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June 16, 1999
GSP Subcommittee
Office of the U.S.
Trade Representative
600 17th Street NW,
Room 518
Washington, DC 20508
Re: Request for Review of the Intellectual Property Rights Practices of Belarus in the 1999 Annual GSP Country Eligibility Practices Review, 64 Fed. Reg. 20046 (April 23, 1999)
To the Subcommittee:
On April 23, 1999, the Trade Policy Staff Committee (TPSC) of the
Office of the United States Trade Representative (USTR) published in the
Federal Register a notice announcing the 1999 Annual Generalized System
of Preferences (GSP) Product and Country Eligibility Practices Review.
USTR indicated that interested parties "may submit petitions to
have the GSP status of any eligible beneficiary developing country
reviewed with respect to any of the designation criteria listed in
subsections 502(b) or 502(c) of the 1974 Act (19 U.S.C. 2462(b) and
(c))." See 64 Fed. Reg. 20047.
The International Intellectual Property Alliance (IIPA) hereby
submits its request that the eligibility of Belarus as a GSP beneficiary
developing country be reviewed, and that its GSP benefits be suspended
or withdrawn, in whole or in part, if requisite improvements are not
made by Belarus to remedy the deficiencies (outlined below) which
adversely affect U.S. copyright owners. In 1998, Belarus exported goods
valued at $6.76 million to the U.S. which received preferential
duty-free treatment under the GSP Program. This represents approximately
47.6% of total imports to the U.S., according to U.S. government
statistics. Last year, Congress reauthorized the GSP program through
June 30, 1999. Currently there are several bills pending before Congress
which would extend the GSP program.
Petitioner and
its Interest: The International Intellectual Property Alliance
IIPA is a coalition of seven trade associations that collectively
represent the U.S. copyright-based industries -- the motion picture,
music and recording, business and entertainment software, and book
publishing industries. IIPA’s member associations are the Association
of American Publishers (AAP), AFMA (formerly the American Film Marketing
Association), the Business Software Alliance (BSA), the Interactive
Digital Software Association (IDSA), the Motion Picture Association of
America (MPAA), the National Music Publishers’ Association (NMPA) and
the Recording Industry Association of America (RIAA).
These member associations represent over 1,350 U.S. companies
producing and distributing works protected by copyright laws throughout
the world -- all types of computer software including business software
and entertainment software (such as videogame CDs and cartridges,
personal computer CDs and multimedia products); motion pictures,
television programs, home videocassettes and DVDs; music, records, CDs
and audiocassettes; and textbooks, tradebooks, reference and
professional publications and journals (in both electronic and print
media).
These U.S.
copyright-based industries represent the leading edge of the world's
high technology, entertainment and publishing industries. According to
the most recent edition of the report, Copyright Industries in the
U.S. Economy: The 1998 Report, prepared for IIPA by Economists,
Inc., these core copyright industries accounted for $278.4 billion in
value added to the U.S. economy, or approximately 3.65% of the Gross
Domestic Product (GDP) in 1996 (the last year for which complete data is
available). The total copyright industries accounted in 1996 for $433.9
billion in value added, or approximately 5.68% of GDP. The core
copyright industries’ share of the GDP grew more than twice as fast as
the remainder of the U.S. economy between 1977 and 1996 (5.5% vs. 2.6%).
Employment in the core copyright industries grew at close to three times
the employment growth in the economy as a whole between 1977 and 1996
(4.0% vs. 1.6%). More than 6.5 million workers were employed by the
total copyright industries, about 5.15% of the total U.S. work force, in
1996. The core copyright industries accounted for an estimated $60.15
billion in foreign sales and exports in 1996, a 13% gain over the $53.25
billion generated in 1995. This report has been made widely available to
officials working on country and IPR issues at USTR, and throughout
other agencies, including the State Department, the Commerce Department,
the U.S. Patent and Trademark Office, and the U.S. Copyright Office. A
summary of this report is available on IIPA’s website, at http://www.iipa.com/html/pr_05071998.html.
The U.S. creative industries represent one of the few sectors of
the U.S. economy that regularly contributes to a positive balance of
trade. It is essential to the continued growth and future
competitiveness of these industries that our trading partners provide
free and open markets and high levels of protection to the copyrights on
which this trade depends. Inexpensive and accessible reproduction
technologies make it possible for U.S. copyrighted works to be pirated
-- stolen -- in other countries, and including specifically for the
purposes of this petition, Belarus. However, the copyright industries
represented in IIPA lose an estimated $20-22 billion annually due to
piracy outside the United States. These staggering losses, if not
halted, could reverse this path of growth in these sectors, threaten the
high wage employment that these industries bring to the U.S. economy,
and damage U.S. competitiveness. In addition to the worldwide problem of
piracy, several foreign countries have erected market access barriers to
U.S. copyright products. To combat these dual problems in developing
countries, the U.S. copyright-based industries joined with the
Administration and Congress to fashion new legislation and negotiating
tools. IIPA and its members have supported various trade tools with IPR
provisions over the years, including the GSP Program, Special 301,
Section 301, the Caribbean Basin Economic Recovery Act, and the Andean
Trade Preferences Act.
Action Requested
by Petitioner
Pursuant to Section 501 et seq. of the Trade Act of 1974,
as amended, 19 U.S.C. 2461 et seq., and 15 C.F.R. Part 2007, and
pursuant specifically to Section 502(c)(5) of the Trade Act (19 U.S.C.
2462(c)(5)), and 15 C.F.R. 2007.0(b), IIPA, on behalf of its seven trade
association members, hereby petitions the President to review the
eligibility of Belarus as a GSP beneficiary developing country, and if
requisite improvements are not made by Belarus, then IIPA requests the
President to suspend or withdraw GSP benefits of Belarus, in whole or in
part, for its failure to provide adequate and effective copyright
protection for U.S. copyright owners.
Legal Authority
for this Petition and Discussion of the IPR Criteria in the GSP Statute
Provisions tying intellectual property protection to trade
benefits were first added to the Trade and Tariff Act of 1984
[hereinafter "TTA 1984"]. Title V of the TTA 1984, known as
the GSP Renewal Act of 1984, renewed the GSP Program which had been
introduced in the Trade Act of 1974 [hereinafter "TA 1974"],
and specifically required the President to consider intellectual
property protection in determining whether to designate a developing
country as eligible for GSP benefits. The GSP Program provides
unilateral, non-reciprocal duty-free tariff treatment to over 4,400
articles imported from more than 140 countries and territories
designated beneficiary countries and territories (these are less
developing countries) to aid their economic development through
preferential market access. An additional 1,700 articles are eligible
for GSP treatment for specified least developing countries. While there
has been a minor change in the statutory language between the GSP
Renewal Act of 1984 and the GSP Renewal Act of 1996, the Act remains
essentially the same as in 1984. The legislative history of the 1984
Renewal Act is particularly instructive on the important link between
GSP benefits and strong IPR protection.
The GSP Renewal Act of 1984
In the GSP Renewal Act of 1984, Congress specified conditions
that GSP beneficiary countries must meet in order to gain and maintain
their preferential trading status. In particular, one of these express
conditions (which Congress also delineated as one "purpose" of
the GSP Program) was to encourage developing countries "to provide
effective means under which foreign nationals may secure, exercise, and
enforce exclusive intellectual property rights."
The legislation required the President to apply mandatory and
discretionary criteria with respect to IPR protection as a condition to
a country achieving "beneficiary" status under the GSP
Program. The mandatory criterion prohibited the designation of a country
from becoming a "beneficiary developing country" if, for
example, "such country has nationalized, expropriated, or otherwise
seized ownership or control of property, including patents, trademarks,
or copyrights, owned by a United States citizen or by a corporation,
partnership, or association which is 50 percent or more beneficially
owned by United States citizens." See Section 503(b)(4) of
the GSP Renewal Act of 1984, now codified at 19 U.S.C.
2462(b)(2)(D).
The GSP Renewal Act of 1984 added as a discretionary criterion,
in determining whether to designate a developing country as eligible to
receive GSP duty-free trade treatment, that
the President shall take into account ... the extent to which
[each] country is providing adequate and effective means under its laws
for foreign nations to secure, to exercise, and to enforce exclusive
rights in intellectual property, including patents, trademarks, and
copyrights.
Section 503(c)(5) of
the GSP Renewal Act of 1984, codified at 19 U.S.C. 2462(c)(5).
The Senate Finance Committee Report explained that:
To determine whether a country provides "adequate and
effective means," the President should consider the extent of
statutory protection for intellectual property (including the scope and
duration of such protection), the remedies available to aggrieved
parties, the willingness and ability of the government to enforce
intellectual property rights on behalf of foreign nationals, the ability
of foreign nationals effectively to enforce their intellectual property
rights on their own behalf and whether the country’s system of law
imposes formalities or similar requirements that, in practice, are an
obstacle to meaningful protection.
S. Rep. No.98-485, 98th
Cong., 2d Sess. At 11 (1984). The Senate Report also noted:
In delegating this discretionary authority to the President, it
is the intent of the Committee that the President will vigorously
exercise the authority to withdraw, to suspend or to limit GSP
eligibility for non-complying countries ....
Where valid and reasonable complaints are raised by U.S. firms
concerning a beneficiary country’s market access policy or protection
of intellectual property rights, for example, it is expected that
such interests will be given prominent attention by the President in
deciding whether to modify duty-free treatment for that country.
Id. at 12-13 (emphasis added). The House Ways and Means
Committee stated that "countries wishing to reap the benefits of
preferential duty-free access to the U.S. market must fulfill
international responsibilities" in the intellectual property area.
House Rep. No. 98-1090, 98th Cong., 2d Sess. at 12 (1984).
The IPR criteria are a condition, not only for obtaining GSP
benefits in the first place, but also for retaining them. The 1984 Act
authorized the President to "withdraw, suspend, or limit the
application of the duty-free treatment accorded under Section 501 of
this title with respect to any article or any country" and
requires the President, when taking any such action, to "consider
the factors set forth in Sections 501 and 502(c)." TTA 1984 Section
505(a)(1); TA 1974 Section 504(a)(1), as amended; 19 U.S.C. 2464(a)(1)
(emphasis added). The Act also created a system of "general
reviews" to ensure that these statutory criteria are met. TTA 1984
Section 505(b); TA 1974 Section 504(c)(2)(A), as amended; 19 U.S.C.
2464(c)(2)(A); see also 15 C.F.R. 2007.3.
This GSP Subcommittee is asked to follow the explicit intent of
Congress, and advise the President to "vigorously exercise"
his authority to withdraw, suspend or limit GSP eligibility of Belarus
for its non-compliance with the statutory criterion on IPR in the GSP
Program.
Over the years, retaining GSP benefits has figured prominently in
the decisions of a number of countries to improve their IPR protection.
In the 1980s, such leverage was used to encourage Singapore, Indonesia
and Malaysia to adopt new copyright legislation. IIPA has filed
petitions against several countries for their failure to provide
adequate and effective copyright protection. IIPA petitions which have
been accepted by USTR over the past ten years (1989-1998) include:
Indonesia, Thailand, Cyprus, Egypt, El Salvador, Turkey and Poland. IIPA
has participated in GSP IPR reviews involving Malta, Guatemala, the
Dominican Republic, Honduras, Panama, and Paraguay (all of which were
initiated by other petitioners or by USTR). IIPA also filed petitions in
1995 against the Russian Federation, the Philippines, Bolivia and Peru
which, we learned in October 1996, were not accepted by USTR for the
1995 GSP Annual Review. A GSP petition which IIPA filed against Turkey
in June 1993 remains under investigation.
The GSP Renewal Act of 1996
When the GSP Program was reauthorized in August 1996, the
language of the IPR discretionary criterion for GSP eligibility in
Section 502(c)(5) was simplified slightly and now requires the President
to "take into account the extent to which such country is providing
adequate and effective protection of intellectual property rights."
The expired law specified (as discussed above) that each beneficiary
country provide "adequate and effective means under its laws for
foreign nationals to secure, to exercise and to enforce exclusive rights
in intellectual property, including patents, trademarks, and
copyrights." Otherwise, the GSP Renewal Act contains identical IPR
provisions, including "mandatory" criteria denying GSP status
to countries that directly or indirectly expropriate U.S. property
(including intellectual property), and authorizing the President to
withdraw, suspend or limit GSP privileges based on failure to meet the
IPR criteria.
Belarus fails to
provide "adequate and effective protection" of United States
copyrights. It also is in violation of its bilateral treaty obligations
with the United States to provide adequate and effective protection and
enforcement.
This information on Belarus has been previously presented to
members of various U.S. government interagency groups, including the
Special 301 interagency group, several members of the GSP Subcommittee,
as well as the Trade Policy Staff Committee, in the context of USTR’s
Annual Special 301 review. On February 16, 1999, IIPA filed its annual
Special 301 submission to Assistant USTR for Services, Investment and
Intellectual Property Joseph Papovich; this submission was widely
distributed among the interagency for its internal consideration in the
1999 Special 301 Annual Review. IIPA’s entire report is available on
our website, http://www.iipa.com.
A full description of the deficiencies in Belarus’ copyright legal and
enforcement regime appears in Appendix 1, which is the IIPA
Special 301 report on Belarus filed with USTR in February 1999.
In sum, the U.S. should suspend Belarus’ GSP eligibility or
withdraw GSP benefits (in whole or part) because Belarus fails to
provide adequate and effective copyright protection and is in violation
of its bilateral treaty obligations with the United States. It has not
provided the legal framework it obligated itself to provide in 1993, nor
has it established an effective enforcement regime. The C.I.S. is
becoming a hub for an increasing number of pirate producers of CD (and
CD-ROM) musical recordings, as well as business and entertainment
software; illegal musical cassette production is also a major problem.
These illegal manufacturers are swamping the entire region with illegal
product, completely disrupting markets in Central and Eastern Europe,
and elsewhere in the Confederation of Independent States (C.I.S.). Since
pirates move across borders into environments with the least adequate
legal and enforcement regimes, this absence of "adequate and
effective protection and enforcement" (as required under Article
VIII of bilateral agreement) in Belarus is causing harm to the copyright
industries.
In January and February 1993, Belarus and the United States
exchanged letters to implement a bilateral trade agreement. This
agreement entered into force on February 16, 1993 (see Article VIII of
the bilateral agreement for the IPR obligations, as well as the separate
IPR Side Letter). The failure to comply with the obligations of the
bilateral trade agreement has become of increasing concern to the
copyright industries as they consider investments and distribution of
copyrighted products in the C.I.S. (all of the former republics of the
Soviet Union). All twelve of these countries entered into bilateral
trade agreements with the U.S. in exchange for receiving MFN (now known
as Normal Trade Relations or "NTR") treatment. These identical
agreements contain provisions obligating each country to meet certain
IPR obligations as a quid pro quo for MFN (NTR) treatment. Many
years after the treaty went into force, Belarus has not enacted adequate
copyright laws, nor met its enforcement obligations thus failing to meet
its obligations in the copyright (and other IP) areas as required by the
bilateral agreement. These failures are long past the deadlines set in
the agreement to take such action.
The background of the
U.S.-Belarussian 1993 agreement is as follows: in 1990, the U.S. and the
Soviet Union signed a far reaching bilateral trade agreement including
extensive intellectual property rights obligations. These obligations
included the enactment and enforcement of a modern copyright regime, as
measured by the standards pertaining prior to the TRIPS Agreement. As a
result of the tumultuous events of August 1991, the 1990 U.S.-U.S.S.R.
Trade Agreement, which required the U.S.S.R. to adopt a Berne-compatible
copyright law by December 31, 1992, never entered into force because the
USSR did not implement it before it dissolved. The U.S. government
determined that each country of the C.I.S. could re-sign the 1990 U.S.-U.S.S.R.
Trade Agreement with only minor technical amendments, including new
deadlines to meet the Agreement’s obligations, and a statement from
each country of the C.I.S. acknowledging its succession to the Soviet
Union’s Universal Copyright Convention obligation, dating from May 27,
1973.
All twelve of the former republics of the Soviet Union did sign
these agreements. Once each agreement was signed, it was agreed it would
enter into force upon an exchange of diplomatic notes between the U.S.
and each new country. All twelve countries, including Belarus, have now
put the agreements into force. At such time each country would be
eligible for "most favored nation" (now "Normal Trade
Relations") status. Once in force, each country (other than the
Russian Federation), agreed to make its "best efforts" to
enact all of the IPR components of the Trade Agreement by December 31,
1993. (The Russian Federation agreed to complete its obligations by
December 31, 1992.)
The obligations of the Belarussian bilateral trade agreement
(Article VIII of the Agreement and in the accompanying Side Letter on
IPR) include:
(1) joining the Berne Convention (Paris Act); (2) providing
protection for sound recordings, including a right of reproduction,
distribution (and importation), and a commercial rental right; (3)
providing a point of attachment for foreign (U.S.) sound recordings and
making best efforts to join the Geneva Phonograms Convention; (4)
providing full retroactivity (per Article 18 of Berne); (5) protecting
computer programs and databases (as "literary works"
consistent with Berne, and now TRIPS); (6) providing adequate and
effective protection and enforcement (which is understood to include
deterrent civil and criminal penalties, as well as border measures);
and, (7) establishing a working group with each country to monitor the
continuing progress of copyright and other IP protection and
enforcement.
Belarus is a member of the Berne Convention and has recently
ratified the two new WIPO treaties, although they are not yet in force
(the WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms
Treaty (WPPT)). However, Belarus is not providing any of the required
protection and rights to U.S. or any other sound recordings, nor is
Belarus a member of the Geneva Phonograms Convention — two obligations
of the trade agreement. So, U.S. sound recordings are completely
unprotected, more than five years after the bilateral trade agreement
required such protection.
Belarus does not clearly provide retroactive protection
for works or sound recordings as required by the clear obligation in its
bilateral trade agreement, as well as by Berne (Article 18), national
treatment obligations, and the TRIPS Agreement (Article 14.6 for sound
recordings and Article 9 for works). Belarus must clearly provide
retroactive protection for works and sound recordings to meet these
obligations.
Belarus is providing legal protection in the statute, though no
actual on-the-ground enforcement, for computer programs and databases as
required under the bilateral trade agreement.
Belarus has not amended its Criminal Code, following passage of
its new copyright law, to adopt criminal provisions for IPR violations,
in breach of the bilateral agreement. In addition, Belarus is not
providing "adequate and effective" enforcement with any
meaningful police or prosecutorial activity, as required by the
bilateral trade agreement, even if some (albeit weak) civil and
administrative provisions do exist. Also, border enforcement is very
weak in Belarus, allowing illegal copies that are produced in any
country in the region (like Ukraine and Belarus) to freely cross borders
for sale in others.
The failure to provide an adequate legal and enforcement regime
in Belarus is causing significant harm to the copyright industries. The
recording industry (IFPI/RIAA) reports that Belarus has large-scale
illegal music cassette production facilities for domestic and foreign
consumption. It is estimated that there are over 200 tape duplication
facilities in Belarus producing over 2 million cassettes (with capacity
levels far exceeding this amount). The environment is ripe for illegal
optical media production facilities, although there are no confirmed
reports of these plants, at this time. The recording industry estimates
trade losses in Belarus were $8 million in 1998; the piracy rate was
estimated at 95%. The Business Software Alliance (BSA) estimates that
trade losses due to software piracy in all of the C.I.S. other than
Russia was $34.1 million in 1998, and that the level of piracy is 93%.
Attached as Appendix 2
is the methodology used by IIPA members to calculate losses due to
piracy. This methodology was also submitted to the USTR in IIPA’s 1999
Special 301 submission.
CONCLUSION
For the reasons stated in this submission (including the
Appendices), IIPA requests that the TPSC initiate a review the country
eligibility of Belarus for its failure to provide adequate and effective
copyright protection and enforcement for U.S. copyright owners. If
requisite improvements are not made in Belarus to remedy these
deficiencies, then IIPA requests that the U.S. suspend its eligibility
or withdraw GSP benefits of Belarus, in whole or in part.
Respectfully submitted,
Eric H. Smith
President
International Intellectual Property Alliance