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GATT - WTO. General Agreement on Tariffs and Trade. Context: Pre-war depression “cured” by WWII - unlikely to be a regular economic policy option. Depression caused by protectionism. Depressions causes political instability. Political instability causes war Ergo: Need to end protectionism.

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GATT - WTO

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GATT - WTO


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General Agreement on Tariffs and Trade

  • Context: Pre-war depression “cured” by WWII - unlikely to be a regular economic policy option.

  • Depression caused by protectionism.

  • Depressions causes political instability.

  • Political instability causes war

  • Ergo: Need to end protectionism


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Harry S. Truman, US President


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General Agreement on Tariffs and Trade

  • Thus - US leads campaign for postwar trade regime based upon:

  • Classic (economic) liberal principle of comparative advantage. In effect:

  • Tariffs would be lowered

  • Each country to specialise in production of those goods it produced best (trading with other countries as appropriate).

  • In theory all countries would be better off as a result.


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General Agreement on Tariffs and Trade

  • 1947: Originally US vision for postwar trade regime to be encapsulated in creation of International Trade Organisation. Met domestic opposition.

  • GATT - established as temporary agreement to provide basis for trade negotiation underway in Geneva.


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General Agreement on Tariffs and Trade

  • In consequence US effectively dominated GATT.

  • For example:

  • The eight trade rounds that constituted GATT for example, were typically initiated by grants of negotiating authority from the US congress to the US President


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General Agreement on Tariffs and Trade

  • GATT embodies 1st world rules/ assumptions for economic prosperity:

  • Standardised production,

  • Vast scale of production,

  • Endless expansion of markets

  • combine to create the engine for global economic growth


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General Agreement on Tariffs and Trade

  • GATT based on four norms:

  • Most-Favoured Nation

  • Reciprocity

  • Exemptions

  • Development Norm


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General Agreement on Tariffs and Trade

  • Most-Favoured Nation

  • All members agree to extend unconditional MFN status to one another - no country receives preferential treatment not accorded to all other MFN countries.

  • Any benefits acquired by one country are automatically extended to all MFN partners

  • Only exceptions to this rule are customs unions (e.g. EU, NAFTA)


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General Agreement on Tariffs and Trade

  • Reciprocity

  • Any country that benefits from another’s tariff reduction should reciprocate to an equivalent extent.

  • In theory then, fair and equitable tariff reductions by all countries are ensured.

  • Taken with the MFN principle, reciprocity is intended to create a “downward spiral” of tariffs.


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General Agreement on Tariffs and Trade

  • Exemptions

  • Regarded as acceptable if:

    • temporary

    • imposed for short-term balance-of-payments reasons

    • country experiencing severe market disruptions due to increased imports


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General Agreement on Tariffs and Trade

  • Development Norm added (from 1965 onwards) allowing:

  • 1. Unilateral/unreciprocated tariff reductions by developed countries on imports from developing countries

  • 2. Export subsidies by developing countries.


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General Agreement on Tariffs and Trade

  • GATT until the 1980s focused (very successfully) on reducing manufacturing tariffs:

  • 1948 - 1993

  • Reduction in official tariffs on manufacturing from 40% to 5%

  • Global trade increases by factor of four (mainly benefiting 1st world - by 1990s 20% of the world’s population does 80% of international trade.)

  • SO - GATT A (BUT NOT THE ONLY) FACTORBEHIND GLOBALISATION


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General Agreement on Tariffs and Trade

  • GATT and film:

  • 1947 - Preparatory meeting in Geneva. US delegation “worked vigorously to secure agreement” for inclusion of provision under GATT under which “all film restrictions would be removed except quotas on playing time for domestically produced motion pictures.”

  • MPEA Paris Rep, worked closely with the US delegation throughout.


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GATT Article IV - SPECIAL PROVISIONS RELATING TO CINEMATOGRAPH FILMS

  • Quantitative regulations relating to films limited to screen quotas - governments could require the exhibition of cinematograph films of national origin during a specified minimum proportion of the total screen time actually utilized, over a specified period of not less than one year.

  • The quotas were to be subject to negotiation for their limitation, liberalization or elimination.


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GATT - From Geneva to Ururguay

  • Despite Article 4, GATT manufacturing focused until 1980s.

  • By 1990s, however, services sector outstrips value of manufacturing:

  • 70% of 1st world GDP

  • 50% of 3rd world GDP

  • GATT slow to recognise this - services notoriously hard to quantify


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  • However de-industrialisation in the 1960s and 1970s has left the US the most indebted nation in the world

  • As of 1993 - the US recorded international trade surpluses from the aerospace and audiovisual industries - and nowhere else.


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Uruguay Round

  • Hence - September 1986 Punta del Este Declaration placed Trade in Services (TIS) at centre of GATT debates.

  • Driven by US pressure (in turn influenced by American Express, Citibank and IBM lobbyists)

  • TIS included: film, TV and broadcast advertising production and distribution


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Uruguay Round

  • “Cinema used to be side salad in world commerce - now it’s the beef.”

  • Daniel Toscan du Plantier - President of French Govt. Film Marketing Body


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Uruguay Round

  • US objected to the the following barriers to trade in audiovisual products:

  • Local media content quotas

  • Restrictions on foreign ownership of the press

  • Subsidies to screen industries

  • Subvention and diplomacy designed to assist a/v industries in exporting their product


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Uruguay Round

  • The US makes these objections in the following context:

  • The US government endorses trust-like behaviour overseas whilst prohibiting it domestically.

  • The US government has a long history of aiding its own film industry through:

  • tax-credit schemes,

  • film commission assistance,

  • State and Commerce Department Representation,

  • The Informational Media Guaranty Programme


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Uruguay Round

  • What’s more the Justice Department is authorised to classify all imported films which it can ban as “political propaganda”.


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Uruguay Round

  • EU A/V Deficit 1992 - 1996 (in $000,000s)

  • 199219931996

  • 337537205600

  • To put this in context: in 1992 the EU imported $3.7bn in a/v material from the US whilst the US imported just over $300m (less than 10% of exports to EU) of Euro a/v material.


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Uruguay Round

  • Despite the inclusion of TIS in the UR, the major focus from 1986-93 was on reducing agricultural export subsidies (e.g. the EU’s CAP).

  • Deadline for agreement December 15 1993. Farm issue settled December 7.

  • Suddenly replaced by dispute over a/v industries.


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Uruguay Round

  • Mickey KantorJack Lang

  • US Trade RepresentativeFrench Minister for at GATT talksCulture


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Uruguay Round

  • From the outset of the UR US attempts to remove support for a/v industries almost universally opposed, esp. by India, Canada, Japan, Australia, Europe and the Third World - in the name of cultural sovereignty.

  • In the last week, however, the dispute became the US versus EU (and mainly France)


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Uruguay Round

  • US Position - Sought end to all EU subsidies and quotas arguing from the precepts of neoclassical economics for untrammelled play of comparative advantage inside laws of supply and demand.

  • French position - cultural products are public as well as private goods with a historical and national significance which couldn’t be captured within economic formulas


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  • “Culture is synonymous

  • with the soul of a nation

  • and the memory of its

  • people, not a good to be

  • bought and sold.”

  • Francois Mitterrand


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Uruguay Round

  • Reason for prolongation of dispute - use of differing premises:

  • US - justified monopolistic competition on the grounds of the sovereign consumer

  • French - justified state support on the ground of the sovereign citizen

  • The consumer was a fully formed subject making a rational choice in favour of entertainment and distraction the citizen was an insufficiently knowing subject in need of education in civics


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Uruguay Round

  • In Ireland concern expressed that the US, if successful, would demand end of:

  • Eurimages

  • Irish Film Board

  • “TV Without Frontiers”directive


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Uruguay Round

  • French and US dig in their heels.

  • Dec 12 - US accepts continuation of state subvention of cultural production in Europe (and elsewhere) but pushed issue of levies on cinema/video tickets/rentals.


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Uruguay Round

  • Specifics:

  • French subsidy system levied an 11% tax on cinema tickets - used to fund some 150 films per annum

  • Mickey Kantor pointed out that the majority of tickets sold in France were for US films


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Uruguay Round

  • Therefore Jurassic Park subsidising Germinal. US sought access to subsidies for US producers


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Uruguay Round

  • 3 am December 14 1993

  • US still seeking:

  • EU free to continue reserving 51% of local TV programming for European production but thus should apply to 24 hour day as a whole (e.g. France was entirely banning US material from primetime)

  • For satellite, cable (new techs) - Us willing to allow EU to reserve 50-70% of all channels but opposed application of EU “must carry” 51% Euro content rules to every channel (potential source of difficulty for Comedy Channel, Nickelodeon, Discovery - indeed Sky)


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Uruguay Round

  • US artists/producers entitled to fair share of levies raised from blank audio and video tapes but would commit to investing the funds raised in Europe. Film and television industries

  • Pay-per-view and video-on-demand channels should not be restricted since consumers could make a free choice to watch one film rather than another and pay for that choice.


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Uruguay Round

  • EU offered:

  • Standstill on existing legislation

  • No more than 51% of programming would be reserved

  • Commitment to begin negotiations on how the a/v sector should be handled multilaterally

  • SO WHAT HAPPENS?


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Final Outcome - an agreement to disagree.

  • Mickey Kantor:

  • Rather than accepting that EU proposal which “would have enshrined the principle of limiting viewer’s rights to see what they wish…and recognised a system which denies artists and producers the right to funds they have legally earned through royalties” Kantor rejected any deal.


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Final Outcome - an agreement to disagree.

  • “We can best advance the interests of our artists, performers and producers - and the free flow of information around the world - be reserving all our legal rights to respond to policies that discriminate in these areas.”

  • Mickey Kantor Dec 15 1993


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Final Outcome - an agreement to disagree.

  • “A great and fine victory for French and European culture…We got what we wanted from the start, which is basically the cultural exception.”

  • Alain Carignon,

  • French Communications Minister


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Who won the Uruguay round?

  • Everybody a winner? Success by contrast might add $270 billion to world income by 2002 (GATT, OECD & World Bank estimates).

  • Much of the discussion re: the Uruguay round stressed the dire consequences of failure.

  • Arguably “the only clear winners from the freeing of world trade under GATT rules may be those 500 or so companies which control two-thirds of that trade.”

  • Barrie Axford, The Global System


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Who won the Uruguay round?

  • Uruguay round brought economic imperatives and cultural institutions head-to-head.

  • Under UR - any rule of institution that might hinder another nation’s goods or services from entering freely will be counted as a tariff. Such tariffs must be reduced.


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Who won the Uruguay round?

  • However in some cases these hindrances are not rules but ways of life or means of supporting cultural diversity:

  • Hence French defence of film subsidies but also…

  • US negotiators considered as restraint of trade the Japanese practice - hokoosha tengoku - of encouraging small shops in pedestrian streets since it interfered with thew prospects of US traders for establishing large out-of-town shopping facilities in Japan.


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Who won the Uruguay round?

  • French claim victory over a/v negotiations

  • Yet despite the absence of any specific commitments on a/v industry, the sector was still included within the general framework of the Uruguay Round of trade negotiations under GATT (specifically the GATS - General Agreement on Trade in Services).

  • Thus it would be subject to the rules laid down for international trade generally, particularly in connection with transparence and settlement of trade conflicts at GATT level.


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Who won the Uruguay round?

  • Also meant that the a/v industry would come under the dispute resolution mechanisms of the WTO

  • WTO designed as successor to GATT - responsible for ensuring growth and liberalisation of world trade, policing observance of Uruguay Round rules and settling trade conflicts


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GATT is dead, Long live WTO

  • Actually GATT rules still form basis of WTO’s operations.

  • WTO:

  • Secretariat (of 500 people) based in Geneva. Main functions to supply technical support to WTO’s various councils, committees and ministerial conferences.


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WTO Structure

Ministerial Conference

General Council

Goods CouncilServices Council Intellectual Property Council


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WTO operation

  • Ministerial Council meets every two years. Sets general aims of WTO.

  • Council membership made up of 130 countries, representing 90%+ of world trade


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WTO and media/communications

  • WTO treats these industries in the context of the GATS

  • The GATS formally consists of:

  • 29 articles, 8 annexes, and 130 schedules of commitments (each WTO Member must submit a schedule) on specific services or service sectors.

  • The articles of the GATS lay out the scope of the Agreement and the general obligations and disciplines to be observed.


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WTO and media/communications

  • The GATS formally consists of:

  • They also define the specific commitments to be inscribed in schedules and how to go about negotiating them.

  • Finally, there are provisions for dispute settlement and the establishment of the Council for Trade in Services.


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WTO and media/communications

  • GATS principles:

  • Covers all services

  • MFN

  • National treatment only applies where specific commitments are made


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Definition of Services

  • Ways of providing international services defined as:

  • Services supplied from one country to another (e.g. telecoms)

  • Consumers/firms making use of service in another country (e.g. tourism)

  • Foreign company setting up subsidiary in another country

  • Individuals travelling from home to supply services in another country


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What has WTO done for us?

  • A/V services not directly subject to any WTO negotiations - yet.

  • Telecoms - however…:

  • Feb 1997 - Basic Telecoms Agreement


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Basic Telecoms Agreement

  • GATT sees US push (unsuccessfully) for inclusion of provision on liberalising network access.

  • Issue pursues through GATT.


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Basic Telecoms Agreement

  • Origins of the negotiations

  • Marrakesh Ministerial Meeting closed the Uruguay Round in April 1994. Meeting extends negotiations on trade in basic telecommunications beyond the Uruguay Round.


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Basic Telecoms Agreement

  • Negotiations begin May 1994, (with 33 WTO Member govts), under the auspices of the Negotiating Group on Basic Telecommunications (NGBT). Negotiations to conclude by 30 April 1996.

  • Actually takes until 1998 to implement the final agreement


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Defining basic telecommunications

  • Examples of the services under negotiation were voice telephony, data transmission, telex, telegraph, facsimile, private leased circuit services (i.e. the sale or lease of transmission capacity), fixed and mobile satellite systems and services, cellular telephony, mobile data services, paging, and personal communications systems.


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Basic Telecoms Agreement

  • Overview

  • The February 1997 deadline for the negotiations on basic telecoms resulted in the tabling of 55 offers, covering 69 governments (counting individually the EU Member States)


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Basic Telecoms Agreement

  • Only the schedules themselves provide authoritative and complete information on the telecoms services included, the scope of the commitments, and the degree (i.e. full or partial) of market access permitted.

  • BUT...


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Basic Telecoms Agreement

  • - On voice telephone service, 63 govts committed to competitive supply (permitting two or more suppliers).

  • These commitments permit competition the supply of public voice services, (either immediate or phased-in)on local service, domestic long distance, and international service and resale of public voice telephone

  • In total 70% of the 62 governments were permitting a degree of competition in public voice service.


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Basic Telecoms Agreement

  • Commitments on other services:

  • 65 govts - data transmission services;

  • 62 govts - access to cellular/ mobile telephone markets

  • 56 govts - competition in leased circuit services (the supply of transmission capacity)

  • 62 govts - mobile services (PCS, mobile data or paging).

  • 53 govts - mobile satellite services/transport capacity

  • 52 govts - fixed satellite services/transport capacity.

  • 10 govts - value-added telecoms services (e.g. e-mail, on-line data processing or data base retrieval).


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