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Canada's Dumb Scrap with China

US bullied us into an ill-founded trade complaint. Now we look silly.

By Michael Geist 10 Feb 2009 | TheTyee.ca

Michael Geist's column on digital policy and politics runs every Tuesday in The Tyee. He holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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Former minister of trade David Emerson.

Late last month, the World Trade Organization released a much-anticipated decision involving a U.S.-led complaint against China over its intellectual property laws. Canada was among a number of countries that participated in the case, which alleged that China's domestic laws, border measures and criminal penalties for intellectual property violations do not comply with its international treaty obligations.

On April 25, 2007, David Emerson, then the minister of international trade, issued a press release announcing Canada's participation, stating that it was "based on concerns expressed by Canadian stakeholders on a range of issues related to China's intellectual property rights regime."

Yet according to dozens of internal Canadian government documents obtained under the Access to Information Act, Canadian officials, unable to amass credible evidence of harm to Canadian interests, harbored significant doubts about the wisdom of joining the case and ultimately did so only under the weight of great pressure from the United States.

Three shaky claims

The case centred on three claims -- that Chinese law does not provide adequate legal protection to all works; that its border measures, which allow customs officials to donate confiscated items to the Red Cross, violate international trade law; and that the Chinese criminal enforcement does not live up to international standards by establishing a minimum threshold before authorities are able to prosecute cases of infringement. Canada supported the U.S. position on all three issues.

The WTO panel confirmed the U.S. claims on legal protection for all works, but virtually all of the Chinese border measures were upheld as lawful. Moreover, the panel rejected claims regarding the criminal thresholds, admonishing the U.S. for failing to provide adequate evidence to demonstrate a violation of China's treaty obligations.

The panel's emphasis on the lack of evidence should resonate with Canadian officials since documents indicate that the inability to gather solid evidence of Canadian harm in China hampered the case from its very inception.

Arm twisting by US

Government records reveal that the U.S. began to pressure Canada to join the case as a full party in 2006, months before the case was formally filed with the WTO. In April 2006, officials at the Department of Foreign Affairs asked the Beijing and Shanghai consular offices for information on intellectual property infringement problems, but neither provided much assistance.

Two months later, with the case making little progress (in May, an RCMP official wondered aloud why Canada was even concerned with enforcement in other countries), Foreign Affairs launched a public consultation on intellectual property enforcement abroad. The consultation was not limited to China, as officials decided to keep it open-ended.

The consultation generated 55 responses, but officials hoping to build a solid case against China were left sorely disappointed. According to a government summary (the consultation results have never been disclosed to the public and were obtained under Access to Information), only one-third of the responses specifically referenced China as a problem. In fact, there were more responses that criticized the United States and the consultation itself.

By the end of the summer, the U.S. had provided Canadian officials with its legal arguments, but Canada was without the evidence it needed to demonstrate harm and thereby participate as a co-complainant in the case. Indeed, on the key issue involving criminal enforcement thresholds, a Department of Justice official noted that Justice and RCMP guidelines used similar thresholds for prosecutorial decisions and that the Chinese could effectively make similar claims against Canada.

Given the weak position, Canadian officials could not support becoming a co-complainant, instead recommending that Canada join as a third party. Anticipating an October 2006 complaint, a press release was prepared but was never issued after the U.S. decided to delay launching the case.

Canadian recording industry ups the volume

With no complaint in sight, the Canadian Recording Industry Association, which had been the most vocal supporter of Canadian participation, met with senior Foreign Affairs officials in January 2007. Documents prepared by department officials in advance of the meeting noted that CRIA's previous efforts to encourage participation had "lacked specifics." The memo concluded that "we remain of the view that we do not have enough information related to specific Canadian experiences and interests to go forward as a co-complainant" and that "there is still no real concrete information however, of Canadian interests that have been harmed in China."

Over the next few months, Canadian officials grappled with several concerns as a U.S. complaint appeared inevitable. For example, with plans for Canada to participate in the intellectual property case against China but not in a second case on market access, officials feared that the Canadian steel industry would voice its objections.

Further, as Canadian officials drafted a formal letter of notification of its participation, a Geneva-based official asked "do we have statistics to mention about intellectual property owned by Canadians sold in China or something like it to explain why we are interested?" Without solid statistics, the formal notification did not reference the issue, instead merely stating Canada's "concern" with Chinese practices.

A double loss for Canada

The U.S. commenced its action on April 9, 2007. Canada filed its notification as a third party participant two weeks later, and within hours CRIA wrote to Foreign Affairs to offer its assistance on the case.

Nearly three years after Canada began exploring its potential participation, the case has led to a double loss for Canadian interests. Not only has the WTO panel rejected most of its key arguments, but Canada's politically-motivated participation has undermined its relationship with China.

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