Could French flicks derail a US-EU free trade pact?

The US and Europe hold deeply differing attitudes on things such as data privacy or genetically modified foods that have long caused trade disagreement. But the two are attempting to put those aside to forge the Transatlantic Trade and Investment Partnership (TTIP), which would be the largest free trade deal in the world.

Nonetheless, one obstacle to the trade deal might turn out to be insurmountable: the French fight to preserve their cultural identity.

Both US President Barack Obama, scheduled to travel to Europe next week for the G8 in Northern Ireland, and the European Commission have voiced strong support for an all-inclusive trade deal that they say will boost growth and create jobs at a time when they are desperately needed.  But the French want to invoke the “exception culturelle,” or cultural exception, to keep movies and digital media off the negotiating table as a way to safeguard their own film production from the hegemony of Hollywood.

For formal talks to begin – which could be announced as early as next week – both sides must to agree to the terms first. Trade ministers of the EU are in Luxembourg today trying to unify their position, but the French have said they won’t agree if audiovisual and media are not excluded. That could set the opening of talks back and generate a series of demands for exclusions from the US – which could ultimately water down the accord by limiting the most politically sensitive issues that can be “traded” to reach compromise.

“In the beginning, what is important is to have as much as possible on the table. Otherwise it limits the ability to have the [inevitable] horse trades,” says Jacob Kirkegaard, a senior researcher at the Peterson Institute for International Economics in Washington. “That immediately limits the scope of this deal quite dramatically.”

A 'game-changing' pact

The TTIP, which had been under discussion for over a year, was announced by President Obama in February during his state of the union address and embraced by EU officials. "A future deal between the world's two most important economic powers will be a game-changer, giving a strong boost to our economies on both sides of the Atlantic," said EU Commission President Jose Manuel Barroso in February.

Tariffs between the US and EU are already relatively low, but because of the sheer size of trade between the two – representing half of global economic output – advocates say it would be a major booster of growth and jobs, especially in debt-stricken Europe that has seen record high unemployment at 12.2 percent.

The two already invest nearly $4 trillion in each other’s economies, according to US statistics, which translates into 7 million jobs.

Polls have shown that Americans and Europeans both support increased trade between the two. But the French, with smaller countries joining their position, are digging in their heels on the question of culture, fearing an invasion of Hollywood that already dominates the world market.

Current EU rules allow specific governments to promote their own culture by setting subsidies and putting quotas on non-national and non-European output. France, for example, mandates that TV airs at least 40 percent of content produced at home. Another 20 percent comes from the EU. Then American hits can be considered.

This idea is “that certain categories can’t simply be commodified because they are part of culture,” says Philip Golub, a professor of international and comparative politics at the American University of Paris. “Culture is something broader and higher than the rest of the market. That argument, whether one agrees with it or not, … that’s a point of contention between the US and some of Europeans as far as this transatlantic trade agreement goes. The main sticking point is mass media and culture.”

'A red line'

Ahead of Friday’s talks, Culture Minister Aurelie Filippetti has been explaining France’s position, telling Reuters TV that France will “defend the cultural exception to the end – that's a red line.”

Meanwhile, Prime Minister Jean-Marc Ayrault told France’s parliament: "France will go as far as using its political veto. This is about our identity, it's our struggle."

Michel Hazanavicius, who won the Academy Award for best director in 2012 for "The Artist," wrote in the Financial Times that “Europe needs an 'exception culturelle'." 

“This is an important deal but I fear this could mark the moment when Europe enters a new era – one in which politics surrender to the market and sacrifice one of our continent’s most precious assets: its culture,” he wrote.

Trying to draw France to the table, officials have reportedly agreed to allow member states a say in the negotiations when it comes to audiovisual. “I think the commission’s stance on this, trying to convince France, is a clear message to the US that the EU really wants this to happen,” says Guillaume Xavier-Bender of the German Marshall Fund of the US in Brussels.

It’s a compromise also drawn in fear that if exclusions are placed at the outset, the US will place its own demands, limiting what can ultimately be agreed.

Both sides have an incentive to put aside differences and move forward, and not just because of jobs, but the political awards and the potential to set global standards for everything from cars to data privacy to chemicals.

“You can certainly see it as a way to cement the relationship in an era in which the NATO relationship has become less relevant,” says Mr. Kirkegaard. “Secondly it’s an agreement much less about tariffs … because barriers are relatively small. It has much more to do with industrial standards….  [The standards] become de facto because of the size of the combined market.”