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U.S., China on Brink of Trade War for 2nd Year

Commerce: Dispute involves piracy of American films, music and software. Talks continue as deadline looms.


BEIJING — For the second consecutive year, U.S. and Chinese trade officials have pushed negotiations over copyright piracy issues perilously close to a Clinton administration deadline that would trigger more than $2 billion in sanctions against Chinese imports.

Late Sunday, officials here were still hoping for a last-minute settlement of the dispute centered on pirated films, music and computer software manufactured at 13 Chinese plants identified by U.S. officials. American entertainment and software company representatives claim the pirated goods cost them $2.3 billion a year in lost revenue.

In a replay of a similar trade skirmish last year, the U.S. threatened punitive sanctions against targeted products, including textiles, if China's government does not take concrete steps to halt the rampant piracy.

China countered with an even more severe list of sanctions against the U.S. that includes the cancellation of existing contracts with American companies. In a new twist this year, China moved to isolate the American leadership on copyright issues by promising more business to Japan and Europe if the Clinton administration goes through with its threatened sanctions.

The last-ditch negotiations to resolve the dispute took place during one of the lowest points in U.S.-China relations in many years, with the two countries at odds on issues ranging from nuclear proliferation to claims that the U.S. has illegally exported garbage to China's shores.

Acting U.S. Trade Representative Charlene Barshefsky arrived in Beijing on Friday to participate in negotiations with Vice Foreign Trade Minister Shi Guangshen. The U.S. Embassy reported that the talks continued into the night Sunday. The deadline set by the Clinton administration was 9 p.m. Sunday PST.

In the week leading up to the deadline, China unveiled a series of actions it claimed to have taken against copyright pirates. Television news programs showed uniformed police officers setting fire to stacks of pirated music CDs. One report showed police driving over the discs with a steamroller.

China also claimed to have closed six factories, revoked the licenses of two CD plants and halted export shipments.

A similar flurry of activity occurred before the last round of copyright piracy talks in March 1995. The U.S. claim that China has not lived up to the promises contained in the 1995 accord is what prompted the new round of talks and threats of sanctions.

However, once Barshefsky arrived, the Chinese side seemed to sense victory, apparently presuming that a senior U.S. official would not travel to Beijing unless a settlement was imminent.

U.S. officials had hoped to conclude the talks Saturday. But on Sunday morning Barshefsky announced tersely that "substantial additional progress is going to have to be made."

Before entering the afternoon talks, Barshefsky said: "We are still working on it."

The main sticking point appeared to be U.S. demands that China open up its market to permit U.S. companies to form joint ventures in China to manufacture music recordings, films and books.

This demand is sensitive in China, where the government jealously guards its control of information and the arts.

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