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The Honolulu Advertiser
Posted on: Saturday, July 1, 2006

Faked products draining profits from U.S. manufacturers

By Foster Klug
Associated Press

At Uniweld Products, executive vice president David Pearl displays his company's air-conditioning gauges, left, next to counterfeit versions from China. He estimates that the cheaper fakes which are labeled with Uniweld's trademark but don't work have cost his company more than $1 million in lost business.

STEVE MITCHELL | Associated Press

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WASHINGTON By the time David S. Pearl II finally saw one of the knockoff versions of his company's refrigeration testing devices, the damage had been done.

For more than 35 years, Uniweld Products Inc. had painstakingly built its reputation in the air-conditioning hungry Middle East. But as the cheap counterfeits entered the market, sales plummeted. Workers were laid off, consumer confidence destroyed.

The reason for Uniweld's misery sat before him, just out of an express-mail package: a Chinese-made, nearly identical version of the real thing one of a flood of pirated American products, the bulk from China, that the United States blames for costing thousands of jobs, robbing companies of profits and seriously harming the U.S. economy's ability to compete.

In Pearl's case, the bogus equipment matched the original right down to the name, trademark, address and phone number of his manufacturing company's headquarters in Fort Lauderdale, Fla.

The differences, though, were crucial: The fake products cost half as much as the real ones, and they didn't work. Pearl estimated that over the years Uniweld lost well over a million dollars in sales, a significant amount for a small company.

"You look at them side by side, it is absolutely amazing how well they copied them, and it's scary," Pearl, Uniweld's executive vice president, said in a phone interview.

"The United States is a country of thousands and thousands and thousands of small businesses, who employ the majority of the employees in the country. For them to be hammered by Chinese counterfeits is a serious problem."

U.S. lawmakers, government officials and businesses agree that stopping the theft of American brands abroad would save companies billions of dollars and would help correct a U.S. trade deficit that hit an all-time high of $202 billion with China last year.

But the accord often ends there.

Businesses want lawmakers to do more; Congress urges the Bush administration to take a harder line on China's alleged lax enforcement of existing copyright protection laws; and the U.S. government threatens China with punitive action in the World Trade Organization if progress is not seen.

Meanwhile, rampant theft of copyrighted American products continues.

Worldwide, officials estimate that piracy and counterfeiting cost U.S. industry as much as $250 billion a year.

China is a major culprit, U.S. officials say, accounting for nearly 70 percent of all pirated products seized at the U.S. borders last year more than 10 times greater than from any other American trading partner.

Russia is also seen as a problem, with U.S. business groups urging stronger pledges from Moscow to protect intellectual property before being allowed WTO entry.

U.S. officials say they are working hard to get Beijing to more aggressively fight the problem and to follow through on commitments made when China joined the World Trade Organization in 2001.

The United States posted its first intellectual property attache in Beijing in 2004 and plans additional attaches this year; dozens of copyright protection training programs have been conducted with Chinese officials since 2001, the U.S. government says.

Last year, America's trade envoy formally requested that China document what it was doing to enforce copyright protection under its WTO obligations; though China's response was "less than forthcoming," officials say they continue to push for those details.