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China: Copy and
export
BEIJING - Foreign
companies - which have battled the insidious
problem of violation of intellectual property
rights (IPR) within China for years - now have to
contend with another problem: the export of
pirated goods from China.
"The export of
pirated goods is increasing," says Emory Williams,
Chairman of the American Chamber of Commerce in
Beijing. "Obviously it concerns all companies to
see their goods pirated, but of particular concern
is when they affect health and safety standards."
Companies are concerned that products such as
pirated pharmaceuticals, building materials and
car parts, which may have a detrimental effect on
health and safety, have started to find their way
to Europe and the United States.
Intellectual property rights are the
principal concern of AmCham members in China. "Our
members here spend a great deal of time finding
ways to deal with it. [But] I don't think anyone
can say that there hasn't been an improvement in
IPR protection," says Williams. "The question is
whether the level of improvement can keep up with
the economy, in particular as China's trade with
the world grows at a fast pace and China becomes
more integrated with world trade. What formerly
was a domestic problem - or, at least, a domestic
problem for those with intellectual property
rights - has become a growing international
problem."
While both Washington and
Brussels are anxious to resolve the IPR problem,
Williams says: "The party we work most closely
with is China itself." Many senior people within
the Chinese government are trying to provide both
regulation and education, and to build enforcement
to improve the situation, he says. "These people
are trying to build infrastructure to protect
intellectual rights and to allow and encourage
Chinese companies themselves to do research and
development, and to be able to benefit from their
own R&D." He says R&D would otherwise be
difficult, in an environment where property rights
are not respected. Williams told ATI: "These are
joint efforts between China, the US and other
parties. It is a multilateral, engaged process to
try [to move] the ball forward."
Issues of
market access are also a source of concern for
American companies doing business in China.
Williams says foreign companies are unable to
invest in distribution and logistics industries,
such as cold-chain logistics. This restriction
prevents American or European agricultural
producers or medical suppliers from reaching
deeper into the Chinese market than the eastern
coastal regions. China is to open its distribution
sector under the WTO access agreement. Improving
market access in line with China's WTO commitments
is perhaps one of the most important ways to
reduce trade imbalances, Williams says. "As
distribution systems become more efficient,
foreign products of all types will be able to gain
better market access." He adds that improved
distribution infrastructure and foreign investment
in the sector would help China's inland locations
become more efficient suppliers and consumers.
Another market access issue is regional
protectionism. This hinders not just foreign
products - it also impacts on the Chinese
government, which is trying to improve market
access for Chinese domestic products between
regions. "Most people feel that China, with some
exceptions, is generally in line with its WTO
commitments. The areas which concern people most
are where China is perhaps furthest behind in its
commitment - issues such as IPR, distribution and
the like."
Williams says foreign companies
exporting goods they process in China back to the
US and Europe play a role in size of the trade
deficit. "But overall, this is not the case. For
instance, in our membership only one in 10
companies came to China to pursue an
export-related agenda. One in six produces in
China for export. The rest are focused on
investing, selling to and being involved with the
dynamic China market." Contrary to popular
perception, Williams says companies do not invest
in China for reasons of labor costs. "Relatively
few companies come here simply to chase lower
labor rates," he says. "Most pay a relatively high
wage by Chinese standards. If people were looking
at labor rates alone, they might not invest here."
China's growing trade surplus with its
main trading partners - the US, Europe and Japan -
is causing greater tension. The surplus with the
US is expected to be as high as US$200 billion and
about half of that for the EU, Williams says.
"China trade is getting a lot more attention in
the US and EU. Certainly, at any time you have
trade growing like this, you have growing trade
friction. Both the US and the EU have increasing
and politically unsustainable bilateral trade
deficits with China. [In the] short term, this may
be healthy for China and the region because the
reserves may be needed to recapitalize the banking
sector. Other, longer-term factors like rising
wages will come into play, and will impact the
balance of trade."
Western governments
face political pressure because of job losses, but
Williams told ATI more jobs are actually being
lost in China than in any other country. "The
Chinese economy is changing rapidly. A lot of
people were laid off here because of increased
investment in automation and doing things to meet
world standards."
Williams says trade
problems arise when dislocations become too
severe. "We are seeing that in textiles, for
instance," he says, referring to US anger over
Chinese textile imports. Despite all the
controversy, textiles still represent only 1% of
China's exports, Williams says, but "it doesn't
mean it is not significant to the people involved
- so hopefully a single issue like that won't
drive the other 99% of China's exports." AmCham
has not taken a position on the textile issue.
However, people are very interested in such trade
disputes with China because China is a relatively
new member of the WTO and because the issues are
politically important, says Williams. "The textile
issue is perhaps most meaningful as a test of the
abilities and mechanisms which China and its
trading partners have in place as part of the WTO
Accession Protocol."
Williams remains
confident that the problem will ultimately be
resolved, but then other issues could emerge. Yet
he is not alarmed at the prospect of more trade
friction. If there was a trade war, he says, it
would be a "terrible disappointment" because all
parties would lose. "It benefits no one if there
is an escalation instead of a focus on how to
solve the problem. I think everybody understands
that," Williams said, adding: "That doesn't mean
that there will not be voices for protection. But
countries are getting together to discuss how they
can work together and solve problems and end up
with a better total solution."
(Asia
Pulse/Asia Today Magazine) |
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