Many consider China to be the next world superpower. They have the resources, population and organization to challenge the US for this mantle in the near future. The US and China are each other’s second largest trading partner, with the value of two-way trade in goods worth $408 billion in 2008. However, legally, China is well behind their Western counterparts.
The World Trade Organisation (WTO) has ruled that China’s limits on the sale of books, films and music from the US are unfair and inequitable. The WTO found that the behavior of the Chinese violates global commerce rules.
The WTO judges largely sided with the complaints of Barack Obama’s administration that the Chinese Government is forcing US companies to sell copyright-protected products through China’s two state-approved businesses, the China Film Group and Huaxia.
However, where to from here? David Cohen, an economist with Action Economics in Singapore stated, “[w]e have to see whether [the judgment] can be enforced; I suspect there’s a lot of skepticism about that”.
Some analysts are arguing that improvements in China’s intellectual property laws may help US companies more than changes in its current importation policies.
Dan Glickman, CEO of the Motion Picture Association of America (MPAA) stated that “[t]he Chinese system for distributing US film to Chinese audiences is among the most restrictive and burdensome in the world”. The MPAA views China as a haven for intellectual property pirates who have almost totally usurped the place of a legitimate home entertainment sector. The International Property Alliance has estimated US copyright losses in excess of $3.5 billion a year.
China sets a quota on the number of foreign films that can be imported each year and requires the 20 movies that obtain the most lucrative “revenue sharing” terms to be distributed by one of the two state-owned enterprises. There are approximately 50 film distribution firms in China and many people within the US entertainment fraternity are hoping that the WTO decision will result in them having access to these other Chinese distributors.
In their 469 page report issued on the Geneva-based trade arbiter’s web site, the WTO judges state that China should “bring the relevant measures into conformity with [their] obligations”.
However, the decision was not entirely critical of China. Judges agreed with Chinese submissions that their criminal law is strong enough to deter piracy. The ruling also rejected Washington’s argument that Chinese censorship of music hampered sales.
Chinese officials have voiced their discontent with the decision and have stated that the outcome will “severely damage” trade ties. They have expressed their intention to appeal the decision. They have also defended their media controls as being required to ensure the eradication of offensive content and to protect public morals.
Some analysts argue that the government is attempting to build-up China’s state-owned film studios and other media to promote the ruling party’s political agenda in China and abroad.
China’s copying of movies, music and software cost companies $2.2 billion in 2006, according to an estimate by lobby groups representing big-hitting entertainment companies such as Walt Disney Co.
Google Inc’s Chinese-based search engine and global music labels launched an advertising-supported, free music download service in March of this year, to compete with pirates.