At a time when films are global co-productions, this tactic of weaponising cultural activities in a multi-cultural society will hurt not only the US but producers across the world
The emperor has struck once again with his tariff sledgehammer but this time it was not on goods but on services and that too on the popular movie industry. The last month last day decision by US President Donald Trump that he proposed to slap 100% tariffs on all foreign-made movies has not come a day too soon! The fanciful tariff proposal is deemed a ‘knock-out’ punch to the global film fraternity that has lately emerged from the aftermath of Covid-19 and the toughest competition from the streaming segment that is out to get a bigger chunk of the audience at the click of the mouse from the convenience of their house than going all the way to the theatres to spend time, energy and money.
Many a nation felt helpless in the face of open defiance of the free trade bastion’s rules-based world trading system exemplified by the World Trade Organisation (WTO) when the US President in his second innings inaugurated a new era of gargantuan uncertainty by steeply raising import duty on trading partners that it deemed not helping the US in addressing the massive trade deficit they caused to the US by exporting more and importing far less from the US.
The prevalent industrial tariffs of less than 2% in the US zoomed to 100% for countries like India and only some countries were able to negotiate successfully on terms dictated by the US to escape the effect of the extortionate tariffs.
Even as this unilateral minatory merchandise goods tariffs by the US could not be challenged by any trading nation either through alliances or on its own in the WTO with its writ remaining nugatory, the US used this paralysis phase to go ahead with its further actions in extending its tariff spree from goods to cross-border services too.
In a post on his Truth Social platform, Trump said he seeks to levy a 100% import tax on movies made outside the country, stating the movie business ‘has been stolen’ from Hollywood and the US, just like stealing ‘candy from a baby.’ Whether the analogy of candy and baby is appropriate to the movie moguls of Hollywood making moola out of the multi-billion-dollar films they produce is anybody’s guess.
A question occupying the stakeholders is how these tariffs would work out since movies and television shows are today being transmitted digitally without going through ports. At a time when films are global co-productions, this tactic of weaponising cultural activities such as films in a multi-cultural society like the US would hurt not only the US but also other producers across the world who make films for a wider audience.
For the Bollywood filmmakers, the new tariff move is a shocker. Figures from Producers Guild of India show Indian films fetch an estimated one hundred million to 150 million dollars a year in North America. This revenue includes box office collections, digital, satellite and other distribution rights sold in the US. Many a Hindi, Telugu and Tamil movie has grossed millions of dollars with the diaspora devouring desi movies in gusto.
The producers of such movies with overseas audiences in view could pass on the tax burden to consumers, instead of absorbing into their cost calculations. In that case the existing movie ticket price may move from 15-20 dollars to 30-40 dollars range to take care of distributors’ margins to the discomfort of the movie goers!
The obverse side of this unilateral move by the US President is that the Hollywood studios like Disney, DreamWorks and Pixar which outsource a considerable chunk of the animation and visual effects (VFX) works to Indian studios might face the reprisal here as tit for tat gambit gains traction, hurting the harmonious cultural relations.
A study by CII and India Brand Equity Foundation said the country’s animation and VFX segment is likely to go up from 1.3 billion dollars in 2023 to 2.2 billion dollars by 2026. Hence, the US needs to reckon the harsh impact it may have on its own industry that is mostly dependent on the outside contribution for its enrichment of content and entertainment.
While it may be argued that tariffs on films contravene binding US multilateral commitments under the General Agreement on Trade in Services (GATS) with the US promise to provide market access and national treatment to cross-border delivery of audio-visual services, covering motion picture and video tape production and distribution services, radio and television services, there is no guarantee that the US would abide by its commitment. It has already abandoned its commitment to WTO-compatible duty norms on goods. As regards GATS, the US has nothing to lose as the commitments remain loose for want of participation by all members for the rules to take effect.
The fact remains that the US is upsetting the ordered structure of institutional cooperation in all realms of progress and development for humanity that stems from its imagined pique and putative suffering by the recklessness of others! This is the sad reality today, analysts wistfully say, contending such parochial thinking and action upon such erroneous premise is both, humanely wrong and morally incorrect.
(G Srinivasan is a senior economic journalist based in New Delhi)
