China agreed to significantly increase market access for U.S. movies in order to resolve an outstanding trade dispute, The White House announced on Friday.
The concession comes as part of an attempt to resolve outstanding issues related to films after the United States won in a World Trade Organization dispute last year.
"The agreement announced today will allow significantly more job-supporting U.S. film exports to China and provide fairer compensation to U.S. film producers for the movies being shown there," the White House said.
Read more: Top Industry Execs Meet With Biden
The Motion Picture Association praised the agreement as one that would allow 50% more U.S. films in the Chinese market, and noted the following concessions:
>>China will permit 14 premium format films (IMAX, 3D) to be exempt from the 20 film import quota, which remains in place
>>The box office share US studios earn under the master contract increases to 25% from 13%
Senator Chris Dodd, Chairman and CEO of the MPAA issued a statement Friday night:
"This landmark agreement will return a much better share of the box office revenues to U.S studios, revising a two-decade-old formula that kept those revenues woefully under normal commercial terms, and it will put into place a mechanism that will allow over 50% more U.S. films into the Chinese market."
The good news provides a welcome boost for Dodd, who with the MPAA last month suffered a very public defeat when broad anti-piracy legislation stalled in Congress after a public and social media firestorm.
Chinese Vice President Xi Jinping met with Vice President Joe Biden in Los Angeles on Friday, on the final day of his visit to the United States. Xi is expected to become president of the world's most populous nation next year. He visited a trade conference downtown, and later visited a suburban school in South Gate that specializes in Asian studies (pictured).
Biden announced the deal and said: “This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry."
China represents the largest untapped international market for American movies, but up to now its market has been tightly controlled by quotas. Still, the three highest-grossing films in China last year came from the the U.S., led by "Transformers 3," which took in $172 million there.
Walt Disney Co. chairman Robert Iger said: "This agreement represents a significant opportunity to provide Chinese audiences increased access to our films."
”For Independents, this agreement is momentous,” said President-CEO Jean Prewitt of the Independent Film and Television Alliance. “Our sector has been unable to benefit fully from the existing revenue-sharing importation quotas and has had limited avenues through which to distribute. For the first time, through this Agreement, there is a promise of creating a commercial foundation that will allow independent producers to participate more fully in the Chinese marketplace.”
With regard to films, a WTO panel found in a report issued in August 2009 that key Chinese film import restrictions were inconsistent with China’s WTO obligations.
The Chinese box office revenue was $2.1 billion last year, according to The White House.
Here is the full White House statement:
United States Achieves Breakthrough on Movies in Dispute with China
Washington, D.C. – Vice President Joe Biden announced today that China has agreed to significantly increase market access for U.S. movies in order to resolve outstanding issues related to films after the United States’ victory in a World Trade Organization (WTO) dispute last year.The agreement announced today will allow significantly more job-supporting U.S. film exports to China and provide fairer compensation to U.S. film producers for the movies being shown there.
“This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry,” said Vice President Biden, who spent the day in the Los Angeles area with Vice President Xi Jinping of China.“At the same time, Chinese audiences will have access to more of the finest films made anywhere in the world.”
“U.S. studios and independent filmmakers cite China as one of their most important world markets, but barriers imposed by China and challenged by the United States in the WTO have artificially reduced the revenue U.S. film producers received from their movies in the Chinese market,”said United States Trade Representative Ron Kirk. “This agreement will help to change that, boosting one of America’s strongest export sectors in one of our largest export markets.”
The Chinese film market is large and growing quickly; last year, Chinese box office revenue was up to $2.1 billion. Much of this revenue came from 3D titles, which are a rapidly growing sector of the film industry.
The agreement allows more American exports to China of 3D, IMAX, and similar enhanced format movies on favorable commercial terms, strengthens the opportunities to distribute films through private enterprises rather than the state film monopoly, and ensures fairer compensation levels for U.S. blockbuster films distributed by Chinese state-owned enterprises. The agreement will be reviewed after 5 years to ensure that it is working as envisioned. If necessary, the United States can return to the WTO to seek relief.
The United States initiated the underlying WTO dispute in April 2007. In the dispute, the United States sought to address significant market access concerns relating to China’s treatment of films for theatrical release, as well as other cultural products.
With regard to films, a WTO panel found in a report issued in August 2009 that key Chinese film import restrictions were inconsistent with China’s WTO obligations. In December 2009, after China appealed, the WTO Appellate Body rejected China's claims and upheld the panel's findings. China promised to come into compliance by March 2011, but informed the United States at the deadline that this would not be possible. The two sides have been making efforts to resolve their differences since that time.
On a global basis, films and other audiovisual services are a key export sector in which the United States enjoys a $12 billion trade surplus. U.S. cross-border exports of audiovisual services, including films, have consistently exceeded U.S. cross-border imports over the last decade.