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US Moves on Ukraine Trade Benefits Over CD Piracy
WASHINGTON (Reuters) - The United States on Tuesday said it will suspend Ukraine's duty-free access to the U.S. market and begin steps to impose sanctions on potentially hundreds of millions of dollars of Ukrainian goods because of rampant piracy of music compact discs and similar products.

"The United States has been urging Ukraine to take measures to stop production of pirated optical media products for over two years. Yet the problem persists," U.S. Trade Representative Robert Zoellick said in a statement.

"The United States is moving forcefully to protect our rights and, if necessary, we will impose sanctions," he said. "We welcome foreign products into our markets, but we insist that we be treated fairly in return."

Like many developing nations, Ukraine enjoys duty-free access to the U.S. market for a list of its exports under the U.S. Generalized System of Preferences.

The Bush administration will suspend that duty-free access in the coming weeks, Zoellick said. Ukraine shipped about $40 million worth of goods to the United States under system of preferences in 2000. Much of that was chemicals, minerals and rare gases.

The United States also has put together a preliminary list of Ukrainian goods that could be hit with trade sanctions if Kiev fails to stop the ongoing piracy and establish a strong optical media licensing regime, he said.

Those include iron and steel -- which are major Ukrainian exports to the United States -- as well as anhydrous ammonia, fertilizers, chemical products, apparel and footwear.


The U.S. music industry estimates it loses more than $200 million annually from pirated Ukrainian discs sold in Eastern and Central Europe and as far away as South America.

Under Section 301 of the 1974 trade act, the United States could retaliate for the lost U.S. sales by imposing 100 percent duties on an equivalent amount of imports from Ukraine.

Duties of 100 percent on $200 million worth of Ukrainian goods would hit about 25 percent of the country's exports to the United States, which totaled $873 million last year.

Ukraine is estimated to have the capacity to produce up to 70 million CDs, video discs, computer software and other optical media products annually, compared to domestic demand of 1 million to 5 million.

The Bush administration first warned Ukraine on March 13 it could face sanctions unless it took steps to crack down on the compact disc piracy "within three months." But in June, it let that deadline pass without taking action.

At the time, which came just before President Bush's first trip to Europe, U.S. trade officials said they were continuing to work with Ukraine on the issue.

In an apparent last-minute bid to avoid U.S. action, Kiev pledged in late July to crack down within three months on sales of pirated tapes, videos and compact discs.

When former President Bill Clinton visited Kiev a year ago, Ukrainian President Leonid Kuchma agreed to a "joint action plan" to clamp down on the pirates and strengthen the country's copyright laws.

Since then, Ukraine has let several deadlines pass without taking significant action.

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