Hollywood's Disappearing Act: International Trade Remedies to Bring Hollywood Home

Abstract

This article explores whether subsidies that other countries provide to domestic companies who have established local operations in those countries could be challenged under the World Trade Organization Agreement on Subsidies and Countervailing Measures (SCM Agreement) if those subsidies cause adverse effects to the domestic industry in question. In particular, this article analyzes this question under Articles 5 and 6 of the SCM Agreement.

The article uses the U.S. film industry as a case study. However, countries around the world provide subsidies to many other foreign industries with local operations. Therefore, it has far-reaching implications regarding whether such subsidy programs are subject to challenge under the SCM Agreement by various domestic industries.

The article goes to the heart of the WTO trade rules and what is actually intended to be promoted and protected under these rules. In particular, it touches upon whether harm to labor groups within a domestic industry must be considered for purposes of determining whether that industry has been adversely affected by a foreign subsidy program. In this regard, it also indirectly considers the meaning in most of the WTO Agreements of a domestic product versus a foreign product, given that products are made all over the world today and investors in many industries in various countries can also be from many different countries. The appropriate definition of a domestic product is particularly complicated with respect to a media product.

Finally, the article considers two sub-issues relevant to the special character of media items, including films. The first is how digital technology has affected the analysis of whether a film should be considered a product (in which case the SCM Agreement applies) or a service (in which case it does not). The second is how and when would a foreign media item and a domestic media item be considered to be like products or directly competitive and substitutable products in various provisions of the WTO laws.

This article was selected as one of the best published during 2006 in the fields of entertainment and communications, and as a result is reprinted in the 2007 edition of the Entertainment, Publishing, and the Arts Handbook published by Thomson-West.

Keywords: Subsidies, actionable subsidies, foreign investment, SCM Agreement, WTO, movie, media, like product, directly competitive and substitutable, national origin, good vs. service, domestic industry, labor and trade, adverse effects, material harm, economics of subsidies

JEL Classification: K10, K20, K23, K33