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State Support for Audiovisual Products in the World Trade Organization: Protectionism or Cultural Policy?

Published online by Cambridge University Press:  30 January 2007

Tania Voon
Tania Voon
Affiliation:
Senior Lecturer, University of Melbourne Law School; former Legal Officer, Appellate Body Secretariat, World Trade Organization; Fellow, Tim Fischer Centre for Global Trade & Finance. Email: tania.voon@unimelb.edu.au
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Abstract

The failure to agree on the treatment of audiovisual products in the Uruguay Round led to an unsatisfactory result for all World Trade Organization (WTO) members. Yet a balanced evaluation of the arguments on both sides demonstrates that the stalemate need not continue indefinitely. The audiovisual industry is a business, but audiovisual products have cultural features that distinguish them from other tradeable goods and services. If members see local audiovisual products as a means of communication among their people, or if they do not wish to stifle creativity, free speech, or the progressive development of culture, they may need to support local audiovisual products in a manner that discriminates expressly against foreign products. The same cannot be said of discrimination between foreign audiovisual products. If a member wishes to extend benefits to audiovisual products from countries with cultures similar to its own, it can do so by adopting objective criteria, such as language to distinguish between the relevant products. Cultural policy measures in relation to audiovisual products should be the least trade-restrictive necessary to achieve their objectives.ACKNOWLEDGEMENTS: For helpful comments on an earlier version of this article, I thank Dr. Roger O'Keefe, Justin Fung, Alison Lam, Dr. Andrew Mitchell, Matthew Stilwell, and anonymous referees. All errors and omissions, as well as the opinions expressed here, are mine.

Information

Type
Research Article
Information
International Journal of Cultural Property , Volume 13 , Issue 2 , May 2006, pp. 129 - 160
Copyright
© 2006 International Cultural Property Society

INTRODUCTION

The problem of trade and culture has a long history in the World Trade Organization (WTO), and it has played out most intensively in the area of audiovisual products (including film, television, radio, and sound recording). Under the General Agreement on Tariffs and Trade (GATT) 1947,1

GATT 1947 and its reincarnation in GATT 1994 provide the underlying rules agreed by WTO members in relation to trade in goods.

Article IV already provided certain exceptions for cinematograph films to the core GATT disciplines of national treatment and most-favored nation (MFN) treatment,2

National treatment and MFN treatment are two key WTO disciplines, reflected in several WTO agreements, that are intended to minimize discriminatory barriers to international trade (see the discussion in this article under “Types of Discrimination”). Article III of GATT 1994 essentially requires WTO members to treat imported products of other members no less favorably than like domestic products with respect to such matters as internal taxation and other regulations related to sale and distribution. This is a national treatment obligation. Article I of GATT 1994 essentially requires, with respect to customs duties and other rules affecting import or export, that WTO members provide any benefit offered to a product originating in or destined for any other country to all like products originating in or destined for any other WTO member. This is an MFN obligation.

based on the views of some GATT contracting parties that “the regulation of the film industry was more related to domestic cultural policies than to economic considerations such as … trade.”3

General Agreement on Tariffs and Trade, L/1741, [8]; GATT, MTN.GNS/AUD/W/1, [3]. See also Jackson, World Trade and GATT, 293.

Article IV was retained in GATT 1994, but the dilemma of audiovisual products resurfaced in the negotiations leading toward the General Agreement on Trade in Services (GATS). In the final stages of the Uruguay Round,4

The Uruguay Round of negotiations between GATT contracting parties took place from 1986 to 1994 and culminated in the adoption of the WTO agreements, which entered into force along with the WTO itself on January 1, 1995.

like many other matters being negotiated, this issue depended largely on the United States and the European Communities (EC) reaching agreement.5

Croome, Reshaping the Trading System, 328; General Agreement on Tariffs and Trade, NUR 077.

Ultimately, the United States refused to recognize the special cultural character of audiovisual services, and the EC responded “at the urging of various national ministries of culture”6

Drake and Nicolaïdis, “Electronic Commerce and GATS,” 408.

by making no offers in relation to audiovisual services.7 Thus, GATT contracting parties “agreed to disagree” on how to treat audiovisual services.8

World Trade Organization, S/C/W/40, [24, 30]; General Agreement on Tariffs and Trade, NUR 069.

In part, this failure to reach consensus was caused by negotiating mistakes (for example, the late submission of the EC's final position, and the lack of preparation by both sides).9 However, it can also be attributed to the intractable nature of this problem and the wide gap in the perspectives of different countries.

Divergent views remain among WTO members about audiovisual products, as reflected in the services negotiations that began on February 25, 2000, in accordance with GATS Article XIX:1.10

World Trade Organization, S/C/M/41. See generally Footer, “The GATS.”

In 2001, the Special Session of the Council for Trade in Services adopted guidelines and procedures for the negotiations, including an agreement that “[t]here shall be no a priori exclusion of any service sector.”11

World Trade Organization, S/L/93, [5]; WTO, S/CSS/M/8, [6].

Thus, the audiovisual sector is open to negotiation like any other. These negotiations were incorporated into the Doha Round,12

The Doha Round of negotiations or Doha Development Agenda commenced in 2001 and is designed to improve a range of WTO rules and commitments by members; see World Trade Organization, WT/MIN(01)/DEC/1.

which was suspended in July 2006 following the Sixth Session of the WTO Ministerial Conference held in Hong Kong in December 2005.13

World Trade Organization, WT/L/579, [7]; World Trade Organization, WT/MIN(05)/DEC, [25–27]; World Trade Organization, Talks suspended. “Today there are only losers.” news item (24 July 2006).

Clearly, the cultural aspects of audiovisual services remain a contentious issue. Countries such as Australia, Brazil, and Switzerland have formally emphasized the need for special treatment of such services on cultural grounds,14

Australian Department of Foreign Affairs and Trade, Intervention on Audiovisual Services; World Trade Organization, S/CSS/W/99, [9–12]; World Trade Organization, S/CSS/W/74, [11–12].

whereas Japan and the United States have indicated a desire to enforce and enhance GATS disciplines in this sector.15

World Trade Organization, S/CSS/W/42, [36–37]; World Trade Organization, S/CSS/W/21, [7, 10(ii)].

In June 2005 Chinese Taipei, Hong Kong, Japan, Mexico, and the United States issued a communication “express[ing] great concern over efforts by some key participants in the negotiations to create an a priori exclusion for such an important sector.”16

World Trade Organization, TN/S/W/49, [4]. See also World Trade Organization, TN/S/M/15, [206] (Hong Kong), [231, 309] (Chinese Taipei), [260–261] (Japan), [284] (United States).

Canada's initial negotiating proposal for trade in services raises another aspect of the trade and culture problem. Canada has indicated that it will “not make any commitment that restricts our ability to achieve our cultural policy objectives until a new international instrument, designed specifically to safeguard the right of countries to promote and preserve their cultural diversity, can be established.”17

World Trade Organization, S/CSS/W/46, [9].

Several organizations have been developing new instruments to promote cultural diversity in the face of international trade.18

See, for example, Canadian Department of Foreign Affairs and International Trade, Agreement on Cultural Diversity; International Network for Cultural Diversity, Proposed Convention; International Network on Cultural Policy, Draft International Convention.

In particular, the United Nations Educational, Scientific and Cultural Organization (UNESCO) recently concluded a new convention that purports to deal with the problem of trade and culture, namely the UNESCO Convention on the Protection of the Diversity of Cultural Contents and Artistic Expressions19

UNESCO, Press Release 2005–128; UNESCO, CLT-2005.

(UNESCO Convention). These steps demonstrate that the awkward relationship between trade and culture is not exclusively the concern of the WTO. They also highlight the importance of this issue for many WTO members and raise the possibility that the solution could be taken out of the hands of the WTO.

In summary, in the words of one European lawyer, “[a]ll are in agreement that the present, post-Uruguay Round situation is quite unsatisfactory inasmuch as it has left most issues unresolved.”20

de Rivery, “Unresolved Issues,” 439.

Before we can begin to imagine ways of reaching a compromise that better serves the interests of all members, it is crucial to appreciate the opposing arguments. In this article, I examine the ideological origins of the current WTO stalemate—that is, the very different views expressed by members and others regarding the relationship between trade and culture in connection with audiovisual products—and the best way of addressing it. I consider cultural, economic, and policy arguments related to state support for audiovisual products in the context of GATT 1994 and GATS to provide a basis for understanding the opposing views of WTO members and a broad framework for approaching the issue in the WTO. I do not address certain related issues that I have explored elsewhere, such as the implications of the UNESCO Convention for the WTO,21

Voon, “UNESCO and WTO” (explaining that the UNESCO Convention does not change the WTO rules but may have some impact on WTO negotiations and disputes). See also Bernier and Fabri, Évaluation de la faisabilité; Acheson and Maule, “Convention on Cultural Diversity”; Gagné, “Une Convention internationale.”

the details of the current treatment of audiovisual and other culture-related subjects in WTO law, or the specifics of how best to reform that law.22

Voon, Cultural Products. See also Echols, Food Safety and WTO; Footer and Graber, “Trade and Cultural Policy”; Graber, Kultur im Audiovisionsrecht der WTO; Wunsch-Vincent, Trade in Digital Products.

Verhoosel describes a state's domestic regulatory autonomy as encompassing two aspects: “its autonomy as regards the policy objectives it chooses to pursue; and … its autonomy as regards the means by which it chooses to pursue such policy objectives.”23

Verhoosel, National Treatment, 51.

The first issue to be resolved in understanding the difference between cultural policy and protectionism is thus whether the promotion or preservation of culture through audiovisual products is, of itself, a legitimate regulatory objective in the context of the WTO. This depends on the extent to which audiovisual products can be said to embody culture, and the limitations on policy objectives imposed by the WTO rules. Assuming that this is a legitimate regulatory objective, the second issue is whether WTO members should be free to pursue that objective using discriminatory means (whether involving discrimination against or between foreign audiovisual products). In answering this question, one must evaluate the peculiarities of the market for audiovisual products to determine whether nondiscriminatory measures could work equally well or better in promoting or preserving culture through audiovisual products.

In this article, I examine these two issues in turn before considering how state support for audiovisual products could be evaluated within the WTO to distinguish protectionist measures from genuine cultural policy. In this regard, I consider the possible motives for cultural policy measures, the effectiveness of such measures, and how their trade-restrictiveness could be minimized. This should assist in reconciling members' understanding of the cultural and commercial aspects of such products and in improving the treatment of audiovisual products in the WTO.

LEGITIMACY OF STATE SUPPORT FOR AUDIOVISUAL PRODUCTS

The Nature of Audiovisual Products

If audiovisual products merely entertain or help pass the time of those who consume them, it is difficult to see why governments should step in to support them in a trade-restrictive manner. But it is fairly uncontroversial to suggest that audiovisual products do something more than entertain. On one view, audiovisual products “serv[e] a very important function in providing information to the public and thereby in the formation of public opinion.”24

Perino and Schulze, “Competition, Cultural Autonomy,” 52 (see also 54).

They also have an educational purpose.25

Carniaux, “L'audiovisuel,” 471.

From a less utilitarian perspective, Article 8 of UNESCO's Universal Declaration on Cultural Diversity26 (UNESCO Declaration) describes “cultural goods and services … as vectors of identity, values and meaning, [which] must not be treated as mere commodities or consumer goods.” Within the WTO, Brazil has highlighted the role of “audiovisual services … in the transmission and diffusion of cultural values and ideas,”27

World Trade Organization, S/CSS/W/99, [6].

while Australia has suggested that such services “develo[p] and reflec[t] a sense of national and cultural identity within Australia's multicultural society.”28

Australian Department of Foreign Affairs and Trade, Intervention on Audiovisual Services.

Even the United States has admitted that “the audiovisual sector may have special cultural characteristics.”29

World Trade Organization, S/CSS/W/21, [7].

However, the economic significance of audiovisual products cannot be forgotten in evaluating justifications for trade-restrictive cultural policy measures. Unlike other, less tangible aspects of culture, it is undeniable that making and selling audiovisual products in the domestic market and in international trade is generally motivated by profit. For example, according to a report by the Organisation for Economic Co-operation and Development (OECD), the value of global recorded music sales was US$32 billion in 2003.30

Organisation for Economic Co-operation and Development, DSTI/ICCP/IE(2004)12/FINAL, 23.

Trebilcock and Howse suggest, “There are surely deeper measures of a society's cultural evolution than how many minutes are occupied by which country's soap operas on local commercial television networks.”31

Trebilcock and Howse, Regulation of Trade, 2nd ed., 14. See also Trebilcock and Howse, Regulation of Trade, 3rd ed., 639.

Assuming this is correct, this does not mean that audiovisual products are without cultural significance. Thus, the preamble to the UNESCO Recommendation on Participation by the People at Large in Cultural Life and their Contribution to It32

19 C/Resolutions, annex I, 29 (November 26, 1976).

(UNESCO Recommendation on Participation in Cultural Life) points out that “the mass media can serve as instruments of cultural enrichment, both by opening up unprecedented possibilities of cultural development, [and] in contributing to … the preservation and popularization of traditional forms of culture, and to the creation and dissemination of new forms.” Moreover, one should avoid the temptation to place a greater value on high culture such as ballet and theatre than on low or pop culture such as films and contemporary music.33

On this distinction, see Caves, Creative Industries, 186–88.

All these things are businesses.

In sum, it appears reasonable to conclude that audiovisual products have both cultural and commercial aspects. This does not necessarily mean that WTO members should be allowed to impose trade-restrictive measures on audiovisual products for cultural reasons. However, the dual nature of audiovisual products does suggest that it is worth looking further at claims that states may wish to support audiovisual products to promote or preserve culture.

Promoting or Preserving Culture through Cultural Products

Having established the existence of certain cultural elements in audiovisual products, I now examine whether promoting or preserving culture through audiovisual products is a legitimate regulatory objective of WTO members. The WTO agreements might contain some evidence regarding the legitimacy of cultural policy measures within the WTO (for example, GATT Article IV). However, identifying evidence in this way is rather circular, given that this article aims to provide a basis for determining how audiovisual products should be treated in the WTO. It is similarly unhelpful to point to actual cultural policy measures or statements of WTO members as evidence of the legitimacy of such measures, particularly when members appear to have quite different views on this question in the context of international trade. Instead, it is worthwhile identifying international or multilateral nontrade bodies, agreements or statements that indicate the value of culture (and in particular audiovisual products) and the need for government intervention to preserve that value.

UNESCO plays a major role in relation to culture on an international plane.34

See, for example, UNESCO, UNESCO and Cultural Diversity.

It was created “for the purpose of advancing, through the … cultural relations of the peoples of the world, the objectives of international peace and of the common welfare of mankind.”35

UNESCO, A Constitution of the United Nations Educational, Scientific and Cultural Organization (November 16, 1945) preamble.

UNESCO has 191 member states and 6 associate members,36

See 〈http://www.unesco.org/general/eng/about/members.shtml〉 last accessed June 19, 2006.

including all but a handful of the 149 members of the WTO.37

Liechtenstein and Singapore are WTO members but not UNESCO member states. WTO membership is not restricted to states: Marrakesh Agreement Establishing the World Trade Organization, Articles XI:1, XII:1. The following WTO members are not UNESCO member states or associate members: the EC, Hong Kong, and Chinese Taipei. Macau is a WTO member and a UNESCO associate member.

The UNESCO Recommendation for the Safeguarding and Preservation of Moving Images recognizes the cultural significance of moving images (which are defined to include film and television).38

21 C/Resolutions, annex I, 156 (October 27, 1980) [1(a)].

The preamble to the recommendation also recognizes the “rights of States to take appropriate measures for the safeguarding and preservation of moving images.” The UNESCO Recommendation on the Safeguarding of Traditional Culture and Folklore provides for states to provide moral and economic support for individuals or institutions cultivating or holding items of folklore including music.39

25 C/Resolutions, annex I(B), 238 (November 15, 1989) [D(d)].

The UNESCO Recommendation on Participation in Cultural Life provides for member states to “create social, economic and financial conditions which should provide artists, writers and composers of music with the necessary basis for free creative work.”40

UNESCO, Recommendation on Participation by the People at Large in Cultural Life and their Contribution to It, 19 C/Resolutions, annex I, 29 (November 26, 1976) [10(a)].

These brief examples reveal multilateral recognition in a nontrade context of the value of culture and the appropriateness of government measures to support culture, including audiovisual products. Accordingly, they suggest that the promotion or preservation of culture through audiovisual products is a legitimate regulatory objective of WTO members. The more difficult (and controversial) question is whether WTO rules should allow members to pursue this objective in a discriminatory or trade-restrictive manner.

JUSTIFICATION FOR DISCRIMINATORY CULTURAL POLICY MEASURES

Types of Discrimination

The WTO is designed to achieve certain objectives, such as “raising standards of living,” through agreements “directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.”41

Marrakesh Agreement Establishing the World Trade Organization, preamble.

Discrimination by WTO members against products of other members in favor of domestic products may distort trade, much like a tariff, artificially increasing the competitiveness of the domestic industry and reducing imports.42

See, for example, Jackson, World Trade and GATT, 273.

Accordingly, the national treatment principle is prominent in both GATT 1994 and GATS (although the latter agreement takes a positive list approach, such that members commit to national treatment only in the sectors they specify).43

General Agreement on Trade in Services, Article XVII:1. See note 2.

Similarly, discrimination by WTO members in favor of imports from certain member or nonmember countries (rather than imports from all WTO members) may also distort trade.44

On the trade effects of such measures, see Hudec, “Tiger Tiger,” 286.

Hence the MFN principle, which again applies generally in GATT 199445

See note 2.

and subject to members' limited exemptions under GATS.46

General Agreement on Trade in Services, Article II:2.

Various other exceptions apply to the MFN and national treatment obligations under GATT 1994 and GATS, some of which might extend to measures that discriminate against or between foreign audiovisual products.47

See, for example, GATT 1994, Articles III:8(b), IV, XX(a), (f), XXIV; General Agreement on Trade in Services, Articles V, XIV(a).

Taking a step back, what interests me is whether and what type of exceptions are warranted in relation to discriminatory audiovisual regulation, in view of the opposing economic and social arguments.

Discriminatory cultural policy measures that members might wish to use in relation to audiovisual products include an additional tax on box office receipts generated from showing foreign-origin films,48

See, for example, Turkey—Taxation of Foreign Film Revenues: Request for Consultations by the United States, WT/DS43/1, G/L/85 (June 17, 1996); Turkey—Taxation of Foreign Film Revenues: Request for the Establishment of a Panel by the United States, WT/DS43/2 (January 10, 1997); Turkey—Taxation of Foreign Film Revenues: Notification of Mutually Agreed Solution, WT/DS43/3, G/L/177 (July 24, 1997).

a requirement that cinemas screen a minimum quota of domestic films,49

See, for example, GATT 1994, Article IV(a); Mexico—Schedule of Specific Commitments, GATS/SC/56 (April 15, 1994) 17; Condron, “Cinema”; Kim, “Screen Quotas in Korea.”

a local content requirement for radio or television broadcasting,50

See, for example, Australian Broadcasting Authority, Broadcasting Services (Australian Content) Standard 1999, (July 2004); Council of the European Communities, Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by Law, Regulation or Administrative Action in member States concerning the pursuit of television broadcasting activities, OJ L298, 23 (October 17, 1989) Article 4(1), 5, as amended by European Parliament and Council of the European Union, Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997 amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in member States concerning the pursuit of television broadcasting activities, OJ L202, 60 (July 30, 1997); World Trade Organization, WT/TPR/S/78, [181].

a restriction on foreign investment in film distribution,51

See, for example, Canada—Measures Affecting Film Distribution Services: Request for Consultations by the European Communities, WT/DS117/1, S/L/53 (January 22, 1998); World Trade Organization, WT/TPR/S/78, [187].

an arrangement with certain countries for coproductions of audiovisual products,52

See, for example, Brazil—Final List of Article II (MFN) Exemptions, GATS/EL/13 (April 15, 1994); European Communities and their Member States—Final List of Article II (MFN) Exemptions, GATS/EL/31 (April 15, 1994); India—Final List of Article II (MFN) Exemptions, GATS/EL/42 (April 15, 1994); Israel—Final List of Article II (MFN) Exemptions, GATS/EL/44 (April 15, 1994); New Zealand—Final List of Article II (MFN) Exemptions, GATS/EL/62 (April 15, 1994); Switzerland—Final List of Article II (MFN) Exemptions, GATS/EL/83 (April 15, 1994).

a requirement that videos distributed by foreign companies be certified as having won an award in an international film festival,53

See India—Schedule of Specific Commitments, GATS/SC/42 (April 15, 1994); Mukherjee, “Audio-Visual Policies,” 231.

and a subsidy to national production of audiovisuals.54

See, for example, World Trade Organization, S/C/W/40, [19]; Organisation for Economic Co-operation and Development, DSTI/ICCP/IE(2004)12/FINAL, 96.

In the following section, before assessing the need for either type of discrimination in cultural policy measures, I address the nature of the market for audiovisual products. This provides a useful backdrop for understanding why governments might decide to support audiovisual products reflecting certain cultures, rather than all audiovisual products.

The Market for Audiovisual Products

Liberalizing domestic markets or international trade “is a means of increasing economic efficiency in a wide range of situations.”55

UNCTAD and World Bank, Liberalizing International Services, 37. On the reasons for preferring economically efficient outcomes in general, see Sykes, “Comparative Advantage and Normative Economics,” 57–9.

If consumers in a given country prefer foreign to domestic audiovisual products, isn't it economically efficient and therefore preferable to allow that country's domestic audiovisual industries to lapse? An important proculture response is that various market failures arise in relation to the audiovisual industries, and government intervention is required to correct these failures. As UNESCO's primer on trade and culture asserts, “it is difficult to argue that self-regulation of markets alone will at some point guarantee a fair development of international trade in cultural products. So far, markets alone do not seem to be able to ensure diversity of choice, access for everyone and fair competition.”56 Similarly, the United Nations Commission on Human Rights maintains that “market forces alone cannot guarantee the preservation and promotion of cultural diversity.”57

United Nations, E/CN.4/RES/2002/26, [13].

In this section, I scrutinize various arguments for recognizing market failures in the context of audiovisual products. Assuming that such failures do exist, government intervention might be justified if it involves lower costs or distortions than those created by the initial market failures.58

World Trade Organization, World Trade Report 2004, 151.

U.S. Dominance

In Baker's view, which is echoed by others,59

See, for example, Grant and Wood, Blockbusters and Trade Wars, 45–7; Sauvé and Steinfatt, “Towards multilateral rules,” 329–31.

the fact that audiovisual products can generally be copied at low cost for simultaneous use by multiple users60

Baker, “Economic Critique,” 1378–79. Cf Acheson and Maule, Much Ado About Culture, 93, 95.

explains why the United States dominates markets in audiovisual products. Specifically, he suggests that the potential revenue of a given audiovisual product depends not on the price paid by each consumer but on the number of consumers. In larger and wealthier domestic markets, the potential revenue and therefore the production budget are greater. When products are traded, consumers around the world tend to prefer those products with greater budgets, being those produced for larger and wealthier domestic markets such as the United States.61

Cowen also suggests that the U.S. population is younger than the European population, further diminishing the size of the European market because “[m]oviegoing is the province of the young”: Cowen, Creative Destructions, 77.

In turn, Baker contends that countries such as the United States with a large proportion of revenue derived from exports are more likely to develop products with greater universal appeal (as opposed to foreign or domestic appeal).62

Baker, “Economic Critique,” 1382–84.

As a result, market failure occurs when marginally successful export-oriented products prevent the survival of domestic-oriented products with smaller audiences.63

Baker, “Economic Critique,” 1386–88.

Baker's arguments in favor of government intervention presume that consumers generally prefer audiovisual products made with larger budgets. This is open to question. In some cases larger budgets may mean better products—for example, by enabling the use of better costumes, sets, actors, or special effects. However, more money does not necessarily mean better products or bigger audiences, and lower budget productions may sometimes equal or surpass the success of higher budget productions. For example, in August 2005 the relatively low-budget U.S. film Nine Lives won the top award at Switzerland's Locarno film festival.64

“Nine Lives takes top Swiss award,” BBC News (August 14, 2005).

Similarly, although the average budget for Indian films is relatively small,65

Cited in Mukherjee, “Audio-Visual Policies,” 222–23.

India produces more films than any other country,66

Mukherjee, “Audio-Visual Policies,” 219; Nielson and Taglioni, Services Trade Liberalisation, [34].

and Indian television and films are in significant demand internationally.67

Mukherjee, “Audio-Visual Policies,” 241. See also Nielson and Taglioni, Services Trade Liberalisation, [33].

In addition, audiovisual industries in countries other than the United States may rely heavily on exports and therefore, under Baker's theory, would be more likely to make products with universal appeal. For example, in Egypt, “domestic revenue from films does not cover production costs, hence external distribution in the Arab world is the major source of revenue.”68

Ghoneim, “Audio-Visual in Egypt,” 205. See also Acheson and Maule, “Canada—Audio-Visual Policies,” 163; Nielson and Taglioni, Services Trade Liberalisation, [36].

Moreover, it is not only countries with large populations that have commercial or export success. In fact, small populations may lead to export reliance. The successful music industries in Jamaica and Sweden rely heavily on exports,69

Power and Hallencreutz, “Profiting from Creativity?” 225–33.

and Australia's audiovisual industries are also increasingly export oriented.70

Gibson and Connell, “Cultural Industry Production,” 244.

The Netherlands is one of the few major European exporters of television programming to the Anglophone world; the Dutch company Endemol (since acquired by Spain's Telefónica) created the reality program Big Brother, which was produced in 17 countries by 2002.71

Baker recognizes that any tendency toward U.S. dominance in audiovisual products will be countered to some extent by a cultural premium72

Grant and Wood, Blockbusters and Trade Wars, 124.

—that is, consumer preference for local products or products in the local language and concerning local issues.73

Baker, “Economic Critique,” 1381–82.

These preferences will not necessarily run along national boundaries, and they may change over time. For example, a preference for local audiovisual products is likely to diminish with increased exposure to foreign audiovisual products.74 This may mean that the cultural premium diminishes in countries that are used to foreign audiovisual products (which may be dubbed or subtitled), but not in those less frequently exposed to such products.

Some commentators argue that diversity and local culture are threatened because the size of the English-speaking market means its products will always be priced lower than those of smaller linguistic communities75

; more specifically, in several countries it is cheaper to purchase U.S. audiovisual products than local audiovisual products.76

See, for example, Australian Broadcasting Authority, “Trade Liberalisation Audiovisual Services,” iii, 3; Carniaux, “L'audiovisuel,” 465–66; Grant and Wood, Blockbusters and Trade Wars, 19, 131.

Some describe U.S. films and television programmes as being dumped on foreign markets after their production costs have been recovered in the large U.S. domestic market.77

See, for example, Grant and Wood, Blockbusters and Trade Wars, 133; Prott, “International Standards,” 229; Redner, Conserving Cultures, 77; but see Cowen, Creative Destructions, 90–1.

Graber, for example, implies that vertical integration of Hollywood studios prevents “fair competition” in this area for this reason.78 But given the commonality of the English language and the broad similarities between, for example, Canadian and U.S. culture, it is difficult to see why Canadian films should not appeal to a U.S. audience. On the supply side, although the chain from production to distribution and exhibition may be easier to establish intranationally79 and partially defined by existing networks,80

Cameron, “Cinema,” 115.

one would expect Canadian films to use the large domestic U.S. market (in addition to the Canadian market) to increase sales and reduce prices,81

Coe and Johns, “Production Clusters,” 199.

particularly as new technologies allow faster and cheaper distribution.82

See, for example, Australian Department of Communications Information Technology and the Arts, Overseas Markets, 45–62; French et al, “E-commerce,” 63; Richardson, “Hollywood's Vision,” 119; Organisation for Economic Co-operation and Development, DSTI/ICCP/IE(2004)12/FINAL, 31–7, 47–54.

Let us assume, nevertheless, that Baker and others are correct that particular aspects of audiovisual products and the market for such products (rather than pure skill or superior products)83

Some would say that “the difficulties suffered by the European audiovisual industry” are caused by factors related to quality such as “unprofessional script-writing,” “a lack of professionalism,” and “production decisions taken by bankers”: de Rivery, “Unresolved Issues,” 441–42.

explain U.S. dominance in this area. This means simply that, because of factors such as chance,84 history, or the size or age of the U.S. market, the United States may have a comparative advantage in making and selling audiovisual products at present.85

Cf Ghertman and Hadida, “Institutional Assets.”

The theory of comparative advantage underlies the WTO, and it is not clear from Baker's arguments why this raises a particular problem for audiovisual products. Cass and Boltuck caution against demands for the elimination of unfairness in international trade because, “[i]n the extreme, equality can mean the elimination of all sources of comparative advantage, a basic source of gains from trade.”86

Cass and Boltuck, “Antidumping and Countervailing,” 359. See also 391.

Thus, if the United States is simply better at making commercially successful films, this should not be characterized as a source of unfairness even though it may disadvantage other film industries. If the success of U.S. audiovisual products results from protectionist measures that the U.S. government imposes in its domestic market, the appropriate response would be to combat those measures by subjecting audiovisual services to the discipline of national treatment rather than to shield it from this discipline. If the market for supply of audiovisual products is too concentrated,87

See, for example, Caves, Creative Industries, 157–58, 314; Coe and Johns, “Production Clusters,” 191, 202; Held et al., Global Transformations, 346–50; Towse, “Cultural Industries,” 172–73.

allowing suppliers to engage in anticompetitive conduct,88

Grant and Wood, Blockbusters and Trade Wars, 87, 357.

this may need to be addressed through competition laws.

Rationalizing cultural policy measures by reference to U.S. audiovisual products may also be overly Eurocentric. Not all WTO members wishing to support audiovisual products are primarily concerned with an invasion of U.S. products. As Appadurai explains:

[F]or the people of Irian Jaya, Indonesianization may be more worrisome than Americanization, as Japanization may be for Koreans, Indianization for Sri Lankans, Vietnamization for the Cambodians, and Russianization for the people of Soviet Armenia and the Baltic republics … [F]or polities of smaller scale, there is always a fear of cultural absorption by polities of larger scale, especially those that are nearby.89

Appadurai, Modernity at Large, 32. See also the reference to “Haitian imperialism” in Cowen, Creative Destructions, 1. Even within the EC, smaller member states may be equally concerned with the domination of audiovisual markets by larger member states: Carniaux, “L'audiovisuel,” 470–71.

Finally, the dynamics of the cultural product market will change as different countries develop their audiovisual industries. Even if the United States is the prime concern of many countries now, this may change over time,90

On the dynamic nature of cultural flows, see Held et al., Global Transformations, 369.

particularly as new technologies make it easier to access audiovisual products from around the world, rendering each country less dependent on its own domestic market for profit-making and therefore reducing the importance of the size of that market in determining success. Similarly, the United States may presently benefit from economic clusters of specialized labor91 and infrastructure, facilitating the creation of successful audiovisual products in particular areas (most obviously the film industry in Hollywood). However, audiovisual industry clusters also exist outside the United States (for example, for sound recording in Jamaica and the United Kingdom92

French et al., “E-commerce,” 59.

and films in Mumbai),93 and new such clusters may develop in future. For example, runaway film production in Vancouver is increasingly successful and could threaten Hollywood's dominance because of the lower production costs in Canada.94

Coe and Johns, “Production Clusters,” 197.

In these circumstances, justifications for government intervention based on the special nature of audiovisual products per se are more likely to endure than arguments decrying the dominance of U.S. audiovisual industries.

Positive Externalities of Audiovisual Products

Other arguments in favor of state support for audiovisual products rely on the nature of audiovisual products in general rather than the audiovisual products of any particular country. Thus, Wood writes the following in his coauthor's note to Blockbusters and Trade Wars:

Whatever problems plague the market for popular Canadian culture, they have little to do with the products of that culture or their producers. They are not even peculiarly Canadian. They have everything to do with the unique economic behaviour of cultural products in general. That behaviour and its negative consequences are as evident in the United States as anywhere. The failure belongs to the market, not to the culture.95

Grant and Wood, Blockbusters and Trade Wars, 9 (original emphasis).

A report by the Canadian Federal Cultural Policy Review Committee describes cultural activity as a “merit good” and declares “the manifest value of cultural activity in releasing the creative potential of a society, and in illuminating and enriching the human condition.”96

Canadian Department of Communications, Federal Cultural Policy Review, 68.

According to the committee, the market may fail “to reflect the demand for cultural products in its entirety.”97

Canadian Department of Communications, Federal Cultural Policy Review, 65.

In particular, the demand by today's consumers for audiovisual products reveals at most only the benefits to the present generation, when in fact audiovisual products (unlike most other consumer products) frequently convey lasting benefits to future generations as well.98

Canadian Department of Communications, Federal Cultural Policy Review, 65.

The committee goes on to suggest that the public is largely unaware of the social benefits conferred by cultural activity and that intervention is required to correct this information failure.99

Canadian Department of Communications, Federal Cultural Policy Review, 68.

This raises an important economic argument in favor of state support for audiovisual products: the existence of positive externalities, which arise where people other than the consumer benefit from the consumption of audiovisual products.100

World Trade Organization, World Trade Report 2004, 150.

For example, audiovisual products that celebrate local culture may encourage social bonding or inspire consumers to contribute more to their community. They may also improve the reputation of a country internationally.101 Society could also benefit from the mere existence of such products and their promotion of national coherence and identity.102

Canoy et al., “Economics of Books,” 11–12. Frey, “Public support,” 391.

Some people might value “a strong and informative public broadcasting system, even though they themselves consume mostly entertainment shows on private channels.”103

Krajewski, National Regulation, 19.

But consumers may be unwilling to pay for these broader societal benefits of audiovisual products104

Throsby, Economics and Culture, 32.

because they do not realize that they exist (incomplete information),105 they do not care about them at all (private value is lower than social value),106

Conversely, “profit-based” production decisions may “neglec[t] social costs of imported culture”: Withers, “Broadcasting,” 106.

or they realize that they can enjoy them at the expense of others (free rider problem). As a result, audiovisual products embodying local culture may be at risk of underconsumption and underproduction.

Public goods might be seen as a specific case of externalities.107

Pure public goods are nonrivalrous (their consumption by one person does not diminish the ability of others to consume them) and nonexcludable (they cannot be restricted to certain consumers); as a result, public goods that generate positive (rather than negative) externalities would be produced in insufficient quantities in the absence of government supply or support. Impure public goods, which may be partially rivalrous or excludable, may also suffer from underproduction.108

Krajewski, National Regulation, 15.

The benefits of public goods may flow from one person to the next; one generation to the next109; or even, in the case of global public goods,110 to people across the world. Like biodiversity,111 culture or cultural diversity could be described as a public good.112

Serageldin, “Cultural Heritage,” 240.

To the extent that audiovisual products contribute to cultural diversity, they may also have public good aspects.113 It is true that audiovisual products themselves may be excludable to some extent (e.g., through intellectual property) and rivalrous (e.g., if a person hires a video, only a limited number of people can watch it at the same time); but they also embody culture, and the existence of varied audiovisual products increases cultural diversity, which is less obviously excludable and rivalrous.

In the abstract, this kind of reasoning seems convincing. It explains why governments may wish to intervene in audiovisual industries. However, it is important to keep in mind two things about these arguments about market failures. First, if accepted too readily they could be used to justify intervention in a wide range of industries, given that many products (particularly services) have positive externalities and public good aspects. Second, the existence of market failures does not of itself justify trade-restrictive measures in response. Rather, it is necessary to examine the particular circumstances to determine whether the market failures could be addressed in a nondiscriminatory manner. As noted earlier, trade-distorting cultural policy measures are justified only to the extent that their costs are lower than those imposed by the market failures identified in the first place. Government intervention may also fail, for example, because “politicians are motivated by the need for re-election rather than by any direct incentive to provide welfare-maximizing cultural policies,”114

and “politicians and public officials are exposed to the influence of pressure groups.”115

The Need for Discrimination

Against Foreign Audiovisual Products

On the need for discrimination against foreign audiovisual products, two questions arise. First, would it be possible or desirable to pursue the legitimate goal of preserving or promoting local culture or cultural diversity through origin-neutral regulation of audiovisual products—that is, regulation that does not expressly discriminate against foreign source products (meaning imported goods, services supplied through one of the four GATS modes, or the suppliers of such services)? If so, cultural policy measures need not involve de jure discrimination contrary to the notion of national treatment. Second, could such measures be designed to avoid de facto discrimination?

The need for cultural policy measures to discriminate expressly against foreign audiovisual products depends to some extent on the nature of the culture the government is trying to promote or preserve. Baker identifies two distinct conceptions of culture. The need to protect culture in Baker's preferred dialogic sense focuses on providing an opportunity for members of a community to speak to each other as they develop their identity and values as a community. Baker explains that the “goal of the dialogic conception is to maintain (or create) a dynamic local cultural discourse. This goal requires preserving (or creating) local cultural industries.”116

More specifically, in the absence of a local audiovisual industry, local cultural speakers may be unable to speak. This conception of culture is consistent with certain statements of WTO members regarding the need to protect culture. For example, references to culture as an instrument of “expression”117

Appellate Body Report, Canada—Certain Measures Concerning Periodicals, WT/DS31/AB/R (June 30, 1997) 31.

or of transmitting and diffusing “values and ideas”118

World Trade Organization, S/CSS/W/99, [6].

seem to reflect a view of culture as a means of communication between members of a community.119

See also Gibson and Connell, “Cultural Industry Production,” 256.

For a cultural policy measure to promote or preserve culture according to this dialogic conception, it must favor audiovisual products originating in the relevant cultural community, regardless of their content or whether they are examples of high or low culture. In other words, the cultural importance of a film or a book rests not on what it says but on who is saying it. An American film about France does nothing to promote French culture in a dialogic sense, whereas a French version of an American reality television show may well do so. But culture does not necessarily follow national boundaries.120

Appadurai, Modernity at Large, 160–61; Galperin, “Cultural Industries Policy,” 637.

Thus, the community designated by the government could be located in a particular area of the country, a particular minority group within the country, or the population of the country as a whole.121

I address cultural groups extending beyond national boundaries later in this article.

In any case, this would involve de jure discrimination against foreign audiovisual products, which by definition would not originate in the relevant community.

Mas-Colell describes measures of this kind as involving “protection of national cultural production,” and queries whether national cultural production is substantially different “from the case of shoes.”122

Mas-Colell, “Cultural Goods,” 89.

Howse points out that a “legal economist can always imagine a hypothetical welfare-maximizing regulatory instrument that achieves a public purpose without resort to trade restrictions; the logical conclusion is that the choice of any other instrument is due to protectionist measures.”123 The legal economist's imagination might be applied to the regulation of audiovisual industries as follows. In protecting or preserving national culture, a WTO member could impose regulations based not on the nationality of the filmmakers or other aspects external to the story in the film but on elements contained in the story itself. In this way, a member could avoid origin-specific regulation falling foul of the national treatment obligation in the WTO agreements.

Cultural policy measures of this kind could not promote culture in a dialogic sense, as already explained. However, they could promote culture in the more concrete museum sense, as labelled by Baker, which focuses on the content of a particular culture. Again, certain statements of WTO members indicate a concern with the cultural content124

Panel Report, Canada—Certain Measures Concerning Periodicals, WT/DS31/R (March 14, 1997) [3.84].

of audiovisual products consistent with this understanding of culture. The museum conception of culture might focus on distinctive elements such as musical instruments used in a sound recording or languages spoken in a film or song. In many countries, language is considered one of the most important elements of cultural diversity.125

See, for example, Mattera, “L'Union européenne,” 221, 225.

Moreover, as audiovisual products often convey messages or stories, those stories could represent wide-ranging aspects of a particular culture. For example, the story could be set in an identifiable place within a country and the characters in the story could be of a particular nationality. The characters might engage in certain rituals or pastimes that are characteristic of a given country. They might eat food typical of that country or a region in that country, and they might wear clothes associated with that country.

It would be possible to construct a measure favoring audiovisual products that exhibited cultural elements in this museum sense without expressly requiring that any person involved in the product or its production come from any particular place or country. In this way, a measure protecting culture in the museum sense need not be origin-specific and therefore de jure discriminatory. Thus, a British cultural policy measure might support films such as the U.S.-produced Calendar Girls, set in Yorkshire.126

“Disney-in-the-Dales,” The Economist (May 22, 2003).

However, such support could well involve de facto discrimination because national audiovisual products would be more likely to contain the requisite cultural elements and could therefore more easily qualify.

This type of regulation, which Mas-Colell describes as involving “protection of the production of national culture,”127

Mas-Colell, “Cultural Goods,” 89.

could raise several other problems. To begin with, it would require the government to identify particular elements as forming important parts of that country's culture. The government may be reluctant or unqualified to do this, assuming it can be done at all. Identifying cultural elements in this way would also be restrictive, limiting culture to certain things and preventing its development over time and through influences from other places. This would be contrary to the dynamic nature of culture and the need to encourage free thinking and new ideas in a cultural context.128

See generally Frey, “Creativity, Government.”

It may also be inconsistent with general public goals or constitutional norms regarding creativity or the freedom of speech. Therefore, it may be more consistent with a country's understanding of its own culture to adopt regulations that use origin-specific criteria as a proxy for cultural content. In other words, a WTO member may decide to protect its audiovisual industries on the assumption that those industries are more likely to enrich that member's culture by creating stories that are about or addressed to that member's people.

In practice, cultural policy measures tend to be origin-specific, particularly in those countries that emphasize the special nature of audiovisual products in trade negotiations. In Canada it is assumed that “Only Canadians will make Canadian films. Therefore, the criteria by which films are judged eligible for Canadian government assistance … must ensure not only substantial majority participation by Canadian creative personnel but also Canadian control of production.”129

Canadian Department of Communications, Federal Cultural Policy Review, 256.

For the purposes of Canadian domestic content quotas, “Whether a programme appearing on a television screen is deemed Canadian content does not depend on the national aspects of its story, images or sounds but on the nationality of those who financed, managed and made it.”130

Acheson and Maule, “Canada—Audio-Visual Policies,” 161.

Cultural policy measures operate in a similar manner in France. Thus, the film The Fifth Element, which Messerlin describes as “a perfect Hollywood clone made by a French director,”131

received state support as a French film even though it was shot in English and starred the American Bruce Willis.132

Messerlin and Cocq, “Preparing Negotiations,” 3.

Conversely, the film Un Long Dimanche de Fiançailles was ineligible for French subsidies because its production company was controlled by Hollywood's Warner Brothers and run by the head of Warner Brothers France, even though it was in French, with a French director and hundreds of French actors and technicians, and was the most nominated film in the 2005 César awards in France.133

“French Films,” The Economist (February 24, 2005), 30.

A government could have three main reasons for adopting origin-specific cultural policy measures, whether or not it articulates or even conceptualizes its logic in these terms:

  1. it sees culture in a dialogic sense;134

    See, for example, Australian Department of Communications Information Technology and the Arts, Overseas Markets, 26.

  2. it sees culture in a museum sense, but it is unwilling to restrict creativity and cultural evolution for the reasons described earlier; or
  3. it is in fact more concerned with protecting domestic audiovisual industries than local culture.135

    “Regulatory powers can be used as easily to achieve anti-competitive goals of the providers of a service as to protect buyers of the service from lazy or predatory providers”: UNCTAD and World Bank, Liberalizing International Services, 42 (original emphasis).

Later in this article, I return to the question of government motives for imposing cultural policy measures. For now, it is sufficient to note that members could have legitimate reasons for imposing cultural policy measures that involve de jure or de facto discrimination against foreign audiovisual products.

Between Foreign Audiovisual Products

Members of the WTO sometimes support not only domestic audiovisual products but also audiovisual products from specified other countries. In principle, this is contrary to the obligation of MFN treatment. However, if a member wished to grant more favorable treatment to audiovisual products from certain countries, could this be justified on cultural grounds?

I have already described why discrimination against foreign audiovisual products might be necessary and why governments might wish to support local audiovisual products in particular. However, this does not mean that the government should try to block foreign audiovisual products. Here, the objectives of cultural diversity and trade liberalization coincide, as discussed further in the following text. Assuming, then, that a WTO member allows imports of foreign audiovisual products, it is unclear why that member must discriminate expressly between such products on the basis of their origin to further cultural interests. Whether the member sees culture in a dialogic or museum sense, it could identify those foreign products that contribute to local culture using certain objective cultural criteria such as language (instead of simply identifying the countries, subregions, or regions from which those products originate). This would ensure that all relevant foreign products are included, rather than only those based on historical ties or extraneous considerations. Concerns about restricting creativity or stifling cultural development would be less acute in this context, because the member would not necessarily be defining the scope or content of local culture. Rather, it could simply identify those aspects of its culture that might be shared with that of other countries, and that it considered important. Moreover, as the criteria selected would be applied only to distinguish between foreign audiovisual products, they would not affect the incentives of local artists or producers to create or innovate.

In short, while a member could genuinely consider de facto discrimination between foreign audiovisual products necessary as part of its cultural policy, it is much harder to justify de jure discrimination of this kind.

EVALUATING CULTURAL POLICY MEASURES IN THE WTO

Motives for Cultural Policy Measures

In the previous section, I determined that a WTO member might have valid cultural grounds for de jure discrimination against foreign audiovisual products, or de facto discrimination against or between foreign audiovisual products. This does not necessarily mean that all such discrimination in cultural policy measures is motivated by cultural concerns. If cultural policy measures of WTO members are not truly motivated by a desire to preserve or promote culture, this is a powerful reason against accepting them or providing any special treatment for them in the WTO agreements.

Unfortunately, it may be extremely difficult to differentiate between protectionist and nonprotectionist motives for supporting audiovisual products. For example, if a WTO member grants tax concessions to its film industry on the grounds that this will promote its culture, it may be impossible to determine whether the member was motivated by cultural or mercantilist interests. This is a particularly tricky problem given that a WTO member might wish to protect its local audiovisual industry as a means of preserving or promoting its culture. Furthermore, identifying the motive for a government measure may be problematic in any legal system. First, numerous motives may underlie a particular measure. For example, different political parties and individual legislators may have varied motives for enacting a particular law. Second, the true motives underlying a particular measure may be impossible to discern. Should these motives be gleaned from public statements to the media, parliamentary debates, or purely the text and architecture of the measure itself?

Given the problems with sorting legitimate from illegitimate motives for cultural policy measures, in the following sections I instead consider alternative mechanisms for distinguishing legitimate and illegitimate cultural policy measures connected to audiovisual products.

Effectiveness of Cultural Policy Measures

One response to members who claim they must impose discriminatory cultural policy measures on audiovisual products is that such measures cannot be effective in preserving or promoting culture, or that the measures used by various WTO members have been ineffective and inefficient.136

See, for example, Acheson and Maule, “Canada—Audio-Visual Policies,” 164; Ghoneim, “Audio-Visual in Egypt,” 212.

Practical reasons may explain this ineffectiveness. For example, if a quota limits the proportion of foreign films that can be shown in cinemas, this quota may be bypassed by consumers who obtain foreign films via the internet or satellite.137

See Acheson and Maule, Much Ado About Culture, 204; Feketekuty, “Regulatory Reform,” 227; Messerlin and Cocq, “Preparing Negotiations,” 4.

A more principled objection to such cultural policy measures is that they do not achieve their goal of promoting or preserving local culture, or, worse, they damage culture and audiovisual products. This is a specific example of a more general problem with measures designed to protect any enterprise or industry, which is that quality suffers, whereas exposure to domestic or international competition may improve product quality.

Although it may be impossible to assess the quality of a cultural product in an objective, abstract sense,138

Pignataro, “Imperfect Information,” 56–7.

one can try to determine the impact of cultural policy measures on the nature of audiovisual products in particular countries. In 1982, the Canadian Federal Cultural Policy Review Committee concluded that a particular tax incentive was ineffective in enabling “Canadians to create fresh and distinctive Canadian films, and … audiences in Canada and abroad to see those films.”139

Canadian Department of Communications, Federal Cultural Policy Review, 255.

Acheson and Maule explain the view that “there is no evidence that there is a systematic connection between ownership and content. Canadian ownership of Cineplex-Odeon, a significant exhibitor of films in Canada, has not led to an appreciable increase in the number of Canadian films appearing on Canadian screens.”140

Acheson and Maule, Much Ado About Culture, 21 (see also 254). See also Tim Burt, “Quotas fail to save European producers from an influx of U.S. television shows,” Financial Times (Paris, May 27, 2005); Feldthusen, “Awakening,” 42.

Messerlin and Cocq argue that French quotas requiring a minimum proportion of French films to be broadcast on television (in place since as early as 1928)141

Condron, “Cinema,” 209.

have led to extensive “reruns of old French films” because of the insufficient number of successful French films being made.142

Messerlin and Cocq, “Preparing Negotiations,” 7–8. See also Messerlin, “France and Trade Policy,” 298.

Evidently, the effectiveness of any particular cultural policy measure in preserving or promoting national culture will depend on its structure and operation. For example, according to Messerlin and Cocq, the 1989 “Lang Plan,” which “still remains at the heart of French film policy,”143

Cocq and Messerlin, “French Audio-Visual Policy,” 29.

changed the emphasis of state support to favor high-budget instead of low-budget films.144

Cocq and Messerlin, “French Audio-Visual Policy,” 32–5.

As the domestic market for films in France is small,145

Cocq and Messerlin, “French Audio-Visual Policy,” 37–8.

this led to two strategies: one “domestically-oriented, with the market having influenced production in such a way that most productions opt for historical dramas or popular comedy,” and the other “oriented towards foreign markets, focusing on movies based on the Hollywood blockbuster model.”146

Cocq and Messerlin, “French Audio-Visual Policy,” 32–9.

Technology also influences the effectiveness of cultural policy measures, in ways that may vary from country to country and year to year. For example, in countries where internet use is high, the opportunity for consumers to purchase or view films online may reduce the effectiveness of screen quotas in cinemas and on television.147

Cocq and Messerlin, “French Audio-Visual Policy,” 46–7.

The same may happen as DVDs become more popular. In these circumstances, subsidies may be preferable to quotas.

The fact that a cultural policy measure is ineffective in protecting or promoting culture may raise some doubt about whether it genuinely stems from those goals. However, members may have different conceptions of culture and cultural values, and the WTO may not be the right place to pass judgment on cultural values, per se, or the effectiveness of particular measures in promoting those values. What the WTO can do, as discussed in the next section, is evaluate the relationship between cultural policy goals and particular measures imposed in relation to audiovisual products by assessing the measures' trade-restrictiveness.

Minimizing Trade Restrictions

For the WTO to limit members' choice of cultural policy measures on audiovisual products according to the trade-restrictiveness of such measures, it must first establish that cultural policy measures can achieve their cultural goals without necessarily restricting trade or restricting it to any particular degree. An examination of certain international agreements and instruments relating to culture and cultural diversity suggests that the trade-restrictiveness of cultural policy measures can be limited or minimized without jeopardizing the underlying cultural goals. At the same time, Ezetah suggests that encouraging cultural diversity may increase the benefits of free trade.148

Ezetah, “Patterns of Legalism,” 123.

In this regard, the values of trade liberalization run parallel to those of cultural diversity to some extent.

UNESCO's Beirut Agreement provides for contracting states to exempt from customs duties, quantitative restrictions, and import licences the import of films and sound recordings of an “educational, scientific or cultural character” originating in any other contracting state.149

Agreement for Facilitating the International Circulation of Visual and Auditory Materials of an Educational, Scientific and Cultural Character, 197 UNTS 3 (adopted December 10, 1948) Articles I, II, III:1.

Similarly, states parties to the Florence Agreement undertake not to apply customs duties or other charges on or in connection with the importation of, among other things, visual and auditory materials of an educational, scientific, or cultural character (including films and sound recordings).150

Agreement on the Importation of Educational, Scientific and Cultural Materials, 131 UNTS 25 (adopted June 17, 1950) Article I:1, annexes A, C. See also General Agreement on Tariffs and Trade, Barriers to the Import and Export of Educational, Scientific and Cultural Material, GATT/CP/12 (March 8, 1949) 3.

Subject to certain exceptions, the parties to the Nairobi Protocol agree to extend this obligation to certain additional materials.151

Protocol to the Agreement on the Importation of Educational, Scientific and Cultural Materials, 1259 UNTS 3 (adopted November 26, 1976) [1].

These UNESCO commitments look much like trade liberalization commitments such as those contained in the WTO agreements.

The problems with restricting trade in audiovisual products in order to promote or preserve culture are also reflected in widespread, multilateral recognition through UNESCO of the need to encourage the free flow of products and ideas for culture to develop and flourish. Thus, UNESCO's 1966 Declaration of the Principles of International Cultural Co-operation notes that cultural cooperation—through the dissemination of ideas, knowledge, literature, and the arts—is essential to the enrichment of cultures and cultural life.152

UNESCO, Declaration of the Principles of International Cultural Co-operation, 14 C/Resolution 8 (November 4, 1966) Articles IV:1, IV:4, VI, VII:1.

Similarly, the UNESCO Recommendation on Participation in Cultural Life states that “the mass media can serve as instruments of cultural enrichment, both by opening up unprecedented possibilities of cultural development, [and] in contributing to … the preservation and popularization of traditional forms of culture, and to the creation and dissemination of new forms.”153

UNESCO, Recommendation on Participation by the People at Large in Cultural Life and their Contribution to It, 19 C/Resolutions, annex I, 29 (November 26, 1976) preamble.

Finally, the Universal Declaration on Cultural Diversity, adopted in 2001, confirms that creativity “flourishes in contact with other cultures,” and therefore that “genuine dialogue among cultures” should be encouraged.154

UNESCO, Universal Declaration on Cultural Diversity (November 2, 2001) Article 7. See also UNESCO, 33 C/23, [8].

These pronouncements do not prove that cultural policy measures need not restrict trade at all or that discriminatory cultural policy measures cannot be grounded in cultural interests. Indeed, many more UNESCO declarations and recommendations confirm the importance of preserving a space for all the world's cultures,155

See, for example, Convention for the Protection of Cultural Property in the Event of Armed Conflict, 249 UNTS 240 (adopted May 14, 1954) Article 4.3; Convention for the Protection of the World Cultural and Natural Heritage, 1037 UNTS 151 (adopted November 16, 1972) Article 4; UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects, Diplomatic Conference for the Adoption of the Draft Unidroit Convention on the International Return of Stolen or Illegally Exported Cultural Objects, Rome—Acts and Proceedings 1996 (adopted June 24, 1995) Article 1; UNESCO, Recommendation on the Safeguarding of Traditional Culture and Folklore, 25 C/Resolutions, annex I(B), 238 (November 15, 1989) [B].

and WTO members could argue that unrestricted flows of audiovisual products are likely to damage cultural diversity. However, the instruments highlighted previously do indicate that, although cultural policy measures may have incidental trade-restrictive effects, trade restriction itself need not and should not be the goal of such measures. Accordingly, minimizing trade-restrictiveness may provide an appropriate guide for members' design of cultural policy measures and for evaluating those measures within the WTO.

A WTO framework for minimizing the trade-restrictiveness of cultural policy measures could take two main forms.156

For analysis of a broader range of tests to balance trade values with other values, see Trachtman, “Trade and … Problems.”

First, WTO members could agree on a broad rule that such measures are allowed provided that they are no more trade-restrictive than necessary to meet the relevant cultural goals. This might look something like the existing exceptions in Article XX of GATT 1994 or Article 5.6 of the Agreement on the Application of Sanitary and Phytosanitary Measures, which requires members to ensure that their sanitary or phytosanitary measures are “not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection.” If challenged, individual cultural policy measures would be evaluated through the dispute settlement process.157

See generally Sykes, “Least Restrictive”; World Trade Organization, S/WPDR/W/27.

Second, WTO members could establish more concrete and comprehensive rules, reflecting a multilateral decision ex ante about the types of measures that will allow members to pursue their cultural goals in the least trade-restrictive manner. Such rules might resemble more closely Article XI of GATT 1994, which imposes a general prohibition on quantitative restrictions (reflecting the preference for tariffs as a less trade-restrictive and more transparent measure), or Article 3 of the Agreement on Subsidies and Countervailing Measures, which imposes a general prohibition on certain types of subsidies.

CONCLUSION

The WTO's Doha Round was originally scheduled to end on January 1, 2005,158

World Trade Organization, WT/MIN(01)/DEC/1, [45].

but the subsequent goal of concluding negotiations successfully in 2006159

World Trade Organization, WT/MIN(05)/DEC, [1]. See also World Trade Organization, TN/C/5, 2–3.

has been discarded. Meanwhile, UNESCO has marched ahead and in October 2005 adopted the UNESCO Convention, which reaffirms states' “sovereign right to formulate and implement their cultural policies and to adopt measures to protect and promote the diversity of cultural expressions.”160

UNESCO, CLT-2005, Article 5(1). See also note 21.

In some ways, this timing could be fortunate. For WTO members it should at least bring home the need to address cultural products in these negotiations, perhaps before the UNESCO Convention enters into force.161

The UNESCO Convention is to enter into force three months after the deposit of the 30th instrument of ratification, acceptance, approval or accession: UNESCO, CLT-2005, Article 29(1).

At the same time, there is no point in members simply reiterating arguments made during the Uruguay Round. The views on each side are extremely strong and neither is going to win by waiting for the other to give up altogether. Instead, the situation requires a willingness to cooperate and devise ways of amending the existing provisions and encouraging new commitments while taking into account cultural concerns.

This article has explored the arguments on both sides of the trade and culture debate to determine guidelines for improving the current treatment of audiovisual products in WTO law. Unsurprisingly, given the long and still unresolved disagreements over this issue, it is a complex problem. Much of the complexity stems from the nature of audiovisual products as both commercial and cultural. However, accepting the dual nature of audiovisual products does not mean accepting that such products are unique or exceptional. Like other areas falling within the scope of WTO rules, it is important to scrutinize any claims that particular products or industries require protection departing from the usual WTO disciplines. Nevertheless, the earlier analysis shows that preservation or promotion of culture through audiovisual products is a legitimate regulatory objective supported by a range of international instruments.

But are members justified in adopting discriminatory cultural policy measures, contrary to the usual principle of nondiscrimination in the WTO? Although much concern about trade in audiovisual products (at least as expressed by WTO members such as Canada and the EC) is fueled by the success of the United States in this field, more permanent reasons for protecting local culture through audiovisual products are found in the general nature of the market for audiovisual products. In particular, the value of that culture is not necessarily reflected in decisions regarding the production or consumption of audiovisual products, due to the gap between the private and social value of such products. In protecting local culture through audiovisual products, members may have well-founded, nonmercantilist reasons for preferring measures that discriminate against foreign audiovisual products, whether in a de jure or de facto manner. However, members should be able to find ways of protecting local culture through audiovisual products without de jure discrimination between foreign audiovisual products.

In assessing whether a given audiovisual measure is a genuine measure of cultural policy rather than the product of protectionist inclinations, rather than trying to establish the motives behind the measure (directly or by assessing its effectiveness), WTO members could impose a trade-restrictiveness test. The WTO could thus sanction those audiovisual measures that are no more trade-restrictive than necessary to achieve their declared cultural goals. The details of such an approach within WTO law I leave to another day.

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