TED Analysis Cases

RESEARCH PAPER NUMBER: X11

RESEARCH PAPER MNEMONIC: XCULT

RESEARCH PAPER NAME: Trade and Culture

DRAFT AUTHOR: Karen Elizabeth Rinaman

• Abstract
• Issue Background
• Relevant TED Cases
• Policy Implications
• Further Information

I. Abstract

The preservation of cultural identity has become a major focus of concern in international trade negotiation today. In order to protect their cultural autonomy, governments like those of France and Canada have implemented methods by which to control the flow of cultural products into their national media systems. Their placement of taxes, bans and quotas upon cultural products is seen by US trade officials as contradictory to the trade agreements they are bound to. The following case studies involve trade disputes between the US and France and the US and Canada. All three involve cultural industries and will effect future trade policy regarding cultural products worldwide.

II. Issue Background

In the 1960's Canadian Professor Marshall McCluhan first popularized the concept of the "global village". He marveled at the thought of the world communication exchange that would be possible in the global village, speculating that social, racial and ethnic barriers worldwide would cease to exist. In his book Understanding Media, he examined the possibility of world communications exchange making "the entire globe, and the human family, of a single consciousness."(1). In the "global marketplace" of today, McCluhan's pacific idea of a "single consciousness" is no longer looked upon as a benefit. His intrigue has been replaced with concern, and his concept of "global village" with new terms such as cultural hegemony and cultural imperialism. Shifting centers of economic, political and cultural power in the form of information production and distribution make it increasingly difficult to measure the limits of international trade against its effects on cultural sovereignty. Many nations are testing these limits today, struggling to create the international trade precedents that will be implemented and adhered to tomorrow. This paper will explore cultural industries and their effects on cultural sovereignty. Using three case studies, two from Canada and one from France, the implications of trade policies as they relate to cultural products will be examined. Because the United States has the greatest interest in preserving free trade policies within the cultural product sector, all three case studies entail trade disputes with the US.

COMMUNICATION AND THE ISSUE OF SOVEREIGNTY

Modern communications have consequences for all nations of the world because they penetrate all spheres of the lives of individuals as well as of societies. The use or abuse of communications can have a direct effect on the sovereignty of a nation, its political and economic stability, and its cultural identity (2). The omnipresence of American culture has become a threat to the cultural identity of people in every quadrant of the world. This is why governments have begun to fight against what they consider an assault to their cultural sovereignty. The balance of information or communication flow is of utmost concern to nations like Canada and France because American values are instilled in their societies through mediums like music, film and literature. Canada and France have expressed great concern over the "cultural imperialism" they feel is taking place within their borders. This is why they have created policies to encourage indigenous cultural expression in their national media.

THE SHOPKEEPERS IN THE GLOBAL MARKETPLACE

World	US	EEC	Japan	others
Media 315	140	70	65	40
Services 380	180	90	50	60
Equipment 400	165	92	108	35
Components 90	30	15	30	15
Total 1185	515	267	253	150

(3)Source: Institut pour le Developpement de l'Audiovisuel et des Telecommunications en Europe, contribution to World Communication Report (Paris: Unesco, 1989), p.83

To understand the parties arguing over cultural imperialism it is first helpful to become aware of the interests that each party has at stake. The table above clearly demonstrates the United States' dominant position in the communications sector. This dominance gives the US a huge economic incentive to protect free trade within the sector. Hamid Mowlana would describe the United States as a "chief" in the global village that McCluhan described.

It is not surprising that with today's extremely competitive economic environment, export promotion and free trade rank among the United States' highest priorities. The Cultural industry represents a large portion of US exports, and a highly lucrative one. This is evident because the United States is the dominant producer, processor, storer and exporter of information worldwide. In addition to being the most technologically advanced information society on the planet with the most number of films being shown on the world's movie and tv screens, its culture and ideology have penetrated the consciousness of people on every continent. From democracy to freedom, capitalism to consumerism, the American mentality has been exported and captured in some form by societies that exist in every area of the world.

With such massive control within the communication sector, it is not surprising that more than a third of America's $5.5 trillion GNP is generated from ideas rather than from manufactured goods (4). 46 Percent of the labor force in the United States works within the information industry (5). For this reason the United States has a vested interest in protecting its ability to export information-related products in other world markets. This explains why American ambassadors spend more time assisting US businesses than on any other single function (6).

The breadth of the United States' control within the communications sector is wide and deep: north, south, east, and west. Production and distribution of cinematic films is a major area of global information flow and the US remains the single largest exporter. Interestingly enough, the United States is the second largest producer of cinematic film behind India (7). In addition to cinematic film, the majority of nations worldwide depend upon imported television programming from the United States, usually in the form of entertainment or sports programs. In contrast, the United States imports less than 2 percent of its television programming from abroad (8). Within the radio industry, the US broadcasts more than 2,401 hours of radio programming (the most by any country in the world) across its borders every week (9). Combined with music and television, movie exports represent the second largest US trade surplus after aircraft. By the turn of the century, more than 50 percent of the revenue from the American entertainment industry will be earned abroad (10).

In print media such as books, newspapers and periodicals, the United States also prevails. The US exports $591,358 thousand in books and pamphlets every year.(Frederick 62)These media carry information and ideology both domestically and across borders to foreign audiences. The demand for American printed material is more easily met today than ever before because transporting such materials can be accomplished within hours. Publishers can transmit the entire contents of their publications to printing plants around the world via satellite. This raises the question of whether such easy access can make a nation vulnerable to cultural invasion.

THE CONCEPT OF CONTROL

Hamid Mowlana's Model of the International flow of Information suggests that four quadrants make up the process of communication. These include: production of technology, distribution of technology, production of communications/cultural products and distribution of communications/cultural products. (See Attached Appendix A) Many nations of the world are only in the position to master one or two of these quadrants, therefore depending on other nations to fulfill those aspects of the process of communications that lay in other quadrants. Using Mowlana's model, one might think of the United States as a nation that controls all four quadrants, therefore rendering other nations dependent upon the US for the functions of the quadrant(s) they lack (12).

If one considers that 80 percent of the world's wealth is controlled by one fifth of the world's population, it is not difficult to believe that such an imbalance also exists within the communications realm. Many scholars today identify those populations who control information as the information rich, and those that do not as the information poor. While Canada and France represent "information rich" nations in the world arena, their reactions to the imbalances that they perceive in the communications sector could also benefit the "information poor." If they are successful in their pursuits to protect their cultural autonomies, other nations with even less control over their national media systems will have precedents to go by in order to protect their own cultural autonomies.

To the US and to the average American, the idea of balance in the communications system is of little significance. Our attitudes might be changed slightly if 90 percent of the programming in print and broadcast media here in the US was imported. Imagine turning on the television and finding 90 percent of the selection to be in the French or Japanese language. This does not even consider the difference in cultural content that would exist. Fortunately for the US, we will never be in a position to experience the feeling of "cultural invasion." But perhaps we could attempt to empathize with those nations who do.

III. Relevant TED Cases

A. Case Listings and Brief Descriptions

1. French Cultural Exception (Frenchtv Case)

   The French-led 1989 EU "Television Without Frontiers" directive imposes quotas limiting the number of American films shown in European theaters and on European Television. The more extensive EU Broadcast Directive passed in October 1989 protects and promotes the European cultural identity by requiring that 51 percent of air time on television be of European origin. The directive requires that EU member-states reserve a majority of entertainment broadcast transmission time for programs of European origin. Throughout the controversy France has aggressively worked to pass the EU directive and to implement French and European quota systems. In order to show its good faith, France has exhibited the most aggressive quota system in Europe, even requiring its TV and Movie distributors to purchase from European neighbors, without any guarantee that they will reciprocate. The United States argues that the quota system defies GATT, and that such measures amount to protectionism. The US argument is justified because the GATT prohibits quantitative restriction and other forms of protection except for customs tariffs. This prohibition includes internal taxes and other measures that discriminate against imports, including internal government regulations operating to protect domestic goods.

2. Canadian Country Music television Case (CMTCAN Case)

   Country Music Television, a division of Westinghouse's Group W Satellite Communications lost an audience it spent nine years wooing when it was removed from Canadian airwaves to make way for Canada's New Country Network(CNC). CNC entered the market with its own 24-hour country music format in 1995. The president of the Canadian Radio- Television and Telecommunications Commission defended Canada's move to bump Country Music Television because under Canadian law, foreign programming is welcome only when it does not compete with a Canadian equivalent (13). The defense that Canadian officials put forth is that Canada's restrictions are meeting the need to protect Canadian heritage -- not just industry. The United States argues that the tax defies the NAFTA, and that the measures amount to protectionism.

3. Canadian Split-run magazine Case (Sportsill Case)

   The Canadian government recently placed an 80 percent excise tax on all foreign magazines sold in Canada that do not contain at least 80 percent Canadian content. The controversy began in the early nineties when the Time-Warner US magazine giant began beaming Sports Illustrated content electronically to a Canadian printer in order to circumvent Canada's 30-year old ban on split-run magazines. Time-Warner argued that it was established in Canada consistent with Canadian trade law and with the full knowledge of Canadian government. Now it sees the tax imposed upon its magazine not as an effort to protect cultural identity, but as an economic commercial directive. Canada argues that it already competes with US magazines, and that split- run magazine give the US an unfair advantage in their market --that the practice is the equivalent of "cultural dumping"(14). Wishing to avoid setting any kind of a precedent by allowing Sports Illustrated to get away with its split-run publication, Canada placed the 80 percent excise tax on the magazines advertising profits. The US reacted by sending its case to the World Trade Organization. The case will be heard this year and is expected to take at least 8 months. Both countries have indicated they will abide by the final ruling (15).

Case number	Mnemonic	Description	Link
1	SPORTSILL	Canadian Magazine Publishing and Cultural Protectionism	To Case Study
2	CMTCAN	Canadian Country Music Television and Cultural Protectionism	To Case Study
3	FRENCHTV	French Film Quotas and Cultural Protectionism	To Case Study
RELATIONSHIPS ALL THREE SHARE	Cultural Protectionism	Trade disputes with the US	International Trade Agreements

B. Comparison and Contrast

All three of the above case studies involve the international trade or distribution of cultural products via standard communication mediums. These standard mediums operate within the information and communication sector which includes the audiovisual industrial complex (cinema, television, video), the sound complex (radio, recorded music), and the printed media (newspapers, journals, books) (16). Through these mediums the main flows of cultural goods circulate nationally and internationally and the cultural industry develops and thrives.

Contrary to the idea of a thriving cultural atmosphere, Theodore Adorno and Max Horkheimer, two German philosophers exiled to the US during World War II, view the culture industry as a sector that allows serialization and standardization to occur that transforms culture into a commodity, bringing about a state of cultural bankruptcy (17). Because culture becomes "mass", they suggest that it loses the individual dynamic necessary for it to thrive. Furthermore, they believe the economic "value" now intrinsic to culture in today's information society detracts from its critical power. It has become more and more homogenized and therefore has been compromised.

France and Canada would perhaps agree with Adorno and Horkheimer. Both nations fear that their national cultural industries are being compromised by the excess amount of cultural products that flow across their borders by way of dominant US print, film and music industries. In order to alleviate the problem, both have implemented trade regulations within the cultural sector which protect their cultural industries. In doing so, they have challenged obligations to the United States under The GATT and The NAFTA respectively. All three case studies involve discrepancies between national rights to protect cultural sovereignty and their obligations under certain trade agreements. In all instances the issue is over which issue should take precedence over the other.

The United States views their concern as a ploy to circumvent International trade policies and as economic commercial directives which amount to protectionism. Both sides have a valid argument but, at least for now, the protection of cultural industries is being recognized as legitimate. Much to the United States' chagrin, this legitimacy has resulted in a "domino" effect spurring nations worldwide to begin implementing measures to protect their cultural heritage. Because of the United States' position as the most powerful producer of cultural goods, this issue is of major concern to US Trade Representatives.

THE ARGUMENT FOR CULTURAL PROTECTION

International law guarantees the right of peoples and nations to maintain permanent sovereignty over their natural wealth and resources. Sovereignty has historically referred to a nation's right to protect its borders from military invasion; to preserve natural resources, and to choose and protect political social, economic and cultural systems without interference by another state (18). Culture, if included in the realm of natural resources must also be recognized as a legitimate entity capable of being preserved. In other words, a nation has the sovereign right to maintain and protect its cultural sovereignty and autonomy.

In the Sports Illustrated case study, Time Warner Inc. recognized the advantage of transmitting Sports Illustrated to Canada not only in terms of logistics, but also in terms of international law and trade policy. The magazine took advantage of its technological abilities to circumvent Canadian trade law and policy. Time Warner did not anticipate that Canada would see this as an infringement of international law and Canada's right as a nation to protect its cultural sovereignty.

By the same token that Canada was justified in protecting its magazine industry in the Sports Illustrated, Case, it was also justified in protecting its television industry in the Country Music Television Case. Similarly, France was justified in protecting its television and film industry in the French TV Case. In all three case studies the concept of "cultural exception" was put forth to justify protection of cultural products in dispute.

THE ARGUMENT FROM THE US PERSPECTIVE

From the US perspective, Canada and France ignored their obligation to adhere to NAFTA and GATT. The US has a justifiable argument because Under NAFTA and GATT, Canada and France are bound to allow open access to trade with The United States. In all three case studies, the United States claims that protectionism and commercial directives are the premise of the dispute. That these disputes involve culture is seen as a ploy more than a valid argument by the Canadians and the French.

The US entertainment industry says quotas, like those used by the French, violate trade agreements by hindering access to foreign markets. The GATT encourages open markets by limiting the extent to which members direct trade through instruments of trade control rather than prices. It thus prohibits quantitative restriction and other forms of protection except for customs tariffs. This prohibition includes internal taxes and other measures that discriminate against imports, including internal government regulations operating to protect domestic goods, such as bans on the internal sale of imported products.

Non- discrimination under GATT obligates a trading partner to treat all other trading partners equally. It also means that foreign companies should be given the same rights as domestic concerns. One of the core principles of the GATT system of Trade liberalization is the rule known as "national treatment". It can be traced back to treaties of centuries ago, and obligates governments to treat foreign products or persons the same as they treat domestic products or persons, for purposes of a variety of governmental actions (19).

However, GATT prohibitions on trade restrictions are not applied without exception. GATT Article XX recognizes certain protective measures. Its exact language states that exception can be applied when "necessary to protect human, animal, or plant life or health." This exception is applicable as long as the measures are not "applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or is a disguised restriction on international trade."(See French TV Case

This is where the cultural exception argument loses strength against the US argument that France is being discriminatory. Similarly, under the NAFTA, Canada could be faced with a strong argument against cultural exception. It is all a matter of interpretation. It is valid to say that under GATT's article XX "General Exceptions" protection of human, animal or plant life and the conservation of exhaustible natural resources strongly supports cultural protection. If culture is considered an exhaustible resource which can be harmed by domestic consumption of foreign cultural products, then France and Canada have a justifiable argument. It is possible that cases like the three discussed here will result in compromise, as in the Country Music Television Case. This seems to be the logical result given the ambiguity of the trade agreements guiding international trade negotiations between the US and other nations worldwide.

WHY CULTURAL PRODUCTS IMPACT CULTURE

Culture is a highly influential thread in the fabric of a society. From cultural values, cultural identity is established. The influence of culture can be regarded as a circle: culture affects values which affect attitudes, which affect behavior, which in turn affects culture itself (20). It follows that unnatural outside interferences in the process of cultural change can cause alterations to a culture which can be harmful to cultural identity. The import of certain goods and services from one country to another then, conceivably impacts the process which maintains cultural identity. Publications and film, two of the cultural industries being examined in the above case studies, exemplify tradable products capable of altering behavior, values and attitudes --therefore capable of altering culture.

OTHER INTERESTING TED CASES RELATED TO CULTURE

LIONS AND TIGERS AND BEARS -- OH NO???

Issues of culture are becoming commonplace within the international trade forum. This is apparent by the proliferation of cases like those involving the cultural industry, but also in other instances where cultural drives industry:
(The Tiger Case)

As Russia's borders became permeable due to economic reforms it increased trade activities, including the illegal hunting and trading of tigers. Siberian tigers (Amur tigers) are poached and traded with China for large sums of money by individual poachers.It has been known that many Asian countries use animal parts for medicinal and aphrodisiac purposes. India, Bangladesh, Bhutan and other Asian countries are also engaged in this illegal but lucrative business. Due to these activities, the tiger population has decreased considerably and they have become an endangered species. All tigers are prohibited from commercial international trade by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) treaty. TRAFFIC, a department in the World Wildlife Fund, has reported that of the fourteen tiger range countries only six are Party to the CITES treaty. Most of these countries give a low priority to conservation of nature because of inadequate infrastructure, low funding, dated equipment and inadequate training of staff members.
(The Bear Case)

Bear gallbladders are prized in many Asian countries for their medicinal and aphrodisiac qualities. In countries such as South Korea, Japan, Taiwan and China, bear gallbladders sell for astronomical prices and are often considered more valuable than gold. Because bear parts commanded high prices in Asia, this demand diminished the bear populations with the rise in incomes there. With the decline in Asian bear populations, Asian merchants came to North America to procure gall bladders of the North American black bear. Reports indicate that an increasing quantity of bear gallbladder used in such medicines and aphrodisiacs are originating in the United States, from such places as the Shenandoah Valley or the Berkshire Mountains in Massachusetts. Legislation has now been enacted to protect the bear in North America. In response, China has set up bear farming operations in many parts of the country to produce bear products. China is now are an exporter of bear products to other Asian countries.

IV. Policy Implications

Within the last decade a "global marketplace" has evolved which encompasses businesses, governments and institutions from throughout the world. The commodification of cultural products within the global marketplace has brought about a new concern for cultural preservation at the national level. Because the United States is the dominant exporter of cultural products many cultural exception policies are seen as a threat to the US cultural industry. France and Canada both have a trade relationship with the United States which is lucrative and beneficial to all parties. NAFTA and GATT are the agreements by which trade between the US and Canada and the US and France is facilitated. However, taxes, bans and quotas placed upon cultural products by the French and Canadian governments are seen by US trade officials and businesses as contradictory to the trade agreements they are bound to.

In light of this contradiction, the US traditionally fights back when issues of cultural sovereignty and exception arise. The case studies involving cultural products examined in this analysis all involve cultural industries and will effect future trade policy regarding cultural products in the future. Policies that will result from these case studies will involve the economic, political and cultural stakes that all parties are vieing to protect. Based on the outcomes of these cases, the parameters of future trade within this sector will be identified. From this a measure with which to judge future trade disputes within this sector will emerge.

V. Further Information

A. Bibliography

B. Web Sites

C. Endnotes