Hollywood Wins at the WTO, Chinese Culture Never to be the Same

Today, the WTO released a ruling in favor of the U.S. in its complaint against Chinese restrictions on imports of U.S. entertainment and media products.

The ruling addressed a number of contentious trade issues.  For example, are intellectual goods to be treated as manufactured goods under trade law? Also at stake is the use of “cultural protection” as an excuse for trade restrictions. 

I’m going to focus on the second one for now. 

The WTO has struggled since its inception with “trade and…” issues because trade comes into conflict with other values that certain countries may prioritize.  Environmental goals, food and health regulations, and labor standards are the most commonly discussed.  And there is nothing ostensibly perverse about these pursuits.  However, they often mask protectionism.

So that’s where WTO law comes in.  Members agree to uphold the principles of non discrimination and national treatment, basically not discriminating in favor of domestic producers or certain countries at the disadvantage of others.  

I am not in agreement with (and maybe not in the majority of) other free traders, but I believe that a country is not a threat to the free trading system if it democratically decides to elevate another of these goals ahead of trade so long as it respects the two major planks of WTO law (see the seal trapping case between Canada and the EU.)

But you’ll notice a couple of problems with China’s case.  First of all, the “trade and…” issue is culture.  Culture is different from the other goals I mentioned because by definition it violates the principle of national treatment.  A country is saying that a certain tradable good produced domestically is so integral to a national culture that it desevers protection.  China used the excuse for its entertainment and media restrictions, including one that limits the number of annual Hollywood movie releases to 20 and creates incentives for pirating. 

China is only the most recent to jump on the culture bandwagon.  France has been at this for years, defending French film, among other goods.

But here’s the key point: culture changes.  It is what a people want to be.  If French or Chinese people want to pay to see Batman– like it or not–that is a part of French or Chinese contemporary culture.  If Chinese films are good and reflect the culture the government is supposedly trying to protect, then people will go see them. 

Of course, this case wasn’t as simple as a French restriction put in place by a democratic government.  And that brings me to the second problem: “trade and…” restrictions in general are okay by me if democratically decided.  China doesn’t have that ability.  What is the WTO to do with unfair trading rules decided by an authoritative government?

The answer is to give a partial victory to the plaintiff.  The entertainment and media controls are not really about culture.  They’re about censorship.  And the U.S. complaint went for the kill, arguing that censorship laws were non-tariff barriers to trade.   The WTO declined to respond to that argument and, instead, addressed more minor restrictions through the lens of a culturally-based trade regulation. 

To call censorship laws a threat to a liberal trading regime is to call non-democratic government a threat to a liberal trading regime.  And that flies in the face of the whole idea of the WTO in the first place.  It was never intended as a democracies-only club.

 The WTO panel found a way to dismiss “trade and culture” complaints, throw a bone to anti-China interests in the U.S., and preserve its institutional integrity.  Not a bad day.

Photo of a work by Wang Guangyi from Michael Berger Gallery, Pittsburgh, PA.

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