On 27 November 2007, theWTO agreed to set up a panel to decide whether Chinese import restrictions and distribution rules on films, books, journals, videos and music violateWTO rules. The panel was established by theWTO’s Dispute Settlement Body (DSB) following a second request fromthe US. China refused the first request on 22 October but, under DSB rules, was not permitted to refuse a second.

The US alleges, inter alia, that: 

  • various Chinesemeasures (i) prohibit foreign service suppliers (including foreign-invested enterprises) fromengaging in certain types of distribution of publications (“master distribution” and “wholesaling of ‘electronic publications’”); and (ii) that, to the extent that foreign services suppliers are allowed to engage in distribution of publications, Chinamaintains discriminatory rules and requirements; 
  • various Chinesemeasures (i) prohibit foreign service suppliers (including foreign-invested enterprises) fromengaging in the “master distribution” of video cassettes and DVDs; and (ii) require that other types of distribution service be supplied through an entity with limited foreign participation; 
  • Chinamaintains a dual distribution systemfor films for theatrical release and that this offers fewer opportunities for the distribution of foreign films; and 
  • (i) China prohibits foreign-owned or foreign-invested enterprises fromengaging in the digital distribution of sound recordings; and that (ii)music in which certain rights are held by foreign-owned or foreign-invested enterprises is subject to content review before digital distribution (while Chinese-ownedmusic is not subject to such content review).

In its reported response, China announced its disappointment with the US complaint, which it declared wasmade “despite the amplemarket access that China grants to foreign publications, films and audiovisual products and services.”

This is, in fact, the US’s fourthWTO complaint against China in just over a year. The other threematters where theWTO is expected to make rulings in 2008 are: a US and Mexican complaint over Chinese industrial subsidies; claims by the US and the EU that China has a tax systemthat blocks imports of foreign-made auto parts; and US claims that China violates provisions of theWTO Agreement on Intellectual Property Rights (TRIPS).