France Shoots Itself In Foot

Economic rationality has never stopped the French government from shooting the country, in the foot

By Wolf Richter   

On Friday, France vetoed the launch of free-trade negotiations between the EU and the US, though France has been racking up a trade surplus with the US and has much to lose if the US retaliates. The problem: cultural protectionism. It wanted “protection of cultural services and a clear and explicit exclusion of the audio-visual sector,” whined Foreign Trade Minister Nicole Bricq at a Friday meeting of the EU trade ministers. Catch phrases for American movies and TV shows!

Her speech and the veto were hushed up in Europe, and I couldn’t find any reference to it in the major media outlets. But an unnamed “EU diplomat” leaked the text of her speech to the Chinese media group Xinhua, which wasn’t shy about spreading the word.

It was the day that the European Council was supposed to approve a mandate to start haggling over the Transatlantic Trade and Investment Partnership (TTIP) with the US. All along, France had vociferously threatened to shut down the process before it even got started unless the European Commission included in advance a non-negotiable, iron-clad “cultural exception” to protect the French market from a tsunami of evils, namely American movies – a theme that goes back two decades.

France concocted this “cultural exception” under socialist President François Mitterrand and, with the support of a handful of other countries, forced it on the 1992-93 negotiations of the General Agreement on Tariffs and Trade (GATT), the so-called Uruguay Round – under the pretense that applying GATT principles to movies and other audiovisual products “would undermine their cultural specificity (and unique status), in favour of their commercial aspects.”

Since then, the concept of “cultural exception” has become, according to UNESCO, a “tacit understanding,” without legal value, “that culture is not like any other merchandise because it goes beyond the commercial....” Sounds good. It was propagated by conservative Jacques Chirac when he ascended to the French presidential throne in 1995 and has now become part of the DNA of France’s political class.

It permitted France not only to subsidize its film industry with taxpayer money but also to impose quotas on theaters and TV channels as to the percentage of time that French productions must be shown, even if they’re lousy, and even if no one comes to see them. With the quotas, the government tried to limit access to American movies. On the basis that the State knows best what the people need to watch.

So in France, about 50% of the admissions were to American movies, while in other European countries that ratio was closer to 90%. Based on my own boots-on-the-ground impressions from when I was living in Paris in 1996/97: American movies were packed and often sold out, though Bruce Willis disturbingly spoke impeccable French with a funny voice, and the movements of his mouth never quite matched his actual French words.

But many of the French films I saw – and I’m a fan of French films – had lots of empty seats, and some of the films were walk-out bad, didn’t deserve being shown, and few people were stupid enough to buy tickets for them, but they were shown nevertheless because they’d been produced with loads of taxpayer money and were forced upon theaters through the quota system. I’m not sure what the quota system actually accomplished; French movie goers are very savvy and know how to make up their minds about what they like and what they scorn – regardless of what their government says.

That worries the government. It prefers to dictate what people should spend their money on. It wants its subjects to watch French films, not that American cultural pollution that seeps across the porous border. Hence the unlikely survival of the Exception Française.

The French audio-visual sector, lagging years behind, might not survive as US companies would introduce “technological revolutions” that their French counterparts might not be able to adapt, said Trade Minister Bricq in her speech. “Sixty percent of European screens are occupied by American movies, while European films are occupying between three and six percent of the American market,” she lamented – as if that were part of an evil plot rather than a choice by savvy movie goers.

An embarrassing internal setback for the EU. And an economic setback. The US and the EU combined make up about half of the world economy. Experts have pegged the economic benefits of a free-trade agreement at $157 billion for the EU and at a smaller $125 billion for the US. France’s veto widened the rift across the EU that had already been deepened by the trade sanctions on Chinese solar panels [here is my take on that debacle... Germany Fires Salvo In Sino-European Trade War ... At Brussels].

The US has threatened to retaliate if “special French exemptions” made it into the negotiations, which could be painful for France, given the trade surplus France has with the US. But economic rationality has never stopped the French government from shooting itself, or rather the country, in the foot.

In the US, new dynamics have surfaced. Much like scandal-ravaged Presidents Nixon and Clinton, who triangulated in favor of legislation considered vital by their opponents, President Obama is now likely to support conservative legislation that would reform corporate income tax and spur a renaissance in manufacturing. Read.... “Made In America” Renaissance Begins.