Intellectual Property and US Relations with Indonesia, Malaysia, Singapore, and Thailand 9781501719431

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Elisabeth Uphoff

INTELLE TUAL PROPERTY AND US RELATIONS WITH INDONESIA, MALAYSIA, SINGAPORE, AND THAILAND

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Elisabeth Uphoff

INTELLE TUAL PROPERTY AND US RELATIONS WITH INDONESIA, MALAYSIA, SINGAPORE, AND THAILAND

SEAP Southeast Asia Program 120 Uris Hall Cornell University, Ithaca, New York 1991

© 1990, Cornell Southeast Asia Program ISBN 0-87727-124-0

About the Author Elisabeth Uphoff received her BA degree with honors from Cornell University in May 1990. As a College Scholar, she followed an interdisciplinary program of study dealing with the political economy of South and Southeast Asia. She is presently teaching Southeast Asian history and English in Thailand in Site 2 refugee camp on the Thailand-Cambodian border under the auspices of the Catholic Organization for Emergency Relief and Rehabilitation (COERR).

CONTENTS

Introduction

1

1. US Policy toward Intellectual Property Protection

5

2. Singapore

13

3. Malaysia

21

4. Indonesia

27

5. Thailand

37

Conclusion

51

Bibliography ,

55

Glossary and List of Abbreviations

61

V

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INTRODUCTION

I the mid-1980s, the US Government made improved protection of American intellectual property abroad a major goal of foreign economic policy. The US Trade and Tariff Act of 1984 classified inadequate protection of intellectual property as an unfair trade practice and required the President to take action against offending countries, requirements which were reinforced and tightened in the 1988 Trade Act. On April 7, 1986, the Reagan Administration issued an "Administration Intellectual Property Rights Policy Statement/7 outlining the importance of intellectual property rights to economic development and trade. The Office of the US Trade Representative (USTR) was charged with implementing the policy and, although a new issue, intellectual property protection quickly became one of USTR's most important issues, to the point where the US delegation threatened to walk out of the GATT talks if intellectual property was not on the agenda.1 The policy was aimed at developing countries and was backed up by the threat of trade retaliation against those countries that refused to provide "adequate'" levels of protection. The ASEAN countries (with the exception of the Philippines, which was partly exempted for political reasons) were among the first targeted as "problem" countries. Because the US policy was applied uniformly across countries at the same time, the issue of intellectual property protection allows for an interesting comparison of decision-making in Singapore, Malaysia, Indonesia, and Thailand and for an exploration of relations between the United States and the Association of Southeast Asian Nations (ASEAN) in the mid-1980s. The US policy confronted each government with a very real and immediate choice—either amend national law within a fixed time or face possible loss of trade privileges and/or decreased access to the American market. The decision also forced the governments to make an explicit choice of development strategy. The official US argument is that strong intellectual property protection is necessary to encourage local creativity and to attract foreign investment in industries based on intellectual property. On the other side, many developing countries argue that they need free access to ideas and technology in order to "catch up" with the industrialized countries. Protection of new technologies such as computer software, semiconductors, and biotechnology is yet more controversial and even countries which are already committed to strong intellectual property rights may disagree on the form of protection. Intellectual property protection also sheds light on aspects of some of the new issues in international trade policy. A study of how intellectual property protection was handled may help in understanding the process by which conflicting parties deal

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^US Congress, Senate Finance Committee, Intellectual Property Rights, 99th Congress, Second Session, May 14,1986, p. 87.

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with these types of issues, as well as the interests and constraints on both sides. First, intellectual property protection is one of a series of new international trade issues that have arisen as a result of new technology and increasing economic interdependence, issues which are likely to play an prominent role in future international trade conflicts. Second, the US initiative on intellectual property and other fair trade issues marks the first time the ASEAN countries have been directly faced with active US trade diplomacy (as opposed to non-country specific tariffs or quotas) of the kind that Japan and Europe had faced for years. From World War II through the 1970s, US governments have tended to see the ASEAN countries in primarily political and military terms. Now in the 1980s, ASEAN has become the United States' fifth largest trading partner and the US is ASEAN's most important market, especially for manufactured goods.2 Both sides have generally regarded the growing economic ties positively, but some trade disputes have inevitably arisen as the US tries to stem the erosion of markets for American goods at home and abroad, while the ASEAN countries try to promote their own economic development through expanding exports. Intellectual property has been one of the first such encounters but it is unlikely to be the last. This monograph will not try to verify the economic advantages and costs of intellectual property protection or the relationship between protection and development, but will focus rather on how the alternatives were perceived by the four countries. The study will focus first on each of the Southeast Asian governments7 decisions on how to respond to American pressure, taking into account the key factors and the political process involved in each county. Second, it will assess the effectiveness of the US policy and what it bodes for relations between the US and these countries. The focus on political factors is not meant to downplay economic factors or legal questions, but rather to understand how these governments handled a technological/legal issue with which the top decision makers were unfamiliar. There are a number of different categories of intellectual property rights, covering different types of created works and offering different levels of protection. I have chosen to concentrate on copyrights (which protect literary and artistic works) and patents (which protect industrial works) because these are the areas to which the US Government has assigned priority, and which have proved most contentious. The Philippines has not been included in the study because its laws are basically acceptable by US standards; lack of protection is primarily due to lack of enforcement. Also, in 1985-1986, when the US Government began seriously applying pressure elsewhere, attempts to cope with the unstable political situation in the Philippines were given precedence over improving enforcement of copyright and patent laws. The first chapter briefly covers the history of international intellectual property legislation and then discusses the development of US policy. Although the focus of the study is the response of the four ASEAN governments, the genesis of the US policy is important for understanding the objectives and constraints of American negotiators. I also feel it is important to demonstrate that American policy was not based purely on economic or moral imperatives, but was as much affected by domestic political factors and interests as was the response of the four ASEAN countries. The second, third, fourth, and fifth chapters are case studies of how Singapore, Malaysia, 2

Seiji Naya et al., ASEAN-U.S. Initiative (Honolulu: East-West Center, and Singapore: Institute of Southeast Asian Studies, 1989), p. 7.

Introduction

3

Indonesia, and Thailand responded to the US policy. The case studies are arranged chronologically, according to the order in which an agreement (at least in principle) was reached with the US. My research is based on existing publications and interviews with government officials, businessmen, and scholars in Washington, Jakarta, and Bangkok. Finally, it should be stressed that the figures on piracy are only estimates and tend to vary widely, depending on the source of the calculations.

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1 US POLICY TOWARD INTELLECTUAL PROPERTY PROTECTION

ntellectual property rights/7 the government-licensed ownership of ideas, are a device to balance conflicting private and public interests in human creativity. Ideas (a song, an invention, a design) are neither tangible nor exclusive: one person's use of an idea does not prevent or interfere with another person's use. To the contrary, if there are no restrictions on use, a new invention or work of art is likely to inspire imitations, thus driving down the price that the creator can charge. The lower the cost of ideas, the more people have access to them and the more quickly they spread. Low costs and wide diffusion of ideas are considered in society's interest. However the unrestricted use of ideas also imposes a cost on society by lowering the rate of creativity since, if artists and inventors cannot realize profit from their creations, they have less incentive to create. For this reason, governments often intervene to grant temporary monopolies to the producers of ideas, balancing the cost of monopoly to consumers against the benefits of increased creativity.1 Copyrights and patents are two of the most widely used forms of protection for intellectual property. The first national intellectual property laws were passed in England—patent legislation in 1623, and copyright law in 1709—but it took another century for countries to appreciate the value of protecting the ideas of other countries' citizens, as well as their own.2 The first international copyright agreement was signed between France and England about 150 years after England's Copyright Act was passed, and it was not until the end of the nineteenth century that the growth of trade in these items convinced the European countries that some kind of international structure was needed. This conviction led to the Paris Union (1883), which bound its members to extend national treatment to other members' patents and other industrial property, and to the Berne Convention (1886) which created a standard of copyright protection for members to adhere to. Since then, the major international debate over intellectual property protection has been between the industrialized countries, which produce most of the world's traded intellectual property, and the developing countries, which are primarily con-

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^or further discussion of the economic rationale for intellectual property protection, see any of the following: Robert P. Benko, Protecting Intellectual Property Rights (Washington, DC: American Enterprise Institute for Public Policy Research, 1987); Helena Stalson, Intellectual Property Rights and U.S. Competitiveness in Trade (Washington D.C.: National Planning Association, 1987); or Paul Goldstein, Edmund Kitch, and Harvey Perlman, Unfair Competition, Trademarks, Copyrights and Patents: Selected Statutes and International Agreements (Mineóla, NY: Foundation Press, 1986). ^Stalson, Intellectual Property Rights, p. 12.

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sumers. The industrialized countries argue that without protection for intellectual property, there is no incentive for creators to create and therefore it is impossible to develop any artistic or scientific industry based on intellectual property. Developing countries are concerned that the restrictions of licenses and the cost of paying royalties would deprive them of access to the technology and knowledge that they need to develop. This division was evident even as the first international conventions were formed—in 1886, the US refused to sign the Berne convention on the grounds that, as a developing country, it had a right to the "heritage of mankind" to help its development. After World War II, as dozens of colonies became independent countries, the international institutions governing intellectual property were restructured to allow for the increase in members and provide a framework for dialogue between the two opposing views. In 1952, the Universal Copyright Convention (UCC) was created under UNESCO administration as a less demanding alternative to the Berne Convention, both for developing countries and for the US, whose Copyright Act did not match Berne standards although the US was now firmly on the side of strong protection. Then in 1967, the Paris and Berne conventions were placed under the jurisdiction of the World Intellectual Property Organization (WIPO), which became a UN agency in 1974. Both organizations worked to encourage protection and help governments in developing countries draft new intellectual property laws or revise old ones. However, neither WIPO nor UNESCO was given power to enforce protection and, as developing countries made up the majority of members in these organizations, the international debate tended to be dominated by the question of how developing countries could get increased access to intellectual property, especially with regard to technology transfer, rather than how to increase protection. In the 1970s, the position of the developing countries was reinforced by dependency theory, which explained intellectual property rights in center-periphery terms, arguing that treating ideas as property helped countries at "the center'7 keep those at "the periphery" dependent on them for technology.3 Building on this analysis, proponents for the Group of 77 framed intellectual property rights in the context of overall North-South relations, arguing that protection of foreign intellectual property rights meant in effect protecting the property of Northern-based multinational corporations and thus widening the gap between developing and industrialized countries. The success of Japan, Taiwan, and South Korea (all avid copiers during the early stages of rapid industrialization) supported the theory that copying was a natural stage in economic development, whereby less industrialized countries could gain necessary knowledge and experience to build their own industry by imitating the products of more industrialized countries. In the late 1970s the direction of concern was reversed. Claiming that unauthorized copying, or "pirating," in Third World countries was causing them serious losses (an estimated US$60 billion dollars a year worldwide), producers of intellectual property in the industrialized countries launched efforts to make developing countries extend and enforce intellectual property rights.4 There are several reasons for the timing of this shift. First, rising levels of education in developing countries increased the demand for Western books, films, and consumer goods in most devel3

For further discussion, see Paulo Bastos Tigre, Technology and Competition in the Brazilian Computer Industry (New York: St. Martin's Press, 1983). 4 Stalson, Intellectual Property Rights, p. 2.

US Policy

7

oping countries faster than incomes needed to meet these demands; the resulting gap was filled by "pirates/7 Second, advances in reproduction technology have made it much easier to copy books, audio/videotapes, movies, etc. Also, as the industrial sectors in developing countries matured, so did the quantity and quality of what could be copied. By the 1980s, some developing countries copiers made copies that were good enough to export. Another factor is that research and development costs for many patented industries, such as pharmaceutical and agrochemical industries, have risen dramatically, making it easier for pirates to undersell legitimate producers. Finally, as world trade has increased so has trade in intellectual property and therefore the number of people affected by such trade. With the general economic downturn and increased competition in the late 1970s and 1980s, previously disregarded Third World markets took on a new importance. Producers of intellectual property began mobilizing to fight piracy in the late 1970s, both on an international and national basis. The majority of members of the various international coalitions and associations were American (the US is the largest producer of intellectual property in the world) and British, reflecting the development of an international culture and therefore a market for pirated goods based on Anglo-American culture. Within the US, pharmaceutical and chemical manufacturers, computer companies, book publishers, recording artists, the movie industry, and others formed anti-piracy committees to monitor the situation and to enlist US Government support. The US Government had supported strong intellectual property rights as a matter of policy for several decades, but had made only a minimal commitment of time or resources. While sympathetic to the problems of US companies, it did not have the means to force other countries to comply. During the General Agreement on Trade and Tariffs (GATT) talks in 1978, the US Government proposed an international code to stop imports of counterfeited goods. However the code was strongly opposed by developing countries who felt that the World Intellectual Property Organization (WIPO) was the appropriate forum for intellectual property issues. In response to growing complaints by American companies, the US State and Commerce Departments also began raising the problem with the worst offenders in bilateral talks but, as with the GATT code, US negotiators had no way to force the other countries to respect intellectual property rights. After the 1982 GATT talks failed to produce any measures to stop piracy, American companies turned to the US Congress for direct action. The US Congress was eager to listen, both for economic and domestic political reasons. First, both the relative and the absolute importance of intellectual property to the American economy has increased dramatically over the past few decades. Goods high in intellectual property value have increased from less than 9 percent of American exports in 1947 to 27.4 percent in 1986.5 In 1982, the copyright industries alone contributed over $153 billion to the US economy, employed over 2 percent of the work force, and earned a trade surplus of over $12 billion.6 Losses to piracy were equally impressive. The US International Trade Commission (USITC) estimated that ^R. Michael Gadbaw and Timothy Richards, Intellectual Property Rights: Global Consensus, Global Conflict? (Boulder & London: Westview Press, 1988), p. 4. 6The International Intellectual Property Alliance, Piracy of U.S. Copyrighted Works in Ten Selected Countries: A Report by the International Intellectual Property Alliance to the United States Trade Representative (Washington: August 1985), p. 1.

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inadequate intellectual property protection cost US industries between $43 billion and $61 billion a year worldwide.7 It was further estimated that 750,000 American jobs were being lost each year due to foreign piracy of intellectual property.8 In addition to its dollar value, intellectual property protection is crucial to high-technology fields such as bio- and computer technology, two of the few areas where the US is still the unquestioned world leader. There were political reasons for Congress to be receptive as well. An aggressive intellectual property rights policy, along with other "Fair Trade" initiatives, provided a way for Congress and the President to respond to the political pressure created by the trade deficit without resorting to protectionism. Since the 1970s, the domestic consensus on free trade has been called increasingly into question. As the gap between American technology and productivity and that of its competitors has narrowed and as the US economy has become more integrated into the world market, the number of people adversely affected by trade competition has increased. Furthermore, the perceived role of government in the success in Japan and the East Asian countries has raised doubts about the continued validity of liberal trade theory. The recession in 1981-1982, followed by an unprecedented trade deficit, even in manufactured goods, brought considerable pressure on Congress to do something to relieve suffering industries and make America competitive again. One "solution," backed by labor and some domestic industries, was to restrict imports through quotas, domestic content legislation, etc. Such measures were adamantly opposed by President Reagan on ideological grounds, by lobbies of exporters who feared retaliation from other countries, and by importers. Even among those who questioned the continued validity of "free trade" in the 1980s, many were still uncomfortable with the idea of open protectionism. Another proposal was that the United States needed an industrial policy. Citing the example of Japan and the "Newly Industrialized Countries" (NICs), a number of books and articles claimed that the reason the US was not able to compete was that it was the only industrialized country in the world without an industrial policy. This also ran into strong opposition from the President and others who opposed increased government intervention in the economy. A third solution, which offered both immediate action and was less politically divisive, was "Fair Trade" legislation or "reciprocity." "Fair Trade" legislation is based on the assumption that, while US businesses play by the rules of international trade, other countries engage in erecting trade barriers, subsidizing exports and other unfair practices. Accordingly, this legislation empowers the President to take action to counter-balance these unfair practices by imposing tariffs and quotas on offending nations. Such an explanation of America's trade problems appealed to legislators and lobbyists seeking more direct protection and also to those seeking to avoid protectionist measures. Many of the latter began to define themselves, not as pro-free trade, but rather as anti-unfair trade because of the widespread skepticism about free trade. Protection, they argued, would only reduce the volume of world trade and make everyone worse off, but a tough Fair Trade policy would break down foreign trade barriers to American goods and services and 7

The Intellectual Property Committee, Keidanren, and UNICE, Basic Framework of GATT Provisions on Intellectual Property: Statement of Views of the European, Japanese, and the United States Business Communities, June 1988, p. 13. 8 US Congress, Joint Economic Committee, International Piracy Involving Intellectual Property, 99th Congress, Second Session, March 31,1986, p. 3.

US Policy

9

would increase world trade. Although President Reagan initially opposed Fair Trade legislation, like other Congressional free traders he soon accepted it as necessary to forestall protectionism. Protection of American intellectual property abroad became an additional source of support and justification for Fair Trade policy. When American companies complained to their Congressmen about piracy in other countries, ''Fair Traders" drew them into the coalition that was being built against protectionism by defining inadequate intellectual property protection as an unfair trade practice and a trade barrier, because pirates in other countries who stole American ideas could (since they had no development costs) undersell US producers and shut them out of the market. The cause of international intellectual property protection quickly became a very popular subject on Capitol Hill, even beyond the support due as part of Fair Trade policy. Not only were the intellectual property organizations very well organized, funded, and very aggressive, but the issue fit very well with the broader debate over trade policy. In 1982-1983, the countries which topped the intellectual property lobby's list of offenders—Taiwan, South Korea, and Hong Kong—were the same countries under attack in Congress for their trade surpluses. Intellectual property protection was also seen as crucial to US future competitiveness, another facet of the trade debate. Finally, not many Congressmen had constituents who would be hurt if developing countries protected American patents or copyrights, so it was an easy issue on which to prove one's "toughness" on trade. Also, unlike other options under consideration, intellectual property protection was one solution to the trade problem where both the Administration and all groups in Congress were in complete agreement. Although intellectual property protection was not part of President Reagan's 1981 "White Paper" on the Administration's trade policy agenda, the President was sympathetic to business complaints and by 1983 was referring to the importance of intellectual property protection in policy statements and speeches. Another political source of support for an aggressive intellectual property policy abroad was the battle to renew the Generalized System of Preferences (GSP).9 The program was due to expire in January 1985 unless Congress chose to renew it. By 1983, there was already considerable opposition to renewal from unions and industries who felt threatened by GSP imports (despite the fact that GSP was only 3 percent of US imports), as well as a general feeling that the US had no business being generous when it had its own economic problems. Another problem was that twothirds of the benefits went to a handful of countries, and the top beneficiaries (Taiwan, South Korea, and Hong Kong) were also under fire for trade surpluses and unfair trade practices. As with Fair Trade policy, supporters of the program enlisted the intellectual property lobbies by presenting the GSP as a bargaining tool for increasing market access (including intellectual property protection), a tactic which also helped win over opponents.10 The combined pressure resulted in the Trade and Tariff Act of 1984 which linked intellectual property protection with trade policy for the first time. The Trade and Tariff Act affected the position of intellectual property protection as a trade objective ^The GSP is a program whereby developing countries are allowed to export certain goods to the US duty free. 10 The same tactics had already been used to mobilize support for the Caribbean Basin Initiative in 1983.

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in two ways. First, it defined a country's failure to provide adequate and effective protection of intellectual property rights as an "unreasonable" policy or practice (i.e., an unfair trade practice) against which the President has authority to take all "appropriate action" under Section 301 of the 1974 Trade Act. This is the first offensive law in this area; previous trade laws only allowed the President or US International Trade Commission (USITC) to prevent imports of counterfeit goods. In addition, the Trade Act required the USTR to make an annual report to Congress cataloging unfair trade practices in other countries, and confirmed the President's authority to "self-initiate" Section 301 cases; previously a petition by an American business had been required for an investigation. Second, for the first time intellectual property protection was made part of the criteria for the renewal of trade privileges under the US Generalized System of Preferences (GSP). Under the new GSP, when deciding whether a country will continue to receive benefits during the annual review, the President is required to take into account whether a country provides adequate and effective protection of American intellectual property. The 1984 Act also simplifies the procedures by which US companies can petition the USTR to remove a country from the list of beneficiaries. In addition to the annual reviews, the 1984 Act required the President to undertake a general review of country eligibility by January 4,1987, using the new criteria. To increase the President's leverage, a two-tiered "competitive-need limit" (CNL) was set up. Previously, if a country's exports of any given product met or exceeded 50 percent of total US imports of that product or $36.8 million, whichever was larger, that item was no longer eligible. Under the new system, if the President decides a country is "sufficiently competitive" in a product, he can subject it to a CNL of 25 percent of total US imports or $25 million; if, however, he feels that the country provides or is making an effort to provide adequate market access and/or adequate intellectual property protection, he can waive the CNL altogether. The policy was acted on almost immediately. In October 1984, the Secretary of Commerce charged the International Trade Administration (ITA) and the Patent and Trademark Office (PTO) with finding a solution to the problem of piracy. Because intellectual property rights are embodied in national laws, increased protection for American intellectual property required convincing other countries to change their national laws. With the help of the private sector, a list of goals was drawn up. National laws should: 1) provide protection for traditional and new forms of intellectual property; 2) provide full protection and exclusive rights to US owners and an adequate term of protection; 3) eliminate onerous substantive and procedural formalities that inhibit the effective exercise and enforcement of intellectual property rights; 4) provide adequate penalties that are enforced. The policy was applied fairly consistently across countries through the GSP review, with extra attention given to "problem" countries according to the volume and extent of piracy. US negotiators (focusing first on copyrights, then on the more complicated problem of patents) would stress the importance of intellectual property rights to economic development and creativity and also that better protection would attract foreign investment. If these arguments did not work, there was the threat of trade penalties: the GSP General Review was to report to the President by January

U S Policy

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1987, and intellectual property protection was expected to play a considerable role in determining benefits. Furthermore, US companies could petition to have a country removed, and the USTR worked very closely with American companies representatives, particularly the International Intellectual Property Alliance (UFA) and the Pharmaceutical Manufacturers Association (PMA), in making evaluations. At the same time, the PTO also began a series of training programs to train nationals from developing countries for careers in intellectual property protection and organized seminars around the Asian-Pacific region to explain the need for intellectual property protection. In addition to the more prominent bilateral strategy, intellectual property protection was also pursued through GATT. The inclusion of intellectual property rights on the agenda was made a condition for US participation in the Uruguay round of GATT talks, which helped win support for the talks in Congress. Several developing countries, led by Brazil and India, opposed inclusion on the grounds that Western technology was too expensive and too crucial to development, and that WIPO was the appropriate body. Intellectual property was finally put on the agenda after the American delegation threatened to walk out of the negotiations if it (along with barriers to services and investment) were not included. Rather than distracting from the bilateral negotiations, US Government strategy viewed the GATT talks as complementary, calculating that developing countries would be more inclined to negotiate in a multinational forum if the alternative was bilateral action by the United States. While the Administration was implementing intellectual property policy abroad, Congress continued to apply pressure on the Administration. In the past, trade remedy laws have rarely been enforced, since the President is rarely willing to disturb relations with an ally for, say, subsidies on canned tuna. However, in 1985, the trade deficit continued to rise, bringing more pressure on Congress to do something. Even more importantly, despite a worsening trade balance, the Administration took no new initiatives on trade and offered no course of action except messages that the trade deficit was due to the strong dollar and would go away when the exchange rate corrected itself—not much for a Congressman to show constituents who came to him out of work.11 The result was a surge of protectionist activity in Congress. In 1985, 634 trade bills were introduced, 99 of which were considered directly protectionist. Many other bills focused on amending Fair Trade legislation to restrict Presidential discretion in applying the trade remedy laws; transferring authority to the USTR or Commerce Department, setting a timetable for investigations and negotiations, and making retaliation mandatory if a settlement was not reached within a fixed period of time. As in 1984, Fair Trade appeared the only alternative to protection, and gained bipartisan support as Republicans tried to distance themselves from the President's free trade stance which had become equated with being a "trade patsy." Although by 1986, it was generally acknowledged in Congress that unfair trade could not possibly account for more than 10 percent of the trade deficit, as Democratic Congressman Jenkins said, "It will get you through November 1986" (the Congressional elections).12 n

l. M. Destler, American Trade Politics: System under Stress (Washington, D.C.: Institute for International Economics, 1986), p. 104. ^Congressional Quarterly, March 8,1986, p. 555.

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The attacks forced President Reagan to justify the Administration's policy and show there was no need to restrict the President's freedom of action. In an attempt to regain the initiative on trade and show Congress that it was concerned about trade and was doing something, the Administration launched a crusade against unfair trade, using the new powers it had been granted under Section 301 of the 1984 Trade Act. In September 1985, the Administration initiated investigations of Brazil's informatics policy, Korean insurance, and Japanese tobacco and set deadlines on three other ongoing 301 cases. Intellectual property featured prominently in the Administration's Fair Trade initiative. As previously noted, the President already believed it was a legitimate problem, and a war on piracy was unlikely to cause a conflict with any major U.S trade partners. In October 1985, the USTR used Section 301 to bring a case against South Korea for inadequate intellectual property protection. Further details of the intellectual property rights campaign were outlined in December and the following April. In addition to the agencies already involved—the USTR (which had primary responsibility for the initiative), the Commerce Department, the Patent and Trademark Office (PTO), and the Copyright Office—the State Department and the various Embassies were brought in to help pursue intellectual property protection abroad. To back up the regular negotiations, government officials travelling to "problem countries" were expected to deliver the message. Embassies also frequently emerged as key players, pressing the issue with government officials and private sector, arranging and sponsoring seminars, and disseminating information as well as channelling information back home. The 1988 Trade Act dropped the most controversial protectionist measures, but the restrictions on the President's discretion in applying the trade remedy laws remained. The most important to intellectual property policy was "Super 301," which shifted authority for initiating investigations for unfair trade practices from the President to the USTR and required the USTR to publish a list of "priority countries" which maintain a systematic pattern of unjustifiable trade practices and trade barriers against US goods, services, and investments (including inadequate intellectual property rights), to enter into negotiations with these "priority countries" and, if the situation is not resolved within the time set, to retaliate. The sudden emergence of intellectual property protection as a major goal of US foreign economic policy in the mid-1980s was a result both of an objective change in the value of intellectual property, and of the domestic political debate over how to respond to the trade deficit and the relative decline of American economic power. The policy was formed with considerable participation by the private sector in defining issues and problems, identifying countries, and supplying information. The result was an active—perhaps interventionist—foreign policy that tended to be inward looking and inflexible because of its role in the broader debate over trade. The policy had a clear potential for international trade conflict since, because of the nature of intellectual property, pressing for better protection meant in most cases pressing other countries to change their national laws. The following chapters will examine the response of four Southeast Asian governments to this pressure from the United States to improve their protection of intellectual property.

2 SINGAPORE

ingapore was targeted as one of the prime offenders from the beginning, both by copyright industries and by the US Government. The section on Singapore Alliance report begins, S in the 1985 International Intellectual Property "Singapore is truly the world capital of piracy/71 Pirating was a more or less acceptable occupation and pirates were estimated to control 80-90 percent of the Singapore tape market, and similar portions of the software, vidéocassette, and book markets as well.2 With only 2.6 million people, the Singapore market itself was not very significant. Of greater concern was Singapore's export of pirated goods. In 1984, Singapore shipped over $270 million worth of pirated tapes and books to Asia, Africa, the Middle East, and Europe, and by 1986 it was frequently cited as the biggest exporter of pirated tapes in the world. In the early 1980s, foreign companies (particularly American and British) began trying to use the Singapore courts to stop the copying of their products. In 1983, IFPI (an international record label association based in London, with 630 members in 64 countries) organized 66 raids and captured a quarter of a million pirated tapes. The same year, Apple took 11 Singapore companies to court for counterfeit machines, and later another 15 companies for pirating software. IBM also brought suit against two Singaporean companies over software, and other US firms brought charges over pirated computer manuals. These exercises tended to be extremely frustrating for the foreign companies, both because of the limited protection offered by Singapore's Copyright Act and because of the Singapore Government's lack of interest in enforcement. After all, the export of pirated tapes was earning a fair amount in foreign exchange. The Copyright Act in force at that time had been passed in 1911 and was out of date. It did not cover computer software and, because the Singapore Government was reluctant to prosecute, it was rarely enforced. Foreigners found it difficult to establish their rights because Singapore had no clearly authorized place for registering copyrights.3 Even if someone was convicted, the penalties were too low to be much of a deterrent. The 1911 Act set a maximum fine of S$50 (about US$23) per copy, not exceeding S$l,000 (US$450) in total, and no more than two months impris-

S

*The International Intellectual Property Alliance, Piracy of U.S. Copyrighted Works in Ten Selected Countries: A Report by the International Intellectual Property Alliance to the United States Trade Representative (Washington, August 1985), p. 1. 2 Kompas, November 13,1983. 3 The 1911 Act had established a Register of Imports and Exports to register copyrights, but it was later abolished with no successor. In June 1984, the Government designated the Registry of Trademarks and Patents to register copyrights as well, but then reversed the decision on the grounds that such an act was illegal without Parliamentary consideration.

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onment for a repeat offense (maximum one year for audiotapes), and actual penalties tended to fall far short of the maximum. Foreign companies complained that pirates considered the fines part of the cost of doing business. The Singapore Government was not unaware that the 1911 Act had shortcomings. In 1980, before the US Government became involved, an Inter-Ministerial Committee began meeting to consider changes in the Copyright Act, but had its own idea of whose interests intellectual property protection should serve and how. When US State and Commerce Department officials began pressing the issue in 1982, they were told that Singapore was still a developing country and needed free access to Western intellectual property. While accepting the American argument that at some point good copyright protection was necessary for development and therefore in Singapore's own interest, the Singapore Government countered that when copyright protection was in Singapore's interest it would change its laws, but that Singapore had not yet reached that stage. Prime Minister Lee Kuan Yew told one visiting Congresswoman that since the US had allowed Japan to rebuild its economy by copying everything, it couldn't tell the Southeast Asian countries that they couldn't do the same/ The American emphasis on investment did not at first make much of an impression. Although Singapore is very dependent on foreign investment—70 percent of the investment in manufacturing is foreign—none of the copyright industries are important to Singapore, with the exception of computer software. In 1981, the Singapore Government initiated a computerization plan that included making Singapore the software capital of Asia through a strategy of alliances with foreign computer companies.5 By 1984, there was some concern that the lack of copyright protection might affect the development of the industry, but the Singapore Government believed it would be possible to make a deal with foreign software companies for separate protection of software, rather than change the entire law.6 The threat which the 1984 trade bill posed to the General System of Preferences (GSP) was not taken very seriously either; not because GSP was considered unimportant (in 1985, Singapore's exports to the US under GSP totalled US$730 million, making Singapore the seventh largest beneficiary of the US GSP), but because the government was relying on its traditional allies in Washington—exporters and companies with investments in Singapore—either to stop the legislation or to prevent Singapore from being singled out for retaliation.7 When a delegation of businessmen from the American copyright industries visited Singapore in 1984, Prime Minister Lee Kuan Yew expressed his belief that raising the subject of copyright protection was premature, and the group came back to the US with the impression that Singapore had no intention of changing anything. When the US Patent and Trademark Office (PTO) began organizing seminars in the region on copyrights, the Singapore Government declined to host one. 4

US House Committee on the Judiciary, Intellectual Property and Trade, 99th Congress, Second Session; February 19,1986, p.75. ^Syed Rahim and Anthony Pennings, Computerization and Development in Southeast Asia (Singapore: Asian Mass Communication Research and Information Center, 1987), p. 56. 6 Phiroze K. Irani, "Protecting Software," Singapore Business, February 1984, p. 51; see also Par Eastern Economic Review, May 31,1984, p. 82. 7 Gadbaw and Richards, Intellectual Property Rights, p. 321, n. 34.

Singapore

15

Singapore, however, changed its position very quickly during the last few months of 1984. The passage of the 1984 Trade and Tariff Act proved that the government's confidence that US trade legislation would not affect Singapore had been misplaced. Not only had the amendment to the GSP program been passed, but Singapore was near the top of the list of offending countries. In addition, the American software industry association refused the offer of a separate deal on software, saying it would continue the campaign for complete protection for all the copyright industries. According to most accounts, the first clear commitment to increased intellectual property protection came when US Secretary of State George Schultz raised the issue with Prime Minister Lee during a visit in August 1984, saying that it was a serious problem in US-Singapore relations. Lee brushed it aside as a matter for underlings, saying that he gave his word that the problem would be taken care of.8 The following year, the climate regarding copyrights changed markedly. In February 1985, in a suit which five British publishers had been waging since 1981, the Singapore High Court confirmed that the 1911 Act protected works first published in the United Kingdom. Then in August, the government met with a delegation from IFPI and assured them that it was concerned about adequate protection. By the time the General Review reached Singapore (the first official talks were held on November 13,1985) steps were already being taken to revise the law. Evidence of the change in attitude can be seen in the dramatic decrease in piracy as record, cassette, and video pirates began switching over to legitimate sales. An Australian retailer (the only legitimate video seller in Singapore) reported that sales were up 40 percent in 1985 from fear of a new law, and in the first half of 1986, the Singapore Phonogram and Videogram Association reported a 90 percent increase in sales over the previous year.9 The Singapore Government managed the amendment of the Copyright Act quickly and with little opposition. By the spring of 1986, a draft bill had been developed by the Attorney General's Chambers (copied almost word for word from the Australian Copyright Act, even including pending amendments) and introduced to Parliament, where a Parliamentary Select Committee was created to handle the problem. The committee then held a series of open hearings from May to December, 1986, to gather evidence for and against the bill, including testimony by British and US Government officials and businessmen. The openness of the hearings was actually deceptive since it allowed the strongest and most passionate supporters of the bill (foreign governments, foreign companies, and their Singaporean subsidiaries) to argue the virtues of increased copyright protection. While those with an interest in continued loose copyright protection (presumably those doing the pirating) were also allowed to express their views, they could not speak too loudly against the bill for fear of being the first targets of the new law when it passed—and the Singapore Government had already indicated that it would be. There were no objections to the bill as a whole and most testimonies carefully established their support of the principle of copyright and the bill, confining their objections to specific points.10 8

Ibid.

9 Worldwide Anti-Piracy Newsletter (Motion Picture Association of America, NY), June 15,1985, p.l. 1(> The following account is taken from Gadbaw and Richards, Intellectual Property Rights, pp. 314-19.

16

Intellectual Property

The Singapore Chinese Chamber f Commerce and Industry and the Singapore Hotel Association asked that hotels, restaurants, and nightclubs not have to pay royalties on performances for their guests, and the Video Library Association asked that the law be phased in gradually so that its members would not have to destroy US$15 million in stock. Neither request was granted. Book sellers and consumer groups had better success and, despite protests by foreign companies, persuaded the Parliament to remove the clause in the 1911 Act which protected against parallel imports (imports of a product by other than the licensed distributor) in the name of price competition. US negotiators have taken a position against parallel imports but the issue is vague and not a primary negotiating objective. The final issue of contention came from libraries and educational institutions requesting more liberal regulations; these were mostly granted. Other domestic groups also took part in the hearings, but cautiously. The Singapore Manufacturers Association had formed a committee on copyright in 1985 but the membership, caught between the threat to US trade privileges and the advantages of piracy, was unable to reach a consensus. The Singapore Law Society also took no formal position although it testified against various points of the bill. Although the Consumers' Association of Singapore supported the bill overall on the grounds that it would give consumers more variety and help develop local talent, it did favor removing the restrictions on parallel imports and granting exceptions for educational purposes, as did the National University of Singapore Students' Union Executive Committee. While Parliament was deliberating, US negotiators continued to meet with their Singaporean counterparts to monitor progress, offering a possible increase in GSP benefits as an incentive. In a second meeting on May 6, 1986, the US team said it could not promise that the CNL would be waived but that, if American copyright demands were met, they would have more flexibility. In a third meeting in September, the Singapore team showed the draft of the copyright bill, saying that it had been expedited because of the GSP review and that specific US demands had been incorporated. A Record of Understanding was then agreed upon, in which the American delegation "stressed that it would recommend a favorable GSP package... if the Copyright Act were passed with the changes described ... and protection granted to US works by the end of 1986// This was reconfirmed in a "non-paper" given by the USTR delegation to the Minister of Trade and Industry, Lee Hsien Loong in November.11 Having received the testimony of the Select Committee in December, the Parliament passed the new Copyright Act on January 26,1987, and a bilateral agreement with the US was signed on May 18,1987. Not coincidentally, when the results of the general review were announced, Singapore received a net increase in GSP benefits of 12 percent, the only one of the six largest beneficiaries of the program to benefit from the review. The 1987 Act conforms to international law and fulfills almost all US requests. It protects computer software as a literary work, raises the penalty for infringement of copyright to a maximum of S$100,000 (US$5,100) and five years imprisonment, and creates a special tribunal for intellectual property protection. Also, the new law shifts the burden of proof to the defendant, who now has to show that the work is not copyrighted, and defines criminal intent by whether the defendant knew, or reasonably ought to have known, that the work was copyrighted; ll

The Straits Times Weekly Overseas Weekend Edition, February 27,1988, p. 6.

Singapore

17

proof of actual knowledge is not required. Section 136(7) goes on to define possession of five or more infringing copies as presumption of commercial intent, therefore criminal possession.12 The new regimen was implemented with vigor. The Singapore Government cooperated actively with the private sector in enforcement and prosecution, including working with IFPI and Singapore Sound Tape Retailers7 Association to get the pirated goods off the market before the official crackdown.13 The police formed a special intellectual property unit and the High Courts made frequent use of Anton Pillar orders (which allow a plaintiff to search the defendant's premises for incriminating evidence if there is danger it might be destroyed). Under this onslaught, piracy vanished very quickly. The UFA calculated that losses to American companies from piracy dropped from US$358 million in 1984 to US$10 million in 1988. Tape piracy virtually vanished—from US$220 million to US$1 million. Book piracy went from US$107 million to US$2 million; what remains is mostly illegal commercial photocopying of university textbooks. Losses from software piracy fell from US$20 to US$2 million. American companies still report US $5 million losses in the market for vidéocassettes due to imports to Singapore of counterfeit US videotapes from Malaysia,14 but the fact that they are counterfeits (disguised as legal products) indicates that the new laws are being taken seriously. Having taken such decisive action to meet US conditions, Singapore was very surprised when on January 1,1988, the USTR announced that Singapore, along with the other East Asian NJCs, would be graduated from the program the following year because it was now "sufficiently developed/' The graduation actually had little to do with Singapore—it was more a side effect of a Cabinet-level decision regarding Taiwan, South Korea, and exchange rates—but having just made what they regarded as an explicit deal, the Government of Singapore was understandably upset, and for several months after the announcement, US-Singapore relations were very touchy. Minister Lee Hsien Loong made public in Parliament documents showing that US negotiators had specifically linked continued GSP to copyright protection. Singapore also tried to get the other ASEAN countries to condemn the US action, without much success.15 Although the graduation upset relations, Singapore made it clear that it was not a permanent rift. The US was then Singapore's leading source of foreign investment (46 percent of foreign commitments in 1985) and markets, and because of its trade dependence, Singapore needs the US to maintain an open trading system. After revealing the documents proving American duplicity on GSP, the Minister of Trade reminded Parliament that the US was a strategic ally and that the dispute "... is not 12

The IIPA claims this clause was included at its urging. The International Intellectual Property Alliance, Trade Losses Due to Piracy and other Market Access Barriers Affecting the U.S. Copyright Industries: A Report to the United States Trade Representative on 12 "Problem Countries" (Washington, April 1989), p. 85. 13 Ibidv p. 82. 14 Ibid. 15 Ironically, Singapore found an ally in the IIPA which, concerned that the motivation for enforcement might decline, supported Singapore's protest and called the graduation an unfortunate and short-sighted action. Ibid., p. 5, n. 7.

18

Intellectual Property

with an enemy, but with a friend, who is still a friend. This determines how we respond/'16 Despite initial concern among American companies that the removal of GSP would diminish the incentive for protection, the Singapore Government has remained committed to intellectual property rights.17 Intellectual property groups report that the law is strictly enforced, and foreign companies have been able to prosecute infringers successfully. Although there has been an increase in the price of some items, the law in general does not seem to have hurt consumers. In fact, the 1989 IIPA report claims that improved protection has resulted in greater variety and higher quality of products available, and in new spinoff businesses.18 Singapore has also been successful in attracting foreign companies to set up software design centers. Although it is hard to say how much of this has been influenced by improved copyright protection, it has been a factor in some companies7 decision to invest.19 US companies would like to see a number of "improvements/7 regarding parallel imports, lack of minimum penalties, and transition procedures. However, none of these are considered major problems. Singapore still has not joined an international convention but has been supporting the US position in the GATT talks. CONCLUSION The Singapore Government's decision to improve copyright protection was influenced by a number of considerations. The most immediate motivation for the decision to reform was the desire to retain GSP benefits. In 1985, 28 percent of Singapore's exports to the US were under the GSP program. In addition, the Government realized that, because of its high per capita GNP, not only the extent of benefits but Singapore's continued eligibility might depend on how it rated in the General Review. By acting on intellectual property, Singapore hoped to win points with the US that might ensure a longer hold on trade privileges, since intellectual property protection was the only complaint the USTR had against Singapore. Except for 1984-1985, Singapore has run a negative trade balance with the US, and American officials tend to view Singapore favorably because of its firm position on free trade. The importance of GSP in the decision is confirmed by which parts of the Singapore Government were involved in reaching it. The main actors were the Ministry of Trade and Industry, the Economic Development Board, and the Trade Development Board. The Ministry of Law, although responsible for copyright and active in the initial move toward a review of the Copyright Act in the early 1980s, did not play a very influential role in developing the 1987 Law. The Education Ministry, which has a significant interest in copyrights, was not involved.20 Continuation of GSP privileges, rather than copyright protection itself, appears to have been the overriding issue during the negotiations. Although the issue was defined and handled in terms of the US demands for GSP^ retention, the fact that the Singapore Government moved before the US Govl6

The Straus Times Weekly Overseas Weekend Edition, February 27,1988, p. 6.

17

The US has raised objections to the Newspaper and Printing Presses Act (NPPA), which allows restricted publications to be reproduced for sale; however, this is more an issue of censorship than copyright. 18

IIPA, Trade Losses Due to Piracy, p. 81. Asian Business, April 1987, p. 85. 20 Gadbaw and Richards, Intellectual Property Rights, p. 322. 19

Singapore

19

ernment applied direct pressure suggests that Singapore was already predisposed to that course of action. While this should not be overstressed—Singapore was keeping close tabs on what was happening in Congress and has a history of acting to preempt trouble—Singapore's development strategy would have required reform of the Copyright Act sooner or later. In 1979, worried by Singapore's high labor costs (relative to other NICs) and by increasing competition from developing countries in labor intensive industries, the Singapore Government announced a "second industrial revolution." This was a plan to force the Singapore economy to shift from labor intensive to high-value-added/capital intensive/high-tech industries. The plan depended on Singapore being able to capture foreign technology and capital in these fields, and the government worked hard to attract investment and joint ventures through infrastructure and financial incentives. Copyright protection is crucial to the software industry, which the Singapore Government had picked as an area in which Singapore had a natural advantage. Since Singapore's "revolution" was based on foreign investment and joint ventures, piracy and reverse engineering (acquiring technology without the owner's permission by dismantling its products) were not an option. Once the decision was made, copyright protection was incorporated as part of overall development strategy. For example, a 1986 Economic Committee Report included improved copyright protection as part of plans to develop the service sector, specifically with regard to computers.21 The recession of 1985-1986 occurred after the initial decision had been made, but undoubtedly reinforced the Singapore Government's commitment to an improved copyright regimen as essential to successfully making the move to a high-tech information society. The Singapore Government's decision was not significantly influenced by nongovernmental actors. Although producers of pirated goods were well organized—in 1985, domestic opposition by sellers was cited as one of the chief obstacles to getting an agreement—once the government had weighed the options, nongovernment actors had little impact.22 The Singapore delegation drove a hard bargain during the copyright/GSP negotiations in Washington, asking US officials to "help bring the Singapore public around" by making some concessions. However, the issues that were conceded to domestic groups in the final draft of the bill were those that the US did not have strong objections to, such as insubstantial copying for educational institutions and parallel imports. Provisions which the US had a strong position on, such as delayed implementation, special licensing agreements for tapes, and free showings, were not. The Singapore Government could afford to ignore pressure by domestic industries in favor of broader economic policy because of the autonomy and strength of the Singapore State. Since Independence in 1965, the People's Action Party (PAP) has controlled almost all of the seats in Parliament as well as the executive branch. The Singapore Government is not dependent on any single sector of society, and has been accustomed to making the decisions concerning Singapore's economic development according to its own judgment. Neither the USTR nor IIPA had any concern about the Singapore delegation's ability to carry out its promises. Despite its position of power, the government was careful to coopt resistance rather than impose the new 2l

Far Eastern Economic Review, February 18,1988, p. 17. Office of the US Trade Representative, National Trade Estimate: A Report on foreign Trade Barriers (Washington, DC, 1985), p. 183.

22

20

Intellectual Property

law only by force; for example, allowing the open hearings on the copyright bill and working with the private sector to get pirated goods off the market.

3 MALAYSIA

Ithough Malaysia was near the top of the list of offenders, US officials were met with enthusiastic cooperation. Motivated by its own development plans, Singapore's example, and the inability to maintain censorship over an explosion of pirated videotapes, the Malaysian Government welcomed American suggestions and immediately took steps to crack down on pirates and to reform Malaysia's intellectual property regimen. American companies were concerned with both patent and copyright protection. Malaysia's Patent Act, which had been passed in 1983 to replace separate British Ordinances for various states, offered too short a term of protection (only 15 years) and allowed compulsory licensing.1 However, patent protection was not as big an issue as with many other countries, since Malaysia, like Singapore, already protected Pharmaceuticals.2 Copyright protection was a more pressing concern. Malaysia's first national copyright law (also the revision and consolidation of previous regional British laws) was passed in 1969 and revised in 1979. The law gave protection only to Malaysian citizens; foreign works were only protected if they were first published in Malaysia, and sound recordings had actually to be recorded in Malaysia to qualify for protection. Although the Act did allow protection to be extended through international conventions, Malaysia was not a member of either the Universal Copyright Convention (UCC) or Berne Convention. Prosecution was difficult because Malaysian High Court judges issued conflicting decisions as to what constituted "simultaneous publication" for a foreigner to be eligible for protection.3 Hong Kong TV and film producers had been filing suits and calling for police raids on Malaysian video stores since 1981, but without effect, because the Malaysian courts usually ruled in favor of the pirates. The length of protection was too short by American standards: the life of the author plus 25 years, except for sound recordings and broadcasts which were protected for only 20 years after first record/broadcast. In

A

^The law was not actually implemented until October 1,1986 because some legislation took additional time to pass and because of lack of technical personnel. Malaysian Business, January 16,1986, p. 73. Compulsory licensing allows a government to require an owner of intellectual property to license it (with compensation) either to the government or another individual, for reasons of national interest. The Paris Convention accepts the legitimacy of compulsory licensing, but US businessmen and officials usually regard it as a form of legitimized theft. 2 In any case, Malaysia's pharmaceutical industry was ten years behind Indonesia or Thailand in technological terms and did no primary production, only assembly of imported components. Malaysian Business, April 16,1988, p. 28. ^"Simultaneous" publication allows a work to be protected as if it were first published in that country. Most countries define "simultaneous" as within 30 days.

22

Intellectual Property

addition, the law did not cover computer software, carried low penalties, and was infrequently enforced. lite Malaysian Government does not appear to have been especially supportive of the pirates, but simply uninterested—except in the case of video piracy. The main products pirated were audio/video tapes, books, and computer software. Piracy was primarily for domestic consumption rather than export; for example, an estimated five to six million pirated audiocassettes were produced each year, about 80 percent of the market.4 The most visible piracy was of video tapes—not surprising as Malaysia has one of the highest rates of VCR penetration in the world.5 This posed a problem for the Malaysian Government, since the censorship of "immoral" foreign films and TV programs and the promotion of Islamic values has long been a major concern of official information policy, and has prompted the Government to build a matching bureaucracy to control the new medium.6 When the video rental industry took off in 1983, the government passed provisions to regulate the industry, requiring all video films to be censored and classified and all rental shops to be licensed. However, the small scale and decentralization of technology allowed most video dealers to avoid government regulations just as they avoided copyright dues. Even government raids on unlicensed outlets did little to stem the tide. By 1984, there were 2,000 licensed outlets and thousands of unlicensed shops—as a business magazine observed "even housewives can do it [duplicate tapes] at home."7 Malaysian courts began tightening copyright protection even as the new US policy was being implemented. In early 1985, the Malaysian Supreme Court reversed several lower court rulings in cases filed by Hong Kong producers, culminating in a decision on May 18 that foreigners did have copyright protection if the work was published in Malaysia within 30 days of first publication elsewhere.8 The ruling was appealed unsuccessfully by the Malaysian Video Tape Dealers' Association on the grounds that the 1969 Act had not been intended to protect foreigners. Within ten days of the ruling, police began raids to search for pirated videotapes.9 When the USTR began negotiations, the Malaysian Government was very responsive to American requests, not only accepting American arguments but actively articulating the need for better intellectual property protection to facilitate foreign investment and technology transfer.10 When the Patent and Trademark Office (PTO) organized a seminar on the importance of intellectual property protection, the Chamber of Commerce and the Malaysian Computer Association co-sponsored it, and the seminar's message was positively received by Malaysian government offi*Kompas, November 13,1983. 5 IIPA, Piracy of U.S. Copyrighted Works in Ten Selected Countries, section on Malaysia, p. 1. "Vincent Lowe, Dependency Within Bounds: Media and Information Technology Policies within the ASEAN Region (Bangkok: Institute of Asian Studies, Chulalongkorn University), 1987, p. 11 ff. 7 Mdaysian Business, January 1,1984, p. 73. 8 On January 23,1985, Malaysian courts set aside two injunctions granted the previous year to local videotape dealers barring four Hong Kong companies from filing complaints with the police or obtaining search warrants. In May, the Supreme Court accepted the public prosecutor's appeal to retry a November 1984 case of video piracy, also brought by Hong Kong companies. 9 New Straits Times, May 28,1985. 10 USTR, National Trade Estimate, p. 214.

Malaysia

23

ciáis and businessmen. One prominent local recording artist and member of the Malaysian Recording Industry Association likened piracy to a black cloud threatening the entire music industry, and later delivered the same message at the FTC's copyright seminar in Indonesia.11 The Malaysian Government began work on amending the copyright law almost immediately, and the first draft of a new bill covering software and increasing the penalties was published by November 1,1986. The government actively sought US advice on the new law. The USTR commented on the draft and copies were circulated among several of the concerned foreign companies. While the draft was being written, the police cracked down on producers and retailers of pirated goods. The Malaysian Government was also cooperative with regard to patents; although not willing to give up compulsory licensing, the patent law was amended to provide "reasonable'7 compensation for expropriation and the term of protection was increased. In addition, the Ministry of Health agreed to discontinue its policy of purchasing drugs only from non-patent holders. The Malaysian Parliament passed the final law in April of the following year, to go into effect on December 1,1987. The new law unambiguously included software and videofilms, extended the term of protection to 50 years, offered protection against parallel imports, and established a copyright tribunal to handle applications for compulsory translation licenses. Fines and terms of imprisonment were doubled, to a maximum of M$l00,000 and/or three years imprisonment for a first offense. Enforcement was also increased. An authorized officer or police officer was given authority to arrest without warrant anyone committing or abetting a suspected violation. There had previously been rumors of corruption hampering raids; the 1987 law gave responsibility for enforcement to a special division within the Ministry of Trade and Industry. The head of the division had just received training at one of the PTO training courses in Washington and took his job very seriously. Among other things, he would stage raids on shops and factories based on American companies' complaints, even though, as the US and Malaysia still had no copyright relations, such action was not strictly necessary. Concluding a bilateral copyright agreement between the two countries has proved more difficult than amending the laws. Negotiations began shortly after the law was passed, but, as of January 1990, no agreement had yet been signed. Part of the delay has been caused by drafting errors, but recently two more serious obstacles have arisen. First, American businessmen and officials object to the broad compulsory licensing clause in the Copyright Act.12 A second obstacle appeared when the Attorney General's office issued a "definitive ruling" that it would be illegal for Malaysia to sign a bilateral treaty.13 After further negotiations, the government announced that it would be ready to sign a bilateral agreement as soon as measures to limit the compulsory license clause had been implemented. However, the USTR 11

US Congress, House Committee on Foreign Affairs, Status of Intellectual Property Protection, 99th Congress, Second Session; July 31,1986, p. 26. 12 Article 24 allows the Malaysian Government to "use," "reproduce/' or "adapt" any copyrighted material if "adequate compensation" is given. ^Telephone interview with an official in the Commerce Department, October 1989. The Attorney General's office claimed that Article 59 of the Copyright Act (which allows extending protection to foreign nationals through multi/bilateral treaties) was in conflict with Articles 4 and 10 (requiring first or simultaneous publication in order for protection to be granted), and that the latter had precedence.

24

Intellectual Property

interpreted the Ministry of Trade and Industry's draft of proposed changes (sent in February 1989) as a retreat from its earlier promises, and consequently put Malaysia on the "watch list" in its May reporton trade barriers. The sudden reversal at the end was due mainly to developments in American negotiations with neighboring countries. After witnessing Singapore's experience with the US breaking an agreement and Thailand's dilemma (discussed in Chapter 5), the Malaysian Government did not want to appear to be giving in to American pressure, nor did it want the kind of problems its neighbors have had with bilateral negotiations. In October 1989, the executive branch was reported to have decided that Malaysia should join the Berne Convention rather than sign a series of bilateral agreements, after which any remaining problems could be worked out in a multilateral framework.14 Despite the ambiguity regarding bilateral agreements, the Malaysian Government has carried through with its commitment to enforce intellectual property protection, both for Malaysian and foreign works. Piracy of motion pictures is still a problem despite government raids, since it frequently takes more than 30 days for films to get by the government censors. Piracy of college textbooks is also a problem, even though the government has been seizing pirated American books using the trade descriptions law, as is software piracy. Piracy of audiotapes, however, is well down, due to IFPI's assistance to members which enables them to take advantage of the 30 day definition of "simultaneous publication."15 Local producers have also benefited. In the first half of 1987, local Malay recordings sales jumped to to 3.3 million ringgit, from 1.94 million ringgit in 1986.16 CONCLUSION Trade pressure does not seem to have played a very big role in the Malaysian Government's decision, at least not in the sense of a trade threat. Unlike the other three countries, Malaysia was not in danger of being graduated from GSP benefits, nor had any suits been brought to have it removed from the list. While not at all happy when a few Malaysian exports were "graduated" from GSP in 1985 for exceeding the "competitive-need" limit (QSJL), even critical commentators acknowledged that GSP was a privilege and that Malaysian industries had to prove themselves competitive on the world market.17 A more important factor was probably Malaysia's overall development plans and US investment. Under Prime Minister Mahathir, the Malaysian Government has been very concerned about upgrading Malaysia's manufacturing sector and making the leap to "NIC" status, now that labor-intensive industries no longer hold out sure potential for the high rate of economic growth necessary to keep racial tensions diffused. Although Mahathir's plan for developing heavy industry has followed an import-substitution model, the Malaysian Government's approach to high technology, including computers, has been to encourage foreign investment and joint 14

Telephone interview with official in the Commerce Department, October 1989. This is a complete a reversal of the attitude two years earlier, when the Minister of Trade and Industry said that Malaysia would only seek copyright relations with certain countries (i.e., bilaterals) and that there was no need to join a convention. Jakarta Post, December 2,1987. 15

IIPA, Trade Losses Due to Piracy, p. 45. Malaysian Business, October 16,1987, p. 3. l7 New Straits Times, May 5,1985, p. 10. l6

Malaysia

25

ventures, particularly from the US because of American corporations' technology and expertise/8 The role of intellectual property protection in a computer industry probably also influenced the decision Although computers were not considered central to government plans for economic development, Malaysia was not immune to their status value, and Prime Minister Mahathir took a personal interest in computerization.19 In 1985, the government began taking steps to develop an indigenous computer and software industry, following policies very similar to Singapore's and therefore subject to the same constraints; a strategy based on foreign joint ventures could not permit piracy. Singapore's decision to reform its Copyright Act probably influenced the Malaysian Government, since Singapore commands considerable respect (and some envy) in Malaysia for its economic success. Several American officials noted that it sometimes seemed that Malaysia and Singapore were competing to see which of them could modernize its laws first.20 The manner in which the decision was handled was consistent with the Malaysian Government's history (particularly under Prime Minister Mahathir) of taking active responsibility for the country's economic development, and of intervening and making decisions on what is best for the economy according to its own judgment.21 Both the initial decision to improve protection and the later reversal on bilateral agreements were kept almost entirely within the executive branch, with negotiations and enforcement carried out primarily by the Ministry of Trade and Industry. The decisions were then approved with little objection by Parliament.22 Reflecting this centralization, the only points of contention in negotiations have had to do with governmental prerogatives or legal questions, not questions of the effect on local businesses. Negotiations were simplified by the fact that overall US-Malaysian trade relations have been generally good; in fact, the most frequent complaint is that Malaysia does not get enough attention from the United States. The United States has now passed Singapore and has become Malaysia's second largest trading partner, and it is the most important market for Malaysia's manufactured exports (76 percent in 1984), primarily electronics and textiles and apparel. There has been some trade friction, but not as much as with the other ASEAN countries. The Malaysian market is relatively open and its exports have not provoked as many complaints from American producers. Despite its criticism of the United States for dumping tin and following a contradictory trade policy, Malaysia has actually benefitted from US actions on textile quotas, since Malaysia would not be able to compete with East Asian technology or lower wages in other developing countries without the protection that quotas provided by allotting Malaysia a fixed share of U.S textile imports. The American Soybean Association's campaign to brand tropical oils as hazardous provoked anger and Djakarta Post, December 2,1987. 19

Syed Rahim and Anthony Pennings, Computerization and Development in Southeast Asia, (Singapore: Asian Mass Communication Research and Information Center, 1987), p. 60. 20 See for example, US Copyright Office, "Copyright Piracy in the Western Pacific Rim: Update '86," paper by Ralph Oman, Register of Copyright, before the International Anticounterfeiting Coalition, San Diego, May 29,1986, p. 8. 2l

The Far Eastern Economic Review, January 2,1986, p. 22.

22

That is, the initial reforms were, and it appears that the planned accession to the Berne Convention will be also.

26

Intellectual Property

concern, but was recognized as the effort of a private group, not the US Government; accordingly Malaysia fought back by hiring its own public relations firm.23 American pressure was the catalyst for government action, but domestic opinion was generally supportive, particularly that of the business community. Musicians and producers were particularly vocal. The Malaysian recording industry was estimated to be worth 150 million ringgit a year, but 120 million ringgit of that was siphoned off by pirates.24 Exporters, a considerable force since over half of Malaysia's GDP comes from exports, also supported stronger protection rather than risk losing any of the US market.25 News coverage was generally anti-pirate but, given the Malaysian Government's control over the press, anything else would have been surprising. One New Straits Times article, reporting on the 1985 Supreme Court decision, claimed that "The last nail has been driven into the pirate's coffin . .. unscrupulous pirates who have been making money off legitimate businessmen and depriving artists of their rightful benefits will now have to look elsewhere."26 Against this, the pirates did not have much chance. There were reports of opposition from "pirate rings," but although the main opposition (the 3,800 video dealers) was organized into trade associations, it had little impact.27 They were not substantial exporters like their counterparts in Singapore or Indonesia, nor were any of their operations large enough to have much political influence. Furthermore, the majority of dealers were Chinese, which would not have endeared them to the largely ethnicMalay government. Moreover, after its struggle to control uncensored and pornographic video tapes, the Malaysian Government was probably more inclined to identify with foreign victims of piracy than with the pirates. ^Malaysian Business, September 1,1987, p. 35. Ibidv October 16,1987, p. 7. 25 Alasdair Bowie and Richard F. Doner, "Business Associations in Malaysia: Communalism and Nationalism in Organizational Growth," paper prepared for the 1988 annual meeting of the American Political Science Association, Washington, D.C., September 1-4,1988, p. 7. 26 New Straits Times, May 22,1985, p. 15. 27 IIPA, Piracy of U.S. Copyrighted Works in Ten Selected Countries, section on Malaysia, p. 1. 24

4 INDONESIA

fter Taiwan, South Korea, and Singapore, Indonesia was the earliest and most often cited offender on business and government lists. Indonesia drew attention not only for the scale of piracy, but also because, instead of offering merely inadequate protection to foreign patent and copyright holders, it offered practically none. The Dutch copyright law was retained after independence but Indonesia withdrew from Berne membership ("inherited" from the Netherlands) in 1958 on the grounds that, as a developing country, Indonesia needed easier access to foreign works. Furthermore, it was argued that continued membership was inappropriate until Indonesia could join under the authority of its own (not colonial) laws. The first domestic copyright law was passed in 1982, but explicitly did not extend protection to foreign works unless they were first published in Indonesia. By the 1980s, unauthorized copying of both foreign and domestic works was widespread. Pirates dominated an estimated 70 to 90 percent of the domestic market for books, videotapes, computer software, records, and cassette tapes. It was unclear if the Copyright Act even covered videotapes, and virtually all those produced in Indonesia were pirated.1 Piracy of Indonesian and Western music, particularly audiocassettes, had been a well-established industry since 1968.2 Major record producers in Jakarta invested in sophisticated sound reproduction technology and competed with each other in coming out with the latest Lagu Barat (Western music) the fastest. A common practise was to have people stationed in California to grab new releases as soon as they came out and carry them to Jakarta. Each company had its own brand name and tried to establish consumer loyalty by offering the most attractive cover art or most popular ordering of (pirated) songs.3 In 1985, an estimated 1-2 million pirated Western tapes were being produced every month for the domestic market and another 1 million tapes a month were being exported to the Middle East and Italy.4 Because Indonesia was not a member of any international copyright convention, there was nothing illegal about this. Indonesian tapes were in high demand abroad, because they they were cheap (generally around US$2 each) and because the process used in Indonesia produced higher quality recordings than copies made in Singapore—so much so that Indonesian producers complained that Singapore was pirating their tapes. In 1986, with Singapore closing down its pirate industry, Indonesia was the world's largest exporter of pirated tapes.

A

*IIPA, Piracy of U.S. Copyrighted Works in Ten Selected Countries, section on Indonesia, p. 2. Kompas, October 28,1984. 3 Ibid. *Tempo, December 21,1985. 2

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Intellectual Property

The other major area of concern to foreign companies was pharmaceutical patents. Indonesia has never had a patent law. The Dutch Patent Act was discontinued after independence because it required inventions to be registered in the Netherlands—obviously inappropriate for a newly independent nation. Indonesia has been a member of the Paris Convention since 1950 and has been registering patents since 1953 in anticipation of a law being enacted, but despite several starts nothing was passed. As there was no patent law, local drug manufacturers were free to copy products. Sometimes Indonesian manufacturers would contract with a foreign company to manufacture a drug under license and then produce additional unauthorized batches to take advantage of different market niches, producing licensed drugs for wealthier customers and cheaper unauthorized copies for the less affluent.5 Of all the ASEAN countries, Indonesia was the one US negotiators were most apprehensive about. Its laws were furthest from the international standard, and the unauthorized copying of songs and pharmaceuticals was an established and lucrative business, one which earned the government taxes and foreign exchange. At the same time, the US had little GSP leverage; Indonesia's low level of industrialization, structure of manufactured exports, and overall low level of non-oil trade with the US meant that GSP was not worth very much to Indonesia—only about US$39 million a year, compared to Singapore's over US$700 million. During the General Review, the USTR negotiators did not even really try to use GSP to put pressure on Indonesia, because they did not feel they had the leverage for it to be worthwhile. Finally, the Indonesian Government was regarded as the most nationalistic in the region with regard to economic policy, having the population and the oil revenue to be able to maintain such a stance.6 US negotiators focused on convincing the Government to improve copyright protection first. The most important change needed was to amend the law to allow protection to be extended to foreign works through bilateral or multilateral treaties. Other changes included giving unequivocal protection to sound recordings (which the 1982 law did not explicitly cover) and computer software; and to give exclusive protection for translations into Bahasa Indonesia or reproduction of works for use in Indonesia. The term of protection granted (life plus 25 years, 15 years for films) was too short by US or Berne standards and therefore should be increased to the life of the author plus 50 years. Penalties also needed to be raised: infringement of the 1982 law carried a maximum penalty of three years (the usual sentence was more often three months) or Rp. 25 million (US$5,000), not enough to outweigh the easy profits offered by piracy.7 The initial response to requests by American private sector organizations and government officials was not very encouraging. The government was not actively hostile, but neither was it interested. Arguments about development and trade met with the reply that Indonesia did not have a software industry to protect and probably would not in the near future, and that, in any case, they did not want Western songs and books.8 Nor did the suggestion that increased protection would bring more investment make much impression. In May 1985, the Minister of National 5

Interview with the owner of an Indonesian pharmaceutical manufacturing company, June 1989. Interviews with USTR officials, November and December 1988.

7

IIPA, Piracy of U.S. Copyrighted Works in Ten Selected Countries, section on Indonesia, p. 4.

Interviews with USTR officials, November and December 1988.

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29

Development Planning said that, while they would work to attract US investors by simplifying investment rules and export/import procedures, Indonesia could not offer a new copyright law as the United States was suggesting.9 Conscious of the dangers of provoking a backlash by pushing too hard, the US Embassy began a campaign to bring the government around, trying to persuade toplevel officials in the Ministries of Justice, Health, Trade, Industry, and Science and Technology through a constant flow of meetings, letters, seminars, and other contacts. In addition, most US Government officials visiting Indonesia brought up the matter of intellectual property rights, stressing the rewards it would bring in terms of investment, trade, and development. It is hard to say how much effect these efforts had before the issue was overtaken by two rather spectacular outside events. In December 1985, five months after the Live Aid charity concert for African famine victims, pirated versions of the concert (1.5 million at first estimate) produced in Indonesia began appearing in Southeast Asia, the Middle East, and Italy. The concert's organizer, British rock star Bob Geldof, complained to the Indonesian Ambassador, who, somewhat embarrassed, replied that piracy of foreign recordings was not illegal because Indonesia did not belong to any international convention. The infuriated Geldof launched a public "campaign'' against Indonesia for condoning piracy, threatening to get Australia to cut off its tourist trade to Indonesia, to have ten major international recording artists sue the Indonesian Government, and finally to go to Jakarta and personally confront the pirates if the bootlegs were not stopped within two weeks.1 " All this received press coverage in Indonesia, England, the United States, and other countries. Although the government continued to insist that legally nothing wrong had been done, the incident was deeply embarrassing. Justice Minister Ismail Saleh called the producers responsible for the copies into his office, and Foreign Minister Mochtar publicly criticized the pirating as unethical. By December 28,11 days after the pirated tapes were first discovered in Italy, all Live Aid tapes were pulled from the market. The Indonesian Government also gave $30,000 to the Live Aid fund, but, given that an estimated two million copies of the concert had been exported and that the tax was 15 cents a tape, the contribution was less than one-tenth of what the government had made in revenue from Live Aid tape sales—as Geldof and IFPI were quick to point out. The Association of Indonesian Producers (APNI), an association of licensed producers of Western music cassettes, held their own press conference, admitting ethical guilt but claiming that they had not actually produced as many as Geldof said because Singapore was exporting pirated tapes with Indonesian labels.11 A second well-publicized and very embarrassing incident occurred at the same time. On December 13, 1985, an Indonesian businessman was caught in an FBI "sting" operation for offering 360,000 counterfeit tapes to a US company, using the Indonesian diplomatic pouch to transport "samples." The Indonesian Government and press charged that this was entrapment and, in fact, the case was later dismissed on those grounds, but it also was reported in the international press. Like the Live Aid scandal, it did not put Indonesia in a very good light. These two incidents had considerable impact on the government's perception of intellectual property protection. Several knowledgeable sources believed that at this ^mpo, May 11,1985. w

Billboard (NY, Billboard Publications), December 21,1985, p. 3. lbid.

n

30

Intellectual Property

point President Soeharto took a personal interest in the issue and gave orders that the embarrassment be taken care of. In February, the US Embassy and the Indonesian Agency for National Law Development (Ministry of Justice) co-sponsored another seminar on intellectual property rights. During the seminar, the Minister of Justice denounced piracy of intellectual property as "detestable" and "contravening the Pancasila spirit."1-* While the incidents created a mandate from the top for some kind of change, it is not clear what the pace or extent of reform would have been, had it not been for US trade pressure. Previous attempts to reform Indonesia's intellectual property laws had foundered on bureaucratic division and intransigence. Indonesian writers had begun pressing for a new copyright law in 1958, and there had been at least seven attempts within the Ministries of Justice and Education to draft a new law, but nothing happened until the late 1970s. Even then the 1982 law was not fully implemented.13 Writers, publishers, and music producers continued to lobby to get the law fully implemented and better enforced, without any notable success. Patent protection was even more contentious because it required a completely new law, involved a number of ministries, and would affect industry interests. Unlike the situation with copyrights, there was almost no domestic pressure for protection—more than 12,500 of the over 13,000 patents registered with the Ministry of Justice since 1953 were foreign owned. In 1953, the Minister of Justice announced provisional measures for handling patent registration in anticipation of a Patent Act, but the different ministries involved had different ideas about protection, and 35 years later Indonesia still had no Patent Act. The Justice Ministry wanted a technically "good" law by international standards, the Ministry of Industry wanted to use the law to help Indonesian businesses (although there were nationalist and internationalist factions within the ministry over how to accomplish this), and the Health Ministry (which had close connections with the pharmaceutical industry) opposed the inclusion of pharmaceuticals. The intra- and inter-ministerial groups which were formed periodically to deal with the issue were unable to resolve these differences.14 In 1986, the attitude at the top may have changed but there was still considerable entrenched resistance within the bureaucracy; however, this time the debates were not taking place in isolation. In the spring of 1986, US pressure mounted. A stream of officials visiting the area pushed the catechism of intellectual property protection and, during his visit to Bali for the ASEAN summit, President Reagan specifically raised intellectual property rights with President Soeharto, while aides took the opportunity for extensive discussions with their Indonesian counterparts.15 Then on June 1,1986, the IIPA petitioned the USTR to remove Indonesia from the list of GSP beneficiaries for failing to provide adequate intellectual property protection. On July 30, 1986 President Soeharto announced the formation of a "working team" to study the question of intellectual property protection in Indonesia, charged with responsibility to speed up solution of problems in implementation; the first task was to come up with a bill to amend the Copyright Act, to be passed the following ^Jakarta Post, February 24,1986. The 1982 Act authorized further steps to improve protection, such as the formation of a Copyright Council and rejoining the Berne Convention, but no action was taken to fulfill them. 14 Confidential interview with an informed source. 15 Interviews with USTR officials, November and December 1988. 13

Indonesia

31

year, and another was to formulate a patent law (Presidential Order #34).16 The team was made up of representatives from all the ministries involved, but it was very much under the control of the State Secretariat. The chairman was Cabinet Secretary Moerdiono, and both Bambang Kesowo (the driving force behind the committee's legal/technical decisions and lead negotiator) and Hamid Attamini (who handled the administrative side) had close connections with Moerdiono. Although the Ministry of Justice was responsible for all administration of intellectual property protection through the Directorate of Patents and Copyright, the Working Team handled all negotiations with the United States and other countries.17 Despite these steps, external pressure for reform did not abate. The USTR accepted the IIP A case and set a March 27,1987 deadline for resolving the dispute. On April 2,1987 the USTR announced that the deadline would be extended to October, due to the progress being made now that Indonesia was aware that such protection was in its own interest. This did not diminish the pressure. In May, the European Community (EC) Commission began an investigation on unauthorized reproduction of sound recordings, with the possibility that European GSP benefits might be withdrawn. The Indonesian Parliament gave final approval to the changes to the new Copyright Act on September 9,1987. The amendments made it possible for Indonesia to extend protection to non-Indonesian works if their country of origin had a bilateral agreement with Indonesia or had joined an international convention. They also increased the length of protection offered to the life of the author plus 50 years, and included computer software (25 years protection) and sound recordings. The Copyright Act increased the penalties for infringement: maximum seven years and maximum fine of Rp. 100 million (US$60,000) for producers, five years and Rp. 50 million for selling pirated goods. Furthermore, piracy was classified as a criminal act, no longer requiring complaint or civil action by the rightful owners for prosecution. Negotiations for bilateral treaties began immediately after the bill was passed, and an agreement was signed with the EC on April 27,1988 for reciprocal protection of sound recordings. Moerdiono (now State Secretary) used the occasion to deliver a message to pirates—"From now on, think twice before doing it/'18 APNI asked the Indonesian Government to suspend the agreement with the EC for six months to give stores time to clean out their stock, arguing that they could stop production by June but could not retrieve goods already on the shelf—there were an estimated three million Lagu Barat tapes on the local market and slightly less than that ready for export. They got little sympathy from the Indonesian Government, which announced that, as soon as the agreement was in effect, European sound recordings would be treated as Indonesian works and any violations would be subject to the same penalties.19 Stores carrying pirated copies were mobbed in May, before the agreement went into effect on June first and all foreign music tapes (including American) were withdrawn from circulation. A bilateral copyright treaty with the United States was delayed by American objections to Article 15 (compulsory licensing), until Indonesia agreed to implement regulations to narrow the scope of licensing.20 The regulations were approved 1

Confidential interview with an informed source. Interview with a US Embassy official, June 1989. ls Straits Sunday Times, May 8,1988, p. 12. ^Jakarta Post, May 11,1988, p. 1. 20 IIPA, Trade Losses Due to Piracy, p. 33. 17

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by President Soeharto on January 14,1989 and the agreement was signed on March 22,1989, causing another rush on software before it went into effect on August 1. The Indonesian Government has taken its new position on intellectual property rights quite seriously. Several new offices and positions have been created to handle enforcement.21 In 1989, the Working Team and the Ministry of Justice began a public awareness campaign, using seminars and workshops (including a roving seminar which travels to different cities and universities talking to judges, police, lawyers, and others) to get out the message concerning intellectual property rights. The IIPA reports that there is a "very good attitude" toward enforcing copyrights in the Ministry of Justice responsible for enforcement, and cases have been successfully prosecuted under the new law—and publicized, along with denunciations of piracy and its cost to society, by judges and government officials.22 The efforts have had an effect. Piracy of foreign sound recordings virtually vanished within one week after the agreement with the EC went into effect. Starting in August 1988, licensed Lagu Barat has returned but not the pirates. There are rumors of "sound-a-likes"—rather than copying a record of Michael Jackson singing his latest hit, producers record Indonesian or Filipino groups singing Michael Jackson's latest hit, in the belief that this avoids copyright—but on the whole, foreign music is well protected. Video piracy is also down, but piracy of books (especially of university textbooks) and software is still a problem.*3 The Minister of Justice has announced plans to join the Berne Convention but has taken no actual measures yet. The patent law took longer to pass. The Working Team's first priority had been to get the copyright situation settled; only after that was done did they turn their attention to patents. Also, there was still disagreement among the ministries. The Ministry of Science and Technology and the Ministry of Industry strongly supported a patent system, and the Ministry of Trade was willing to accept US demands on intellectual property in return for trade privileges and market access. On the other side, the Ministry of Agriculture did not want plant or animal varieties included, and the Health Ministry (supported by Indonesian pharmaceutical manufacturers) opposed inclusion of pharmaceuticals on the grounds that it would make them too expensive. As it became clear that some kind of protection was going to be adopted, the Health Ministry tried to divert this by offering alternative plans, such as "phasing" in patent protection or allowing patents for certain drugs. None of these plans was compatible with a patent system and they were soon dropped. The ministry and the pharmaceutical manufacturers continued to oppose inclusion of pharmaceuticals in the law until a month or two before the bill went to Parliament, when they suddenly dropped their objections. Knowledgeable sources suggest that an order came down from higher up in the bureaucracy (probably the State Secretariat) that they were to keep quiet.24 21

In October 1986, the Justice Ministry sent representatives to Washington for the Patent and Trademark Office training program. In 1988, a Directorate General of Copyrights, Patents, and Trademarks was created within the Ministry of Justice, responsible for implementing and enforcing intellectual property laws and conducting public education, and a new office of Copyright Investigator was set up. 22

IIPA, Trade Losses Due to Piracy, p. 35.

23

The IIPA 1989 report calculated that book piracy increased 400 percent between 1984 and 1988 and that university textbooks were "100% pirated." Ibid., p. 30. 24 Interviews with members of the Indonesian and international pharmaceutical industry, June 1989.

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33

A patent bill was submitted to Parliament in February 1989. American companies were not entirely satisfied with the bill. First, it contains a compulsory licensing clause which allows the Indonesian Government to require foreign owners to license property which the government considers significant to the national interest. Another clause requires the owner to work the patent in Indonesia in order to be eligible for protection. Finally articles 17 and 18 allow the importation of counterfeit or pirated goods. These last articles were probably included in the spring of 1989 at the request of Indonesian companies (which did not want to cut themselves off from cheap imports) and accepted by the writers of the bill on the grounds that it was not Indonesia's affair if another country was pirating. The bill also grants too short a term of protection by American standards, and does not allow patents for food and beverages. The US Embassy voiced these objections to the Indonesian Government, but without effect.25 After some disagreement in Parliament over whether the money from patent fees should go to the Patent Office or the national treasury, the patent bill was passed on October 13,1989 with a minimum of publicity. The offending articles remain, but the USTR has indicated that the new law is at least acceptable and it is likely that protection will be tightened in the implementing regulations.26 CONCLUSION Most sources seem to agree that the Indonesian Government, at least at the top levels, was not really opposed to increased intellectual property protection—just indifferent to it. The primary impetus for the change in this attitude seems to have been the embarrassment of the Live Aid incident. Although the incident dropped out of the newspaper headlines after the initial stir, the theme of Indonesia's responsibility to the world community continually reappears in government statements and court judgments. Regarding one case over protection of foreign trademarks, the Supreme Court announced, "... that the Republic of Indonesia is an independent state which participates in the society of nations and is obliged also to maintain international relations with honour and respect among others, marks (trademarks) of foreign citizens." A verdict from a court case in which a man was sentenced for pirating Indonesian songs claimed: "This is to prevent the tarnishing of Indonesia's image in foreign countries"27 Commenting on the new Copyright Act, the Justice Minister said it "shows our sense of responsibility to the international community."28 The issue of international perception continues to weigh on the government's mind. At a workshop on patents in March 1989, the Minister of Justice said that Indonesia is making efforts to improve its image in the enforcement of property rights in the international forum.29 These statements and the amendments passed in 1987 reflect a dramatic change in perception of Indonesia's position in the world. The publicity from the Live Aid incident, the arrest in New York, and international denunciation of Indonesia's laws struck the government particularly hard because it has been trying to build a larger ^Interviews with members of the foreign pharmaceutical industry and a US Embassy official, June 1989. 2&Far Eastern Economic Review, November 2,1989, p. 52. Djakarta Post, April 28,1987. ^Indonesia Development News, September/October 1987, p. 1. Djakarta Post, March 15,1989, p. 3.

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role for Indonesia in international affairs and as a regional leader.30 Although it is hard to document, many familiar with the situation believe that President Soeharto took the outcry as a blow to his personal pride. The shame was reinforced as other countries in the region began reforming their laws, leaving Indonesia behind the times, out of date. A country like Indonesia could no longer use its position as a developing country to act outside the rules and also participate in the international economic community. Indonesia's desire to take part is indicative of its changing economic strategy. While cushioned by the influx of oil money in the early 1970s, the Indonesian Government adopted more nationalistic economic policies, restricting foreign investment and protecting the domestic market from imports. Starting with the 1983 decline in the price of oil, Indonesia's attitude toward trade and foreign investment has begun to shift to a more internationalist perspective. The need for non-oil trade and foreign investment is acknowledged in its fourth 5-Year Development Plan (Repelita IV), which lays out a strategy to decrease Indonesia's dependence on oil by increasing manufactured exports. In this context, US trade pressure became a serious consideration. Twenty-eight million dollars worth of GSP exports was not much compared to total exports, but it represented a foothold in the US market for Indonesian manufactured goods which could be expanded, particularly since it was considered only a matter of time before the four Asian NICs would be graduated.31 Similarly, the importance of good intellectual property protection to attracting foreign investment, while not important enough in and of itself to change the attitude towards protection, became an additional reason once the issue had caught the government's attention. Concern with trade and investment was undoubtedly sharpened by the sharp drop in the price of oil in early 1986, and when US officials and businessmen began spelling out the costs of the current intellectual property laws to trade and investment a few months later, the Indonesian Government was ready to listen. The formation of the Presidential Working Team in July 1986 represented not so much a new consensus on intellectual property protection—deep differences still remained among the different ministries—as the realization that a consensus needed to be reached. President Soeharto's involvement was crucial in forcing action. Once the Presidential Committee had been formed, the structure of the committee insured that the faction of Moerdiono (acting as the President's deputy) could control the outcome by holding key positions on the committee; inclusion of all ministries with a possible interest in the legislation meant that the few ministries with strong objections were outnumbered. The decision to reform Indonesia's intellectual property laws was not much influenced by non-governmental actors. Since the 1965 coup, the military has dominated political life and tolerated little opposition. The government party, Golkar, uses its access to state resources and organizations to control most of the seats in Parliament, winning 73 percent of the vote in the last elections (1987). Further strengthening Golkar's position, no political parties are allowed below provincial level. Unlike Thailand and Singapore or even Malaysia, there was little popular opposition to the new laws. The triggering event which brought the issue to public awareness—the 30

Gordon R. Hein, "Electoral Victory and Economic Adjustment for the New Order/' Asian Survey (February 1983), p. 186. 31 Kompas, February 12,1987.

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35

piracy of Live-Aid tapes—turned public sentiment against the pirates, since the kind of people interested in Western music were likely to be aware of the international reaction, and they did not like their country being called the "number one" pirate capital of the world. The event also helped cast the issue as an international one, despite the prominence of US concerns. At the same time, the groups which have been opposed to concessions on intellectual property in other countries, such as the pirates of cassette tapes (the majority of whom are Chinese) and students, are not in a strong position to protest; the former because of their position as a resented minority, the latter because the Indonesian Government is very sensitive to the dangers of student demonstrations and keeps the campuses under tight control. The pharmaceutical manufacturers had much greater input and influence on the patent bill, but when it came to a question of domestic manufacturers' concerns versus foreign approval and trade, the latter won. Academics were called in from the universities to give advice to the Working Team on the new laws, often on fundamental points, but always within the bureaucracy, and, as disclosure of a draft law is still a crime, the questions under discussion were not widely debated. There were some open seminars but the government selected the participants. Indonesian artists and producers, while very active and vocal in support of copyright reform, did not really have much effect on government policy. They had been complaining about the inadequacy of protection for some time—in the case of writers, from the time Indonesia withdrew from the Berne Convention in 1958. The book publishers' association, IKAPI, had pressed for a national law since the 1960s, and it renewed its efforts to get the 1982 law fully implemented and enforced. ASIRI, which represents most of the Indonesian music recording industry (and is over three times as big as the Western music industry), also complained for years that pirates were destroying its market; even agreeing in 1983 to a new sticker system that would increase the collection of taxes, in the hope that in return the government would crack down on pirates. Both organizations also called police raids against shops carrying pirated works. Despite these efforts, the Indonesian Government paid little attention until external events called the problem to its attention. Protection of foreign works has been by all accounts swift and thorough; in contrast, Indonesian artists and producers have not been nearly as effectively protected. Once intellectual property became an issue, the plight of Indonesian artists received public sympathy and denouncements of the moral evil of piracy from the various ministries involved, and prosecution has increased, but piracy of Indonesian works is still a serious problem.32 Part of the difference is undoubtedly due to greater problems of enforcement—Indonesian products and therefore scope for piracy are far greater, and Western works tend to be concentrated in a few cities. Still, it is clear that stopping piracy of Western products was the Indonesian Government's primary target, which it achieved very effectively. ^Jakarta Post, February 14,1989.

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5 THAILAND

w

hen the US intellectual property policy was first launched, it was assumed that Thailand would not be a problem; thus Thailand came under concerted pressure from the United States somewhat later than the other three countries. By world standards, the country already had fairly good intellectual property laws and was a member of both the Berne and Paris conventions. While piracy was as "rampant" in Thailand as elsewhere in Southeast Asia, losses to US companies were considerably less than in its neighbors and were confined to the domestic market. Thailand did not export significant quantities of pirated goods. Furthermore, the Thai Government was viewed as cooperative and pragmatic. US companies, however, had complaints about Thai lack of protection of both patents and copyrights. The 1979 Patent Act specifically excluded pharmaceutical products (pharmaceutical processes could be patented), agricultural machinery, and food and beverages. Of the three categories, protection for pharmaceuticals was the major concern. A more immediate problem was that American works had no copyright protection at all. The 1966 Treaty of Amity and Economic Relations contained an agreement to protect each other's copyrighted works; however the treaty was never approved by Parliament, only announced. At the time, the Thai market was unimportant and piracy technology limited, so the irregularity went unnoticed. It was not until the early 1980s, when the value of the market and the cost of piracy had grown, that US companies began trying made a serious effort to prosecute for infringement and were advised that an argument for protection based on the 1966 treaty probably would not hold up in court. Some legal experts even questioned whether the 1978 Copyright Act even allowed copyright to be extended through bilateral treaties.1 To solve this problem, the USTR asked that the Copyright Act be amended specifically to allow copyright protection to be extended through bilateral treaties. In addition to the investment/development incentives, US negotiators argued that even if the 1966 treaty had not been implemented, Thailand had a moral obligation to provide protection because the United States had been protecting Thai works since 1921. They also asked that computer software be explicitly protected, since the 1978 copyright law was ambiguous. Although the Juridical Council had issued an advisory opinion in 1984 that software was protected, the opinion was not binding. 1

Article 42 of the 1978 act, in conjunction with the 1983 Royal Decree prescribing the conditions for the protection of international copyright, was interpreted to mean that copyright protection could be extended to other countries only through international conventions, not through bilateral treaties.

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The Thai Government appeared willing to accommodate US requests. The Economics Department of the Foreign Ministry, which handled the Thai side of the negotiations, was very cooperative and assured the USTR that the matter would be taken care of. Not until the other countries in the region had started reforming their laws did US negotiators realize that Thailand was not following suit. The US then began to press the Thai Government for a commitment. On September 17,1986 the Cabinet agreed in principle with the Foreign Ministry to amend the Copyright Act to include the 1966 Treaty, and in October the government submitted a draft bill to the Cabinet. Some members of the Democrat Party (one of the coalition members) objected, but the issue did not receive much attention. The USTR review of the General System of Preferences was published in January 1987. Thailand was not penalized, but neither was it given any increase in benefits or waivers, as a signal to get moving. The Thai Cabinet first announced its intention to amend the 1978 Copyright Act on May 12,1987 (two weeks before the USTR date for accepting petitions from US companies for a review of GSP privileges). The Cabinet declared support of a bill which would amend the 1978 act to allow the inclusion of the 1966 treaty but which left other details, such as the inclusion of computer software, up to Parliament. The announcement provoked immediate and widespread opposition, both inside and outside the government coalition. The controversy was such that some observers, including former Prime Minister Kukrit Pramoj, warned that it could lead to a political crisis. Supporters of the amendment (most notably the Ministry of Foreign Affairs and businessmen involved in export trade) argued that Thailand could not afford a confrontation with the United States and that GSP was too important. From 1985 to 1986, Thai exports to the US under GSP increased by 21.4 percent to $1.87 billion, and Thailand's fastest growing exports were covered under GSP.2 As one analyst pointed out, if the big fish like Taiwan and South Korea had been caught, there was little chance of Thailand escaping.3 Siddhi Sawetsila, Foreign Minister and leader of the Social Action Party (SAP), even threatened to resign if the bill were not accepted, saying that Thailand could not afford a trade war with the United States.4 Critics of the bill (academics, students, labor leaders, consumer advocacy groups, and the press) opposed it for reasons of nationalism and economic development. The US demand that Thailand change national law to suit American companies was seen as unwarranted interference in Thai internal affairs and an affront to sovereignty.5 Questions of sovereignty were particularly touchy with regard to the United States because Thailand had already been the subject of a number of unfair trade actions brought by American companies under the new trade laws (cases were filed against Thai rice, tuna, textiles, shoes, steel pipes/and ball bearings exports). Although not 2

Far Eastern Economic Review, June 11,1987, p. 126; and The Asian Wall Street Journal April 2930,1988, p. 1. 3 The Nation, May 15,1986. 4 T/z£ Bangkok Post, May 30,1987. 5 For example, the Student Federation of Thailand protested in front of the American Embassy, charging that passage of the bill would cause Thailand to lose its sovereignty. See The Nation, November 24,1987.

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the target, Thailand had also been affected by other protectionist legislation.6 Following these disputes, the demand that Thailand change its Copyright Act was seen as one more case of the US trying to bully Thailand—especially since, if the United States joined the Berne Convention (as Congress was considering at that time), American works would automatically receive copyright protection. Citing Thailand's development needs, critics of the bill argued that Thailand could not afford to pay royalties, particularly for textbooks and pharmaceuticals.7 There was also the concern that Thailand should not block its own technological progress by protecting computer software, because many local programmers worked by adapting foreign programs. Critics of the bill dismissed the importance of GSP— the jewelry industry had already had its privileges removed for exceeding the "competitive need limit" (CNL) and survived. Thailand's economic success gave rise to the feeling that it was time for the country to show its independence of the United States. In any case, passing the amendment was no guarantee that Thailand would retain its GSP privileges—an argument which was confirmed when Singapore was "graduated" shortly after passing its new copyright law. Academics, particularly professors from the faculties of Law, Economics, and Pharmaceutical Science at Chulalongkorn and Thammasat Universities, played a prominent role in articulating and legitimizing the opposition to American demands. Beyond their direct opposition to any concessions, academics acted as sources of information and expertise for sympathetic political parties and offered an alternative vision of Thailand's development to that presented by US negotiators and other supporters of increased protection for foreign intellectual property. Despite real concerns on both sides of the issue, the discussion in Parliament quickly took on a highly partisan cast. As the debate continued through the summer and fall, the Thai Cabinet split along party lines, particularly over the inclusion of computer software. The Social Action Party (SAP), whose leaders have been described as "the cornerstone of banking and financial empires," took the position that GSP was more important to Thailand than resisting US demands on computer software.8 The "10 January group," a dissident faction within the Democrat Party which had previously challenged the party leadership over the distribution of Cabinet posts, immediately announced its opposition to the bill in any form—a move that was widely seen as an attempt to seize leadership of the Democrat party. After a few days, the head of the party, Bichai Rattakul, moved to join them, opposing the inclusion of software or any swift move to please the United States. The other two parties vacillated, although a splinter of the Chart Thai (sponsored by General Pramarn Adireksarn, who operates a large network of videotape shops) also opposed the bill.9 Together, the Democrat Party and part of the Chart Thai were able to postpone debate of the bill, despite SAP concern that this would provoke US trade retaliation. 6 Of particular concern were the 1985 Textile Bill, which would have sharply restricted one of Thailand's fastest growing exports had it passed, and the Food Security Act of 1985, which subsidized American rice farmers. 7 The copyright bill would not have affected pharmaceuticals, which are covered by patents, but the two were frequently confused. In any case (local pharmaceutical manufacturers and consumer lobbies argued) if Thailand agreed to give copyright protection for software, the US would ask for protection of pharmaceutical products next. See The Nation, November 24,1987. ^Chai-Anan Samudavanija, The Thai Young Turks (Singapore: Institute of Southeast Asian Studies, 1982), p. 65. 9 The Nation, November 24,1987.

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Retaliation was a real possibility. With Taiwan, South Korea, Hong Kong, and Singapore out of the picture and Indonesia discussing reforms, Thailand was the biggest unrepentant producer of pirated goods in Asia, and began to attract special attention. In the summer of 1987, the International Intellectual Property Alliance and the Pharmaceutical Manufacturing Association petitioned the USTR to revoke Thailand's GSP privileges, claiming that copyright violations in Thailand cost their members $34 million and $40 million a year, respectively.10 This set the investigative machinery into action, and the US Trade Representative had to inform Thailand that, if it did not pass acceptable legislation protecting American intellectual property within the time limit, it would lose some or all of its GSP privileges. Prime Minister Prem and the SAP scheduled the first reading of the bill in November, hoping to get it approved quickly, but the session dissolved into chaos; sonríe observers described it as a near collapse of the government.11 Three drafts of possible amendments to the copyright law were on the floor—one including software (sponsored by SAP), one specifically excluding software (Democrat), and one which was ambiguous. Despite the importance of the issue and widespread public concern, the pros and cons of the bills were hardly discussed in the meeting. Most of the session was spent on recriminations and demands for a cabinet reshuffle by the "10 January group" and the opposition. Finally the rest of the government coalition was able to force all three bills through the House, and Parliament adjourned. When Parliament reconvened in the spring, it soon became clear that the November vote had solved little. Discussion on the issue was postponed several times due to the fear that it would destabilize the government. When the bill finally came to a vote on April 29,1988, sixteen ministers from the Democrat Party resigned after they were unable to prevent thirty-two members of the "10 January group" from voting against the bill. With a fractured Cabinet and the threat of a no confidence motion by the opposition, Prime Minister Prem dissolved the Parliament, nullifying the bill. New elections were scheduled for July 24.12 The copyright amendment was not important in the elections, except in the South, where the Democrat Party had been strong since World War II. Now that the party had split, the former "10 January" faction (now calling themselves the Prachachon Party), had to explain why they had left the party. This led to some interesting campaign rallies, in which small groups of villagers in the jungle would be treated to speeches on the merits and demerits of copyright protection, as an explanation of why the Democrat Party had failed the people.13 The Democrat Party ignored the copyright issue, claiming that the real reason the dissidents had left the party was greed. The new Prime Minister, Chatichai Choonhavan (of the Chart Thai Party), was much less willing to yield to US demands. As the first elected civilian Prime Minister of Thailand in twelve years, he was in a precarious position, and many expected the six-party coalition government would not survive long—some commentators gave it only three months. To avoid the fate of the previous coalition government, Chatichai 1(>

rhe AFL-CIO also tried to get Thailand's GSP withdrawn for violating labor rights, but the petition was rejected by the USTR. ll The Nation, November 24,1987. l2 The Asian Wall Street Journal April 29-30,1988, p. 1. 13 Information received from James Ockey, graduate student in the Cornell Southeast Asia Program.

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adopted a more nationalistic position towards intellectual property protection. A tough position on trade also fit in with his populist style and his belief that Thailand was strong enough to stand on its own feet. This position was reinforced when, in a move to broaden his base of support, he asked his son to form a committee of academics to act as personal advisers on policy matters. The six chosen for this "kitchen cabinet" were among those who had been very outspoken on intellectual property protection and other issues. The move was very popular and won praise as an effort to widen participation. By this time, the US Congress was taking the steps necessary for the US to join the Berne Convention, making an amendment to the Thai Copyright Act unnecessary, but several problems remained. Some legal experts in Thailand questioned whether US accession to Berne really required Thailand to protect US works.14 Protection of retroactive works (works not yet in the public domain) and computer software also remained unsolved. The latter issue was complicated by proposals in Parliament to pass a law giving software sut generis (i.e. non-copyright) protection. The USTR objected strongly to this, believing that such protection was likely to be inferior to copyright. Finally, the USTR moved pharmaceutical product patents to the list of immediate demands and added the requirement that Thailand support the US position in the GATT talks.15 There were sharp divisions within the Thai Government over how to respond. The "kitchen cabinet" of personal advisers, which had already become involved in a number of policy issues, advocated a strong nationalist position in trade relations with the U.S and opposed concessions. Both the policy and interference antagonized the traditionally conservative Foreign Affairs Ministry and the Commerce Ministry (both dominated by the Social Action Party [SAP]), which put a high priority on maintaining trade and good relations with the United States. Intellectual property policy was hung up for weeks as the two sides argued over the formation of a new committee to deal with the trade relations.16 The Foreign Ministry side "won" that battle, and the new International Economic Relations Policy Committee (IERPC) was dominated by the Ministries of Commerce and Foreign Affairs. The advisers, however, continued to have a considerable impact on policy—including taking part in the US trade negotiations, to the confusion of the US delegation, which was uncertain who they were or why they were there.17 In November 1988, talks were held in Hawaii and a record of agreement was produced which was intended to be signed in Washington on December 12, three days before the December 15 deadline for final negotiations. Both sides agreed that existing US works would be given "full protection" under the law and that, if the Thai courts ruled otherwise, the Thai Government would take administrative steps to ensure full protection. Thailand also agreed to to support the US position in GATT. 14

This argument hinged on whether the Berne Convention was considered one convention with different articles or a series of separate conventions. If the latter was the case, then since the US had signed the Paris version and Thailand had signed the Berlin version, Thailand was only obligated to protect US works at the level of the Berlin Convention—or possibly not at all. 15 The US position was that intellectual property protection should be treated as a question of norms and standards, in which case the GATT talks could create a code addressing the quality of protection offered by national laws. Brazil and India wanted it treated as a purely trade problem, in which case GATT could only address imports and exports of infringing goods. 16// From Copyright to Intellectual Property/' Siam Rath, October 23-29,1988. 17 Interviews with USTR and PTO officials, December 1988.

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Software was more difficult to resolve. The Thai position was that the courts should decide whether software was protected under the Copyright Act. The USTR agreed to wait for a court ruling but in the meantime it wanted the Thai Government to make a commitment not to submit and to oppose legislation providing sui generis protection and to submit and strongly support an amendment giving explicit copyright protection to software if the Thai courts ruled otherwise. The Thai Government responded that it would be contrary to a democratic system and publicly indefensible for the Cabinet to promise a foreign country that Thai legislators would not submit a non-copyright bill, although it was willing to agree not to take any action to prejudice the issue.18 The problem of pharmaceutical patents was also unresolved. The Thai delegation proposed that, within three years after the conclusion of the Uruguay Round of GATT negotiations, the Thai Government would submit a bill to Parliament to amend the Patent Act to fulfill US requests, to the extent that such measures would be in conformity with the norms and standards agreed on in the Uruguay Round. Until then, the Thai Government offered to implement interim measures to require Thai companies seeking to register their version of a foreign drug to submit to a series of comparison tests by the Thai Food and Drug Administration. This would give a temporary monopoly to foreign manufacturers of up to a year and a half. US negotiators wanted the issue "delinked" from GATT (the bill should meet US specifications and be submitted to Parliament no later than December 31,1990) and wanted interim protection for five years or however long it took to implement the new Patent Act. The Thai Government rejected these terms as inconsistent with international principle (what if the US-approved bill differed from the GATT code?) and maintained that the Thai Government had no legal power to prevent Thai manufacturers from producing a product for five years.19 The Thai Government remained divided as the deadline rapidly approached. The coalition nearly broke up during squabbles between the advisers and SAP bureaucrats over Indochina and US trade policy, and at the end of November, Foreign Minister Sitthi Sawetsila resigned as chair of the IERPC Thai-US subcommittee, saying he was tired of being accused of being soft on copyright.20 Chatichai was able to smooth things over—Siddhi and his faction moved closer to to the Prime Minister's position on Indochina and the academic advisers were to be excluded from future US-Thai trade talks—but on December 15, there were still a number of unsettled issues.21 Thailand had already fulfilled the pledge to support the United States actively during the Mid-Term Review of GATT in Montreal. Although no agreement had been reached for computer software, in the December talks, the US agreed to drop the demand that Thailand not issue a separate law. Both negotiating teams thought an agreement was possible, until a last minute order from the Cabinet (attributed to the influence of the advisers) forbade the Thai delegation from altering the wording of the agreement which had been approved by the Thai Cabinet.22 The move turned out to be very popular and won Chatichai much public praise for standing up to the ls

The Nation, December 18,1988. Interview with Dr. Karun Kittisathaporn, Deputy Director General, Department of Business Economics, Ministry of Commerce, July 1989. 2Q Bangkok Post, December 1,1988, p. 4. 2l Far Eastern Economic Review, June 8,1989, p. 26. 22 Bangkok Post, December 20,1988, p. 1. 1

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United States. In any case, even if software had been resolved, no agreement had been reached on pharmaceutical patents. With this, the talks broke off. On January 19,1989, in one of his last acts before leaving office, President Reagan withdrew US$165 million worth of GSP privileges from Thailand (equivalent to about 30 percent of 1987 exports under GSP) for failure to make acceptable progress in protecting software and pharmaceuticals. US Government officials viewed this as a mild rebuke, reflecting State and Defense Department concern with Thailand's strategic importance. In response, Thailand designated its Ambassador to Geneva as leader of the Thai delegation to the GATT talks, rather than the Permanent Secretary for Commerce (who usually headed the Thai delegation), with orders to keep quiet and not take any position.2^ In Thailand, although the GSP cuts were shrugged off as unpleasant but not damaging, the escalating costs of continuing to oppose the US brought more pressure on the Thai Government to compromise. The fact that the US actually had retaliated was an unpleasant shock, as was Trade Representative Yeutter's letter, spelling out what the US expected from Thailand, and raising the threat of a 301 action if the demands were not met by May 31. Then in March, the International Intellectual Property Alliance denounced Thailand as the "software capital of the world/' claiming that Thailand's 90 percent piracy rate was causing its members US$60 million in losses a year.24 Thai business associations, hitherto not very active in the debate, became more vocal. The Board of Trade publicly urged the Thai Government to be more flexible to prevent further retaliation. It was joined by the Federation of Thai Industries, the Thai Bankers' Association, the Thai Chamber of Commerce, and the Thai Gems and Jewelry Traders' Association. In response, the Thai Government set itself the goal of keeping Thailand off the USTR's list. The Foreign Ministry and one of the academic advisers, Dr. Surakiart, began lobbying American industry groups and US Government officials in Washington. The Thai Food and Drug Administration (FDA) also met with its American counterpart to discuss possible methods of interim protection for pharmaceuticals.25 The Thai Government's efforts were successful, and on May 25, when the USTR list was announced, Thailand was not named for immediate retaliation. However, it was one of eight countries on the "priority watch list" (a list created by the US Administration to keep track of problem countries not marked for immediate retaliation) and given until November 1,1989 to resolve the trade dispute or face possible retaliation within 21 months. At this point, American tobacco companies filed a complaint about Thailand's ban on the sale of foreign cigarettes, and the AFL-CIO (for the third time) petitioned that GSP be revoked for labor violations. Thus, the problem of avoiding a 301 action replaced intellectual property as the focus of attention. To some, it seemed that a 301 might be inevitable—even if Thailand gave in on one issue, the US would just come back with another demand. It is ironic that this should have happened, as the two sides were actually close to an agreement. US negotiators, realizing that the Thai Government was not planning to introduce or encourage sui generis legislation, had allowed software protection to ^Bangkok Post, February 3,1989. 24 Bangkok Post, March 17,1989; and IIP A, Trade Losses Due to Piracy and other Market Access Barriers, p. 97. ^The Bangkok Post, January 24,1989 and an interview with members of the Thai Food and Drug Administration, July 1989.

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become a non-issue, pending a decision by the Thai courts; and while the US continued to insist on its timetable for amending the Patent Act, the possibility of interim measures provided a basis for further negotiation. The Thai Government really did want to reach an agreement, although it was still constrained by the opposition in Parliament, which had given notice that it would oppose any attempt by the government to strike a deal that would "violate Thailand's interest or sovereignty." Negotiations in August and October brought the two sides closer together. The Thai Government offered a written commitment to include pharmaceutical products when the Thai Patent Act was revised, and set up a committee to review a draft of the bill. In return, when the USTR announced its findings on section 301 investigations on November 1, Thailand remained on the priority watch list and was not scheduled for investigation. As required by the 1988 Trade Act, the USTR has continued to report on the state of negotiations. As of May 1990, Thailand was still on the priority watch list while a Thai Government commission reviewed possible amendments to Thailand's intellectual property laws. It is uncertain what will happen when the commission submits the amendments to Parliament but until then, as long as the USTR can claim that some progress is being made, it is unlikely that Thailand will be designated for retaliation.2^ CONCLUSION The Thai case appears at first paradoxical. The Thai Government was initially more sympathetic to US requests than Singapore or Indonesia had been. Thailand already had good laws, compulsory licensing was never an issue, and the US had significant trade leverage. In contrast with Singapore, Malaysia, and Indonesia, the pirating sector was small and unorganized. Yet Thailand is the only one of the four countries which did not accommodate US demands, even after withdrawal of GSP and the threat of a 301 action. Thailand's firmness is even more anomalous given its history of close ties with the US and its "bend in the wind" foreign policy—diverting rather than directly opposing external forces. The development of intellectual property protection as an issue reflects changes, both in overall US-Thai relations and in the political system within Thailand. The conflict over trade (of which intellectual property was part) was a result of changing political and economic relations between Thailand and the United States. From the end of World War II through the Vietnam War ties between the two countries were characterized by the United States providing economic assistance to Thailand in return for political and military loyalty. This relationship was disrupted during the mid-1970s, with the political upheaval in Thailand in 1973 and the US withdrawal from Indochina. While the early 1980s have seen renewed US-Thai military cooperation and increased American military aid, the military link is no longer as important (relatively speaking) to either side. Southeast Asia no longer occupies such a crucial position in US foreign policy and Thailand has diversified its military patrons and diplomatic allies to become militarily and diplomatically more independent of the United States.27 In contrast, trade relations have become both closer and more strained as Thailand's economy has developed and shifted from agriculture to manufactured exports. 26

Interview with a Thai desk officer, US Department of Commerce, May 1990. John Funston, "The Role of the Ministry of Foreign Affairs in Thailand", Journal of Contemporary Southeast Asia (December 1987): 229.

27

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Up until 1973, Thailand's external trade consisted primarily of agricultural exports and imports of manufactured goods, particularly consumer goods. But by the late 1970s, the Thai economy had changed in both direction and composition. Export/ import trade became more important, growing from 33 percent of GNP in 1960 to 48 percent in 1980, as industries which had started as import substitution projects in the 1960s began exporting manufactured goods. While rice still dominated exports in the 1970s, the fastest-growing sectors were manufactured goods. In 1958, rice constituted 46 percent of total exports and four primary products (rice, rubber, tin, and teak) made up 74 percent of total export value. In the 1970s a number of manufactured goods were added—such as textiles, integrated circuits, precious stones, and processed foods—and by 1981, rice made up only 17 percent of total exports. By 1986, the manufacturing sector contributed more to GDP than agriculture.28 These rapid changes have prompted speculation that Thailand would soon imitate Taiwan and South Korea's success. By concentrating on products using cheap, unregulated labor and by acquisition of high technology, Thai Government officials and business leaders have predicted that Thailand will become a "NIC" (Newly Industrialized Country) maybe within the decade.29 Part of this has been predicated on a shift in trade partners. Japan was Thailand's largest source of imports and markets in the 1960s and 1970s, but as Thailand's capacity to produce and export manufactured goods increased, access to the larger and more open American market was seen as crucial to continued expansion. In 1984, Japan continued to be the primary source of Thai imports but the United States replaced Japan as Thailand's largest export market.30 Because of this success, Thailand became a target of fair trade actions by American companies, as described earlier. Even though neither the wave of protectionist sentiment which had prompted the 1984 Trade Act, nor the major product-specific legislative actions (the Textile Bill and Food Security Act of 1985) were concerned specifically with Thailand, once the legislation was in place, it cost US companies little to use it against foreign competitors. None of the legislation seriously hurt the Thai economy, certainly not as much as Thai media and officials predicted. President Reagan vetoed the Textile Bill, Thailand was able to find new markets for rice, and efforts by the Thai Government and American Embassy officials staved off or ameliorated the effects of trade actions against Thailand initiated by US companies. Despite this, both the Thai Government and much of the Thai public were very bitter about what one official described as "trade harassment."31 The Thai perception of the conflict has changed over time. At the beginning, many Thai still saw relations with the US in patron-client terms whereby Thailand gave political allegiance for economic munificence, as had been the case in the 1950s and 1960s. They thus regarded the sudden burst of American protectionism as a betrayal.32 With the new sense of confidence under the Chatichai Government, this 2

^Kheeseng Anansiriprapha, General Trading Companies and Manufactured Exports from Thailand (Bangkok: Thammasat University, May 1983) and Economist Intelligence Unit, Country Report: Thailand (London), No. 1,1988. 29 Far Eastern Economic Review, October 9,1986, p. 67. 30 Ibid.,July25,1985,p.56. ^Thailand Foreign Affairs Newsletter, November/December 1986. 32 In trade negotiations and speeches, Thai officials repeatedly brought up Thailand's status as a front-line state, its responsibilities in handling the Cambodian refugees, and its part in the war on drugs as reasons why the US should not demand that Thailand play by the same

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bitterness has given way to a more general criticism that the US is behaving in a very un-leaderlike manner, and that it should not be punishing other countries for its own problems (i.e. the trade deficit), particularly not developing countries. There is also a sense that the United States is behaving very hypocritically. American companies filed unfair trade complaints against Thailand over what was then found to be a 0.84 percent rice subsidy, while the US Congress passed the Rice Title of the Food and Security Act of 1985 which gave about US$1 billion in subsidies to fewer than 15,000 American rice farmer families.33 When Thailand complained, the US told them to wait for the GATT negotiations on agricultural subsidies in the GATT round. The United States, however, then rejected Thailand's proposal that it wait for the conclusion of the GATT intellectual property talks before amending its patent law, insisting that Thailand amend the patent law by 1990 or face possible trade retaliation. Furthermore, Thailand's request for assurances that the rice clause would be deleted when the Food Security Act was renewed was denied on the grounds that it was up to the US Congress to decide legislation—yet the US rejected this same argument when the Thai used it to explain why they were unable promise that the Thai Parliament would not pass sui generis protection for computer software.34 Despite harsh words on both sides, the trade conflict has not disrupted Thai-US relations very badly. The ties are too strong and both governments have worked to contain the political damage. However, the dispute has strained the friendship and encouraged the Thai Government and business to think about diversifying away from the US, both economically and diplomatically.35 Changing US-Thai relations created the conditions for conflict over intellectual property, but the Thai Government's response was shaped by domestic politics. The traditional model of Thailand politics was that of a "bureaucratic polity," dominated by the military and characterized by 1) an arena of politics within the bureaucracy ("a functionally specialized state apparatus that is immune to control or direction by extrabureaucratic forces'7); and 2) "a style of politics that plays across the shifting lines of personal factions rather than through such social structures as formal organizations, classes or interest groups."36 While this may have described the situation in the 1950s and 1960s, rapid economic growth during the 1960s created new social groups, including an urban middle class, capable of successfully challenging the military's monopoly of political power. In 1973, the military government was forced to yield power and a civilian government was installed. The military recaptured power in 1976, but only with the cooperation of civilian elements and the King's approval. The first post-1976 regime tried to control the country through repression, without success, and in October 1977, economic rules. US officials saw these as reasons for foreign aid, but not valid excuses for unfair trade. 33 Surakiart Sathirathai, "Thai-U.S. Trade: Problems and Outlook," Paper submitted to the seminar on "Management of Thailand's International Economic and Trade Relations," Siam Intercontinental Hotel, Bangkok, February 2,1989, p. 3. 3 *Ibid. 35 Interviews with Thai Government officials, members of the Thai Parliament, and Thai academics, July 1989. 36 See Fred Riggs, Thailand: The Modernization of a Bureaucratic Polity (Honolulu: East-West Center Press, 1966).

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the more pragmatic military leaders staged a coup and began cautiously building a political system (frequently described as "power-sharing") that could accommodate the new forces in Thai society. In 1978, political parties were allowed to operate, and in 1979 a new constitution was implemented, allowing an elected House of Representatives, balanced by an Upper House appointed by the King. Over the course of the decade, military and bureaucratic control of the political process has gradually loosened, and recently the term "semi-democracy" has been used to describe Thai politics: democracy within limits.37 As Pisan Suriyamongkol and James Guyot argue in their book, The Bureaucratic Polity at Bay, this is in a sense the purpose of the Thai Constitution: to allow participation while accommodating powerful interests which might overturn the whole system if pushed too hard.38 The 1980s have seen widening political participation and competitive elections, but parliamentary politics tend to follow the old pattern of patron-client networks rather than ideological or functional groups. In the absence of ideological diversity or broad popular participation, the focus of the political game is elected office. The new value of parliamentary seats has not made parliamentary politics more stable; quite the opposite, in fact. The jockeying for the "prize" of elected office is leading to more expensive and violent elections. Money is a major factor in elections and the cost of campaigns is increasing rapidly. A single vote can cost US$10.40 As elections become more costly, candidates and parties need more money to finance their patronage systems, and the best way to get access to resources is through a cabinet post.41 This has caused the frequent break-up of Thai governments (Prem went through five cabinets in seven years) as the members of different parties try to capture coveted positions. As one journalist commented: "A no confidence debate is now becoming an almost annual affair in Thailand's parliament."42 Another cause of instability is that, without ideological diversity or mass participation, parties have no deep roots and therefore (like coalition governments) often split and merge as individual ambition dictates. The more successful the party, the more prone it is to internal divisions since it now has more members competing for top positions. It was this kind of rivalry that made intellectual property protection an important issue. The Democrat Party had won the largest number of seats in the 1986 elections, and soon some members, feeling that they had not received a fair share of cabinet posts, challenged the leadership of the party, using the copyright bill.43 The issue of copyright protection was an occasion for, rather than a cause of, the collapse 37

Clark D. Neher, "Semi-Successful Semi-Democracy/' Asian Survey (February 1988): 129; and Anek Laothamatas, "Business and Politics in Thailand: New Patterns of Influence," ibid. (April 1988): 151. 38 Pisan Suriyamongkol and James F. Guyot, The Bureaucratic Polity at Bay (Graduate School of Public Administration, the National Institute of Development Administration, Doc. No. 51, Bangkok, December 1986), p. 38. 3 ^Clearly being a Member of Parliament is seen as a desirable position because more and more military officers are moving into politics. 40 The Economist, May 7,1988, p. 29. 41 F«r Eastern Economic Review, June 25,1987, p. 74. 42 Ibid., August 3,1989, p. 15. 43 Commentators agree that political maneuvering and personality conflicts were the prime motives for the split. One editorial described the party as a "Rabble without a cause." Ibid., June 4,1987, p. 44. See also ibid., July 16,1987, p. 37.

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of the Prem Government—the weak nature of political parties had already set the stage so that any controversial issue could bring the government down. The politicization of intellectual property protection illustrates the fragility of the current political arrangements but also that the system has become sufficiently entrenched to allow the intrusion of extra-bureaucratic forces into the decision-making process, at least in some areas. The very volatility of parliamentary politics created the incentive and opportunity for some MPs to impose a policy course which neither the government, the military, nor big business wanted. The Prime Minister, the bureaucracy (with the exception of the Ministry of Health), and the majority of government parties much preferred to compromise with the United States than risk bad relations and loss of market access. The Ministries of Foreign Affairs and Commerce consistently stressed the importance of trade, and the Ministries of Education and of Science and Technology both favored increased intellectual property protection. The military also publicly supported amending the Copyright Act, although it was not a major concern. Business associations did not have as much impact as one might have expected, since many sectors were indifferent to both intellectual property and GSP, and others were torn between cheap software and the threat of trade retaliation. However the large banks, exporters, and export industries have been very concerned about the economic effect of trade retaliation and have argued these concerns publicly. Prior to the public outcry, the Prime Minister and the Cabinet agreed in principle with the Foreign Ministry that the Copyright Act would be amended to bring it into line with the 1966 treaty. The majority of government parties continued to support this position and the bill actually was passed in April 1988—only to be nullified by the subsequent dissolution of Parliament. Under the Chatichai Government, the economic incentives for meeting US demands increased. First, the alternative was raised from loss of GSP privileges to a 301 action. Even the threat of retaliation hurts since American businesses may be reluctant to place orders with Thai companies for fear of being hit by raised tariffs. Second, increased Thai-US trade increased the value of potential losses. In 1988, 20 percent of Thai exports (2/3 of which were manufactured goods) went to the US, and US-Thai trade was expected to grow by 30 percent between 1988 and 1989 to a record US$6 billion.44 Third, the Chatichai Government is seriously considering setting up a data processing zone, a move which would require an internationally acceptable level of protection for computer software. However, as the dissolution of Parliament in April 1988 demonstrated, the political costs of compromising with the US were too high. Opposition MPs let it be known that they would oppose any "compromise" of Thailand's interests, which would then create an opportunity for dissatisfied coalition members to defect. One MP said that, even though he supported increased intellectual property protection along the lines the US was suggesting, he would not vote for such a bill or allow it to pass until the government had carried out more education so that the public understood the need, and the subject was no longer so controversial.45 The importance of the political factor is underlined by the fact that the Thai Government was willing to ^Bangkok Post, July 22,1989. 45 Interview, July 1989.

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give the kind of protection the US wants—if it could be handled in a non-political (i.e., non-Parliament) way, such as through the courts or in GATT. Unlike Singapore, Malaysia, or Indonesia, the people actually doing the copying did not (with the exception of pharmaceutical manufacturers) take much part in the debate. Copyright piracy involves small-scale operations which are not organized and are not important exporters. In most cases they are also not legal, since the Thai Copyright Law already applies to all Berne members. The US was an exception as the only one of the developed countries not belonging to the Berne Convention and therefore not eligible for automatic protection. The MPs who have most strongly opposed increased protection are from the South and the Northeast, not from Bangkok (where almost all copying takes place), nor was it an election issue in Bangkok—which confirms that it was not the influence of producers that was responsible for the opposition in Parliament. Even copiers of pharmaceuticals, who had more capital and resources than copiers of books and tapes, were not a strong political force. Although the Thai Pharmaceutical Manufacturers7 Association (TPMA) did actively oppose pharmaceutical product patents, only two, or possibly four, medium-sized manufacturers were actually involved in copying foreign products. Members of the foreign pharmaceutical manufacturing industry in Thailand have called attention to the Democrat Party's connections with the pharmaceutical industry, but it is not clear how important this has been.46 The leadership and the majority of the Democrat Party initially supported the copyright bill in May, only moving to oppose concessions after party dissidents did, and then voted for the copyright bill in April 1988. The political rivalries in Parliament allowed two other actors—academics and the press—to play an important part in shaping the issue. Academics influenced the debate in two ways. First, they provided information and ideas to MPs who were looking for a legitimate reason to challenge the government.47 Armed with sophisticated arguments, the dissident MPs were able to build a very strong case for opposing concessions during parliamentary debates, easily outclassing government MPs. Second, the academics mobilized popular opposition through seminars and articles. This was not the first instance of this kind of participation. University professors and students had earlier mobilized against the Army's proposed amendment to the Constitution in 1983, publicizing the issue, giving intellectual legitimacy to the opposition, and urging people to express their opinion.48 The press also played an interesting role. If the first half of the 1980s saw Parliament come into its element, the second half has seen the rising influence of the press. Primarily nationalist in its own outlook, the press also served as the medium through which the different actors communicated. Businessmen (both Thai and foreign) and academics used the press as one of the primary ways to get their views across or to 46

In the past few cabinets, the Health Minister has always been a Democrat, and the leader of the party, Bichai Rattakul, owns a pharmaceutical company himself and was president of the TPM A at one point. 47 At the time the US began implementing its policy, the Thai Parliament had begun to experiment with research staff for House committees. Several of the professors on the staff for the Foreign Affairs Committee were already interested in the issue of intellectual property protection and had strong views on why Thailand should not give in to US demands. There were also a number of Democrats on the same committee, who were dissatisfied with the party leadership (who later became the "January 10" faction). 48 Suriyamongkol and Guyot, Bureaucratic Polity at Bay, p. 55.

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influence the government. Seminars were considered effective because they attracted the interest of the press. Articulation in the press made the issue a public concern, in a sense creating a legitimate public opinion, and in this war of words, the forces against concessions (with their academic backing) were the strongest. In contrast, the government parties and the ministries had less appealing arguments and fewer experts, and they did not use the press nearly as much. They also made much less effort to present their views, particularly the Foreign Ministry which felt it had no need to explain anything to the public—or to Parliament. Although the Prem Government did use TV to try to get the message out, the broadcasts were not seen as expressions of public opinion (in the way that newspapers were), because they were aired on government-owned channels. The intellectual property issue suggests that Thailand's political system has become more participatory in some respects. One issue does not provide a sufficient base to make a judgment on the institutionalization of a democratic system, nor is intellectual property policy a good test case, since it does not seriously challenge vested interests. Limits remain, as evidenced in August 1989, when one of Chatichai's academic advisers was forced to resign after criticizing the military. Furthermore, academic and public opinion (as expressed in the press) were important primarily because they suited the political needs of politicians, and Prime Minister Chatichai has managed to blunt academic criticism to some extent by bringing some of the harshest critics into the government. What the case does confirm is that the extrabureaucratic forces do have some influence on policy, and that the previous attitude (best exemplified by the Foreign Ministry) that the government does not need to explain its decisions, is no longer acceptable in Thai politics.

CONCLUSION

n this study, we have reviewed the response of four ASEAN countries to US pressure for intellectual property protection. Each of the four countries responded very differently and for different reasons. Singapore abruptly reversed policy, from refusing even to discuss the topic to almost complete compliance with US requests, once trade privileges were threatened. Malaysia agreed almost immediately, actively protecting American works even before legal protection had been established. Indonesia remained indifferent to arguments and trade threats until the Live Aid incident hurt national pride and brought the issue to the President's attention. Finally in Thailand, initial willingness to meet US demands has been replaced by an insistence on protecting Thailand's interests, even after partial withdrawal of GSP benefits and the threat of further trade sanctions. Despite individual variations, if the four countries' responses are reduced to a question of compliance/non-compliance, Thailand stands out as the only one which did not comply with American demands. Why has Thailand resisted US pressure while the other three did not? A comparison of quantitative factors, such as the size and level of organization of the pirate sector versus the strength of the pro-protection lobby, or international considerations such as the place of intellectual property in development strategy and the importance of GSP/US market access and investment, reveals no clear pattern. Thailand's solitary opposition can better be explained in terms of differences in state strength than by differences in economic interests or strategies. As we have seen, when forced to choose, all four governments perceived compliance with US demands as the best alternative; setting trade, foreign investment, and good relations above national prerogatives and free access to foreign intellectual property. What has made Thailand an exception is that the Thai government lacked the cohesiveness and autonomy to impose its choice. In the other three countries, debate and discussion were closely restricted within the government. In Singapore and Malaysia, development plans had already begun to force rethinking about intellectual property protection; US threats provoked the Prime Minister and the powerful trade boards and ministries to accelerate the process in order to safeguard vitally important trade. In Singapore, control of the issue was so firm that the government was able to change policy almost overnight and use the copyright law to bargain effectively with the United States. In Indonesia, although the bureaucracy had been stalemated by internal divisions, the ministries fell into line when the President ordered something to be done. In all three countries, Parliament served primarily to confirm what the executive had already decided, and public debate was mostly within the definition of national interest established by the government.

i

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In contrast to the other three governments, the Thai Government was neither sufficiently established nor cohesive to control the debate or impose decisions on the Parliament. Unlike the situation in Indonesia, in Thailand the military has withdrawn from direct control of government; unlike Singapore and Malaysia, Thailand has no single established party which has dominated national politics since independence. The Thai coalition government controlled neither Parliament nor the debate, and the vulnerability of the coalition cabinets to challenges within Parliament, coupled with relative freedom of the press and academic criticism, allowed an alternative interpretation of national interest to be put forward and have impact. Government officials in both Indonesia and Thailand concluded that an important reason for piracy was the public's lack of knowledge about intellectual property rights—however, Indonesia passed a law and then began a public education campaign, while in Thailand, supporters of stronger protection are arguing that the government needs to educate the public now so that a bill can be passed at all. How effective has US policy been? In dollar terms it has been very successful. From 1984 to 1988, losses to US copyright industries from piracy in Singapore, Malaysia, and Indonesia fell from US$637 million to $87 million, easily outweighing the increase of US$27 million in Thailand.1 In addition, all four countries have begun to play a more active role in the GATT talks, generally supporting the US position and acting as mediators between the industrialized countries and other developing countries. However, the policy has succeeded at a cost to US stature in the region. While all four governments have acknowledged that increased intellectual property protection is also in their own economic interest, the policy itself is widely perceived as a campaign to protect American business interests and to divert domestic attention from the US budget deficit. The unilateralism and inconsistency of US intellectual policy and other trade policies has been taken as proof of the United States' economic decline and of its unwillingness or inability to continue as a leader of international free trade. There has been no serious damage—all four countries are too dependent on the US to allow relations to deteriorate badly. At the same time, government officials in those countries have expressed the belief that the US cannot be trusted to follow an equitable and consistent trade policy and have begun trying to decrease their dependence on the United States. The use of trade threats produced rapid results, but the high profile and aggressive tone of the policy angered the countries it was directed against and hurt and embarrassed friendly governments. Since intellectual property protection is embodied in national laws, it was hard to avoid its becoming an issue of national sovereignty. It is not clear that it was necessary for American policy to be quite so confrontational in order to achieve results. Historically, countries have changed their intellectual property laws once it was to their advantage to do so. By the mid-1980s, all four countries were becoming aware of the costs of lack of intellectual property protection. Since all four countries hope to become "information economies" and are too small and dependent on foreign investment to adopt piracy as a development strategy the way that India and Brazil have done, development plans would have forced the pace of reform.2 ÏHPA, Trade Losses Due to Piracy and other Market Access Barriers, p. v. 2

While Indonesia cannot be considered small, it does not have ^nDughreducated manpower or infrastructure to follow the example of India and Brazil.

Conclusion

53

American needs would also have been easier for the governments to handle if more of the negotiations had been carried out within the GATT framework, which would have infringed less on national sovereignty. Furthermore, because of their dependence on international trade, the ASEAN countries have very strong reasons for supporting the US in GATT and working to preserve the international trading system? However, although one of the initial justifications for a bilateral (or unilateral) strategy was that it would encourage developing countries to participate in GATT, thereby strengthening the system, US deadlines and goals have tended to overrule GATT considerations once the policy was in place.4 A quieter, multilateral approach with fewer ultimata would have made US demands for increased intellectual property protection easier politically for governments to handle. Based on Thailand's experience, this will be increasingly true if the other countries in the region move to broaden political participation and free press controls. Of course, such a policy would have taken more time and would not have played as well in American domestic politics. As Chapter One described, American trade policy (including intellectual property policy) has been driven by attempts to deflect protectionist pressure in Congress and was shaped by executive-legislative rivalry. Intellectual property protection in ASEAN is only a peripheral offshoot of that trade policy but it highlights some of the policy's problems. US negotiators were aware before April 1988 that pressing too hard over copyrights might destabilize the Thai Government, but were constrained by the requirements of the new trade law.5 In other cases, the law has required negotiators to put US demands above the GATT process. If the United States intends to continue to support the multilateral trading system, it will have to find some way to reconcile domestic political pressures with preservation of that system. It was easier to balance a multilateral foreign economic policy and democracy at home in the 1950s when the US was the strongest economy in the world and the distances between nations were greater. Yet now, in a multipolar world where national economies are increasingly interpenetrated and economic competition is overshadowing ideological conflicts, the ability to follow a consistent and outward looking trade policy may be even more crucial. 3

See Mohamed Ariff and Tan Loong-Hoe, eds., ASEAN Trade Policy Options: The Uruguay Round (Singapore: Institute for Southeast Asian Studies, 1988); and Surakiart Sathirathai, Thailand and International Trade Law (Bangkok: Chulalongkorn University, 1987). 4 In addition to the disagreement with Thailand over patents, section 337 of the 1984 US Trade Act (concerning imports of counterfeited products) has been ruled in violation of GATT principles. In November 1989, after eight formal requests from GATT, the United States finally agreed not to block a GATT panel finding to that effect, but President Bush has declared that he will continue to enforce Section 337 unless the Uruguay Round produces equally effective measures. New York Times, November 13,1989, section D, p. 1. 5 US Congress, Committee on Energy and Commerce, Foreign Unfair Trade Practices, 100th Congress, 1st Session, 1987, p. 70.

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BIBLIOGRAPHY

US POLICY BOOKS AND MONOGRAPHS Baldwin, Robert and J. David Richardson. Current U.S. Trade Policy: Analysis, Agenda, and Administration. Cambridge, Mass.: National Bureau of Economic Research Report, 1986. . Issues in the Uruguay Round. Cambridge, Mass.: National Bureau of Economic Research, 1988. Bonkers, Don. America's Trade Crisis. Boston: Houghton Mifflin, 1988. Destler, I. M. American Trade Politics: System under Stress. Washington, DC: Institute for International Studies, 1986. Destler, I. M. and John S. Odell. Anti-Protection: Changing Forces in U.S. Trade Politics. Washington, DC: Institute for International Studies, 1987. Lake, David A. Power, Protectionism, and Free Trade: International Sources of U.S. Commercial Strategy, 1887-1939. Ithaca: Cornell University Press, 1988. Lande, Stephen L. and Craig VanGrasstek. The Trade and Tariff Act of 1984. Lexington, Mass.: Lexington Books, 1986. Preeg, Ernest, ed. Hard Bargaining Ahead: U.S. Trade Policy and Developing Countries. Washington, DC: Overseas Development Council, 1985. Se well, John, Richard Feinberg, and Valariana Kallab. U.S. Foreign Policy and the Third World: Agenda 1985-86. New Brunswick, New Jersey: Transaction Books, 1985. Schuh, G. Edward. The U.S. and the Developing Countries: An Economic Perspective. Washington, DC: National Planning Association, 1986. Stohl, Michael and Harry R. Targ, eds. The Global Political Economy in the 1980's: The Impact of the New International Economic Order. Cambridge, Mass.: Schenkman Publishing Co., 1982. PERIODICALS Congressional Quarterly The National Journal Intereconomics International Organization US GOVERNMENT DOCUMENTS A Competitive Assessment of the U.S. Software Industry. Washington, DC: Department of Commerce, December 1984. National Trade Estimate: A Report on Foreign Trade Barriers. Washington, DC: Office of the US Trade Representative.

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Report on Intellectual Property Rights in an Age of Electronics and Information: Joint Subcommittee on Patents, Copyrights, and Trademarks, Washington, D.C.: Office of Technology Assessment, April 1986. Trademarks. Washington, DC: Office of Technology Assessment, April 1986. U.S. Department of State Bulletin: The Official Monthly Record of U.S. Foreign Policy. Washington, DC: US Department of State. U.S. Trade: Performance in 1987. Washington, DC: Department of Commerce, June 1988. US Congressional Hearings Weekly Compilation of Presidential Documents. Washington, DC: Office of the Federal Register.

INTELLECTUAL PROPERTY RIGHTS BOOKS AND MONOGRAPHS Basic framework of GATT Provisions on Intellectual Property: Statement of Views of the European, Japanese, and U.S. Business Communities. Intellectual Property Committee (US), Keidanren (Japan), and UNICE (Europe), June 1988. Benko, Robert P. Protecting Intellectual Property Rights. Washington, DC: American Enterprise Institute for Public Policy Research, 1987. Gadbaw, R. Michael and Timothy J. Richards, eds. Intellectual Property Rights: Global Conflict, Global Consensus. Boulder: Westview Press, 1988. Gereffi, Gary. The Pharmaceutical Industry and Dependency in the Third World. Princeton: Princeton University Press, 1983. Goldstein, Paul, Edmund Kitch, and Harvey Perlman. Unfair Competition, Trademarks, Copyrights, and Patents: Selected Statutes and International Agreements. Mineóla N.Y.: Foundation Press, 1986. The International Intellectual Property Alliance. Piracy of U.S. Copyrighted Works in 10 Selected Countries: A Report by the International Intellectual Property Alliance to the United States Trade Representative. Washington, D.C., August 1985. . Trade Losses Due to Piracy and Other Market Access Barriers Affecting the U.S. Copyright Industries: A Report to the United States Trade Representative on 12 'Problem Countries/ Washington, D.C, April 1989. International Piracy—The Threat to the British Copyright Industries. London: Publishers Association and International Federation of Phonograph and Videogram Producers, on behalf of the United Kingdom Anti-Piracy Group, 1986. Katz, Raul Luciano. The Information Society: An International Perspective. New York: Praeger, 1988. Sauvant, Karl P. Trade and Foreign Direct Investment in Data Services. Boulder: Westview Press, 1986. Stalson, Helena. Intellectual Property Rights and U.S. Competitiveness in Trade. Washington, DC: National Planning Association, 1987. Tigre, Paulo Bastos. Technology and Competition in the Brazilian Computer Industry. New York: St. Martin's Press, 1983. Walker, Chris and Mark Bloomfield, eds. Intellectual Property Protection and Capital Formation in the Next Decade. New York: University Press of America, 1988. Wildman, Stephen and Stephen Siwek. International Trade in Films and Television Programs. Cambridge: Ballinger, 1988.

PERIODICALS Billboard Copyright Bulletin Publisher's Weekly

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MALAYSIA BOOKS AND MONOGRAPHS Ariff, Mohamed and Muthi Semudram. Trade and Financing Strategies: A Case Study of Malaysia. London: Overseas Development Institute, Working Paper No. 21, July 1987. Bowie, Alasdair and Richard F. Doner, "Business Associations in Malaysia: Communalism and Nationalism in Organizational Growth," paper prepared for the 1988 American Political Science Association meeting, Washington, DC. September 1-4,1988. Lim, Chee Peng. Industrial Development: An Introduction to the Malaysian Industrial Master Plan. Kuala Lumpur: Pelanduk Publishers, 1987. McLellan, Susan. "Malaysia's New Economic Plan: the Role of TNCs," Canadian Journal of Development Studies, Summer 1985. Milne, R.S. and Diane K. Mauzy. Malaysia: Tradition, Modernity, and Islam. Boulder: Westview Press, 1985. Onn, Fong Chan. New Economic Dynamo: Structures and Investment Opportunities in the Malaysian Economy. London: Allen and Unwin, 1986. Osman-Rani, H., Toh Kin Woon, and Anuwar Ali, eds. Effective Mechanisms for the Enhancement of Technology and Skills in Malaysia. Singapore: Institute of Southeast Asian Studies, 1986.

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GLOSSARY AND LIST OF ABBREVIATIONS

APNI ASEAN ASIRI Berne Convention CNL GATT GSP IERPC IFPI IKAPI IIP A ITA NICs PAP Paris Union

PMA

pro

Repelita SAP TPMA UCC USITC USTR WIPO

an association of Indonesian producers of Western music Association of Southeast Asian Nations the major Indonesian music recording industry association the major international copyright convention, founded in 1886 "competitive-need limit" General Agreement on Trade and Tariffs Generalized System of Preferences International Economic Relations Policy Commute International Federation of Phonogram and Videogram Producers Association of Indonesian Book Publishers International Intellectual Property Alliance International Trade Administration "Newly Industrialized Countries" People's Action Party the major international convention for the protection of patents and other industrial property, founded in 1883 Pharmaceutical Manufacturers Association Patent and Trademark Office Rencana Pembangunan Lima Tahus—Five Year Development Plan Social Action Party Thai Pharmaceutical Manufacturers' Association Universal Copyright Convention, a second international copyright convention, founded in 1952 US International Trade Commission Office of the US Trade Representative World Intellectual Property Organization