China Plea Dismissed by WTO


The Wall Street Journal

JOHN W. MILLER

The World Trade Organization on Monday dismissed an appeal from Beijing over the WTO’s August ruling against Chinese restrictions on distribution of Hollywood movies and other Western media, sealing one of China’s biggest-ever losses at the WTO.

The decision, if implemented by China, could prove lucrative for U.S. and other foreign companies. Despite its size, China remains one of the least-profitable markets for U.S. movie studios. China allows only 20 foreign films to be released every year in theaters there. It is also illegal to sell music over the Internet in China, a hindrance to Apple Inc. and its iTunes music-downloading business.

“U.S. companies and workers are at the cutting edge of these industries, and they deserve a full chance to compete under agreed WTO rules,” U.S. Trade Representative Ron Kirk said. “We expect China to respond promptly to these findings and bring its measures into compliance.”

China now has one year to comply with the WTO ruling, which can no longer be appealed. If it doesn’t, the U.S. would have the right to levy trade sanctions equivalent to the revenue lost by music, movie and even videogame makers because of Chinese distribution laws, which could amount to billions of dollars.

Chinese officials couldn’t be reached for comment.

WTO officials rejected China’s argument that a defense of its “public morals” gave it the right to impose laws such as an order obliging foreign firms to distribute media through a state-owned firm called China Film Group Corp.

The Motion Picture Association of America said the WTO ruling doesn’t lift the 20-films-a-year rule, so the floodgates won’t necessarily open.

On Monday, the WTO also said it would look into claims by the European Union, Mexico and U.S. that China used export quotas and tariffs to keep products such as coke, bauxite and magnesium cheaper for its domestic factories than they are on international markets, in violation of WTO rules.

—Lauren A.E. Schuker contributed to this article.

Write to John W. Miller at john.miller@dowjones.com

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