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Lights! Camera! More Inaction?

Author: Bruce Stokes
July 17, 1999
National Journal

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The ever-expanding basket of "cultural" issues—movies, books, recordings, and even the sanctity of a particular language or way of life—has long been an off-limits topic whenever nations gather to discuss ways of making trade less troublesome and more profitable for all concerned. For the past half century or so, because they’ve been judged politically too hot to touch, cultural industries have been exempt from the rules that govern global commerce.

After the Uruguay Round of international trade talks, only 19 of the 134 members of the new World Trade Organization lifted any restraints on the buying and selling of cultural products. And in the talks that led to the North American Free Trade Agreement, the Canadians and the Mexicans demanded that cultural industries e excluded from the otherwise groundbreaking pact.

All in all, trade in cultural goods remains one of the most restricted segments in an otherwise increasingly open world economy. For instance, only 40 percent of the films aired on European television can be produced abroad. The same percentage holds true in Canada. And even the United States limits foreigners to 25 percent ownership of radio and television stations.

Come November, however, this old fire wall between commerce and culture may finally be breached in Seattle, where a new round of global trade talks will be launched. Culture could be a late addition to the agenda, thanks to growing American worries about Hollywood’s runaway movie and television productions, mounting evidence on the ineffectiveness of French cultural subsidies for its domestic industry, and Canada’s new0found interest in finally loosening its rules a bit for cultural imports. Trade ministers may eventually punt and agree only to study the matter further—that is, file it and forget it. But many cultural issues will inevitably be included in their unavoidable discussions on electronic commerce, intellectual property, and investment, all issues that affect the transmission, distribution, and exhibitions of, say, movies and television programs.

The agenda in Seattle will be crowded with proposals for more-liberalized trade across a broad spectrum, from agriculture to professional services. Negotiators will be out to cut tariffs on industrial products. And they will wrestle once again with a host of potentially divisive issues involving the environment and labor rights. As recently as a year ago, culture was regarded as a nonstarter.

But like it or not, culture—viewed by many nations as a symbol of their national sovereignty (and uniqueness)—is about to be overwhelmed by economic tides. Such a world needs "the civilizing virtues of rule-making," said Pierre Sauve, a Canadian professor who’s a visiting fellow at the John F. Kennedy School of Government at Harvard University. "The world yearns for a Big MAC," quipped Sauve, "a Multilateral Agreement on Culture."

Those who, in the past, have used culture as an excuse for maintaining trade barriers generally define the term narrowly, in a self-serving manner. To the French, it appears to be largely a matter of keeping their language free of crude Americanisms. To the Canadians…who knows, perhaps a north country sensibility.

Clearly, "culture" has many definitions. In this country, Ukrainian Orthodox parishes, shot-and-a-beer taverns, and the hard lives of steelworkers and their families were, taken together, the culture of Monongahela River towns in western Pennsylvania at the insistence of other nations, America agreed to sacrifice that culture to pave the way for broader economic gains.

Over the years, in a string of international trade deals, the United States assented to the closing of blast furnaces, and the dismantling of rolling mills because others—the Koreans, the Brazilians—asserted that they could (and they obviously did) make steel more efficiently. Embedded in these agreements was an implicit understanding that the United States could concentrate on selling to the world, among other goods and services, the ephemeral product America makes best—entertainment—now our most valuable export.

It’s a threat to the delicate public consensus that undergirds U.S. support for the international trading system when others’ fears of being overwhelmed by America’s culture are used to sharply limit U.S. access to certain foreign markets.

In Washington, cultural matters are receiving greater attention because of new evidence that foreign film subsidies are reducing the number of Americans employed by the industry. From 1990-98, the number of U.S. film and TV productions that shifted offshore—most of them to Canada—to lower their costs nearly tripled. The runaway productions are costing the American industry nearly 20,000 jobs a year, according to a study for the screen actors’ and directors’ guilds by the Monitor Co., a management consulting firm in Santa Monica, Calif. In the first half of this decade, the number of workers in Canada’s cultural industries grew by 5.6 percent, a development that has caught Ottawa’s attention at a time when total employment in Canada actually dropped by 0.5 percent.

In Canada, productions cost about one-quarter less than in the United States, mainly because the weak Canadian dollar makes everything less expensive in Vancouver or Toronto. But Canada also offers subsidies that cover up to 9 percent of a production’s costs.

"We wouldn’t tolerate these subsidies if they were hurting the microchip industry," said Cody Cluff, president of the Entertainment Industry Development Corp., Los Angeles’ municipal film office.

Ironically, mounting worries in Hollywood (at least among industry employees’ groups) and in Washington about runaway productions come as Canadians are being forced to rapidly rethink their attitudes about cultural industries. Canada is now the world’s second-largest exporter of television programming, trailing only the United States, and now has an interest in how others treat its cultural exports. The real pain has been felt at the state level, where once-booming regional productions have lost out to the Canadians. "There is no doubt it has affected us," said bill Arnold, director of the North Carolina film office. "In 1995 we had 30 movies-of-the-week shot here. last year we had four."

Moreover, this year, the World Trade Organization struck down a prohibitive Canadian tax on advertising in the Canadian editions of U.S. magazines, undermining its protectionist regime.

In light of these development, Canadian cultural industries have proposed that Ottawa negotiate "a new international cultural instrument" that would both promote cultural diversity and establish rules for what nations can and cannot do in the marketplace in the name of shielding a supposedly distinct, threatened culture. Ottawa is gauging whether the climate is right to pursue such a pact in Seattle.

The principle obstacle may be the French government, ever-fearful of being overrun by thing American . Paris argues that a broad international discussion of trade and culture is not relevant to France’s narrow concern—preserving its tottering audiovisual industry.

But economics may yet determine French obstinacy. Current limits on broadcasting foreign films have been counterproductive. Because so few domestically produced movies are strong enough to draw large prime-time TV audiences, French television has resorted to airing more and more reruns of "classic" films. Paris’ film subsidies increasingly benefit Hollywood-style extravaganzas, not the intimate cinema French directors have been known for abroad. "French policy is actually making the industry less competitive," complained Patrick A. Messerlin, an economics professor at the Institute of Political Science in Paris. Moreover, as consumers are able to download movies and television programs from the Internet and satellites, technology is rapidly making French content controls obsolete.

So what, if anything, could be achieve in Seattle and the three years of international negotiations that will very likely follow? Production subsidies are not liable to be on the table. The Motion Picture Association of America Inc., which represents the Big Seven moviemakers, who benefit from both foreign and domestic subsidies, and is a big player in Washington power politics, has no interest in cutting off the handouts. A possible short-term resolution to the subsidies debate is an American effort—at the state and local level—to match foreign largesse. The California Legislature is already considering tax breaks for filmmakers. The Monitor study estimated that a 10 percent to 15 percent subsidy would be enough to keep productions at home. "It’s all about leveling the playing field," said Dawn Keezer, president of Film US, a coalition of state film commissions.

More broadly, the Canadians may propose a negotiating framework that would spell out the rights of foreign investors in cultural industries; set guidelines for what kinds of material can be copied from the Internet; determine ground rules for cracking down on piracy; and develop a common tax and legal status for actors, directors, and others who temporarily work in foreign countries.

Washington’s stance on such issues could prove pivotal. The Clinton Administration desperately wants to avoid a repeat of the nonproductive confrontation in the Uruguay Round, when a bitter dispute over U.S. access to the European TV and film markets came close to short-circuiting the talks. So the White House’s mantra is, "Do no harm."

The United States might be willing to accept classification of cultural industries as "somewhat special," as long as any exemption from general trade rules were narrowly defined. The American film industry sees some merit in a standstill agreement (countries would agree to no new cultural barriers). And U.S. trade negotiators would like to see some assurances that American builders of new multiscreen film cineplexes abroad won’t run afoul of zoning and investment restrictions.

In the end, the trade ministers in Seattle may settle for establishing a WTO working group on culture, not unlike those on competition and the environment. Many analysts fear such a move would merely pigeonhole the cultural issue. But Kennedy School fellow Sauve argues that such a study "would be a decade-long journey full of technical surprises in which the journey, not the outcome, would be the reward.

Such a Zen-like perspective is not a sentiment one commonly associates with hard-headed trade negotiators. But what can you expect in dealing with the culture industry? And if such an approach ultimately gets the French to accept a Big MAC, c’est magnifique!

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