US-China: Entertainment Products (DS 363) An Phong Le Melvin Mosely Matthew Moskitis.

US-China: Entertainment ProductsUS-China: Entertainment Products(DS 363)(DS 363)

An Phong LeAn Phong Le

Melvin MoselyMelvin Mosely

Matthew MoskitisMatthew Moskitis

History and ContextHistory and Context

Key FactsKey Facts•Short Title: China – Audiovisual ServicesShort Title: China – Audiovisual Services•Complainant: United States of AmericaComplainant: United States of America•Respondent: ChinaRespondent: China•Third Parties: Australia; European Union; Japan; Korea (Rep. Third Parties: Australia; European Union; Japan; Korea (Rep. of); Chinese Taipeiof); Chinese Taipei•Agreements Cited: Services (GATS): Art. XVI, XVII; GATT 1994: Agreements Cited: Services (GATS): Art. XVI, XVII; GATT 1994: Art. III:4, XI:1Art. III:4, XI:1•Request for Consultations: 10 April 2007Request for Consultations: 10 April 2007•Panel Report: 12 August 2009Panel Report: 12 August 2009•Appellate Body Report: 21 December 2009Appellate Body Report: 21 December 2009•12 July 2010 – China & U.S. inform DSB they had agreed on a 12 July 2010 – China & U.S. inform DSB they had agreed on a reasonable period of time for China to implement reasonable period of time for China to implement recommendations (14 months ending 19 March 2011)recommendations (14 months ending 19 March 2011)

Source: http://www.wto.org/english/tratop_e/dispu_e/cases_2/ds363_e.htmSource: http://www.wto.org/english/tratop_e/dispu_e/cases_2/ds363_e.htm

Previous Related CasesPrevious Related Cases

•Previous disputes involving distribution date back to September Previous disputes involving distribution date back to September 28, 1995:28, 1995:

•DS 16DS 16: European Communities – Regime for the Importation, : European Communities – Regime for the Importation, Sale & Distribution of Bananas (Complainants: Guatemala; Sale & Distribution of Bananas (Complainants: Guatemala; Honduras; Mexico; USA) 28 September 1995Honduras; Mexico; USA) 28 September 1995•DS 27DS 27: European Communities – Regime for the Importation, : European Communities – Regime for the Importation, Sale & Distribution of Bananas (Complainants: Ecuador; Sale & Distribution of Bananas (Complainants: Ecuador; Guatemala; Honduras; Mexico; USA) 5 February 1996Guatemala; Honduras; Mexico; USA) 5 February 1996•DS 45DS 45: Japan – Measures Affecting Distribution Services : Japan – Measures Affecting Distribution Services (Complainant: USA) 13 June 1996(Complainant: USA) 13 June 1996•DS 105DS 105: European Communities – Regime for the Importation, : European Communities – Regime for the Importation, Sale & Distribution of Bananas (Complainant: Panama) 24 Sale & Distribution of Bananas (Complainant: Panama) 24 October 1997October 1997•DS 117DS 117: Canada – Measures Affecting Film Distribution : Canada – Measures Affecting Film Distribution Services (Complainant: European Communities) 20 January Services (Complainant: European Communities) 20 January 19981998•DS 142DS 142: Canada – Certain Measures Affecting the Automotive : Canada – Certain Measures Affecting the Automotive Industry (Complainant: European Communities) 17 August 1998Industry (Complainant: European Communities) 17 August 1998

Source: http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm?id=S3#selected_subjectSource: http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm?id=S3#selected_subject

Related Cases

Disputes Involving Publications• DS31

Canada — Certain Measures Concerning Periodicals (Complainant: United States of America) 11 March 1996

• DS363

China — Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (Complainant: United States of America) 10 April 2007

Source: http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm?id=G8#selected_subjectSource: http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm?id=G8#selected_subject

China’s Trade with the United States ($billion)China’s Trade with the United States ($billion)Notes: US Exports reported on FOB basis; imports on a general customs value CIF basisNotes: US Exports reported on FOB basis; imports on a general customs value CIF basis

Source: US International Trade Commission; http://www.uschina.org/statistics/tradetable.htmlSource: US International Trade Commission; http://www.uschina.org/statistics/tradetable.html

20002000 20012001 20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009

US US exportsexports 16.316.3 19.219.2 22.122.1 28.428.4 34.734.7 41.841.8 55.255.2 65.265.2 71.571.5 69.669.6

% % changechange 24.424.4 18.318.3 15.115.1 28.528.5 22.222.2 20.620.6 32.132.1 18.118.1 9.59.5 -2.6-2.6

US US importsimports 100.0100.0 102.3102.3 125.2125.2 152.4152.4 196.7196.7 243.5243.5 287.8287.8 321.5321.5 337.8337.8 296.4296.4

% % changechange 22.322.3 2.22.2 22.422.4 21.721.7 29.129.1 23.823.8 18.218.2 11.711.7 5.15.1 -12.3-12.3

TotalTotal 116.3116.3 121.5121.5 147.3147.3 180.8180.8 231.4231.4 285.3285.3 343343 386.7386.7 409.2409.2 366.0366.0

% % changechange 22.622.6 21.421.4 21.221.2 22.822.8 28.028.0 23.323.3 20.220.2 12.712.7 5.85.8 -10.6-10.6

US US BalanceBalance -83.7-83.7 -83.0-83.0 -103.1-103.1 -124.0-124.0 -162.0-162.0 -201.6-201.6 -232.5-232.5 -256.3-256.3 -266.3-266.3 -226.8-226.8

China’s Trading Rights CommitmentsChina’s Trading Rights Commitments

•China acceded to the WTO on 11 December 2001.China acceded to the WTO on 11 December 2001.•China’s Accession Protocol provides that it shall, China’s Accession Protocol provides that it shall, together with certain commitments referred to in together with certain commitments referred to in China’s Accession Working Party Report, “be an China’s Accession Working Party Report, “be an integral part of the WTO Agreement.”integral part of the WTO Agreement.”•A political factor is always present where there are A political factor is always present where there are sovereign states, and in the manufacturing sector, sovereign states, and in the manufacturing sector, trading rights and distribution are the major priorities.trading rights and distribution are the major priorities.

Two Main WTO Issues: Trading Rights Two Main WTO Issues: Trading Rights and Distribution Servicesand Distribution Services

On April 17, 2007, the US requested consultations with On April 17, 2007, the US requested consultations with China regarding:China regarding:

•Certain measures that Certain measures that restrict trading rightsrestrict trading rights and and reserve reserve the right to importthe right to import films for theatrical release, audiovisual films for theatrical release, audiovisual (A/V) home entertainment products, sound recordings and (A/V) home entertainment products, sound recordings and publications publications to wholly or partially owned Chinese state-to wholly or partially owned Chinese state-owned enterprisesowned enterprises. (Restrictions also imposed on other . (Restrictions also imposed on other Chinese firms that are not partially owned or state-owned.)Chinese firms that are not partially owned or state-owned.)

•Certain measures that impose Certain measures that impose market access restrictionsmarket access restrictions on on foreign service providersforeign service providers seeking to distribute seeking to distribute publications and A/V home entertainment products.publications and A/V home entertainment products.

WTO Issue: Trading RightsWTO Issue: Trading Rights

Ten Chinese measures targeted by the US:Ten Chinese measures targeted by the US:

1.1. The Regulations on Administration of the Films Industry;The Regulations on Administration of the Films Industry;2.2. The Provisional Rules on the Entry Criteria for Operating Film The Provisional Rules on the Entry Criteria for Operating Film

Enterprises;Enterprises;3.3. The Administrative Regulation on Publishing;The Administrative Regulation on Publishing;4.4. The Administrative Regulations on Audiovisual Products;The Administrative Regulations on Audiovisual Products;5.5. The Catalogue for Guidance of Foreign Investment Industries;The Catalogue for Guidance of Foreign Investment Industries;6.6. The Several Opinions of the Ministry of Culture, State Administration of The Several Opinions of the Ministry of Culture, State Administration of

Radio, Film and Television, General Administration of Press and Radio, Film and Television, General Administration of Press and Publication, National Development and Reform Commission and the Publication, National Development and Reform Commission and the Ministry of Commerce on Introducing Foreign Investment into the Ministry of Commerce on Introducing Foreign Investment into the Cultural Sector;Cultural Sector;

7.7. The Measures for the Administration of Import of Audio and Video The Measures for the Administration of Import of Audio and Video Products;Products;

8.8. The Measures for Administration of Chinese Foreign Contractual The Measures for Administration of Chinese Foreign Contractual Distribution Ventures of Audiovisual Products;Distribution Ventures of Audiovisual Products;

9.9. The Administrative Regulations on Electronic Publications;The Administrative Regulations on Electronic Publications;10.10.The Procedure for Examination and Approval of Establishment of The Procedure for Examination and Approval of Establishment of

Publication Importation Entities.Publication Importation Entities.

Source: WTO Request for Consultation by the United States 4/10/2007


In Laymen's Terms:In Laymen's Terms:•China only allows specially authorized partially or wholly China only allows specially authorized partially or wholly state-run companies to import movies, DVDs, music, state-run companies to import movies, DVDs, music, books, journals, and other publications to the exclusion of books, journals, and other publications to the exclusion of foreign-owned enterprises in China and other Chinese foreign-owned enterprises in China and other Chinese firms.firms.

•They are treated less favorably than the partially or wholly They are treated less favorably than the partially or wholly state-run companies with respect to the right to trade.state-run companies with respect to the right to trade.


•Regarding Trading Rights, the US Alleged the Chinese measures Regarding Trading Rights, the US Alleged the Chinese measures were inconsistent with:were inconsistent with:

•Paragraphs 1.2, 5.1 and 5.2 of Part 1 of the Protocol of Accession:Paragraphs 1.2, 5.1 and 5.2 of Part 1 of the Protocol of Accession:•1.2 – “The WTO agreement to which China accedes shall be the agreement 1.2 – “The WTO agreement to which China accedes shall be the agreement as rectified, amended or otherwise modified by such legal instruments as as rectified, amended or otherwise modified by such legal instruments as may have entered into force before the date of accession.” Inconsistent to may have entered into force before the date of accession.” Inconsistent to the extent that it incorporates commitments in paragraphs 83 and 84 of the the extent that it incorporates commitments in paragraphs 83 and 84 of the Report of the Working Party on the Accession of China.Report of the Working Party on the Accession of China.•5.1 - “All enterprises in China shall have the right to trade in all goods 5.1 - “All enterprises in China shall have the right to trade in all goods throughout the customs territory of China…and all such good s shall be throughout the customs territory of China…and all such good s shall be accorded national treatment.”accorded national treatment.”•5.2 - “All foreign individuals and enterprises, including those not invested 5.2 - “All foreign individuals and enterprises, including those not invested or registered in China, shall be accorded treatment no less favorable than or registered in China, shall be accorded treatment no less favorable than that accorded to enterprises in China with respect to the right to trade.” that accorded to enterprises in China with respect to the right to trade.”

•Article XI: 1 GATT 1994Article XI: 1 GATT 1994• ““No prohibitions or restrictions other than duties, taxes or other charges" No prohibitions or restrictions other than duties, taxes or other charges" are allowed to be established on the importation of products of other are allowed to be established on the importation of products of other members or on the exportation any product destined for any other member.members or on the exportation any product destined for any other member.

WTO Issue: Distribution ServicesWTO Issue: Distribution Services

Ten Chinese measures targeted by the US: Ten Chinese measures targeted by the US:

1.1. The Administrative Regulation on Publishing;The Administrative Regulation on Publishing;2.2. The Administrative Regulations on Audiovisual Products;The Administrative Regulations on Audiovisual Products;3.3. The Provisions on Guiding the Orientation of Foreign Investment;The Provisions on Guiding the Orientation of Foreign Investment;4.4. The Catalogue for Guidance of Foreign Investment Industries;The Catalogue for Guidance of Foreign Investment Industries;5.5. The Several Opinions of the Ministry of Culture, State Administration of The Several Opinions of the Ministry of Culture, State Administration of

Radio, Film and Television, General Administration of Press and Publication, Radio, Film and Television, General Administration of Press and Publication, National Development and Reform Commission and the Ministry of National Development and Reform Commission and the Ministry of Commerce on Introducing Foreign Investment into the Cultural Sector;Commerce on Introducing Foreign Investment into the Cultural Sector;

6.6. The Administrative Regulations on Management of Foreign-Invested Book, The Administrative Regulations on Management of Foreign-Invested Book, Magazine and Newspaper Distribution Enterprises;Magazine and Newspaper Distribution Enterprises;

7.7. The Administrative Regulations on the Publication Market (revised);The Administrative Regulations on the Publication Market (revised);8.8. The Administrative Regulations on Electronic Publications;The Administrative Regulations on Electronic Publications;9.9. The Administrative Measures on Subscription of Imported Publications;The Administrative Measures on Subscription of Imported Publications;10.10. The Procedure for Examination and Approval of Establishment of Chinese-The Procedure for Examination and Approval of Establishment of Chinese-

Foreign Entities, Cooperative Joint Ventures, and Wholly Foreign Owned Foreign Entities, Cooperative Joint Ventures, and Wholly Foreign Owned Publication Distribution Enterprises;Publication Distribution Enterprises;

11.11. The Measures for Administration of Chinese Foreign Contractual Distribution The Measures for Administration of Chinese Foreign Contractual Distribution Ventures of Audiovisual Products.Ventures of Audiovisual Products.

Source: WTO Request for Consultation by the United States 4/10/2007

WTO Issue: Distribution ServicesWTO Issue: Distribution Services

In Laymen's Terms:In Laymen's Terms:•Chinese rules unfairly prohibit foreign firms from Chinese rules unfairly prohibit foreign firms from engaging in distribution activities for these goods and engaging in distribution activities for these goods and discriminating between foreign and domestic distributors.discriminating between foreign and domestic distributors.

WTO Issue: Distribution of ServicesWTO Issue: Distribution of Services

Regarding Distribution Services for Publications and Regarding Distribution Services for Publications and A/V Home Entertainment Products, the US Alleged:A/V Home Entertainment Products, the US Alleged:

•Chinese measures were Chinese measures were inconsistentinconsistent with obligations with obligations made in the Uruguay Round under Articles XVI and XVII of made in the Uruguay Round under Articles XVI and XVII of the General Agreement on Trade in Services (GATS).the General Agreement on Trade in Services (GATS).

Main WTO Issue: Distribution of ServicesMain WTO Issue: Distribution of Services

•Articles XVI and XVII of the General Agreement on Articles XVI and XVII of the General Agreement on Trade in Services (GATS).Trade in Services (GATS).

•Article XVI: Market AccessArticle XVI: Market Access•“…“…each member shall accord services and service each member shall accord services and service suppliers of any other Member suppliers of any other Member treatment no less favourabletreatment no less favourable than that provided for under the terms, limitations and than that provided for under the terms, limitations and conditions agreed and specified in its Schedule…”conditions agreed and specified in its Schedule…”

•Article XVII: National TreatmentArticle XVII: National Treatment•“…“…each member shall accord to services and service each member shall accord to services and service suppliers of any other Member suppliers of any other Member treatment no less favourabletreatment no less favourable than that it accords to its own like services and service than that it accords to its own like services and service suppliers.”suppliers.”•Treatment to be considered less favourable if it modifies the Treatment to be considered less favourable if it modifies the conditions of competition in favour of its own companies.conditions of competition in favour of its own companies.

Panel Decision (1 of 3)Panel Decision (1 of 3)

China’s Accession Protocol:China’s Accession Protocol:•Concluded that a number of Chinese measures were Concluded that a number of Chinese measures were inconsistent with China’s obligation to grant “trading inconsistent with China’s obligation to grant “trading rights” because measures restricted the right of rights” because measures restricted the right of enterprises to import reading materials, films for theatrical enterprises to import reading materials, films for theatrical release, AVHE products, and sound recordings.release, AVHE products, and sound recordings.

•Article XX (a) defenceArticle XX (a) defence•Panel determined that because there was at least one Panel determined that because there was at least one other reasonably available alternative, China’s measures other reasonably available alternative, China’s measures were not “necessarily” within the meanings of Article XX were not “necessarily” within the meanings of Article XX (a)(a)


GATS Claims:GATS Claims:

•Chinese measures prohibiting foreign invested enterprises are Chinese measures prohibiting foreign invested enterprises are inconsistent with China’s national treatment commitments inconsistent with China’s national treatment commitments under Article XVI.under Article XVI.•Chinese measures imposing requirements relating to Chinese measures imposing requirements relating to registered capital and operating terms for the distribution of registered capital and operating terms for the distribution of reading materials are inconsistent with China’s national reading materials are inconsistent with China’s national treatment commitments.treatment commitments.•China’s prohibition on foreign invested enterprises supply of China’s prohibition on foreign invested enterprises supply of sound recording distribution services are inconsistent with sound recording distribution services are inconsistent with China’s national treatment commitments.China’s national treatment commitments.•Chinese measures limiting commercial presence for the Chinese measures limiting commercial presence for the distribution of video cassettes, DVDs, etc., are inconsistent with distribution of video cassettes, DVDs, etc., are inconsistent with China’s market access commitments under Article XVI and its China’s market access commitments under Article XVI and its national treatment commitments under Article XVII.national treatment commitments under Article XVII.


GATT 1994:GATT 1994:

•Chinese measures restricted distribution channels for certain Chinese measures restricted distribution channels for certain imported reading materials by requiring their distribution to be imported reading materials by requiring their distribution to be conducted exclusively through subscription, and by Chinese conducted exclusively through subscription, and by Chinese wholly state-owned enterprises.wholly state-owned enterprises.•Chinese measures limit the distribution of certain imported Chinese measures limit the distribution of certain imported reading materials to wholly Chinese-owned enterprises.reading materials to wholly Chinese-owned enterprises.•Panel concluded that these measures were inconsistent with Panel concluded that these measures were inconsistent with China’s obligation under Article III:4 of the GATT 1994.China’s obligation under Article III:4 of the GATT 1994.•Hard-copy sound recordings – panel concluded that the U.S. Hard-copy sound recordings – panel concluded that the U.S. had not demonstrated that the measures were inconsistent with had not demonstrated that the measures were inconsistent with Article III:4.Article III:4.•U.S. had not been able to demonstrate that China’s regulations U.S. had not been able to demonstrate that China’s regulations and rules established, either de jure or de facto, a duopoly that and rules established, either de jure or de facto, a duopoly that would prevent other enterprises from applying for, and would prevent other enterprises from applying for, and receiving, a license to distribute imported films. Panel found no receiving, a license to distribute imported films. Panel found no violation in respect to this claim.violation in respect to this claim.

Appeal to Appellate Body (1 of 3)Appeal to Appellate Body (1 of 3)

•Appellate body upheld panel’s conclusion regarding films Appellate body upheld panel’s conclusion regarding films for theatrical release and unfinished audiovisual products.for theatrical release and unfinished audiovisual products.

•Appellate body found that Panel did not error in findings Appellate body found that Panel did not error in findings regarding contributions made by State-ownership regarding contributions made by State-ownership requirement and by provisions excluding foreign-invested requirement and by provisions excluding foreign-invested enterprises engaging in the importation of products.enterprises engaging in the importation of products.


•Appellate body found that the Panel did error in finding Appellate body found that the Panel did error in finding that the State plan requirement in Article 42 of the that the State plan requirement in Article 42 of the Publications Regulation is apt to make a material Publications Regulation is apt to make a material contribution to the protection of public morals .contribution to the protection of public morals .

•Appellate body upheld panel’s conclusion that China’s Appellate body upheld panel’s conclusion that China’s measures prohibiting foreign-invested entities from measures prohibiting foreign-invested entities from engaging in the distribution of sound recordings in engaging in the distribution of sound recordings in electronic form are inconsistent with Article XVII of GATS.electronic form are inconsistent with Article XVII of GATS.


•Appellate body recommended that the Dispute Settlement Appellate body recommended that the Dispute Settlement Body (DSB) request China to bring to conformity its Body (DSB) request China to bring to conformity its measures found to be inconsistent with the Accession measures found to be inconsistent with the Accession Protocol, Working Party Report, GATS and GATT 1994.Protocol, Working Party Report, GATS and GATT 1994.

•On July 12, 2010 the United States and China agreed On July 12, 2010 the United States and China agreed upon a reasonable amount of time for China to comply upon a reasonable amount of time for China to comply with DSB recommendations. To be implemented by March with DSB recommendations. To be implemented by March 19 2011, 14 months from the date of the adoption of the 19 2011, 14 months from the date of the adoption of the Appellate body report.Appellate body report.

Panel FindingsPanel Findings

Sources:Sources:•Protocol on the Accession of the People's Republic of China, Protocol on the Accession of the People's Republic of China, WT/L/432, 23 November 2001 (the "Accession Protocol").WT/L/432, 23 November 2001 (the "Accession Protocol"). •WTO Request for Consultation by the United States 4/10/2007WTO Request for Consultation by the United States 4/10/2007•US International Trade Commission, US International Trade Commission, http://www.uschina.org/statistics/tradeable.htmlhttp://www.uschina.org/statistics/tradeable.html•World Trade Law, World Trade Law, http://www.worldtradelaw.net/reports/wtoab/china-publicationshttp://www.worldtradelaw.net/reports/wtoab/china-publications%28ab%29.pdf%28ab%29.pdf •WTO Summary of Panel Findings, WTO Summary of Panel Findings, http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds363_e.htmhttp://www.wto.org/english/tratop_e/dispu_e/cases_e/ds363_e.htm

US-China: Entertainment Products (DS 363) An Phong Le Melvin Mosely Matthew Moskitis.

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