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

FTAC Position Paper



JUNE 2008

The outsourcing of American film and television production for the domestic market is having a severe economic, social and cultural impact on our country.

American film workers and small businesses have become collateral damage in a trade war declared on the United States by its treaty partners.  When our movies and television shows are made in foreign countries not only are jobs lost, but Social Security, pension and health plan contributions are not made, taxes are not paid and the profits from the domestic and foreign sales of these entertainment products are not reinvested in our local and national economies.  Outsourced production also contributes to our dangerously ballooning trade deficit and the devaluation of our dollar against other currencies.  It harms literally every single American citizen in many very real ways.

Repeated studies have shown that this outsourcing of the physical production of America’s largest export is overwhelmingly driven by one factor:  Substantial subsidies offered by foreign governments to production originating in other countries, as opposed to their own.  Subsection 125.5 of Canada’s Income Tax Act makes this distinction quite clear, saying “This program is designed to encourage the production of film and video productions in Canada without regard to Canadian content and ownership.  Its goal is economic, that is, to attract foreign productions to Canada and to employ Canadian residents.” As a result, American workers suffer wholesale discrimination as American employers agree to deliberately exclude them and hire foreign citizens instead in order to qualify for these incentives.

While Canada remains the prime offender because of its generosity and its proximity to the United States, many other countries have followed suit, introducing subsidy programs based on the Canadian model.  In response to this increased competition for American production, Canada’s federal and provincial governments have raised their subsidy payments repeatedly since their inception.  Here in the United States many states have joined a stampede to create their own incentive programs, redistributing the production which mostly would have stayed at home in America anyway and unfortunately distracting attention away from the ongoing exodus of studio films to Canada and its imitators.

Meanwhile, the studios are the only real winners.  Always profitable, they are now able to produce their product at artificially discounted rates for goods and services both at home and abroad.  They have successfully conditioned politicians to give them what they want, with governments around the world and all across our country vying to see who can give them the most of their taxpayers' money in what is clearly economic extortion.

The simplest solution to this escalating insanity is to restore fair trade by removing the foreign subsidies.  This can be accomplished easily and at no additional expense to taxpayers merely by enforcing the United States’ existing trade agreements.

While the World Trade Organization (WTO) does allow its member countries to use internal subsidies, it very specifically prohibits programs such as Canada’s, which are intentionally designed to reach across international borders in order to relocate industries from one country to another.  Article 5 of the World Trade Organization Agreement on Subsidies and Countervailing Measures stipulates “that no member should cause, through the use of subsidies, adverse effects to the interests of other signatories, i.e. injury to domestic industry of another signatory . . . . In the event that it is determined that such adverse effects exist, the subsidizing member must withdraw the subsidy or remove the adverse effects.” The WTO also absolutely prohibits retaliation in any form, and because it has enforcement powers its rulings are binding.

The United States already has a mechanism which protects its trading rights around the world under agreements such as the WTO.  Section 301 of the Trade Act of 1974 provides relief from unfair and illegal foreign trade practices to both corporations and groups of workers, and is routinely used by all kinds of American businesses and industries.  It is currently being aggressively used by the Motion Picture Association of America to fight film piracy overseas.

While America is historically a country of entrepreneurs, we do not tolerate the use of illegal and immoral means to make money.  Nevertheless, every day our movie and TV screens are filled with products made with stolen labor.  No one is saying our studios should not be profitable, but it is wrong for them to discriminate against American citizens by utilizing illegal foreign subsidy programs specifically designed to steal American jobs in order to augment their legitimate profits.

The Film and Television Action Committee (FTAC) originally coalesced around efforts to create an incentive plan for film production in California in 1999, but as we studied the issue in depth our focus changed.  We quickly learned that outsourced production is a national problem, and that incentives are not the best solution for a number of reasons:

1. Incentives relocate jobs and industries; they do not create them.  What one place appears to gain another place actually loses.

2. Incentives exist at the whims of politicians and may be changed, removed or listed in the budget but “not funded,” depending on who is in power at a given time. 

3. Not all states and cities have the political will or the financial resources to give incentives, and none can match the largesse of foreign federal governments.

4. Incentives ultimately serve only to fuel ever-escalating subsidy wars between competing jurisdictions.  The creation of incentive plans by a few states originally in response to unfair foreign competition has now spawned rapidly proliferating and constantly increasing domestic incentives all around the U.S., starting a new war between the states.

5.Incentives are not a permanent solution because they can always be matched or trumped by a competitor with a bigger treasury, leading to bidding wars such as we are currently experiencing, which benefit only the recipients and no one else.

We are film and television industry artists, technicians, workers and small business owners.  We are suffering, and the communities across the United States where we live and used to be employed are suffering as a result of outsourced production.  We believe any solution to the problem of outsourced production must include a Section 301 investigation of foreign subsidy programs to determine whether or not they are consistent with our trade agreements.  If they are not, the means already exists to have them removed.  It’s literally that simple.  All we ask is to be able to compete on a truly level playing field. 

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