China has missed a deadline to comply with a World Trade Organization ruling against restrictions on foreign companies distributing copyright-intensive goods like books, newspapers, films, DVDs and music, a U.S. official said.

“The U.S. government is disappointed that China has not yet fully complied with the WTO ruling in this case, a lack of compliance which China has acknowledged,” said Nkenge Harmon, a spokeswoman for the U.S. Trade Representative’s office.

“The U.S. Government has communicated its concerns to China, and is working to ensure that China promptly brings its measures into full compliance,” she added.

The failure to meet the deadline could expose China to U.S. retaliation if Beijing did not eventually resolve the issue to Washington’s satisfaction.

Greg Frazier, executive vice president of the Motion Picture Association of America, said his group was also disappointed China missed the March 19 deadline to bring its regulations into line with it WTO commitments.

“We understand, however, that the Chinese authorities are working to comply with the WTO’s ruling and that the U.S. government is actively engaged with the Chinese government to ensure that China meets its commitment,” he said.

The United States argues that China’s restrictions on the distribution of legitimate movies, music and other copyrighted

goods creates enormous Chinese demand for pirated copies sold on the Internet and on the street.

“Pirate services are the only way that Chinese consumers have access to goods because the legitimate side is so complicated,” said Neil Turkewitz, executive vice president at the Recording Industry Association of America.

The International Intellectual Property Alliance, a coalition of U.S. copyright industry groups, estimates U.S. companies have lost billions of dollars in sales over the years in China due to piracy.

The WTO’s appellate body ruled in late 2009 that Beijing had failed to comply with commitments it made when it joined the WTO in 2001 to remove many restrictions on the distribution of copyrighted goods within three years.

China was given until March 19, 2011 to comply with the ruling, requiring it to change “a complex web of measures issued by numerous agencies,” USTR has previously said.

Both Frazier and Turkewitz expressed hope the two sides could still strike a deal to bring China into compliance.

“It’s been our great hope that they would use this occasion to address their whole regulatory structure in this arena and to develop a more rational policy that will expand legitimate commerce,” Turkewitz said.

If restrictions were removed, China would probably account for at least $1.5 billion in annual sales of legal online music, compared to about $70 million currently, he said. (Reuters)