WTO Ruling
A major win for the US entertainment industry, or an "improper" and "regrettable" decision? As China prepares its appeal against last week's WTO ruling, the real implications of the decision are still far from clear.
The WTO expert panel upheld a number of the complaints that the US brought against China when it filed the case in 2007. It ruled that China has breeched international trade laws by restricting the import of foreign entertainment products such as DVDs, books and movies to a few state-owned companies. It also found China has breeched the commitment it made when it joined the WTO in 2001 to open sales and distribution channels within the next 3 years.
The United States didn't win on all of the allegations it brought against China, though. The panel ruled that a number of the claims were either unsubstantiated or outside the scope of the WTO. For example, the WTO panel said China can refuse to import any products it finds objectionable because censorship falls outside the scope of the WTO's charter. It also dismissed the United States' claim that China has failed to take adequate measures to guard against piracy.
Despite the mixed result, the United States government and industry lobby groups such as the Motion Pictures Association of America were quick to hail the ruling as a significant victory.
"These findings are an important step toward ensuring market access for legitimate US products in the Chinese market, as well as ensuring market access for US exporters and distributors of those products," said US Trade Representative Ron Kirk in a statement. "We will work tirelessly so that American companies and workers can fully realize the market opening benefits that this decision signals."
Beijing issued a more measured and muted response, with Ministry of Commerce spokesperson Yao Jian calling the ruling "regrettable" and "improper", according to a Xinhua News Agency report last week.
"China has always fulfilled its obligations on market access for publications, and the channels for foreign publications, films and audio-visual products to enter the Chinese market are extremely open," he said.
Yao Jian said he thinks it is only appropriate and just for China to impose some controls that are in line with its stage of economic development, as well as its cultural and historic traditions.
The striking disparity in the response illustrates neatly how the US and China view the trade in cultural products. China starts from a position of no imports and counts upwards, so by its own measure, it is significantly more open than before. The US, on the other hand, starts from the position of a free market and counts downward. From this perspective, trade in China is saddled with several onerous restrictions, not least the stringent limits on the numbers of films allowed to compete at the box office.
With both China and the US allowed to lodge appeals against the ruling, the final outcomes won't be clear for several months. Meanwhile, lawyers from all sides are still combing over the 496-page WTO document in a bid to evaluate the ins and outs of the decision. It is still from clear what impact the WTO ruling may have on even the most basic points of trade, such as whether it will make it easier to import films.
Despite this, many are cautiously optimistic that the WTO ruling will prove a solid starting point for the two parties to gradually find a middle ground between their diametrically opposing perspectives. Strong lobbying by foreign governments and trade organizations have yielded positive results in the past – such as the 20 films a year imported to China on a revenue-sharing basis – even if the groups did not always achieve the exact outcome they desired. Meanwhile, people are finding ways of working with the system to open the China market more and more.