Cultural Trade Policy: Import Barriers vs. Subsidies for Film Industries

Introduction: The Global Audiovisual Trade Debate

This memo responds to the question of whether countries should impose barriers to hinder the import of cultural trade or provide subsidies to promote the distribution and production of cultural products such as film and television.

Historically, cultural products including television, movies, and broadcasting systems were developed and distributed exclusively within national territories, shaped by national regulations. Even in the twenty-first century, the promotion of cultural values through television, films, and movies remains largely a national phenomenon. However, rapid development of information technology has revolutionized the international promotion of cultural values. The advent of satellite and cable channels, coupled with the growth of modern technology such as the internet and digital compression, has transformed cultural products into global commodities. To spread their channels across borders and reach transnational audiences, major television stations such as MTV, CNN, Eurosport, and BBC have launched international channels in multiple languages. Similarly, film and movie companies have translated their works into different languages to reach international viewers. One significant benefit of selling cultural products internationally is that it helps countries earn foreign exchange. Additionally, cultural products enhance the development of the audiovisual sector and create employment opportunities. The growth of television has also stimulated strong regional development in markets such as Latin America and the Arab countries.

Despite these benefits, some countries have implemented strict policy and regulatory frameworks to control the importation of cultural products. Their primary concern is that foreign television, movies, and films reflect the cultures of their countries of origin, and allowing such imports can erode a nation's cultural values. Countries such as China and South Korea have implemented strict policies and regulations to control foreign cultural product importation. Between 1916 and the 1920s, the German government initiated policies banning the importation of foreign movies. France established quotas on foreign film imports to protect its domestic film market during the same period. The United Kingdom and Portugal implemented screen quota policies in the mid-1920s, which required theaters to screen certain percentages of domestic films.

Alternatively, some countries have not employed aggressive trade barriers on cultural products; instead, they have offered tax concessions and subsidies to promote local film production. The United States actively opposed foreign film quotas, arguing that such policies conflicted with globalization and World Trade Organization (WTO) deregulation agreements. Many countries removed their quotas due to trade disputes with the United States. Brazil attempted similar quota policies in the 1940s but abandoned them under pressure from the U.S. government. Today, many countries employ different strategies to support domestic film production through passive regulatory policies such as tax concessions and subsidies. However, countries such as China continue to restrict foreign cultural product imports. Despite these varied approaches, empirical evidence supporting the effectiveness of audiovisual sector protectionism remains limited.

This paper argues that countries should allow the importation of foreign films while simultaneously providing subsidies to promote the distribution and production of domestic film and movie industries.