 
     closed a few factories engaged in piracy, in the past such 
     actions have been cosmetic and only temporary; and
       Whereas the United States Trade Representative has 
     determined that the People's Republic of China tolerates the 
     greatest volume of intellectual property rights piracy of all 
     of the United States trading partners: Now, therefore, be it
       Resolved, That it is the sense of the Senate that sanctions 
     should be imposed upon the People's Republic of China for its 
     failure to comply with the 1995 Intellectual Property Rights 
     Agreement which it entered into with the United States and 
     that such sanctions should remain in effect until the United 
     States Trade Representatives certifies to the Congress that 
     the People's Republic of China is complying with all of the 
     terms of that Agreement by either--
       (1) closing all factories that are engaged in piracy, or
       (2) assuring such factories operate only pursuant to joint 
     ventures or licensing agreements with United States 
     companies.

  Mrs. BOXER. Mr. President, I have been calling on the administration 
to impose sanctions on China if they do not live up to the intellectual 
property agreement that they willingly signed.
  The fact of the matter is, they have approximately 31 factories that 
are turning out laser disks and CD's. They are supposed to destroy 
these factories. I spoke to the U.S. Trade Representative. They seem to 
be making some progress, but not enough.
  And so, Mr. President, I will be pushing hard for these sanctions. As 
the MFN debate comes up, I will support MFN. I also am pleased to say 
Senator Judd Gregg is a coauthor of my sanctions resolution.
  Mr. President, in January 1992 the United States and China signed a 
Memorandum of Understanding obligating China to strengthen its patent, 
copyright and trade secret laws and to improve the protection of United 
States intellectual property.
  On April 30, 1994 the United States Trade Representative, or USTR, 
announced that while China had made significant progress toward 
implementing the 1992 agreement--by enacting new laws on intellectual 
property rights--China's enforcement of those laws was weak and 
sporadic.
  In February 1995 the United States and China reached an agreement, 
signed in Beijing, in which China pledged to substantially reform its 
intellectual property rights and to improve market access. It is under 
this agreement, the 1995 Intellectual Property Rights Agreement, that 
the United States and China currently operate.
  The USTR has determined that China's overall implementation of its 
obligations under the 1995 agreement fall far short of the requirements 
of the agreement.
  The manufacture of pirated U.S. intellectual property, particularly 
computer software, compact discs, laser discs and videos, continues to 
be rampant. Moreover, China's efforts to stop the manufacture of 
pirated United States products has been utterly inadequate.
  A delegation from the office of the United States Trade 
Representative traveled to China on Thursday June 6 and Friday, June 7, 
to reiterate to Chinese officials the United States' resolve in holding 
China to the commitments it made in the 1995 Intellectual Property 
Rights Agreement.
  Ambassador Barshefsky is joining that delegation today and they will 
be meeting with Chinese officials in Beijing over the next several 
days.
  The United States delegation, led by Ambassador Barshefsky, is 
seeking China's commitment to close compact disc plants producing 
pirated software, tighten customs controls on exports of pirated goods 
and to give greater access to the Chinese markets for United States 
music, film and computer software firms.
  It is important to note that the USTR is not seeking new concessions 
on the part of the Chinese Government. Rather, Chinese officials made 
all of these commitments in the Intellectual Property Agreement signed 
last year.
  It has been reported that Chinese officials have indicated progress 
could be made on most of the United States demands--closing compact 
disc factories producing pirated software and tightening controls on 
exports of pirated goods. However, Chinese officials have apparently 
said that United States demands of freer access to the Chinese 
publication, music and software markets may not be met.
  Chinese officials have also balked at United States demands to open 
their markets and to allow United States companies to engage in joint 
ventures with Chinese companies to produce legitimate copies of music, 
films and books.
  Yesterday China's propaganda department reported that it had ordered 
all CD plants opened in recent months, not approved by Beijing, closed. 
China reports that at least 12 plants have been closed.
  Exactly how many plants have been closed, will be closed and most 
important will remain closed remains the subject of verification 
efforts by the USTR delegation and the subject of Ambassador 
Barshefsky's talks with Chinese officials.
  Ambassador Barshefsky has said that ``it remains to be seen whether 
the Chinese effort in this and other areas is sufficient to meet the 
terms of our agreement. I also want to ensure that there is an 
enforcement system in place to crack down on intellectual property 
piracy in the future.''
  Among the seven factories which were closed last spring when the 
agreement was initially signed, all but one has re-opened. There are 
currently about 31 factories, operating throughout China, churning out 
pirated United States computer software, compact discs, laser discs, 
videos, movies, and other products.
  The USTR has recently estimated that United States companies lose 
more than $2 billion annually as a result of the pervasive piracy of 
United States products in China.
  The United States software industry estimates that piracy of computer 
software is in excess of 95 percent in China. The piracy of United 
States CDs, laser discs, cassette tapes, videos, and movies is close to 
100 percent in many parts of China.
  The USTR reports that in the past 2 years, Chinese companies have 
begun

[[Page S6246]]

to export pirated products in fairly significant quantities. For 
example, 29 compact disc and laser disc factories in China have a 
production capacity of as much as 75 million CDs for a domestic market 
that can absorb only 5 million CDs.
  Similarly, China's exportation of CD ROMs, which can hold dozens of 
computer software programs, and other copyrighted works, on a single 
disc continues to increase.
  Some of the fastest growing and most competitive industries in the 
United States--and ones in which we frequently have a trade surplus--
are located in my home State of California. These companies have been 
particularly devastated by China's failure to adequately enforce 
intellectual property rights. The California economy has also been 
affected.
  California is the leading producer of movies, computer software, 
recordings, video games, and other creative works.
  California's movie and television industries employed almost 165,000 
Californians last year. The combined payroll of those industries was 
almost $7.5 billion.
  California, while in the midst of an economic recovery, was gripped 
by a recession from 1990 through early 1995. Much of the success of 
this recovery is largely dependent upon the continued growth and 
expansion of California's entertainment and high technology industries. 
Industries which produce patented and copyrighted material to be sold 
domestically and internationally.
  I would note that the entertainment and high technology industries 
have also helped spurn the Nation's economy. Moreover, these industries 
have provided more jobs and more high wage jobs in California than 
almost any other industries.
  These companies cannot continue to flourish, however, if their 
intellectual property rights are not vigilantly enforced and protected 
throughout the world.
  I understand that the United States-China relationship is a 
multifaceted and important relationship for reasons beyond economics. 
However, China's effective enforcement of intellectual property 
protections is critical to the future success of that relationship and 
is also a clear test of our resolve to enforce our trade agreements.
  That is why I, along with my co-sponsor Senator Gregg, am introducing 
this resolution, expressing the sense of the Senate that sanctions 
should be imposed on China until the USTR certifies that China is 
complying with the 1995 agreement--whether by closing all pirate 
factories, or by allowing such factories to operate pursuant to joint 
venture or licensing agreements with U.S. companies.
  The USTR initiated special section 301 investigations of China's 
intellectual property rights violations in 1991, 1992, and 1994, but no 
sanctions were imposed.
  The USTR has determined that China tolerates the greatest volume of 
intellectual property rights piracy of all of other United States 
trading partners.
  Therefore, I think it is imperative that we pass this resolution. The 
passage of this resolution will send a clear message that the U.S. 
Senate is firmly committed to protecting U.S. intellectual property 
throughout the world.
  The passage of this resolution will also let the Chinese government 
know that the United States Senate is firmly resolved to effectuating 
and enforcing our trade agreements.

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