-VFX Outsourcing
Regional Victories:
- Glendale
- West Hollywood
- Burbank

Using Trade Pacts to Stem Loss
of TV and Film Jobs to Canada
August 5, 2004

LOS ANGELES, Aug. 4 - Out-of-work film technicians - those actors, prop men and other entertainment industry workers whose names unfurl on the screen as moviegoers scramble out of the theater - are rallying behind international trade rules to stem the flow of film and television production to Canada.

With the Teamsters leading the fight, the Film and Television Action Committee, a grass-roots organization started by an unemployed production designer in 1998 specifically to fight "runaway production," has sent 20 pages of comments to the new Unfair Trade Practices Task Force of the Commerce Department and demanded that the Bush administration take action against Canadian film subsidy programs, which have lured United States filmmakers north of the border and siphoned tens of thousands of jobs out of the country.

Using $100,000 donated by Teamsters locals, the action committee hired Stewart & Stewart, a leading Washington law firm specializing in international trade issues. A former assistant secretary of commerce under President George H. W. Bush, Alan M. Dunn, now a partner in the firm, drafted a 20-page filing asserting that the subsidy programs violate obligations made to the United States under the World Trade Organization agreement on government subsidies.

The Commerce Department task force, created in May, tries to identify unfair trade practices and alleviate them before a formal petition is filed with the Commerce Department.

Australia is named in the action committee's filing, but the main target is Canada, where tax credits, which can climb to nearly 50 percent of the labor costs of a production, have persuaded United States studios to shoot films like the Oscar-winning "Chicago" in Toronto and to go to Montreal to make "Rudy!," a television movie about Rudolph W. Giuliani, the former New York mayor. 

According to the 2002-3 activity report of the Canadian Audio-Visual Certification Office, 95 percent of productions qualifying for certification for tax credits have copyright holders originating in the United States.

"These Canadian content subsidies were to stimulate the indigenous Canadian film business," Brent Swift, founder of the action committee, said. In 1999 Mr. Swift, a member of the Hollywood Art Directors Guild, formed the action committee after seeing a correlation between steep industry layoffs and the start of the Canadian subsidy programs.

"Immediately it was apparent they were enticing foreign companies, who create shell companies to generate a Canadian product that magically becomes an American product when it crosses the border," Mr. Swift said.

This is exactly the point made by supporters of the subsidies. They contend that the real windfall comes from distribution rights to these productions made outside the United States, and those are ultimately reassigned to United States distribution entities.

"Are we really concerned where something is made or where the money comes home to?" asked Marla Ginsburg, president of Waterwalk Productions, a Los Angeles-based television production company. In the 1990's she was an executive producer of "Highlander" under Canadian content subsidies and shot this French-Canadian series in Vancouver, Toronto and Paris. It was distributed internationally by a United States company, Rysher Entertainment.

For a long time the action committee was a fringe organization, viewed askance by groups like the Directors Guild of America and the Motion Picture Association of America, which lobbies in Washington for Hollywood studios.

"We've been called everything from crazy to Communists," Mr. Swift said.

But the tide has begun to shift. The International Cinematographers Guild, one of the largest and most influential entertainment industry unions, recently reversed its stance and sent a letter to the Commerce Department commending it for its willingness to look into runaway production.

The Motion Picture Association, however, says this is not the arena in which to argue the issue.

"There are over 30 states in the U.S. that have film incentives themselves, so if you declare Canadian film subsidies illegal, then by extension American film subsidies are illegal," said Bonnie Richardson, the association's vice president for trade and federal affairs.

Nevertheless, Mr. Swift said he hoped that with the cinematographers on board, other industry alliances would follow and would be as financially helpful as the Teamsters. His action committee is working with people in several unions, including the Screen Actors Guild, to get them to join the fight. The soundmen recently donated money, and the plasterers voted to pay extra dues earmarked for the fight.

"Everything we're getting is coming from the ground floor up," Mr. Swift said, and will go toward the next costly legal go-round: a petition under United States trade laws alleging that the Canadian subsidies violate existing accords like the North American Free Trade Agreement and the General Agreement on Tariffs and Trade.

"It's a big undertaking," Mr. Dunn said of the committee's effort. He was the lead United States negotiator with Mexico and Canada on subsidies and antidumping rules leading up to the Nafta signing in 1992. He added, "You're trying to convince a lot of parts of the U.S. government to review these issues, and then if Canada disagrees, you've got to go before a W.T.O. dispute settlement panel."

In a separate case, Joel Joseph, a Bethesda, Md., litigator, sent a letter to the minister for Canadian heritage on June 15 notifying her of his intent to file a Nafta claim on behalf of a small New York-based animation production company, Contractual Obligation Productions. Mr. Joseph contends that his client was forced off an animated series it created for the cable television channel AMC because the United States citizenship of the company's partners kept AMC from receiving Canadian subsidy money. He said the subsidies led to expropriation of the property.

A spokeswoman for AMC said the allegations were without merit. Jenny Chen, a spokeswoman for International Trade Canada, said: "Canada offers a favorable exchange rate, lower costs for many goods and services, as well as access to highly skilled crews and excellent locations. The purpose of the tax credit in question is to encourage the use of Canadian labor in these sectors. This is entirely consistent with Canada's international trade obligations."

Groups like the Motion Picture Association, the American Film Marketing Association and the Directors Guild of America have maintained that tinkering with Canadian subsidies will backfire and lead to a further loss of jobs or even trade wars. Instead, they have lobbied legislators for a national film incentive in the United States that would make it advantageous for studios and production companies to shoot at home.

"We export far more to Canada than we import from them," Ms. Richardson said. "Unilateral approaches to trade policy are definitely not a good idea, especially in this sector."

Both sides agree that the American economy would be bolstered by the over $10 billion a year it loses to runaway production, not only from direct production spending but also from related services and tax revenue.

"Outsourcing is a very short term goal," Mr. Swift said. "You pay someone in China to make something that sells for
25 cents when you bring it back here, and pretty soon people don't have the 25 cents to buy it."


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