WTO orders China to liberalize media imports

The World Trade Organization has upheld a ruling that China is illegally restricting U.S. imports of music, films and books.

The decision, issued Monday in Geneva,could force China to liberalize imports of mediain the next year or face sanctions.

China forces creators of DVDs, books, filmsand music to route their products through state-owned companies.

Complaints against the practice had been raised by the trade associations representing record labels such as EMI and Sony Music Entertainment, publisherssuch asMcGraw Hill and Simon & Schuster and a group of Hollywood studios.

In August, the WTO ruled the Chinese government must stop forcing U.S. artists and production companies to use state-controlled distributors and allow foreign companies to sell online music.

In September, China appealed the ruling on the grounds it was defending its "public morals."

The WTO appeals body agreed that Beijing may review foreign goods for objectionable content, but it added that the current distribution restrictions were not "necessary" to protect public morals.

Its decision could open the door for companies such as Apple's iTunes, which has not been able to sell directly to the Chinese market.

China must bringits practices in line with international trade law in the coming year, the WTO ruled.

China allows only 20 U.S. movies into the country every year through its state-owned movie distributor. The WTO did not directly address this quota, but said China Film "can no longer be the monopoly importer."

The runaway success in China of this year's Transformers: Revenge of the Fallen and Michael Jackson's This Is It have somewhat mollified Hollywood and the studios are also moving into the Chinese market by investing in co-productions with Chinese moviemakers.

The U.S. is the world's biggest exporter of entertainment products, and had atrade deficit with China of $166 billion US in the first nine months of 2009.

U.S. firms also hope that liberalizing of trade rules will provide them with more tools to fight the black market in American movies and other entertainment products in China.