U.S. winning WTO ruling on China's film barriers

WASHINGTON (Reuters) - The United States appears to have won a victory against Chinese barriers to imported films, books and recorded music in a preliminary World Trade Organization ruling not yet made public.

"We've always felt like we've had a pretty strong case on the matter," a U.S. official told Reuters. "We're still feeling pretty good."

The official declined to provide further details because the decision is still confidential. A public ruling is expected in coming months.

A U.S. victory would mark a significant milestone in Washington's longtime battle against piracy in China, which the United States says costs its film, music and book industries billions of dollars in lost sales every year.

However, WTO rulings are often complicated documents, giving both sides grounds to declare victory.

China is one of the fastest-growing movie markets in the world, but only allows 20 imported films per year.

That and other market access barriers creates huge Chinese demand for pirated DVDs, CDs and books, Washington argues.

The limit of 20 foreign films per year is double what China allowed before it joined the WTO in 2001.

But in a case that began in April 2007, the U.S. Trade Representative's office said Beijing uses other measures to limit imports of films, books and recorded music that violate commitments China made to open its market.

China promised to let foreign companies to import books, newspapers, DVDs, sound recordings and films for theatrical release, but in fact only allows state-owned "monopolies and oligopolies" to do that, the United States said.

Beijing also has not followed through on a commitment to give foreign companies distribution rights within China and has violated a WTO rule requiring that foreign books, music and films receive the same treatment as their domestic counterparts, the United States said.

According to a U.S. government brief, one of China's arguments in the case was that a film is not a "good" because it "consists of a sequence of pictures that is projected on a screen in rapid succession and accompanied by a soundtrack."

That "intangible" nature exempted films from the commitments China made on goods, Beijing argued.

U.S. lawyers ridiculed this argument, noting "the fact that a good is used to provide a service does not mean that the good is not a good."

"For example, stethoscopes are goods that may be imported. The fact that the stethoscope is subsequently commercially exploited by health care service providers in order to examine patients does not mean that the stethoscope is not a good," the U.S. lawyers said in a July 2008 brief.