Washington - The United States, under the auspices of the World Trade Organization (WTO), has asked China to address deficiencies in its protection of intellectual property and its import barriers that hamper the distribution of foreign books, music, videos and movies.

The high-level discussions, announced by the Office of the U.S. Trade Representative (USTR) April 9, will take place under the WTO’s formal dispute resolution process. If the two countries do not resolve their differences within a 60-day consultation period, the United States could refer the matter to a WTO dispute settlement panel, which has the authority to recommend further action.

“Piracy and counterfeiting levels in China remain unacceptably high,” U.S. Trade Representative Susan C. Schwab said in a prepared statement. “Inadequate protection of intellectual property rights in China costs U.S. firms and workers billions of dollars each year, and in the case of many products, it also poses serious risk of harm to consumers in China, the United States and around the world,” she said.

At a briefing on April 9, Schwab told reporters that the announcement of talks “should not be viewed as hostile actions against China.”  Rather, the talks are a way to have neutral arbiters help settle the dispute because less formal discussions have failed to resolve U.S. concerns, she said.

Schwab acknowledged that China has taken numerous steps to improve its protection of intellectual property rights, but said “we have not been able to agree on several important changes to China’s legal regime that we believe are required by China’s WTO commitments.”

The United States says Chinese law creates substantial “safe harbor” for distributors of pirated and counterfeit products by establishing quantitative thresholds that must be met before the government will initiate criminal prosecution. Wholesalers and distributors are able to operate below those thresholds “without fear of criminal liability,” according to the USTR press release.

The Chinese authorities recently have lowered the threshold from 1,000 to 500 pirated copies of a protected work. Schwab told reporters that it was “a step in the right direction,” but one that “does not go far enough to solve the fundamental problem.”

As part of the consultation process, the United States wants to discuss Chinese regulations that U.S. authorities say permit goods seized by Chinese customs authorities to be sold on the market after fake labels and other infringing marks are removed. WTO rules require that such goods normally should be kept out of the marketplace, USTR says.

Another issue raised by U.S. trade officials is a Chinese law that prevents the filing of copyright infringement complaints on foreign works while those works are waiting for the approval of Chinese censors. “Pirates, of course, don’t wait for approval - they just put the fake copies on the street,” Schwab said.

The United States has requested a separate WTO consultation on Chinese laws that deny U.S. firms the right to shop around for distributors for their books, journals, movies, music and videos. Instead, foreign distributors must use only state-approved and state-run Chinese import companies.

”State-run import companies can impose high costs and build in delays that give IPR [Intellectual Property Rights] pirates and counterfeiters a leg up in the marketplace, all to the detriment of our exporters and China’s consumers,” Schwab said.

Entertainment products are only the most high-profile examples of the intellectual property theft, she said. But they are a broader statement about the respect for labor, she added. “This is as true for world class cellists like Yo-Yo Ma as for assembly line workers in Ohio machine components,” she said.

She said the United States will continue to work with China on a range of economic issues through the U.S.-China Strategic Economic Dialogue and the Joint Commission on Commerce and Trade.

For additional information, see The United States and China and Protecting Intellectual Property Rights.