Petition on ‘Runaway’ Productions Filed

In a move harshly denounced by many of Hollywood’s major players, representatives of some entertainment industry labor groups formally asked the federal government to impose penalties on film and television productions shot in Canada to take advantage of substantial government subsidies there.

The request, filed Tuesday with the Commerce Department, opens a new front in an ongoing battle being waged by Hollywood’s rank and file to stem the loss of jobs to cheaper foreign locations.

The petition, however, has created deep divisions among powerful industry labor unions that list “runaway” production as a top concern. And the filing was rebuked by the Directors Guild of America for containing a “gross misrepresentation” of their members’ position.

It also has put major studios and smaller independents on high alert.

Jack Valenti, head of the Motion Picture Assn. of America, blasted the petition as “dangerous” and called it a “direct incentive to a trade war.”

Even in the preliminary stages, any inquiry probably will require studios, smaller production houses and the labor guilds to turn over confidential financial information to government investigators. Industry officials estimate the legal costs of any response to be at least hundreds of thousands of dollars.

The petitioners, led by the grass-roots Film and Television Action Committee and the Screen Actors Guild, are asking for “countervailing tariffs” to be levied on films that benefit from Canadian subsidies--in effect, charging a fine equal to the cost savings as a condition for the film being released in the U.S.

“Canada fired the first shot in this trade war,” said Joel D. Joseph, who drafted the petition and serves as general counsel for the Made in the USA Foundation. “We’re trying to have a cease-fire to find out whether the subsidies are legal.”

News of the filing led Canadian officials to defend their practices. Saying Canada “strongly regrets” the decision to press forward with the charges, Martine Lagace of the Department of Foreign Affairs and International Trade said her government is “very committed” to defending its entertainment interests.

Though SAG supports the petition--which remains controversial within the guild--the assertion that Canada has engaged in unfair trade practices was faulted by other top unions as being shortsighted and counterproductive.

The fear among a coalition of groups--including the directors guild, a group of 200 state and city film commissioners and others--is that the petition will derail legislation, pending in Congress, aimed at making U.S. locations more competitive. The bill calls for wage-based incentives for labor costs of up to $10 million for productions that stay in the United States.

Guild officials were infuriated Tuesday by the petition’s assertion that though their leadership was opposed to the effort, “a majority of its members are in support.” A chart in the petition lists the guild’s 12,300 members as supporting the effort.

The claim of widespread support within the industry is crucial to the success of the petition. Legal guidelines require a substantial portion of the affected industry to be in support of the inquiry for it to be pursued by federal regulators.

The Commerce Department has 21 days to make its preliminary determination about the petition’s validity, although a poll of the industry’s labor and business groups may be needed to determine opinion. If a poll is required, the deadline probably would be extended.

Critics of the call for tariffs warned the move could lead to retribution from countries that have long resented U.S. domination of the entertainment industry and may perceive any attack on government film subsidies as a cultural threat. And they question how well it will achieve the intended goal: keeping more jobs in the U.S.

But film and television committee Chairman Brent Swift--who flew to Washington to file the petition personally--said he was just doing everything he could think of to keep his colleagues on the job.

“This is for the workers living paycheck to paycheck,” he said Tuesday morning at the steps of the Commerce Department.