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China and the WTO
Let me entertain you
Aug 13th 2009 | BEIJING
From The Economist print edition
A victory for America’s news and entertainment industries
CHINESE trade officials are hardly likely to be quaking in their boots over the ruling announced on August 12th by
a World Trade Organisation (WTO) dispute panel. The ruling upheld American complaints that China breaks its
trade commitments by the way in which it regulates the import and distribution of foreign publications, films and
music.
The officials may reflect that this is, after all, the third time the WTO has ruled against China in just over a year
and the other cases—one on imported automotive parts and another on counterfeiting—have not yet led to
substantial changes in the way business is done. But the latest ruling adds pressure in an especially sensitive area.
It may force China to start untangling the variety of motives behind its persistent effort to control the influx of
foreign cultural and information products.
Although China’s markets have liberalised hugely over the years, the information-based industries remain
something of a special case. Virtually all print and broadcast media are government-run or supervised, and subject
to censorship by Communist Party propaganda officials. The internet is closely monitored and a great deal of
content is blocked. China’s own film producers are likewise kept on a short leash, as are book publishers.
A common view among foreign executives in the news and entertainment fields is that China’s complex and
maddening regulatory restrictions on the import of their products have served a double purpose: both controlling
objectionable content, and protecting local industries. China limits the import of foreign films to no more than 20
each year. It also requires that they be distributed through certain government-run companies. Similar restrictions
hamper the distribution of foreign books and magazines.
According to James McGregor, an author and former Beijing-based media executive, the case means China’s
commercial interests are now bumping up against its propaganda interests. China, he said, was looking at all this
with one eye open and the WTO is now telling them they have to look at it with both eyes.
In the case of films, foreign offerings certainly do pose a competitive challenge to home-grown Chinese products.
In Chinese cities there is a vast trade, illegal but barely hidden, in pirated DVDs of Hollywood movies selling for
about $1. Nor can there be doubt that Chinese cinema-goers would continue buying the rather pricier tickets to
the legal versions of those films, even if the yearly limit were lifted.
A more open market for these goods could go a long way towards helping America cut its persistent and politically
troublesome trade deficit with China, which in the first half of 2009 ran to $103 billion. But such hopes may have
to wait. Ron Kirk, America’s Trade Representative, praised the ruling as a significant victory for America’s creative
industries. But China expressed regret at the ruling and rejected its findings. A spokesman for the commerce
ministry said that China’s market channels for publications and audiovisual products are extremely open, and that
China may choose to appeal.
The WTO’s dispute-resolution machinery turns slowly. America made this complaint in April 2007. It was later
joined by the EU, Japan, Australia and others. Having taken so long to reach this point, the WTO will take a great
deal longer to force compliance, especially if China does appeal.
Mr McGregor, meanwhile, advises China to open up bit by bit on films and other entertainment. Foreign hard-news
products, he reckons, can be blocked on other grounds, but entertainment has become a commodity, like toasters
or anything else. And besides, thanks to the black market in pirated versions, most urban Chinese have already
seen “Sex and the City”.
Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved.
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