Europe’s U.S. Film Curbs Could Scuttle Trade Talks

Issues involving billions of dollars in potential U.S. entertainment industry profits appear likely to become one of the final sticking points in the marathon worldwide trade negotiations now heading toward a climax.

The conflict between Hollywood and Europe, which wants to protect its culture and its entertainment industry from an onslaught of American films, presents a difficult political challenge for President Clinton, for whom Hollywood has been an important political backer.

Clinton, who will be in Los Angeles today to raise $2 million for the Democratic Party from the entertainment industry, has publicly committed himself to taking on the issue of Europe’s restrictions, which include limits on foreign movies, television programs and related technologies, and entertainment business subsidies.

After a White House meeting with 16 top entertainment executives seven weeks ago, Clinton pledged that he would not sign any agreement in which film, television and video exports are “singled out for unacceptable restrictions.”

But some in the Administration worry that unless he has bargaining room on the issue, the entire trade package, affecting virtually the entire U.S. economy, could go down the tubes when the talks hit their Dec. 15 deadline for completion. Recognizing that bind, the industry has quietly relaxed its position in recent weeks, and now says that it can live with some import quotas.

European negotiators, too, have shown some flexibility, offering for the first time to address the issue in the trade talks. But it remains far from certain that they will ultimately go along with what Jack Valenti, Hollywood’s chief lobbyist, now describes as “our bottom line.”

And even if they do, it is equally questionable whether they can sell the deal to their member countries, where political sentiment to restrict American cultural imports is strong.

Entertainment is one of this country’s premier exports, last year generating a $4-billion trade surplus--more than any other industry except aircraft. Those exports have remained remarkably resilient in an otherwise weak U.S. economy, with revenues from foreign sales of theatrical, television and home video rising 10.2% in the first six months of the year.

Europe in particular seems to have an insatiable appetite for anything American, with reruns of TV shows like “MacGyver” and “Santa Barbara” enjoying even greater popularity there than they did in their initial U.S. runs. Overall, European demand has accounted for more than half the U.S. industry’s foreign revenues this year.

Yet there is also a deep-seated fear in Europe that the continent’s own culture could ultimately be submerged in a tidal wave of American sitcoms and other fare. That is why the 12-nation European Community in 1989 imposed a decree that no more than 49% of any country’s television time could be devoted to non-European films and television series.

Europe also demands the right to continue heavy subsidies of its entertainment industry, and perhaps most important, to retain the right to impose restrictions on Hollywood’s access to such emerging technologies as programming delivered by satellite, interactive cable and fiber optics.

Julius Katz, who was a top trade negotiator during the George Bush Administration, said that much of the motivation behind the restrictions is old-fashioned protectionism. “But politically, it’s painted as a cultural issue, and there, we have very little support in the world,” he said.

“It’s a tough political issue on both sides,” Katz added. “This is going to go down to the last minute.”

Until now, agriculture has been the major issue blocking progress in the 116-nation talks that have been dragging on for seven years.

That dispute has been so all-consuming that neither side has ever really moved from their opening positions: America wants the barriers to go, and Europe believes they should not even be up for discussion in the talks.

As recently as Oct. 4, the EC’s ministers for the arts issued a statement reaffirming its stand, including a demand that negotiators “exclude the audiovisual sector from the principle . . . of the progressive liberalization of trade.”

“As of this moment, there’s really been no negotiations,” said Valenti, who speaks for this country’s entertainment industry as president of the Motion Picture Assn. of America. “They’re probably just now beginning in earnest. . . . Hopefully, they’d begin this weekend.”

Now, however, European Trade Commissioner Sir Leon Brittan has said that his side might be willing to include the quota issue in the ultimate deal, if both sides agree that the current quotas remain intact.

Valenti says that Hollywood also could live with the current arrangement--but with some conditions. But it is in those conditions that the deep disputes remain. For instance, Valenti insisted that each individual European country should be allowed to set a lower quota on European programming if it wishes to.

France, where sentiment to protect its own entertainment industry is most intense, could retain its 60% quota already in effect, he said. “The key is that each country within the EC have the discretionary authority to determine whether they want to have quotas or not. For example, the Germans don’t want quotas. The Dutch and the Danes don’t have quotas.”

However, European diplomats argue that this would defeat the entire idea behind the quota rule--turning it into a maximum, rather than a minimum.

Valenti also remains opposed to heavy subsidies--$700 million last year--with which Europe finances its own entertainment industry. The EC insists that they are crucial to the survival of its relatively small producers, who face American competitors with much greater economic might.

He also said the agreement should include a guarantee that contracts negotiated in America be respected in Europe. Those contracts often involve the amount of control the business side of the industry has over its creative side.

The two sides remain as far apart as ever on the issue of whether new technologies should be covered by the agreement.

In its demands that Clinton hang tough, the American entertainment industry is attempting to avoid a repeat of what happened when the Bush Administration signed a free trade accord with Canada.

As the price of getting a deal in other areas, the U.S. government agreed at the last minute to exempt cultural issues from the agreement--essentially leaving Canada broad leeway to pursue whatever policies it chose.

“We got thrown overboard on Canada, no question about that,” Valenti said. Yet he added that he was heartened by Clinton’s strong public endorsement of the U.S. industry.