## Facts

- The United States challenged multiple Chinese measures regulating the importation and distribution of publications and audiovisual entertainment products, including books, newspapers, periodicals, reading materials, DVDs and other home-entertainment products, films for theatrical release, and sound recordings distributed online and physically.
- The measures operated as a coordinated set of rules that reserved or tightly conditioned trading rights (especially importation) for covered goods to state-owned or state-designated enterprises and excluded foreign-invested enterprises from engaging in certain importation and distribution activities.
- The United States alleged violations of China’s trading-rights commitments in its Protocol of Accession, and violations of GATT 1994 (including Articles XI:1 and III:4) and GATS commitments (notably for sound recording distribution services).
- China defended key restrictions as necessary to protect public morals by maintaining control over the content of cultural and entertainment products, invoking GATT Article XX(a).
- A WTO panel largely ruled for the United States; China appealed several findings, and the United States filed a conditional other appeal on certain legal interpretations.

## Issues

1. Whether China’s Protocol commitment to ensure all enterprises have the right to trade in all goods (subject only to negotiated exceptions) applied to films for theatrical release and unfinished audiovisual products.
2. Whether China’s state-ownership/state-designation requirements and exclusion of foreign-invested enterprises could be justified under GATT Article XX(a) as measures necessary to protect public morals.
3. Whether China’s GATS schedule entry for “sound recording distribution services” covered distribution of sound recordings through physical and electronic channels, and whether the challenged measures imposed unscheduled market-access and national-treatment restrictions.

## Decision

- The Appellate Body largely upheld the panel’s findings that China’s measures restricting importation and related trading rights to state-owned/state-designated entities breached China’s Protocol trading-rights obligations and were inconsistent with GATT obligations, including Articles XI:1 and III:4.
- The Appellate Body rejected China’s reliance on GATT Article XX(a) to excuse the trading-rights-related restrictions, concluding China did not demonstrate the measures were necessary to protect public morals given reasonably available, less trade-restrictive alternatives.
- The Appellate Body clarified and largely upheld the panel’s interpretation of China’s GATS commitments on sound recording distribution services, concluding that certain restrictions on foreign participation violated GATS Articles XVI (market access) and XVII (national treatment) because they were not covered by scheduled limitations.
- The Appellate Body recommended that China bring the measures into conformity with WTO obligations.

## Legal Principles

- Accession-protocol trading-rights commitments are construed as general grants covering “all goods” unless an express negotiated exception applies; a Member may not add unilateral carve-outs beyond the protocol’s listed exceptions.
- GATT Article XX(a) “public morals” permits Members to pursue moral-protection objectives and affords discretion in defining public morals, but the defending Member must show the challenged measure is “necessary,” considering the objective’s importance, the measure’s contribution, trade restrictiveness, and reasonably available less restrictive alternatives.
- A state-channeling requirement (e.g., limiting importation/distribution to state-owned or state-designated entities) is not “necessary” under Article XX(a) where content review can be achieved through less trade-restrictive tools such as non-discriminatory licensing, universal submission to review, and enforcement penalties.
- GATS schedules are interpreted using customary rules reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties, focusing on ordinary meaning, context, and object and purpose.
- The interpretive concept of in dubio mitius cannot displace Vienna Convention analysis to artificially narrow commitments where text and context indicate broader coverage.
- Measures that reserve service-supply opportunities or restrict foreign participation in committed service sectors may constitute prohibited market-access limitations (GATS Article XVI) and less favorable treatment (GATS Article XVII) absent scheduled limitations.

## Conclusion

The Appellate Body held that China’s state-centered restrictions on importing and distributing certain publications and audiovisual products violated its accession trading-rights obligations and related GATT and GATS commitments, and that China failed to justify key restrictions under the public-morals exception because less trade-restrictive, reasonably available alternatives could achieve content-control objectives.


China—Measures Affecting Trading Rights & Distribution Services for Certain Publications & Audiovisual Ent. Prods., WTO Doc. WT/DS363/AB/R (App. Body Jan. 19, 2010)