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W.T.O. Rules Against China’s Limits on Imports

time2009/11/07

HONG KONG — The World Trade Organization gave the United States a victory on Wednesday in its trade battle with China, ruling that Beijing had violated international rules by limiting imports of books, songs and movies.

The W.T.O. panel decision in Geneva buttresses growing complaints from the United States and Europe that China is becoming increasingly nationalistic in its trade policies. It also offers some hope that China will remove its restrictions on media and reduce rampant piracy of intellectual property, though the country can appeal.

But even if China changes its policy in light of the decision, Western companies could struggle to increase their sales anytime soon. The ruling does not affect a quota that caps at 20 the number of foreign films that can be released in Chinese movie theaters each year.

Also, because of piracy, Chinese consumers are so accustomed to paying very little for DVDs, or downloading movies or songs free on the Internet, that American movie companies already sell authorized DVDs of their movies for much less in China than in the United States — and still struggle to find buyers.

Still, 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.”

For the American media industry, the ruling essentially means that the W.T.O. supports demands by United States movie studios, book and newspaper publishers, and record labels that they be allowed to sell more directly to the Chinese consumer, rather than first going through a middleman, often a state-owned enterprise, as China has required. It does not necessarily mean the Chinese consumer will have access to a broader array of American films, books and music — although those industries hope that may eventually occur.

“American companies now have the right to trade without going through a Chinese intermediary at the border,” said James Bacchus, a lawyer at Greenberg Traurig in Washington who represented the China Copyright Alliance, a consortium of media companies, in the case.

Dan Glickman, chairman of the Motion Picture Association of America, acknowledged that the decision might not immediately result in a wider array of American movies available to the Chinese consumer.

“I wouldn’t say it will have a night-and-day, revolutionary impact right away,” he said. However, he added, “It’s hard for me to believe that the import quota, which has been in effect for 10 years, will be there in perpetuity with this decision.”

Either side may appeal the panel’s ruling. It is difficult, although not impossible, for a panel decision like this one to clear the way for the petitioning country to impose trade sanctions on the country that broke the rules.

The 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 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 restrictions on imported books, movies and other content. Demand is met by pirated copies made in China; the latest Hollywood movies are on DVDs on street corners across China within days of their release, at a cost of $1 or less — much less in inland cities and for the buyer who bargains aggressively.

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. Officials sometimes wait a day or two to respond to adverse trade developments.