Trade Wars and the Silver Screen

Trade Wars and the Silver Screen

Hrab Op-ed in Cato's Regulation
July 26, 2004

Op-ed pages, political Web sites, and call-in radio shows were abuzz last spring with rants against the “outsourcing” of “U.S. jobs.”  Most of those critiques were based on the notion that outsourcing is a one-way street:  U.S. jobs go from Boise to Bombay, and American workers get nothing in return.  But that view is inaccurate.  As The Financial Times pointed out, the world economy offers lucrative opportunities for “in-sourcing” by other countries into the United States.

Consider the worldwide demand for the products of America’s “copyright” industries—e.g., computer software, music/sound recordings, and motion pictures—that account for a combined $90 billion in annual exports.  Consumers abroad are outsourcing their demand to U.S. companies and creating work for Americans.  Outsourcing, from this perspective, goes both ways. 

Unfortunately, many foreign governments fear that outsourcing entertainment to America weakens their national identity and cohesion.  About 60 of those governments have formed an organization called the International Network on Culture Policy (INCP).  The organization’s goal is to help governments implement policies that will encourage consumers to buy more locally produced culture, and less culture from America.

In their new book Blockbusters and Trade Wars, communications lawyer Peter S. Grant and journalist/writer Chris Wood—both Canadians—provide a detailed and sympathetic look into cultural protectionists’ arguments.  (Canada is perhaps INCP’s strongest backer after France.)  Grant and Wood acknowledge that globalization has produced “an unparalleled expansion in the distribution of books, television programs, and other cultural products worldwide.”  They note that “on its face, this would seem to augur well for cultural diversity.  There are seemingly more ideas, more pluralistic expression.”  However, the authors see “disturbing signs” that the “concentration of media is growing apace around the world,” producing a dwindling group of mainly American corporate “gatekeepers”—a trend that will “reduce choice rather expand it.”  They worry in particular that this concentration will reduce opportunities for “local cultural expression.”

The bulk of Blockbusters consists of case studies of governments using political means “to sustain or develop a broad range of popular cultural products, without undermining freedom of expression.”  What forms should those policies take?  Here is a partial list: supporting public broadcasting, making reasonable scheduling or expenditure requirements of private broadcasters and other gatekeepers, supporting the creation of popular works in underrepresented genres through subsidies or tax incentives, and limiting foreign ownership in certain sectors.  If that list seems like clumsy statism, that is because it is.

One sentence from the book lays bare the zero-sum mentality driving the anti-outsourcing backlash both in America and abroad.  “A Canadian estimate,” the authors write, “is that exhibition fees for Hollywood movies take some C$200 million a year out of [Canada].”  This implies that an outflow of money from Canada to the United States represents a loss for Canada—a simplistic and short-sighted view.

The fact is that, overall, cultural trade between the United States and Canada produces mutual benefits.  Yes, it is true that Canadians watch a lot of American movies—U.S. feature films annually take 85 percent of Canadian box office receipts.  But there is more to the issue than the overwhelming popularity of American films.  American studios produce—or outsource, to use that fashionable term—dozens of films in Canada each year, creating many jobs for Canadians.  Canada’s federal government reports “total foreign location shooting in Canada” contributes as much as $1.2 billion (U.S.) annually to the Canadian economy.  Again, outsourcing is a two-way street.  Blockbusters briefly touches on this outsourcing to Canada, but prefers to see it as a triumph of interventionist Canadian “government policy”—not an example of mutual gains through a (relatively) free trade framework.

The policy wonk in me enjoyed reading Blockbusters—it is well-written and filled with detail, research, and nuance.  Still, I feel that the authors could have dealt more extensively with those who support a laissez faire view of culture, such as Tyler Cowen of George Mason University or Nick Gillespie of Reason magazine.  Blockbusters pays the two pundits’ arguments unduly short shrift.

But that is a minor quibble.  One of my main concerns with Blockbusters is that it is too wonkish.  The book could have been better organized had Grant and Wood presented the more technical sections on topics such as international trade law and various national tax policies as appendices.  The same goes for the sections comparing different countries’ multi-layered cultural policies.  Judicious use of appendices and footnotes would have allowed the authors to present their central thesis on globalization and culture more clearly and coherently, and to incorporate their trove comparative research without disruption the flow of their argument.

Grant and Wood, avowed believers in the idea that “the free flow of ideas across borders” enriches cultural diversity, have written a book that representatives of those cultural protectionist governments will read with gusto.  American policymakers who plan on contesting this blatant protectionism will be well advised to read Blockbusters and Trade Wars also.  By doing so, they can familiarize themselves with the protectionists’ views in advance of what promises to be an explosive debate.