Edward Alden [Bernard L. Schwartz Senior Fellow, Council on Foreign Relations]: "Under normal circumstances, China's decision to appeal a recent World Trade Organization ruling against Beijing's restrictions on the import of foreign films, books and music would scarcely have been noticed. In the 13-year history of the WTO's experiment with binding dispute settlement, about 70 percent of the panel decisions have been referred to the organization's highest court, known as the appellate body. In most countries, public opinion does not permit knuckling under to a WTO ruling until all the legal options have been exhausted.
Furthermore, China is likely to lose the appeal. In its defense, China is citing the rarely used "public morals" clause that permits countries in certain cases to block imports or take other discriminatory measures deemed "necessary to protect public morals." Certainly there is much coming out of Hollywood that would offend morality almost anywhere, but that claim has only been tested once before and failed miserably. The United States tried the tactic in its effort to block tiny Antigua and Bermuda from offering offshore online gambling to US residents, a plea the appellate body struck down in 2005. (There is a fine account of the dispute in Paul Blustein's just-published book Misadventures of the Most Favored Nations, which I highly recommend.)
So why all the fuss? The big reason is that, even as the leaders of the G-20 are gathering in Pittsburgh to renew their pledge to eschew protectionism is all its guises, they are doing just the opposite. A copious report released this week by Global Trade Alert, a group of London-based scholars monitoring recent developments in world trade, warned of a growing "protectionist juggernaut." While that is a bit too alarmist, the authors show that the number of beggar-thy-neighbor trade measures has grown considerably in the past year.
The United States, despite the controversial recent decision by President Obama to slap high tariffs on imports of Chinese tires, is far from the worst offender. Depending on the metric, Russia, Germany, Ukraine and China have taken the most protectionist moves, with the US scarcely in the top 10. But the US, long the flag bearer for trade liberalization, is rightly expected to adhere to a higher standard. And, not surprisingly, the Chinese are determined to discourage any similar actions by the US in the future.
In the wake of the tire decision, China announced that it would consider new restriction on imports of American chicken and auto parts. The US steelworkers union, fresh off the tire victory, is seeking tariffs on imports of paper from China and Indonesia. In this context, the Chinese appeal of the WTO decision on entertainment imports is the latest in what is looking a bit too much like an escalating tit-for-tat between two of the world's biggest trading powers.
The good news so far is that the trade spats have been contained within the rules of the WTO. It is easy to imagine the protectionist free-for-all that might be occurring now had the WTO never been created. But the bad news, as we are seeing, is that there is an awful lot of backsliding that is possible even within the rules of the WTO. All the more reason for President Obama and other G-20 leaders to call a halt in Pittsburgh, and to mean it this time."