The World Trade Organization handed the United States a major victory Wednesday by ruling that China’s restrictions on imported books, films, DVDs, music and other copyrighted products violated China’s WTO obligations.
The ruling could provide huge marketing opportunities for American filmmakers, publishers, recording artists, video-game designers, online music distributors and other entertainment companies to sell their wares in the world’s most populous country. They will be able to market their products at cheaper prices through more favorable distribution channels.
“Today, a WTO panel handed a significant victory to America’s creative industries,” said U.S. Trade Representative Ron Kirk. “These findings are an important step toward ensuring market access for legitimate U.S. products in the Chinese market.”
In deciding the case brought by the United States in October 2007, a three-member WTO panel instructed China to discontinue its practice of forcing U.S. owners of intellectual property rights to deal only with government-run or state-owned companies. China should “bring the relevant measures into conformity with its obligations,” the WTO panel said.
The WTO panel also ordered China to permit foreign companies to sell their music over the Internet. China’s rules prohibited foreign companies from offering music downloads to computers and mobile phones directly to Chinese customers. That decision could be a boon to Apple Inc. and its iTunes store.
If China fails to resolve these issues, Washington could impose retaliatory measures including tariffs or quotas on Chinese imports. China also has the right to appeal Wednesday’s decision.
The Chinese Embassy did not immediately return phone calls seeking comment.
The WTO ruling comes as China has solidified its positions as the biggest foreign holder of Treasury debt issued to finance America’s soaring budget deficit and the largest foreign purchaser of mortgage-backed securities sold by Fannie Mae and Freddie Mac. In this environment, the Obama administration sought to play down the long-simmering trade disputes between the two countries at last month’s U.S.-China Strategic and Economic Dialogue in Washington.
Many members of Congress and manufacturing companies, however, have charged that China manipulates its currency to gain an unfair trade advantage. China achieved a record-breaking $266 billion trade surplus with the United States last year, and ran up another $103 billion surplus during the first half of 2009, the Commerce Department reported Wednesday.
The WTO rulings stopped short of a complete victory for the United States. China prevailed on some points. For example, the panel rejected Washington’s claim that Chinese censorship was hurting sales of American music. The Chinese government will still be able to censor foreign films. And the panel said that China had not illegally restricted the distribution of American films by forcing them to go through two state-owned movie-theater companies in order to be seen in Chinese cinemas.
The rulings addressed U.S. concerns about China’s commercial restrictions that curtailed U.S. intellectual property rights and contributed to the prevalence of piracy in China, said Terry Miller, the director of the Center for International Trade and Economics at the Heritage Foundation.
“But the ruling did not resolve the censorship issue,” Mr. Miller said. “Censorship will remain in place and be a constant friction, as well as affect the development of democracy and freedom in China.”
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