WTO to mull China options

Country doesn't free up movie market by deadline

HONG KONG — The World Trade Organization will discuss China’s failure to meet last week’s deadline to implement its ruling against restrictions on foreign companies distributing copyrighted goods including movies, DVDs and music.

Hollywood had welcomed the 2009 ruling because it looked set to open up the potentially huge Chinese market to U.S. product, but the March 19 deadline passed without any change.

“We are disappointed China did not fulfil its commitment,” Greg Frazier, executive VP and policy chief of the Motion Picture Assn. of America said in a statement. “We understand, however, that the Chinese authorities are working to comply with the WTO’s ruling and that the U.S. government is actively engaged with the Chinese government to ensure that China meets its commitment.”

The MPAA believes China’s restrictions on the distribution of legitimate movies, music and other copyrighted goods creates enormous demand for pirated copies sold on the Internet and on the street, costing billions of dollars every year.

The WTO’s Dispute Settlement Body is scheduled to discuss the matter on Friday.

Membership of the WTO, which China joined in 2001, has transformed the country’s trading environment, opening up new markets for Chinese products but also forcing the country to deal with competition from overseas.

The WTO says China’s system of importing and distributing books and movies breaches international trade rules and it requires that China must increase foreign access to the domestic movie market.

Many in the homegrown market welcome the challenge, as Chinese movies had a record-breaking year last year, bringing in box office worth $1.5 billion.

There is currently a quota of about 20 foreign movies allowed into China every year on a revenue-sharing basis, although overseas studios prefer flat fees as a big hit can make more money. This means a lot of countries are fighting over the small number of slots — France won six of the 20 slots last year, for example. A further 40 films per year can be imported on a flat-fee basis.

These movies are distributed by the powerful China Film Group, which produces and distributes most films in China, alongside Huaxia Group.

In theory, the new ruling meant that foreign companies can use private distributors to get their movies onto Chinese screens.

The WTO’s extremely detailed and complicated ruling is difficult for China to argue against. It found that China was contravening the fundamental WTO rule requiring equal treatment between local and foreign businesses, and breaching commitments made when it joined the WTO in 2001 to open up sales and distribution within three years.

U.S. trade representative at the time, Ron Kirk, characterized the ruling as “a big win” for American companies.

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