【nytimes】W.T.O. Rules Against China’s Limits on Media Imports

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W.T.O. Rules Against China’s Limits on Media Imports
http://www.nytimes.com/2009/08/13/business/global/13trade.html?_r=1&hp



                                                                              European Pressphoto Agency
Pirated DVDs, sold openly at a market in northeast China, cost less than $1, which is steep competition for legitimate discs.


By KEITH BRADSHER
Published: August 12, 2009


HONG KONG — A World Trade Organization panel ruled on Wednesday that China had violated its international free trade rules by limiting imports of books and movies, in a decision that buttresses growing complaints from the United States and Europe about Chinese trade policies.

The W.T.O. decision in Geneva is a victory for the United States at a time when a growing number of business executives and politicians perceive China as becoming increasingly nationalistic in its trade policies.

The restrictions also required foreign financial news services to operate through a government-designated distributor.
Ron Kirk, the United States trade representative, praised the panel’s legal finding. “This decision promises to level the playing field for American companies working to distribute high-quality entertainment products in China,” Mr. Kirk said, “so that legitimate American products can get to market and beat out the pirates.”

The Bush administration filed the original complaint more than two years ago partly to head off possible legislation in Congress requiring a more confrontational trade policy toward China. The Obama administration now faces pressure from the Democratic majority in Congress to take more assertive action in response to China’s trade surplus during the current recession, and could use the ruling as evidence that the issue is already being addressed.

The Chinese government had no immediate reaction to the decision, which was released late at night Beijing time. Chinese state media also initially ignored the decision. Chinese officials sometimes wait a day or two to respond to adverse trade developments.

Wednesday’s ruling goes to the heart of one of the biggest trade issues pending between China and the West: whether intellectual property, like copyrighted songs, books and movies, should be granted the same kind of protection from discriminatory trade practices as manufactured goods.

China has enjoyed double-digit economic growth through most of the last three decades in part because of rapid expansion of exports, virtually all of which have been manufactured goods. But Chinese imports have grown much more slowly, particularly if imports of goods for re-export are excluded, like computer chips from Japan that are assembled in China into consumer electronics for shipment to the United States.

One reason for the slow growth in imports has been China’s web of restrictions on imported books, movies and other intellectual content. The demand is met instead by pirated copies made in China; the latest Hollywood movies are available on DVD on street corners across China within days of their release, at a cost of $1 or less — much less for the buyer who bargains aggressively or is making a purchase in an inland city.

The cost of pirated copies is so low that American movie companies sell authorized DVDs of their movies for much less in China than the United States — and still struggle to find buyers. Chinese consumers are so accustomed to paying very little for DVDs, or downloading pirated movies or songs for free on the Internet, that Western companies could face an uphill challenge to sell more even if China does make changes in response to the W.T.O. report.

In its petition to the W.T.O., the United States particularly criticized China’s requirement that most copyrighted material be imported through a few government-designated companies, which tend to be wholly owned or majority-owned by the government.

The panel condemned this, saying in its report that, “it also appears that foreign individuals and enterprises, including those not invested or registered in China, are accorded treatment less favorable than that accorded to enterprises in China with respect to the right to trade.”

Like the United Nations, the W.T.O. has limited power to enforce its decisions. But an adverse decision at the W.T.O. can shame countries, and panel rulings against other countries have frequently become the basis for bilateral or multilateral negotiations that result in policy changes.

China in particular has been an enthusiastic supporter of the W.T.O. since its admittance in 2001, because the group’s free-trade rules have made it hard for other countries to impose anti-dumping and anti-subsidy limits on Chinese exports. But the Chinese government has not removed heavy taxes on imported auto parts that were condemned by another W.T.O. panel in July, 2008.

The Chinese government has taken a series of actions in recent months that have alarmed trade negotiators and other officials in Western capitals.

Economic planners in Beijing have ordered government agencies not to buy imported goods for the country’s nearly $600 billion stimulus program except when no domestically produced goods are available. The government has set high domestic content requirements for the wind and solar power industries, and has rejected bids even by multinationals that erected factories in China to supply the local market.

Chinese security forces have also detained four Rio Tinto employees in Shanghai; they were formally arrested on Wednesday on suspicion of commercial bribery and trade secrets infringement, although more serious charges of theft of state secrets were not brought against them.

The American business community in China has become wary of recent Chinese moves, and welcomed the W.T.O. ruling.

“The W.T.O. decision is a firm step toward common sense,” said Richard Vuylsteke, the president of the American Chamber of Commerce in Hong Kong. “We don’t want to go to the W.T.O. for these decisions, it shouldn’t have to go that far.”

Responding to a petition filed by the United States in early April 2007, and joined two weeks later by the European Union, the panel urged China to remove its extensive administrative restrictions on the import and distribution of a wide range of books, movies, DVDs and music recordings. So while the United States has been much more vocal on this issue, in many ways this is a victory for the United States and Europe.

Many of these restrictions, like limiting the number of foreign movies that can be shown each year in Chinese theaters, have been aimed partly at limiting foreign influence in China but also at sheltering domestic industries.

However, the panel stopped short of endorsing an American requests for a ruling on whether Chinese censorship has unfairly restricted imports. The panel said that this question was outside its purview; for the same reason, the panel also declined to rule on whether China’s approval processes were too onerous for would-be distributors of imported entertainment.

Either side may appeal the panel’s ruling. Several procedural hurdles make it difficult, although not impossible, for a panel’s decision to eventually clear the way for the petitioning country to impose trade sanctions on the country that broke the rules.

Chinese officials have defended their restrictions on imports of news and entertainment as necessary to protecting their culture; France has used a similar argument over the years to try, with limited success, to defend its film industry against Hollywood’s offering.

But the W.T.O. and its predecessor, the General Agreement on Tariffs and Trade, have moved gradually in the last two decades toward a narrower interpretation of how far countries can go to limit trade in the name of cultural preservation.

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