China rounds up the usual suspects

At the end of the movie Casablanca, Rick (Humphrey Bogart) shoots Nazi Major Strasser so that Ilsa (Ingrid Bergman) can escape. Although French Police Chief Renault had just witnessed the shooting, when his men arrive he tells them, "Round up the usual suspects."

Life sometimes imitates cinema. China just rounded up the usual suspects. Their crackdown on copyright crimes is timed for President Hu's visit to the United States from January 18-21. AsiaOne reports (China detains 4,000 people in copyright crackdown):

BEIJING, CHINA - China has detained more than 4,000 people suspected of violating intellectual property rights since November and will toughen punishment to tackle the rampant crime, an official said Tuesday....

The number of arrests, cases and value of infringements were three times higher than the same period a year earlier, Gao said, according to a transcript posted on the official website China.com.cn.

Wow! The number of arrests is three times higher than last year's roundup! According to ip-sharing.com:

Beijing has launched repeated crackdowns and boosted penalties in the past, but foreign governments and trade groups say its enforcement remains unsatisfactory because it has not been strict enough. In particular, in its WTO complaint, the US complained about prosecution thresholds in Chinese law that allow violators to escape punishment if they make less than 500 copies of an item. It also accused Beijing of violating trade rules by turning a blind eye to the piracy of CDs and DVDs that haven't been passed by state censors....

The 2010 National Trade Estimate published by the office of the United States Trade Representative makes it clear that the United States is aware of China's strategy. China delays sales of the legitimate items while allowing this piracy of U.S. CDs and DVDs. The relevant section of that report begins:

In addition to censorship reviews by Chinese authorities, which can delay the arrival of imported foreign films on Chinese movie screens, the Chinese government has historically decreed “black-out periods” during which no new revenue-sharing blockbuster foreign films may be released in order to prevent competition with Chinese films being released during the same period. Banning the release of new foreign titles or removing popular foreign films during peak seasons not only hurts theatrical revenues but also contributes to increased piracy, as pirates meet immediate consumer demand for foreign titles by offering illegal downloads through the Internet, on pirate optical discs, and pirate video-on-demand channels. (p. 22)

When Presidents Obama and Hu meet in Washington next week, President Obama should tell President Hu that trade between the two countries had better move rapidly toward balance, or he will impose tariffs to force it into balance. The ideal tariff would be a scaled tariff whose duty would take in 50% of our trade deficit with China. The duty rate would go down as China takes down its tariff, non-tariff, and currency-manipulation barriers to U.S. products.

President Obama must choose between pretend free trade and balanced trade. If he chooses pretend free trade, he will be able to watch a pirated-version of Casablanca in his hotel room next time he goes to China. If he chooses balanced trade, he will revive the American economy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I own Chinese yuan through CYB and Vanguard Emerging Markets Stock Index Fund (VEMAX)