Frustrated by the unwillingness of Sacramento and Washington to slow runaway film production, a group of disaffected Hollywood workers is petitioning the U.S. Commerce Department to sanction Canada for unfair trade practices stemming from its use of government subsidies and tax rebates.
The move marks a major change in strategy for the 3,500-member Film and Television Action Committee (FTAC), which is seeking a "countervailing duty" investigation in its petition to the International Trade Commission. FTAC wants to reverse what it claims are illegal enticements by Canada under the North American Free Trade Agreement and other laws.
If the commission and the Commerce Department agree with the FTAC, "countervailing" (offsetting) tariffs could be imposed against Canadian productions that would cancel out the economic benefits of film and television work shot in what has become known in recent years as Hollywood North.
Canada is by no means the only country offering government subsidies for film production, but it represents the biggest threat to U.S. workers, said FTAC Chairman Brent Swift, an independent production designer.
"I don't think rebates are going to happen in Washington, and I know there is going to be nothing happening (in Sacramento)," Swift said. "Legislators are closing their eyes to the fact that this is a multibillion-dollar industry that supports several states and the federal government itself."
To push its cause, the FTAC has enlisted the backing of local trade unions and is now seeking the support of the 100,000-member Screen Actors Guild, which appears to be receptive. Lance Simmens, SAG's national director for government relations, said the guild's legislative committee has heard from FTAC and will brief SAG's board on the issue as soon as possible. A vote on whether to endorse the petition, which would provide a huge boost to FTAC's cause, could come next month.
"My guess is the presentation was favorably received. There's a new sense of urgency to look at any potential trade abuses by Canada," Simmens said. "But we want to take a very methodical look at this before presenting it to our members."
Simmens said that meetings on runaway production he attended last month in Washington convinced him that there is growing support for countervailing (offsetting) duties. "Both among Democrats and Republicans, both in the White House and on the Hill, there was more interest than I had anticipated in looking at the trade angle," he said.
Government efforts aimed at stemming runaway production such as Film California First, the three-year, $45-million program to keep production in California by offering reimbursements for filming on public land are nothing but a "Band-Aid," according to Swift. Such efforts are a bit helpful but woefully inadequate to address the thousands of jobs that have been lost to Canada in recent years.
On the federal level, legislation introduced by Rep. Xavier Becerra, D-Los Angeles, that would provide tax rebates for some productions has been temporarily shelved, perhaps to reappear later this legislative session.
Swift and others say that Canadian incentives are "blatantly illegal. But the change in tack for the group is not without risks. A recent Commerce Department study confirmed what many in Los Angeles have known for years the foreign production drain costs the U.S. economy billions of dollars a year and has impacted the livelihoods of thousands of local workers. But the report also concluded that trade sanctions would be unwarranted.
And, unlike during their earlier push for subsidies, the workers can't expect support from the Hollywood studios, which have been pleased with the savings they're reaping by shifting productions to Vancouver, Toronto, Montreal and other Canadian locales.
And then there's the Bush administration, which, despite Simmens' claims of White House receptivity to the tariff idea, has espoused a hands-off philosophy when it comes to free trade.
"It's very easy to understand the frustration of people who can't make a mortgage payment because they can't get a job, but this (petition to get tariffs imposed against Canadian productions) is politically naive," said one congressional source who spoke on condition of anonymity. "This is a free-trade administration. The chance of even the most minute movement with this tactic is practically nothing."
Rather than pushing for tariffs, Mark Rosenthal, president and COO of Raleigh Enterprises, which owns production facilities in Hollywood and Manhattan Beach, said the best way to stop the Canadian migration is to show that Hollywood is the best place to do business both a creatively and financially. "The industry has to pull together and show why (producers) are better off here. We have to work with what we have, which is a great talent pool and facilities in L.A.," Rosenthal said.
That may be so, but it's not enough to compete with the tax and labor credits provided by each of Canada's 10 provinces, as well as an 11 percent tax break offered to foreign producers by the Canadian government, proponents of sanctions assert.
Joel Joseph, general counsel for the Washington, D.C.-based Made in the USA Foundation, an organization which will lead FTAC's legal charge for sanctions, said that Canada has been abusing NAFTA and the General Agreement on Tariffs and Trade, simply because no one has held it accountable. Funded by unions and individuals, Made in the USA has represented workers' interests in a number of international trade disputes.
"If anything symbolizes America, it's the American film industry," Joseph said. "Countervailing tariffs are the remedy, but we would be willing to negotiate."
Once its petition is filed, FTAC can expect to wait between 200 and 300 days for a determination from the Commerce Department about whether illegal subsidies are occurring. Even with an affirmative finding, negotiations could stretch on for years before tariffs were introduced.
Without dismissing the possibility of tariffs, Becerra said that U.S. tax credits remain the best bet for slowing the migration of productions to Canada and other countries.
"If we could have the muscle and capability of waging this war on two fronts, I'd love it," Becerra said. "But if you think legislation is a slow process, try to work your way through the international trade arena."
Swift agreed with Joseph that a negotiated settlement would be preferable to a protracted trade war. But negotiations would only be fruitful if they were supported by the weight of potential U.S. sanctions, he said.
"The main point is to kill the (Canadian) subsidies, that would even the playing field," Swift said. "Then we don't need the tariff."
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