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The 1999 Consultation on Audiovisual Services


The negotiations on audio-visual services in the GATS took place within the framework of the Uruguay Round, which began in 1986 and was closed in April 1994. The intrinsic sensitivity of audio-visual services made the negotiations on this dossier particularly difficult and conflictual. The outcome of these negotiations is the following:

Therefore, the status of audio-visual services in the GATS is the following: the European Community and its Member States benefit from a room for manoeuvre in the audio-visual sector, which relates both to policies and measures at national and Community level. This margin allows both to secure an adequate protection of existing national and Community measures in the audio-visual sector, and to secure a margin of manoeuvre to further development of national and community audio-visual
policies and instruments to respond to the evolutions of the sector.

However, in spite of the coverage of the audio-visual services in the GATS Agreement, there is no commonly agreed definition of such services in the EC offer in the GATS for the purpose of the implementation of the above mentioned margin for manoeuvre.

This margin for manoeuvre is likely to be called into question during negotiations due to begin in the year 2000. Primarily, the Article XIX of the GATS contains a built-in agenda for further liberalisation in the services, with a view to increase the general level of specific commitments taken by Parties to the Agreement. Moreover, the extension of the scope of issues dealt with in WTO, i.e. the inclusion of new disciplines such as investment, may have an impact on services in general, and audio-visual services in particular. This element will have to be taken into account during the preparatory phase of the forthcoming Round.

In this respect, this consultation primarily addresses two different aspects: firstly the need to clarify and define which types of objectives, measures and policies pursued and carried out by the Member States at national level and undertaken at EC level, do request this margin for manoeuvre, and for which services (defensive interests). Secondly, it also deals with the opportunities for the audio-visual industry with relation to Trading Partners' markets, which require in the first place to identify clearly the obstacles to trade in these markets (offensive interests).

Although the position of other trading partners is not known at this stage, and without prejudice to the position that the European Community may adopt at a further stage notably on the basis of the results of the consultation process, it appears that the Community acquis in this field might be called into question in different ways. The following part intends to raise the issues and questions whose answers will help the preparation of negotiation positions in this field.

On the basis of the latest statements from some representatives of US industry, it would appear that their objectives may not be quite the same as in the past. Representatives of the MPA (Motion Picture Association) have suggested with Commission officials that they accept that their should be no reopening in GATS 2000 of the status of Television Without Frontier nor of their ealier demand for national treatment in the field of audio-visual revenue and subsidy. This remains to be confirmed officially. In any cas, the US would seem certain to challenge our desire to be free to regulate emerging services based on new technologies. This debate reflects previous developments related to the status of audio-visual services in the GATS, and in the perspective of the opening of the new round, it appears that the acquis reached for audio-visual services at the last negotiations is likely to be challenged. This is likely to arise not only within the next Round negotiations, but also in other exercises such as the WTO work programme on electronic commerce, notably through the angle of the scope and classification of electronic commerce-related services. The following developments intend to shed some light on the background and the possible direction of discussions on some key issues relevant for the sector.

I. What room for manoeuvre for the audio-visual sector and for which policies and measures ?

At EC level, the regulatory instrument of the "Television Without Frontiers" directive(1), and the financial support mechanisms, i.e. in particular the MEDIA Programme, are the main existing measures which require protection from the application of certain GATS disciplines in order to be pursued. At national level, both types of instrument exist as well, for which the same level of protection is equally necessary. Preserving cultural diversity is one of the missions assigned by the EC Treaty(2) to the European Community. This key element has to be duly taken into account for the WTO negotiations.

Technological convergence, amongst other factors, brings about new questions in the field of audio-visual, which may translate into new measures, policies, frameworks. In this respect, the room for manoeuvre described above is also a necessary element to secure in order that any future policies and instruments are able to be set up both at EC and at national level. This is the likely focus for requests from our trading partners. It is therefore important to develop the best possible European consensus of the range of future needs we foresee.

- What are the existing policies and measures we need to protect from the application of GATS positive rules and disciplines ? What are the public interest objectives pursued by such policies and measures ?

- What are the future and foreseen policies and measures we may need and in what respects might they depart from GATS rules and disciplines, so that we would need to protect them from such requirements ?

- What are the public interest objectives pursued by such policies and measures ?

II. What room for manoeuvre in the audio-visual sector for what services ?

A - Definitions

The Community and its Member States have opted for a broad conception of audio-visual services. In the context of the Uruguay Round, it appeared clearly that such services, according to EC views, embraced a vast range of activities related to audio-visual content, irrespective of the technology used, thus covering both traditional means of transmission and services based on new technologies. Such an approach is reflected in the internal EC audio-visual policy.

Sometimes, this conception is not necessarily shared by a majority of trading partners which have often taken restrictive definitions of audio-visual services, not necessarily covering the "new" services. The EC approach only appears in the list of MFN exemptions submitted by the EC and their Member States. The list contains elements of definitions of audio-visual services which are made only for the purpose of the MFN exemption. These definitions are made independently from the Central Product Classification (CPC) and the Services Sectoral Classification List (SSCL, also referred to as W/120).

The CPC is a list established by and for the United Nations (see Annexe)which contains services definitions sometimes referred to by countries in their schedules of commitments. In the audio-visual sector, the CPC definitions are generally technology-bound ones, i.e. restricted to traditional cinema and broadcasting activities. Any reference to CPC definitions is therefore problematic if we want to reflect the Community approach.

The Services Sectoral Classification List) was drawn for the sole purpose of the GATS Agreement. It consists only in a list of services, without any attached definitions. The audio-visual services are treated as a sub-sector of communication services (see Annexe).

In practice, the definitions used by the Parties in their schedules of commitments and/or lists of MFN exemptions find their origin indifferently in the CPC, the SSCL and/or are self-defined by the countries. There is therefore no single set of definitions for audio-visual services which is common to all Parties to the Agreement.

The question of definitions of audio-visual services within this trade negotiation framework mainly stemms from the necessity to establish dividing lines between those services for which the Community and its Member States wish to formulate offers and present offensive interests, and those services for which defensive interests dominate.

Thus, two distinct options are to be considered:

- the definition of services other than audio-visual services provides elements of "definition by default" of audio-visual services (e.g. the distinction between transport/content laid down in the offer of the Community and its Member States within the framework of the Agreement on basic Telecommunications). It is crucial to avoid situations whereby definitions of other categories of services would cover activities related to the audio-visual sector for which the Community and its Member States may wish to preserve.

- so far, the "positive definition" of audio-visual services has only been necessary in the context of the exemptions to the Most Favoured Nation clause (MFN) tabled by the Community and its Member States. Such positive definition would also be necessary if the Community and its Member States wish to present an offer covering specific activities of this sector for specific modes of provision of services.

In all cases, the preparation of negotiations must be based upon a clear and precise identification of activities to be reserved (defensive interests) as well as upon a serie of concepts which allow to distinguish between these activities and possible related activities.

On a more general level, the increasing pressure towards more transparency may require the Community and indeed all Parties to the Agreement to ensure more coherence amongst the various definitions in use for the purpose of the GATS. Also relevant is the increasing necessity to gather GATS Parties around commonly agreed definitions. Moreover, our trading partners are likely to require the EC and their Member States to clarify and determine precisely what margin for manoeuvre is asked, and which protection is necessary, for which services. They might intend to isolate some sub-sectors or sub-categories within the generic terminology of "audio-visual services" for this purpose. The issue of definitions might appear to be crucial for delimiting the scope of the protection required by the EC in the GATS.

It is also likely that our trading partners will ask the EC to clearly identify the type of measures and policies foreseen both at national and EC levels, as well as the rationale behind such measures and policies, i.e. cultural and identity objectives; linguistic objectives; industrial policy objectives etc. It is in our interest to have the clearest picture on these policy orientations.

The existing carve out in the GATS always refers to the "audio-visual sector" without providing any definition of that sector(3). Some of our trading partners have already tried to limit the scope of this concept; aiming at excluding, for example, on-line services and multimedia content. Moreover, the concept of "audio-visual services" is likely to be challenged in various ways, and notably be absorbed within new concepts such as "electronic commerce", "information and entertainment services", "on-line

The main function of the elaboration of definitions within this specific framework will be the defense of the interests of the audio-visual sector within the GATS, and only with reference to the GATS. In this respect, it is important to distinguish this exercise from another exercise which is currently being developped and concerns the new modes of regulation of this sector. The latter exercise has a broader function and purpose and its results and conclusions might not be relevant for the present exercise related to the GATS framework. Moreover, any definition to be found within and for the purpose of the GATS will apply to the GATS environment only and should not impact on discussions within Member States related to the regulatory distinction between services. The present exercise is therefore limited to the sole purpose of the forthcoming negotiations with respect to the GATS. Its aim is to support the arguments to be put forward during these negotiations. The objective is to define services, sectors, sub-sectors if applicable according to their respective interests and only insofar as such definitions come in support of the defense of these interests.

In view of the previous developments:

- What is the scope of the audio-visual sector which needs some protection, and which definition of audio-visual would best reflect such a scope?

- If need be, what kind of criteria could efficiently distinguish between sub-sectors and/or between audio-visual and neighbouring concepts (e.g. "information content and services", "electronic commerce", "on-line trading" etc.)?

- Within the audio-visual sector, would you distinguish categories or sub-categories of services for which interests may differ, i.e. offensive v. defensive interests ? How would you define these categories if need be ?

The pressure for transparency is likely to concern both the definitions of the services covered by the provisions of the GATS, both schedules of commitments and lists of MFN exemptions, as well as the policies and measures themselves in the audio-visual sector, which can exist and develop in an autonomous manner. In this respect, it can be expected that the pressure will be put on the need to limit the room for manoeuver to such policies and measures which already exist and/or which can be
clearly identified.

B - The GATS Disciplines and Horizontal Rules

As underlined in the previous sections, there is a built-in agenda for the extension of market access and further liberalisation which concerns all services, including audio-visual services. Even if they recognise the specific nature of audio-visual services - as reflected in the limited number of WTO members that have tabled commitments in this sector – some trading partners will insist on obtaining some commitments in this field.

The acquis reached for audio-visual services at the GATS might be called into question both in terms of the two main disciplines – market access and national treatment - and the MFN. In this respect, it could be expected that national treatment be a key requisite, i.e. for US subsidiaries in Europe. This would imply, inter alia, access to public support mechanisms. As far as market access is concerned, the pressure could entail the provision to cover specific sub-sectors (e.g. near-on-demand and on
line type of audio-visual services). Finally, a more targeted MFN is likely to form part of relevant trading partners’ request at the WTO.

In addition to these elements, there also exists a pressure towards the strengthening of some disciplines: in the area of subsidies, new rules might be negotiated along the lines of existing provisions for goods (e.g. total ban on export subsidies).

- What kind of horizontal rules could apply to audio-visual services, which would not affect the special treatment they have under the GATS, allowing EU policy while creating greater opportunities for European audio-visual services worldwide?

- What kind of horizontal rules should not apply to audio-visual services ?

III. What are the prospects for audio-visual services with respect to geographical interests and GATS disciplines and rules ?

In addition to the necessity to preserve cultural diversity and thus secure an effective room for manoeuvre in the audio-visual sector, there are also offensive interests in the audio-visual sector, which derive from the development of the sector itself. One of the main objectives of the audio-visual policy as defined at EC level is to reinforce the European audio-visual industry, and foster its development as a competitive actor in the world-wide market. The multilateral negotiations appear to be crucial to
realise this objective.

In order to assess the nature of potential offensive interests of the European audio-visual services, geographical objectives have to be defined and existing obstacles to be removed have to be identified.

A – Geographical Objectives: the Trading Partners

- In which geographical areas do audiovisual services currently have the fastest
  growth rate ? And which services ?

Eastern Europe
North America, including Mexico
Central and South America
Middle East
Asian countries, including Japan, Korea, India and ASEAN
African countries
Australia, New Zealand
WTO Acceding countries (China, Russia, Saudi Arabia)

- Where would you have the highest commercial expectations for new market opportunities should the current trade barriers be eliminated?

Eastern Europe
North America, including Mexico
Central and South America
Middle East
Asian countries, including Japan, Korea, India and ASEAN
African countries
Australia, New Zealand
WTO Acceding countries (China, Russia, Saudi Arabia)

- Is the situation of developing countries, for which the general level of liberalisation in
the GATS is lower than the developed countries, particularly relevant for the audio-visual sector ?

B – Obstacles to trade

Market Access

The Market Access principle obliges the Members to open their domestic markets to all service suppliers from all Members. The following questions intend to assess the extent to which your activities are impeded by the existence of barriers to trade in other WTO Members.

The following list of possible trade barriers can help you assess the discriminatory and protectionist treatment encountered:

- discrimination in licensing and qualification requirements
- dominance of local monopoly
- unfair competitive environment
- restriction on movement of persons
- restriction on ownership
- nationality and residency requirements
- limitations on the number of services suppliers and/or on the value of operations
- limitation on the type of the legal form requested to operate
- adverse taxation rules or rates
- discrimination in government procurement
- restrictions to investment
- operating conditions
- export subsidies

- Indicate which, if any, of the trade barriers mentioned above you experience as the most restrictive.

- Would these principles help you address properly the current most important problems that you face ?

- Market Access
- National Treatment

- If not, is it so because of the limitations that are listed in the schedules of specific commitments?

- Are the obstacles/regulatory barriers that your organisation encounters related to specific forms of trade related to audio-visual services, e. g. electronic commerce ?

Administrative and regulatory measures

Under the GATS, Members are allowed to exercise their regulatory powers. However, their domestic regulations must comply with the Agreement. In this respect, an important limitation is set to their right to regulate, but only insofar as specific commitments have been made in a given sector. In these circumstances, Art. VI requires that all national measures be applied in a reasonable, objective and impartial manner and covers measures such as licensing, qualifications, prior approval, technical
standards. Also, recourse to a local impartial tribunal must be offered to all services suppliers. In addition, legislation that formally respects the GATS but the application of which leads in practice to discriminations or restrictions contravenes the Agreement.

- Which one is the most restrictive trade barrier that you face ?

- legal measures
- administrative burdens
- commercial practices and /or "unfriendly" environment
- regulation: absence of it, restrictive regulation or contradictory regulations between different countries

- What are the most appropriate fora to deal with the barriers and obstacles identified ? (multilateral ? regional ? bilateral ?)

- How should those aspects be handled internationally ? Through regulation ? industry-led solutions ? self-regulation ?

C – GATS rules and disciplines

Modes of supply

- What is the relative importance of each mode of supply in the sector ?

- Are there some difficulties to distinguish certain modes of supply in practice for certain services ?

- Are there some specific modes which are more relevant for audio-visual services, for which European industry would have specific interests ?

- Has there been a shift of the relative importance of certain supply modes which would justify more emphasis to be put on certain supply modes, e.g. cross-border trade (e.g. taking into account electronic commerce)?

-If commercial presence is the mode of delivery that you are the most interested in, what form of establishment would be sufficient to meet your needs?

- joint venture
- wholly-owned subsidiary
- branch
- majority ownership

-Do you face the following restrictions?

- restrictions on ownership
- authorisations and licensing procedures
- restrictions to movement of persons
- others

-Is investment abroad a priority for your business?

The Most Favoured Nation Clause

Under the GATS (Article II), in principle, the most favourable treatment that is granted to the service suppliers from any foreign country must equally be offered to all foreign suppliers of this service. This Most-Favoured-Nation provision (M.F.N.) therefore prohibits discrimination among third countries’ service suppliers.

- Is this Most-Favoured-Nation principle helpful in your business ?

- If so, for which type of trade barriers ?

Dispute Settlement Procedures

The WTO provides for a dispute settlement procedure against illegal trade practices such as the ones mentioned above in point 3.d (Art. XXII and XXIII). Members may lodge complaints before the WTO tribunal. Also, there are ways to enforce Members to respect a WTO judgement requiring the elimination of the illegal measure.

- Are you satisfied with the current Dispute Settlement Mechanisms ?

- Have you identified a need to improve this procedure?

Mutual Recognition of standards

Under certain conditions, the GATS allows groups of Members to conclude agreements in order to recognise each others domestic standards or criteria for the authorisation, licensing and certification of services suppliers as equivalents (Article VII). Such mutual recognition may cover education or experience obtained, requirements met or licenses and certifications granted.

- Would such mutual recognition offer new liberalisation opportunities in your area?

- If yes, what would be the object of such mutual recognition?

ANNEX: Classification of audiovisual services for the purposes of the GATS

Central Product Classification (United Nations) :

Sector 2 – Communication services - sub-sector D – audiovisual services:
a. motion picture and video tape production and distribution services (9611);
b. motion picture projection services (9612);
c. radio and television services (9613);
d. radio and television broadcast transmission services (7524);
e. sound recording (not applicable);
f. other.

GATS Secretariat Services Sectoral Classification List (SSCL):

1. Business

2. Communication

          A. Postal services
          B. Courier services
          C. Telecommunication services
          D. Audio-visual services
                  a. Motion picture and video tape production and distribution services
                  b. Motion picture projection services
                  c. Radio and television services
                  d. Radio and television transmission services
                  e. Sound recording
                  f. other
           E. Other
3. Construction and Engineering
4. Distribution
5. Education
6. Environment
7. Financial
8. Health
9. Tourism and Travel
10. Recreation, Cultural, and Sporting
11. Transport
12. "Other".

1) EEC/89/552 Directive as modified by EC/97/36 Directive (OJ L 202/60 of 30 July 1997).
2) Article 128.1.
3) A first element of definition appeared in the framework of the basic telecom agreement in which the EC commitment is based on the distinction between transport (telecom) and content (other services): "Telecommunication services are the transport of electromagnetic signals – sound, data, image and any combinations thereof, excluding broadcasting. Therefore commitments in this schedule do not cover the economic activity consisting of content provision which require telecommunications services for its transport. The provision of that content transported via a telecommunications service, is subject to the specific commitments undertaken by the European Communities and their Member States in other relevant sectors." (for the purpose of this definition, the term "broadcasting" is defined as the uninterrupted chain of transmission required for the distribution of TV and radio programme signals to the general public, but does not cover contribution links between operators.

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