By Teng Fei
The dispute between China and the United States over
intellectual property rights (IPR) has been gaining momentum in
recent years as bilateral trade development speeds ahead. It is of
real and present significance for both countries to deal with this
core issue by objective assessment and rational analysis, and to
discuss in-depth co-operation in protecting and promoting IPR in a
timely fashion.
Strengthening IPR protection is the logical choice for both
countries to safeguard the basic interests of their national
economies. The US economy is highly dependent on technology export
trade centered on IPR, and China has become the fourth-largest
export market for the United States.
In the past five years, the value of US exports to China grew at
a rate five times that to other countries. As the exclusive
ownership of IPR will bring long-term benefits to US enterprises
exporting to China, it is only natural for the United States to
emphasize IPR protection for the sake of its national economic
interests.
China's economic development has largely passed the phase of
"imitation" and has entered that of "learning" and "innovation." It
is now part of China's basic national strategy to build itself into
an innovative nation, to respect others' IPR and possess its own
IPR. To China, strengthening IPR protection is not a result of
outside pressure, but of a real need for the development of its
national economy, respect for international rules and to safeguard
national security and economic interests.
The Sino-US dispute over IPR reflects different attitudes
towards related international conventions. China follows the
fundamental philosophy of "international treaty comes first." When
China's domestic law is in conflict with an international treaty of
which it is a signatory, the latter is usually applied first unless
it has reservations. The US Congress, however, has made it clear,
upon ratifying relevant international treaties, that US domestic
law takes precedence when the two are in conflict.
The sharp contrast in the way each country treats international
treaties has resulted in vastly different styles of solving IPR
disputes with other countries. China is building up its own IPR
regulatory system on the basis of respect for international
treaties and bringing its own IPR administration in tune with
international treaties. whereas the United States tends to force
changes in international treaties in its favor when they do not
serve US interests; or the nation reserves its self-possessed right
not to follow international treaties and imposes unilateral
sanctions against those it accuses of infringing on US IPR.
Along with globalization and the explosive development of
information technology, IPR violations are becoming more
complicated in the Chinese market, while the protection of IPR in
China is faced with structural obstacles, posing a long-term threat
to China-US efforts to solve the problem.
The IPR issue between China and the United States is in essence
the clash of different standards followed by the two countries at
different stages of development. The United States has a fully
fledged anti-monopoly, competitive system and takes IPR
administration, the order of market economy and trade all into
account at home; while internationally it is pushing for forced
global protection of IPR in a bid to gain monopoly control of
foreign markets and reap as much economic benefit as possible.
China has been doing its best to beef up IPR protection according
to international standards, but its efforts are seriously hampered
by the enormous cost born of its nascent development level and huge
regional gap, which makes it very hard for China to apply US-style
super-harsh protection for IPR in its domestic market.
The criminal activities in IPR infringement are undergoing a
globalization of their own, with numerous perpetrators of IPR and
trademark violations forming tight-knit networks throughout the
world, making it increasingly difficult for China to enforce IPR
laws.
The difference between the statutory mechanisms the two
countries maintain is also one of the causes of bilateral disputes
on IPR protection. From the standpoint of a market economy, using
exclusive ownership to abuse IPR in the form of a monopoly and high
prices will distort the market price system and upset the balance
between supply and demand, thus leaving more room for profiting
through IPR violations such as piracy.
For this, the United States and other developed countries
continue to improve anti-monopoly measures and take IPR
administration, the order of the market economy and trade all into
account, while encouraging the market to check IPR violations by
its own efforts through appropriate intervention. In contrast,
China has been suffering from the persistent problem of a porous
statutory mechanism for IPR administration, leaving the
ill-balanced supply and demand in the Chinese market caused by some
multinational companies' price monopolies intact for years. This is
another reason why IPR infringement is so rampant in China.
Cross-national companies have become key players in the Chinese
market, making the identification of real perpetrators of IPR
violation increasingly difficult. Take computers, for instance.
Most of the manufacturers of brand-name PCs in China are
multinationals and most of the computers made in China are seen as
a processing trade. If the use of pirated software in China is
really 90 percent, it would mean a good many of those
cross-national companies are using pirated software, though there
is no hard evidence of that at this moment.
Now China and the United States are showing a trend of settling
IPR disputes rationally.
The United States has been flirting with a domestic force of
trade protectionism against China for years. Those people use
imaginary, or obviously unfounded, data to wantonly blow out of
proportion the seriousness of IPR violations on the Chinese market
and the losses they have incurred on US businesses. Their purpose
is to reap political benefit from politicizing and complicating the
issue. Recently, the US protectionists whipped out another bunch of
sensational figures, claiming the use of pirated software in China
is 90 percent and causes US$20 billion to US$24 billion worth of
losses to US IPR owners each year, all without identifying any
sources or revealing how the figures were tallied.
The good news is that the US government is now aware of the
complexity of China's IPR infringement problem and is seeking
co-operation with Chinese law enforcement authorities, with some
degree of success. For instance, the two countries joined forces to
successfully crack a case of illegal online sales of pirated DVDs
by a US citizen in 2004. US government officials at various levels
have also emphasized on many formal occasions the importance of
US-China co-operation on IPR protection to achieve mutual benefit
and prosperity, while the Chinese side has responded with concrete
action in a highly co-operative manner, allowing the joint IPR
protection mechanism to further improve.
IPR protection requires the support of a sound and competent
economic foundation that is complementary to the improvement of IPR
protection. The resolution of the IPR issue depends on the
all-round development of Sino-US trade and economic relations and
even more on the healthy, harmonious and simultaneous development
of the two countries' national economies.
The author is a researcher with the International Technology
and Economy Institute under the State Council Development Research
Center.
(China Daily April 19, 2006)
