I’ve had some time to think about the announcement that the US was going to file two WTO cases this week against China, one on IP enforcement and the other on import restrictions of media products.

I have yet to comment on the merits of the cases themselves since I’m still trying to figure out the strategy here. My conclusion thus far is that I need some inside information to determine what really happened over the past week.

Last week we had a new Judicial Interpretation by the Supreme People’s Court that essentially lowered the threshholds for criminal enforcement of, primarily, digital entertainment products (i.e. stuff on CDs and DVDs).

The press reports from the US, the ones with background comments from US officials, noted that the cases were based on the following: 1) restrictions on foreign books and movies; and 2) [quoting the Bloomberg story] “China sets too high a value on pirated movie or music disks before prosecuting violators.” The latter is based on a TRIPs, Article 61 legal theory – maybe I’ll get into this tomorrow if I have time.

OK, in other words, the basis of one of these cases is the exact same legal issue that was the subject of last week’s Judicial Interpretation. So there are two possible theories here:

1) China learned/was told of the pending WTO cases and rushed through the Judicial Interpretation in order to hold off US filing of the case(s).

2) The Judicial Interpretation was released coincident to the US WTO actions.

Since I don’t believe in coincidences, particularly in this case, I’m going to believe that the US has been threatening China in a really big way through USTR or perhaps Department of Commerce channels. Knowing that this was coming, China pushed through the Judicial Interpretations at the eleventh hour.

Next question: if the US succeeded in getting China to do this, what will they do now with their threat? Will they follow through with filing the cases? Again, two possibilities:

1) China promised not only the Judicial Interpretations, but something else. US will proceed until the rest of the deal comes through.

2) US will pull the plug at the last minute, or perhaps during the 60-day consultation period after filing, citing China cooperation. [FYI, WTO Dispute Settlement Understanding, Article 4(7) provides for a mandatory 60-day consultation period before a panel can be established. See WTO DSU text here.]

No surprise, but I’m pulling for option 2, since that would mean I am still technically correct in my prediction, which was that the US would not proceed with dispute settlement under the TRIPs agreement.

Well, this is certainly exciting stuff. Hope I can sleep tonight.