OK, this is another intermediary post, no overall conclusions yet.
I wanted to break out one important issue since I have a feeling that the reporting on this might be a little fuzzy.
One of the US complaints was that foreign companies were barred from certain activities in China, including distribution and importation of these A/V products.
One of China’s defenses was based on GATT 1994 Article XX(a), which provides:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
(a) necessary to protect public morals;
When you put aside all of the technical mumbo-jumbo, you are left with a relatively simple issue: can China’s restrictions in the entertainment industry regarding distribution and import of these products be justified by invoking content restrictions/reviews?
The GATT/WTO certainly allows nations to restrict products like this based on content because of public morals. So no argument there.
But the US here said that despite this, China was not able to adequately justify why it not only restricts content, but also the enterprises involved in importation and distribution.
Essentially, China was saying that proper content review requires control over the entities involved in importation and distribution, while the US argued that those are apples and oranges (i.e. two completely separate things).
I completely agree with the US position here:
The United States argues that content review, which is China’s concern, is independent of importation and can be performed by individuals or entities unrelated to the importation process at any time before, during or after that process. The United States observes in this regard that CNPIEC – the monopoly importer of AVHE products and sound recordings – conducts content review before it even begins negotiating importation.
Simple enough. If you can imagine a tough content review process put into place that adequately stops content that goes against public morals from being approved, who cares which company is doing the importing and/or distributing?
Very easy to understand, no? In other words, these restrictions are simply unnecessary, and according to WTO law, a measure is found to be unnecessary where a WTO-consistent alternative is available. End of story.
The linkage between these restrictive provisions and the policing of public morals was not demonstrated by China to the satisfaction of the Panel, and the provisions therefore were not found to be necessary.
Considering that it is not apparent to us that the requirements in question make a contribution to protecting public morals and that they completely deny the right to import to relevant enterprises in China, they cannot, in our view, be characterized as “necessary” restrictions of the right to trade, even though the protection of public morals is a highly important interest and their restrictive impact on trade may seem limited.
We therefore conclude that China has not demonstrated that Articles X.2 and X.3 of the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; or Article 21 of the Audiovisual (Sub-)Distribution Rule are “necessary” to protect public morals in China.
OK, general conclusions in the next post (I promise).