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 On March 12, 2001, Ukraine was designated as a "Priority Foreign Country" (PFC) for persistent failure to take effective action against significant levels of optical media piracy and to implement intellectual property laws that provide adequate and effective protection. According to industry, Ukraine is the largest producer and exporter of pirated optical disks in Europe. Ukraine's exports of pirated compact discs (CDs) are disrupting markets throughout the region and beyond. For more than two years, the U.S. Government has been urging the Ukrainian Government to close down the pirates' CD production facilities and enact legislation to adequately protect copyrights. Despite many promises, including high-level commitments made in June 2000, the Ukrainian Government has been unwilling or unable to curtail the activities of these pirates. As a result of the PFC designation, USTR also initiated an investigation of Ukraine's practices under Section 301 of the Trade Act of 1974. As part of this process, USTR conducted consultations with the Government of Ukraine in early April to discuss the above concerns. Failure by the Government to address these concerns within three months of initiating the investigation could lead to the imposition of trade sanctions. Further, this failure to protect intellectual property rights could jeopardize Ukraine's efforts to join the WTO and undermine its efforts to attract trade and investment. The U.S. Government will remain actively engaged with Ukraine, to help and encourage the nation to combat piracy and to enact the intellectual property rights legislation required by both the 1992 bilateral Trade Relations Agreement and the TRIPS Agreement.

 Although lack of enforcement of intellectual property rights remains a significant problem in China, particularly for trademarked products and copyrighted works, China's officials recognize the need for more effective action to address this continuing problem. Nevertheless, despite intensive enforcement campaigns and senior level attention to the problem, trademark counterfeiting remains widespread, with large-scale production of fake products running the gamut from pharmaceuticals to shampoo to batteries. Unauthorized production and sale of copyrighted products remain widespread. A new and disturbing phenomenon is the increased production of pirated optical media products by licensed plants that had previously only manufactured legitimate products. In addition, piracy of U.S. books continues unabated. The effectiveness of enforcement efforts varies from region to region, and is hobbled by lack of transparency and poor coordination among responsible police and government agencies. Criminal actions are rarely filed, the legal thresholds for prosecutions are too high, and administrative penalties are too low to deter further piracy.

China is now undertaking a comprehensive review and revision of its intellectual property rights laws in preparation for accession to WTO. In that connection, China has agreed to implement its obligations under the TRIPS Agreement as of the date of its accession to the WTO. China's revised patent law will take affect in July 2001 and amendments to its copyright law and trademark law are currently under final review. Current drafts take steps to improve enforcement