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Trade
U.S. Faults China On Protecting IP Rights
by Keith Koffler and Martin Vaughan, CongressDaily
The United States has resolved several trade disputes with foreign trading partners but continues to face a list of barriers and problems headed by China's failure to enforce intellectual property laws, according to a Bush administration report released today.
The successes and continuing disputes were described in the 2007 version of the National Trade Estimate Report, which is submitted each year to Congress. The report states that the long-simmering dispute with China over intellectual property rights is infringing on exports of a variety of U.S. products ranging from films, music and published materials to numerous other consumer and industrial goods.
With continued U.S. complaints over the scope and pace of China's efforts to address the issue, speculation has been rampant that the United States will eventually file a case with the World Trade Organization. "We've been in consultation with China for quite a while on [intellectual property rights]," said Office of Trade Representative General Counsel Warren Maruyama in a conference call with reporters. "If the issues aren't solved, all options are on the table."
In the report, other outstanding disputes listed as top priorities for the United States include European subsidies for Airbus, Chinese subsidy practices that allegedly harm small- and medium-sized U.S. manufacturers, and "discriminatory" taxes by India on wine and distilled spirits. The United States has already filed cases with the WTO on these three issues.
In a related development, Commerce Undersecretary for International Trade Frank Lavin said Monday that a Commerce Department decision to give the green light to anti-subsidy tariffs against a Chinese import -- for the first time in nearly 20 years -- is not a signal of escalating trade tensions or of a new approach to China by the Bush administration.
The department last Friday imposed preliminary duties on imports of glossy paper from China in response to a petition filed by an Ohio paper manufacturer.
"This China [countervailing duty] case to our mind doesn't presage a trade war or point us to a new era of trade friction." Lavin told a lunch meeting hosted by the National Association of Manufacturers. "It is one more tool in the toolbox."
Lavin cast the policy change on countervailing duties as just one part of a multipronged administration approach to China that places a premium on negotiated solutions, and also includes dispute settlement in the World Trade Organization and export promotion in China. "Our preferred path is the negotiating pillar," he said in a speech to the group.
Lavin said the Commerce Department will continue to examine whether to adjust its methodologies in an antidumping investigation that is unfolding parallel to the countervailing duty -- or CVD -- case. The Commerce Department, he said, has not yet decided whether specific industries in China could be treated as market economies in applying U.S. antidumping law.
Lavin said the decision in the paper case opens the door for CVD cases to be filed by a variety of U.S. industries. But he downplayed the notion that the new CVD policy would have a large impact on the overall trade balance between the U.S. and China because most Chinese exports are traded fairly. "The segment of China's exports to the U.S. governed by illegal subsidies is far, far short of a majority of their exports," he said.
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Television
FCC Set To Approve Report On TV Violence
by David Hatch
All five FCC members will vote to approve a controversial report to Congress that could pave the way for regulating violent television content, government sources confirmed Monday. The commissioners are tentatively scheduled to approve the document this week, though the timeframe could slip. The report could come as early as Friday, but is more likely to be issued the week of April 9, putting it on a collision course with the National Association of Broadcasters convention in Las Vegas, from April 14 to 19.
Television outlets vehemently oppose such regulation, arguing that it violates their First Amendment rights and amounts to government censorship. But cracking down on the blood and gore that is a nightly viewing staple is gaining political traction, with Sen. John (Jay) Rockefeller, D-WVa., poised to reintroduce legislation to clean up the airwaves. The bill will be introduced in late April or early May, with the Senate Commerce Committee expected to hold a hearing next month.
The report, requested by Congress in 2004, has been the focus of negotiations for months. It states that graphic images must be curbed and that there is a constitutional way to achieve that goal. Republican Chairman Kevin Martin and Democrat Michael Copps are the chief proponents, and at Martin's insistence, the document recommends that Congress require cable operators to offer per channel pricing, known as a la carte. The cable industry says that option would result in higher consumer costs and hurt emerging channels that have survived by being bundled with other content.
While sharing their colleagues' concerns, Republican Robert McDowell and Democrat Jonathan Adelstein have raised some red flags. While addressing the NAB in late February, McDowell suggested that self-regulation and technology improvements could solve the problem, prompting an angry retort from Rockefeller: "Commissioner McDowell's suggestion is shortsighted. The broadcasters have already tried and failed in their attempts at self-regulation."
"The question is: What's the role of government, and what's the role of broadcasters? I mean, there should be some sense of responsibility," Adelstein told Technology Daily in February.
Despite the reservations, sources insisted that both members never opposed the report, but have only sought to improve it. Adelstein wants to include more discussion about the constitutional and legal parameters of limiting violence, the availability of existing blocking technologies and the importance of consumer education. His written statement accompanying the report will highlight the nuances involved in defining gratuitous violence for differing platforms, such as entertainment, news and sports. McDowell also is seeking revisions, but at presstime it was not clear what they were.
Copps, meanwhile, is drawing harsh criticism from watchdogs who have long supported him on numerous issues but now feel betrayed. "I think Copps has probably already tarnished his legacy," said Jeff Chester, executive director of the Center for Digital Democracy. "Copps needs to be called out and criticized for fueling an alliance with people who wish to censor."
"The FCC's recommendations are a full frontal attack on the First Amendment. Imposing government standards would not only stifle artistic expression, but also violate Americans' right to free speech," said Caroline Fredrickson, director of the ACLU's Washington legislative office, in a statement provided to this publication.
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Intellectual Property
Anger Over Internet Radio Royalties Downplayed
by Andrew Noyes
The record industry-created entity that collects and distributes digital music royalties told the Copyright Royalty Board on Monday that parties angered by a recent ruling on Internet radio royalties are largely trying to re-argue old claims or invent new ones.
The board's March decision set performance royalty rates webcasters will pay artists and record labels based upon the fair market value of their work, SoundExchange said. The group's latest filing responds to about a half-dozen stakeholders who are seeking reconsideration of specific issues relating to the decision.
The unhappy parties' filings are "a rehashing of arguments and evidence that the board already considered and rejected, or an attempt to come up with new arguments that shouldn't change the outcome," SoundExchange General Counsel Michael Huppe said. He called the ruling "very balanced and thorough."
"They had extensive hearings, extensive discovery and heard quite a large body of evidence," Huppe told Technology Daily. "For parties to come in after the fact and present new arguments and new evidence -- that's not typically something a court is inclined to entertain" in general litigation.
SoundExchange was not surprised by the flurry of filings. "The CRB agreeing to have the parties respond to the filing is far different from having a rehearing or changing the ruling," Huppe said. This briefing process "does not necessarily mean that the board will stray from its original decision," he added.
The ruling set per-performance rates for Internet radio stations through 2010 and rejected requests by online music providers that sought calculations based on percentage of revenue. Some claim the board's ruling will put small Internet broadcasters out of business and limit what larger stations can offer listeners.
SoundExchange Executive Director John Simson said artists and labels value Web radio and are interested in working with other stakeholders "to encourage a vibrant marketplace." He said a "vocal minority" is making unfounded claims about the new rates.
National Public Radio, digital music services and small-scale webcasters were expected to file their complaints by the end of the day. NPR and its member stations have asked for a public rehearing where supplemental testimony and oral argument can be provided, NPR spokeswoman Andi Sporkin said.
NPR also asked the board "to remember public radio's non-commercial status and our public service mission, as other royalty groups and decisions have done for years," she said. Previously, a reasonably-determined flat fee was viewed as fair and just, she said.
The trade group that represents America Online, Microsoft and Yahoo, urged the board to "set a date as soon as possible for oral argument" and allow the group to submit more evidence to support its claims.
The Digital Media Association wants clarification on the establishment of a $500 "per channel" minimum fee, under which some specialized programming would have base royalties that exceed $50 million. DiMA also wants the board to grant an alternative "tuning hour" rate, which would make calculations based on the total hours consumers listen to a service.
DiMA "cannot stress enough the potentially grave and imminent hardship" the ruling would inflict upon its member companies unless the judges order a rehearing, the group said in its filing.
Dave Oxenford, an attorney for Accuradio, ioMedia, Radio Paradise and other small webcasters, also planned to submit paperwork to the board but the document was not made available by deadline.
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Trade
Korea To Open Market To Autos, But Hill Reaction Cool
by Keith Koffler and Martin Vaughan, CongressDaily
The Bush administration concluded a free trade agreement late Sunday with South Korea that slashes barriers for U.S. autos -- but does not improve access to Korea's protected rice market, and may have to be partially renegotiated with respect to labor and the environment.
The deal was completed and Congress notified of the administration's intention to sign the agreement just before midnight, which administration officials said is the statutory deadline for consideration by Congress under current presidential trade negotiating authority rules, which expire June 30. The two sides expect to sign the deal by the end of June.
Deputy U.S. Trade Representative Karan Bhatia, the lead U.S. negotiator during the final round of talks in South Korea, said the Koreans are aware that the administration is haggling with congressional Democrats over new labor and environmental requirements for trade deals that could force a renegotiating of these provisions of the Korean FTA.
Bhatia, who briefed reporters by phone from South Korea today, said the Koreans were not pleased that the United States did not have its position formulated on labor and the environment, and that the two sides would have to "decide jointly" whether changes brought by the talks with Congress are acceptable.
Bhatia said the decision to exclude rice from the agreement was made near the end of the talks, when it became apparent that it was politically impossible for the Korean negotiators to include it. Bhatia described the U.S. decision as a choice between insisting on provisions opening the Korean rice market or having no deal at all.
The agreement calls for South Korea to eliminate tariffs on automobiles while forcing Korea to change a tax structure that the United States contends discriminates against the types of vehicles produced by U.S. manufacturers. It also creates a working group to review auto-related regulations being developed, and a special dispute settlement mechanism containing what the United States describes as strong remedies to deter actions on autos that violate the agreement.
But the outcome of the trade talks on autos may prove to be a big stumbling block for winning the support of congressional Democrats. "By hastily pushing through this deal with South Korea before the fast-track deadline, the administration has delivered another agreement that will increase our trade deficit, cost us jobs, and hurt our automobile industry and other manufacturers," Sen. Debbie Stabenow, D-Mich., declared.
While the deal immediately eliminates U.S. and Korean tariffs on most automobiles, Detroit automakers got little of what they were seeking on scaling back Korea's regulatory regime that they contend plays a role in keeping U.S. cars out of that market.
Although the agreement ignores the South Korean ban on U.S. beef, which was instituted over fears about mad cow disease, Bhatia said U.S. officials made it clear that Congress would not approve the FTA unless U.S. beef was welcomed back into the Korean market. Bhatia said the Koreans understand this, and he appeared to indicate that he expects them to comply with U.S. demands.
Senate Finance Chairman Max Baucus, D-Mont., whose home state is a major beef exporter, called the agreement "an entirely unacceptable outcome" and said he would block congressional consideration of the deal unless Korea lifts its ban on U.S. boneless and bone-in beef.
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E-Commerce
WTO Ruling Sparks Debate Over Online Gambling
by Michael Martinez
Opponents of a federal law curtailing online gambling have their fingers crossed that a recent international trade ruling will prompt lawmakers to undo the statute.
The World Trade Organization decided last week that the United States has violated international trade law by prosecuting online gambling cases while still allowing online bets for horse-racing and, in some states, lotteries. The WTO ruling sided with a complaint filed by the tiny island nations of Antigua and Barbuda, which depends economically on e-gambling.
Lawmakers in the 109th Congress authorized legislation to effectively bar the financial industry from processing payments to online gambling sites. The measure cleared the Senate after it was attached to an unrelated port security bill by former Majority Leader Bill Frist, R-Tenn.
The Poker Players Alliance, which lobbied hard last session against the measure, is now trying to convince Congress to reverse it. Former Sen. Alfonse D'Amato, R-N.Y., the group's new chairman, said the WTO ruling is only the beginning of a global blowback against the U.S. on the e-gambling front.
According to D'Amato, it would be much wiser for the United States to allow online wagering and regulate online bets than criminalize it. He said the PPA is going to continue to push for a revocation of the law and to educate lawmakers on why it was a bad idea.
"They've used a cannon to kill a gnat," D'Amato said.
He said the United States should be taking its cues from England, which has explicitly allowed online bookmakers to operate there.
Reps. Shelley Berkley, D-Nev., and Jon Porter, R-Nev., are expected to introduce legislation that would commission a study on how online gambling could best be regulated. They offered a similar bill last session before anti-gambling legislation cleared the House.
House Financial Services Chairman Barney Frank, D-Mass., said last month that the anti-gambling measure cleared by 109th Congress was one of the "stupidest" laws ever passed. He told the Financial Times that he is considering ways to repeal the law.
Frank spokesman Steve Adamske on Monday said any legislation coming out of the office is still in the planning stages. He said the WTO ruling would not affect Frank's opinion on whether outlawing online gambling is impractical.
"The question is whether it changed anyone else's opinion," he said.
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Business
EMI Opens DRM-Free Digital Music Book
by Andrew Noyes
One of the so-called "big four" record labels took a bold step on Monday by announcing that its entire digital music repertoire will be made available at a higher sound quality than existing downloads and stripped of digital rights management restrictions.
EMI retailers will be offered downloads in the DRM-free audio format of their choice in a variety of bit rates up to compact disc quality, officials said. The company is changing its tune in response to consumer demand for better sounding music and complaints about interoperability issues with digital content.
Apple's iTunes Store, which is the first merchant to receive the new premium downloads, will make individual tracks available for $1.29. Standard quality music imbedded with technological protections will still be sold for $0.99.
Full EMI albums purchased on iTunes will automatically be sold at a higher quality and will be DRM-free with no price change, the companies said. Consumers who have already bought standard tracks or albums with DRM can upgrade their digital music for $0.30 per track.
Apple embraced EMI's offering on the heels of a controversial memo written by its CEO Steve Jobs in February that urged labels to abandon anti-piracy locks on digital music. In his letter, Jobs said if DRM was removed, "the music industry might experience an influx of new companies willing to invest in innovative new stores and players."
EMI's CEO Eric Nicoli acknowledged that users' inability to play music on different devices is "frustrating for many music fans" and he believes that offering DRM-free content will boost digital music sales.
The change follows a series of digital music formatting experiments EMI conducted at the end of 2006. It sold several of its popular artists' singles, including Norah Jones's "Thinking About You" and Lily Allen's "Littlest Things," as MP3s.
EMI will continue to use DRM in conjunction with subscription services where users pay a monthly fee for unlimited access to music; super-distribution, which allows fans to share music with their friends; and time-limited downloads, such as those offered by ad-supported platforms.
If EMI's new format quickly turns up on peer-to-peer sites and if sales start off high and then fade away as songs spread from iPod to iPod, "then we will have learned something," the Progress and Freedom Foundation's James DeLong said on the IPcentral Web log.
"If these things do not happen, then we will have learned something considerably cheerier," the known copyright hawk said. "Some of us pessimists might have to eat some crow, but it would taste pretty good, actually."
Public Knowledge President Gigi Sohn called it "a great day for consumers" that will now have "the same digital freedom from an album they download as one they purchase from a store."
Consumer Electronics Association-backed Digital Freedom Campaign spokesman Jake Ward said EMI's news is "a significant sign of progress and reflects what a new generation of consumers demand." "EMI has set a new standard for the industry... We hope other content companies will follow EMI's lead," he said.
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On The Download
Third-Party Web Site Hosting A Danger For Campaigns
by Shira Toeplitz, The Hotline
If you were watching the Web closely last week, you might have thought Sen. John McCain, R-Ariz., had reversed his position on gay marriage, in particular allowing for "passionate females" to wed. You might have also noticed Sen. Barack Obama's, D-Ill., YouTube channel views skyrocket into the millions, exponentially higher than the other candidates and the sum of his own videos' individual views.
In the first case, McCain's campaign was the victim of an Internet prank. According to Tech Crunch, McCain's MySpace page borrowed a template for his page and didn't credit the creator, Newsvine.com CEO Mike Davidson. As a result, Davidson decided to have a little fun with McCain's campaign by changing the template to play a joke on the Senator's position on gay marriage.
Colin Delany, an ePolitics.com editor who writes about politics and technology, said the mistake could have been easily avoided.
"They just didn't think it out," said Delany. "Another rookie mistake is using someone's work without attribution. All the guy really wanted was a credit."
It's less clear about what went on at Obama's YouTube channel page. TechPresident.com editor Joshua Levy wanted to see whether he could artificially raise the number of views. Levy put up a test video on YouTube and then set up his Web browser to automatically refresh the video's page every ten seconds. Through this test, Levy proved it's possible to fake high view numbers with some simple technological skills. And although YouTube has not addressed the incident directly in the media thus far, the company said via a statement last week that they're looking into the matter.
"We don't have any direct evidence anybody was doing anything," said Levy. "But we have highly suspicious numbers and our own experience, it was clear to us that somebody was doing something out there."
Regardless of the impact of these two incidents, both show just how easy it is to game the system when campaigns are using programs hosted by third parties. The results were relatively harmless this time, but the insecurity of hosting campaign information away from home base can be a risk for campaigns. It's a challenge that's going to be especially hard for candidates in 2008, many of whom will certainly draw ire from any opponent with a keyboard.
Caleb Sima, the CTO and co-founder of Web applications security development firm SPI Dynamics, recalls an incident in late 2005 when a worm named "Samy" infected 1.5 million MySpace profiles. Since then, he said, people have taken the same method and applied it to other worms that can take over someone's browser just by gazing at a MySpace profile.
Sima also suggested that some technology experts looking to make a political statement could take over a candidates' online profile to post unfavorable comments to supporters.
"In today's day, it's fairly easy to do," Sima continued. "If I was an attacker, and I wanted to break into YouTube, I probably could. It's a matter of time and dedication and how smart you are."
Just how easy is it to find a hole in the system? Ask "Momby," otherwise known as the semi-anonymous duo behind "Month of MySpace Bugs." For the entire month of April, this pair will release what they have deemed to be a MySpace bug every day. But for an example that hits closer to home, ask one of the campaigns whose Web sites went down on days that voters were heading to the polls in 2006.
"I'm not sure what kind of real dirty tricks we're going to see this time," said Delany. "Third parties can do it without any knowledge of the campaign. ... Campaigns are not just vulnerable to their rivals, but anyone out on the Internet that may want to cause them harm, so they better run a pretty tight ship."
Editor's Note: On The Download is Hotline's weekly dispatch on politics, multimedia and the Internet.
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Today's Feature:
Issue of the Week
Anyone who has worked on a presidential campaign can describe the agonizing strategy meetings to shape the message going out to the public. But online communications has made communications more of a conversation than a top down message, though some presidential candidates are still using the old model pasted within the new medium.
Every Monday, read the Issue of the Week by the Technology Daily staff.
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E-briefs
Telecom: A key House Democrat on Monday asked Republican FCC Chairman Kevin Martin to answer numerous questions about the agency's efforts to overhaul the multi-billion dollar universal service fund subsidizing telecom offering in rural and underprivileged areas. Rep. Ed Markey, D-Mass., chairman of the Energy and Commerce House Subcommittee on Telecommunications and the Internet, sought the feedback in an eight-page query. Markey expressed concern that some agency rules designed to implement USF requirements under the watershed 1996 Telecommunications Act are more beneficial to companies than consumers. "As you know, the central purpose of the universal service provisions of the 1996 Act is to benefit consumers, not telecommunications carriers," the Massachusetts lawmaker wrote. He requested a response by May 4.
Antitrust: The Senate Commerce Committee is next in line to examine the pending merger of satellite radio providers Sirius and XM. The panel announced Monday that it would hold a morning hearing on April 17 to study the implications of the proposed pairing that is worth an estimated $13 billion. Sirius Satellite Radio CEO Mel Karmazin has already appeared before the Senate Judiciary Committee's Antitrust Subcommittee, the House Energy and Commerce Telecommunications and the Internet Subcommittee and the House Judiciary Committee's antitrust task force. A witness list for the Senate Commerce hearing has not been released. In other news, the committee scheduled a hearing on Internet-based telephone service and the future of emergency 911 services for April 10.
Homeland Security: The Homeland Security Department on Monday issued long-anticipated final rules for regulating security at the nation's chemical facilities, including one barring state and local governments from enacting chemical security laws that conflict with the federal regulations. Public interest groups, environmental organizations and some lawmakers objected to the department's assertion that it can pre-empt state laws when draft rules were issued in December -- and there was no rush to applaud the rules issued Monday. The department admitted the draft rules were too broad on the issue of pre-emption, and in the final rules, it tried to specify when state laws would be overridden. The department said in a statement: "Only state laws and requirements that conflict or interfere with these regulations, or the purpose for the regulations, will be pre-empted. Currently, the department has no reason to conclude that any existing state laws are applied in a way that would impede the federal rule."
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