Software Issues Top the Agenda for US-China Trade

posted by in Compliance and Enforcement December 17, 2010
Dec 17

If there was any doubt about the relative importance of software issues in the economic relationship between the United States and China, it was dispelled in the ministerial sessions of the Joint Commission on Commerce and Trade (JCCT) that were held December 14–15 in Washington.

The official statement and fact sheet that US negotiators issued at the conclusion of the talks attest to the fact that software concerns — including rampant piracy and China’s indigenous innovation policies — now top the bilateral trade agenda. Credit for this is due to the hard work of US Commerce Secretary Gary Locke, US Trade Representative Ron Kirk and many others in the Obama administration and Congress, including the chairmen and ranking members of the Senate Finance Committee and House Ways & Means Committee.

These JCCT negotiations — the 21st such session — ended up producing a number of noteworthy developments. Chief among them were commitments from China to ensure that its government agencies use legal software, a new pilot project to promote legal software use in China’s state-owned enterprises and an agreement not to make the location or ownership of intellectual property a direct or indirect condition for eligibility in government procurement of products or services, which has been a key point of contention in China’s indigenous innovation program.

All of these developments are most welcome, because the software industry has been squeezed badly in China in recent years. The commercial value of software piracy there nearly doubled from $3.9 billion in 2005 to $7.6 billion in 2009, according to the most recent BSA-IDC Global Software Piracy Study. Meanwhile, indigenous innovation policies have threatened to officially exclude foreign firms from key market sectors. The US International Trade Commission, in the first of two landmark studies, has found that China’s policies and practices on intellectual property have a direct impact on the US economy because they reduce market opportunities and undermine profitability of US firms.

This week’s developments represent an important step forward. But now comes the hard part — ensuring the new commitments succeed in achieving the intended results. At the end of the day, we will know real progress is being made only when software companies start seeing substantial increases in sales. Indeed, past JCCT talks have produced commitments to reduce piracy and boost legal software sales in China, but the commercial value of copyright infringement has kept mounting. Achieving success this time will require a sustained effort on China’s part, not just a six-month or year-long campaign as announced in the weeks prior to the JCCT talks.

Especially encouraging among the commitments made this week, however, was an agreement that the US and Chinese governments will continue discussing between now and the end of January the question of how to verify that software legalization requirements are in fact being met.

After all, promises are one thing; proof is another.

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