France’s Taxing Culture

France has long feared foreign competition as a threat to its domestic producers. The nation has some of the most punitive taxes and labor regulations that make their products more expensive compared to foreign goods. Surprisingly, France has recently proposed to implement trade barriers in the same sector the French have constantly reminded the rest of the world that they have a comparative advantage in — culture.

In May, a 500-page government-commissioned report was released discouraging the viewing of non-French cultural content and encouraging the viewing of French cultural content. The French President Francois Hollande quickly expressed support for the report’s proposals. Out of 80 recommendations, the most stunning was a 4-percent tax on the sale of all devices, including gaming consoles and digital readers that allow access via the Internet to “cultural content.” The revenue generated from this tax would go towards subsidizing French music, television, and film. Titled Culture: Act II, the report’s recommendations were meant to counteract the influence American culture has had on the Internet, which the reports states “constitutes an immense threat to cultural diversity.”

Typically, protectionist policies are meant to protect weaker “infant” industries that governments wish were more developed. But France’s cultural industries, such as its music, architecture, paintings, and fashion have historically lead European trends for centuries. It is suspicious for policy makers to seek protection for an industry with such superior products.

Nevertheless, if French legislators indeed believe it is critical for French culture to be protected through trade barriers, they should have the political courage to state that French consumers prefer American content over French content because American films and music are of greater quality and value. I am sure French voters will appreciate the notion that the only thing that has kept French culture alive is the protective hand of government.

While the majority of the harm of these proposals and other existing cultural protections fall on the French consumers of cultural content, these regulations could threaten the broader agenda of trade liberalization between the United States and the EU. Hollande is clear — preserving his country’s system of subsidies, tax breaks, and quotas to protect local film, television, and music industries is unconditional if France is even to begin negotiations for a free trade agreement with the United States. Reaffirming the President’s position, a senior French official said the following: “If David Cameron does not want his [G8] party to be spoiled, he will need to convince the commission [to accept France’s position]. They have got to choose.”

If France does not move on this issue, it is likely that U.S. officials could move to retaliate by arguing for barriers against French exports. The protection of cultural content is not a position that France is alone in holding: 16 other countries, including Germany, issued a letter from their cultural ministers stating, “The European position to exclude audio-visual services from [the] negotiations must be expressed from the outset and shall not be limited to traditional broadcasting but fully extended to the digital environment.”

If such barriers are erected, this could raise the price of billions of dollars of electronic imports to Europe. Devices that provide audio and visual content have extend beyond conventional devices such as television and desktop computers to iPod, iPads, Kindles, and soon eyeglasses. If European and particularly French culture provides value to viewers, then it should prove its worth in the marketplace like any other good or service.