French Film Protectionism Is Just Part of the Game

Right now, the French government is making a huge stink over whether its existing program of film quotas and subsidies could be threatened by a potential trade agreement between the United States and the European Union. French officials have threatened to obstruct any efforts to negotiate a deal unless they get assurance that their pet program is off the table.

Is this an early sign that the trade negotiations are bound to fail? Not quite.

 

In a piece titled “Pretentious Movies May Doom U.S.-EU Trade Pact,” Evan Soltas offers this unpleasant scenario:

An exclusion of French films would set a precedent. Other nations would like to protect their own entertainment industries. The demand could set off an escalating “tit-for-tat” game with the U.S. and other European nations–eventually leaving large segments of their economies immune from freer trade.

Over at Slate, Matt Yglesias urges people to “calm down” and assures us that France’s obstinacy is political posturing. No one really minds if France gets to keep its subsidies, so the film exception will be accepted and everything will continue apace.

In a way, Soltas and Yglesias are both correct. France’s demand for an exception will not scuttle the negotiations because demanding exceptions is what trade negotiations are all about. An agreement to end all tariffs, quotas, and subsidies is easy to draft. The job of trade negotiators is to reach agreement while managing the very real and harmful “tit-for-tat” game that Soltas worries about.

Trade liberalization is politically difficult. Almost every trade barrier currently in place has a domestic special interest that will fight tooth and nail to keep it in place. Achieving freer trade through international agreements is one way to overcome that opposition; offering access to foreign markets garners support that offsets the opposition.

But some domestic industries just have too much political clout to overcome without a concession. Free trade agreements are full of exceptions, caveats, and contingencies, and each one represents an effort to appease special interests that would otherwise threaten to scuttle the deal. For example, thanks to the ever-shrinking U.S. textile and apparel industries, our trade agreements have historically contained ridiculously byzantine rules of origin and confusing quota systems for textiles. Each inefficient, uncompetitive industry will yelp until it gets a satisfactory bone tossed its way. These exceptions don’t kill the deal; they just make the deal less good.

Liberalizing the French cinema market is not so important that a U.S.-EU free trade agreement cannot continue without it. The main loser in exempting France’s protectionist film policies from the agreement is the French people, who are denied the full benefits of a competitive marketplace. Exceptions should be counted as losses in the battle to liberalize global commerce, but the immediate goal is to minimize the number and impact of these exceptions while still arriving at a final deal.