adherence to Berne, submitting proposed implementing legislation to achieve that objective. The ranking minority member of the subcommittee, Mr. Moorhead, has, in fact, introduced the Administration's bill, H.R. 2962, and in this regard I would like to defer to Mr. Moorhead so that he might insert the bill into the hearing record and make, if he cares to, any remarks about it.

The gentleman from California.

Mr. MOORHEAD. Thank you, Mr. Chairman. I ask unanimous consent that the Administration bill, H.R. 2962, the section by section analysis, and my statement entered into the record of the House at the time the bill was introduced, be made a part of this hearing record.

Mr. KASTENMEIER. Without objection, so ordered. [The information is reprinted in appendix I (4).]

Mr. MOORHEAD. Thank you, Mr. Chairman. I would like to join you in welcoming Secretary Baldrige, Ambassador Yeutter, and Under Secretary Wallis. The last time I saw these three gentlemen together in the same room was when they appeared before this subcommittee last year to extoll the merits of the manufacturing clause. They ultimately proved successful on that issue, and I am hopeful that the chemistry is still there and will carry over to their work on the implementing legislation for United States adherence to the Berne Convention.

Recently I was pleased to introduce the Administration's proposal on the Berne Convention, H.R. 2962, along with my good friend, the ranking Republican on the full Judiciary Committee, Mr. Fish. The primary difference between H.R. 2962 and the bill introduced by my good friend, Mr. Kastenmeier, H.R. 1623, of which I am also a co-sponsor, is in their treatment of moral rights.

Needless to say, the issue of moral rights is a very important one, and I intend to explore it fully in the context of these hearings. I am happy that both bills at least raise the issue and attempt to deal with it. As you know, we are very concerned over our present trade imbalance and the number of our trading partners who send us billions of dollars of their goods, but refuse to permit the United States to export our goods into their country.

I am very much in favor of free and open markets. However, when it comes to protecting American inventions, American technology, and American creativity, I am a protectionist. These endeavors represent the work product of our people, and they have every right to the maximum protection for their work product, and I think that is one of the primary reasons that we are looking into joining the Berne Convention.

I am looking forward to this morning's testimony. I did have an explanation of a number of the differences between the two bills, which in many areas are very slight. They are both good pieces of legislation, but I understand that, Mr. Yeutter, Mr. Baldrige, you are going to be asked to answer that question by our chairman, and I will wait for your explanation.

Mr. KASTENMEIER. I thank my colleague for his remarks. It is now my pleasure to introduce the distinguished panel of witnesses, an Administration all star team. The most senior member of the panel is the longest ranking cabinet Secretary, the Secretary of Commerce, Malcolm Baldrige. Second, we have the United States

Trade Representative, obviously very well known in the republic, Ambassador Clayton Yeutter. And third, we will hear from the Under Secretary of State for Economic Affairs, the Honorable Allen Wallis. It should be observed that his chief is testifying just down the hall to a far larger audience on a different subject.

As the gentleman from California suggested, the panel did testify before us in the last Congress on the manufacturing clause. They were most convincing that the clause not be continued as part of the Copyright Act, so, indeed, they bring a winning record to the subcommittee.

I would like to first recognize Secretary Baldrige and then later Ambassador Yeutter and the Under Secretary Wallis. Mr. Secretary.

TESTIMONY OF HON. MALCOLM BALDRIGE, SECRETARY OF COMMERCE; HON. CLAYTON YEUTTER, U.S. TRADE REPRESENTATIVE; HON. W. ALLEN WALLIS, UNDER SECRETARY FOR ECONOMIC AFFAIRS, U.S. DEPARTMENT OF STATE

Secretary BALDRIGE. Thank you, Mr. Chairman, members of the subcommittee. I am here today to talk about an increasingly important issue: assuring that there is adequate and effective protection for U.S. intellectual property throughout the world. The Department of Commerce has worked closely with other agencies represented here at the table today, and with the Library of Congress' Copyright Office, to improve levels of intellectual property protection worldwide. We have done this to eradicate piracy and counterfeiting of U.S. products. We have had some real successes, but often only after a lot of hard work.

Traditionally, the Commerce Department focused its primary intellectual property concerns on patents and trademarks because the administration of those laws is a responsibility of Congress, while the copyright laws are administered by the Library of Congress. In this Administration, however, we have increasingly devoted our attention to copyright issues. This is a natural and appropriate response to the growing importance of works protected by copyrights to the United States domestic and/international trade.

In a 1984 study, the Copyright Office estimated that in 1982 the copyright and information-related industries contributed over $153 billion to the U.S. economy and employed 2.2 percent of the civilian labor force. Also, in 1984 the International Trade Commission estimated that in 1982 the copyright industries earned a trade surplus of over 1.2 billion.

We think that is a very good performance, but one that might even be better. As I noticed earlier, the Administration wants to improve the protection of intellectual property. We believe that this will preserve our own or even improve the export earnings of such successful competitors in the world market.

However, because of factors that I will discuss later, this already difficult task is made even harder. In 1985, the International Intellectual Property Alliance estimated that in 1984 copyright industries lost $1.3 billion to piracy in only ten selected countries. When I speak about improving the export earnings of successful competitors, I am not talking about protectionist measures to keep foreign

products out of our markets. I am talking about stopping those staggering losses due to piracy.

Inadequate intellectual property laws and ineffective enforcement where laws do exist are the fountainhead of this problem. In response to this, the Administration has undertaken several efforts to improve the international protection of copyrights.

As Ambassador Yeutter will tell you, we are working in the new round of GATT negotiations to define and to develop a method to enforce compliance with high-level standards of intellectual property protection. To succeed in that work, we need to put ourselves in the best possible position. But presently our position is not as good as it should be because we do not adhere to the Berne Convention for the Protection of Literary and Artistic Works.

Mr. Chairman, there is absolutely no reason for us not to join Berne, at least no reason that takes into account the long-term interests of the United States, our creative community and U.S. copyright holders. Berne adherence requires only a few changes in U.S. law, and will not disturb the careful balance of public and private interests under our law.

The most important reason for joining Berne is that it will assure the highest available level of international protection for U.S. authors and copyright holders. The Berne Union has 76 members: nearly all of the developed countries, a number of developing nations, and several Eastern Bloc countries. The United States and the Soviet Union, and I might add the PRC, to date, are conspicuously absent from this list.

Some argue that the benefits of adhering to Berne are speculative and remote. If this were true, why would U.S. publishers undertake the substantial expense-one firm's estimate is about $10 million a year—to obtain rights under Berne through simultaneous publication in a Berne country, in short, going through the "back door"?

Our copyright owners have traditionally obtained and want Berne protection through simultaneous publication in the United States and in a Berne country, often Canada. Some argue that we do not need to adhere to Berne because we can always get Bernelevel protection through the "back door" in those countries that belong only to Berne. They argue further that we can get Bernelevel protection through national treatment in those countries which adhere to both the UCC and Berne.

These arguments, however, ignore several facts. First, only large U.S. copyright interests can afford the substantial expense of a program of regular simultaneous publication in a Berne country. This is too expensive and difficult or even impossible for many U.S. publishers and for most individual authors, artists and composers. For them, Berne protection through the back door is simply not economically feasible.

Another reason is that U.S. copyright holders may find the "back door" to Berne slammed in their faces or on their fingers. The Berne Convention allows its members to retaliate against the works of non-member states. Plainly put, the risk of retaliation will increase if the United States rejects Berne and continues to take a free ride through that "back door."

Additionally, adherence to Berne will give us copyright relations with 24 countries with which we have no current relations, some of which, Egypt and Turkey, for example, are emerging copyright trouble spots. A twenty-fifth country, the PRC, People's Republic of China, with more than a billion potential users of copyrighted works, has given strong signals that is is considering adhering to Berne.

Some argue that we already have a major role in international copyright, and that the proposed inclusion of intellectual property in GATT is far more likely to get us the high levels of international copyright protection that we want. These claims are just shortsighted.

It is true that the United States is the largest exporter of copyrighted works and maybe on that basis you could call us a leader in international copyright. But it does not follow that a large market for U.S. works is the same as a strong role in setting and maintaining effective standards to help fight international copyright piracy.

New technology, satellites, photocopiers, computers, video and audio recorders have "internationalized" intellectual property, and U.S. participation in an effective international copyright organization is clearly essential. We need an immediate and strong presence in the Berne Union.

Berne membership would let us participate fully in the administration and management of the Convention. As a Berne member, we would be able to block any decision that goes against our interests because revision of Berne requires a unanimous vote.

Membership in Berne will also strengthen our credibility in trade negotiations with countries that are havens for piracy. Thailand, a Berne member, is a good example. When we call on the Thai government to combat piracy, they ask us why we do not belong to Berne. They also ask why we take advantage of Berne benefits through national treatment and the "back door," at the same time that we urge other nations to conform to Berne standards. U.S. adherence will only heighten our credibility and make it more likely that other nations will join the Convention or increase existing levels of copyright protection.

The argument that the proposed inclusion of intellectual property within the GATT eliminates the need for U.S. adherence to Berne simply cannot be taken seriously. Developing a GATT code on intellectual property which includes an effective dispute resolution mechanism may be a difficult and lengthy process. We will be very lucky if it is not. Also, when such a code is developed, it will be difficult to get the pirate countries to join.

The United States position for implementation of high level standards within GATT may be seriously weakened if we do not adhere to the Berne Convention. Make no mistake about our position. Berne adherence is not a substitute for a GATT intellectual property code, but neither is a GATT intellectual property code a substitute for Berne adherence.

United States adherence to the Berne Convention will require minimal changes in U.S. law. You, Mr. Chairman, as the principal author of the 1976 copyright revision act, recently stated that that copyright revision was drawn "with a weather eye on Berne." And

last year, those of us here testified before you about the expiration of the manufacturing clause. My copyright experts tell me that the expiration of the clause removed one of the remaining large obstacles to compatibility between our copyright law and Berne, and that only a few further changes are needed.

Commissioner Quigg has prepared a statement that I would ask you to accept for the record that explains the intent and purpose of H.R. 2962, the Administration's bill introduced by Mr. Moorhead and Mr. Fish. It explains why our bill differs in certain respects from your bill and Senator Leahy's bill in the Senate..

I am not a copyright expert. I will not try and review the intricacies of such a specialized bill, but I would like to make one observation: a large number of copyright experts believe that the concern over the so-called moral rights issue is ill-founded.

Our law presently provides an adequate level of protection for an author's right to demand to be named as the author on his work and his right to object to the uses of his works that may discredit his honor or reputation. It meets the minimum level of the relevant provisions of the Convention. No additional changes are needed. Our bill proposes a congressional finding to that effect.

I would like to emphasize, sir, that the Department of Commerce will be pleased to continue to work with you and your committee on this and other copyright issues. This concludes my prepared statement, and I would be pleased to respond to any questions you may have, Mr. Chairman. Thank you.

[The statements follow:]