Hope For U.S. China Talks

-- With the New Year, U.S.-Chinese relations seemed to take another turn for the worse. U.S. Trade Representative Mickey Kantor threatened to impose $2.8 billion in tariffs on Chinese imports unless Beijing improves protection of intellectual property rights by early February. China said it would retaliate by excluding U.S. companies from some joint ventures and doubling tariffs on such U.S. consumer goods as cigarettes and cosmetics. Beijing also blames Washington for blocking its admission to the World Trade Organization.

Yet after sorting through the rhetoric, observers see room for an agreement. Even U.S. officials admit that the Chinese have made progress since 1992 in passing legislation protecting intellectual property rights. "The central government understands the importance [of intellectual property rights] and they believe in it," says a U.S. official in Hong Kong.

Where Beijing has work to do is in convincing many local officials that they shouldn't make knockoffs. For instance, the U.S. has named 29 factories that crank out illegal CDs. Local government officials often see no benefit in shuttering such industries, which provide jobs and tax revenues.

But as Kantor's Feb. 4 deadline nears, some progress is evident. In early January, the Chinese shuttered three factories in Guangdong province for patent infringements. It will take bigger actions than that to seal a deal. But most China watchers believe both sides desire an agreement to avert an all-out trade war.

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