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The following story is from the October 15 issue of International
Trade Reporter
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U.S. Files Counter-Appeal Against WTO
Ruling on Chinese Audiovisual Restrictions
GENEVA—The United States has filed a counter-appeal against part of a World Trade Organization ruling on a U.S. complaint targeting Chinese restrictions on trading and distribution services for publications and audiovisual products sold in China.
The U.S. counter-appeal filed Oct. 5 targets only one of the panel's findings, that backing China's claim that its restrictions on firms importing print publications could be characterized as necessary to protect public morals (26 ITR 1129, 8/20/09).
Other findings of the panel that favored China, including the panel's rejection of U.S. claims that China's duopoly for film distribution violated WTO rules by discriminating against foreign film imports and that China's censorship regime for music transmitted over the internet discriminates against imported hard-copy CDs, went unchallenged by the United States.
In all, the panel issued 76 findings on the U.S. complaint, including rulings on procedural issues as well as substantive matters.
While less than half of those findings were favorable to the United States, the panel backed key U.S. claims that China's restrictions on foreign suppliers of books, newspapers, periodicals, DVDs, sound recordings, and digitalized music distributed over the Internet violated nondiscrimination provisions and market access commitments under the WTO's General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), and China's 2001 WTO accession protocol.
Beijing filed an appeal Sept. 22 against some of the panel's findings against China, including the panel's findings on China's “public morals” defense which is also the object of the U.S. appeal
(26 ITR 1286, 9/24/09).
Article XX of the WTO's General Agreement on Tariffs and Trade sets out certain exceptions that WTO members can cite to justify restrictions on trade which would otherwise be illegal. One of these exceptions is the right to impose restrictions considered “necessary to protect public morals” (Article XX (a)).
China Claims ‘Public Morals.’
China argued before the panel that its content review requirements (i.e., censorship) for imported reading materials and audiovisual products were necessary for the protection of public morals, adding that the content of those goods “may collide with standards of right and wrong conduct which are specific to China.
The “public morals” claim was used by China to defend regulations such as Article 42 of its Publications Regulation, which requires that firms engaging in the import of publications conform with a state plan for the number, structure, and distribution (geographical coverage) of the importing entities. The plan limits the number of import entities and requires extensive geographical presence through branches, with branches located close to customs entry points.
The United States said it was not challenging China's right to determine its desired level of public protection but rather the means China has chosen to achieve those ends. In specific, the United States said China failed to show that the measures in question were “necessary”
to achieve its objectives.
In particular, the United States said China could still achieve its public morals objectives through other, less trade-restrictive means. The United States noted that domestic producers of publications and audiovisual products in China carry out their own in-house content review and that a similar arrangement could be envisaged for foreign firms.
Finding That Restrictions Necessary
The panel agreed with the United States that China's Article XX (a) defense failed on this “necessity” criteria, declaring that China either failed to make the case that the measures in question were necessary or that other, less trade-restrictive measures were not reasonably available to China.
But in a finding which displeased Washington, the panel said the Article 42 restrictions on the number, structure and distribution of publication importers can be characterized as “necessary” to protect public morals in the absence of reasonably available alternatives.
In particular, the panel said the requirement that importers comply with China's state plan “is apt to make a material contribution to the protection of public morals,” that it was “likely to minimize unnecessary delays in importing,” and that it does not “a priori exclude particular types of enterprises in China from establishing an import entity.”
By Daniel Pruzin
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