The “301 watch” (actually Section 301 of the 1974 Trade Act, as amended in 1984), gives authority to US president to deal with states that failed to provide ‘adequate and effective’ protection for US intellectual property. So, under the 301 process, an unfavourable finding in a country could lead to withdrawal of its trade benefits or imposition of duties on goods.
The 2008 report puts Pakistan in ‘Special 301 Watch’ category where it mostly has been in the past. The level of protection has not been up to the satisfaction of the United States Trade Representative’s office.
Only a year ago and even in 2006, Pakistan was placed in simple 301 watch list which meant the US was satisfied, if not happy, with the efforts the country was making in bringing its IPR regime nearer to the standards fixed by Washington for developing countries
. Pakistan created Intellectual Property Organisation (IPO) in 2005 at the behest of Washington to seek its nod for a free trade agreement. But nothing of the sort happened. Even, a bilateral investment treaty has not been inked.
In October, 2007, in its out-of-cycle review (OCR) process, even the International Intellectual Property Alliance (IIPA), a coalition of seven American trade associations representing the copyright-based industries and on whose recommendations and policy inputs the USTR takes decisions, had recommended that Pakistan remain on the watch list due to its continued co-operation and enforcement activity of the Federal Investigation Agency (FIA) and Pakistani Customs, especially with respect to stopping factory-pressed optical disc pirate production and exports.
However, USTR’s decision is based on different reasons. This time, it is the ‘ineffective’ protection of pharmaceutical patents. In 2007, the US monitored Pakistan’s progress on enacting legislation to provide effective protection against ‘unfair commercial use of undisclosed test and other data’ generated to obtain marketing approval for pharmaceutical products, as well as a system of co-ordination between its health and patent authorities to prevent the issuance of marketing approvals for unauthorised copies of patented pharmaceutical products.
“Due to a lack of progress in either of these areas”, notes the 2008 report, “Pakistan is being elevated to the Priority Watch List.”
However, the United States appreciates, as also noted by IIPA, Pakistan’s efforts to root out large-scale illegal optical disc production and their retail sales and wants it to take more actions against book piracy, aggressively prosecute IPR crimes, and ensure that its courts issue deterrent-level sentences for IPR infringers.
This year, the US administration has placed nine countries, including Pakistan, on a “priority watch list” which, in some cases, could eventually lead to economic sanctions. These countries are China, Russia, Argentina, Chile, India, Israel, Pakistan, Thailand and Venezuela. Another 31 countries have been shifted to a lower-level watch list, indicating it has concerns about copyright violations in those nations but they don’t warrant the highest level of scrutiny. Egypt, Lebanon, Turkey and Ukraine have been taken off the “priority” list and placed on the lower-level watch list.
Meanwhile, the United States National Trade Estimates Report 2008, which contains estimates of trade losses, and which the USTR submits to president and various congressional committees a month before the actual USTR report, tells a different story why Pakistan has been shifted to priority watch list. It says the country is now functioning as a conduit for infringing products coming from Russia, Malaysia, Singapore, China, Bangladesh, and Sri Lanka for onward distribution.
The IIPA report for 2008 has mostly updated the actions being taken by Pakistan FIA, customs and other agencies. One key issue in Pakistan, it says, remains the lack of ex officio authority being employed by FIA or IPO. At present, a formal complaint must be lodged by a copyright owner or an authorised representative before FIA take any action. The affectees have met the Intellectual Property Office (IPO) officials at various forums and are trying to convince law enforcement authorities to take more ex officio actions against blatant piracy.
Another problem, it says, appears to be leaks within the enforcement units. In November 2007, after thorough investigation, the recording industry group lodged a complaint against five pirate audio cassette manufacturing factories and warehouses. FIA raided all five sites but pirated goods were found at only one site. It is believed that there have been instances in which FIA has leaked the information before the raid.
What are the accurate losses because of piracy? It is difficult to figure out. The cost of copyright piracy to the US economy, according to a recently-released study, amounted to at least $58 billion in 2006. In Pakistan, according to IIPA figures, trade losses to US concerns amounted to $156 million during the year 2007, two million dollars less than 2006, owing to piracy in record and music, books and business software. Meanwhile, an anti-piracy campaign group of Pakistani private sector called Anti-Counterfeiting Infringement Forum (ACIF) has put the figure of annual loss to national exchequer at Rs10 billion. Nobody can confirm the authenticity of such figures.
When Peter Drahos, an IPR scholar, asked a USTR official how accurate the industry figures on piracy could be, the latter smilingly said: “trade organisations have a varying degree of commitment to accuracy.” It is interesting to recall that when USTR negotiating teams used to travel to places like Seoul, Singapore and Rome in the nineties to meet officials, they were more careful to highlight piracy figures to show serious trade losses for the US. For instance, when USTR Clara Hills sent a team to Rome in 1992 to discuss the piracy of Disney movies with officials, their repeated stress was that the US industry was losing $224 million annually to Italian pirates.
Presenting a case of piracy in impressive numbers is more convincing in many ways. It creates a fact for general public and also develops the pirate image of a country. If the USTR does impose sanctions on a country, the high figure of trade losses helps to provide a justification for the measure. Similarly, no large company would like to be seen having a small estimate of losses. It would imply its products are not worth pirating. Hence, the incentives to be generous in one’s estimate of the piracy problem are usually strong.