Taiwan Today

Among the 140, the Republic of China is ranked first-the top beneficiary of the GSP. Ironically, according to U.S. International Trade Commission records, the ROC is also one of a number of countries producing counterfeit U.S. products.

Recently, the U.S. Congress has been considering making a country's current counterfeiting record a criterion for its access to the GSP privilege. Accordingly, although counterfeiting among small manufacturers is but a tiny underworld in this country's immense export production, it is a ticking time bomb for the nation's foreign trade prospects.

Stephen Sims, special assistant to the U.S. House of Representatives Subcommittee on Oversight and Investigation of the Committee on Energy and Commerce; David Nelson, a staff economist of the Subcommittee; and James Christy, a Subcommittee minority counsel, were dispatched by the U.S. Congress to the Republic of China to establish the facts about the situation here and to determine the ROC govern­ment's intentions on combating counterfeit­ing activities.

In six days of fact finding, they ar­ranged meetings with experts from both the public and private sectors, including the vice ministers of Economic Affairs and Foreign Affairs. They engaged in discussions with Taiwan's prestigious Li & Li law firm, attended a copyright seminar, met with executives of the computer industry, and visited the Ford, Zenith, and Arvin establishments here.

The day before their return to the United States, they agreed to the following interview with the Free China Review:

FCR: What will be the result of your mission to the Republic of China?

Nelson: We will write a report; the information we gathered here in the past five days will be an integral part of that report. The Subcommittee is likely to take the report, including any recom­mended changes in the law that may be incorporated in it, and rewrite it to suit itself.

Christy: It is too early to say what our recommendations will be. We will go back to review the hearing records­—from the hearing we held today, plus the information we gathered both in Hong­kong and Taiwan—and put it all together to make a report. The report will contain the recommendations of the staffs. That report will be presented to the members of the Congress and will deal with the issues that we have been looking at, spot­-lighting counterfeiting, textile exports, and GSP.

FCR: After exchanging viewpoints with experts from both the private and public sectors of the Republic of China, can you tell us the extent, as you see it, of the counterfeiting problem in the Republic of China?

Nelson: I think it is fair to say that we remain convinced that the problem is extensive. We are impressed with the ef­forts that your government has undertaken.* Today we have been told that other efforts will be forthcoming shortly. We eagerly await the results of those; we offered some suggestions, at the request of ROC governmental officials, to your government. We think that the solution to the problem still lies in the future ac­tions of the government of the Republic of China. We hope the government will pursue these efforts vigorously.

Christy: The only thing I will add is that the business community in the Republic of China is interested in seeing the counterfeiting eliminated. The legitimate manufacturers are harmed by the problem. The reputation for quality which the United States seeks to have for its products is also damaged by the existence of counterfeiting. We hope that such groups as TEAMA (Taiwan Electronic Appliance Manufacturers Association) will have some success in suggesting to the government the ways through which these things can be stopped, and in encouraging the government to crack down hard on those who violate existing trademarks and copyrights.

FCR: Mr. Nelson, you just men­tioned suggestions. What are the suggestions that you have made to the ROC government?

Nelson: We talked to the govern­ment about bringing ROC laws, with regard to certain kinds of violations, closer to the kinds of protections that are available under U.S. laws: We talked to the government of means of beefing up enforcement efforts. We suggested close cooperation between your customs services and ours—so the parties on both sides of the transaction can be appre­hended and dealt with by their respective sovereign nations.

Christy: In connection with the Generalized System of Preferences, offered to help underdeveloped countries come into the world trading partnership: one of the things we found here is that the Republic of China is developing so rapidly and so successfully—its businesses are so competitive and vigo­rous—that maybe they are one of the best competitors in the world and don't need the GSP privilege ... (laughter) maybe you should grant us GSP.

FCR: Mr. Sims, what would be your suggestion to our government?

Sims: Quite frankly, I have been im­pressed by what your government and private sector told me they intend to do. But the question is, the implementation. One of the key areas, where the Republic of China can take a leading place among the nations of the world, is in the patent area. I know your government has this under study. If the Republic of China can develop a very modern and effective patent law, I think it will encourage investment from the developed countries. Perhaps it will form the basis for a whole new sector of industry in the Republic of China-pharmaceuticals and chemicals, etc. That would be my major suggestion. Your government and private industry both recognize the importance of the copyright law covering computer software. But we are here to establish facts and to survey opinions, and I don't think we consider ourselves experts in the area of administration. It is not really our mission or our place to tell the sovereign government of the Republic of China what to do. We came out here to find out what you intend to do and report that back to the Congress; and then our bosses, the elected members of Con­gress, can decide on the policies they want to pursue.

FCR: Would you like to make a comparison of nations in this area with the same problem?

Christy: We found the problem exists in many Far Eastern countries, including Singapore, Hongkong, Korea, Thailand, and the PRC, and it exists in our hemisphere in Mexico, Colombia, and others. So we have told this to representatives of your government and to people in your business community: that we are not here to single out your coun­try as being a sole culprit in this area. There are many countries who do this, and primarily they are developing countries. Perhaps they see this as a shortcut to economic success. But in the long term, it is our view that this will be damaging to them, and also damaging to our country and to our business. Yes, there are a number of countries involved. Our presence here should not be interpreted as meaning the Republic of China is the sole problem.

FCR: Are you aware that many for­eign investors bring their own plans here and have their designs manufactured in Taiwan. When the design is pirated, our factories may commit a counterfeiting crime without really knowing it. Is there legislation at the U.S. end that penalizes such practices?

Nelson: We are quite aware of that. There are provisions in U.S. laws cur­rently to deal with that. If our govern­ment and your government are able to develop a close cooperation between the customs services, that will make it hard for counterfeit goods to come through. The very movement of counterfeit goods in the United States is a matter that's quite seriously illegal, unless they are declared to be counterfeit when they are brought in. If they are declared to be counterfeit, they will be seized and destroyed. If they come through and they are not declared to be counterfeit—they falsify the documents entering the United States—then there is a punish­ment of five years in prison and a $10,000 fine. We think that it is at least as important that those Americans who are encouraging this kind of activity in Taiwan be caught and stopped…and punished. We are also, inside the United States, in the process of attempting to change our law. Congress has under active consideration to make such coun­terfeiting illegal inside the United States. We already have fairly strong laws on the books regarding the movement of coun­terfeit goods into the U.S. market. How­ever, we are quite concerned that this doesn't truly touch the problem-the in­fringement on U.S. patents and copyrights in the Republic of China, and particularly the third-market exports of counterfeit American products-not to America nor for sale in Taiwan, but to other countries.

FCR: What is your frank assessment of the status of the ROC anti-counterfeiting campaign at this time?

Nelson: Before we came over, we had the statistics provided to us by our International Trade Commission. The statistics showed improvement in the ROC's counterfeiting problem. Now, we have a better appreciation of the inten­sity…of how strongly the government officials deal with this matter. I think it is too early to tell if future efforts-even the efforts stemming from your newly revised trademark law-will stop the problem.

Christy: I would say it is really important for your anti-counterfeiting com­mittee to work very close with the busi­ness community. They have to go out and find out where the problem exists and take legal enforcement and customs enforcement measures to see the prob­lems are remedied.

We do know anti-counterfeiting activities are being taken seriously by both your government and public. For instance, I noticed on the front page of the China Post, that one of the people who has just registered his mark put it there in very bold face-a block right on the front page of the newspaper. He has registered his copyright and put everyone on notice that any infringement will result in legal action. Obviously, they would not take that step unless they thought there was a prospective problem out there. So it is going to take concerted efforts by both government and business to stop it.

FCR: I have just finished my questions. Would you like to add anything?

Nelson: We have dealt with some very hard questions here in the Republic of China, and they have been dealt with, in turn, in the spirit of attempting to communicate the information that we asked for courteously and with great graciousness. We wish that when we have a problem within the United States and we investigate, that it will be as easy to talk openly as it has been here.

Sims: This is my second trip to Taiwan. I was here about nine years ago. The economic and industrial develop­ment and the general rise in the standard of living-today compared to what we saw nine years ago—is quite extraordinary. All the Chinese people on Taiwan can be justifiably proud of the progress that you have made.

Christy: I leave with several impres­sions, one of which is the great quality and conscientiousness of your public servants. Second is the impression that the economic miracle which is taking place here is quite remarkable. Thirdly and lastly, I think there is a great underlying spirit of friendship between people in the United States and the Republic of China. And I would hope there would be no one who would think of our presence here looking into counterfeiting matters-as an indication of difficulty in that friendship. Because the spirit of the talks we have had here with your governmental people was quite remarkablely candid. That could only be done in that way if we have the underlying spirit of friendship that does in fact exist.

*Major ROC anti-counterfeiting measures to date:

• Promulgation of the new "Measures Governing the Prevention of Trademark Counterfeiting and Falsification of Places of Origin"—stipulating that all exports of trademarked goods must be preauthorized by the Board of Foreign Trade.

• Revision of the "Trademark Law" increasing penalties for counterfeiting of trademarks to a maximum of five years in person, incommutable to a fine.

• Establishment of the top-level "Anti-Counterfeiting Committee" to vigorously pursue coordinated action; it is composed of representatives of the responsible agencies of the Ministry of Economic Affairs and of the Ministry of Justice, plus the affected policing units.

• Established an ad hoc task force within the Police Administration of the Ministry of Interior, to handle copyright infringements.

Some of the initial results of the new measures:

• Applications for registration of legal trademarks have sharply increased. The figures for April alone showed 4,900 new applications, a record.

• From January 1, 1982 to July 31,1983, the Board of Foreign Trade rescinded registrations for 38 traders or exporters and suspended the export privileges of 48 others already convicted by the courts.

• The courts have handled 149 trademark infringements, 28 copyright infringements, and 26 patent infringement cases as of September 30, 1983, a major increase over all previous 9-month periods.