China Piracy: Rules Are Meant To Be Broken

The US got what it described as a victory in a WTO case against China. The system set up in the world’s most populous nation forced US companies to sell books, DVDs, and movies through state-owned or state-approved companies. The Americans made the case that this prevented free trade. They want the ability to market entertainment through any legitimate partner based on the mainland, not those designated by the central government.

According to the The New York Times, Ron Kirk, the United States trade representative, praised the panel’s legal finding. “This decision promises to level the playing field for American companies working to distribute high-quality entertainment products in China,” Mr. Kirk said, “so that legitimate American products can get to market and beat out the pirates.”

Mr. Kirk’s comments hide the core of the Chinese attitude toward intellectual property. The issue is not whether products from the original producers make it to consumers first. The prevention of piracy in China is not a race, and the WTO ruling will do nothing to change that. A US movie company that wants to charge $2 for a DVD will continue to be up against a web of piracy set up to sell consumers that product for $.20. The fact that it is now available directly from America does not change that. The only thing that will alter the illegal sale of content is the strictest enforcement of intellectual property laws, and the Chinese have shown absolutely no intention of doing that.

Microsoft has made Windows available in China for years. China.org reports that PC sales hit 40 million units last year. Ninety percent of those had Windows installed on them, but a significant portion of the software was pirated. ComputerWorld recently carried a report that pirated copies of Windows 7 are available in China. The product will not go into public release in the US until October 22.

The WTO ruling means nothing. The movie and software industries have complained to Congress for years that America needed to set up tougher restrictions in trade with China to get the nation to pay any real attention to the piracy problem which costs US companies billions of dollars a year. The extent of the piracy problem is so extreme that calculating an exact number is impossible.

The great problem with finding a solution to the issue is that the theft of intellectual property goes on within the sight of the central government. DVDs, made outside Beijing, are shipped into the capital and sold by the thousands at bazaars within walking distance from Mao’s tomb.

There are a number of members of Congress who are convinced that legislation which financially punishes China for refusing to enforce intellectual property laws is the only means by which the communist government will be brought to heel. This is almost certainly the case. Pacifists argue that pushing China will begin a trade war. It would be foolish to deny that possibility.

The American ability to rebuild its GDP is not only based on a stimulus package and the ability to get more credit into the commercial and personal borrowing markets. A US software company or movie studio that spends millions of dollars creating products for the world market cannot afford to have a country with 1.3 billion people stealing the product and taking away all the revenue from the world’s third largest nation based on the size of its economy. The US GDP would automatically get a boost if every piece of intellectual property used in China was paid for.  America might be better off paying the movie studios and software firms for the products that they would sell in China so that the Chinese can just give them away for free.  That would be an economic stimulus package.

Douglas A. McIntyre