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 production, and are beginning to see the legitimate licensing of film and music production in China. But, China must demonstrate a greater resolve to address illegal importation of CD and VCD products, as well as other IPR violations including the illegal reproduction of software products, retail piracy, and trademark counterfeiting. Consistent with our approach of enforcing all of our trade agreements, we will continue to work to ensure that China strengthens its enforcement against illegal importation, distribution, reproduction and sale of all illegitimate IPR products."


 * Progress has also occurred in Bulgaria since the January announcement that Bulgaria would be identified as a priority foreign country as early as April 1998. Today Ambassador Barshefsky said, "Bulgaria's stated commitment and the recent steps it has taken toward addressing piracy are a welcome indication of the Government's resolve to enforce its intellectual property laws. While initial reports of Bulgaria's efforts to address pirate CD production are encouraging, given the magnitude of the problem, Bulgaria must demonstrate its ability to substantially eliminate copyright piracy over the long term. We will closely monitor the level of piracy in Bulgaria and review the situation in September 1998. Should Bulgaria fail to maintain significant enforcement efforts against pirate production of CDs and software compilations on CD-ROMs, it will be identified as a priority foreign country as early as September."

On January 28, Bulgaria announced a CD manufacturing plant licensing decree which aims to address the alarming increase in pirate CD production. Under this decree plants are not allowed to operate without a manufacturing license or without a specific license for titles that are being produced. As a result, Bulgarian officials reported that all CD production facilities were closed pending the issuance of manufacturing licenses. Some plants have since been issued licenses and resumed production under this decree. This production must be closely monitored as there have been unconfirmed reports of additional piracy. Bulgaria has also committed to place CD plants under 24 hour surveillance and immediately address any evidence of illegal production, establish a specialized enforcement unit to deal with CD piracy, and introduce regulations on the importation of CD manufacturing equipment and raw materials. Bulgarian officials report that the Ministry of Interior has carried out 174 operations resulting in the seizure of 120,000 pirate CDs thus far in 1998.


 * Over the past year, the Government of Brazil has enacted modern laws to protect computer software and copyrights. This complements Brazil's May 1997 implementation of modern patent legislation. In recognition of these significant developments, Brazil is removed from the Watch List. However, Brazil must take further significant steps to combat piracy. We look forward to issuance of a significant number of pharmaceutical "pipeline" patents in the very near future.


 * Taiwan authorities have worked diligently over the last five years to improve intellectual property laws and regulations; however, more work needs to be done in the implementation and enforcement of these laws and regulations. Taiwan-origin pirate and counterfeit products -- CDS, CD-ROMs, and video games -- are being seized in the United States and Latin America,