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A World Trade Organisation panel was established in 2007 to investigate distribution policy in China following a complaint filed by the US Trade Representative in April of that year.  Their findings – that China was indeed in violation of international trade rules – also applied to the importation and distribution of DVDs, music, books and journals.

At the time of the finding, US and other foreign countries had to negotiate with China’s China Film Group and the State Administration of Radio, Film and Television to secure any of only 20 available slots for foreign films, which meant that they were effectively excluded from dealing with other Chinese distributors.   Chinese representatives, however, denied that foreign film companies were prohibited from approaching other distributors.   American distributors also had very little control over films that did manage to win distribution deals, with films often being removed from circulation without explanation.   It was also argued that the restrictions were a key contributor to the thriving market in pirate DVDs in the country.   With a population of over 1.3 billion, the potential rewards to the American film industry were immense.

Dan Glickman, the Chair-CEO of the Motion Picture Association of America, said, 'The WTO decided in the US government’s favour on virtually every count, declaring some of China’s most difficult barriers to its entertainment market to be clear violations of international trade rules.   The decision points a way forward that will begin to even the playing field in this important market.

‘The Chinese system for distributing US films to Chinese audiences is among the most restrictive and burdensome in the world.’

Ron Kirk, an official with the Office of US Trade Representative, said the US government would be ‘keenly watching China’s adherence to their obligations.’   He also added: "We've created an opportunity for American companies to go and talk with other distributors within China that might be well suited to distribute those films. We are taking the Chinese government at its word, and we hope they comply.’

China was given the opportunity to appeal the ruling before it was put forward to the full World Trade Organisation for ratification.

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