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Last Updated: Tuesday, 25 September 2007, 10:43 GMT 11:43 UK
WTO investigates Chinese 'piracy'
Counterfeit brand name shirts on display in Beijing
US manufacturers claim Chinese copies are costing them jobs
The World Trade Organization (WTO) has launched a formal investigation into a US complaint about piracy in China.

A WTO dispute body has now been set up to look into allegations that Beijing has failed to tackle counterfeiting.

According to the US, China's failure to enforce copyright laws is costing software, music and book publishers billions of dollars in lost sales.

If the WTO finds in the US's favour it could authorise US sanctions against China worth billions of dollars a year.

However, the WTO case is limited to whether China has taken sufficient action to protect intellectual property rights.

Washington added that talks with China on the issue in recent months had failed to resolve the issue.

Copies targeted

US trade representatives have said the move is intended to "eliminate significant structural deficiencies that give pirates and counterfeiters in China a safe harbour to avoid criminal liability".

However, Beijing has said it is stepping up its battle against counterfeiting and warned the WTO case could damage relations between the US and China.

The US has brought a number of cases to the world trade body since last year amid pressure from politicians to tackle the country's mounting trade deficit and manufacturing job losses.

However, the US is also the target of another investigation launched by the trade body in Geneva.

The WTO is to look into European Union (EU) allegations that the US is continuing to break global rules with the way it penalises the "dumping" of imports.

Dumping takes place when foreign exporters ship out products at below the market price - usually to corner a market or because the goods are subsidised - and in certain circumstances governments are allowed to impose fees on such imports to protect domestic businesses.

In a ruling last year, the US was reprimanded for dumping fees it imposed on several imports ranging from pasta to stainless steel.

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