U.S., Citing Lack of Progress, Vows Sanctions Against China

WASHINGTON —  The White House is contemplating massive trade sanctions against Chinese exports to the United States to retaliate for China’s failure to shut down its burgeoning business in pirated compact discs, movies, computer software and other products protected by U.S. patents and copyrights.

Nearly a year after China agreed to close factories turning out pirated goods and punish those involved in the lucrative business, 28 or 29 plants are flourishing, U.S. officials say. Just one has been shuttered and operations at five others have been suspended, U.S. officials say.

With no sign of progress in sporadic talks with Chinese officials, U.S. trade officials said in an interview Friday that they are ready to return to the kind of intense showdown that brought the two countries to the brink of trade sanctions last February, when the U.S. was about to impose tariffs of $1 billion on Chinese goods sold here.

The $1-billion figure was arrived at a year ago by calculating the loss to U.S. companies, entertainers and workers when their products were copied in Chinese factories that paid no royalties.

Officials said the figure will be higher this time around if sanctions are required. And they said the United States would block China’s entry into the World Trade Organization, the international body governing global commerce that Beijing is eager to join.

“It certainly would not be unfair to come to the conclusion the calculations would be larger if we had to go to sanctions a year after the agreement,” U.S. Trade Representative Mickey Kantor said Friday in an interview with The Times.

Kantor said the sanctions would cover an expanded list of products. The sanctions considered last year would have taken the form of 100% tariffs--taxes on imports--on $1 billion worth of Chinese goods.

Although the current dispute revolves around CDs, videotapes and, increasingly, expensive CD-ROMs, the issues at stake are much wider. They cover the breadth of the growing U.S.-Chinese trade relationship, which includes such disparate goods as agricultural products, textiles, telecommunications equipment and heavy machinery.

U.S. exports to China in 1995 increased about 20% through October, the most recent month for which figures are available. But the nation’s trade deficit with China is expected to be a record $35 billion when the year’s final figures are available--”an alarming number,” Kantor said. The gap reflects $48 billion worth of Chinese sales in the United States and American sales in China estimated at $13 billion.

“We’re in danger of China becoming another Japan,” or even dwarfing Japan in terms of the trade problems it creates, Kantor said. He was referring to Japan’s history of keeping U.S. goods out of its potentially huge market while trying to flood the United States and other markets with items based on U.S. technology made at low cost.

“We watched this happen before. We should have learned. . . . We will not put up with it,” he said.

Kantor’s comments represent an escalation of remarks he made in October, when The Times reported China’s failure to abide by the trade agreement. He said then that the United States would take “very strong action” if China did not act by year’s end.

U.S. officials have met with Chinese counterparts 15 times since the Feb. 26 agreement as they tried to gain compliance with its terms. A Chinese delegation is scheduled to visit here next week, and U.S. negotiators will visit China at the end of the month and again in February.

Officials did not impose a deadline for compliance. But the crunch is not likely to arrive until mid-spring, when Kantor is expected to accompany President Clinton to Japan.

Failure to bring China into compliance raises the risk of political and diplomatic humiliation for the administration after it accepted China’s assurance it would crack down on the CD factories.

Under the U.S.-Chinese agreement, Beijing said it would halt production of counterfeit U.S. movies, recorded music and computer software; prosecute serious offenders of laws protecting so-called intellectual property; tighten customs enforcement at borders to halt distribution of pirated goods and immediately halt their export; drop import restrictions on U.S. films and music; and establish joint ventures to handle the legal distribution in China of these U.S.-made items.