The concept of a 100% tariff on all films produced outside the U.S. is unworkable for a number of reasons I covered in a prior article; it is a basically a misaimed blunderbuss. However, I certainly support the goal of bringing film production back to the U.S., so what is a workable way to deal with foreign production subsidies, the main reason for runaway production?
A common proposed alternative is to provide a competing U.S. subsidy in the form of a tax credit for U.S. production. The main difficulties with this approach are (a) that it would cost the U.S. dearly, and that is not an appealing alternative with the current U.S. debt of $38 trillion and (b) passing such legislation is rather unlikely given that Hollywood is not exactly the darling of the current U.S. Congress.
There is a simple potential alternative that avoids these pitfalls: Under the rules of the World Trade Organization (“WTO”), to which almost all countries are signatories, if one country subsidizes products that are imported to other countries, the other countries may impose a countervailing duty to offset the benefit of the subsidy. The U.S. uses this mechanism all the time when it believes that a particular country has given unfair subsidies that hurt U.S. production, including imposing duties on steel and solar panels from China and Airbus planes from Europe. It is not an across-the-board tariff; it is a targeted duty calibrated to offset the subsidy.
Up until now, there has been a “Cultural Exception” that was intended to foster local cultural values in foreign countries. For example, France is allowed to subsidize films to foster French films. The problem, of course, is that the Cultural Exception is being abused to permit subsidies to produce mainstream English-language films that have nothing to do with the local culture. All that needs to be done is to limit the Cultural Exception to films that are intended to be shown in the local country. The simple way to achieve that is that before a film with primarily English dialogue (even if dubbed) is exhibited in the U.S. (whether in theaters or via streaming), the distributor of the film would have to pay a duty to the U.S. equal to the value of any foreign subsidy for production or post-production of that film. I would suggest doing that for all films that start production after 2025. Admittedly, this approach would impose duties on supposedly “local” English-language films that are shot with subsidies in the UK, Canada, and Australia, but the vast majority of those films are intended for the U.S. market, so it is fair to impose duties on them.
In this manner, the U.S. gains revenue instead of losing it, and the duty levels the playing field because it is equal to the value of the foreign subsidy. If a film needs to be shot outside the U.S. only due to foreign locations or lower production costs, and not to take advantage of foreign production subsidies, there would be no duty. Also, a film with primarily foreign dialogue would not be subject to the duty even if exhibited in the U.S.
The duty is thus proportionate to the harm inflicted by foreign countries artificially attracting English-language productions with subsidies that abuse the Cultural Exception, which is precisely the type of harm that is intended to be addressed by adherence to the WTO. What’s not to like about that?