Believe it or not, I’ve been writing about this WTO dispute since 2008, including three posts on the panel decision (this is a good place to start since it includes links), as well as comments on the appeal and failure of China to meet self-imposed remediation deadlines.
Last Friday, the U.S. and China finally agreed to a settlement with the signing of a Memorandum of Understanding, the major details of which were released.
From the U.S. Trade Representative:
Vice President Joe Biden announced today that China has agreed to significantly increase market access for U.S. movies in order to resolve outstanding issues related to films after the United States’ victory in a World Trade Organization (WTO) dispute last year.
[ . . . ]
The 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, and ensures fairer compensation levels for U.S. blockbuster films distributed by Chinese state-owned enterprises. The agreement will be reviewed after 5 years to ensure that it is working as envisioned.
If you remember way back to the beginning of this dispute, the U.S. complaint was that although China had promised when it joined WTO that it would liberalize both the import and distribution of certain audio visual products, it had not done so according to schedule.
China responded to the WTO dispute, claiming that it could not open up such markets for a variety of reasons, in particular because doing so would jeopardize its domestic censorship policies (which are WTO consistent, by the way).
The WTO ultimately found for the U.S., essentially holding that China’s censorship and cultural control policies could still be adequately maintained even if import and distribution were opened up. For what it’s worth, this always made a lot of sense to me. It really doesn’t matter who imports and sells movies as long as the products meet all censorship requirements, right?
Anyway, since China lost the appeal, it has been in numerous talks with the U.S. about how best to fix the problem. As you can imagine, the bigfoot U.S. entertainment industry wasn’t about to let this slide.
So how best to characterize this settlement? Well, certainly there was give and take on both sides:
Beijing will permit 14 premium format films, such as IMAX or 3D, which will be exempt from the quota, as will the 2D versions of the films, a U.S. trade official said.
The Chinese box office share for U.S. studios also will increase under the master contract to 25 percent from around 13.5 percent to 17.5 percent, the official said.
On the U.S. side, more movies will be coming in to China, and US studios will be getting a bigger slice of the box office pie. On the China side, the basic import quota will remain in place and its firm control of the industry will not change. Note that the additional imports also mean more gross revenue for domestic cinemas, which will be taking less off the top and giving a bit more to foreign distributors.
Hard to say who got the best end of the deal. Fourteen additional titles is a big increase, although these “premium format” films are presumably big budget CGI-ish theatricals that China can’t really compete against anyway.
Moreover, emphasis on these types of movies places all the foreign benefits into the hands of the major U.S. studios that have the financial wherewithal to produce this high-ticket stuff. I was therefore amused at Vice President Biden’s statement:
This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry[.]
Independent filmmakers? Ha!
As to the box office take, the increase sounds good too, although keep in mind that it’s notoriously difficult for foreign distributors to monitor and verify these numbers. Will distributors see some of that increase eroded via questionable accounting practices of cinemas? I suppose that was taken into account during the negotiation.
I find it interesting, though, that no one seems to be questioning whether the settlement actually fixed the defects identified by the WTO. Seems to me like it doesn’t. As to imports and distribution, will foreign firms now be able to get into that business? The USTR language is far from clear, saying that the deal:
[S]trengthens the opportunities to distribute films through private enterprises rather than the state film monopoly[.]
[E]nsures fairer compensation levels for U.S. blockbuster films distributed by Chinese state-owned enterprises[.]
Seriously, what does this mean? Which private enterprises? How will they be approved and who can qualify? Why do I feel like this issue is being swept under the carpet now that the major film studios got a few concessions?
To be fair, I suppose this is the best deal that Hollywood could get. It does, however, tell you something about the importance of “free trade principles.” Keep this in mind the next time you see a press release from the U.S. government complaining about protectionism. At the end of the day, profit sharing is much more important than free trade.
Finally, during this entire dispute, the one issue that drove me absolute batshit was the media’s frequent mistaken belief that the WTO decision called into question China’s right to institute an import quota and/or a censorship regime. This was never the case, but it’s hard to argue with a sexy headline.
Now that a settlement has been reached, I hope everyone can relax and admit that censorship is alive and well (and WTO consistent), as is the import quota.
© Stan for China Hearsay, 2012. |
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Post tags: censorship, film quota, movies, world trade organization, WTO