When the United States and China on Monday begin two days of talks in Washington, U.S. officials are expected to discuss the value of China’s currency, the yuan, and Chinese officials will likely raise the issue of America's huge budget deficit.
But experts and American officials say two other issues also need urgent attention - the lax enforcement of intellectual property rights in China and China's policies that limit market access for foreign companies.
For years, Chinese and U.S. officials have been discussing the problem of pirated computer software, music and films - and yet, the problem persists virtually unabated.
Michael Schlesinger, counsel to the U.S.-based International Intellectual Property Alliance, says the piracy of computer software in China costs U.S. companies billions of dollars each year. "China has made commitments in bilateral negotiations with the U.S. dating back to 2004 to curtail software piracy. Yet the value of unlicensed software use in China more than doubled from $3.6 billion in 2004 to $7.6 billion in 2009," he said.
In recent months, Chinese officials have promised to seriously address the problem - including pledging to begin dealing with the problem of pirated software use by Chinese-owned state enterprises.
Michael Schlesinger, who testified a recent U.S.- China Security and Economic Review Commission hearing, says Beijing's commitments are significant.
He says the problem is affecting company revenues and international competition.
"Software piracy in China harms more than just U.S. software firms. Software is a critical input in production for business in many sectors. The unlicensed use of software by business in China across a wide array of sectors results in products from these firms competing unfairly against products made by U.S. firms that pay for the software they use," he said.
Testifying at the same hearing, Ken Wasch, president of the Washington-based Software and Information Industry Association, noted that China not only is duplicating software and selling it domestically, but also exporting hard copies overseas and as well as over the Internet.
"China is becoming the primary source for illegal intellectual property goods of all kinds, being distributed through Chinese servers," he said.
According to Schlesinger, intellectual piracy and Beijing's policies to boost Chinese firms are keeping U.S. companies out of one of the world’s biggest and fastest growing markets.
"There are also a growing number of policies being rolled out by the Chinese government that can severely restrict access to the legal market in China for foreign software companies. These so-called 'indigenous innovation' policies seek to use government procurement, standards setting and other levers to bolster domestic technology companies by shutting out foreign competitors and compelling transfers of technology to them," he said.
Indigenous innovation and intellectual property protection are two key issues that U.S. Treasury Secretary Timothy Geithner and Commerce Secretary Gary Locke touched on in the run up to this week's Strategic and Economic Dialogue talks.
Speaking last week at the Woodrow Wilson Center for International Scholars, Locke said that despite increased Chinese investment in the United States in recent years.
"[T]hat is not the case for American companies operating in China, where they are frequently shut out of entire industries or they are forced to give up proprietary information as a condition of operating in China. This imbalance of opportunity is a major barrier to continued improvement of the United States and China’s commercial relationship," he said.
Locke says that although Beijing often pledges to improve conditions for foreign companies in China, those promises frequently are not implemented.
Beijing complains about market access in the United States and American restrictions on the export of U.S. high technology goods to China.
The U.S.-China Strategic and Economic Dialogue talks are scheduled to begin Monday morning and finish Tuesday afternoon.
