WTO Says China Unfairly Restricting U.S. Music, Films

December 21, 2009

by The Associated Press

The World Trade Organization's top arbitrators upheld a ruling that China is illegally restricting imports of U.S. music, films and books, and Washington pushed forward with a new case accusing China of manipulating the prices for key ingredients in steel and aluminum production.

Monday's verdict by the WTO's appellate body knocked down China's objections to an August decision that came down decisively against Beijing's policy of forcing American media producers to route their business through state-owned companies.

If China fails over the next year to bring its practices in line with international trade law, the U.S. can ask the WTO to authorize commercial sanctions against Chinese goods.

"Today America got a big win," U.S. Trade Representative Ron Kirk said in a statement. "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. We expect China to respond promptly to these findings and bring its measures into compliance."

The Asian country's import restrictions have been a key gripe of Western exporters, who complain that China's rapid rise as a trade juggernaut has been aided by unfair policies that boost sales of Chinese goods abroad while limiting the amount of foreign products entering the Chinese market.

The probe initiated Monday by the WTO — at the request of the U.S., Mexico and the 27-nation European Union — focuses on the other half of the equation by examining China's treatment of domestic and foreign manufacturers with regards to its vast wealth of raw materials.

Washington and Brussels claim that China unfairly favors domestic industry by setting export quotas on materials such as coke, bauxite, magnesium and silicon metal. Export quotas are contentious under trade rules because they can cause a glut on the domestic market, driving down prices for local producers, while leading to scarcity and higher prices for competitors abroad.

Beijing, however, claims that the curbs are an effort to protect the environment, and says they comply with WTO rules. For its part, China is challenging U.S. trade rules on a number of issues such as poultry, and asked the WTO at the dispute body meeting Monday for a new investigation into American import taxes on Chinese tires.

Washington delayed the tire probe for another month, but the global trade referee will likely rule in all these disputes over the course of the next year.

Analysts and observers believe these Sino-American trade fights are only the beginning as President Barack Obama's administration will likely file more cases against China. Obama made campaign pledges to take a tougher approach with U.S. trading partners in the face of soaring job losses and the longest U.S. recession since World War II.

Last week, the two countries settled a dispute initiated by the Bush administration in December over subsidies that China allegedly provides to exporters of famous Chinese merchandise. Beijing agreed out-of-court to eliminate the subsidies, according to the office of the U.S. Trade Representative, which will boost the prospects of U.S. exporters of household appliances, textiles, chemicals, medicines and food products.

The media dispute with China focused on a number of complaints raised by the trade associations representing record labels such as EMI and Sony Music Entertainment; publishers including McGraw Hill and Simon & Schuster; and, to a lesser extent, the major Hollywood studios of Warner Bros., Disney, Paramount, Universal and 20th Century Fox.

The WTO made no finding that implies it is illegal for Beijing to review foreign goods for objectionable content. But it said China cannot limit the distribution of U.S. goods to Chinese state-owned companies, and said the Asian country's burdensome restrictions were not "necessary" to protect public morals.