Real Trading Partners Don't Counterfeit
The May 24 House vote to grant permanent normal relations with China is a watershed for globalization. Combined with China's recent acceptance into the World Trade Organization, the most populous country in the world has now been brought into the global trading system--an enormous achievement by itself (page 42).
But it's just the start. There is a long list of practices that China has to change in order to live up to the agreements that it signed, such as pulling down trade barriers and eliminating the requirement that foreign companies have to transfer key technology and buy locally made parts if they want to invest in China. Moreover, in some areas, things are getting worse. Shampoo, razor blades, pens, software, batteries, CDs, soccer jerseys--the list of counterfeit brand-name goods being mass-produced in China keeps getting longer and longer. The packaging of the fakes is getting more sophisticated; some are almost impossible to tell from the originals. Now the pirates are even copying promotional materials to give their copies a greater air of authenticity.
Based on past experience, China's compliance with trade agreements is by no means assured. In the short run, that means the appropriate response is to closely monitor China to make sure it lives up to its new and old agreements. For example, it's important to increase pressure on Beijing to fulfill its five-year-old promises to crack down on pirating and counterfeiting.
But in the long run, the best thing is to get China to understand that it is in its own best interests to enforce the global rules. Companies have to be able to invest in the country without worrying that their reputations and brand names will be hijacked. And countries need to be able to trade with China and feel that they are getting their fair share of exports. That is the only way to have a stable long-term global economy.