Just as the IRS applied a double-standard regarding tax-exempt status for a group of conservative organizations (long delays) and another for liberal ones (no delays), so the U.S. government’s Special Trade Representative, has used a double standard in its annual report on protection of intellectual property. For the first time in seven years it has singled out one country, Ukraine, as a “priority country.” This is no compliment, for it means the USTR considers Ukraine to be the world’s leading pirate of such things as films music, software, games and television programs.
The USTR report overlooks the fact that the Chinese government turns the other cheek to the fact its country is the world’s leader in the piracy of intellectual property, including the things listed above and also manufactured items in many other fields critical to the U.S. economy.
Days after the USTR’s report, the co-chairmen of an independent, nonpartisan Commission on the Theft of American Intellectual Property, Adm. Dennis Blair, former U.S. Director of National Intelligence and Jon Huntsman, former Ambassador to China, noted in the Washington Post, “U.S. software manufacturers… lost tens of billions of dollars in revenue annually from counterfeiting just in China, where the problem is most rampant.” Yet, the USTR singled out Ukraine’s significantly smaller piracy problem.
Designating Ukraine as a “PFC” starts the clock on a thirty-day period to initiate an investigation under Section 301 of the U.S. Trade Act. A negative outcome could lead to sanctions that would cripple U.S.-Ukraine trade and also lead to a withdrawal of foreign investment into that important country, sandwiched as it is between Russia on the east and Poland, Hungary, and Romania on the west. As it works hard to stabilize its democratic political system and its economy, Ukraine seeks to be on good terms with its neighbors and, importantly, the U.S.
The USTR report has negative policy implications beyond the intrinsic one that it may have violated the World Trade Organization’s rules. Professor Sean Flynn, of American University in Washington, D.C., in an article in Intellectual Property Watch, writes, “Any sanction of Ukraine, including removal of General System of Preferences (GSP) benefits, would likely violate WTO rules.” He notes that this is only the second time the U.S. has threatened a fellow member of the WTO with “PFC” sanctions.
Ukrainian Piracy of intellectual property such as films is not new, but the USTR’s “remedy” is way out of proportion to the “disease.”
In fact, the cabinet of President Viktor Yanukovych recently asked parliament to strengthen and broaden protection of intellectual rights in the country. A draft law was submitted in mid-May. It would have the State Intellectual Property Service issue to applicants control marks -- holograms confirming compliance with copyrights. The service would record the date of issue of a mark, its series and number. Suspected violations would be brought to the Service’s attention for remedial action. Categories to which this would apply are audiovisual works (such as films and television programs), audio and video recordings, computer programs and databases. An announcement from the Service states that the bill is designed “to ensure legal protection of the rights of authors, performers and producers… (in order) to overcome piracy and improve the investment climate in Ukraine.
Now that Ukraine is actively working on solving the problem the USTR should back off. Then, it might better spend its time taking a closer look at China.