Soviet Piracy of movies threatens U.S. trade ties


WASHINGTON -- "Gone With the Wind" and "Rain Man" -- not to mention "Predator" and "Commando" -- are helping to block a new era in trade relations between the United States and the Soviet Union.

A byproduct of glasnost and perestroika in the Soviet Union is the spirited piracy of American movies and videocassettes. And the American motion picture industry, which charges that the Soviet government both condones and profits from it, wants the pirating stopped.

In an angry June 4 letter to Soviet Deputy Foreign Minister Vladimir Petrovskiy, Jack Valenti, head of the Motion Picture Association of America and its chief lobbyist in Washington, warned that U.S. filmmakers will neither sell to the Soviets nor participate in any Soviet film festivals until "adequate copyright legislation" is approved by the Soviet legislature. Attached to the letter was evidence of a state-run theater showing a pirated film.

But the well-connected Mr. Valenti has gone further. Officials say the dispute over copyright protection -- with movies being a key element -- is now a major issue holding up long-awaited approval of most-favored-nation trade status for the Soviet Union.

"There will be no MFN without a trade agreement, and there will be no trade agreement until [intellectual property rights] is cleared up," said one informed U.S. official, who added that "Valenti's people are major actors" in holding up the symbol of a major turning point in U.S.-Soviet relations.

Previously, the administration had said that the lack of a liberalized Soviet emigration law was the only impediment to bestowing MFN status on the Soviet Union. But officials agree that the copyright dispute is one of the key issues holding up the granting of non-discriminatory trade status to the Soviets.

The movie industry's dispute with the Soviets dates at least to September 1988, when Mr. Valenti -- once a top aide to President Lyndon B. Johnson -- participated in U.S.-Soviet information talks as chairman of the U.S. film panel.

Those talks ended with what he described in his recent letter as "an agreement of historic dimensions" that would allow U.S. film companies to share in box-office receipts when their films are shown in the Soviet Union.

"Much to my dismay, after two years not only had nothing been done on the Soviet side to implement this agreement, it was even publicly belittled by a ranking official of Sovexportfilm," Mr. Valenti wrote.

Draft changes in Soviet law remain "inadequate and unresponsive," he said. Further, the alleged piracy is "officially condoned by the Soviet government."

On a trip to Moscow recently, an American movie industry executive discovered that the state-controlled Udarnik theater was showing videotapes of "Gone With the Wind" and "Rain Man" to paying audiences.

"I am attaching hereto a copy of a photo taken by our executive of the sign above the box office at the Udarnik theater," wrote Mr. Valenti, who sent copies of his letter to the State Department, the Office of the U.S. Trade Representative and the U.S. Information Agency.

In addition to the Udarnik theater, he cited the showing by Soviet television of "Predator" and "Commando" and the coming showing of "Die Hard II," noting, "None of the aforementioned films have been sold to the Soviet Union."

Quoting the newspaper Izvestia to the effect that the Soviet Ministry of Finance has now demanded a share of the revenue from the pirated viewings, he said, "If this report is correct, then not only are the above-named organizations engaging in piracy, but so is the U.S.S.R. Ministry of Finance."

Partly as a result of the movie rights flap, U.S. officials say, President Bush probably won't be able to announce the granting of MFN status before he leaves for next week's London summit of seven industrialized democracies, known as the Group of Seven or G-7, where he will meet with Soviet President Mikhail S. Gorbachev.

The dispute shows how the U.S. drive to push the Soviet Union toward unfettered capitalism can collide with business pressures within the United States.

It assumes a growing importance as U.S. officials complete preparations for a package of measures -- in lieu of large amounts of aid -- intended to encourage Soviet self-help in moving its economy toward serious free-market reform.

President Bush plans to tell Mr. Gorbachev -- probably by letter -- not to expect large sums of Western aid to flow from the London summit, a senior administration official said yesterday.

The "cornerstone" of what will emerge will be associate status for the Soviet Union in the International Monetary Fund and World Bank, allowing it to draw on the international financial institutions' expertise.

This is a cost-free step, since it would not enable the Soviets to draw on the banks' funds. But the move carries potentially revolutionary implications for the Soviet economic system.

Separately, President Bush is considering urging Congress to repeal two 1975 laws that have sharply restricted the amount of financing available through the Export-Import Bank for U.S.-Soviet trade and joint ventures.

And a new impetus has been given to negotiations for a bilateral investment treaty between the United States and the Soviet Union, U.S. officials say. A Soviet delegation is due here next week to resume talks.

But the movie dispute -- technically the intellectual property dispute -- is not the only impediment to granting the Soviets most-favored-nation treatment.

A senior official who briefed reporters in advance of the G-7 summit said changes in Soviet economic law enacted since the trade agreement was signed appear to contradict its provisions.

"We are discussing with the Soviets how to get that fixed. In my view, it's not a particular problem," he said, but added that the issues probably won't be resolved before next week's summit.

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