The WTO battle over American film exports also began in 2007 and was won by the United States in 2009. But it was only during this year’s visit by incoming Chinese leader Xi Jinping that a settlement was concluded.
Greg Frazier, executive vice president of the Motion Picture Association of America, acknowledged the limits of that deal. Bumping the number of imported first-run films from 20 to 34 per year was hardly a revolution. The increase in studio box-office receipts from 13 percent to 25 percent still falls short of the typical 50-50 split. To get the agreement, the United States also had to agree to leave the government’s China Film Group as the country’s sole film importer.
But U.S. business officials say they accept that progress with China will always be grudgingly step by step.
“The view was, use the WTO to crack restrictions, which had been in place for 20 years, and try to set up a dynamic that will feed into commercial changes that are taking place,” Frazier said. “People look at this market, and they want to transform it. It’s not in the cards. You do what is politically feasible.”
Some U.S. executives say American companies should stay engaged in China and cut deals as they can.
“China is going to be the world’s biggest economy, and U.S. companies have to figure out how to do business there,” said John G. Rice, General Electric’s vice chairman.
Experts say it is unlikely that WTO enforcement will broadly change China’s policies. The Chinese “think they have a pretty good model, and they don’t see the WTO as an institution that can make major changes,” said Gary Hufbauer, a trade expert at the Peterson Institute for International Economics who follows U.S.-China economic relations. “Modest changes. Minor changes. But not major systemic change.”
Obama administration officials say they hope recent WTO cases will hit at the core of China’s industrial policy. That means, for example, challenging China’s export restrictions on rare-earth minerals critical to high-tech manufacturing, as well as other industrial raw materials. U.S. officials say they hope persistence — increasing the number and complexity of cases filed in Geneva — will pay off and prompt China’s policymakers to avoid adopting trade measures that they know will be successfully challenged.
“There has been a seminal shift under this administration in how the United States enforces trade agreements with respect to China and other countries,” said Timothy Reif, general counsel at the U.S. Trade Representative’s Office. “Our role is to make clear that if they are going to engage in inconsistencies, we will fight it and, when necessary, litigate it.”
Reif has hired three Mandarin-proficient lawyers over the past year to work with Katherine Tai, the office’s chief counsel for China trade enforcement, and the pace of case filings has increased. The new Interagency Trade Enforcement Center is focusing on China and has drawn in personnel from other agencies. The rare-earths challenge was considered so complex and sensitive, its preparation involved help from the Environmental Protection Agency, the State Department and intelligence agencies, and extensive deliberations with the White House.
WTO challenges are not the only tool the United States has to try to open China’s market. The Commerce Department has imposed dozens of tariffs on Chinese products considered unfairly priced or subsidized. The United States also holds regular high-level talks with China to push trade and economic issues.
But in the 10 years since China joined the WTO, the group has become the venue for a steady series of trade battles.
China was quick to settle the first cases brought against it, said Henry Gao of the Shanghai Institute of Foreign Trade, but is now fighting back more aggressively and negotiating tougher when it loses.
The country has sent promising young lawyers to programs such as Georgetown University’s Institute of International Economic Law, begun sending more participants to world trade forums and panels, and expanded Chinese organizations such as the Shanghai Institute to press its viewpoint.
The Chinese “don’t like litigation, and there was a lack of experience with the WTO system” in the early years, Gao said. But the country recognizes that the WTO is one field in “the competition for economic supremacy.”
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