GENEVA - The World Trade Organization opened a formal investigation yesterday into allegations China is providing a safe haven for product piracy and counterfeiting, the most far-reaching of four current trade disputes between Washington and Beijing.
The US complaint over China's lax enforcement of intellectual property rights is the culmination of years of agitation in Washington and elsewhere over one of the world's biggest sources of illegally copied goods, including DVDs, CDs, designer clothes, sporting goods, and medications.
"The United States recognizes that China has made the protection of intellectual property rights a priority and that China has taken active steps to improve . . . protection and enforcement," US trade official Dan Hunter told the WTO's dispute settlement body.
But Beijing has not done enough, Hunter said. He added that consultations between the two countries failed to resolve US concerns, making the establishment of a WTO investigative panel necessary.
Beijing heavily criticized Washington this year for starting the case, saying it could damage trade relations.
The case could have significant ramifications for American industries, from Hollywood to Silicon Valley, in determining how they combat piracy.
Lu Xiankun, a Chinese trade official, said Friday the US legal action was regrettable and that China would defend its interests before the global commerce body. China strongly opposes US attempts to impose regulations that go beyond what is required by the WTO, Lu told the WTO's dispute body.
The WTO panel's scope will be limited to whether Beijing has taken sufficient action to protect intellectual property rights, but it could ultimately authorize US trade sanctions against China worth billions of dollars annually - the amount the United States claims its companies lose because of China's lax enforcement. Such a panel often takes years to reach a final decision.
Hunter declined to repeat US accusations of Chinese wrongdoing. Instead, he referred to a statement to the dispute body last month by US trade lawyer Juan Millan, who said product piracy in China remains "unacceptably high."
Millan also complained that China refuses to criminalize piracy of American movies, music, books, and software still being blocked from the Chinese market because of censorship review laws.