AS U.S. NEGOTIATORS move closer to a critical deal with Russia to lower trade barriers and protect intellectual property, China's treatment of the movie industry stands as a reminder of how fleeting progress can be.
The Office of the U.S. Trade Representative announced Friday that it had reached an agreement in principle with Russian officials on that nation's entry into the World Trade Organization. The pact, expected to be signed this week when Presidents Bush and Vladimir Putin meet in Vietnam, calls for changes in Russian law, regulations and tariffs to provide greater market access to U.S. farm and industrial exports as well as financial services. It also lays out a blueprint for Russia to step up protection of copyrights, patents and trademarks, bringing the country into compliance with global intellectual property treaties.
The details of the agreement remain under wraps, yet representatives of the entertainment and software industries sounded cautiously optimistic notes. Although Russia has provided a growing market for U.S. movies and music, lax enforcement has made it a hotbed for global piracy.
How Russia treats intellectual property is important not just to Hollywood but to all U.S. industries. It's a basic question of whether Russia is prepared to enforce laws that countries around the world embrace. U.S. trade negotiators were right to insist that Russia demonstrate its commitment to enforcing intellectual property rights before gaining admission to the WTO.
Once Russia is in the WTO, Washington may lose much of its leverage, despite the availability of the trading club's dispute-resolution process. Just look at what happened in China to Warner Bros., which announced last week that it plans to withdraw from the movie theater business there. Despite China's entry into the WTO in 2001, Hollywood has continued to face three key barriers to capitalizing on its rapidly expanding market. Chinese regulations have limited U.S. studios' investment in local filmmaking and strictly capped the number of Hollywood films shown there each year.
To attract investment, China agreed in 2003 to let foreigners own up to 75% of a theater joint venture. The new limit, which applied to seven Chinese cities, led Warner Bros. to open four cinemas and plan as many as 26 more. China changed the rule late last year, however, lowering the foreign ownership limit to 49%. Last week, Warner Bros. announced that it would pull out. Russia is the world's most important economy outside the WTO, and its inclusion will be a step toward a freer, more law-abiding marketplace. But as China shows, progress isn't assured even after inclusion.