Transcript WTO Issues - International trade

DS363: US – China Dispute of
Publications and Audiovisual Products
Elena Novak
Matt Mawhinney
Matt Meldrum
Agenda
• Current State of Affairs/Historical Context
• Main Thrust of Case / WTO Issue
• Position of Parties
• Laws and WTO Agreements
• Proposed Resolution / Implementation Plans
DS 363, U.S.-China: Entertainment Products
Current Climate
 Chinese government restricts the importation and
distribution of several types of entertainment products
including books, DVDs, and films for theatrical release
For Example:
China only allows 20 U.S. produced films for theatrical
release each year. For a period this number dropped to 0.
DS 363, U.S.-China: Entertainment Products
DS363: Timeline
Apr ‘07 – US Files
Dispute / Consultations
Jul ‘07 – US / EC requested
supplemental consultation
Apr ‘07 - EC requested to
join consultations
Aug ‘09 – Panel Report
Issued
Mar ‘08 – Panel
composed
Oct ‘07 – US
requested panel
Oct ‘09 – US to appeal
Sep ‘09 – China to
appeal
DS 363, U.S.-China: Entertainment Products
Oct ‘07 – DSB deferred the
establishment of panel
Nov ‘07 – DSB
established panel
Jan ‘10 – DSB adopted the report
and the panel
Dec ‘09 – Report issued by
Appellate Body
Historical Cases
• DS285 – Measures Affecting the Cross-Border Supply of
Gambling and Betting Services
• Case found that US must grant full market access in gambling and betting
services (Antigua / Barbuda)
• US unable to invoke successfully the GATS exceptions provisions
(Articles XIV(a) and XIV(c))
• US failed to show ‘necessary to protect public morals or to maintain
public order’, within meaning of Article XIV(a)
• DS161 –Various Measures on Beef (US / Australia / Korea)
• Korea’s dual retail system (requiring imported beef to be sold in separate
stores)
• Dual system virtually cut off imported beef from access to the ‘normal’
distribution outlets for beef (modified the conditions of competition)
DS 363, U.S.-China: Entertainment Products
POSITIONS OF PARTIES: USA
1. China has not fulfilled it’s end of the agreement to the WTO when it comes
to particular industries and the services and products they offer.
The four sets of products and services in questions are:
Reading material (i.e. newspapers, books) as well as their wholesalers
• Audiovisual home entertainment (AVHE) products (i.e. video cassettes, DVD’s)
and its distributors
• Sound recordings (i.e. mobile phone ringtones, songs) and its distributors
• Movies targeted for theatrical release
•
2. China fails to meet its obligations to the WTO by:
Prohibiting individuals and companies from importing the above mentioned
products
• Placing unreasonable and unjust restrictions on the distribution of above
mentioned products by any foreign entity
• Using a variety of measures to restrict and discriminate against such imported
products
•
DS 363, U.S.-China: Entertainment Products
6
POSITIONS OF PARTIES: CHINA
1.
China believes that the trading rights agreements it agreed to upon accession into the
WTO apply only to trade goods (i.e. corn, cotton, fertilizer) and not things such as
audiovisual products or films, which it considers to be services and content and thus no
subject to China’s trading rights commitments.
2.
China argues that particular measures and restrictions on trade are necessary in order to
preserve what it sees as the moral integrity of the Chinese population.
3.
China argues that the distribution of sound recordings through electronic means is not in
violation of GATS and is not inconsistent with it’s national treatment obligations GATS
Article XVII.
4.
China argues that particular measures and restrictions on trade are necessary in order to
preserve what it sees as the moral integrity of the Chinese population.
5.
China argues that the distribution of sound recordings through electronic means is not in
violation of GATS and is not inconsistent with it’s national treatment obligations GATS
Article XVII.
DS 363, U.S.-China: Entertainment Products
7
Third Parties
 No third parties joined the U.S. on this WTO case
 Foreign governments did not want to be associated with case (merit /
timing)
 Foreign policy
 Other global trade considerations
DS 363, U.S.-China: Entertainment Products
Contested Chinese Laws and Practices
 The Film Regulation & The Film Enterprise Rule
Restrict trading rights and market access of films for
theatrical release
 The Audiovisual Products Regulation & The Audiovisual Products
Importation Rule
Restrict trading rights and market access of audiovisual
home entertainment products ( e.g. DVDs, video cassettes) and
sound recordings
 The Publications Regulation
Restricts trading rights and market access of publications (e.g.
books, newspapers, magazines, and electronic publications)
DS 363, U.S.-China: Entertainment Products
WTO Agreements Involved
 China’s Accession Protocol/Accession Working Party Report
Outline of requirements for China’s accession to the WTO
and report on areas where China needs to work to bring
practices into compliance with WTO agreements
 GATT (General Agreement on Trade and Tariffs) 1994
Agreement to reduce or eliminate tariff rates and nontariff buriers
 GATS (General Agreement on Trade in Services)
Agreement to allow market access for services
DS 363, U.S.-China: Entertainment Products
China’s Accession Protocol
 Paragraph 1.2
“ The WTO Agreement to which China accedes shall be the
WTO Agreement as rectified, amended or otherwise
modified by such legal instruments as may have entered into
force before the date of accession. This Protocol, which shall
include the commitments referred to in paragraph 342 of the
Working Party Report, shall be an integral part of the WTO
Agreement.”
DS 363, U.S.-China: Entertainment Products
Accession Working Party Report
 Pararaph 84(b)
“With respect to the grant of trading rights to foreign enterprises
and individuals, including sole proprietorships of other WTO
members, the representative of China confirmed that such rights
would be granted in a non-discriminatory and non-discretionary
way. He further confirmed that any requirements for obtaining
trading rights would be for customs and fiscal purposes only and
would not constitute a barrier to trade. The representative of
China emphasized that foreign enterprises and individuals with
trading rights had to comply with all WTO-consistent
requirements related to importing and exporting, such as those
concerning import licensing, TBT and SPS, but confirmed that
requirements relating to minimum capital and prior experience
would not apply.”
DS 363, U.S.-China: Entertainment Products
GATS
 Article XVII
“1. In the sectors inscribed in its Schedule, and subject to any
conditions and qualifications set out therein, each Member
shall accord to services and service suppliers of any other
Member, in respect of all measures affecting the supply of
services, treatment no less favorable than that it accords to its
own like services and service suppliers.”
DS 363, U.S.-China: Entertainment Products
GATT 1994
 Article XX
“Subject to the requirement that such measures are not
applied in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between countries
where the same conditions prevail, or a disguised restriction
on international trade, nothing in this Agreement shall be
construed to prevent the adoption or enforcement by any
contracting party of measures:
(a)
necessary to protect public morals.”
DS 363, U.S.-China: Entertainment Products
So, are the Chinese laws consistent
with the relevant WTO
agreements?
DS 363, U.S.-China: Entertainment Products
Appellate Body Report
 Upholds Panel’s conclusion that Article 30 of the Film
Regulation and Article 16 of the Film Enterprise Rule are
inconsistent with China’s trading rights commitments in its
Accession Protocol and Accession Working Party Report
 Upholds Panel’s conclusion that that Article 5 of the
Audiovisual Products Regulation and Article 7 of the
Audiovisual Products Importation Rule are inconsistent with
paragraph 1.2 of China’s Accesssion Protocol and paragraph
84(b) of the Accession Working Party Report
DS 363, U.S.-China: Entertainment Products
Appellate Body Report Cont’d
 Found that while China may invoke Article XX(a) of GATT
19994 to justify provisions inconsistent with its obligations,
China had not established that Article 42 of the Publications
Regulation was “necessary” for the protection of public
morals
 Upholds the Panel’s conclusion that provisions of China’s
measures prohibiting foreign-invested entities from engaging
in the distribution of sound recordings in electronic form are
inconsistent with Article XVII of the GATS
DS 363, U.S.-China: Entertainment Products
National and International Interests
Parties of Interest
 Country
 China
Varying Interests
 Protection of Public Morals
 Restrict Public
 US
 Private Industry

 Recording Studios

 Distributors

 Artists
 International
DS 363, U.S.-China: Entertainment Products


Consumption
Free Market / Trade Access
Maximize Revenue / Profits
Property Rights
Freedom of Expression
Labor
Team Proposal
 Multilateral negotiations over unilateral actions
 Resolution offers the possibility of adoption of newer rules for the global trading system
 Develops / clarifies rules optimal solution to trading system
 Multilateral enforcement helps secure legitimacy / reduces political costs
 Minimize possibility for trade war that could lead to more Chinese restrictions on U.S.
multinationals (investments in China / China’s investments in U.S.)
 Uphold GATT XVII
 China must adhere to fair treatment policy to all distributors / suppliers
 Right to trade; treatment no less favorable than domestic enterprises
 Uphold GATT Article XX(a) 19994 (Public Moral Protection)
 WTO must acknowledge the importance of culture / public morals
 However, China failed to meet ‘necessity test’
 No reason to limit films being imported; alternate less trade-restrictive proposals
 Potential solution: private firms to import / government to review content
DS 363, U.S.-China: Entertainment Products
Conclusion
 Ruling won’t radically change the way business is done in China
 Ruling mainly addresses how products are distributed
 Doesn’t force Beijing to let in products it deems harmful
 Still no more than 20 foreign films imported per year
 Unless restrictions are lifted – U.S. could begin imposing duties
on Chinese goods equal to the damage caused by the restrictions
 Foreign film companies potentially could distribute directly to cinemas
and bypass the China Film Group (govt. run)
 Ruling could mean that China has to more strictly enforce
intellectual property-rights laws if it works with WTO to bring
itself into conformity
DS 363, U.S.-China: Entertainment Products
Sources
 http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds363_e.htm
 http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm
 http://www.worldtradelaw.net/articles/malawerchinalitigation.pdf
 http://www.nftc.org/default/trade%20matters/2010/TradeMattersV11N01.
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pdf
http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/08
/hollywoods_smal.html
http://www.america.gov/st/businessenglish/2009/December/20091222103457DMslahrelleK0.2171137.html
http://www.ustr.gov/trade-topics/enforcement/dispute-settlementproceedings/wto-dispute-settlement/china-%E2%80%94-measures-affe
http://www1.law.nyu.edu/journals/lawreview/issues/vol81/no2/NYU206.
pdf
DS 363, U.S.-China: Entertainment Products