The Senate Committee on Commerce, Science, and Transportation's Subcommittee on Trade, Tourism, and Economic Development has scheduled a hearing on Piracy and Counterfeiting in China for Wednesday, March 8, 2006, at 2:30 p.m. in room 562 of the Dirksen building.
The hearing will review China's growing piracy and counterfeit rings and their impacts on U.S. domestic industries and commerce.
Gordon H. SmithSenator
STATEMENT OF THE HONORABLE GORDON H. SMITH, CHAIRMAN,
SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT
SUBCOMMITTEE HEARING ON THE IMPACTS OF PIRACY AND
COUNTERFEITING OF AMERICAN GOODS AND INTELLECTUAL PROPERTY IN CHINA
March 8, 2006
I call to order this hearing of the Senate Subcommittee on Trade, Tourism, and Economic Development. I thank Ranking Member Dorgan for suggesting the topic for today’s hearing. We will examine the impact piracy and counterfeiting in China has on U.S. businesses. I appreciate all of our witnesses for re-arranging their schedules to be here. I want to give a special welcome to Andy York, who has traveled here from Beaverton, Oregon to talk about the problems his business has faced in China.
U.S.-China economic ties have expanded greatly in the last several years. In 2005, total bilateral trade rose to an estimated $286 billion – up from only about $5 billion in 1980. Today, China is the United States’ third-largest trading partner and our fourth-largest export market. While U.S. exports to China have grown dramatically in recent years, so too have Chinese exports to the United States. Last year, the U.S. trade deficit with China hit a record of $203 billion.
Experts will tell you that while staggering, this number also reflects goods produced by U.S. companies in China and then shipped to the United States and sold to American consumers. What is not reflected in this number is the billions of dollars that U.S. producers lose because of the illegal reproduction of software, retail piracy, and trademark counterfeiting in China. The reality is that the Chinese are consuming U.S. goods, but they are not always paying for them.
According to the Congressional Research Service, counterfeit goods represent between 15 and 20 percent of all products made in China and account for about 8 percent of China’s GDP. The Business Software Alliance estimates that in 2004 the rate of software piracy in China was roughly 90 percent, and for motion pictures, the rate of piracy was approximately 93 percent. In 2003, more than 66 percent of the imported counterfeit goods seized by the U.S. Customs Service were traced back to China.
This December will mark the 5-year anniversary of China’s accession to the World Trade Organization. When China acceded to the WTO, it promised to bring its intellectual property laws into compliance with the WTO rules. However, actual enforcement of China’s IPR laws remains a huge problem, and U.S. companies are still reporting large-scale counterfeiting and piracy of their products in China.
I look forward to hearing from today’s witnesses.
Witness Panel 1
Mr. Chris IsraelCoordinator for International Intellectual Property EnforcementU.S. Department of Commerce
Witness Panel 2
Mr. Franklin VargoVice President of International Economic AffarisNational Association of Manufacturers
Mr. Andy YorkVice PresidentLeupold & Stevens, Inc.
Professor William AlfordDirector of East Asian StudiesHarvard Law School