I. Identification

1. The Issue:

Japanese motorcycles such as Honda, Yamaha, Suzuki, and Kawasaki are popular in Southeast Asia that is attractive market for motorcycle industry. For example, word "Honda" is used as synonym of motorcycle in Vietnam. To have a Honda "Dream II"or "Super Dream" is seen as a good investment for your money especially if it has the "right" color, namely reddish brown. However, Chinese manufacturers have made most motorcycles in Southeast Asia that have trademark of Japanese manufacturers by violating Japanese intellectual property. (The upper left-hand picture is genuine motorcycle by Honda. The rest are illegal imitation by Chinese manufacturers such as Hongda.) In the beginning of 1990's, these imitations were found only in Chinese market. Chinese manufacturers have registered old model of Japanese motorcycles and trademark of Japanese manufacturers to their authority to sell their imitation at Chinese market legally. Therefore, Japanese manufacturers have endured this situation since they thought it was beyond their control. By the late 1990's, Chinese manufacturers have begun to export their products to Southeast Asian market. This incident have changed attitude of Japanese manufacturers. They have decided to fight against illegal imitation to maintain their share of Southeast Asian markets.

2. Description:

Elimination of illegal imitation of Japanese motorcycle is not only for profit of Japanese manufacturers but also for basic foundation of global free trade in East and Southeast Asia. Free trade led by WTO allows participants to compete freely in global market. China and countries in Southeast Asia have advantage in global competition because of cheap labor and abundance of natural resource. However, participants need to clear some requirements such as protection of intellectual property for fair competition. However, these rules have not been kept fully by countries in East Asia even after their affiliation to WTO.

We still can find variety of imitations. There are reasons why imitations are so popular in this region. In case of motorcycle, consumers in this region do not have enough money to buy pure Japanese motorcycle. Therefore, they usually buy imitation by Chinese manufacturer since price is less than half of Japanese motorcycle. Important point we need to keep in mind is that consumers know those products are imitation. They also know that quality of most of those motorcycles are worse than Japanese products. However, there is no problem for them if design and quality of motorcycle fulfill their minimum standards. Thus, consumers' low moral accelerate the spread of imitation.

At the begriming, imitation produced by Chinese manufacturers copied only designs or trademark of Japanese motorcycle. However, complete copy of Japanese motorcycle by Chinese manufacturer has appeared in the market as time goes by. Moreover, Japanese engineers were surprised for its quality since there is no difference between those new copies and genuine Japanese products including engine design. Therefore, Honda has made strategic alliance with Chinese manufacturers producing copies instead of fighting at the court.By this strategic alliance, Honda has developed new model "Wave" in 2002. This model has become so popular in Vietnam because of its reasonable price and high quality. This happened because it is using Japanese technology and cheap Chinese parts. As a result, number of copies in Vietnam has decreased dramatically. But illegal imitation still exist in the market. Furthermore, even "Wave" is copied by some Chinese manufacturers. (See picture in the issue.) Thus, fight for eliminating copies is still on the way.

Lastly, imitation of product is not limited in this region. Manufacturers in Japan also imitate American products after World War II. However, they imitate only basic structure such as engine in case of motorcycle. Therefore, illegal imitation of design or use of trademark without authority cannot be permitted. If China and countries in Southeast Asia want to attract more investment from outside they need to strive to enforce law on their industries. Unless authorities in these countries get down to eliminate imitations, foreign companies cannot invest to these countries without anxiety. Moreover, original brands by manufacturers in China or countries in Southeast Asia are not going to be born if they keep imitating Japanese brands. Hence, struggle by Japanese motorcycle manufacturer to eliminate imitations could be benefit for whole region.

3. Related Cases:

a. Tequila (Intellectual property)

b. Smirnoff (Intellectual prperty)

c. Poke mon (Cultural impact)

d. Japanese air pollution

e. Proton (Competition in free market)

4. Author and Date:

Atsuo Yoshimura, 4/21/2004

II. Legal Clusters and Status:

5. Discourse and Status: Disagreement and Allegation

JAMA-CAAM "Project of Intellectual Property on Motorcycle Industry" (2002-2004)

Step1: Research committee for design similarity

Step2: Intellectual property symposium on motorcycle industry

Step3: Training in Japan for Chinese who are taking charge of intellectual property in large manufacturers

Step4: Foundation of organization for mediation on intellectual property in motorcycle industry

Effect of action

Expulsion of copy by Chinese manufacturers from Southeast Asian market

6. Forum and Scope: Japan and Bilateral

8. Decision Breadth: 1

JAMA (Japan Automobile Manufactures Association)

CAAM (China Association of Automobile Manufacturers)

Authority in Japan, China, and ASEAN

9. Legal Standing: International treaty and domestic regulations

III. Geographic Clusters

9. Geographic Locations:

a. Geographic Domain: Asia

b. Geographic Site: East and Southeast Asia

c. Geographic Impact: Vietnam

10. Sub-National Factors: No

11. Type of Habitat: Tropical

IV. Trade Clusters

12. Type of Measure: Intellectual Property

a: Crack down by Chinese authority on request of Japanese manufacturers

b: Strategic alliance with Chinese manufacturers by Japanese manufacturers to allow them to produce genuine Japanese motorcycle

c: Foundation of organization for mediation between Japanese and Chinese manufacturers

13. Direct v. Indirect Impacts: Direct

Direct Impacts: Large reduction of share by Chinese motorcycle in Southeast Asian market in recent years

Indirect Impacts: Development of inexpensive motorcycle for Southeast Asian market by Japanese manufacturers

14. Relation of Trade Measure to Environmental Impact:

a. Directly Related to Products: Motorcycle

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: Yes Intellectual property

15. Trade Product Identification: Motorcycle

16. Economic Data:

Key exporter

Japan (2002)

Table 1

As numbers are indicating, relatively small class (51cc-125cc) is popular in Asia. Therefore, illegal copy of Japanese model probably can be seen in this category.

Others (1999)

Table 3

Some source estimated that total amount of export by China achieved 1,000,000 in 2000. Since China is member of WTO, its total amount of export in 2002 probably bigger than that of 2000. On the other hand, Taiwan that used to be an exporter of illegal copy of Japanese model decreased its total amount of export by emergence of Chinese manufacturers.

Key importer

Vietnam (2002)

Table 4

Quota for production in Vietnam (2002)

Table 5

In 2002, the Vietnamese government imposed reduced quota to Japanese manufacturers. Government announced that it cut the quota since the country's vast number of motorcycles - the main mode of transport - was causing road congestion and too many accidents. However, it is undeniable that widening trade gap might be one of the reason for this government action. Since Vietnamese government has accepted request from Japanese government and manufacturers for additional quota, they have avoided large reduction for their quota. ( Table 3 shows final quota of 2002.)

17. Impact of Trade Restriction: Medium

In case of Vietnam, Japanese manufacturer need to assemble their products at local factory by imported parts form Japan.

18. Industry Sector: Automobile industry

19. Exporters and Importers:

Top 9 leading exporters (1998) and Top 11 leading importers plus percentage of Japanese share (1998)

V. Environment Clusters

20. Environmental Problem Type: Air pollution

21. Name, Type, and Diversity of Species: N/A

22. Resource Impact and Effect: Low and Structural

One Person-based Case
People of Muong tribe live in mountainous lands of Vietnam. They have managed their living by traditional slash-and-burn agriculture that has been inherited generation after generation. They have burned the forest for cultivation with taking power of recovery by nature into account as their ancestor did. However, recent industrialization and urbanization in Southeast Asia are about to destroy their traditional life style.

By economic development, huge middle class is emerging in Southeast Asia. In most countries in Southeast Asia, people who belong to middle class have motorcycle for their transport. Most of their motorcycles are made in China that has loose regulation of exhaust gas. According to experts, current Chinese regulation is same as that of advanced countries in 1970s. Therefore, a large quantity of toxic chemical substances are scattered from these motorcycles. In advanced countries, most of the toxic gas is emitted from cars. However, motorcycles are the main cause of air pollution in case of Vietnam since motorcycle overwhelm the car in number. For example, demand of motorcycle in Vietnam from 2001-2005 is 817,000 units.It means 163400 units per year. On the other hand, automobile manufacturers in sold 19,558 units in Vietnam.It is about 8% of demand fro motorcycle. Therefore, toxic substances that are emitted mainly from motorcycles are bringing disaster to even mountainous area that is far from cities.

When toxic chemical substances that are emitted from motorcycles are scattered in air they cause acid rain. It destroys forest in a wind range. Therefore, people of the Muong tribe have to reduce the range for slash-and-burn. Moreover, deforestation leads flood in summer. If it happens, it sweep away not only their crops but also income for his living. Furthermore, deforestation causes global warming. It means their crops might not grow normally because of abnormal weather. By deforestation, they probably cannot pursue normal traditional life style. In worst scenario, they would move to urban area to get a job.

General Information
In these twenty years, many scientists have warned that exhaust gas is causing global warming. Moreover, area of forests is keep decreasing by rise of average temperature. The number of farmers who are facing difficulty in their business by deforestation in Southeast Asia is tremendous. In most Southeast Asian countries except Malaysia and Singapore, half of the working population is engaged in agriculture. If we define ASEAN as Southeast Asia, its working population is more than 250 million. Since population of Singapore and Malaysia is lower than other ASEAN countries, perhaps 125 million farmers are facing some kind of difficulty such as deforestation that is caused by exhaust gas in Southeast Asia.

For farmers who belong to ethnic minorities, deforestation might destroy their identity. There are many groups of ethnic minority in Southeast Asian countries. For example, more than 60 groups of ethnic minority are sustaining their traditional culture in Vietnam. Most of these groups are engaged in slash-and-burn agriculture for their living. Therefore, deforestation caused by exhaust gas might force them to leave their home since they lose forest to burn for cultivation. As a result, their indigenous culture might die out by migration.

Deforestation not only affects not only agriculture but also other industries since it cause flood. Although 75 percent of the land was covered with forest in the Mekong basin countries in 1945, it is reduced to 25% by deforestation. As a result, worst flood in 2000 brought catastrophe to various industries. For example, about 400 people were killed by flood in Vietnam and Cambodia. Moreover, several million people lost their home in these two countries. Flood is not unusual phenomena in Southeast Asia because of the monsoon climate. However, scale of the flood is getting bigger as time goes by. Hence, it cannot deny that deforestation that is caused by exhaust gas is intensifying the flood

23. Urgency and Lifetime: Low and 100s of years

24. Substitutes: New energy (Hydrogen)

VI. Other Clusters

25. Culture: No

26. Trans-Boundary Issues: No

27. Rights: Yes

28. Relevant Literature:

General information about violence of intellectual property in motorcycle industry

Column by Rensei Baba (Former editor at Yomiuri Shin bun - Japanese Newspaper)

http://www.incs.co.jp/tsurezure/bb/2001/011210.html

http://www.incs.co.jp/tsurezure/bb/2001/011217.html

Mekong Sources

http://www.mekongsources.com/Reports.asp?DocID=90161&cat=Motorcycles+%26+parts&country=Vietnam

The Japanese Commerce and Industry in China

http://www.cjcci.biz/sansi_pdf_2003/index2.htm

Japan External Trade Organization (JETRO)