August 21, 2009

Last week, the World Trade Organization struck down China’s use of a governmental agency to supply western movies to consumers, stating that the practice provided Chinese movies with an unfair trade advantage.

  Until recently, China had been using governmental agencies to act as a “middleman” to regulate the flow of western movies into the country.

While China can still appeal the decision, “The ruling goes to the heart of one of the biggest trade issues pending between China and the West: whether intellectual property, like copyrighted songs, books and movies, should be granted the same kind of protection from discriminatory trade practices as manufactured goods.”  China, along with most countries in the world, claims that movies are inherently a cultural phenomenon, and therefore can be regulated without violating free trade agreements.  The United States and Japan, however, have long argued movies are like any other good, and should be regulated as such.

However, the recent squabble with China is only the most recent development in a long fight the United States has picked with the international community on trade in cultural productions such as films.  For example, France’s promotion of the EU film subsidies and quotas has raised U.S. protests, and Canada’s insistence that cultural productions be excluded from free trade agreements almost sank NAFTA.

Even as far back as the Uruguay Round of the WTO, the GATS negotiations on Audiovisual Productions were among the most contentious talks the Organization had seen.  Several parties threatened to walk out, and few countries committed agreements on the subject.  The GATS meeting ended in failure, and barriers to trade in cultural productions have been negotiated on a bilateral basis ever since.

Why are nations so reticent to allowing free trade in films?  The role of economics may be overblown, as barriers to entry are rarely profitable.  Canada, which has given CAD2.5 billion since 1995 in grants to domestic filmmakers, has received only a fraction of its money back.  The European Union, which is the largest subsidizer of films in the world, has never presented a strong case that they provide subsidies for economic reasons.

Claims that import barriers are helping infant industries don’t carry water either.  The film industries in most nations are still nascent or non-existent, even though many protectionist regulations are long-standing.  For example, the computer consulting industry in Canada is a CAD2.6 billion business, almost twice as large as its film industry.

Yet, it is more likely that barriers to entry are the result of concerns over less concrete issues.  Most statements from the European Union stress that subsidies are designed to protect European styles of cinema from American cultural dominance.  Canada has expressed concerns about preserving its national identity, claiming that assistance to its film sector is, in part, due to ensuring “Canadian content is available and accessible to all Canadians.”

The U.S. insistence that films can be viewed like any other manufactured good clearly clashes with national sentiments in several countries.  While the WTO may have ruled in favor of the U.S., the Motion Picture Association of America, Hollywood’s main lobbying firm, admits this is unlikely to increase Hollywood’s market share in China.  The United States will only be successful in liberalizing film trade if it acknowledges the cultural component of movies—doing so will be a good first step for the United States to create the diplomatic space for fruitful negotiations.

Such talks may not abolish barriers to entry for films entirely, but a more realistic view might lower some foreign restrictions on Hollywood movies.  While this may not be the optimal outcome for United States and Hollywood, it is certainly better than the status quo.  Moreover, a positive outcome would help the WTO address the controversial issue of trading cultural goods.

Griffin Huschke is an intern with the Atlantic Council's Energy and Environment Program.  He holds an MA in International Relations from the University of Chicago.  

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