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 * As a result of our Special 301 investigation and the agreement on the June 1996 enforcement accord, China has begun to take meaningful, serious action to halt CD export piracy. Close to 40 underground production facilities have been closed, over 250 people have been arrested with resulting jail sentences being handed down. In addition, Customs has stepped up raids at the border and seized smuggled CD production equipment. Rewards are now being offered of up to $75,000 for information leading to the closure of illegal production facilities. Nonetheless, pirate production of CD/CD-ROMs/VCDs continues to be a serious problem and domestic end-user piracy rates remain high. The United States Government will continue to monitor closely China's implementation of the 1995 and 1996 enforcement agreements.

The Administration has decided to place 10 countries on the priority watch list because of the lack of adequate and effective intellectual property protection or market access in these countries is particularly troublesome to U.S. interests. The trading partners are:


 * Argentina's patent regime denies adequate and effective protection to U.S. right holders, particularly in the pharmaceutical industry. As a result, President Clinton recently decided to withdraw benefits for approximately fifty percent of Argentina's exports under the Generalized System of Preferences (GSP) program. This decision was the result of a Special 301 "out-of-cycle" review. Argentina's patent law contains onerous compulsory licensing provisions and pharmaceutical patent protection will not become available until November 2000. Its law does not provide TRIPS-consistent protection for exclusive test data. There is no provision for pipeline protection or protection from parallel imports, which are long-sought U.S. objectives. An additional concern is the ruling by Argentine courts that computer software are works requiring specific legislation, not protected under copyright law. This ruling contradicts a 1994 Argentine decree and the TRIPS Agreement which specifically states that computer programs are literary works protectable under copyright law.

has not yet ratified and implemented the 1993 U.S.-Ecuador Intellectual Property Rights Agreement. In the context of WTO accession, the Government of Ecuador had committed to fully implement TRIPS by July 1996. However, Ecuador has stated that it will not, in fact, abide by this commitment but rather will avail itself of the full transition period in the TRIPS Agreement. Furthermore, Ecuador has not yet repealed a GATT-inconsistent law, the Dealers' Act, which denies national treatment and protection to U.S. investment and U.S. trademarks. We are seriously concerned by Ecuador's apparent disregard for its bilateral and multilateral commitments. We therefore will be pursuing WTO dispute settlement consultations immediately and will conduct an out-of-cycle review of Ecuador's progress toward resolving these issues in September 1997.

is taking significant steps in improving the legal framework for protection of copyright works. However, because of a lack of sufficient enforcement and the failure to impose deterrent penalties there as not been a significant reduction in piracy, particularly with respect to video, book, and