Why We Need to Watch with Care the Cultural Diversity Debate at Trade Talks

OECD is compiling trade restrictions of all member countries in the services trade and will give each country a trade restrictiveness score (Services in Trade Restrictiveness Index or STRI). The obvious goal of this project, led by the U.S. is to put “peer pressure” on trade-restricting countries, a pressure to liberalize. Europe does not like this effort as far as it includes the audio-visual services industry which the member countries protect with various forms of broadcasting quota and other domestic-only subsidies. The US-EU fight on this issue is rountinely witnessed in trade talks. However, all internet companies and users need to watch with care this free trade vs. cultural diversity debate because the Internet may become the innocent victim of the trade war.

[This legendary US-EU altercation originates from as far back as 1995 Uruguay Round where the U.S.’s effort to create a single-rule regime like GATT and Europe’s demand for a ‘cultural exception’ were not reconciled and resulted in a very inefficient so-called ‘voluntary’ system whereby all countries open up services market only the extent that they want: GATS.]

That possibility became menacing, for instance, at an OECD experts meeting, April 2011, Paris.

What was not interesting, was that the US reps argued for more liberalization while EU reps pleaded against it with the usual data on how the U.S. cultural products dominate European domestic markets.

What was interesting, there was an issue that these two opponents in a trade-vs-culture dispute passionately agreed on: the need to control piracy and therefore the Internet. French artists angrily argue that piracy on the Internet kills cultural diversity by depriving them of the fruits of their creation. Motion Picture Association of America, spearheading the efforts to make it easier to enter other countries’ markets, of course, is asking for more stringent copyright enforcement such as Three Strikes and monitoring obligations. The ‘mutual enemies’ in a culture-vs-trade dispute, were now all joining their voices in condemning the internet companies’ or the countries’ failure to combat copyright piracy.

As the two duelists were singing the same song, the harmony became so ridiculous to a point where MPAA rep proposed to list the lack of copyright enforcement a trade barrier! The idea is that it is difficult for MPAA to enter into a market where copyright is not enforced, and therefore copyright enforcement is a barrier to foreign companies. Now, this is a huge departure from the usual meaning of a trade barrier, which normally means too much regulations. Here too little regulation is also a trade barrier. With that sleight of hand, now the countries all the world faced the risk of being listed as a trade-restrictive country unless they adopt 3-strikes and stronger intermediary liability regime.

There I argued as follows: Once lack of copyright enforcement is deemed a trade barrier, more stringent copyright enforcement measure will be considered a ‘trade liberalization.’ However, if a country adopts one of the copyright regulations such as 3-strikes and monitoring obligations on intermediaries, it will become only more difficult for foreign internet companies to enter that country’s market and it will make it difficult foreign users to connect with domestic users.

An example will be Korea where mandatory user identification was adopted to facilitate stamping out ‘illegal content’ from the internet. Foreign internet companies, having no means to comply with the identification requirement, and therefore could not enter the Korean market, unless they do what Google heroically did in 2010, and foreign users having no means to comply, could not use Korean portals.

If we accept MPAA’s argument that lack of copyright enforcement and lack of internet control is a trade barrier, a trade liberalization in one sector (film) becomes a trade barrier in another sector (internet), which beats the whole purpose of listing trade barriers set up by each country and giving each a score.

Upon this rebuttal, the 30 or so countries’ representatives came to their senses and decided not to include piracy as a trade barrier, but only at that meeting. I suspect that many other meetings are dressed as and start out as trade-vs-culture debates and end up turning into the internet bashing. We should watch with care.