The U.S. government has imposed trade sanctions against Ukraine for failing to introduce effective measures to combat the country's emergence as one of the biggest centers for producing counterfeit compact discs and software. Some in Ukraine are concerned that any restrictions could eliminate Ukraine's share of a future legitimate market once demand for legally licensed products grows. Others believe Kyiv must introduce stiffer laws against piracy. Future access to World Trade Organization membership would be easier, they say, and Ukrainian artists would benefit.
Kyiv, 25 January 2002 (RFE/RL)) -- What is the difference between two recordings of the song by Canadian pop singer Nelly Furtado "Turn Out the Lights."
On the streets of the Ukrainian capital, Kyiv, the difference is about $14. The one record is a legally manufactured compact disc that sells for around $16. The other is a pirate CD made in Ukraine and sold openly in kiosks and street markets throughout the country for about $2.
The difference in price between the legitimate CD and the pirated copy represents around half the average monthly salary for most Ukrainians. For them, there is no question about whether to buy the legitimate or illicit version of a product. The illicit version is the only one they can afford.
This impoverishment has made pirate music CDs, computer software, and videotapes big business in Ukraine. Most of the these counterfeit items can be purchased on the streets almost as soon as they appear in legitimate markets, and sometimes even before.
Videos of the Hollywood movie "Titanic," copied from tapes made available to journalists reviewing the film and companies publicizing it, were on sale in Kyiv before the film even premiered in the U.S. One of this year's biggest movie attractions, "The Lord of the Rings," which opened a few weeks ago, is now available for $4.
It is not only private buyers who take advantage of the cheap copies. A recent Ukrainian government survey showed that around 90 percent of the computer software used in its own offices was counterfeit.
Both the U.S. government and legitimate CD manufacturers are concerned because the counterfeits not only circulate in Ukraine but are exported by the millions, cheating the international music industry of $180 to $250 million a year.
For years, the Ukrainian government's attempts to pass laws to curb piracy were resisted. Last week (17 January), the Ukrainian parliament voted through a watered-down version of the law desired by the U.S.
Myron Vasylyk is the Kyiv director of an American lobbying company, PBN, which investigates intellectual property abuses. Vasylyk says the largest counterfeiting rackets are in Asia, but that Ukraine has been cited as the biggest emerging CD pirater in Europe.
"If you put together the violations of copyrights, related rights, trademark violations, patent violations, we have done studies where we have shown the annual sum of these violations exceed a $1 billion per year."
He said that after years of frustration, the U.S. finally lost patience and judged the law passed in Ukraine last week as being too little, too late. The U.S. sanctions will restrict imports of Ukrainian steel and other items. Washington says the sanctions will cost Kyiv some $75 million in lost trade. Ukraine puts the figure closer to $470 million. Vasylyk:
"I believe the U.S. has introduced these sanctions because it believes that the diplomatic effort in Ukraine has come to a standstill, and Ukraine is not moving forward on living up to those commitments it has taken up with the United States. As a result, the U.S. is now using a different, more forceful effort -- meaning economic sanctions -- to prod the Ukrainians into moving further on this issue. Unfortunately, it's come to this. But until the Ukrainians feel the negative impacts on their own economy, I don't believe they're going to move forward on this issue."
One of the Ukrainian parliamentarians who co-sponsored the law passed last week is Mykhailo Pavlovsky of the center right Fatherland (Batkivshcyna) Party. He, like many other Ukrainian deputies, believes that cracking down on pirate CD manufacturers now would mean the destruction of the country's entire infant CD manufacturing base.
"By passing this law, we have demonstrated that Ukraine has its own views. Strong countries always respect those who defend their interests, and I think that from this moment and this law the United States will begin to respect Ukraine. The main thesis of the U.S.A. is the defense of the rights of its people, the citizens of the U.S.A. We should follow their example and work independently. I don't condemn the United Sates. They are working correctly in the interests of their people. We should work properly in the interests of our nation and our manufacturers."
Pavlovsky, who studied market economics in the U.S., is concerned that if restrictions are introduced now, they would eliminate Ukraine's share of a future legitimate market when demand for legally licensed products grows. One such area, he says, is the planned introduction of computers in every Ukrainian school and higher education establishment within the next few years.
But Vasylyk believes Ukraine would benefit by introducing stiffer laws against piracy. He says the road toward World Trade Organization membership would become smoother and that Ukrainian artists also would benefit.
"Many of the Ukrainian artists who are producing or are popular in this country do not receive the royalties that other artists do in Western countries from the sale of their CDs or videos. That's a particular problem. Unfortunately, these Ukrainian artists remain poor because the law as it exists today on the books, and the law that was recently adopted, gives more rights to the manufacturers than the creators of these goods and services."
Ukrainian Prime Minister Anatoliy Kinakh said the government will hold talks with the U.S. and do more work on copyright laws after parliamentary elections in March.
Ukrainian President Leonid Kuchma condemned the U.S. trade sanctions and said the U.S. is making unfair demands. Kuchma must still sign the antipiracy bill passed by parliament last week, and has indicated he will do so.