China Tells WTO To Be Patient on Movie Market Opening

China says it respects the trade ruling, then complains about it.

BEIJING – Two weeks have passed since China promised to tell the World Trade Organization what it’s doing about allowing an agreed upon rise in foreign participation in the distribution of movies at its booming box office and all that’s come out of Beijing is a plea for patience and a complaint about the world trade body.

A December 2009 WTO ruling said China -- where gross ticket sales leaped 64 percent to $1.5 billion in 2010 -- must open its film industry’s distribution sector and loosen the duopoly of the state-run China Film Group and its sister company Huaxia Film Distribution. 

In a statement obtained by The Hollywood Reporter on Thursday, the Chinese delegation to the WTO’s Dispute Settlement Body asked “relevant WTO members” “to understand the difficulty and complicated situation China is facing during the process of implementation."

Dated March 25, the statement, a “status report” required by WTO rules, was read aloud at the trade body where Yi Xiaozhun is China’s ambassador, almost a week after the March 19 deadline to comply with the ruling that favored the plaintiff, the United States.

The one-page status report was meant to bring the WTO up to date on China’s required “Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products.” The WTO ruling also suggested an opening of China’s markets to foreign participation in the distribution of television, music and books.

The Chinese side said in the report it “respects the ruling and recommendations” of the WTO’s Dispute Settlement Body but has “reservation opinions on reports of the appellate body [the DSB] and the panel on this dispute.”

“This dispute involves a number of Chinese administrative measures on cultural products and is embodied with more complexity and sensitivity than other disputes,” the statement said.

China told the WTO it has made “tremendous efforts” to implement the WTO’s rulings and recommendations, including “regulations on the management of publications” and “regulations on the management of audiovisual products and “a number of rules at (sic) ministerial level.”

The statement did not detail these rules and regulations.

China joined the WTO in 2001. In 2007, the U.S. brought the complaint to the world trade body. The 2009 ruling that China had broken world trade rules by restricting the import of foreign movies and other media was celebrated as a victory by Hollywood.

Although the ruling did not address China’s annual 20-title cap on imported films allowed to share in a percentage of the gross ticket sales they generate, Hollywood studios hoped that opening the distribution system would lead to greater market access.

Hollywood films on average gross more at the Chinese box office than their Chinese-language competitors. Last year, Avatar grossed about $200 million in China alone, roughly double the box office take of Let the Bullets Fly, the most commercially successful Chinese film of all time.

Thus far, China’s brief statement around the WTO deadline has received little or no attention in the Chinese media and elicited scant reaction from U.S. trade representatives and the Motion Picture Assn. Both bodies issued statements saying that while “disappointed” in China, they trust that the country will open its markets in due course.