China Criticizes U.S. for Filing Trade Grievance Cases With World Trade Organization

WASHINGTON – The Bush administration announced new trade cases against China over copyright piracy and restrictions on the sale of American movies, music and books.

Standing near a table of pirated movie DVDs, music CDs and books, U.S. Trade Representative Susan Schwab said that American companies were losing billions of dollars annually from piracy levels in China that "remain unacceptably high."

She said the United States would file the two cases on Tuesday with the World Trade Organization, the Geneva-based organization that oversees trade disputes.

One case will contend that Beijing's lax enforcement of copyright and trademark protections violates WTO rules, and the other will argue that Beijing has erected WTO-illegal barriers to the sale of U.S.-produced movies, music and books in China.

The action marked the latest move against China on the part of the Bush administration, which is trying to deal with rising political anger over soaring U.S. trade deficits.

In Beijing, the Xinhua News Agency reported that that the Chinese government "expressed on Tuesday great regret and strong dissatisfaction" at the U.S. decision to file the complaints.

The trade cases exposed a split in the business community: The film, music and book publishing industries supported the move while some other industries were concerned over whether the aggressive approach to China could result in retribution.

In her news conference, Schwab acknowledged that different industries favor different approaches. She noted that the software industry scored a big victory last year when China agreed to sell all computers with operating software.

"Where we are making progress, there is no need to litigate," Schwab said.

The U.S. trade deficit set a record for the fifth consecutive year in 2006 at $765.3 billion. The imbalance with China grew to $232.5 billion, the highest ever with a single country.

Earlier this year, the administration filed a WTO case against China's use of government subsidies to support Chinese companies. The administration on March 30 announced it was imposing penalty tariffs on Chinese glossy paper imports in a case that broke a 23-year precedent that had barred U.S. companies from seeking such protection in cases involving nonmarket economies such as China.

Democrats, who won control of both the House and Senate last fall with campaigns that attacked Bush trade policies, said Monday that tougher action was still needed.

"Late is better than never," said Sen. Charles Schumer. "I hope this is just the beginning of a much-stronger administration stance on China's nonstop violations of free-trade rules."

Schumer and a group of other senators are drafting legislation to penalize China for manipulating its currency to gain trade advantages.

Sen. Sherrod Brown called the timing of the new cases "certainly suspicious" given that they come when the administration is asking Congress to renew President George W. Bush's fast-track authority, which allows him to negotiate trade deals for expedited consideration by Congress.

Gary Hufbauer, a trade expert at the Peterson Institute, a Washington think tank, said that the new get-tough approach is an effort by the administration to regain control of the trade debate now that Democrats are in control of Congress.

Hufbauer said Treasury Secretary Henry Paulson, who has initiated new high-level economic talks with the Chinese, probably warned Beijing that it could expect trade cases to be filed if his discussions did not bear fruit.

The decision to go to the WTO with the two new trade cases will trigger a 60-day consultation period during which trade negotiators from both countries will try to resolve the two disputes.

If that fails, WTO hearing panels would be convened. If the U.S. wins the cases, it would be allowed to impose penalty economic sanctions on Chinese products.

In a statement, the Motion Picture Association of America and the Recording Industry Association of America both applauded the administration's action.

The MPA said that American industries lost an estimated $2.3 billion in revenue to copyright pirates in China in 2005 with only one out of every 10 DVDs sold in China a legal copy.