Tracking the Cultural Exception, Part Five: There Is Another Way

ftaIn the final entry to my series, the question I want to address is more difficult to answer: Why haven’t more countries woken up to the inefficiency of cultural exceptions in trade agreements? They are harmful to consumers, don’t give either signatory an edge, and are no longer even effective at blocking trade in cultural products. So why don’t more policy makers would realize this?

One reason is that politicians like to pose as protectors of their nation’s cultural heritage against encroachment of overly commercialized mass popular culture, mostly from America. Another is that old policies die hard. Once a policy is in place, inertia tends to keep it there. So what would a trade agreement without a cultural exception look like?

The Korea-United States free trade agreement (KORUS), signed in 2007 is an important treaty for many reasons. It resolved a number of supposedly insurmountable trade differences—from automotive tariffs to investor protection. But just as important was South Korea’s decision not to seek a cultural exception.

The KORUS negotiations put audiovisual products on the table alongside everything else. The final treaty included reduced television and film screen quotas. Korea had previously required 106 days per year of domestic film on screen. France’s current requirements are similar—five weeks out of every quarter. Six years later, Korea has followed through, and rather than the domestic film industry falling apart, Korean films’ market shares are at an all-time high.

This is a significant achievement. South Korean officials had long called for waiting until Korean film and television productions hit a 40 percent market share inside the country before quotas could begin to be phased out. But even though Korean films hit nearly a 50 percent market share in their home market in 2001 (according to Korean Film Council reports), quota phase-outs didn’t begin until the KORUS treaty negotiations were underway later that year. As I noted in my discussion of U.S. audio-visual subsidies, it often takes external pressure to change longstanding policies.

Interestingly, the French industry is similar to the Korean in other ways. French films account for around 40 percent of their home market—down from a peak of 45 percent in 2008, thanks to increased shares from other European countries, most probably the result of reforms in EU policy. Regardless, French films are doing well enough to meet what many see as a commonsense threshold for negotiation on audiovisual policy. This, along with the new precedent set by KORUS, provides some optimism for audiovisual goods making it to the negotiating table for the proposed Transatlantic Trade and Investment Partnership (TTIP).

Some have even proposed using KORUS and the Korea-European Union free trade agreements as models for TTIP, which would certainly strengthen the pressure to reform. The Korea-EU treaty does contain a cultural exception, so that should temper optimism somewhat. But if negotiators consider harmonizing these two treaties as part of the TTIP negotiations, they will at least have to take a second look at the cultural goods and services.

In the best case scenario, these pressures will bring negotiators to consider a different approach to audiovisual industries and other sensitive topics, as many of the arguments against cultural exceptions can be applied to other popular protectionist provisions as well.

Protecting culture, workers, or the environment make for nice political rhetoric, but trade agreement provisions aimed at doing so are often ineffective both in terms of their narrow stated goals and in the overall trade gains that are the trade agreement’s purpose. If free trade agreements are to bring about real economic gains, lawmakers and trade negotiators shouldn’t carve out industries. Even sensitive ones like audiovisual services.