Alleged glaring loopholes in China's fight against the counterfeiting of goods will now be examined in detail by a World Trade Organisation (WTO) disputes settlement panel, which was established yesterday (25 September) at the insistence of the United States.

The committee will have the authority to tell China is should tighten up anti-counterfeiting policing as a breach of world trade law, namely the WTO's Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement.

Washington alleges in particular that China's lack of criminal procedures and related punishments for commercial scale counterfeiting and piracy break its commitments under TRIPs.

Clothing companies in the US and other countries have long been complaining about China's laissez faire attitude towards clothing fakes, and the European Union, Japan, Mexico, Taiwan and Argentina will also participate in dispute hearings, attacking Beijing.

The US Trade Representative office (USTR) has said: "Over the past several years China has taken tangible steps to improve IPR (intellectual property rights) protection and enforcement. However, we still see important gaps that need to be addressed."

These also include - claims the US - that Chinese customs officials release counterfeit good seized from export consignments straight back into the Chinese domestic market.

Copyright protection is also weaker than the international standards of the Berne Convention.

Should the panel find against China, probably next year, the Chinese would either have to toughen their anti-counterfeiting policing, or they could face authorised retaliatory measures by the US.

These could take the form of special tariffs on Chinese exports and would reflect the estimated losses to American manufacturers because of breaches of TRIPs. These would be high.

By Keith Nuthall.