Findings and recommendations from the 2005 European Business in China Position Paper

Over the next few months, we will be taking a look at some of the findings of the newly released European Chamber Position Paper, which reflects the progress made by the Working Groups during the past year. The Chamber's sixth edi-tion reveals where progress has been made in opening up China's business environment, and key recommendations pinpoint areas where further change is still required.

The paper covers the findings of 24 different Working Groups dedicated to the business and trade sectors as well as horizontal issues affecting both. All have been informed by industry experts as to what can be done to better under-stand regulatory issues in the operating environment. The most basic goal of the position paper is to facilitate long-term economic growth and partnership between Chinese authorities and foreign businesses.

Aviation

Driven by global forces, the aviation industry is demanding transparent and internationally competitive regulations in order to fulfill growing consumer demands in the Chinese market. De-spite the economic might of the avia-tion industry, airlines continue to be extremely sensitive to fluctuations in market parameters. Indeed, as it stands, executing global strategies remains a challenge in a complex Chinese avia-tion market.

Key Recommendations:

Airport Administration Fees

Chinese airports have become some of the most expensive in the world with a considerable degree of price difference existing between those applied to Chi-nese and European carriers. As a result, this has raised questions with regards to providing domestic and foreign carriers with a fair and equal market on which to compete.

In Europe airport regulatory fees are transparent, and in every airport a fee base is available for all airlines using the airport services. The fees are market-regulated and are similar for both domestic and foreign companies. The Chinese aviation market would pro.t from free competition between carriers and airports alike, allow-ing the best performers to bene.t and not allowing non-transparent discrepancies to rule the market.

The Working Group recommends lower airport regulation and administration fees by making all costs and services transparent and available to all domestic and foreign carriers.

Labor Agency developments

Foreign airlines can only hire local staff through a single labor agency, thus resulting in a monopoly of the market. The present situation constrains foreign airlines. .exibility to hire personnel in China. In Europe, neither foreign nor domestic agencies are faced with limitations in terms of hiring staff. The obligation to recruit personnel using a special labor agency represents a forced outsourcing.

Abolishing the requirement to hire staff through labor agencies, or at least allowing the airlines to choose between different labor agen-cies is recommended.

Jet fuel costs

Fuel costs in China are much higher than the worldwide average and nearly 40 percent higher than the average price in European countries. This puts foreign airlines at a serious disadvantage given that Chinese carriers pay much lower prices when refueling in European countries. The Working Group recommends re-ducing the jet fuel price for all airlines to make them comparable with European prices.

Intellectual Property Rights

During the second half of 2004, China has de.-nitely prioritized the necessity to protect Intellectual Property. The European Chamber acknowledges the efforts made by Vice Premier Wu Yi and her colleagues in the Central Government to create a National Task force to tackle the problem of IPR infringement, which has resulted in improvements being made to the existing IPR laws and regula-tions, with an emphasis on the strengthening of IPR education among officials and the public.

Ministry of Information Industry (MII) of the Administrative Measures for the Protection of Online Copyright, which took effect on May 30, 2005 to combat on-line piracy and copyright infringement over the internet.

While it is clear that Chinese enterprises are becoming increasingly competitive, both in and out of China, it is equally clear, demonstrated by the increase in the number of disputes over IPR between domestic companies, that Chinese companies are becoming more exposed to pi-racy and counterfeiting of their technologies and brands. The White Paper published by the State Council in 2005 acknowledges this fact. Its stated objective reveals that it is the inten-tion of the Central authorities to increase all aspects of IPR enforcement. There is, indeed, recognition among the European Chamber membership that more work needs to be done, particularly in the area of enforcement, if the efforts of the Central authorities are to ful.ll their stated objectives.

Key Recommendations

Protection of confidential information

Restrict the requirement for disclosure of con-.dential information to what is strictly neces-sary, and provide clear and improved measures and sanctions in the law to protect IP rights owners.

Unfair Behaviors

Anti-Unfair Competition Law:

(1) Spell out a strong principle, with explicit reference to the prohibition of unfair and anti competitive behavior in general.
(2) Supreme People's Court to periodically issue Interpretations for the guidance of enforce-ment agencies and the judiciary.
(3) Prohibit the slavish imitation of the shape of a product.

Patent Law: Provide protection for partial designs
Registration of another person's identi.er:
SAIC to authorize direct access to the Trademark Registry data and to issue specific regulations and instructions to AICs.Enforcement Consistency: Limit the information published when announcing an enforcement campaign and focus on geographical areas which have proved difficult to enforce IPR in.

Retail Markets: Issue formal warnings to owners and landlords of "Booths" found selling infringing goods. Withdraw business licenses in cases of repeated offence.

Criminal Prosecution: Improve existing Interpretation of the Supreme People's Court and Supreme People's Procuratorates with reference to the valuation of counterfeit stock and the abolition of the distinction of individual and unit.

Enforcement at the Border: Issue specific regulations to Customs officials regarding the treatment of suspected consignments of coun-terfeit goods in coordination with the police; offer more lenient treatment or exemption to intermediaries who disclose helpful information to Customs.

Designs patents: amend the Measures for Administrative Enforcement of Patent Rights to grant the SIPO IP Bureaus the same powers as those granted to other agencies.

Industry specific concerns

Telecommunication equipment, electronic home appliances: Allow Chinese companies to sign license agreements with owners of "Essential patents”.

Pharmaceutical Industry: Consider the possi-bility to restore the time spent during the clinical trials and development until regulatory approval has been granted in China.

Automotive and Auto Components Indus-try:

Acknowledge publicly the scale of the IPR problem in light of the danger it poses to road users. Take veri.able steps to improve the safety of road users by cracking down on the counter-feiting of auto parts.