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U.S.-China trade deal said close

BEIJING — BEIJING -- U.S. and Chinese negotiators all but sealed a last-minute agreement today that would avert a damaging trade war between the two economic giants.

U.S. officials scheduled a press conference for 1 p.m. EST in Washington to announce the outcome of the trade talks, which have dragged on for weeks and almost resulted in the United States imposing $1 billion in punitive sanctions -- the largest ever.

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Other U.S. officials were also expected to give an informal briefing in Beijing early today. The United States had given China until 12:01 a.m. EST to crack down on the theft of U.S. intellectul property or face sanctions. China threatened tit-for-tat sanctions.

Even though the deadline passed without an announcement, negotiators had already ended their talks and did not seem concerned that the sanctions might take effect -- giving the clearest indication that they had reached an agreement.

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The deal was said to have been all but assured when China announced that it was closing the two most notorious factories that produce pirated products. The two factories had been cited by U.S. negotiators as the sort of facilities that had to be closed in order to satisfy Washington that China is serious about ending the rampant theft of software, music and movies that deny U.S. companies up to $1 billion a year in royalties and fees.

The two factories are the Shenfei Laser and Optical System Co., which was toured and praised by senior leader Deng Xiaoping three years ago, and the Zhuhai Special Economic Zone Audio-video Publishing House. They were stopped from doing business recently for "severe infringement upon copyrights," the official Xinhua news agency said, adding that Shenfei "made illegal visual discs of the 'Jurassic Park' and other audio laser products."

"Its products were found not only available on the Chinese market, but also on some overseas markets," the news agency said.

The trade talks dragged on for months and have been a clear sign that relations between the world's most populous and most powerful countries are going through a difficult period. Even if the deal unravels at the last moment and sanctions are imposed today, talks are likely to continue until a solution is reached because of each country's need for world markets.

China and the United States conducted trade worth $45 billion in with China selling far more to the United States than the United States sold to China. Washington's 1994 trade deficit with China last year was nearly $30 billion, second only to the trade imbalance with Japan.

The mere possibility of sanctions is evidence of the difficulty the two countries are having in coming to terms with each other since the end of the Cold War. During the 1980s, the two countries buried their differences to confront the Soviet Union. But with the Soviet Union no more, and with Russia not considered a major threat, friction between China and the United States has begun to surface.

Many Chinese officials, for example, believe that the United States sees China as its main enemy and is using trade, human rights and other issues to thwart China's efforts to modernize and take its place among the world's powers.

Among the issues troubling China is U.S. support for a United Nations resolution condemning Beijing's human rights record. In addition, Chinese diplomats are disturbed that President Clinton plans to nominate James Sasser, the former Democratic senator from Tennessee, to replace J. Stapleton Roy, a career diplomat who grew up in China, as ambassador. Mr. Sasser sponsored a resolution in the Senate calling for the Nobel Peace Prize to be awarded to a Chinese dissident, Wei Jingsheng.

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China's state-run media has also blasted the United States for preventing China from joining the new World Trade Organization established Jan. 1. Another major source of tension has been intellectual property rights -- the subject of the trade talks. Although China has outlawed the theft of ideas, the laws are rarely enforced -- making it possible, for example, to buy a pirated computer operating system invented by Microsoft for a few dollars, as well as compact discs, video movies and laser discs.

Even if enforced, the laws are fairly weak, said Zhang Chijun, a Beijing lawyer who specializes in intellectual property rights and who recently won a copyright suit for the widow of China's last emperor, Pu Yi. The widow claimed royalties for Pu Yi's autobiography, but the Chinese publishing house refused for 10 years to pay.

Few people have been imprisoned because of the law, Mr. Zhang said. U.S. companies have been willing, however, to try out the law. On Friday, for example, the Beijing Intermediate People's Court heard opening arguments in a case brought by eight U.S. filmmakers against two Beijing audio-video shops for copyright violations of 18 movies.

The judge adjourned the case until next month, requesting more evidence.

The United States began pressuring China about intellectual property rights in 1993. In mid-1994, U.S. Trade Representative Mickey Kantor announced a formal investigation into Chinese copyright violations.

Mr. Kantor announced Dec. 31 that China was guilty of pirating U.S. goods and that trade sanctions would be imposed by Feb. 4 unless China took convincing steps to find a solution. As promised, the sanctions were decided upon on Feb. 4 and were to take effect today if no solution were reached.

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But as in previous trade disputes, the $1 billion in higher import duties was designed so that its effect would be more symbolic than economically harmful. Washington said it would levy taxes of 100 percent on $1.08 billion in goods, such as answering machines and cellular phones, sporting goods and small-wheeled bicycles. But left off the list are some of China's biggest exports, including toys.

HIGHLIGHTS IN U.S.-CHINA TRADE RELATIONS

Aug. 25, 1993: Clinton administration imposes trade sanctions on China because of Chinese missile sales to Pakistan.

May 26, 1994: White House announces it will no longer link trade to Chinese human rights violations.

June 30, 1994: U.S. Trade Representative Mickey Kantor announces investigation into Chinese copyright violations of U.S. goods.

Oct. 4, 1994: United States lifts sanctions on China over missile exports.

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Dec. 31, 1994: Mr. Kantor threatens tariffs on Chinese imports if China does not crack down on the piracy of U.S. goods.

Jan. 28, 1995: U.S.-Chinese negotiations over copyrights end without an agreement.

Feb. 4, 1995: U.S. threatens to impose $1 billion in punitive tariffs by Feb. 26 unless pirating is stopped.

Feb. 5, 1995: China announces countertariffs; threatens to shut out U.S. auto companies from Chinese market.

Feb. 17, 1995: Trade talks resume in Beijing; China announces that if U.S. goes ahead with sanctions, it will cancel $2 billion in aircraft orders from Boeing.

Feb. 18, 1995: China announces sweeping raids against counterfeiters.

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Midnight, Feb. 25, 1995: U.S. deadline for agreement.


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