The World Trade Organization (WTO) has agreed to investigate a United States complaint that China is stealing its intellectual property by producing and selling counterfeit versions of its films, software and other goods.  Lisa Schlein reports for VOA from WTO headquarters in Geneva the organization will set up a panel of experts to settle the dispute.

Pirated movies and software discs are gathered for destruction during a ceremony to highlight China's effort to crack down on piracy, 14 Apr. 2007

Washington says U.S. manufacturers of  DVDs, CDs, designer clothes and medications are losing billions of dollars every year because of China's thriving counterfeit market.  It says pirated or counterfeit versions of these goods sell for a fraction of their cost and this has to stop.

Last month, China blocked the establishment of a World Trade Organization dispute panel to investigate the complaint.   But, under WTO rules, the panel was automatically approved following a second request from the United States. 

The two parties now have 20 days in which to agree on the three panelists.  If they are unable to do so, the Director General of the World Trade Organization will name the panel. 

China says it regrets the United States has taken this course of action.  The Chinese say they would prefer to settle the dispute bilaterally. 

WTO Spokesman, Keith Rockwell, tells VOA that WTO members can decide to suspend the panel's work and try to resolve the matter bilaterally at any time during the process.

"In fact, the system is very much oriented to try and produce an outcome like that, because it saves everybody time and money," he noted.  "But, if they cannot resolve it bilaterally, and today the United States said in their 60 days of consultations with the Chinese on this matter, they were unable to resolve it bilaterally.  Hence, they are requesting for the second time the formation of a panel."  

The United States has been complaining about China's counterfeit industry for years.  With the growing U.S. trade deficit, Washington has been stepping up its battle to get China to conform to WTO rules.

Last year, the US trade deficit reached a record $765.3 billion.  The imbalance with China grew to $232.5 billion, the highest ever with a single country.

Some observers worry that the U.S.-China dispute could set off a trade war between the two nations.  But, Rockwell says the world trade system is operating as it was intended to. And the formation of a dispute panel is business as usual.

"What you are looking at here is more dispute activity between these two very large trading nations," he explained.  "But, again, the volume of trade between these two countries has increased to a very, very large extent.  China's trade has increased across the board averaging in both exports and imports 25 percent growth per year since they came into the WTO in 2001.  It is very much a function of that exponential growth that you see more disputes."

Rockwell says there will be more disputes as trade between the U.S. and China broadens and deepens. 

The European Union, Japan, Argentina, Mexico and Taiwan have joined the U.S. complaint.  

The panel is due to make a recommendation six to nine months after it begins hearing the case.  A decision can be appealed.  So, the dispute could take several years to resolve.