BREAKING… Refresh For latest… U.S. and Chinese negotiators announced an agreement today to significantly increase the number of U.S. films allowed to be shown in Chinese movie theaters and provide a more equitable share of revenue for American film companies. It will put into place a mechanism that will allow over 50% more U.S. films into the Chinese market. The White House is boasting that it’s a “breakthrough” to resolve outstanding issues related to films after the United States’ victory in a World Trade Organization (WTO) dispute last year. Immediately walt Disney Company President/CEO Bob Iger hailed the pact: “China is one of the most populous countries in the world, and this agreement represents a significant opportunity to provide Chinese audiences increased access to our films.” (More reaction below.)

According to WH stats, last year, Chinese box office revenue was up to $2.1 billion. Much of this revenue came from 3D titles. This agreement allows more American exports to China of 3D, IMAX, and similar enhanced format movies on favorable commercial terms, plus strengthens the opportunities to distribute films through private enterprises rather than the state film monopoly, and ensures fairer compensation levels for U.S. blockbuster films distributed by Chinese state-owned enterprises. The agreement will be reviewed after 5 years to ensure that it is working as envisioned. If necessary, the United States can return to the WTO to seek relief.

According to the IFTA, China also has agreed that licensing arrangements should be negotiated on commercial terms comparable with other markets proportional in size. Additionally, the pact encompasses key provisions that are considered standard practice elsewhere, including audit rights, approval of sub-licenses, consultation on marketing campaigns and the ability to designate a choice of law when disputes arise. Moreover, censorship rejection cannot be enforced as a material breach of the Agreement. Instead, the licensor and China’s State-Owned Enterprises will now work together to find a solution when these situations arise.
China has also agreed to affirm that no law or regulations can prevent other Chinese enterprises from actively engaging in the distribution of imported films. In fact, the Chinese government will now promote the entrance of other distributors into the marketplace.

The United States initiated the underlying WTO dispute in April 2007 to address significant market access concerns relating to China’s treatment of films for theatrical release, as well as other cultural products. A WTO panel found in a report issued in August 2009 that key Chinese film import restrictions were inconsistent with China’s WTO obligations. In December 2009, after China appealed, the WTO Appellate Body rejected China’s claims and upheld the panel’s findings. China promised to come into compliance by March 2011, but informed the United States at the deadline that this would not be possible. The two sides have been making efforts to resolve their differences since that time.

U.S. Vice President Joe Biden: “This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry,” said Vice President Biden, who spent the day in the Los Angeles area with Vice President Xi Jinping of China. “At the same time, Chinese audiences will have access to more of the finest films made anywhere in the world.”

U.S. Trade Representative Ron Kirk: “U.S. studios and independent filmmakers cite China as one of their most important world markets, but barriers imposed by China and challenged by the United States in the WTO have artificially reduced the revenue U.S. film producers received from their movies in the Chinese market,” said United States Trade Representative Ron Kirk. “This agreement will help to change that, boosting one of America’s strongest export sectors in one of our largest export markets.”

MPAA Chairman/CEO Chris Dodd: “This is a major step forward in spurring the growth of U.S. exports to China. It has long been a top priority for the MPAA, and it is tremendous news for the millions of American workers and businesses whose jobs depend on the entertainment industry. This landmark agreement will return a much better share of the box office revenues to U.S studios, revising a two-decade-old formula that kept those revenues woefully under normal commercial terms, and it will put into place a mechanism that will allow over 50% more U.S. films into the Chinese market.”

Independent Film & Television Alliance President/CEO Jean Prewitt: ”For Independents, this agreement is momentous. Our sector has been unable to benefit fully from the existing revenue-sharing importation quotas and has had limited avenues through which to distribute. For the first time, through this Agreement, there is a promise of creating a commercial foundation that will allow independent producers to participate more fully in the Chinese marketplace. In addition to improving the existing revenue-sharing regime, under the terms of the Agreement, China has committed to allowing new local companies to engage in local distribution, to introducing transparency into censorship and importation decisions, and to offering terms and conditions equivalent to comparable markets such as France and Germany. Most importantly, these changes will accelerate the development of a competitive marketplace in which both the U.S. and the Chinese independent film industries can flourish.”