Info Service on WTO and Trade Issues (Sept09/02)
dispute panel rules against China on publications, AV products
Geneva, 13 Aug (Kanaga Raja) -- A dispute panel of the World Trade Organization (WTO) on Wednesday found that China had acted inconsistently with the provisions of its Accession Protocol, the GATS and the GATT 1994 concerning its measures affecting trading rights and distribution services for certain publications and audiovisual (AV) entertainment products.
dispute was brought by the
its ruling, the panel concluded that to the extent that
a press release issued on 12 August, US Trade Representative Ron Kirk
welcomed the results of the panel report. The report found that major
Chinese restrictions on the importation and distribution of copyright-intensive
products such as theatrical films, DVDs, music, books and journals are
a WTO panel handed a significant victory to
decision promises to level the playing field for American companies
working to distribute high-quality entertainment products in
reports have cited
In April 2007, the US had sought consultations with China on: (1) certain measures that restrict trading rights with respect to imported films for theatrical release, audiovisual home entertainment products (e. g., video cassettes and DVDs), sound recordings, and publications (e. g., books, magazines, newspapers, and electronic publications); and (2) certain measures that restrict market access for, or discriminate against, foreign suppliers of distribution services for publications, foreign suppliers of audiovisual services (including distribution services) for audiovisual home entertainment products, and foreign suppliers of sound recording distribution services.
The US concerns specifically related to: (1) certain measures that provide less favourable distribution opportunities for imported films for theatrical release than for like domestic films; and (2) certain measures that provide less favourable opportunities for foreign suppliers of sound recording distribution services and for the distribution of imported sound recordings than are provided to like service suppliers and like products.
A panel was established on 27 November 2007 to rule on these issues.
In a background to the dispute, the panel said that the dispute involved the US claims of violation with respect to: (a) Chinese measures that are alleged to unjustifiably restrict the right of enterprises in China and foreign enterprises and individuals to import into China reading materials, AVHE (audiovisual home entertainment) products, sound recordings, and films for theatrical release by limiting trading rights to Chinese state-owned enterprises; (b) Chinese measures relating to the distribution of reading materials, AVHE distribution services, and sound recording distribution services.
to the panel, more specifically, the
-- prohibit foreign-invested enterprises from engaging in the master distribution of reading materials, the master wholesale and wholesale of electronic publications, and the distribution of imported reading material;
-- impose, on foreign-invested enterprises permitted to engage in the sub-distribution of reading materials, requirements that are more burdensome than those applicable to wholly Chinese-owned distributors. Such requirements relate to registered capital, operating terms, pre-establishment legal compliance, examination and approval process, and decision-making criteria;
-- limit commercial presence for the distribution of AVHE products to Chinese foreign contractual joint-ventures with majority Chinese ownership;
-- as regards the sub-distribution of AVHE products, discriminate against Chinese-foreign contractual joint ventures by imposing on them certain requirements that are more burdensome than those that apply to wholly Chinese-owned enterprises. These requirements relate to operating terms, pre-establishment legal compliance, examination and approval process, and decision-making criteria;
-- prohibit foreign-invested enterprises, but not wholly Chinese-owned enterprises, from engaging in the electronic distribution of sound recordings, e. g. through the Internet and mobile telecommunications networks.
The panel also referred to Chinese measures that allegedly do not provide national treatment for imported reading materials, sounds recordings intended for electronic distribution, and films for theatrical release.
-- restrict distribution channels for certain imported reading materials by requiring their distribution to be conducted exclusively through subscription, by Chinese wholly state-owned enterprises, and only to subscribers that have been examined and approved by the Chinese government; unlike the situation for similar domestic reading materials;
-- limit the distribution of certain imported reading materials (which can be distributed other than through subscription) to wholly Chinese-owned enterprises, while the distribution of similar domestic reading materials can be effected by other types of enterprises, including foreign-invested ones;
-- discriminate against imported sound recordings intended for electronic distribution by subjecting them to more burdensome content review regimes than similar domestic products;
discriminate against imported films for theatrical release by limiting
their distribution to two state-owned enterprises, while similar domestic
products can be distributed by any distributor operating in
its ruling Wednesday, the panel also addressed the issue of the broad
defence raised by
This type of approach by both panels and the Appellate Body has in recent periods come in for some adverse review and criticism from legal experts. In this particular case, the International Economic Law and Policy Blog has drawn attention to this.
said the panel, China argues that the challenged measures, except to
the extent that they apply to films for theatrical release and audiovisual
products intended for publication, are covered by its "right to
regulate trade" in a WTO-consistent manner, and are consistent
with, and therefore justified by, the provisions of Article XX(a).
The panel cited Article XX(a) of the GATT 1994 which states: "Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (a) necessary to protect public morals; ..."
panel said: "It is clear that the WTO Agreement includes the GATT
1994, and that the GATT 1994 includes Article XX(a). Nevertheless,
find it appropriate in this case to follow the approach of the Appellate
Body in the
concluding its examination of
"Having regard to the Panel's finding that none of the relevant measures has been demonstrated to be "necessary" within the meaning of Article XX(a) to protect public morals, the Panel comes to the overall conclusion that these measures are not justified under the provisions of Article XX(a).
"In view of our conclusion that China has in any event not established that the measures at issue satisfy the requirements of Article XX(a), we need not, and hence do not, revert to the issue whether Article XX(a) is in fact applicable as a direct defence to breaches of China's trading rights commitments. We thus take no position on this issue," said the panel. +