Identifier
Created
Classification
Origin
07BEIJING3273
2007-05-16 06:49:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beijing
Cable title:  

CHINA/IPR: U.S.-CHINA ECONOMIC AND

Tags:  ETRD KIPR EIND PREL WTRO CH 
pdf how-to read a cable
VZCZCXYZ0002
RR RUEHWEB

DE RUEHBJ #3273/01 1360649
ZNR UUUUU ZZH
R 160649Z MAY 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 7937
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1826
RUEAHLC/DHS WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMCSUU/FBI WASHINGTON DC
UNCLAS BEIJING 003273 

SIPDIS

INFO CHINA POSTS

USDOC FOR NATIONAL COORDINATOR FOR IPR
ENFORCEMENT - CISRAEL
USDOC FOR ITA/OCEA/MCQUEEN
USDOC FOR ITA DAS KASOFF
USDOC PASS USPTO FOR DUDAS, ANTHONY, BOLAND, WU,
TONG
STATE PASS USTR FOR STRATFORD, WINTER, ALTBACH,
ESPINEL, BAE, MCCOY, CELICO
GENEVA PASS USTR
STATE ALSO FOR H
STATE PSS US-CHINA ECONOMIC AND SECURITY REVIEW
COMMSSION
USDOJ FOR CCIPS - ASHARRIN
USDOJ FOR CHEMTOB
FTC FOR BLUMENTHAL
FBI FOR LBRYANT
TDA FOR SCHOW
DHS/ICE FOR IPR CENTER - DFAULCONER
DHS/CBP FOR IPR RIGHTS BRANCH - PPIZZECK

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD KIPR EIND PREL WTRO CH
SUBJECT: CHINA/IPR: U.S.-CHINA ECONOMIC AND
SECURITY REVIEW COMMISSION EXPRESSES CONCERNS TO
MOFCOM

UNCLAS BEIJING 003273

SIPDIS

INFO CHINA POSTS

USDOC FOR NATIONAL COORDINATOR FOR IPR
ENFORCEMENT - CISRAEL
USDOC FOR ITA/OCEA/MCQUEEN
USDOC FOR ITA DAS KASOFF
USDOC PASS USPTO FOR DUDAS, ANTHONY, BOLAND, WU,
TONG
STATE PASS USTR FOR STRATFORD, WINTER, ALTBACH,
ESPINEL, BAE, MCCOY, CELICO
GENEVA PASS USTR
STATE ALSO FOR H
STATE PSS US-CHINA ECONOMIC AND SECURITY REVIEW
COMMSSION
USDOJ FOR CCIPS - ASHARRIN
USDOJ FOR CHEMTOB
FTC FOR BLUMENTHAL
FBI FOR LBRYANT
TDA FOR SCHOW
DHS/ICE FOR IPR CENTER - DFAULCONER
DHS/CBP FOR IPR RIGHTS BRANCH - PPIZZECK

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD KIPR EIND PREL WTRO CH
SUBJECT: CHINA/IPR: U.S.-CHINA ECONOMIC AND
SECURITY REVIEW COMMISSION EXPRESSES CONCERNS TO
MOFCOM


1. (SBU) Summary: In an April 23 meeting with the
U.S.-China Economic and Security Review
Commission (USCC) that focused on the state of
IPR protections in China, Ministry of Commerce
(MOFCOM) North American Affairs Deputy Director
General Jin Xu told USCC Chairwoman Carolyn
Bartholomew and other delegation members that
China continues to take IPR matters seriously and
has made more progress in recent years in areas
such as education and enforcement. Jin pointed
to efforts by MOFCOMQs IPR Working Group,
including its annual release of Action Plans on
IPR Protection, as evidence that China is making
real progress. Repeating official positions, Jin
noted that ChinaQs IPR situation is not unique in
the world and that others should look at the
structure of ChinaQs judicial system to
understand how ChinaQs IPR enforcement worked.
MOFCOM Fair Trade Bureau Office Director Liu
Danyang raised the issue of the United States
Department of CommerceQs countervailing duty
assessment against certain Chinese paper
manufacturers, calling it a form of
discrimination stemming from a miscalculation by
the Department of Commerce. USCC delegation
members urged Jin to recognize that, despite
ChinaQs claims of progress, United States
businesses continue to complain about a lack of
improvement in ChinaQs IPR environment and that
there are growing concerns about ChinaQs decision
to create categories of state-supported Qpillar
industries. End Summary.

MOFCOM Claims IPR Progress,

But Gives Few Examples
--------------


2. (SBU) In an April 23 meeting with the U.S.-
China Economic and Security Review Commission
(USCC),Ministry of Commerce North American
Affairs Deputy Director General Jin Xu said that
China continues to take IPR matters seriously and
has made more progress in recent years in areas
such as education and enforcement. ChinaQs
annual March 15 QConsumer Rights Protection Day
and a 2006 conference in Xiamen to solicit IPR
feedback from the international business
community and Chinese provincial governors are
examples of how China continues to improve its
IPR environment. As further evidence of ChinaQs
efforts, MOFCOM IPR Working GroupQs Chou Zhongyi
cited the release of the 2007 Action Plan on IPR
Protection which covered 276 measures over 10
issue areas, larger than the 2006 IPR Action Plan
which contained only 160 measures. When asked
for additional examples of recent IPR progress,
however, Chou did not give any further
information and instead referred the delegation
to the 2007 Action Plan web site for more
information.


3. (SBU) In response to a USCC question on how
China would manage innovation and patent policy
as the country developed further, Chou said that




China is working on measures as part of President
Hu JintaoQs plan for China to become an
Qinnovative countryQ by 2020. China held a
technology innovation conference in January 2006
to address these very issues, and Chou affirmed
that the concept of IPR-protected innovation is
fundamental to ChinaQs plans. Chou also
acknowledged that, according to Chinese patent
law, those who invest resources in a discovery
are the owners of the patent. The purpose of
measures that support innovation is to guarantee
the patent ownership incentive.

Only General Explanations
For China's IPR System
--------------


4. (SBU) Asked specifically what mechanisms
MOFCOM uses to bring IPR problems to the
attention of the ChinaQs legislating bodies, DDG
Jin said that the IPR Working Group under the
leadership of Vice Premier Wu Yi cooperates
closely with 30 different Chinese government
offices to develop practical approaches and make
laws more effective. Jin noted that China now
had Qtens of thousandsQ of people in government
working on IPR enforcement, and it is important
for others to understand that China uses both
administrative measures and criminal enforcement
as tools in IPR protection.


5. (SBU) USCC Commissioner Richard DQAmato
recalled that a Chinese IPR analyst had once
recommended that China create an intermediate
level court of appeals specifically to address
IPR cases whose hearings would otherwise be
delayed by backlogs in higher courts. MOFCOM
Fair Trade BureauQs Liu Danyang said that the
idea should be discussed with the courts
themselves, and he questioned what jurisdictions
such a court would cover. IPR Working GroupQs
Chou added that ChinaQs judicial system already
has Qone to two thousand judgesQ specializing in
IPR issues. Furthermore, he said, although China
does not have dedicated courts for IPR, there are
divisions in the judicial system that already
cover those issues.


6. (SBU) USCC Commissioner Jeffrey Fiedler
encouraged the Chinese delegation to consider
that the politics in the IPR dispute between the
United States and China are real, and suggested
that Chinese officials not be too outwardly
sensitive that certain groups in the United
States may seem unaware of the full scope of
ChinaQs efforts on the IPR front. Regardless of
ChinaQs efforts, losing money and jobs due to IPR
violations in China is still likely to upset
United States businesses, and many in the United
States thought that the USTRQs WTO complaint
against ChinaQs IPR violations did not go far
enough. Delegation members also expressed
concern that the creation of Qpillar industry
categories in China is causing heightened concern




about subsidies for Chinese firms and how those
firms behave internationally. Jin answered that
the creation of pillar industries is a result of
ChinaQs changing economy and a new focus on
energy and infrastructure. China, he said, is
even looking to develop domestic manufacturing
capacity in specific sectors like aviation that
could lead to export opportunities.

MOFCOM Upset by USTRQs WTO Filings
and Commerce CVD Determination
--------------


7. (SBU) On the issue of USTRQs filing of a WTO
case against China for IPR violations, MOFCOM IPR
Working GroupQs Chou said China was Qdisturbed
and QregrettedQ USTRQs action. China understands
that IPR is a necessity of development, but
pressure from the United States and EU is not the
right way to achieve progress. Jin later told
the delegation that China needs its American
friends to tell the United States people and
policymakers about ChinaQs progress in IPR.


8. (SBU) On the issue of the Department of
CommerceQs preliminary find of countervailing
duties (CVD) on coated free sheet paper from
China, Fair Trade Bureau Office Director Liu said
that the United States has Qmisunderstood
subsidies in China. Every country has some
subsidies, he said, some of which are even
allowed by the WTO. Liu insisted that China does
not have as many subsidies as the United States
presumed. Citing the example of four previous
CVD complaints from Canada, Liu said that three
cases were determined not to have subsidies, and
in the one case where a subsidy was determined to
exist, it was small, only 3-5 percent. In this
coated paper case, Liu said, the Department of
Commerce used a Qsurrogate benchmarkQ on the loan
rate to calculate the subsidy, which was the
wrong methodology to use and resulted in double-
counting. This determination, which Liu called a
form of discrimination, was unfair to Chinese
companies and is having negative effects on
Chinese industry. He urged USCC to play a role
in talking with the Department of Commerce to
find a way out of this legal issue. Both sides
should seek to increase the benefits of the
relationship, he said, not make more problems.

Meeting Participants
--------------


9. (U) United States Participants:
Carolyn Bartholomew, Chairwoman, USCC
Daniel Blumenthal, Vice Chairman, USCC

C. Richard DQAmato, Commissioner, USCC
Jeffrey Fiedler, Commissioner, USCC
Kerri Houston, Commissioner, USCC
Larry M. Wortzel, Commissioner
Marta McLellen, Analyst, USCC
Dante Paradiso, Embassy Beijing Political Officer
Michael Pignatello, Embassy Beijing Economic




Officer (note taker)


10. (U) Chinese Participants:
Jin Xu, Deputy Director General, North American
Affairs, Ministry of Commerce
Chou Zhongyi, Officer, IPR Working Group,
Ministry of Commerce
Liu Danyang, Office Director, Fair Trade Bureau,
Ministry of Commerce
Tan Yuwei, Assistant, North American Affairs,
Ministry of Commerce
Gong Rui, Assistant, North American Affairs,
Ministry of Commerce


11. (U) The USCC delegation has cleared this
report.

RANDT