China Agrees Increased Access For US Movies

by Leroy Baker, Tax-News.com, New York

22 February 2012

Vice President Joe Biden has announced that China has agreed to increase significantly the access on commercial terms for United States movies in its market, so as to resolve outstanding issues related to films after the latter’s victory in a World Trade Organization (WTO) dispute last year.

The US initiated the underlying WTO dispute in April 2007. In the dispute, it sought to address significant market access concerns relating to China’s treatment of films for theatrical release, as well as other cultural products, such as audiovisual home entertainment products (for example, video cassettes and DVDs), sound recordings and publications.

With regard to films, a WTO panel found, in a report issued in August 2009, that key Chinese film import restrictions were inconsistent with China’s WTO obligations. In December 2009, after China appealed, the WTO Appellate Body rejected China's claims and upheld the panel's findings.

China promised to come into compliance by March 2011, but then informed the US at the deadline that this would not be possible. The two sides have been making efforts to resolve their differences since that time.

On a global basis, films and other audiovisual services are a key export sector in which the US enjoys a USD12bn trade surplus. In addition, the Chinese film market is large and growing quickly; last year, Chinese box office revenue was up to USD2.1bn. Much of this revenue came from 3D titles, which are a rapidly growing sector of the film industry.

The new agreement allows more American exports to China of 3D, IMAX, and similar enhanced format movies on favorable commercial terms, strengthens the opportunities to distribute films through private enterprises rather than the state film monopoly. It also ensures fairer compensation levels for US films distributed by Chinese state-owned enterprises.

The agreement will be reviewed after 5 years to ensure that it is working as envisioned. If necessary, the US can return to the WTO to seek relief.

“This agreement with China will make it easier than ever before for US studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry,” said Biden, after meetings in the Los Angeles area with China’s Vice President Xi Jinping.

“US studios and independent filmmakers cite China as one of their most important world markets, but barriers imposed by China and challenged by the US in the WTO have artificially reduced the revenue US film producers received from their movies in the Chinese market,” said United States Trade Representative Ron Kirk. “This agreement will help to change that, boosting one of America’s strongest export sectors in one of our largest export markets.”

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