China Loses Dispute over U.S. CDs, DVDs

The U.S. has largely prevailed in a trade dispute with China over restrictions on the sale there of American CDs, DVDs, books and computer software.

Officials familiar with the World Trade Organization ruling are telling The Associated Press that the WTO found Beijing is breaking trade rules by forcing U.S. goods to be sold through Chinese state-owned companies.

The WTO's verdict comes as the administration of President Barack Obama is being pressed by Congress to be tough over trade rules with China.

The ruling in the case, filed during the preceding Bush administration, was released to Beijing and Washington last month, but will only be made public on Aug. 12. It finds that Beijing is breaking commerce rules by forcing U.S.-made goods, from magazines to video games, to be sold through Chinese state-owned companies, the officials said.

But, as with most WTO rulings, the officials say the ruling stops short of a complete U.S. victory, as the three-member panel delivered mixed findings on Chinese censorship rules that apply to American-made goods, but not to Chinese products. It also permits China to make U.S. films go through one of two designated distributors to be shown in Chinese cinemas, a requirement not required of Chinese movies.

The officials who had reviewed the ruling spoke on condition of anonymity because of confidentiality rules ahead of publication. The Office of the U.S. Trade Representative and the Chinese Commerce Ministry have declined to comment.

The ruling will also be of interest to a variety of American media producers from Hollywood to Silicon Valley, who argue that discriminatory Chinese rules are costing American media companies millions of dollars. The dispute includes a complaint about Chinese censorship of music recording downloads in China, such as those sold by Apple Inc.'s iTunes store.

The WTO can authorize retaliatory sanctions against countries unwilling to bring tariffs, subsidies and other trade practices in line with international agreements, but generally only after years of litigation. Washington and Beijing can appeal the verdict.

The decision was handed to the governments on June 23, the same day the United States and European Union hauled China to the WTO over allegations Beijing was favoring domestic industry by limiting exports of materials needed to produce steel, aluminum and other products.

Beijing retaliated by saying it would ask for a formal WTO investigation into an American ban on Chinese poultry, as months of relative calm between the two trading powers ended.

When the WTO launched the investigation in November 2007, it marked the fourth official U.S.-China dispute in little over a year as ex-President George W. Bush's administration stepped up pressure on Beijing.

The Geneva-based trade body backed the Bush administration, Canada and the 27-nation European Union by ruling that China was illegally blocking imports of foreign-made auto parts. Last year it also partly sided with Washington in a separate dispute over Chinese product piracy and counterfeiting, while a U.S.-Mexican complaint over Chinese government subsidies in manufacturing was settled out of court.

Washington's trade deficit with Beijing rose 4.4 percent to $17.5 billion in May, but is running 12.6 percent below last year. American manufacturers see the undervalued yuan as the major culprit in the trade deficit with the Chinese, which last year hit $266 billion, the highest recorded with one country.