Statement of Neil Turkewitz, RIAA Executive VP Regarding RIAA Filing to USTR

Submission Highlights Problems Faced by Recording Industry in Foreign Markets

Washington, DC - February 20, 2001 - The Recording Industry Association of America (RIAA) in conjunction with its sister organizations representing the motion picture industry (MPAA and AFMA), book and music publishing (AAP and NMPA), and the computer business and entertainment software (BSA and IDSA) industries, filed a report today highlighting deficiencies in intellectual property protection in 58 territories.

The industry coalition, known as the International Intellectual Property Alliance (IIPA) files its report annually with the Office of the United States Trade Representative (USTR) in connection with so-called "Special 301," a provision of US trade law that requires USTR to identify countries that fail to afford adequate and effective protection to US intellectual property. Special 301 also provides for the imposition of trade sanctions, or the removal of trade preferences where countries do not cure such deficiencies.

Ukraine topped the list of major offenders this past year. Ukraine has developed into a major producer and exporter of pirate CDs, and little progress has been made since President Clinton and President Kuchma of Ukraine signed an agreement in June of 2000 in which Ukraine pledged to undertake major reforms of its legislation and enforcement practices.

USTR announced in January that it would make a decision on Ukraine's status under Special 301 in early March. All signs point to Ukraine's designation as a Priority Foreign Country. Such a designation will lead to removal of trade preferences under the GSP program, and to the imposition of trade sanctions at the end of the USTR investigation--unless Ukraine radically reforms its practices and meets its commitments under the US-Ukraine Agreement. This will all but eliminate any possibility for Ukraine to become a member of the WTO in the near term.

Other highlights of the report include:

• Russia in which piracy continues unabated, a situation that may lead to loss of benefits under GSP. The Government has made recent indications that it intends to reform its legislation and practices to comply with TRIPS, and we look forward to assisting is these critical endeavors; · Brazil where CD piracy is on the rise and where the industry, both local and international, is facing a dire situation. We are hopeful that recent moves by the Brazilian Government, including the establishment of an Inter-Ministerial Committee under the Minister of Justice, signal the beginning of a new chapter in that country's anti-piracy efforts;
• Taiwan, Indonesia, Malaysia and Philippines which are home to some of the largest syndicates involved in the manufacture and global distribution of pirate CDs. Malaysia has recently adopted regulations aimed at preventing the manufacture and export of pirate CDs, and we look forward to its implementation. We also call upon Taiwan, Indonesia and Philippines to do likewise; and · Egypt which has recently made positive moves to address the issuance of fraudulent licenses which have effectively kept RIAA members out of the market. We call upon the Egyptian authorities to confirm the cancellation of known fraudulent licenses, and to complete the process that they have now.

Certain trends are clearly visible in the report. Increasingly, RIAA and the other copyright-based industries are focused on controlling centralized optical media production and global distribution through organized criminal enterprises, and on promoting copyright law development to facilitate electronic commerce and the protection of copyrighted materials on-line. Finding ways to address piracy both on and off line is an essential ingredient for maintaining U.S. economic competitiveness and growth. While the U.S. copyright industries are a core part of the U.S. economy and contribute a tremendous amount to U.S. GDP and employment (see below), the property that we create, itself reflecting the aspirations and hard work of countless individuals, is easily misappropriated. Its protection requires constant vigilance.

In December 2000, the IIPA released an economic report entitled Copyright Industries in the U.S. Economy: The 2000 Report, the eighth such study written by Stephen Siwek of Economists Inc. This report details the economic impact and contributions of U.S. copyright industries to U.S. Gross Domestic Product, employment and trade. The latest data show that the “core” U.S. copyright industries (The "total" copyright industries include the "core" industries plus those that, under conservative assumptions, distribute such products or other products that depend wholly or principally on copyrighted materials. The "core" copyright industries are those which create copyrighted materials as their primary product.) accounted for 4.9% of U.S. GDP, or $457.2 billion in value-added in 1999. In the last 22 years (1977-1999), the core copyright industries’ share of GDP grew at an annual rate more than twice as fast as the remainder of the economy (7.2% vs. 3.1%). Also over these 22 years, employment in the core copyright industries more than doubled to 4.3 million workers (3.2% of total U.S. employment) and grew nearly three times as fast as the annual rate of the economy as a whole (5.0% vs. 1.6%). In 1999, the U.S. copyright industries achieved foreign sales and exports of $79.65 billion, a 15% gain from the prior year.

The copyright industries’ foreign sales and exports continue to be larger than exports of almost all other leading industry sectors, including automobiles and auto parts, aircraft and agriculture. It is essential to the continued growth and future competitiveness of these industries that our trading partners provide not only free and open markets, but also high levels of protection to the copyrights on which this trade depends.

The RIAA is a trade association whose members create, manufacture and/or distribute approximately 84 percent of all legitimate sound recordings produced and sold in the United States.

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The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members are the music labels that comprise the most vibrant record industry in the world. RIAA® members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States.

In support of this mission, the RIAA works to protect the intellectual property and First Amendment rights of artists and music labels; conduct consumer, industry and technical research; and monitor and review state and federal laws, regulations and policies. The RIAA® also certifies Gold®, Platinum®, Multi- Platinum™ and Diamond sales awards as well as Los Premios De Oro y Platino™, an award celebrating Latin music sales.