The movie industry got a big boost Monday from the World Trade Organization on film distribution in China.
Siding with the U.S., a WTO appeals board reconfirmed that Chinese restrictions on the way foreign movies and other content can be distributed inside the country violate trade rules.
As set up, the Chinese curbs have three effects. First they require studios to use one of two state-owned distributors. Second, distributors (not the studios) get to pick the movies to distribute. Third, because the studios have to work with only two distributors, they have little ability to play one off the other in pricing distribution.
American and industry officials called the decision a major victory, but said once the board’s decision is formally adopted by China, it’s up to China what changes will take place.
"Today America got a big win,” U.S. Trade Representative Ron Kirk said in a statement. He called the decision is a key to ensuring full market access in China.
“U.S. companies and workers are at the cutting edge of these industries, and they deserve a full chance to compete under agreed WTO rules,” he said. “We expect China to respond promptly to these findings and bring its measures into compliance."
Motion Picture of America Association Chairman and CEO Dan Glickman also praised the decision in a statement.
“With today’s rejection of China’s appeal, the WTO has taken a major step forward in leveling the playing field for America’s creative industries seeking to do business in China,” he said. “Now that this appeal has been rejected, we are hopeful that we will be able to work closely with U.S. and Chinese officials to implement the WTO ruling and find creative ways to open up the Chinese movie market.”
Hollywood studios face several challenges in distributing movies in China. First, China only allows about 20 foreign films a year to be distributed in the country. Then, China required the distribution to be done by one of two government-related distributors, who get to choose and distribute the films.
The WTO complaint concerned the second challenge.
A WTO panel ruled in favor of the U.S. in August, but China appealed the decision, suggesting its limits were needed to protect public morals.
The Chinese Embassy in Washington did not answer a call seeking comment