China Loses WTO Piracy Dispute

World Trade Organization has partly sided with the U.S. in a dispute with China over product piracy, officials said Thursday.

GENEVA (AP) -- The World Trade Organization has partly sided with the United States in a dispute with China over product piracy, officials said Thursday.

The WTO panel faulted China for not prosecuting pirates who copy CDs and DVDs before they are passed by censors, one trade diplomat who had reviewed the interim ruling said.

But Washington suffered a setback as the panel found that Chinese thresholds for prosecuting piracy do not break WTO rules, the official said.

The U.S. claims the thresholds allow pirates of everything from designer clothes to medicines to tailor their operations to avoid prosecution by staying just below the minimum level of 500 infringing copies.

Officials differed in their reading of the panel's decision on a third issue -- concerning whether seized goods can be reintroduced into the market if the infringing material is removed.

A U.S. trade official said Washington won on that count too, favoring it in two of three issues in the case.

The officials spoke on condition of anonymity because of WTO rules.

The U.S. has for years complained that China is a safe haven for product piracy and counterfeiting and that it is one of the world's biggest sources of illegally copied goods.

The U.S. brought the case last year after negotiations with China to resolve the dispute failed. Beijing heavily criticized Washington for taking the issue to the WTO's dispute settlement panel, saying it could damage trade relations between the countries.

The interim ruling can be challenged by both parties, and a final decision may be years away.

Ultimately, the WTO can authorize U.S. trade sanctions against China worth billions of dollars annually -- the amount the U.S. claims its companies lose because of China's lax enforcement.

The U.S. government has been under pressure from Congress to defend American interests before the WTO because of Washington's soaring trade deficit and lost manufacturing jobs at home, which critics blame in part on unfair trade practices by foreign nations.

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