GENEVA (AP) — The World Trade Organization opened a formal investigation Tuesday into allegations China is providing a safe haven for product piracy and counterfeiting, the most far-reaching of four trade disputes between Washington and Beijing, trade officials said.
The U.S. complaint over China's 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 ranging from DVDs, CDs and designer clothes to sporting goods and medications.
Diplomats leaving a meeting of the WTO's dispute settlement body said an investigative panel was set up. China blocked the panel's establishment last month, but was prevented under WTO rules from delaying the investigation a second time.
Beijing has said it is stepping up its fight against imitations of U.S. copyrights and trademarks, and heavily criticized Washington earlier this year for starting the case, saying it could damage trade relations between the countries.
The case could have large ramifications for American industries from Hollywood to Silicon Valley in determining how they combat piracy.
The WTO panel's scope will be limited to whether Beijing has taken sufficient action to protect intellectual property rights, but could ultimately authorize U.S. trade sanctions against China worth billions of dollars annually — the amount the U.S. claims its companies lose because of lax protection of intellectual property rights. A panel often takes years to reach a final decision.
Juan Millan, a U.S. trade lawyer, told the dispute body last month that product piracy in China remains ''unacceptably high.''
''China has set one of its thresholds for prosecution of criminal copyright infringement at 500 infringing copies,'' Millan said. ''We find it difficult to understand, however, why China has chosen to tie the hands of its prosecutors and prevent its authorities from prosecuting a copyright pirate who is caught with only 499 copies of an infringing product.''
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.
China responded that it ''always takes its commitments very seriously, including those on intellectual property rights.''
''China spares no efforts to enforce its IPR legislation with great success,'' it said, but added that it would not let itself be subject to regulations that go beyond what is required by the WTO.
The U.S. government has brought a series of complaints to the global commerce body since last year amid pressure from Congress to do something about America's soaring trade deficits and lost manufacturing jobs, which critics blame in part on unfair trade practices by foreign nations.
The U.S. trade deficit set a record for the fifth consecutive year in 2006 at $765.3 billion. The imbalance with China grew to $232.5 billion, the highest ever with a single country.
A WTO panel is currently examining a complaint by the U.S. and the 27-nation European Union on whether China maintains an illegal tax system to block imports of foreign-made auto parts into China. A first decision in the dispute — which came as a five-year transition period following Beijing's 2001 entry into the WTO ended — is expected late this year or early 2008.
Last month, the global commerce body launched an investigation into U.S. and Mexican allegations that China is providing illegal subsidies for a range of industries. The U.S. also has accused China of hindering sales of American movies, music and books, through censorship rules that don't apply to Chinese products.