The decision is likely to escalate trade tensions with Beijing, amid US complaints over the value of China's currency and allegations that Chinese exports are effectively subsidised to make them unfairly cheap.

"It's not a sensible move for the U.S. government to file such a complaint"

Tian Lipu,
Intellectual
Property Office commissioner

Reacting to the US move, China's state-run Xinhua news agency quoted a senior official responsible for intellectual property rights (IPR) as saying the case was "not a sensible move for the US government".

"By doing so, the United States has ignored the Chinese government's immense efforts and great achievements in strengthening IPR protection and tightening enforcement of its copyright laws," said Intellectual Property Office commissioner Tian Lipu.

Announcing the case in Washington on Monday, Schwab said the US recognised Beijing's efforts to crackdown on copyright piracy and asked that the complaints "not be viewed as hostile action against China".
 
Arbitration
 

"Because bilateral dialogue has not resolved our concerns, we are taking the next step in requesting WTO consultations"

Susan Schwab, US Trade Representative

"Because bilateral dialogue has not resolved our concerns, we are taking the next step in requesting WTO consultations," Schwab said.
 
"We will continue to welcome dialogue with China in an effort to resolve these issues."
 
Both countries have 60 days to iron out their differences, after which, if no resolution is achieved, the US has the right to demand WTO arbitration.
 
Blaming lax enforcement, Schwab said rampant copyright piracy cost "US firms and workers billions of dollars each year".
 
In some cases, she said, the issue posed "a serious risk of harm to consumers", both in China and around the world.
 
Despite China's pledge to clamp down on the trade, the US says that fake DVDs, software, luxury goods, books, auto parts, footwear and even pharmaceuticals were freely available across the country.
 
Offenders 
 
Despite crackdowns pirated DVDs
remain widely available [Reuters]
On Friday Chinese authorities tightened the rules on media piracy, lowering the threshold for "serious offenders" who face up to seven years in jail, state media reported.
 
A serious offender would be anyone who produces more than 2,500 disks of movies, music or computer software, down from the previous cut-off level of 5,000 disks, the China Daily reported.
 
The US welcomed the move but said wholesalers and distributors were still able "to operate below high thresholds without fear of criminal liability".
 
"These thresholds appear to effectively permit large-scale piracy and counterfeiting," it said.
 
Affected American industries welcomed the decision to take the case to the WTO as "overdue" and a "logical next step".
 
"Rampant and large-scale piracy and counterfeiting in China have persisted too long, and China is not penalising pirates and counterfeiters," said Max Baucus, chairman of the Senate's finance committee.
 
'Billions lost'
 
In a statement, the Motion Picture Association of America said US copyright industries had lost $2.3 bn to piracy in 2005 with 90 per cent of the world's pirated DVDs sold in China.
 
The National Association of Manufacturers said the WTO provided Washington and Beijing the right venue for recourse in "a mature trade relationship".
 
The US has also complained that in many cases fake goods seized by Chinese customs authorities end up back for sale on the black market.
 
US concerns over Chinese piracy is one of several issues to dog what is fast becoming the world's most important trading relationship.
 
In an unprecedented move late last month, the US announced penalty tariffs on China to offset government subsidies for high-gloss paper, drawing a strong reaction in Beijing.
 
The US trade deficit with China ballooned to more than $200 bn last year, a huge imbalance explained in part by Americans' voracious appetite for cheap Chinese goods.
 
Official Chinese estimates show counterfeit products accounting for 15 to 20 per cent of locally-made products, or eight per cent of its $2.2 trillion economy, a Congress-appointed panel said recently.