We had a good discussion on this blog about this case a year ago before the dispute was formally launched. See No News is Bad News at the WTO? The U.S. and EU filed their WTO complaints in March 2008, and Canada joined them in June 2008.
Now the case is settled. China signed an agreement with the three complainants on November 13. See USTR announcement and FT report. What is amazing about the settlement is how completely China has agreed to accommodate the requests of the complainants. First, China has agreed to repeal the restrictions imposed by its 2006 Regulation on direct supply of financial news in China by foreign news agencies, which was the trigger of this dispute. Second, foreign news agencies will be allowed to set up local operations, i.e., branches or subsidiaries, in China, which is a major breakthrough since foreign investment in news services has never been allowed under China's investment law. Third, China will designate an independent regulator in the news service sector that will not have conflicts of interests with the companies it regulates. This means that the official Xinhua News Agency will no longer have the regulatory power in the news industry, another major breakthrough in the Chinese system. China agreed to implement all these measures by June 1, 2009.
Considering how politically sensitive the news sector is to the Chinese government, the concessions are truly remarkable. But why did China agree to these terms? I am sure there are various political and economic considerations in the play, including the demand of Chinese users for quick financial information in today's financial crisis, and China's visible ascent in the international financial order. But legal considerations sure also played a role. China may have realized that it does not have a strong case given the thinly disguised protectionist motive behind the 2006 Regulation.
Ironically, as we discussed a year ago, the interpretation of China's GATS schedule, the key and threshold issue in this case, could be very tricky. And it is not at all clear whether China's concession on the provision of financial information includes financial news services provided by foreign news agencies. China argued that it has never intended to open its market in the news sector. It is very likely that when China negotiated its GATS schedule on the provision of financial information, it had only financial institutions in mind and did not consider financial information provided by news agencies. But in light of US-Gambling, China could not feel confident about the chance of winning on the interpretation of its schedule.
In sum, China may have conceded much more in the settlement of this case than it originally intended in the WTO accession. Despite the uncertainty in the legal technicality of this dispute, it is all in all very impressive what the WTO dispute settlement mechanism can achieve in pushing major changes in a member's domestic system, and in this case, in the right direction.
