June 26 (Bloomberg) -- China lost a dispute at the World Trade Organization brought by the U.S. challenging the Asian nation’s barriers to imports of movies, music and books, a U.S. trade association executive said.

“The U.S. largely won the case,” Dan Glickman, the chairman of the Washington-based Motion Picture Association of America, said in an interview today. “We view it that we will show a victory.”

The WTO panel, in a decision that hasn’t been released publicly, found in favor of the U.S. in two of three aspects of a case brought in 2007 over regulatory requirements China places on the distribution of books, movies and music, a person familiar with the case said.

The ruling would be the first U.S. win against China at the WTO since President Barack Obama took office this year. Obama’s trade representative, Ron Kirk, has made breaking down barriers to exports a top goal, and getting China, Russia and other nations to clamp down on the piracy of American-made goods has been his refrain.

Piracy in China costs U.S. software, music, movie and publishing companies more than $3.5 billion a year in lost revenues, according to the International Intellectual Property Alliance, a group of associations that represent companies such as Microsoft Corp., Walt Disney Co. and Vivendi SA.

The case concerns Chinese regulations for the sale of books and music or the theatrical release of movies. By limiting the distribution of those items, China gives a leg up to sellers of illegal copies, said Glickman, who represents the movie studios of companies such as News Corp.,Viacom Inc. and Sony Corp.

“You can’t get the movies in the front door, but everything is available on the street,” Glickman said.

Recent Trip

Glickman said that during a recent trip to Shanghai, he went to a video store and saw pirated copies of American films. When the local police went back later to raid the shop, they found more than 500 copies of Hollywood films, he said.

Because of caps on the showing of U.S. movies and rampant piracy, “China is very small market” now for Hollywood films, Glickman said. “But China is potentially a market that could rival” the European Union, the largest importer of American films, he said.

China violates its WTO commitments by requiring copyright holders to import their products through government authorized channels, and prohibits foreign firms from distributing reading or electronic materials, which slows sales of the goods, the U.S. argued in this WTO case.

China has designated one state-owned entity, the China Film Import and Export Corporation, to import films for theatrical release, the U.S. said. China’s censors also review sound recordings differently depending on whether they are imported or domestic, according to the case.

The U.S. already won a ruling in a separate case brought against China on the same day in 2007 over what it argued was lax enforcement of intellectual property rights by Chinese authorities.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

Last Updated: June 26, 2009 13:13 EDT