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23 July 2019
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History of Regulation in the International Film Industry

This paper was presented by Jock Given at the recent Australian Film Commission industry briefings in Melbourne and Sydney on 'Cultural policy and Audiovisual trade in relation to the Australia-US Free Trade Agreement'.

Australia, economically, is a small place. In its European age, the economic prosperity of this small place has always depended on trade with the rest of the world. Its cultural life, too, has for all time been influenced by encounters and exchanges between people here and people elsewhere, by exports and imports of goods, services, ideas and practices, of languages, stories, styles and people. Given these truisms, an argument that national governments need to have the power to intervene in the markets in which these exchanges occur, might need some explaining.

I want to try to do a small piece of that explaining by telling a rather old story about how nation states once held onto some of their power at a particularly critical moment.

This old story took place just after the Second World War. For many of those inventing the Bretton Woods‚ institutions which they hoped would administer a world economy without war, one of the most important was an agency to encourage international trade. Ambitious plans for an International Trade Organisation eventually foundered, but part of the agenda was implemented when a General Agreement on Tariffs and Trade, the GATT‚ came into provisional effect in late 1947. It was focused on the removal of barriers to international trade in goods.

The GATT set out enduring principles for trade policy-non-discrimination or most-favoured nation (MFN), national treatment, transparency, no extension of existing preferential trading arrangements (such as British Empire preferences), and a commitment to ongoing liberalisation by negotiation. It also contained qualifications to these principles which allowed some deviations from the overriding idea of free trade. One permitted higher levels of protection and wider-ranging subsidies for agriculture than for industrial goods. Another was about movies.

Article IV contained Special provisions relating to Cinematograph Films. These provisions about goods trade raised many of the issues which would become so critical in negotiating subsequent trade agreements encompassing cultural industries, particularly the new multilateral agreement about services trade in the 1980s and 1990s. The issues included the appropriateness of specific rules for cultural industries, the sectors to which they should apply, the forms of government intervention which they would permit or circumscribe and the impact over time of changes in technology and dominant cultural forms.

The negotiators of the late 1940s managed to cut a very specific deal about the audiovisual sector ˆ something the deal-makers at the end of the Uruguay Round nearly 50 years later could not. And remember the context. Europe was in physical, economic and spiritual ruin. The mainland US, by contrast, was physically unscathed, economically potent and spiritually triumphant. There was great concern in Europe about the need to rebuild their film industries, and the memory of the era up until about the First World War, when Europe had dominated the world film trade, was much more recent. At one point in the late 1940s, the Hollywood studios slapped an embargo on exports to the UK in response to the British government‚s imposition of a new tax on their film earnings. On the other hand, there was also plenty of demand from European audiences for the Hollywood movies many had missed out on during the war.

The special provisions‚ in the 1947 GATT allowed member states to establish or maintain screen quotas‚ requiring the exhibition of cinematograph films of national origin during a specified minimum proportion of the total screen time. This acknowledged the special importance which some of the contracting parties attached to the screening of locally-made films, but it also attempted to tightly circumscribe the policy measures they could use to support them. It was a compromise, delivering neither free trade, nor a free hand for those who wished to assist their film industries.

For those who wanted free trade in films, Article IV outlawed such measures as tariffs on the number or value of imported films, and quantitative limits on the numbers of foreign films which could be imported. The quotas it allowed could only be imposed on exhibitors, not on distributors, which meant the end of Britian's Œenters quota. Any new quotas could not discriminate amongst different foreign sources of supply, and any existing discriminatory quotas could not be increased. Finally, screen quotas were subject to negotiation for their limitation, liberalisation or elimination‚ .

For those who wanted a free hand in supporting domestic films, Article IV guaranteed that the most common form of assistance to national film industries around the world at the time, quotas on cinema exhibition, could still be deployed. Countries which did not already have screen quotas could initiate them, and countries which already had them could increase them, so long as they were not discriminatory and so long as they were prepared to negotiate over time for their reduction or removal. Further, the GATT imposed only weak disciplines on the use of subsidies in all areas of goods trade. Subsidies inconsistent with national treatment were expressly permitted (Article III(8)(b)) and trade distorting subsidies in general had only to be notified to other member states. If serious prejudice‚ was caused or threatened by them, the most an affected member state could require was discussion of them, not their removal. (Article XVI)

So how did this compromise play out? Did the ravaged Europeans recover or did Hollywood retain the dominance of the world's film industry it had acquired during World War I? Well, both. How? With a bit of good luck, and a bit of good measure.

For our story, the importance of the compromise struck over trade in films in the GATT was soon diminished by two factors. First, even while the agreement was being drafted, the new audiovisual medium of television was beginning its extraordinary growth, particularly in the US. The time audiences spent watching these small screens and the number of hours of programming produced for them would soon greatly exceed the equivalent figures for cinema's big screens. TV became the new cultural phenomenon and policy focus, although it supplemented rather than replaced the concerns about film. The words about cinema quotas in the text of the post-War goods trade agreement, which acknowledged the specificity of at least part of the audiovisual sector, were enough to sustain for the next 40 years an inconclusive brawl about whether television was in or out.

Second, the mechanisms increasingly preferred by governments to promote the cultural and industrial agendas they retained for cinema and established for television were not the quotas allowed under Article IV, but subsidies, on which the GATT was soft, and government institutions, public service broadcasters‚ on which a text about goods trade was understandably silent. The French funding body, the CNC, had been established in 1946, and the Eady Levy‚ instituted in the UK in 1950. European public service broadcasters with national monopolies or very limited commercial competition together, it must be said, with the initial cost and technical complexity of recording and exchanging programs for TV broadcast helped to construct a medium which was much less international, and much more national in its orientation than the film business. It need not have been, as the era of multi-channel television has revealed.

So, in including the cinema quotas‚ exception in the GATT, the architects of the post-War trading arrangements missed the new technological and policy trends. But fortunately, they hadn't handed over the power to do something about new technologies outside cinema, and they hadn‚t handed over all their power to introduce or adapt government measures in either cinema or these new areas to meet the policy challenges of the day and the next day, and the next. Things didn't work out quite as they had planned, they rarely do, but the powers retained, I think, were critical to the shaping of the film and television landscape in more interesting and surprising ways than might otherwise have been the case. The negotiators squeezed out their deal, the film industries and audiences in different places, with some Hollywood help, delivered the eras of Ealing and Pinewood Studios and London's swinging sixties. The French delivered their Nouvelle Vague and the Germans their New Cinema.

Finally, it's worth remembering that the inclusion of the special words about cinema quotas in the GATT took some serious fighting, fighting in which Britain seems to have been the critical player resisting the free trade agenda of the Americans. At around the same time this fighting was going on, the British people, reached into their own pockets in huge numbers to fund a memorial to America's war-time president Franklin Delano Roosevelt, in one day, they pledged 200,000 pounds in amounts of 25 pence or less. These were friends doing the fighting about audiovisual trade.

Harry Potter, that curious cultural juggernaut of the turn of the century, might seem like an odd place to go for lessons about Australian trade negotiation in 2003. But I suspect that over the next few months, it is going to be important for us to remember the one that earned Mr Neville Longbottom those 10 points from a smiling Dumbledore: There are all kinds of courage. It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends.

Rowling, JK. Harry Potter and the Philosopher's Stone, Bloomsbury Publishing, London, 1997, p 221.

Jock Given's book Turning off the Television: Broadcasting's Uncertain Future, was published by UNSW Press in April 2003. The above paper is based on Jock's research for a book about the World Trade Organisation, globalisation and media policy, commissioned by the AFC and the Key Centre for Cultural and Media Policy. He is a Senior Research Fellow at Swinburne University's Institute for Social Research and was formerly Director of the Communications Law Centre, Policy Advisor at the AFC and Deputy Chair of Screenrights, the audiovisual copyright society.