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America's losing war on goods
piracy
By Alan Boyd
SYDNEY -
Washington has finally admitted what every backstreet
counterfeiter in Asia has known for years: It is losing
the war against the pirating of goods because no one has
been taking the threat seriously enough.
A damning study by the US justice
department has called for sweeping changes in
investigation procedures, closer cooperation among the
various enforcement agencies, and a regulatory shakeup
that could lead to prosecutors being posted abroad. A
six-month 
task force was set up
in response to what the department termed an increase in
"the scale, scope, and sophistication of international
theft and counterfeiting", especially in Asia and
Eastern Europe.
"Given the simplicity of
disseminating millions of copies of stolen software,
music, video and other products and programs around the
globe with a single computer click, and the inconsistent
enforcement of existing laws worldwide, it is imperative
that intellectual property rights be reaffirmed and
vigorously protected," the study concluded.
Critics of the US approach, found predominantly
among the consumer multinationals that are the chief
targets of goods piracy, have long charged that
Washington relies too heavily on detection in an
industry that knows no boundaries. Intellectual property
theft costs manufacturers worldwide an estimated US$500
billion annually, or 7% of all international trade. Yet
the US was able to seize goods worth only $64 million at
its borders in the first half of this year, and $94
million in the whole of 2003.
One reason
enforcement efforts are not working in the US is that
there are too many enforcers. According to congressional
testimony last month, almost a dozen government agencies
have some jurisdiction over intellectual property
rights, and they don't always get along. Four of them -
the justice department, commerce department, homeland
security department and the US Trade Representative
(USTR) - agreed this month to cooperate more closely
through a Strategy Targeting Organized Piracy (STOP).
But few believe they will succeed.
A similar
initiative in 1999 that led to the creation of the
inter-agency National Intellectual Property Law
Enforcement Coordination Council (NIPLECC) was in effect
stillborn because of internecine turf battles. The
Government Accountability Office (GAO), the
congressional investigative body, testified during last
month's hearing that the NIPLECC "has struggled to find
a clear mission, has undertaken few activities, and is
generally viewed as having little impact".
Loren
Yeager, GAO's director of international affairs and
trade, said US efforts to strengthen foreign protection
of intellectual property were being frustrated because
other policy objectives, including the fight against
terrorism, often took priority. Another problem is that
some foreign countries "lack the political will to
enforce anti-piracy laws because doing so might hurt
their economic interests", or are dissuaded by market
realities such as price differences between legitimate
and counterfeit goods.
The anti-terror battle
may bring new impetus to the faltering campaign as
enforcement agencies now acknowledge that the two
threats have become interwoven because extremists are
being tracked through their other illicit activities,
including counterfeiting. STOP's mandate differs from
other strategies in that it will be proactive, using
methodology borrowed from money-laundering probes and
covert intelligence activities to target the earnings of
traders of counterfeit goods and build up criminal
profiles.
As with the smuggling of narcotics and
weaponry, goods will be examined at source before they
are shipped. They will then be audited on arrival to
ensure that the importers are authorized distributors.
At a legal level, the alliance wants to employ
wire-tapping against suspects, foster closer cooperation
with police and judicial authorities in other countries,
bring more pressure on these countries during trade
negotiations, and streamline extradition procedures so
that counterfeiters can be tried by US courts.
Similar recommendations were issued by the
justice department task force, with the added suggestion
that federal prosecutors be posted at the US consulate
in Hong Kong and its embassy in Budapest to coordinate
enforcement efforts. "The message to the pirates and
counterfeiters is simple," said US trade representative
Robert B Zoellick at the launch of STOP. "We will do
everything we can to make their life miserable."
But there are imposing legal obstacles to
overcome, not least from the failure of US lawmakers to
endorse international criminal statutes that would
assist in the extradition and prosecution of suspects.
Attorney General John Ashcroft noted in the justice
department study that although Washington had signed the
United Nations Convention Against Transnational
Organized Crime and the Council of Europe Convention on
Cybercrime, neither had been ratified by the Senate.
There are relatively few extradition treaties
between the US and the leading Asian suppliers of
counterfeit goods such as China, Thailand, South Korea
and Taiwan, leaving US agencies reliant solely on
domestic criminal codes. Similarly, most Asian
governments have reacted coolly to the suggestion that
they allow pre-shipment cargo checks as part of
counter-terrorism efforts, with only Singapore, Japan
and Thailand buckling to diplomatic pressure.
In
most cases, trade negotiations will remain the key
weapon for getting foreign authorities on board, though
it is debatable how effective these have been in
influencing behavior down at the marketplace. India,
Indonesia, the Philippines, Taiwan and South Korea are
listed on the USTR's "Priority Watch List" for countries
that could attract retaliatory measures unless they do
more to stem the production of illicit goods. China,
Thailand, Malaysia and Vietnam are being monitored for
lower categories of abuse.
South Korea, the most
recent addition to the Priority list, could lose access
to some US markets unless it beefs up regulatory systems
and enforcement procedures. The USTR said this week it
might take evidence of China's infringements to the
World Trade Organization (WTO). But given the economic
and strategic realities of both relationships, the
agency will first have to deal with its occasional
alliance partners in the commerce and state departments,
which work to different agendas.
South Korea is
a close security ally and the sixth largest export
market for US firms, with two-way trade in goods of more
than $58 billion in 2002. China, the fourth largest
trade partner, had two-way transactions worth $147
billion in the same year. Diplomats say that USTR
successes have often been used as an excuse for easing
the screws once concessions have been secured. China was
allowed into the WTO after signing an intellectual
property rights pact in 1995, but its progress has since
been patchy.
As technology cuts out the
middleman and brings piracy right into the living room,
some believe Washington should be focusing on issues
closer home, such as the failure of legitimate
manufacturers to install adequate technical safeguards
for their products. Only the movie industry, with the
evolution of tamper-proof DVDs (digital video discs), is
credited with making a concerted effort to shut the
pirates out. An estimated 600,000 films are downloaded
illegally each day in the US, but this pales in
comparison with losses elsewhere. Sales of recorded
music in the US market have fallen by nearly 14% since
1999, largely because of the rise of online file-sharing
programs such as Napster. In comparison to the music
industry's estimated $30 billion in annual losses, the
direct copying of movies amounts to a modest $3 billion
annually. Neither figure includes Internet piracy
losses, due to the difficulty in getting reliable data.
"Certainly, there is a feeling that some
consumer electronics manufacturers should be doing more
to make their products difficult to copy before they
exit the factory, such as using code insertions or other
technological barriers," said a diplomat. "What we all
worry about is that the available technologies are
out-sprinting the detection capability. Can you image
the impact of having 200 million Chinese households with
high-speed Internet downloading from audio file-sharing
sites?"
(Copyright 2004 Asia Times Online Ltd.
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