Peking backs off US trade war

FROM TERESA POOLE

in Peking

China yesterday bowed to United States demands to crack down on intellectual piracy and to allow greater access for US films and music. The agreement, signed more than nine hours after the deadline for US sanctions to take effect, averted a tit-for-tat trade war.

Starting on Wednesday, there will be a six-month "special enforcement period" to investigate factories in China suspected of producing pirated CDs, laser discs and CD-roms.

The top US negotiator in Peking, Charlene Barshefsky, said that under the pact China will create task forces "to search premises, review business records, preserve evidence, destroy goods, destroy equipment used in the manufacture of infringing goods, to order infringement to stop and to refer cases for criminal prosecution."

Mindful of China's inability to implement existing copyright laws, she added: "There is no question that the key to this agreement will be implementation." For the first year China will provide data every three months on establishments raided, products seized and criminal prosecutions. "The agreement lays out a very detailed verification and consultation package," Ms Barshefsky said.

Recently, as trade sanctions against Chinese imports appeared likely, China had closed seven CD factories and and destroyed more than 2 million pirated CDs and computer software disks. "We believe this is a good beginning, and a foundation on which we can build," she said.

The turning-point appeared to have been reached on Saturday, when China announced it had closed a notorious pirating operation, the Shenfei Laser and Optical System Company, in the southern Shenzhen Special Economic Zone. The party mouthpiece, the People's Daily, yesterday said Shenfei was ordered to stop doing business for "severe infringement upon copyrights", including the production of illegal video discs of the film Jurassic Park. A second factory, the Zhuhai Special Economic Zone Audio-video Publishing House, was also ordered to stop doing business.

More than a year ago, the US gave Peking a list of 29 factories in the south said to be manufacturing 75 million pirated CDs, laser discs and computer software disks a year. Action against these plants became an essential US demand if a trade war was to be averted.

While it appears China has capitulated to US demands, the enforcement question remains. For years China has been improving its copyright laws, but without implementing them.

Yesterday, outside the Independent's office, street hawkers were still selling pirated CDs and said that more would be available. The problem for the government is that the offending factories in southern China often have strong links to local governments that are opposed to closing profitable, albeit unlawful, enterprises.

Asked about US confidence that China would enforce the agreement, Ms Barshefsky said: "We had despaired for some time of China's political will to stop piracy but China's actions in the past month ... provide us, we believe, a basis on which to build stronger and even more effective enforcement authority."

The agreement will help to open the Chinese market to legitimate American products. Ms Barshefsky said that China had agreed to drop quotas, import licence requirements and other restrictions on audio-visual material. The annual quota of 10 foreign feature films for showing in cinemas has boosted the demand for pirated film videos and laser discs.

China will also allow US companies to establish joint ventures for the production of CDs, laser discs, cassettes and videos. To start with, such joint ventures will be allowed in Shanghai, Canton and other big cities, with a commitment to extend the permits to 13 cities by 2000.

China's Minister for Foreign Trade and Economic Co-operation, Wu Yi, said that the agreement was "a new turning- point for our bilateral relationship". Although the US side said that it had made no pledges on aiding China's entry into the World Trade Organisation, settling the copyright dispute may pave the way for negotiations to restart in Geneva.

However, China made clear that it is not about to make a habit of giving in to US demands. The State Council published a vigorous and lengthy reply to a recent US State Department report on human- rights abuses in China. China's cabinet said that there was no such thing as "cracking down on political dissidents", there were no prisoners of conscience, organs were not transplanted from executed criminals without their consent and a Tibetan nun had not been beaten to death.