The World Trade Organization released a report on Wednesday saying China violates free trade practices by limiting the importing and distribution of foreign creative content.
The report says China must loosen its restrictions on books, music and movies. It backed an earlier U.S. complaint that China is forcing American companies to sell copyright-protected products through state-run or state-approved businesses, a practice that violates global commerce regulations.
In essence, the ruling would now allow creative content to be sold in a more open economy. The move is a boon to Hollywood studios, which have long been concerned about overregulation and the inability to expand beyond the country’s tight reins.
The WTO will now attempt to dissolve China’s film import monopoly or barriers that prevent U.S. firms (like studios) from importing and distributing DVDs in China. It also will now change the rules governing U.S. movies shown in Chinese theaters.
China has long restricted the number of foreign films in theaters to about 20 a year.
"The Chinese system for distributing U.S. films to Chinese audiences is among the most restrictive and burdensome in the world," MPAA chairman Dan Glickman said. "This decision may be an opening we have been seeking."
Glickman said all of these changes will help the country’s piracy problem as well.
U.S. Trade Representative Ron Kirk said the WTO ruling is "a significant victory" for the U.S. creative industries and a key step toward more open trade between the U.S. and China.
"This decision promises to level the playing field for American companies," he said.
Commerce Secretary Gary Locke also praised the ruling.
“The findings are important to the American people and our industries," he said in a statement. "They promote greater access to the Chinese market and are a clear demonstration that trade agreements, properly enforced, can provide significant benefits to our economy.”
Trade experts have said that Chinese officials would appeal the ruling. They have said that China will argue there is little the WTO can do to force the country to open up market access to foreign media content.