The proposed trade agreement between the United States and the European Union, the Transatlantic Trade and Investment Partnership (TTIP), is projected to create 100,000 jobs and $90 billion in economic growth. Unfortunately, as U.S. and EU representatives meet for the first round of negotiations this week, an old threat to those gains has reemerged, one that shows why this agreement is not being advertised as a “free” trade deal.
EU negotiators have come to the table with directives in hand that include a blatantly protectionist “cultural exception” for the audiovisual industries, especially film. American negotiators should push back against EU-sponsored exemptions like this by calling for trade liberalization without exceptions. Just as importantly, they should refrain from engaging in a tit-for-tat dispute, trying to get similar exemptions for U.S. industries.
On May 14, the French Culture Ministry issued a letter supporting the protection of audiovisual industries throughout Europe, which mentions a pro-exception petition by filmmakers that has gathered 5,000 signatures. Given this, the assertion from European Commissioner for Trade Karel de Gucht that the industry could always be brought back onto the table is questionable. French cinema will probably keep its protections.
Will it delay the treaty moving forward on time? Probably not, as policymakers are anxious to push this through as quickly as possible on the assumption that it will drag our economies upward. But this will open the door to other exceptions to the treaty that will blunt the gains from trade and create new layers of bureaucracy. It’s not worth it to put this together in record time if granting exceptions to all comers is the price of speed.
This isn’t the first time the “culture” sector was taken off the table in a trade deal. From discussions surrounding the General Agreement on Tariffs and Trade to regional treaties like the North American Free Trade Agreement, Mercosur, and some of the EU’s founding documents, audiovisual goods have been widely protected against foreign competition. Emotional, fact-free appeals to “cultural heritage” seem to trump sound economics every time.
To make matters worse, EU policies on culture allow member states to pay lip service to free trade while protecting markets back home. This sets a bad precedent and should be of concern for the final TTIP text. Here’s why.
EU media policies work at cross purposes, seeking to simultaneously promote “cultural diversity” while striving to create a single European market. Under existing EU agreements, member states may enact subsidies, broadcast quotas, investment caps, or a combination of these. French producers, for example, are protected by quotas and have access to $525 million in annual subsidies from Paris.
If the EU model dominates the upcoming TTIP talks, we could be looking at an expensive international subsidy program meant to offset internal subsidies.
Protectionist EU policies like these could weigh down the TTIP negotiations if they are not reformed. It’s easy to see why the word “free” was scratched from the Transatlantic Trade and Investment Partnership’s title. This kind of trade policy is anything but.
It is also worth remembering how broadly “culture” can be drawn. For example, part of the argument for the EU’s disastrous Common Agricultural Policy is based on the idea of the cultural importance of French farming traditions. On leur donne la main, ils prennent le bras.
How the final deal addresses this and similar issues will determine how wide, or how limited, the benefits of the eventual treaty will be on both sides of the Atlantic. A Swiss-cheese deal full of exemptions by October is a much smaller achievement than a robust free trade agreement a year — or years — later.
Otherwise, European film actors may have some new competition after all — from the anti-protectionist play-acting that comes with policies like this.
Iain Murray is Vice President for Strategy at the Competitive Enterprise Institute (CEI). Alex McHugh is a Research Associate at CEI.