COMPANY TOWN : THE GATT VOTE: IMPACT ON BUSINESS : Hollywood’s New Reading of Pact Supports Passage

There has been no rewrite of the GATT script in the year since European protectionists essentially barred entertainment from the agreement. Nonetheless, Hollywood’s new reading of the treaty is that GATT, though highly defective in some areas, may not be so bad after all.

A year ago this month, trade negotiators hammered out the GATT agreement in Geneva that left open the possibility that Europe--mainly the French--could continue to impose barriers on U.S. entertainment exports. At the time, Hollywood cried foul and threatened an international dogfight.

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But the industry has since gone beyond quietly accepting its fate, to the point of actually supporting passage of the far-reaching trade treaty this week as it finally worked its way through Congress for official ratification.

As expected, GATT--short for the General Agreement on Tariffs and Trade--passed the Senate late Thursday after approval by the House earlier in the week. It now awaits President Clinton’s signature.

“Even though we were bitterly disappointed last year in the final agreement, to oppose this agreement doesn’t make sense. This agreement, defective as it is, is better than no agreement,” said Fritz Attaway, general counsel for the Motion Picture Assn. of America, the industry’s chief lobbying arm.

Hollywood’s seeming change of heart stems from two things. First, GATT includes intellectual property protections that the entertainment industry hopes will stem the growing tide of pirated videos, albums and entertainment software proliferating in such areas as China, Russia and Eastern Europe.

Hollywood estimates its piracy losses at $2 billion a year. GATT provides for measures to help battle piracy, with the threat of trade sanctions hanging over countries that fail to address the problem.

Second, there is the feeling in the industry that lowering trade barriers worldwide is good for business overall because it will stimulate the economies of developing nations, which in turn will eventually boost demand for Hollywood’s products.

“When economies boom, people have more money and go to the movies,” one studio chief said.

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Indeed, some executives say there has been a clear surge in the movie business in Mexico, which they attribute in part to the enactment of the North American Free Trade Agreement.

In a statement, MPAA President Jack Valenti, one of GATT’s most vocal critics a year ago, noted the industry’s “tremendous disappointment in the European Union’s unwillingness to commit to tearing down its trade barriers against America’s creative community.”

But Valenti went on to praise the agreement for including the intellectual property protections and the overall opening up of trade avenues. “Any pact that achieves both those goals is to be lauded,” he said.

That’s not to say there aren’t concerns. France and a handful of other European countries are still aggressively limiting the amount of U.S. entertainment allowed into their countries, chiefly that which airs over its television stations.

Relations have been strained in other ways. United International Pictures, the foreign distribution arm of Universal Pictures, Paramount Pictures and Metro-Goldwyn-Mayer, has been threatened with being dismantled on antitrust grounds. The dispute is now on the back burner.

But Hollywood is encouraged that the enthusiasm for quotas in Europe is inconsistent and that quotas have been enforced only sporadically. Germany and Britain, for example, are lax about enforcement.

In one peace overture, Walt Disney Co., through its Miramax unit, recently said it would promote the distribution of French films and invest up to $30 million in European co-productions. What’s more, entertainment executives believe that even the French will eventually face internal pressure to lift barriers as services such as video on demand develop.

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Companies developing these services, the reasoning goes, won’t sink money into the projects unless they are assured that a wide range of movies and programs will be available on their systems.

“It’s not going to be comfortable for the French to sit behind their Maginot line of quotas,” said Jonas Rosenfeld, president of the American Film Marketing Assn.