The United States‐China copyright dispute: A two‐level games analysis

United States media and computer software industries long have alleged they lose billions of dollars to copyright piracy in China. Negotiations between the countries have had little effect. This article uses two‐level games theory to explore why the United States is reluctant to impose sanctions, and why China is unwilling to take action against the pirates even at the risk of trade sanctions. Negotiations are examined at the usaional level and at the domestic level in both countries. At the usaional level, a two‐player sequential model of the game is presented. At the domestic level, the heterogeneity of interest groups in the United States, and the different agendas of central and provincial authorities in China are discussed. Based on this analysis, the article proposes, (1) a more flexible time‐frame for negotiations with foreign trading partners, (2) greater reliance on multilateral frameworks than on bilateral trade sanctions and (3) American efforts to distribute the gains from better copyright protection to local enterprises in foreign countries to create domestic pressure groups favoring stronger copyright regimes.