US-CHINA BATTLE DOES NOT END WITH COPYRIGHTS DEAL, EXPERTS SAY

US-CHINA BATTLE DOES NOT END WITH COPYRIGHTS DEAL, EXPERTS SAY

China still has far to go to satisfy the United States in terms of protecting U.S. intellectual property rights, leading analysts here said.

The accord "is only the first skirmish in a long battle," said Robert Broadfoot, managing director of Political & Economic Risk Consultancy Ltd., as details of a down-to-the-wire accord between the two countries was being avidly studied here Friday."This must be treated as a long-term negotiating matter," he said.

Assuming China keeps its word, the accord "will increase the level of confidence among companies working in or selling to China, even if they don't yet believe all Beijing's promises," Mr. Broadfoot told The Journal of Commerce.

"Trade problems between the United States and China are not going to go away. But at least this agreement indicates the big one - MFN - may go through," he said, referring to the most-favored-nation status that guarantees an exporting country the lowest available duties in the United States.

China's MFN status, under fire because of the nation's human rights abuses and a lopsided and growing trade surplus with the United States, comes up for annual renewal in Congress.

Stripping China of MFN eligibility would raise the cost of a wide variety of imports by huge amounts, hitting not only manufacturers but also U.S. importers, retailers and consumers.

It would have a sharp backlash in Hong Kong, where manufacturers do most of their work across the border and where the port handles much of China's trade. That business makes up some 65 percent of the local port's volume.

John Meredith, managing director of Hongkong International Terminals Ltd., estimates the port could lose US$160 million (HK$1.25 billion) in revenue. HIT, as the company is known, is the largest containerport operator here.

Gary D. Gilbert, regional vice president of Sea-Land Service Inc., hailed the accord as positive. "We are free traders. We don't like anything that impedes free trade, and welcome anything that promotes it," he said.

Sea-Land, the ocean shipping arm of CSX Corp. of Richmond, Va., handles about 13 percent by volume of container shipments into and out of China. Rival American President Lines Ltd. has about 10.5 percent.

Mr. Broadfoot, whose consultancy advises many U.S. and European companies doing business in or with China, sees the real issue as domestic U.S. politics, not China per se.

"The variable is how much the Democrats can turn China into a domestic election issue by tying it to unemployment. They seem to be focusing more on Japan now, and will probably stick to a single-point approach rather than diffusing their attack."

Mr. Broadfoot believes China will draw fire even if it does live up to the promises made during the protracted talks that ended last Friday.

"There will always be ripoffs, not necessarily by governments. There are also limits on enforceability in China; it's a big place. You have a bunch of people and companies - from outside China as well - always ready to take advantage if they can," he said.

While one issue is off the table, other investigations continue under Section 301 of the U.S. Trade Act.

"The difficulties will still be there, especially in a presidential election year," cautioned T.H. Chau, Hong Kong's director of industry.

Ian Christie, director of the General Chamber of Commerce, suggested the ''show of political toughness by President Bush was necessary for his re- election, but perhaps also paves the way for slightly easier negotiations on unconditional renewal of MFN."

The deal might diffuse the favored-nation status debate by facilitating China's re-entry into the General Agreement on Tariffs and Trade. GATT, based in Switzerland, referees world merchandise trade.

U.S. investment in China was second only to that from Hong Kong, but dropped precipitously after the 1989 Tiananmen Square massacre of pro-democracy demonstrators.