Some agencies seem anxious to throw out as much as 99 percent of the estimated damage in order to arrive at a retaliation figure. Thus, our alleged trade partners find it much easier to live with the limited U.S. slap on the wrist than to rectify the problem that led to the Special 301 action in the first place.

A credible Special 301 demands that there be a credible measure of response to foreign piracy.

Third and finally, in this very brief statement-I hope, Mr. Chairman, you will permit me to enter my full statement for the record.

Senator BAUCUS. Just so all witnesses know, all statements will be entered into the record.

[The prepared statement of Dr. Bale appears in the appendix.] Dr. BALE. Thank you.

Third and finally, one of the greatest concerns in industry is that the fundamentally flawed GATT Dunkel intellectual property, or TRIP's text, will be agreed to.

And worse still, it will effectively kill Special 301, or for that matter, Section 301 as a remedy for unfair intellectual property practices.

While we in the pharmaceutical industry wait 10 to 20 years before a defective TRIP's text becomes effective, we expect not to have recourse to Special 301 under the current Dunkel text.

Mr. Chairman, this problem needs to be addressed. We believe that any delay whatsoever in the transition under the TRIP's text should explicitly allow for interim use of Special 301 to its fullest extent.

As a one-time, it was a long time ago, negotiator in the 19751979 GATT Tokyo Round, I personally share my industry's skepticism about the GATT's outcome in the TRIP's negotiations and the concern about the future of 301 actions if a GATT package is ever implemented.

In conclusion, I hope that at this hearing we might be able to explore some of these issues, and that there might also be a chance to follow up with further thoughts on how to strengthen Special 301, or other legislation, which has been and can continue to be an effective instrument to complement other bilateral and somewhat less effective multilateral tools.

STATEMENT OF JASON S. BERMAN, PRESIDENT, RECORDING INDUSTRY ASSOCIATION OF AMERICA, WASHINGTON, DC Mr. BERMAN. Thank you, Mr. Chairman.

My name is Jason Berman. I am president of the Recording Industry Association of America.

The RIA represents over 250 record labels that produce over 90 percent of the pre-recorded music sold in the United States. And our members also account for approximately 60 percent of the music sold worldwide. That amounted to just over $16 billion in 1992, Mr. Chairman.

It was in recognition of the value of U.S. intellectual property industries, the recording industry included, that Special 301 was created.

It has a very simple predicate, that nations who want to trade with us on favorable terms have an obligation to grant us access to their markets and further, to ensure that the products of American ingenuity and creativity are not pirated or counterfeited.

Unfortunately, the U.S. record companies' market conditions in many places around the world can only be described in one word: hostile.

Whether through the failure to adopt adequate legislation or the unwillingness to effectively enforce laws, many countries have implicitly condoned piratical activities.

We have identified the most serious violators in our annual submissions to USTR under Special 301.

I would like to pay special attention now, Mr. Chairman, to those bilateral consultations that have produced results and to those that have remained on our Special 301 list as offenders for far too long.

Let me begin with the most dramatic development. A little more than a year ago, I sent a letter to USTR apprising them of a piracy problem of huge dimensions in Paraguay.

Yes. Little Paraguay was the source of a big problem. A handful of large and powerful tape pirates not only controlled 100 percent of Paraguay's market, but exported nearly $200 million worth of tapes into the surrounding markets of Argentina, Brazil, and Uruguay.

When Paraguay was named to the Special 301 watch list, Paraguayan authorities took notice. They discovered that this listing affected their ability to attract foreign investment, particularly, much needed U.S. investment.

In this case, Special 301 was able to serve its function merely be highlighting a problem. Paraguayan authorities have moved relatively quickly and decisively to eliminate piracy.

They have done such a good job in this effort that I am pleased to confirm that last week I wrote to USTR, requesting that Paraguay be removed from all Special 301 lists.

On the other side of the coin, however, is Thailand, a permanent resident on Special 301, where years of bilateral discussions aimed at improving copyright enforcement have failed to produce any concrete results.

This may be the result of Thai confidence in its ability to avoid sanctions based on geo-political concerns or that the Thais simply do not believe that sanctions, even if imposed, are too high a price to pay for maintaining an incredibly profitable pirate industry.

Whatever the reasons, efforts to address copyright piracy in Thailand until now have been spectacularly unsuccessful.

Once again, as we near the April 30th deadline for designations under Special 301, the Thais have been making public declarations about their good intentions.

Until recently, these words were unmatched by any deeds. Not a single pirate had been sent to jail as a result of Thai enforcement actions. It is a sorry record. It should not go unnoticed.

Let me add, Mr. Chairman, that April 30th seems to have a kind of magical quality to it when it comes to trade negotiations.

And I have to give credit where credit is due. The new Commerce Minister in Thailand, over the course of the last 2 weeks, has done more to enforce Thai law than in the 31⁄2 years that Thailand has been on Special 301 lists.

As you pointed out in your discussions with Ira, the test is enforcement, but it is enforcement over time. And that remains a question mark.

I do not know the answer to the question, except to say that everything that has happened in the last 2 weeks in Thailand has been wondrous. It is amazing that it took 32 years to do it.

And somewhere in between the success story of Paraguay and the story of Thailand lie Korea and Taiwan, both of whom have deserved reputations as pirate nations.

And again, it is April 30th that has brought the Taiwanese and the Koreans out into the open, offering declarations of good intentions, and some evidence of enforcement. But again, the question is, what will happen over time?

Let me turn to a country that does not appear at the top of my list, but a country that poses the greatest threat to the U.S. recording industry and at the same time, represents the greatest potential and that is, China.

There was some discussion earlier with Ira about events in China. China has passed a milestone copyright law. And on its face, it is a wonderful law. Unfortunately, it has no criminal penalties associated with it.

There is no transparency in the Chinese system for U.S. records to get into the country. There is an unwritten list of 100 titles a year. Unfortunately, most of those go to Hong Kong for Cantonese repertoire.

China needs to be sent a message. And it needs to be an unambiguous message. And this is the year for sending it.

Senator BAUCUS. I will have to ask you to summarize your statement.

Mr. BERMAN. Mr. Chairman, in summary, I am just happy to thank this committee and to see Senator Hatch, here as well, who helps actually to write our own copyright laws. So we have some sense of what is involved.

It has been the involvement of this committee over the years since the creation of Special 301, in the 1988 act, that has led to a confluence of administration actions that have benefitted U.S. industries.

And it is my hope that this committee will stay involved.

Senator BAUCUS. Thank you very much.

Mr. BERMAN. Thank you.

[The prepared statement of Mr. Berman appears in the appendix.]

Senator BAUCUS. Mr. Cummins.

STATEMENT OF JOHN J. CUMMINS, PRESIDENT, U.S.

TRADEMARK ASSOCIATION, NEW YORK, NY

Mr. CUMMINS. Thank you, Mr. Chairman.

My name is John J. Cummins. I am appearing here as chairman of the board of directors and president of the U.S. Trademark Asso

ciation. In every day life, I work for Proctor and Gamble, but I am wearing my USTA hat here.

As with all USTA officers, board members, and committee chairs, I serve on a voluntary basis.

Contrary to what is probably a popular belief, a trademark, that is, a brand name for or an identifier of a product, does not become invulnerable simply because it has been registered or created or because it is being used in the market place.

If left unprotected, a mark's value can descend. And the descent can be both rapid and total. An unprotected mark is subject to a myriad of dangers.

The most pernicious of these is counterfeiting which is usually defined as the use of a spurious mark. It is the same as or undistinguishable from the genuine mark.

Counterfeiting and other protection trade barrier problems are not simply threats to the trademark owner, however; they also constitute threats to consumers and to our global trading system.

Trademarks that are adequately and effectively protected under a jurisdiction's law provide an assurance of consistent quality, standards, and values to the consumer.

Conversely, without this protection, that assurance is lost. As a result, the consumer loses trust, not only in the specific product, but in the whole system.

Indeed, if it is a counterfeiting situation, such as you referred to, Mr. Chairman, it can have disastrous results-I am speaking about the counterfeit Reebok shoes that caused a serious injury.

The trademark owner obviously loses. And as the mark declines in value and sales go down, the economic system as a whole loses. As a 115-year-old not-for-profit association of over 2,500 members, USTA's principal goal is the preservation and promotion of trademarks as essential instruments of commerce, both domestic and international.

With our February 1993 filing of the Special 301 petition with USTR, we have indicated our commitment to create and implement a worldwide program to raise the profile of trademark protection to a level equal to the negotiation priority that has been accorded to the other principal forms of intellectual property: patents and copyrights.

Eight countries have been identified in our petition as particularly troublesome to the worldwide protection of marks: People's Republic of China, Taiwan, Thailand, the Republic of Korea, Brazil, Spain, Indonesia, and Mexico.

These nations are the ones with serious protection/trade barrier problems in many or most of the following areas: slow or cumbersome judicial procedures, arbitrary judicial decisions, ineffective civil remedies, ineffective criminal remedies, trafficking in trademarks, non-national treatment, uncooperative and/or uninformed police, unsympathetic or uninformed judges, and the inability to sue for trademark violations.

We trust that our submission will result in appropriate action by the USTR regarding trademarks. At a minimum, we hope that it will increase the level of understanding of these just-mentioned nations as to the importance that we attach to the need for adequate safeguards for the protection of trademarks.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Cummins appears in the appendix.]

Senator BAUCUS. Thank you, Mr. Cummins.

Mr. Smith.

STATEMENT OF ERIC H. SMITH, EXECUTIVE DIRECTOR AND GENERAL COUNSEL, INTERNATIONAL INTELLECTUAL PROPERTY ALLIANCE, WASHINGTON, DC

Mr. SMITH. Senator, copyright piracy drains from $12 to $15 billion a year from the U.S. economy. During the 5 years since Congress passed the Omnibus Trade and Competitiveness Act of 1988, annual reviews and negotiations under Special 301 to improve inadequate laws and enforcement have, indeed, achieved very significant results.

Special 301 has been essential in stemming the tidal wave of losses in U.S. jobs and competitiveness that have threatened our industries among the country's most productive and fastest growing economic sectors.

Mr. Chairman, Jay Berman's RIAA was a founding member of the IIPA back in 1984. This year, over 1,500 companies, making up the eight trade associations in the IIPA, identified 28 countries whose piracy levels are particularly intolerable and which caused over $4.6 billion in losses to this economy in 1992.

These losses translate into tens of thousands of lost jobs for Americans at a time when job creation is at the heart of national economic and trade policy.

Bilateral pressure under Section 301 under the GSP Program and under Special 301, the subject of this hearing, has been responsible for great successes, among them Singapore, Indonesia, and as recently as last year, China, which passed a copyright law. Even more recently, Greece passed a good copyright law. And we await enforcement. These countries come to mind in the copyright

area.

But as successful as Special 301 has been, we must, nevertheless, communicate to you and to the administration our grave concern for the future.

Many of the countries which you identified in your floor statement of 3 weeks ago and here today have been on the USTR list before. We talked about this.

Some, like Taiwan and Thailand, have been at the top of the list, have even been named as priority foreign countries. Some, like Thailand and India, have been subject to 301 action.

Some have even been the target of trade sanctions in the past, for example, Thailand in 1989.

The question is, have these countries come to view the threat of trade sanctions as no longer a credible threat?

On April 12th, Senator, our eight presidents met with Ambassador Kantor. We pointed out that the threat of trade sanctions is not credible unless we are prepared to use it. And if it is used, it must inflict real economic pain.

We believe Ambassador Kantor agrees with this conclusion. And we were particularly delighted to hear this confirmed by Mr. Shapiro's testimony today.