The European Union has unveiled a €37.2 million ($48 million) grant to help China stamp out piracy, as the two sides kicked off negotiations on a trade agreement that is intended to boost copyright protection.

The EU grant -- confirmed today (Jan. 17) in Beijing by EU external relations commissioner Benita Ferrero-Waldner and Chinese vice minister of commerce Yi Xiaozhun -- will be supported by Chinese government aid to create a €62.7 million ($81 million) pot to speed up co-operation in protecting intellectual property rights (IPR).

The funding will focus on improving the effectiveness of intellectual property right enforcement by giving technical assistance to the Chinese legislative, judicial, administrative and enforcement bodies, as well as boosting China's protection of patents. Commission officials said it was a major step in the EU's efforts to persuade China to tackle rampant copying of CDs, DVDs, software and other goods.

Ferrero-Waldner also launched formal talks with Chinese Foreign Minister Li Zhaoxing aimed at updating the EU's 20-year-old trade agreement with China. The agreement is expected to set new targets for eliminating piracy. Ferrero-Waldner said it could take up to two years to complete the new deal.

The 27-member EU is China's biggest trading partner. It is also the fourth biggest supplier to Europe of pirated CDs, DVDs and software (after Thailand, Malaysia and Pakistan), accounting for 8% of seizures. Commission officials regularly complain that China does too little to protect patents and copyrights, exposing European companies to pirates copying billions of euros worth of music, films and software.

The aid was confirmed as China's Supreme People's Court announced stricter penalties on violators of IPR. All illegal gains and manufacturing tools of IPR violators should be confiscated and their pirated products shall be destroyed, the court said. It also said that fines should be stiff enough to strip pirates of their ability to resume production of illegal copies, without giving details about the value of the fines.

Victims of piracy in China have long complained that sanctions are not severe enough, although officials insist the main problem is enforcement rather than the law itself. The Chinese government says it has 300,000 people devoted to stopping product piracy. Last April, it opened of a 50-city network of intellectual property enforcement offices.

Beijing is also co-operating with a host of international industry groups. Last month, the National Copyright Administration of China (NCAC) signed a memorandum of understanding with the Motion Picture Assn., the Business Software Alliance, the Assn. of American Publishers and the Publishers Assn. of the U.K. pledging to raise efforts to fight the online piracy of movies, software and literary works. MPA data shows that its member studios lost $94 million in potential revenue to illegal downloads in China last year.