U.S. Warns China on Piracy, Market Access
In Beijing, Gutierrez Says Action on U.S. Complaints Could Blunt Protectionism

By Edward Cody
Washington Post Foreign Service
Wednesday, November 15, 2006

BEIJING, Nov. 14 -- Commerce Secretary Carlos M. Gutierrez said Tuesday that he is telling concerned Chinese officials that the best way to avoid trade restrictions from the new Democratic-controlled Congress is to act swiftly on U.S. complaints about brand pirating and market access.

"We don't want to give anyone the justification for protectionist trade policies, which we think would be a big mistake," Gutierrez said in an interview at a U.S.-sponsored roundtable on intellectual property rights.

The suggestion from Gutierrez responded to worries among some Chinese officials and other specialists that Democrats assuming House and Senate committee chairmanships will be less friendly toward China than their outgoing Republican counterparts, particularly on such issues as trade and human rights.

The presumptive incoming speaker of the House, Rep. Nancy Pelosi (D-Calif.), has been noted here as a particular critic of the Communist Party government and its human rights record. In general, Chinese specialists said, Democratic leaders also seem more willing than Republicans to lend a sympathetic ear to complaints from labor unions that U.S. jobs are being lost as companies expand to China, seeking to benefit from a cheap workforce.

Gutierrez said the danger of protectionist measures in Congress had been a subject of concern during his three previous trips to China as commerce secretary. Sen. Charles E. Schumer (D-N.Y.) last year stirred worries here by seeking punitive 27.5 percent duties on Chinese products unless Beijing revalued its currency against the dollar. The effort went nowhere under the Republicans, but concerns have arisen anew in China since Democrats gained control of both houses of Congress in last week's midterm elections.

The underlying problem, China's trade surplus with the United States, has not subsided. The U.S. deficit with China was $202 billion last year and hit $166 billion in the first nine months of this year. Heeding U.S. concerns, China has allowed its currency, the yuan, to revalue slightly against the dollar over the past six months, but at a rate dismissed as too slow and too little by Schumer and other critics.

"Those who espouse protectionism as a legitimate economic policy have a loud voice," Gutierrez said in a speech to participants in the roundtable discussion that addressed those concerns. "They cite specific imbalances. And they point to the lack of robust protection" of intellectual property "in China as a top reason why we should put protectionist policies in place. This would be the wrong course. However, we can't disprove the critics with rhetoric. We need results."

Specifically, Gutierrez said China should strike harder at criminal groups that pirate U.S. brands, enacting laws that make prosecution easier. In response, China's commerce minister, Bo Xilai, told reporters that Chinese prosecutors are bringing more cases against counterfeiters and that the government has financed 50 centers around the country to gather information on intellectual property violations.

In practice, however, knockoff brands have become part of the scene in Beijing and other Chinese cities, where street vendors openly hawk pirated DVD movies and small shops sell fake designer labels. Although police occasionally crack down, enforcement has been sporadic at best, in part because the livelihoods of many poor merchants depend on such trade.

Gutierrez said greater market access for U.S. movie companies also could help discourage such trade, making legitimate discs more available. Banking and retail merchandising are two other areas where regulations should be loosened to allow U.S. business greater freedom to operate, he said.

Although the deficit remains large, since China's accession to the World Trade Organization, U.S. exports to China have grown about 20 percent a year, making China the fourth-largest U.S. export market, Bo told Gutierrez. So far this year, they have risen 34 percent over the comparable period last year, totaling $40.2 billion.