U.S. to press China on counterfeiting

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WASHINGTON (MarketWatch) -- The U.S. will press China next week to ensure that its recent crackdown on counterfeiters will produce meaningful and long-lasting results, a trade official said Friday.

The six-month campaign China launched in October to beef up enforcement of intellectual property rights has won guarded praise of the U.S. government and business community. But frustrated that past pledges to curtail rampant piracy have fallen short, U.S. business groups and lawmakers plan to push for China to agree to benchmarks to demonstrate real progress, at annual high-level trade talks held in Washington next Tuesday and Wednesday.

A U.S. trade official declined to discuss specific proposals being considered, but said the U.S. will seek to build on China's own efforts.

"We're trying to work with China on ensuring that what China does is meaningful in terms of helping our own innovators benefit from increased protections from on [intellectual property rights]," the official told reporters on Friday.

Deputy Under Secretary of Commerce for Intellectual Property Sharon Barner said last week she is encouraged that the campaign is being promoted at the highest levels of the Chinese government. But given the fate of past promises, she said the administration will "watch closely to determine whether or not there is indeed active engagement on protecting IP rights."

U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke are co-hosting the Joint Commission on Commerce and Trade, with Vice Premier Wang Qishan leading a Chinese delegation expected to approach 100 in size.

Lax enforcement of intellectual property rights is just part of a broader range of concerns about China's policies aimed at encouraging innovation domestically.

The currency issue may be the most heated economic dispute between the countries, but many multi-nationals doing business in China say they are more threatened by the so-called "indigenous innovation" policies. They complain that the policies restrict access to the country's lucrative government procurement market and create pressure to give up sensitive technologies.

"The business community has not seen tangible steps yet that China is pulling back from these policies," said Jeremie Waterman, senior director for greater China at the U.S. Chamber of Commerce. "There seems to be a slow walk going on at the central level, meanwhile, discrimination is occurring at the provincial level."

Newly empowered Republicans in the House, such as incoming Ways and Means Chairman Dave Camp (R., Mich.), have also signaled that they plan to shift the focus away from China's undervalued yuan to concerns about innovation and intellectual property rights. While the House has passed legislation to retaliate against China's weak currency by imposing duties, there is little chance that it will be taken up by the Senate this year and become law.

Camp and 32 other House members from both parties sent a letter Friday to Locke and Kirk calling for measurable results on China's commitments to improve market access and intellectual property rights.

"We urge the administration to measure progress on greater U.S. market access into China and protection of U.S. intellectual property rights by objective criteria," the letter said, proposing benchmarks on higher exports to China and a reduction in piracy.

That follows a letter that a bipartisan group of 32 U.S. senators sent to Wang earlier in the week demanding concrete progress during the talks. They urged China to ensure that intellectual property enforcement produces measurable results, its innovation policies don't discriminate, and that restrictions are lifted on U.S. beef imports.

The senators also warned that they could take up the House currency bill unless the yuan is allowed to "appreciate meaningfully" before President Hu Jintao comes to town next month to meet with President Barack Obama.

Despite complaints that the annual trade talks rarely produce significant or lasting results, business groups hope the presidential meeting will improve prospects for progress.

One area of focus is reducing software piracy in a country with a piracy rate of 79%, creating lost revenue of $7.9 billion for software makers last year, according to the Business Software Alliance.

A push by the trade group, which includes tech giants like Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 320.56, +0.80, +0.25%) and Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 27.34, +0.26, +0.96%) , for specific commitments like a 50% rise in software sales and independent verification of legal software use has garnered support on Capitol Hill.

"Whether this agreement results in a significant resolution of the IPR problem will be judged not by a six-month campaign or by a series of statement, but by the proof of whether sales are increasing year over year," Robert Holleyman, president and chief executive of the Business Software Alliance, said.

Holleyman said he is "guardedly optimistic" about progress, following a meeting last month with Wang to discuss China's plan to ensure that government bureaus and businesses are using legitimate software.

The U.S. trade official declined to comment on the proposal, but said the administration is "taking on board a lot of the concerns from the software industry" and will press China for sustainable results.