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WTO Appellate Body Report: China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products

Published online by Cambridge University Press:  27 February 2017

Tania Voon*
Affiliation:
Melbourne Law School, University of Melbourne.

Abstract

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Type
International Legal Materials
Copyright
Copyright © American Society of International Law 2010

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References

Endnotes

* This text was reproduced and reformatted from the text available at the World Trade Organization website (visited March 29, 2010) http://www.wto.org/english/tratop_e/dispu_e/363abr_e.pdf.

1 Convention on the Protection and Promotion of the Diversity of Cultural Expressions, Oct. 20, 2005, U.N. Doc. CLT-2005/CONVENTION DIVERSITE-CULT REV [hereinafter Convention].

2 Id. art. 1(h).

3 See generally Tania, Voon, Cultural Products and the World Trade Organization (2007).Google Scholar

4 General Agreement on Tariffs and Trade, Oct. 30, 1947, 55 U.N.T.S. 194 [hereinafter GATT 1947].

5 Id. art. IV.

6 General Agreement on Tariffs and Trade art. IV, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 33 I.L.M. 1125 [hereinafter GATT 1994].

7 General Agreement on Trade in Services, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 33 I.L.M. 1125 [hereinafter GATS].

8 Appellate Body Report, Canada – Certain Measures Affecting Periodicals, 17-19, 26-28, 30-32, WT/DS31/AB/R (June 30, 1997).

9 Protocol on the Accession of the People’s Republic of China, annexed to WTO Ministerial Conference, Accession of the People’s Republic of China: Decision of 10 November 2001, WT/L/432 [hereinafter Accession Protocol].

10 Panel Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, ¶¶ 7.751, 7.758, WT/DS363/R (Aug. 12, 2009) [hereinafter Panel Report].

11 Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, ¶ 25, WT/DS363/AB/R (Dec. 21, 2009) [hereinafter Appellate Body Report].

12 Panel Report, supra note 10, ¶ 7.766; Appellate Body Report, supra note 11, ¶ 336.

13 Appellate Body Report, supra note 11, ¶¶ 188, 196; Accession Protocol, supra note 9, ¶ 5.1.

14 Appellate Body Report, supra note 11, ¶ 412.

15 Appellate Body Report, supra note 11, ¶¶ 396, 397, 408.

16 See Tania Voon & Andrew Mitchell, Open for Business? China’s Telecommunications Service Market and the WTO, 13(2) J. Int’l Econ. L. (forthcoming 2010).

17 Appellate Body Report, supra note 11, ¶¶ 315, 317, 337.

18 Panel Report, supra note 10, ¶¶ 7.911, 7.914; Appellate Body Report, supra note 11, ¶¶ 214-215.

19 See, e.g., Appellate Body Report, United States – Measures Relating to Shrimp from Thailand / United States – Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties, ¶¶ 310, 319, WT/DS343/AB/R, WT/DS345/AB/R (July 16, 2008).

20 Appellate Body Report, supra note 11, ¶ 415(a).

21 Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A.

22 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 33 I.L.M. 1197 (1994).

23 Agreement on Safeguards, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A. See also Tania Voon, Eliminating Trade Remedies from the WTO: Lessons from Regional Trade Agreements, Int’l & Comp. L.Q. (forthcoming 2010).

24 China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products: Communication from China and the United States concerning Article 21.3(c) of the DSU, WT/DS363/15 (Mar. 9, 2010).

25 Accession Protocol part I, ¶ 6; Press Release, White House Office of the Press Secretary, A Proclamation by the President of the United States of America to Address Market Disruption from Imports of Certain Passenger Vehicle and Light Truck Tires from the People’s Republic of China (Sept. 11, 2009), available at http://www.whitehouse.gov/the-press-office/proclamation-address-market-disruption-imports-certain-passenger-vehicle-and-light-; United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China: Request for the Establishment of a Panel by China, WT/DS399/2 (Dec. 11, 2009), available at http://www.worldtradelaw.net/pr/ds399-2(pr).pdf.

1 We note that, on 1 December 2009, the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community (done at Lisbon, 13 December 2007) entered into force. On 29 November 2009, the World Trade Organization received a Verbal Note (WT/L/779) from the Council of the European Union and the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 1 December 2009, the European Union replaces and succeeds the European Community.

2 WT/DS363/R, 12 August 2009, and WT/DS363/R/Corr.1, 19 August 2009.

3 Panel Report, paras. 2.1 and 2.2.

4 WT/L/432.

5 WT/ACC/CHN/49 and WT/ACC/CHN/49/Corr.1.

6 Panel Report, para. 2.3(a).

7 Panel Report, para. 3.1(a).

8 Panel Report, paras. 2.3(b) and 3.1(b) and (c).

9 Panel Report, paras. 2.3(c) and 3.1(d). The United States also requested the Panel to find that, regarding China’s national treatment obligations in respect of goods, certain of China’s measures are also inconsistent with paragraphs 1.2 and 5.1 of China’s Accession Protocol. (Ibid., para. 3.1(e))

10 The United States challenged, in particular: the Foreign Investment Regulation; the Catalogue; the Several Opinions; the Publications Regulation; the Importation Procedure; the Imported Publications Subscription Rule; the Publications (Sub-)Distribution Rule; the Publications Market Rule; the Sub-Distribution Procedure; the 1997 Electronic Publications Regulation; the 2001 Audiovisual Products Regulation; the Audiovisual Products Importation Rule; the Audiovisual (Sub-)Distribution Rule; the Internet Culture Rule; the Circular on Internet Culture; the Network Music Opinions; the Film Regulation; the Film Enterprise Rule; and the Film Distribution and Exhibition Rule. (Panel Report, para. 3.1) The full titles of these legal instruments are set out in the lists of abbreviations at pages vii and ix of this Report.

The parties submitted translations of the measures, or of certain provisions of the measures, as part of the exhibits attached to their first written submissions. The Panel identified several provisions for which the parties had provided different translations or disputed the meaning of particular terms, and requested that the parties attempt to agree on a single translation. On 9 and 20 October 2008, the parties communicated that they had reduced some of their translation differences but that they were unable to agree on others, and requested that the Panel seek translation of the relevant terms or provisions from an independent source. On 19 December 2008, the Panel requested the United Nations Office at Nairobi (the “UNON”) to provide the relevant translations. The Panel and the parties received the translations from the UNON on 10 February 2009. Annex A-1 to the Panel Report summarizes the translation issues that arose during the Panel proceedings. (See Panel Report, paras. 2.4-2.9)

11 The Panel found that the following were not within its terms of reference: claims relating to China’s trading rights commitments in respect of the Film Distribution and Exhibition Rule; claims under Article III:4 of the GATT 1994 in respect of the 2001 Audiovisual Products Regulation and the Audiovisual Products Importation Rule; and claims concerning certain requirements (pre-establishment legal compliance, approval process requirements, decision making criteria) contained in certain measures. (Panel Report, para. 8.1.1(a) and (b); see also paras. 7.60, 7.82, and 7.104) The Panel separately found that the lack of consultations on a specific claim under Article III:4 of the GATT 1994 regarding certain reading materials did not mean that the claim was outside the Panel’s terms of reference; however, it excluded from consideration claims under Article III:4 of the GATT 1994 in respect of electronic publications and certain provisions of the Imported Publications Subscription Rule. (Ibid., para. 8.1.1(c); see also paras. 7.131, 7.147, 7.156, and 7.161)

12 The Panel found that the Importation Procedure and the Sub-Distribution Procedure did not qualify as “measures” because they did not themselves establish rules or norms of general and prospective application. (Panel Report, para. 8.1.1(d)(ii); see also paras. 7.214 and 7.225) The Panel separately found that the Several Opinions was a measure properly subject to dispute settlement proceedings. (Ibid., para. 8.1.1(d)(i); see also para. 7.198)

13 See China’s Accession Protocol, para. 5.1; and China’s Accession Working Party Report, paras. 83(d) and 84(a). In addition, China assumed obligations to ensure that foreign enterprises and individuals would be granted treatment no less favourable than that accorded to enterprises in China with respect to the right to trade (see China’s Accession Protocol, para. 5.2) and to ensure that trading rights for foreign enterprises and individuals are granted in a non-discriminatory and non-discretionary manner (see China’s Accession Working Party Report, para. 84(b)). The texts of these provisions are included as part of Annex III to this Report, and the Panel’s analysis of them is summarized at infra, section IV.B.

14 These findings relate to Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 42, in conjunction with Article 41, of the Publications Regulation; Article 21 of the Audiovisual (Sub-)Distribution Rule; Article 30 of the Film Regulation; and Article 16 of the Film Enterprise Rule. (Panel Report, paras. 8.1.2(a)(i), (ii), and (v), 8.1.2(b)(ii), 8.1.2(c)(iii) and (vii), and 8.1.2(d)(x); see also paras. 7.351, 7.352, 7.374, 7.401, 7.411, 7.576, 7.598, 7.599, and 7.703) The Panel’s findings of violation in respect of Article 30 of the Film Regulation and Article 16 of the Film Enterprise Rule also extend to the exclusion of foreign enterprises not registered in China and foreign individuals from engaging in the business of importing films. (Ibid., paras. 7.576, 7.598, and 7.599)

15 These findings relate to Article 41 of the Publications Regulation; Articles 5 and 27 of the 2001 Audiovisual Products Regulation; Articles 7 and 8 of the Audiovisual Products Importation Rule; Article 30 of the Film Regulation; and Article 16 of the Film Enterprise Rule. (Panel Report, paras. 8.1.2(b)(viii), 8.1.2(c)(ii) and (vi), and 8.1.2(d)(i), (ii), (v), and (vi); see also paras. 7.437, 7.571, 7.594, 7.633, 7.657, 7.680, and 7.690) The Panel exercised judicial economy with respect to the claims that Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 42 of the Publications Regulation, do not grant in a nondiscriminatory manner the right to trade. (Ibid., paras. 8.1.2(a)(iii) and (vi) and 8.1.2(b)(v); see also paras. 7.357, 7.378, and 7.417) The Panel also made findings that, in respect of certain claims, the United States had not established a violation of China’s trading rights commitments. (Ibid., paras. 8.1.2(a)(iv) and (vii), 8.1.2(b)(i), (iii), (iv), (vi), (vii), and (x)-(xvii), 8.1.2(c)(i), (iv), (v), and (viii), and 8.1.2(d)(iii), (iv), (vii)-(ix), and (xi))

16 Panel Report, para. 7.743.

17 Panel Report, para. 7.745.

18 These findings relate to Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions: Articles 41 and 42 of the Publications Regulation; Article 27 of the 2001 Audiovisual Products Regulation; Article 8 of the Audiovisual Products Importation Rule; and Article 21 of the Audiovisual (Sub-)Distribution Rule. (Panel Report, para. 7.726) Because the Panel found that China had not established that the measures at issue satisfy the requirements of Article XX(a) of the GATT 1994, the Panel did not determine whether Article XX(a) is available as a defence for breaches of China’s trading rights commitments. (Ibid., para. 8.2; see also paras. 7.726 and 7.911-7.914)

19 The Panel concluded that “master distribution” involves the sale of publications by an exclusive seller to other wholesalers or retailers, or to certain professional end-users. (Panel Report, paras. 7.1025-7.1027)

20 The Panel took note of China’s statement that “master wholesale” is a term synonymous with “master distribution”, but is used exclusively in the context of electronic publications. (Panel Report, para. 7.1068)

21 These findings relate to Article X:2 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 42 of the Publications Regulation, in conjunction with Article 4 of the Imported Publications Subscription Rule; Article 62 of the 1997 Electronic Publications Regulation; and Article 2 of the Publications (Sub-)Distribution Rule, in conjunction with Article 16 of the Publications Market Rule. (Panel Report, para. 8.2.3(a)(i)-(v); see also paras. 7.998, 7.999, 7.1048, 7.1058, 7.1074, and 7.1094)

22 These findings relate to paragraphs 4 and 5 of Article 7 of the Publications (Sub-)Distribution Rule. (Panel Report, para. 8.2.3(a)(vii); see also para. 7.1142)

23 These findings relate to Article VI:3 of the List of Restricted Foreign Investment Industries in the Catalogue, in conjunction with Article 8 of the Foreign Investment Regulation, and Article 8.4 of the Audiovisual (Sub-)Distribution Rule. (Panel Report, para. 8.2.3(c)(i); see also paras. 7.1395 and 7.1396) Because the Panel found inconsistencies with Article XVI of the GATS in respect of these provisions, it exercised judicial economy with respect to claims under Article XVII of the GATS. (Ibid., para. 8.2.3(c)(iv); see also para. 7.1427)

24 These findings relate to Article 1 of the Several Opinions and Article 8.5 of the Audiovisual (Sub-)Distribution Rule. (Panel Report, para. 8.2.3(c)(iii); see also para. 7.1426)

25 These findings relate to Article X:7 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article II of the Circular on Internet Culture; and Article 8 of the Network Music Opinions. (Panel Report, para. 8.2.3(b); see also para. 7.1311) The Panel also made findings that, in respect of certain claims, the United States had not established a violation of China’s GATS commitments. (Ibid., paras. 8.2.3(a)(vi), 8.2.3(b)(ii), and 8.2.3(c)(ii))

26 These findings relate to Article 2 of the Publications (Sub-)Distribution Rule, in conjunction with Article 16 of the Publications Market Rule. (Panel Report, para. 8.2.4(a)(iii); see also para. 7.1545)

27 These findings relate to Articles 3 and 4 of the Imported Publications Subscription Rule. (Panel Report, para. 8.2.4(a)(i); see also para. 7.1539)

28 Panel Report, para. 8.2.4(b) and (c); see also paras. 7.1654 and 7.1693. The United States also claimed that any violation of Article III:4 of the GATT 1994 would also be inconsistent with China’s obligations in paragraphs 1.2 and 5.1 of China’s Accession Protocol to abide by the national treatment obligations in Article III:4 of the GATT 1994. The Panel exercised judicial economy in respect of the claims under the GATT 1994 relating to reading materials, and found that the prerequisite of a violation of Article III:4 of the GATT 1994 was not present in respect of the claims relating to films for theatrical release and the electronic distribution of sound recordings. (Ibid., para. 8.2.5; see also paras. 7.1707 and 7.1708) The Panel also made findings that, in respect of certain claims, the United States had not established a violation of China’s obligations under the GATT 1994. (Ibid., paras. 8.2.4(a)(ii), 8.2.4(b)(i) and (ii), and 8.2.4(c)(i))

29 WT/DS363/10 (attached as Annex I to this Report).

30 WT/AB/WP/5, 4 January 2005.

31 Pursuant to Rule 21 of the Working Procedures.

32 WT/DS363/11 (attached as Annex II to this Report).

33 Pursuant to Rule 23(3) of the Working Procedures.

34 Pursuant to Rules 22 and 23(4) of the Working Procedures.

35 Pursuant to Rule 24(1) of the Working Procedures.

36 Pursuant to Rule 24(2) of the Working Procedures.

37 The People’s Republic of China, Schedule of Specific Commitments, GATS/SC/135.

[...]

201 Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 41, and Article 42 in conjunction with Article 41, of the Publications Regulation; Article 27 of the 2001 Audiovisual Products Regulation; Article 8 of the Audiovisual Products Importation Rule; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

202 Such exclusion is set out in the following provisions: Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

203 Article II of the Circular on Internet Culture; Article 8 of the Network Music Opinions; Article 4 of the Several Opinions; and Article X:7 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation.

204 The Panel’s treatment of China’s commitments in respect of the right to trade—that is, the right to import and export goods—is further discussed infra, in subsection IV.B.

205 The Panel determined that each of the measures it found to be inconsistent with China’s trading rights commitments applies in respect of foreign-invested enterprises in China. The term “foreign-invested enterprise” refers to one of several forms of investment projects regulated in China. (See infra, para. 142 and footnote 245 thereto) With the exception of its findings in respect of Article 30 of the Film Regulation and Article 16 of the Film Enterprise Rule (see infra, footnote 298), the Panel found that the United States had not established a claim that the challenged measures apply in respect of foreign enterprises not invested or registered in China, or foreign individuals.

206 WT/L/432.

207 WT/ACC/CHN/49 and WT/ACC/CHN/49/Corr.1.

208 China also raised several preliminary objections, asserting that claims in respect of certain of China’s measures were not within the Panel’s terms of reference, and that certain instruments challenged by the United States are not measures that could be examined in WTO dispute settlement.

209 The United States challenged 19 legal instruments of China. (See supra, footnote 10) The Panel ruled that two of these instruments did not constitute “measures” within the meaning of Article 3.3 of the DSU, and that certain measures challenged by the United States fell outside the Panel’s terms of reference. (See supra, footnotes 11 and 12) The Panel also found that the United States had not established a number of the claims raised, and exercised judicial economy in respect of certain other claims. (See supra, footnotes 15, 23, 25, and 28)

210 There are four such administrative regulations at issue in this dispute: (i) the Foreign Investment Regulation; (ii) the Publications Regulation; (iii) the 2001 Audiovisual Products Regulation; and (iv) the Film Regulation. The Catalogue and the Several Opinions are administrative documents that were issued by one or more Chinese ministries or agencies after obtaining the approval of the State Council.

China explained to the Panel that the hierarchy of Chinese laws and regulations issued by the central Government is composed of three levels: (i) laws enacted by the National People’s Congress or its Standing Committee; (ii) administrative regulations enacted by the State Council; and (iii) departmental rules enacted by ministries or agencies under the State Council. (Panel Report, para. 7.182 (referring to China’s response to Panel Question 37(a)); see also Law of the People’s Republic of China on Legislation (Panel Exhibit US-72)) None of the measures at issue in this dispute are laws enacted by the National People’s Congress or its Standing Committee.

211 There are 11 such departmental rules or administrative circulars or opinions at issue in this dispute: (i) the Imported Publications Subscription Rule; (ii) the Publications (Sub-)Distribution Rule; (iii) the Publications Market Rule; (iv) the 1997 Electronic Publications Regulation (although entitled a “regulation”, this measure was enacted by China’s General Administration of Press and Publication (the “GAPP”)); (v) the Audiovisual Products Importation Rule; (vi) the Audiovisual (Sub-)Distribution Rule; (vii) the Internet Culture Rule; (viii) the Circular on Internet Culture; (ix) the Network Music Opinions; (x) the Film Enterprise Rule; and (xi) the Film Distribution and Exhibition Rule.

212 The Panel found that the Film Distribution and Exhibition Rule was outside the Panel’s terms of reference in respect of claims concerning China’s trading rights commitments, and that the United States had not otherwise established a violation of China’s WTO obligations in respect of the Film Distribution and Exhibition Rule and the Internet Culture Rule. (Panel Report, paras. 8.1.1(a)(i), 8.2.3(b)(ii), 8.2.4(b)(i), and 8.2.4(c)(i); see also paras. 7.60, 7.1305, 7.1654, and 7.1692)

213 For each of the 11 measures at issue in this appeal, the specific provisions found by the Panel to be inconsistent with China’s obligations under the covered agreements are set out in Annex III to this Report.

214 The Panel determined the specific scope of “audiovisual products” for each of the challenged measures. For purposes of its findings in respect of specific provisions of the Foreign Investment Regulation and the Catalogue, for example, the Panel determined that the term “audiovisual products” covers products such as video discs, as well as physical sound recordings and films for theatrical release. (Panel Report, paras. 7.3407.352 (concerning Article X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation))

215 As noted supra, footnote 214, the Panel determined that the term “audiovisual products” for purposes of a provision of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with provisions of the Foreign Investment Regulation, includes films for theatrical release.

216 The Panel determined that, for purposes of China’s foreign investment regulations (the Foreign Investment Regulation, the Catalogue, and the Several Opinions), the electronic distribution of sound recordings was covered by provisions governing “Internet cultural activities”. (Panel Report, paras. 7.1308-7.1310)

217 The Publications Regulation also applies to audiovisual products, but the Panel concluded that relevant provisions in the 2001 Audiovisual Products Regulation take precedence over the corresponding provisions in the Publications Regulation concerning the regulation of audiovisual products. (Panel Report, para. 7.390)

218 Paragraph 1.2 of China’s Accession Protocol provides:

The WTO Agreement to which China accedes shall be the WTO Agreementas rectified, amended or otherwise modified by such legal instruments as may have entered into force before the date of accession. This Protocol, which shall include the commitments referred to in paragraph 342 of the Working Party Report, shall be an integral part of the WTO Agreement.

Paragraph 342 of China’s Accession Working Party Report, provides:

The Working Party took note of the explanations and statements of China concerning its foreign trade regime, as reflected in this Report. TheWorking Party took note of the commitments given by China in relation tocertain specific matters which are reproduced in paragraphs ... 83 [and] 84 ... of this Report and noted that these commitments are incorporated in paragraph 1.2 of the Draft Protocol.

219 We note that the Panel made findings of violation in respect of China’s trading rights commitments as they relate to the obligation to grant the right to trade pursuant to paragraph 5.1 of China’s Accession Protocol and paragraphs 83(d) and 84(a) of China’s Accession Working Party Report, and the obligation to grant in a non-discretionary manner the right to trade pursuant to paragraph 84(b) of China’s Accession Working Party Report. The Panel considered that paragraph 1.2 of China’s Accession Protocol incorporates the relevant paragraphs of China’s Accession Working Party Report such that any inconsistency with paragraph 83(d), 84(a), or 84(b) “leads to a consequential inconsistency” with paragraph 1.2 of China’s Accession Protocol. (Panel Report, para. 7.332) The Panel did not find any violations in respect of China’s obligation to grant in a nondiscriminatory manner the right to trade under paragraph 5.2 of China’s Accession Protocol and paragraph 84(b) of China’s Accession Working Party Report.

220 Panel Report, para. 7.232.

221 Panel Report, paras. 7.8 and 7.9.

222 Paragraph 5.1 of China’s Accession Protocol provides:

Without prejudice to China’s right to regulate trade in a manner consistent with the WTO Agreement, China shall progressively liberalize the availability and scope of the right to trade, so that, within three years after accession, all enterprises in China shall have the right to trade in all goods throughout the customs territory of China, except for those goods listed in Annex 2A which continue to be subject to state trading in accordance with this Protocol. Such right to trade shall be the right to import and export goods. All such goods shall be accorded national treatment under Article III of the GATT 1994, especially paragraph 4 thereof, in respect of their internal sale, offering for sale, purchase, transportation, distribution or use, including their direct access to end-users. For those goods listed in Annex 2B, China shall phase out limitation on the grant of trading rights pursuant to the schedule in that Annex. China shall complete all necessary legislative procedures to implement these provisions during the transition period.

223 Panel Report, para. 7.248.

224 Panel Report, paras. 7.249, 7.251, and 7.252. The Panel noted that both parties agreed that the phrase “all enterprises in China” does not include foreign enterprises that are not registered in China. (Ibid., footnote 201 to para. 7.249)

225 Panel Report, paras. 7.254 and 7.255.

226 Panel Report, paras. 7.275 and 7.276.

227 Panel Report, para. 7.277.

228 Panel Report, para. 7.319. Paragraph 84(b) of China’s Accession Working Party Report provides:

With respect to the grant of trading rights to foreign enterprises and individuals, including sole proprietorships of other WTO members, the representative of China confirmed that such rights would be granted in a non-discriminatory and non-discretionary way. He further confirmed that any requirements for obtaining trading rights would be for customs and fiscal purposes only and would not constitute a barrier to trade. The representative of China emphasized that foreign enterprises and individuals with trading rights had to comply with all WTO-consistent requirements related to importing and exporting, such as those concerning import licensing, TBT and SPS, but confirmed that requirements relating to minimum capital and prior experience would not apply.

229 Paragraph 83(d) of China’s Accession Working Party Report provides:

The representative of China also confirmed that within three years after accession, all enterprises in China would be granted the right to trade. Foreign-invested enterprises would not be required to establish in a particular form or as a separate entity to engage in importing and exporting nor would new business licence encompassing distribution be required to engage in importing and exporting.

Paragraph 84(a) of China’s Accession Working Party Report provides:

The representative of China reconfirmed that China would eliminate its system of examination and approval of trading rights within three years after accession. At that time, China would permit all enterprises in China and foreign enterprises and individuals, including sole proprietorships of other WTO Members, to export and import all goods (except for the share of products listed in Annex 2A to the Draft Protocol reserved for importation and exportation by state trading enterprises) throughout the customs territory of China. Such right, however, did not permit importers to distribute goods within China. Providing distribution services would be done in accordance with China’s Schedule of Specific Commitments under the GATS.

230 Panel Report, paras. 7.310 and 7.315.

231 Paragraph 5.2 of China’s Accession Protocol provides:

Except as otherwise provided for in this Protocol, all foreign individuals and enterprises, including those not invested or registered in China, shall be accorded treatment no less favourable than that accorded to enterprises in China with respect to the right to trade.

232 Panel Report, paras. 7.292 and 7.299. The Panel made the same finding in respect of the term “foreign enterprises” that appears in paragraph 84(a) and (b) of China’s Accession Working Party Report. (Ibid., para. 7.314 and 7.318)

233 Panel Report, para. 7.305.

234 Panel Report, para. 7.322.

235 Panel Report, para. 7.320. The Panel did not consider it necessary to determine whether discrimination between foreign enterprises of different Members is also covered by paragraph 84(b). (Ibid., para. 7.323)

236 Panel Report, para. 7.324.

237 Panel Report, paras. 7.711 and 7.712.

238 China referred, in this regard, to Article 8 of the UNESCO Universal Declaration on Cultural Diversity, which states that cultural goods are “vectors of identity, values and meaning” and that they “must not be treated as mere commodities or consumer goods”. (Panel Report, para. 7.751) China also referred to the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions. (Ibid., para. 4.207)

239 China explained that content that is prohibited ranges “from the depiction or condoning of violence or pornography, to other important values, including the protection of Chinese culture and traditional values”. (Panel Report, para. 7.714) The Panel set out the list of content that may not be included in publications and noted that the United States did not specifically contest that the dissemination of materials containing the types of content listed as prohibited by China could have a negative impact on public morals in China. (Ibid., paras. 7.760-7.762)

240 Panel Report, paras. 7.753-7.755.

241 Panel Report, para. 7.713. China further explained that, due to the limited resources of its administrative authorities and the risk of delay, import entities must be given a substantial role in the content review process in order to ensure effective and efficient content review. On this basis, China argued that “the importance of the input by the import entities in the content review process justifies the appropriate selection of those entities by the competent Chinese authorities, even if it may result in restrictions of the right to import.” (Ibid., para. 7.754)

242 Panel Report, para. 7.754.

243 Panel Report, para. 7.752.

244 Panel Report, paras. 7.716 and 7.752.

245 Panel Report, para. 7.347. The Panel considered that Article 8 of the Foreign Investment Regulation provides guidance on the interpretation of provisions in the restricted category in the Catalogue. (Ibid., paras. 7.1386-7.1388)

246 In this Report, we refer to the List of Restricted Foreign Investment Industries and the List of Prohibited Foreign Investment Industries to distinguish between two parts of the Catalogue that separately list restricted and prohibited categories of foreign-invested projects, and to make clear that these Lists are parts of the Catalogue itself. The Panel referred to these two Lists as the Catalogue of Industries With Restricted Foreign Investment, and the Catalogue of Prohibited Foreign Investment Industries. (Panel Report, paras. 7.340 and 7.342)

247 Panel Report, para. 7.348.

248 Panel Report, paras. 7.1309 and 7.1310. As noted below, the Panel also made a finding regarding certain audiovisual distribution activities set out in the List of Restricted Foreign Investment Industries in the Catalogue. This finding is not appealed. (See infra, footnote 292)

249 Panel Report, paras. 7.187 and 7.198.

250 Panel Report, paras. 7.374, 7.1041, and 7.1308.

251 Panel Report, paras. 7.730 and 7.903. Article 44 of the Publications Regulation provides that publication import entities are “responsible for examining the content of the publications” that are imported. An exhibit in the Panel record indicates that, as of 2008, there were 42 wholly State-owned enterprises approved to import reading materials into China. (Panel Exhibit US-13)

252 Panel Report, para. 7.730. Article 45 of the Publications Regulation provides, in part:

A publication import entity shall, before importing publications, submit a catalogue of the publications it plans to import to the publication administration under the people’s government at the provincial level or above. If the publication administration under the people’s government at the provincial level or above finds any publications that are prohibited or deferred from being imported, it shall immediately notify the publication import entity and inform Customs. A publication import entity shall not import any publication for which there has been a notice of prohibition or deferral, and Customs shall not release such a publication.

253 Panel Report, para. 7.891 (referring to China’s response to Panel Question 191).

254 Panel Report, paras. 7.730 and 7.901. Article 44 of the Publications Regulation provides, in part:

The publication administration under the people’s government at the provincial level or above may directly examine the content of the publications imported by a publication import entity. When a publication import entity is unable to identify whether the imported publications include any content prohibited by Articles 26 and 27 of these Regulations, it may request the publication administration under the people’s government at the provincial level or above [to] examine the contents. The publication administration under the people’s government at the provincial level or above may, when examining the contents of imported publications upon the request of a publication import entity, charge fees in accordance with the standards approved by the State Council’s department in charge of pricing.

255 Panel Report, paras. 7.892 and 7.901 (referring to China’s responses to Panel Questions 191 and 196).

256 These findings relate to Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries contained in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; and Article 4 of the Several Opinions.

257 Panel Report, para. 8.1.2(a)(i), (ii), and (v); see also paras. 7.351, 7.352, and 7.374. Wherever the Panel found that a provision was inconsistent with China’s obligation to grant the right to trade, it was referring to the obligation contained in paragraph 5.1 of China’s Accession Protocol, and paragraphs 83(d) and 84(a) of China’s Accession Working Party Report and, hence, paragraph 1.2 of China’s Accession Protocol.

258 Panel Report, para. 7.392.

259 Panel Report, para. 7.434.

260 The Panel found that the United States had not demonstrated that the five other requirements in Article 42—(i) name and articles of association; (ii) well-defined scope of business; (iii) adequate funding; (iv) fixed business site; and (v) conditions set out in laws or other regulations—are inconsistent with China’s trading rights commitments. (Panel Report, para. 7.409)

261 Panel Report, para. 8.1.2(b)(ii); see also paras. 7.401 and 7.411.

262 Panel Report, para. 8.1.2(b)(viii); see also para. 7.437. Wherever the Panel found that a provision was inconsistent with China’s obligation to grant in a non-discretionary manner the right to trade, it was referring to the obligation contained in paragraph 84(b) of China’s Accession Working Party Report and, hence, paragraph 1.2 of China’s Accession Protocol.

263 China invoked its defence under Article XX(a) of the GATT 1994 in respect of the following provisions as they relate to the importation of reading materials: Article X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 41, and Article 42 in conjunction with Article 41, of the Publications Regulation. China also invoked Article XX(a) of the GATT 1994 in respect of provisions of China’s measures as they relate to audiovisual products. (See infra, footnote 287)

264 In its analysis of China’s defence under Article XX(a) of the GATT 1994, the Panel considered that provisions contained in measures that did not, themselves, provide for content review should still be considered in the light of, and together with, other applicable rules and regulations that do establish or refer to content review mechanisms. (Panel Report, paras. 7.772-7.780)

265 Panel Report, para. 7.763.

266 Panel Report, paras. 7.787 and 7.788.

267 Panel Report, para. 7.869.

268 Panel Report, paras. 7.828 and 7.836.

269 Panel Report, para. 7.911.

270 Panel Report, paras. 7.848, 7.863, and 7.868.

271 Panel Report, para. 8.2; see also para. 7.913. In the light of these findings, the Panel did not proceed to decide whether Article XX is applicable to China’s trading rights commitments under its Accession Protocol and Working Party Report. (Ibid., para. 8.2(a)(ii); see also para. 7.914)

272 Panel Report, para. 7.836.

273 See supra, footnote 19.

274 See supra, footnote 20.

275 Panel Report, para. 8.2.3(a)(iii) and (iv); see also paras. 7.1048, 7.1058, and 7.1074.

276 Panel Report, para. 8.2.3(a)(i), (ii), and (v); see also paras. 7.998, 7.999, and 7.1094.

277 Panel Report, para. 8.2.3(a)(vii); see also para. 7.1142.

278 The Panel made findings under Article III:4 of the GATT 1994 in respect of measures affecting reading materials, films for theatrical release, and the electronic distribution of sound recordings. (Panel Report, para. 8.2.4) The Panel separately found that claims under Article III:4 in respect of the 2001 Audiovisual Products Regulation and the Audiovisual Products Importation Rule were not within its terms of reference. (Ibid., para. 8.1.1(a)(ii); see also para. 7.82)

279 Panel Report, para. 8.2.4(a)(iii); see also para. 7.1545.

280 Panel Report, para. 8.2.4(a)(i); see also para. 7.1539.

281 Panel Report, paras. 7.731, 7.732, 7.892, and 7.901 (referring to China’s responses to Panel Questions 191 and 196). There is only one wholly State-owned enterprise—the China National Publications Import and Export (Group) Corporation—that has been approved to import finished audiovisual products. (Ibid., para. 7.779) The Panel record does not indicate how many entities are approved to import unfinished audiovisual products.

282 These findings relate to Article X:3 of the List of Prohibited Foreign Investment Industries contained in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, and Article 4 of the Several Opinions.

283 Panel Report, para. 8.1.2(a)(ii) and (v); see also paras. 7.351, 7.352, and 7.374.

284 Panel Report, para. 8.1.2(d)(x); see also para. 7.703.

285 The Panel took note of the United States’ claims concerning finished and unfinished audiovisual products. (Panel Report, paras. 7.608 and 7.625; see also infra, footnote 289) The United States asserted that “finished” audiovisual products are produced and replicated outside of China and require no additional production or replication in China before being made available to consumers. (Ibid., para. 7.608)

286 Panel Report, para. 8.1.2(d)(ii) and (vi); see also paras. 7.633 and 7.690.

287 China invoked Article XX(a) of the GATT 1994 in respect of the following provisions as they relate to the importation of audiovisual products: Article X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 27 of the 2001 Audiovisual Products Regulation; Article 8 of the Audiovisual Products Importation Rule; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

288 Panel Report, paras. 7.849 and 7.868.

289 Panel Report, paras. 7.625 and 7.642. See also supra, footnote 285. Article 5 of the 2001 Audiovisual Products Regulation and Article 7 of the Audiovisual Products Importation Rule may apply to both finished and unfinished audiovisual products, but the Panel determined that the United States’ claim concerned only unfinished audiovisual products. (Panel Report, paras. 7.637 and 7.669)

290 Panel Report, para. 8.1.2(d)(i) and (v); see also paras. 7.657 and 7.680.

291 China did not invoke Article XX(a) as a defence to the inconsistency of Article 5 of the 2001 Audiovisual Products Regulation and Article 7 of the Audiovisual Products Importation Rule with China’s trading rights commitments in respect of unfinished audiovisual products.

292 Panel Report, para. 8.2.3(c)(i); see also paras. 7.1395 and 7.1396.

293 Panel Report, para. 8.2.3(c)(iii); see also paras. 7.1421 and 7.1425.

294 Panel Report, paras. 7.500, 7.892, and 7.901 (referring to China’s responses to Panel Questions 191 and 196). There is only one wholly State-owned entity—the China Film Import and Export Corporation—that is approved to import films for theatrical release. (Ibid., para. 7.575)

295 These findings relate to Article X:3 of the List of Prohibited Foreign Investment Industries contained in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, and Article 4 of the Several Opinions.

296 Panel Report, para. 8.1.2(a)(ii) and (v); see also paras. 7.351, 7.352, and 7.374.

297 Article 30 of the Film Regulation states that film import entities must be “designated”, whereas Article 16 of the Film Enterprise Rule states that such entities must be “approved”. China explained that the term “designated” should be followed because, under China’s legal system, the Film Regulation prevails over the Film Enterprise Rule. The Panel stated that the evidence on the record did not demonstrate that the approval requirement in the Film Enterprise Rule was not applied by China when determining who may conduct the business of importing films. (Panel Report, paras. 7.587-7.590)

298 Panel Report, para. 8.1.2(c)(iii) and (vii); see also paras. 7.576, 7.598, and 7.599.

299 Panel Report, paras. 7.569 and 7.593.

300 Panel Report, para. 8.1.2(c)(ii) and (vi); see also paras. 7.571 and 7.594.

301 China did not invoke Article XX(a) as a defence to the inconsistency of Article 30 of the Film Regulation and Article 16 of the Film Enterprise Rule with its trading rights commitments.

302 Panel Report, para. 8.2.3(b); see also para. 7.1311.

303 The People’s Republic of China, Schedule of Specific Commitments, GATS/SC/135.

304 The texts of these provisions are set out in Annex III to this Report.

305 Panel Report, para. 8.1.2(c)(ii), (iii), (vi), and (vii); see also paras. 7.571, 7.576, 7.594, 7.598, and 7.599.

306 See supra, para. 136 and Annex III to this Report. China’s obligation to grant the right to trade does not apply to the goods listed in Annex 2A to China’s Accession Protocol, which are reserved for importation and exportation by State trading enterprises. In addition, for those goods listed in Annex 2B to China’s Accession Protocol, any limitations on the grant of trading rights were to be phased out pursuant to the schedule in that Annex within three years after accession, that is, by 11 December 2004. None of the products at issue in this dispute falls within the scope of the products listed in Annex 2A or 2B.

307 See supra, para. 137.

308 See supra, para. 139.

309 Unlike Article 30 of the Film Regulation, which imposes a “designation” requirement, Article 16 of the Film Enterprise Rule refers to the need to be “approved” by the SARFT. (See supra, footnote 209; see also Panel Report, paras. 7.590-7.599)

310 Panel Report, para. 7.560; see also para. 7.584.

311 See Panel Report, paras. 7.576, 7.598, and 7.599. With respect to Chinese branches of foreign enterprises not registered in China, the Panel made no finding of inconsistency because it noted that the United States’ claims and arguments did not include any assertions with respect to such branches. (See ibid., paras. 7.574 and 7.600)

312 See Panel Report, paras. 7.571 and 7.594. According to the Panel, however, the United States had neither asserted nor established that the discretion enjoyed by the Chinese Government authority under these provisions would affect foreign individuals, foreign enterprises not registered in China, or Chinese branches of foreign enterprises not registered in China. Thus, the Panel did not make any finding of inconsistency under paragraph 84(b) of China’s Accession Working Party Report with respect to such individuals and enterprises. (See ibid., paras. 7.570, 7.572, 7.595, and 7.596).

313 China’s appellant’s submission, para. 211.

314 China’s appellant’s submission, paras. 201-203.

315 China’s appellant’s submission, paras. 204 and 205 (referring to Request for the Establishment of a Panel by the United States, WT/DS363/5, p. 7; and United States’ first written submission to the Panel, paras. 268 and 269).

316 China’s appellant’s submission, para. 207.

317 China’s appellant’s submission, para. 207 (quoting United States’ oral statement at the first Panel meeting, para. 11).

318 China’s appellant’s submission, para. 213.

319 United States’ first written submission to the Panel, paras. 61-68 and 268-270. See also Panel Report, paras. 4.13, 4.14, 4.48, 7.488, 7.492, and 7.578-7.580.

320 China’s first written submission to the Panel, paras. 38-107. See also Panel Report, paras. 4.95-4.104 and 7.493-7.502.

321 See United States’ oral statement at the first Panel meeting, para. 11; and United States’ second written submission to the Panel, para. 13. See also Panel Report, paras. 4.199, 4.200, 4.301-4.303, and 7.503. Furthermore, the United States confirmed before the Panel that its claims should be understood as concerning goods, stating that the subject of its claim is hard-copy cinematographic film, in any tangible form, that can be used to project motion pictures in a theatre. (Ibid., paras. 7.518 and 7.521)

322 See United States’ oral statement at the first Panel meeting, paras. 10-22; and United States’ second written submission to the Panel, paras. 13-29. See also Panel Report, paras. 4.200-4.202, 4.302-4.308, and 7.503-7.510.

323 See China’s first written submission to the Panel, paras. 49-82. See also Panel Report, paras. 4.96-4.101, 7.494-7.499, 7.515, and 7.516.

324 See United States’ oral statement at the first Panel meeting, para. 11; and United States’ second written submission to the Panel, para. 14. See also Panel Report, para. 7.503.

325 See United States’ oral statement at the first Panel meeting, para. 13; and United States’ second written submission to the Panel, paras. 15 and 16. See also Panel Report, paras. 4.304, 4.305, and 7.504.

326 United States’ second written submission to the Panel, paras. 26 and 27. See also Panel Report, paras. 4.307, 7.506, and 7.519.

327 Harmonized Commodity Description and Coding System, Explanatory Notes, 4th edn. (WCO, 2007), p. VI-3706-1 (Panel Exhibit US-53).

328 Heading 3706 of China’s Schedule of Concessions for goods reads as follows: “cinematographic film, exposed and developed, whether or not incorporating sound track or consisting only of sound track”. (United States’ oral statement at the first Panel meeting, para. 12; United States’ second written submission to the Panel, paras. 17 and 28) See also Panel Report, paras. 4.201, 4.308, and 7.507.

329 See United States’ oral statement at the first Panel meeting, para. 11; and United States’ second written submission to the Panel, para. 14. See also Panel Report, para. 7.518.

330 United States’ appellee’s submission, para. 133 (referring to United States’ oral statement at the first Panel meeting, para. 11).

331 Panel Report, para. 7.523.

332 See supra, footnotes 297 and 309.

333 Panel Report, para. 7.575.

334 Panel Report, para. 7.584.

335 See China’s appellant’s submission, footnote 155 to para. 219.

336 The Appellate Body stated that the municipal law of WTO Members may serve not only as evidence of facts, but also as evidence of compliance or non-compliance with international obligations. (Appellate Body Report, India – Patents (US), paras. 65, 66, and 68) See also Appellate Body Report, US – Section 211 Appropriations Act, para. 106; Appellate Body Report, US – Carbon Steel, paras. 156 and 157; Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168; and Appellate Body Reports, China – Auto Parts, para. 225.

337 Appellate Body Reports, China – Auto Parts, paras. 225-245.

338 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.

339 Appellate Body Reports, China – Auto Parts, para. 225.

340 Panel Report, para. 7.543.

341 Panel Report, para. 7.530.

342 Panel Report, para. 7.534.

343 Panel Report, para. 7.533.

344 Panel Report, para. 7.533.

345 Panel Report, para. 7.533.

346 Panel Report, para. 7.535.

347 Panel Report, para. 7.535. The Panel used the term “hardcopy cinematographic films” to refer to either “internegative” films or “interpositive” films, both of which are exposed and developed. Internegative and interpositive films are reproductions of the original copy produced by the producer/licensor. An internegative contains the visual part of the film without sound track, whereas an interpositive contains both the visual part and the sound track. (Ibid., paras. 7.522 and 7.537)

348 Panel Report, para. 7.524.

349 Panel Report, para. 7.537.

350 China’s response to Panel Question 179 (referred to in Panel Report, footnote 415 to para. 7.538). See also United States’ appellee’s submission, para. 130.

351 Panel Report, para. 7.543; see also paras. 7.538 and 7.539. The Panel also found that, if the term “films” were understood as meaning “hard-copy cinematographic films”, Article 30 would directly regulate who may engage in importing such goods. (Ibid., para. 7.543)

352 Panel Report, para. 7.538.

353 Panel Report, para. 7.560.

354 China’s appellant’s submission, para. 233.

355 China’s appellant’s submission, para. 220.

356 Panel Report, para. 7.533.

357 China’s appellant’s submission, para. 232.

358 United States’ appellee’s submission, para. 130.

359 Panel Report, paras. 7.539 and 7.543.

360 China’s appellant’s submission, para. 221.

361 China’s appellant’s submission, para. 234 (referring to Appellate Body Report, EC – Hormones, para. 132; and Appellate Body Report, US – Section 211 Appropriations Act, para. 105); China’s response to questioning at the oral hearing (referring to Appellate Body Reports, China – Auto Parts, para. 225).

362 United States’ response to questioning at the oral hearing.

363 See, for example, Appellate Body Reports, China – Auto Parts, paras. 225-245.

364 See Panel Report, paras. 7.488, 7.512, 7.531, footnote 409 to para. 7.535, and footnote 413 to para. 7.537.

365 China’s appellant’s submission, para. 223.

366 China also quoted Article 1 of the Film Regulation, which states:

These Regulations are formulated for the purposes of strengthening the administration of the film industry, developing and promoting the film undertakings, and satisfying the needs of people for cultural life, promoting the construction of socialist material and spiritual civilization.

(China’s appellant’s submission, para. 222)

367 China’s appellant’s submission, para. 234.

368 We recall that a claim that a panel has failed to comply with its duties under Article 11 of the DSU must stand by itself and should not be made merely as a subsidiary argument or claim in support of a claim that a panel failed to construe or apply correctly a particular provision of a covered agreement. (See Appellate Body Report, US – Steel Safeguards, para. 498; and Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 238)

369 China’s appellant’s submission, para. 242.

370 China’s appellant’s submission, para. 243 (quoting Panel Report, para. 7.549).

371 China’s appellant’s submission, para. 243.

372 China’s appellant’s submission, para. 242.

373 China’s appellant’s submission, para. 240; see also para. 252.

374 United States’ appellee’s submission, para. 134 (quoting Panel Report, para. 7.555).

375 Appellate Body Report, Canada – Periodicals, p. 19, DSR 1997:I, 449, at 465.

376 Appellate Body Report, EC – Bananas III, para. 221.

377 China’s appellant’s submission, para. 238.

378 Appellate Body Report, Canada – Periodicals, p. 17, DSR 1997:I, 449, at 463. (footnote omitted) See also United States’ appellee’s submission, para. 136 and footnote 217 thereto.

379 See United States’ appellee’s submission, para. 131.

380 United States’ appellee’s submission, para. 123 (referring to China’s appellant’s submission, paras. 221, 232, 238, 244, and 245).

381 Panel Report, para. 7.551 (quoting China’s Accession Protocol, para. 5.1; and China’s Accession Working Party Report, para. 84(a)). We recall that China’s obligation to grant the right to trade does not apply to the goods listed in Annex 2A and, prior to 11 December 2004, Annex 2B to China’s Accession Protocol, and that none of the products at issue in this dispute falls within the scope of the products listed in Annex 2A or Annex 2B. (See supra, footnote 306)

382 China’s appellant’s submission, para. 242.

383 China’s appellant’s submission, para. 240. (emphasis added)

384 Panel Report, para. 7.543.

385 China also maintains that the measures at issue “do not have any direct legal effect to restrict the importation of hard-copy cinematographic film.” (China’s appellant’s submission, para. 238) In this respect, we note that, in Canada – Periodicals, Canada submitted that the measure at issue “is a measure regulating trade in services “in their own right’” and therefore not subject to the GATT 1994, despite Canada’s acknowledgement that the measure had “effects on the physical good—the magazine as it crossed the border”. (Appellate Body Report, Canada – Periodicals, p. 17, DSR 1997:I, 449, at 463) Despite these arguments, both the panel and the Appellate Body found that the measure at issue was subject to Article III:2 of the GATT 1994. (Panel Report, Canada – Periodicals, para. 5.19; Appellate Body Report, Canada – Periodicals, p. 20, DSR 1997:I, 449, at 465)

386 Panel Report, para. 7.555.

387 We note that sector 4.B of China’s GATS Schedule, which relates to wholesale trade services, contains a footnote stating that “[t]he restrictions on mode 1 shall not undermine the rights of WTO Members to the right to trade as stipulated in Chapter 5 of China’s Protocol of accession to the WTO.” (GATS/SC/135, footnote 6) In our view, this footnote also suggests that China’s commitments on trade in services cannot diminish the scope of China’s obligation to grant the right to trade.

388 China’s appellant’s submission, para. 250.

389 United States’ appellee’s submission, para. 139.

390 China’s appellant’s submission, para. 252.

391 Panel Report, para. 7.543.

392 Panel Report, para. 7.538.

393 Panel Report, para. 7.584.

394 See also Panel Report, paras. 7.571, 7.576, 7.594, 7.598, and 7.599.

395 The text of these provisions is set out in Annex III to this Report.

396 Panel Report, para. 8.1.2(d)(i) and (v).

397 Panel Report, paras. 7.608, 7.625, and 7.642. See also supra, para. 157 and footnote 289 thereto.

398 Panel Report, paras. 7.637, 7.639, and 7.672.

399 Panel Report, para. 7.640.

400 Panel Report, para. 7.646; see also para. 7.674.

401 Panel Report, para. 7.651.

402 Panel Report, paras. 7.652 and 7.674.

403 Panel Report, paras. 7.657 and 7.680.

404 China’s appellant’s submission, paras. 260 and 261.

405 See also Panel Report, paras. 7.657 and 7.680.

406 China did not invoke Article XX(a) to the extent that these measures and provisions concern the import of films for theatrical release and unfinished audiovisual products. (Panel Report, para. 7.726) China also did not invoke Article XX(a) as a defence to the United States’ claims with respect to the Film Regulation and the Film Enterprise Rule, or the claims regarding unfinished audiovisual products under Article 5 of the 2001 Audiovisual Products Regulation and Article 7 of the Audiovisual Products Importation Rule. As discussed above, China argued that its trading rights commitments did not apply, at all, to these measures, because the measures regulate services and not goods. (See supra, section V of this Report; see also Panel Report, paras. 7.540, 7.584, 7.649, and 7.674) China also did not invoke Article XX(a) to justify the measures that the Panel found to be inconsistent with Article III:4 of the GATT 1994. Nor did China seek to justify, under Article XIV(a) of the GATS, the measures that the Panel had found to be inconsistent with Articles XVI and XVII of the GATS.

407 The text of these provisions is set out in Annex III to this Report. The Panel found that these provisions, and certain specific requirements contained within them, restrict the right to import goods into China. The Panel found each of the relevant requirements to be inconsistent with either: (i) China’s obligation to grant the right to trade (paragraph 5.1 of China’s Accession Protocol, as well as paragraphs 83(d) and 84(a) of China’s Accession Working Party Report and, hence, paragraph 1.2 of China’s Accession Protocol); or (ii) China’s obligation to grant in a non-discretionary manner the right to trade (paragraph 84(b) of China’s Accession Working Party Report and, hence, paragraph 1.2 of China’s Accession Protocol).

408 China’s arguments are summarized in paragraphs 7.239-7.241, 7.244, and 7.245 of the Panel Report.

409 The United States’ arguments are summarized in paragraphs 7.242 and 7.243 of the Panel Report.

410 Panel Report, para. 7.743.

411 The Panel noted that the United States had, referring to the arguendo approach adopted by the Appellate Body in US – Shrimp (Thailand) / US – Customs Bond Directive, invited the Panel to take the same approach in this dispute. In that case, the United States invoked Article XX(d) of the GATT 1994 to defend the measure at issue (a bond requirement) that had been found to be inconsistent with the Ad Note to Article VI:2 and 3 of the GATT 1994 and Article 18.1 of the Anti-Dumping Agreement. The Appellate Body found that the bond requirement was not “necessary” within the meaning of Article XX(d) and did not return to the issue of whether Article XX(d) was available to justify a measure that is inconsistent with the requirements of the Ad Note and the Anti-Dumping Agreement.

412 Panel Report, para. 7.745.

413 Panel Report, para. 8.2(a)(ii).

414 United States’ appellee’s submission, footnote 14 to paragraph 10. At the oral hearing in this appeal, the United States requested us to adopt the same arguendo approach as the Panel, that is, to review the Panel’s findings under Article XX(a) of the GATT 1994 based on the assumption that Article XX(a) is a defence available to China in this dispute.

415 Article 3.2 of the DSU.

416 Article 11 of the DSU.

417 In its analysis of the “restrictive impact” of the inconsistent measures, the Panel found it “appropriate”, in this case, “to consider two different types of restrictive impact”

... not only the restrictive impact the measures at issue have on imports of relevant products, but also the restrictive effect they have on those wishing to engage in importing, in particular on their right to trade. In our view, if Article XX is assumed to be a direct defence for measures in breach of trading rights commitments, it makes sense to consider how much these measures restrict the right to import.

(Panel Report, para. 7.788 (emphasis added)) We address China’s appeal of this finding in section VI.B.3 of this Report.

418 The European Communities expresses similar concerns regarding the uncertainty that may result absent a ruling on the applicability of Article XX(a) in the circumstances of this case. (European Communities’ third participant’s submission, para. 12)

419 Paragraph 5.1 provides that China’s obligation to grant the right to import and export all goods does not apply to the specific goods listed in Annex 2A to China’s Accession Protocol, the import and export of which may be reserved to State trading enterprises in accordance with that Annex. Thus, Annex 2A carves out certain goods from the scope of China’s obligation to grant the right to trade. For all goods not listed in Annex 2A, including all of the goods at issue in this dispute, China is subject to an obligation to grant all enterprises in China the right to import and export such goods, irrespective of the meaning and scope of “China’s right to regulate trade in a manner consistent with the WTO Agreement”. The question of the meaning and operation of the introductory clause to paragraph 5.1—“Without prejudice to China’s right to regulate trade in a manner consistent with the WTO Agreement”—is distinct from the question of whether China has acted inconsistently with the obligation set out in the first sentence of paragraph 5.1. Thus, we do not agree with the argument made by the United States to the Panel that accepting that China’s “right to regulate trade” may justify certain restrictions on trading rights would, in effect, permit China to add new goods to the Annex 2A list.

420 The Panel referred to the following dictionary definitions of “without prejudice to”: “without detriment to any existing right or claim; spec. in LAW, without damage to one’s own rights or claims” (Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 2324); and “[w]ithout loss of any rights; in a way that does not harm or cancel the legal rights or privileges of a party” (Black’s Law Dictionary, 7th edn., B.A. Garner (ed.) (West Group, 1999), p. 1596). (Panel Report, footnotes 207 and 208 to para. 7.253)

421 Among the definitions of “right” are: “[e]ntitlement or justifiable claim ... to act in a certain way”, and “[a] legal, equitable, or moral title or claim to the possession of ... authority, the enjoyment of privileges or immunities, etc.” (Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 2583.); as well as “a recognized and protected interest the violation of which is a wrong” (Black’s Law Dictionary, 7th edn., B.A. Garner (ed.) (West Group, 1999), p. 1322).

422 Thus, the direct beneficiaries of China’s obligation to grant the “right to trade” in paragraph 5.1 are not other WTO Members, as such, but rather, enterprises in China.

423 Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 2516. See Panel Report, para. 7.256.

424 As a noun, trade is defined as: “[b]uying and selling or exchange of commodities for profit, spec. between nations; commerce, trading . . . ”. (Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p 3316)

425 We note that the word “trade” is used three times in the first sentence of paragraph 5.1. The first time is as a noun in “China’s right to regulate trade”. The second and third times, it is used as a verb in the phrase “right to trade”. Paragraph 5.1 expressly defines “the right to trade” as “the right to import and export goods”, which in turn suggests that, in the phrase “the right to trade”, the verb “trade” means “import and export”. Such meaning is consistent with, but narrower in scope than, the dictionary definition of the verb trade: “[e]ngage in trade or commerce, pursue trade”. (Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 3316)

426 The Panel explained that it viewed this sentence as providing that:

... even though they are foreign enterprises and individuals “with trading rights” (in that the Accession Protocol prescribes that they must be granted such rights), such enterprises and individuals must still comply with “all WTO-consistent requirements related to importing and exporting, such as those concerning import licensing, TBT and SPS”.

(Panel Report, para. 7.262)

427 The disciplines that the WTO Agreement, including its Annexes, imposes upon a Member’s use of SPS, TBT, and import licensing measures seek to ensure that such measures may be employed only in particular circumstances and subject to specific conditions. These disciplines preserve the power of Members to adopt certain measures in the exercise of their right to regulate trade in goods, while at the same time ensuring that the use of such measures is carefully circumscribed so as to comport with specific objectives recognized as legitimate and so as to minimize the extent to which the exercise of such rights may constitute a barrier to trade in goods or discriminate against the goods of other Members. The Agreement on the Application of Sanitary and Phytosanitary Measures (the “SPS Agreement ”), the Agreement on Technical Barriers to Trade (the “TBT Agreement ”), the Agreement on Import Licensing Procedures, and the GATT 1994 all recognize and embody this balance.

428 Import licensing requirements, for example, are requirements relating to the activity of importing goods. Typically, licensing requirements and their attendant procedures apply to and are satisfied by those who wish to import the goods, rather than by the goods themselves.

429 SPS and TBT measures may be applied to goods that are imported, and may also be applied to domestic goods. They may be applied at the border, or internally. In essence, they are measures regulating goods.

430 This is reflected in paragraph 80 of China’s Accession Working Party Report. That paragraph describes the restrictions on the right to trade that China maintained at the time, and adds that some members of the Working Party “stated their view that such restrictions were inconsistent with WTO requirements, including Articles XI and III of GATT 1994”.

431 We note that the wording of this commitment closely follows, but is not identical to, the language of Article III:4 of the GATT 1994. More specifically, the above commitment in paragraph 5.1 refers to “including their direct access to endusers”, which is a phrase not used in Article III:4 itself. In addition, not all of the language of the first sentence, and none of the second sentence, of Article III:4 is reproduced in paragraph 5.1.

432 With respect to Article III:4 of the GATT 1994, the panel in India – Autos found that “indigenization requirements” (requirements to use a minimum amount of domestically produced parts) and “trade balancing requirements” (requirements to export products of an equivalent value to the imported products) imposed on automobile manufacturers were inconsistent with Article III:4 of the GATT 1994. (Panel Report, India – Autos, paras. 7.195-7.198 and 7.307-7.309) Similarly, in China – Auto Parts, the Appellate Body found that measures that applied to automobile manufacturers created incentives for those manufacturers to limit their use of imported parts relative to domestic parts, or to avoid entirely the use of imported auto parts, and were, therefore, inconsistent with Article III:4 of the GATT 1994. (Appellate Body Reports, China – Auto Parts, paras. 195 and 196; see also Appellate Body Report, US – FSC (Article 21.5 – EC), para. 212) Requirements that imported products be sold or distributed only through specific points of sale or specific channels have also been found to violate Article III:4 (see the Panel and Appellate Body Reports in Korea – Various Measures on Beef; and GATT Panel Report, US – Malt Beverages, para. 5.38), as have purchase undertakings that conditioned investment approval upon the acceptance by investors of undertakings to purchase goods of domestic origin (GATT Panel Report, Canada – FIRA, para. 6.1). As for Article XI:1, the GATT panel in Canada – Provincial Liquor Boards (EEC) found that restrictions on points of sale were a restriction on importation (GATT Panel Report, Canada – Provincial Liquor Boards (EEC), para. 4.25), and, in Colombia – Ports of Entry, the panel found that a restriction on the ports through which relevant goods could enter Colombia constituted a restriction on importation within the meaning of Article XI:1 (Panel Report, Colombia – Ports of Entry, para. 7.275).

433 In this dispute, the United States challenged a variety of provisions within various Chinese measures as inconsistent with paragraph 5.1 of China’s Accession Protocol. All of the provisions challenged by the United States regulate the right to import the products at issue into China. The United States did not raise claims under any other provisions of the covered agreements, notably under Article III:4 or Article XI:1 of the GATT 1994, with respect to these provisions. As explained, supra, in paragraphs 151 and 152, the United States did, however, raise a number of claims under Article III:4 in respect of the distribution of the relevant products. With respect to one provision—Article 16 of the Film Enterprise Rule—the United States raised claims that China had acted inconsistently with both Article III:4 of the GATT 1994 and its trading rights commitments. That provision relates to both the importation of films for theatrical release, in its first sentence, and the distribution of films for theatrical release, in its second sentence. Ultimately, the Panel found that the United States had not made out its claim under Article III:4 of the GATT 1994 regarding films for theatrical release. (Panel Report, para. 7.1699) The United States further claimed that the provisions relating to the distribution of the relevant products that it alleged to be inconsistent with Article III:4 were also inconsistent with China’s obligations under the third sentence of paragraph 5.1 of China’s Accession Protocol, which refers to China’s obligation to accord to imported goods national treatment under Article III of the GATT 1994, especially paragraph 4 thereof. In respect of such claims, the Panel either exercised judicial economy or found that the United States had not made out its claim. (Ibid., paras. 7.1709 and 7.1710).

434 Panel Report, para. 7.767.

435 Panel Report, para. 7.779; see also paras. 7.773 and 7.774.

436 See, in particular, Panel Report, section VII.C.2.

437 As discussed further below, the United States did contend that the provisions restricting trading rights are not “necessary” to protect public morals.

438 See supra, footnote 433.

439 Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 41, and Article 42 in conjunction with Article 41, of the Publications Regulation; Article 27 of the 2001 Audiovisual Products Regulation; Article 8 of the Audiovisual Products Importation Rule; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

440 Panel Report, para. 8.2(a)(i). See also paras. 7.911 and 7.913.

441 This exclusion is set out in the following provisions: Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

442 See Panel Report, para. 7.836. We note that the Panel stated that the State plan requirement in Article 42 of the Publications Regulation could be characterized as “necessary” in the sense of Article XX(a) of the GATT 1994 “in the absence of reasonably available alternatives”. Ultimately, however, the Panel found that this requirement could not be justified, because China had not demonstrated that a less trade-restrictive alternative proposed by the United States was not reasonably available to it. (Ibid., paras. 7.906 and 7.907)

443 United States’ other appellant’s submission, para. 26.

444 The United States expresses these concerns in its other appellant’s submission in the context of its claim relating to the State plan requirement.

445 United States’ other appellant’s submission, para. 26.

446 United States’ other appellant’s submission, para. 26 (referring to Panel Report, para. 7.786, in turn quoting Appellate Body Report, Brazil – Retreaded Tyres, para. 178). The Appellate Body stated that a panel must consider the importance of the interests or values at stake, the extent of the contribution made by the measure to the achievement of the relevant objective, and the measure’s trade restrictiveness, and that “[i]f this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by comparing the measure with possible alternatives, which may be less trade restrictive while providing an equivalent contribution to the achievement of the objective.”

447 United States’ other appellant’s submission, para. 26 (referring to Appellate Body Report, US – Gambling, para. 307; and Appellate Body Report, Korea – Various Measures on Beef, para. 166).

448 United States’ other appellant’s submission, para. 27.

449 Panel Report, para. 7.836.

450 United States’ other appellant’s submission, para. 27.

451 We note that the United States did not specifically identify this concern in its Notice of Other Appeal.

452 In US – Gambling, the Appellate Body stated that, due to the similar language used in both provisions—in particular the term “necessary” and the requirements set out in their respective chapeaux— previous decisions under Article XX of the GATT 1994 were relevant to its analysis under Article XIV of the GATS. (Appellate Body Report, US – Gambling, para. 291) For the same reasons, the decision of the Appellate Body in US – Gambling dealing with the interpretation of Article XIV of the GATS is relevant to the analysis of Article XX called for in this dispute.

453 Appellate Body Report, US – Gambling, paras. 306-308. In paragraph 305, the Appellate Body quoted from paragraph 166 of Appellate Body Report, Korea – Various Measures on Beef.

454 Appellate Body Report, Brazil – Retreaded Tyres, para. 178; see also para. 156.

455 In articulating the proper approach in Brazil – Retreaded Tyres, the Appellate Body referred to its report in US – Gambling without distinguishing that case or suggesting any intention to depart from the approach articulated in US – Gambling (or, for that matter, Korea – Various Measures on Beef). (Appellate Body Report, Brazil – Retreaded Tyres, footnote 319 to para. 178 (referring to Appellate Body Report, US – Gambling, para. 307))

456 Appellate Body Report, US – Gambling, para. 306. (footnote omitted; emphasis added) See also Appellate Body Report, Brazil – Retreaded Tyres, para. 143; and Appellate Body Report, EC – Asbestos, para. 172.

457 Appellate Body Report, US – Gambling, para. 306.

458 Appellate Body Report, US – Gambling, para. 307. (emphasis added)

459 Appellate Body Report, Brazil – Retreaded Tyres, para. 178; see also para. 156.

460 Panel Report, paras. 7.751-7.793.

461 The Panel set out the list of the types of content that may not be included in publications and noted that the United States did not specifically contest that the dissemination of materials containing the types of content listed as prohibited by China could have a negative impact on public morals in China. (Panel Report, paras. 7.760-7.763) 462 Panel Report, para. 7.817.

463 Panel Report, para. 7.819.

464 For the purposes of its analysis, the Panel grouped certain similar provisions together. The “criteria provisions” comprise: (i) the requirement in Article 42 of the Publications Regulation that approval of a publications import entity must conform to the State plan, and (ii) the requirement in Article 42(4) of the Publications Regulation that publication import entities have a suitable organization and qualified personnel. The “discretion provisions” consist of: (i) Article 41 of the Publications Regulation; (ii) Article 27 of the 2001 Audiovisual Products Regulation; and (iii) Article 8 of the Audiovisual Products Importation Rule. The “exclusion provisions” consist of: (i) the requirement in Article 42(2) of the Publications Regulation that publication import entities be wholly Stateowned; (ii) Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; (iii) Article 4 of the Several Opinions; and (iv) Article 21 of the Audiovisual (Sub-)Distribution Rule. (Panel Report, para. 7.814) We do not use the same nomenclature in this Report.

465 Panel Report, para. 7.828.

466 Panel Report, paras. 7.828 and 7.836.

467 Panel Report, para. 7.848 (the designation requirement in Article 41 of the Publications Regulation); para. 7.849 (the designation requirements in Article 27 of the 2001 Audiovisual Products Regulation and Article 8 of the Audiovisual Products Importation Rule); para. 7.863 (the State-ownership requirement in Article 42 of the Publications Regulation); and para. 7.868 (the provisions excluding foreign-invested enterprises from engaging in the importation of the relevant products in Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 21 of the Audiovisual (Sub-)Distribution Rule).

468 Panel Report, para. 7.897.

469 Panel Report, para. 7.898.

470 Panel Report, para. 7.899.

471 Panel Report, para. 7.908.

472 Panel Report, para. 7.911.

473 Panel Report, para. 7.836.

474 Panel Report, para. 7.869. In the intervening seven pages the Panel weighed and balanced relevant factors for several other provisions and “concluded”, for each, that it could not be characterized as “necessary” to protect public morals within the meaning of Article XX(a) of the GATT 1994. (Ibid., paras. 7.837-7.868)

475 These exclusions are set out in the following provisions: Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

476 Appellate Body Report, Korea – Various Measures on Beef, para. 161.

477 Appellate Body Report, Korea – Various Measures on Beef, para. 164.

478 Appellate Body Report, Korea – Various Measures on Beef, para. 163.

479 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.

480 This is so, for instance, where a measure is part of a comprehensive policy comprising a multiplicity of interacting measures or where the results of a measure can only be evaluated with the benefit of time. (Appellate Body Report, Brazil – Retreaded Tyres, para. 151)

481 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.

482 Panel Report, para. 7.863; see also para. 7.860.

483 China’s appellant’s submission, paras. 15-30 and 37. In response to questioning at the oral hearing in this appeal, China clarified that it was not making a claim with respect to the way the Panel applied the “necessity” test to the State-ownership requirement. Instead, China takes issue with the Panel’s representation of China’s arguments in the Panel Report and the Panel’s assessment of those arguments. China stated that the alleged misrepresentations led to a failure to make an objective assessment of the matter.

484 China’s appellant’s submission, paras. 17-20 (referring in footnotes to Panel Report, para. 7.853; China’s responses to Panel Questions 46(a), 185, 188(b), and 195; China’s first written submission to the Panel, paras. 153, 196, and 197; and China’s second written submission to the Panel, para. 104).

485 China’s appellant’s submission, paras. 18-20.

486 China’s appellant’s submission, paras. 27-29.

487 United States’ appellee’s submission, para. 14 (quoting Panel Report, para. 7.854, in turn referring to China’s second written submission to the Panel, para. 104).

488 United States’ appellee’s submission, para. 24 (referring to Panel Report, para. 7.858).

489 China’s second written submission to the Panel, para. 104.

490 China’s response to Panel Question 46(a). See also Panel Report, para. 7.853 and footnote 581 thereto.

491 Panel Report, para. 7.854.

492 Panel Report, para. 7.854.

493 See Panel Report, paras. 7.854-7.856.

494 China’s response to Panel Question 185.

495 Panel Report, para. 7.856.

496 Panel Report, para. 7.857.

497 Panel Report, para. 7.854.

498 Panel Report, para. 7.854.

499 China’s response to Panel Question 46(b). (footnote omitted; emphasis added)

500 China’s response to Panel Question 46(a). In response to questioning at the oral hearing, China did not point to other arguments or evidence on record.

501 Panel Report, para. 7.858.

502 Panel Report, para. 7.858.

503 Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; or Article 21 of the Audiovisual (Sub-)Distribution Rule.

504 Panel Report, para. 7.868.

505 Panel Report, para. 7.348.

506 Panel Report, para. 7.372. The Panel noted that the United States’ claims in respect of these products related only to physical products. (Ibid., para. 7.371)

507 Panel Report, para. 7.703. The Panel explained that according to Article 2 of the Audiovisual (Sub-)Distribution Rule the term “audiovisual products” applies to sound recordings and other audiovisual products, as it specifically states that the term refers to audio tapes, video tapes, records, and audio and video CDs with audiovisual recorded contents. (Ibid., para. 7.701)

508 Panel Report, paras. 7.773, 7.776, 7.779, and 7.865.

509 China’s appellant’s submission, paras. 32 and 33 (referring to Panel Report, para. 7.865).

510 China’s appellant’s submission, para. 36 (referring to Panel Report, para. 7.825).

511 United States’ appellee’s submission, para. 31.

512 United States’ appellee’s submission, para. 31.

513 Panel Report, para. 7.865. The finding that the Panel refers to is contained in paragraphs 7.860 and 7.863 of the Panel Report.

514 Panel Report, para. 7.865.

515 The State-ownership requirement also excludes Chineseowned enterprises that are not wholly State-owned from engaging in importing.

516 Panel Report, paras. 7.865 and 7.868.

517 Panel Report, para. 7.801.

518 Supra, para. 267.

519 United States’ other appellant’s submission, para. 43.

520 The Panel found:

[S]ince in the case of the Publications Regulation the publication import entities are responsible for content review, we can see that limiting the number of import entities can make a material contribution. It would appear that with a limited number of publication import entities, it is easier for the GAPP to interact with these entities with a view to ensuring, and enhancing, the consistency of the review work of these entities. Similarly, a limited number of entities allows the GAPP to devote more time to conduct careful ex post controls of compliance with applicable content review requirements, e.g., through the annual inspections.

(Panel Report, para. 7.832)

521 Panel Report, para. 7.836.

522 Panel Report, para. 7.899.

523 Panel Report, para. 7.908.

524 Panel Report, para. 7.911.

525 Article 42 of the Publications Regulation is reproduced in Annex III to this Report.

526 China’s response to Panel Question 44.

527 China’s first written submission to the Panel, para. 214.

528 China’s first written submission to the Panel, para. 216.

529 China’s first written submission to the Panel, para. 218.

530 Panel Report, para. 7.831.

531 Panel Report, para. 7.832. See also supra, footnote 520.

532 Panel Report, para. 7.833.

533 United States’ other appellant’s submission, paras. 28 and 29 (referring to Panel Report, para 7.785; Appellate Body Report, US – Gambling, para. 310; and Appellate Body Report, Korea – Various Measures on Beef, para. 161).

534 United States’ other appellant’s submission, para. 34.

535 China’s appellee’s submission, footnote 12 to para. 15 (referring to Panel Exhibit US-13, supra, footnote 172; Panel Exhibit CN-26, supra, footnote 141; and Panel Exhibits CN-33 through CN-37, supra, footnote 172).

536 China’s appellee’s submission, para. 30 (referring to Panel Exhibit CN-22, supra, footnote 140).

537 Appellate Body Report, US – Gambling, para. 304.

538 Appellate Body Report, US – Gambling, para. 310.

539 Panel Report, para. 7.830. (emphasis added)

540 Panel Report, para. 7.832. (emphasis added)

541 Panel Report, para. 7.836. (emphasis added)

542 Panel Report, para. 7.832.

543 China’s appellee’s submission, para. 34.

544 China’s appellee’s submission, footnote 12 to para. 15. In response to questioning at the oral hearing in this appeal, China explained that the State plan does not contain a fixed number for publication import entities, but rather a statement dealing with the number of publication import entities in a flexible manner.

545 China’s appellee’s submission, footnote 12 to para. 15 (referring to Exhibit US-13, supra, footnote 172). The United States refers to the same number of approved publication import entities in paragraph 10 of its other appellant’s submission.

546 China’s appellee’s submission, footnote 12 to para. 15 (referring to Panel Exhibits CN-33 through CN-37, supra, footnote 172).

547 China’s appellee’s submission, footnote 12 to para. 15 (referring to Panel Exhibit CN-26, supra, footnote 141).

548 Panel Report, para. 7.832.

549 China’s appellee’s submission, para. 30 (referring to Panel Exhibit CN-22, supra, footnote 140).

550 Paragraph IV of the Notice on Approving and Issuing License for Importing Publications and Carrying Out Annual Inspection System (Panel Exhibit CN-22, supra, footnote 140).

551 We note that paragraph V.2 of this Notice stipulates that the GAPP will undertake an “examination and verification” on the basis of the material described in paragraph IV. The Notice, however, does not set out any criteria for that examination and verification.

552 Panel Report, para. 7.788.

553 Panel Report, para. 7.788.

554 See Panel Report, paras. 7.826 and 7.827, for the suitable organization and qualified personnel requirement; paras. 7.834 and 7.835, for the State plan requirement; paras. 7.845-7.847, for Article 41 of the Publications Regulation, Article 27 of the 2001 Audiovisual Products Regulation, and Article 8 of the Audiovisual Products Importation Rule; paras. 7.861 and 7.862, for the State-ownership requirement; and paras. 7.866 and 7.867, for the provisions excluding foreign-invested enterprises from engaging in the importation of the relevant products.

555 See Panel Report, paras. 7.826, 7.834, 7.846, 7.861, and 7.866.

556 China’s appellant’s submission, para. 39.

557 China’s appellant’s submission, para. 44 (referring to Appellate Body Report, US – Gasoline, p. 16, DSR 1996:I, 3, at 15).

558 China’s appellant’s submission, para. 43.

559 United States’ appellee’s submission, para. 41.

560 United States’ appellee’s submission, para. 42.

561 See supra, subsection VI.B.

562 Appellate Body Report, Korea – Various Measures on Beef, para. 163 and footnote 105 thereto.

563 Preamble to the GATT 1994, third recital.

564 According to Article I:1 of the GATT 1994, “all matters referred to in paragraphs 2 and 4 of Article III” are also subject to the requirement that any advantage, favour, privilege, or immunity be accorded to the like product. This also suggests a broad coverage and consideration of trade effects.

565 Appellate Body Report, Korea – Various Measures on Beef, paras. 135 and 136. See also Appellate Body Report, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at 109-110.

566 We note that in analyzing a defence of a measure found to be inconsistent with the GATT 1994, a panel may also have to assess the consistency of the measure with the chapeau of Article XX, which would require the panel to analyze whether the measure is applied in a manner that constitutes “a disguised restriction on international trade” or “arbitrary or unjustifiable discrimination”. (emphasis added)

567 The approach of the panel in US – Gambling also illustrates this logical sequence. The panel assessed restrictions on market access in its analysis of Articles XVI:2(a) and XVI:2(c) of the GATS. Subsequently, in its analysis of necessity in the context of Article XIV of the GATS, the panel assessed the restrictive effect of the measures at issue in that dispute and agreed with Antigua and Barbuda that the United States’ measures had the effect of a “total prohibition, which is the most trade-restrictive approach possible.” (Panel Report, US – Gambling, para. 6.495)

568 Appellate Body Report, US – Gasoline, p. 16, DSR 1996:I, 3, at 15.

569 The Panel assessed the restrictive effect of the requirement that import entities have a suitable organization and qualified personnel (Panel Report, paras. 7.826 and 7.827); it considered the restrictive effect of the requirement that import entities conform to China’s State plan (para. 7.835); it examined the restrictive effects of “the designation requirements” contained in Article 41 of the Publications Regulation, Article 27 of the 2001 Audiovisual Products Regulation, and Article 8 of the Audiovisual Products Importation Rule (see paras. 7.845-7.847); and it evaluated the restrictive effects of the Stateownership requirement and the exclusions relating to foreigninvested enterprises (paras. 7.861, 7.862, 7.866, and 7.867, respectively).

570 China’s appellant’s submission, para. 39.

571 Appellate Body Report, Korea – Various Measures on Beef, para. 163. See also Appellate Body Report, Brazil – Retreaded Tyres, para. 150.

572 Panel Report, paras. 7.862 and 7.867.

573 Panel Report, paras. 7.827 and 7.835.

574 In paragraphs 7.826, 7.827, 7.834, 7.835, 7.846, 7.847, 7.861, 7.862, 7.866, and 7.867 of the Panel Report.

575 Panel Report, paras. 7.828 and 7.836.

576 Panel Report, para. 7.898.

577 Panel Report, para. 7.908; see also paras. 7.911 and 8.2(a)(i).

578 Panel Report, para. 7.886.

579 As further alternatives, the United States proposed that a foreign-invested enterprise could develop the expertise to conduct content review for a particular type of product. The foreigninvested enterprise could complete the review and then import the publication into China, or it could perform the content review either while importation is underway and/or once the importation was complete, but before the good is released into commerce in China. Alternatively, the foreign-invested enterprise importing the good into China could hire specialized domestic entities with the appropriate expertise to conduct the content review process before, during, or after importation. (See Panel Report, paras. 7.873 and 7.874. See also United States’ oral statement at the first Panel meeting, para. 35; and United States’ response to Panel Question 21)

580 Panel Report, para. 7.887.

581 See Panel Report, para. 7.898.

582 Panel Report, para. 7.906.

583 Appellate Body Report, US – Gambling, para. 308.

584 Appellate Body Report, EC – Asbestos, paras. 172-174. See also Appellate Body Report, Korea – Various Measures on Beef, para. 180; and Appellate Body Report, Brazil – Retreaded Tyres, para. 156.

585 Appellate Body Report, US – Gambling, paras. 309-311.

586 We note that China refers to its appeal regarding the Panel’s analysis of restrictive effect in this regards. (See supra, subsection VI.B.3)

587 See supra, para. 309.

588 Panel Report, para. 7.899.

589 China’s appellant’s submission, para. 62.

590 China’s appellant’s submission, paras. 56 and 57.

591 China’s appellant’s submission, paras. 62-65.

592 China’s appellant’s submission, para. 67 (referring to Appellate Body Report, US – Gambling, para. 308).

593 China’s appellant’s submission, para. 66.

594 China’s appellant’s submission, para. 69.

595 We note that the Panel referred, in paragraph 7.870, to Appellate Body Report, US – Gambling, para. 311; and, in paragraph 7.871, to Appellate Body Report, Brazil – Retreaded Tyres, para. 156.

596 Panel Report, para. 7.902 (referring to China’s response to Panel Question 185).

597 Panel Report, para. 7.903.

598 Panel Report, para. 7.901.

599 Panel Report, para. 7.904.

600 Panel Report, para. 7.905. Indeed, in response to the Panel’s question whether the Government could charge fees for the review of content in respect of the products relevant to this dispute, China answered that content review conducted by the Government was “not only a matter of money”. (China’s response to Panel Question 195)

601 Panel Report, para. 7.906.

602 Panel Report, para. 7.907. The Panel also noted that China had not argued that the proposed alternative would be WTOinconsistent, and that the Panel saw “no reason to believe that the alternative in question would be inherently WTOinconsistent or that it could not be implemented by China in a WTO-consistent manner”. (Ibid.)

603 We observe, in this regard, that a Member’s right to secure a high level of protection with respect to one of the objectives listed in Article XX of the GATT 1994 has been recognized by the Appellate Body in Korea – Various Measures on Beef. However, the Appellate Body also noted that implementing such choice through a WTO-consistent measure may entail higher costs for its national budget. (See Appellate Body Report, Korea – Various Measures on Beef, para. 181)

604 Appellate Body Report, US – Gambling, para. 308.

605 China’s appellant’s submission, para. 65.

606 China’s first written submission to the Panel, para. 225.

607 Panel Exhibit CN-26, supra, footnote 141.

608 China’s appellant’s submission, para. 69.

609 China’s appellant’s submission, para. 64.

610 China’s appellant’s submission, para. 58 (referring to Panel Report, para. 7.901).

611 China’s appellant’s submission, para. 58.

612 Panel Report, para. 7.903.

613 China’s appellant’s submission, para. 61.

614 In the light of these findings, we need not address China’s request that we complete the analysis and find its measures to be “necessary” to protect public morals within the meaning of Article XX(a) and consistent with the chapeau of Article XX of the GATT 1994.

615 See also Panel Report, para. 7.911.

616 Panel Report, para. 7.1265.

617 Panel Report, para. 8.2.3(b)(i).

618 Panel Report, paras. 7.1300-7.1311. The texts of these provisions along with an excerpt from China’s GATS Schedule are set out in Annex III to this Report.

619 China’s appellant’s submission, para. 79.

620 China’s appellant’s submission, para. 197.

621 China’s appellant’s submission, para. 194.

622 United States’ appellee’s submission, para. 71 (quoting Panel Report, para. 7.1311).

623 Panel Report, para. 7.1181.

624 Panel Report, para. 7.1202.

625 Panel Report, para. 7.1201.

626 Panel Report, para. 7.1194.

627 Panel Report, para. 7.1203.

628 Panel Report, para. 7.1219.

629 Panel Report, para. 7.1220. The Panel found that the United States’ claims were not, as alleged by China, limited to claims relating to the digital distribution of sound recordings over the Internet. Instead, the Panel accepted that the claims in respect of “digital distribution” also referred to other forms of digital communication, “which might include, for example, mobile telephone networks”. (Ibid., para. 7.1152)

630 Panel Report, para. 7.1221.

631 MTN.GNS/W/120, 10 July 1991.

632 MTN.GNS/W/164, 3 September 1993.

633 Panel Report, para. 7.1234.

634 Panel Report, para. 7.1247.

635 Panel Report, para. 7.1265.

636 Appellate Body Report, US – Gambling, para. 164. See also Appellate Body Report, US – Softwood Lumber IV, para. 59; Appellate Body Report, Canada – Aircraft, para. 153; and Appellate Body Report, EC – Asbestos, para. 92.

637 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 248.

638 See also Appellate Body Report, US – Gambling, paras. 166 and 167.

639 Appellate Body Report, EC – Chicken Cuts, para. 176.

640 This entry is not based on the Services Sectoral Classification List that would correspond to this part of China’s Schedule (MTN.GNS/W/120, 10 July 1991, at sector 2.D), nor does it refer to the 1991 United Nations Provisional Central Product Classification (the “CPC”).

641 Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 2493. See Panel Report, para. 7.1173.

642 Panel Report, para. 7.1173.

643 Panel Report, para. 7.1175.

644 Panel Report, para. 7.1176.

645 Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 1, p. 717. See Panel Report, para. 7.1178.

646 Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 1, p. 461. See Panel Report, para. 7.1179.

647 Panel Report, para. 7.1181.

648 China’s appellant’s submission, para. 97.

649 China’s appellant’s submission, para. 119.

650 China’s appellant’s submission, paras. 102 (quoting The American Heritage Dictionary of the English Language, 4th edn. (Houghton Mifflin Harcourt, 2000) (Panel Exhibit CN-71)), and 105.

651 China’s appellant’s submission, para. 113 (quoting The American Heritage Dictionary of the English Language, 4th edn. (Houghton Mifflin Harcourt, 2000) (Panel Exhibit CN-72)).

652 China’s appellant’s submission, para. 127.

653 United States’ appellee’s submission, para. 79.

654 United States’ appellee’s submission, para. 77.

655 United States’ appellee’s submission, para. 82.

656 Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 2493. See China’s appellant’s submission, para 100; and China’s first written submission to the Panel, para. 456.

657 Panel Report, para. 7.1173.

658 The American Heritage Dictionary of the English Language, 4th edn. (Houghton Mifflin Harcourt, 2000) (Panel Exhibit CN-71).

659 Panel Report, paras. 7.1175 and 7.1176.

660 See China’s appellant’s submission, para. 111. The Shorter Oxford English Dictionary defines “distribution” as, inter alia:

1 The action of dealing out in portions or shares among a number of recipients; apportionment, allotment; ECONOMICS the dispersal of commodities among consumers effected by commerce. >b ECONOMICS. The way in which individuals or classes share in the aggregate products of a community.

...

2 The action of spreading or dispersing throughout a region: the state or manner of being located in different places all over a region.

...

3 The division of a whole or collective body into parts, esp. with distinctive characters or functions; division and arrangement; classification.

...

(Shorter Oxford English Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press,2002), Vol. 1, p. 717)

The American Heritage Dictionary of the English Language defines “distribution” as, inter alia:

1. The act of distributing or the condition of being distributed; apportionment. 2. Something distributed; an allotment. 3. The act of dispersing or the condition of being dispersed; diffusion. . . . 5. Division into categories; classification. 6. The process of marketing and supplying goods, especially to retailers. . . .

(The American Heritage Dictionary of the English Language, 4th edn. (Houghton Mifflin Harcourt, 2000))

661 Panel Report, para. 7.1180.

662 The Appellate Body has noted that “information placed before a panel is often voluminous in nature and that the probative value of specific pieces of evidence varies considerably. A panel must examine and consider all of the evidence placed before it, must identify the evidence upon which it has relied in reaching its findings, and must not make findings that are unsupported by evidence. Yet, a panel is also afforded a considerable margin of discretion in its appreciation of the evidence. This means, among other things, that a panel is not required, in its report, to explain precisely how it dealt with each and every piece of evidence on the panel record.” (Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 240).

663 For instance, in paragraph 7.1177 of the Panel Report, the Panel appears to have used the notion of “ordinary meaning” as a synonym for “dictionary meaning”. In paragraph 7.1181, the Panel appears to have drawn preliminary conclusions on the ordinary meaning, based only on dictionary meanings.

664 The Panel, however, makes express reference to China’s reliance on the definitions of “recording” and “distribution” contained in The American Heritage Dictionary of the English Language when describing China’s arguments in paragraph 7.1162 of its Report.

665 Panel Report, para. 7.1203.

666 Panel Report, para. 7.1205. (original emphasis)

667 Panel Report, para. 7.1209.

668 China’s appellant’s submission, paras. 129 and 162.

669 United States’ appellee’s submission, paras. 75 and 87.

670 Panel Report, para. 7.1186.

671 Panel Report, para. 7.1186.

672 China’s appellant’s submission, para. 134.

673 Separate market access and national treatment limitations have been scheduled for the other subsector included under “Audiovisual Services”, that is, “Cinema Theatre Services”.

674 The Panel noted that the CPC, on the basis of which the WTO Services Sectoral Classification List was prepared, “is about “products’ that include both goods and services.” (Panel Report, para. 7.1188).

675 In replying to a question posed by the Panel, China indicated that the distribution of motion pictures is not considered to be the distribution of physical goods. (See China’s response to Panel Question 86)

676 Panel Report, para. 7.1333.

677 China’s appellant’s submission, para. 139.

678 The reference to the CPC in this entry is a reference to a specific category of leasing and rental services concerning video tapes, which is reproduced in paragraph 7.1331 of the Panel Report.

679 Panel Report, paras. 7.1320-7.1349.

680 Panel Report, para. 7.1194.

681 China also claims that the Panel should have relied only on dictionary meanings of the term “videos” that were contemporaneous with China’s accession to the WTO, which define “video” as referring to physical items only. We are not persuaded that, in examining the ordinary meaning of the term “videos”, the Panel should have relied upon dictionaries that were published at the time of the conclusion of China’s accession to the WTO. In any event, we observe that it is not clear that the meaning of the term “videos” is different today than it was in 2001. We consider below, in paragraphs 395 to 397, similar arguments made by China in respect of the terms “sound recording” and “distribution”.

682 Panel Report, para. 7.1202.

683 We recall that the Panel did not rely on this element alone to support its finding on ordinary meaning, but on the entire context provided by China’s entries in the “Audiovisual Services” sector of its GATS Schedule, as indicated in paragraph 7.1203 of the Panel Report.

684 The following products are exempted from China’s commitments on distribution services: salt and tobacco for commission agents and wholesale services, and tobacco only for retailing services. (Panel Report, para. 7.1204)

685 We recall that, in US – Gambling, the Appellate Body found that:

... because a Member’s obligations regarding a particular service depend on the specific commitments that it has made with respect to the sector or subsector within which that service falls, a specific service cannot fall within two different sectors or subsectors. In other words, the sectors and subsectors in a Member’s Schedule must be mutually exclusive.

(Appellate Body Report, US – Gambling, para. 180)

Before the Panel, both China and the United States agreed that the physical distribution of sound recordings embedded in physical media is covered by the more specific entry “Sound recording distribution services” under the “Audiovisual Services” sector and not by the commitment on “Distribution

Services”. (See China’s and the United States’ responses to Panel Question 119)

686 Panel Report, para. 7.1205.

687 We further note that the CPC describes “Distributive Trade Services” as consisting of “selling merchandise”. The CPC classifies wholesale trade services and retail trade services according to the goods that are distributed.

688 Appellate Body Report, US – Gambling, para. 180.

689 Article I of the GATS defines trade in services as the supply of a service:

  • from the territory of one Member into the territory of any other Member;

  • in the territory of one Member to the service consumer of any other Member;

  • by a service supplier of one Member, through commercial presence in the territory of any other Member;

  • by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member.

690 Pursuant to Article XX:1 of the GATS, each Member shall set out in a Schedule the specific commitments it undertakes under Part III of the Agreement on market access, national treatment, and any additional commitments. With respect to sectors where such commitments are undertaken, each Schedule shall specify terms, limitations, and conditions on market access, conditions and qualifications on national treatment, and undertakings relating to additional commitments.

691 Emphasis added.

692 China’s appellant’s submission, para. 161.

693 Panel Report, para. 7.1218.

694 Appellate Body Report, US – Gambling, para. 182.

695 Appellate Body Report, US – Gambling, para. 182 (quoting Panel Report, US – Gambling, para. 6.98).

696 Panel Report, para. 7.1210 (referring to Appellate Body Report, US – Gambling, para. 182; and Panel Report, US – Gambling, para. 6.98).

697 Panel Report, para. 7.1218.

698 China’s appellant’s submission, para. 157.

699 China’s appellant’s submission, paras. 129 and 162.

700 Panel Report, para. 7.1219.

701 China’s appellant’s submission, para. 173.

702 United States’ appellee’s submission, paras. 104 and 106.

703 The second and third recital of the preamble of the GATS read:

Members,

...

Wishing to establish a multilateral framework of principles and rules *IL10* for trade in services with a view to the expansion of such trade under conditions of transparency and progressive liberalization and as a means of promoting the economic growth of all trading partners and the development of developing countries; (underlining added)

Desiring the early achievement of progressively higher levels of liberalization of trade in services through successive rounds of multilateral negotiations aimed at promoting the interests of all participants on a mutually advantageous basis and at securing an overall balance of rights and obligations, while giving due respect to national policy objectives; (underlining added)

704 Panel Report, para. 7.1219.

705 We consider such reading of the terms in China’s GATS Schedule to be consistent with the approach taken in US – Shrimp, where the Appellate Body interpreted the term “exhaustible natural resources” in Article XX(g) of the GATT 1994. (Appellate Body Report, US – Shrimp, paras. 129 and 130)

We observe that the International Court of Justice, in Costa Rica v. Nicaragua, found that the term “comercio” (“commerce”), contained in an 1858 “Treaty of Limits” between Costa Rica and Nicaragua, should be interpreted as referring to both trade in goods and trade in services, even if, at the time of the conclusion of the treaty, such term was used to refer only to trade in goods. (International Court of Justice, Judgment, Case concerning the Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua), 13 July 2009)

706 The GATS Uruguay Round specific commitments entered into force on 1 January 1995. The specific commitments on the movement of natural persons, attached to the Third Protocol to the GATS, entered into force on 30 January 1996; the specific commitments on financial services, attached to the Second Protocol to the GATS, entered into force on 1 September 1996; the specific commitments on basic telecommunications services, attached to the Fourth Protocol to the GATS, entered into force on 5 February 1998; the specific commitments on financial services, attached to the Fifth Protocol to the GATS, entered into force on 1 March 1999. The specific commitments of individual acceding countries entered into force at the time of each accession.

707 We further observe that the fact that parts of a service sector included in a GATS Schedule can be described by terms other than those used to inscribe the commitment in a Schedule, does not change the meaning of the treaty terms used in the Schedule, which must be interpreted in accordance with the rules of the Vienna Convention. Thus, even if a certain type to as “network music services”, the terms of the entry “Sound recording distribution services” as embodied in the Schedule would still have to be interpreted in accordance with the rules of the Vienna Convention. In our view, this is so even if the distinction between physical and electronic distribution is reflected in international classification but has not been used in the scheduling of the commitments at issue.

708 Panel Report, para. 7.1220.

709 Appellate Body Report, US – Continued Zeroing, para. 268; see also para. 273.

710 Article 32 of the Vienna Convention states:

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

  • leaves the meaning ambiguous or obscure; or

  • leads to a result which is manifestly absurd or unreasonable.

711 China’s appellant’s submission, para. 177.

712 China’s appellant’s submission, para. 179.

713 China’s appellant’s submission, para. 182.

714 China’s appellant’s submission, para. 188.

715 United States’ appellee’s submission, paras. 108 and 114.

716 Appellate Body Report, US – Gambling, para. 159. (original emphasis) See also Appellate Body Report, EC – Computer Equipment, para. 84.

717 Panel Report, para. 7.1242.

718 Panel Report, paras. 7.1243-7.1246.

719 Panel Report, paras. 7.1235 and 7.1245-7.1247.

720 Panel Report, para. 7.1242. In so finding, the Panel was merely rejecting China’s argument that this business was neither technically feasible nor commercially viable at the time of the conclusion of the treaty.

721 Panel Report, paras. 7.1243 and 7.1245.

722 In paragraph 7.1245 of the Panel Report, the Panel stated that the alleged lack of a domestic legal framework “would not in itself have prevented China from making a valid commitment on these services in its Schedule”. Moreover, in paragraph 7.1247, the Panel stated that it was not persuaded that “the meaning of the phrase “sound recording distribution services’ cannot extend to the distribution of sound recordings in nonphysical form, for the reason that negotiators of China’s GATS Schedule and, more broadly, WTO Members, had at the time no conception of the technical or commercial viability of this form of distribution.”

723 China’s appellant’s submission, para. 193.

724 United States’ appellee’s submission, para. 115.

725 See also Panel Report, para. 7.1311.

726 See also Panel Report, paras. 7.571, 7.576, 7.594, 7.598, and 7.599.

727 See also Panel Report, paras. 7.657 and 7.680.

728 Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; Article 41, and Article 42 in conjunction with Article 41, of the Publications Regulation; Article 27 of the 2001 Audiovisual Products Regulation; Article 8 of the Audiovisual Products Importation Rule; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

729 Such exclusion is set out in the following provisions: Articles X:2 and X:3 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation; Article 4 of the Several Opinions; and Article 21 of the Audiovisual (Sub-)Distribution Rule.

730 See Panel Report, paras. 7.788, 7.827, 7.835, 7.847, 7.862, and 7.867.

731 See also, Panel Report, para. 7.913.

732 See also, Panel Report, para. 7.1311.

733 Article II of the Circular on Internet Culture; Article 8 of the Network Music Opinions; Article 4 of the Several Opinions; and Article X:7 of the List of Prohibited Foreign Investment Industries in the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation.