United States Senate
Committee on Banking, Housing, and Urban Affairs
Subcommittee on Security and International Trade and Finance

OPENING STATEMENT OF SENATOR EVAN BAYH

This is a matter of significant urgency and importance for our country.  Intellectual property theft is a substantial and a growing problem, and while we have taken some good steps, particularly the STOP Initiative and the recent filing before the WTO, more needs to be done if we are going to make a permanent dent in this problem.  The estimates are that U.S. businesses lose $250 billion annually because of intellectual property theft.  These are resources that could be going to profits, to wages, to investment, and obviously in taxes to our government to meet the costs of Social Security, Medicare, and other priorities.

The estimates are that we have lost over 750,000 jobs in the United States because of intellectual property theft.  Clearly, this is a significant hindrance to employment growth.  Ten percent of all pharmaceuticals worldwide are estimated to be fake, with potentially very serious health consequences.  I have seen articles indicating that up to 90 percent of business software in China is pirated.  Fifty percent of business software in India may be pirated as well.  Airline parts, auto parts, and a variety of other sectors in our economy suffer because of this, and obviously the recent WTO filing targeted music, films, and other parts of the entertainment industry.

The Administration has taken some important good first steps, as I just mentioned, but there are some inherent limitations to these steps, so we need to continue the progress.  For example, the WTO filing is good, but it addresses only 4 percent of the problem, and the WTO process itself can take years to reach fruition.  We also need to make sure that this will be the beginning of a sustained effort.  It has taken years to get to the point where we are finally taking some serious steps.  I personally hope that these steps are not in an attempt to gather support for fast-track legislation or the Korea Trade Initiative, but, instead, to show a new embrace of vigorous efforts to crack down on intellectual property theft.

This is also important to our Nation's security.  I will just touch upon this briefly.  I serve on the Intelligence Committee and the Armed Services Committee.  We take up these issues on a regular basis.  We seized an al Qaeda manual – I think it was in Afghanistan – some time ago, which recommended the sale of counterfeit goods as a possible source of financing for that organization.  There were $1.2 million of fake auto parts seized in Lebanon not long ago.  The proceeds from those sales were destined for Hezbollah.  North Korea engages in illicit sales of fake goods.  There were reports in U.S. News and World Report at the time of the first World Trade Center attack that the attack could quite possibly have been financed by the sale of counterfeit goods.  So, if we are serious about our Nation's security, we also need to be serious about cutting off the funds for those who seek to harm us; all too frequently that involves the theft of intellectual property.

Finally, let me say that support for the global trading system is at stake in this debate.  This goes right to the heart of America's comparative advantage in the economy of tomorrow.  If we invest in innovation, in educating our population, in investing in research and development to create new goods, new services, new cures, and that innovation is stolen from us because intellectual property theft takes place, the global economy will not work well.  It is not a sustainable model, for when our trading partners have a comparative advantage, we buy from them; but when we have a comparative advantage, they steal from us.  That just will not last.

So, I hope that it is possible to be for global trade, but also to be serious about enforcing the rules of global trade, particularly the protections of intellectual property.  Our businesses, our workers, and our taxpayers have a right to expect our government to take vigorous action in the face of such a serious problem, and that is what has brought us here today.