Hollywood entertainment firms that stand to gain entry into new Latin American markets are lobbying hard for passage of the Central American Free Trade Agreement now pending before the House of Representatives.

“This is a region of the hemisphere that is not currently much of a market. It’s largely pirated without the rule of law and strong copyright protections,” said Elizabeth Frazee, secretariat of the Entertainment Industry Coalition for Free Trade.

The coalition includes movie and television studios, broadcast and cable networks, record producers and entertainment industry unions. Several studio executives have made the rounds on Capitol Hill as Cafta is being debated in the House, according to Gayle Osterberg, spokeswoman for the Motion Picture Association of America.

Cafta would remove tariffs and import quotas on an estimated $33 billion in goods traded between the U.S. and six Central American nations Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. (Mexico is a signatory of the North American Free Trade Agreement.)

“If it passes, this agreement will be a plus for the L.A. economy,” said Sebastian Edwards, professor of economics at UCLA’s Anderson School of Management. Not only will the entertainment industry benefit from tighter intellectual property safeguards, he said, but the agreement could spawn enterprises among Central Americans living in the L.A. area.

“We could see new businesses created through these already existing networks,” Edwards said.

The controversial trade pact is supported by President Bush; it passed the Senate on a 54-45 vote on June 30, receiving unexpected support from Sen. Dianne Feinstein, D-Calif., who had opposed the Nafta 11 years ago on grounds that it would eliminate U.S. jobs and hurt the environment. But prior to her Cafta vote, she said this pact would open up new markets for California exports, including agriculture, entertainment and information technology.

The House is expected to take up Cafta this month. The vote is likely to be close, with all but a handful of Democrats voting against it.

Opponents of the accord including many unions, U.S. sugar producers and some garment makers say that U.S. jobs would be outsourced to lower-wage workers and U.S. agricultural producers would be decimated. House Democrats opposed to the agreement said it contains no enforcement mechanism to reduce sweatshop labor conditions in many of the countries.

Entertainment impact


While the national argument has focused on agriculture and apparel, the biggest local impact is likely to be felt in the entertainment industry.

Studios, television production giants and record labels would all see tariffs of up to 20 percent on sales to the six Central American nations eliminated.

The agreement also requires that Central American governments step up enforcement against film, broadcast and music piracy.

Frazee said that the combination of high tariffs and little copyright enforcement in many Latin American countries has severely hampered the ability of entertainment companies to penetrate this market at a time when Latin-themed entertainment is undergoing an explosion in this country.

There is no guarantee that Cafta will increase enforcement of entertainment piracy. Critics cite repeated pledges by officials in other countries especially China to crack down on piracy, which has only grown.

But the trade agreement could also be an opportunity for local companies such as Sherman Oaks-based GoTV Networks. The creator and distributor of content for cell phones has focused on the Hispanic market and sees passage of Cafta as an opportunity to expand into a market with 44 million consumers, said Elizabeth Brooks, GoTV’s senior vice president of marketing. “These are developing markets; simply opening them up to foreign investment is a great help to us,” she said.

Much of the focus up to now has been the effect on the garment and textile industries. Cafta would lift U.S. tariffs on the import of basic garments and fabrics from Central America, which has stirred intense opposition from U.S. garment makers who fear their prices will be undercut.

In L.A., virtually all manufacturers import basic garments and then put designer touches on them before selling them to retailers. Over the last 10 to 15 years, almost all production of these basic garments has been outsourced to China, where labor is much cheaper.

International trade consultant Robert Krieger said many of his garment-maker clients are looking to Cafta to see if it broadens the amount of duty-free products either imported from or exported to Central America.

“We have clients that source in both Central America and China. What they are most concerned with is on-time delivery and quality of products and certain price points,” said Krieger, who is president of Krieger Worldwide, based in Rancho Dominguez. “Cafta can only help this effort.”