The competitiveness of American business is being undermined on many fronts. While the United States continues to suffer record trade deficits, the country's problems are not limited to the merchandise trade imbalance alone. An area of major concern to many U.S. companies and trade officials is the rapid increase in the piracy of intellectual property.
Intellectual property is made up of goods and services protected by copyrights, patents and trademarks--such as motion pictures, books, records, high technology, computer software and chemicals.
Violation of intellectual property rights is a variation of the age-old practice of stealing someone else's idea. In addition to producing fake watches, computers and drugs, however, foreign competitors are now also pirating U.S. technology, designs and the commercial products of creative artists. The Commerce Department estimates that at least 750,000 U.S. jobs have been lost because of counterfeiting. It is likely that increasing violations of intellectual property will result in more thousands of lost jobs.
The situation is particularly severe because piracy hits the United States in one of the few areas in which Yankee ingenuity remains strongly competitive in international markets--the service sector. Services--any type of production that does not produce goods, including such industries as banking, engineering and insurance--now account for more than two-thirds of the gross national product and a significant percentage of the national revenue earned on exports. If piracy of intellectual property goes unchecked, service exports will be cut and the country's overall international position will deteriorate further.
A vital element in the ability of American industry to remain competitive is its ability to innovate, to produce through massive investments new products and services that give our companies their competitive edge. U.S. laws, and the laws of most other countries, protect the products of innovation principally through copyrights, patents and trademarks. Unless companies and individuals know that they will be able to profit commercially from the fruits of their innovation and creativity, they will have no incentive to invest the necessary time and money. Without adequate legal protection, counterfeiting becomes the preferred means of doing business. At present, counterfeiting is one of the fastest growing, most lucrative industries in the world.
Effective protection around the world can be achieved only through international negotiations to build a consensus on these issues. Toward that end, our government is vigorously pursuing a number of initiatives--most notably an effort to reach an international agreement on intellectual property protection under the auspices of the General Agreement on Tariffs and Trade. The United States has successfully managed to include intellectual property on the agenda of a new round of multilateral trade talks that are scheduled to begin Sept. 15.
The General Agreement on Tariffs and Trade is the principal legal framework governing international trade and the forum to take on the broad issues of intellectual property protection and trade. We must also continue to work through other international organizations established to deal with limited aspects of the protection dilemma. At the same time, however, our government must continue to pursue bilateral negotiations with individual countries on specific piracy problems. The United States, for example, recently resolved a dispute with South Korea over that country's refusal to afford adequate protection to software programs.
Congress can also play an important role in improving international protections. Several pieces of legislation are currently pending that would significantly advance the interests of the United States. One of the bills would stop imports to this country of counterfeit goods. Another, more significant, measure would establish new procedures to identify foreign countries that are the prime offenders, require the United States to negotiate with those nations and, if these governments refused to stop the counterfeiting, mandate some form of retaliation. Such legislation would give American trade negotiators the leverage that they need.
The time has come to move aggressively and imaginatively against the piracy of our intellectual property. Unless our government takes firm action to stop the proliferation of counterfeiting, America's international competitiveness will continue to erode.