Graduate School of Development Studies

A Research Paper presented by:

Patchar Duangklad(Thailand)

in partial fulfillment of the requirements for obtaining the degree of

MASTERS OF ARTS IN DEVELOPMENT STUDIES

Specialisation:Governance and Democracy

(G&D)

Members of the examining committee:

Assoc. Prof. Dr. Thanh-Dam Truong (supervisor)Dr. RosalbaIcaza (reader)

The UNESCO Convention on Cultural Diversity: solution to culture and trade

tension? The case of Korean Film Industry

The Hague, The NetherlandsSeptember 2009

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Disclaimer:This document represents part of the author’s study programme while at the Institute of Social Studies. The views stated therein are those of the author and not necessarily those of the Institute.Research papers are not made available for circulation outside of the Institute.

Inquiries:

Postal address: Institute of Social StudiesP.O. Box 297762502 LT The HagueThe Netherlands

Location: Kortenaerkade 122518 AX The HagueThe Netherlands

Telephone: +31 70 426 0460

Fax: +31 70 426 0799

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Acknowledgements

First of All I would like to thank my supervisor, Dr. Thanh-Dam Troung, for her helpful advices and comments that always fast in reply, and her support and understanding that always made me feel more confident and less stressful. My grateful thanks also go to Dr. RosalbaIcaza, my second reader, for her useful comments. I also wish to convey my thanks to Dr. KarimKnio for his suggestions and helps when designed to change my research topic, and for teaching 4212 course that inspired me this research topic.

This research paperwould not has been possible without the help of CholBunnag, who always being there for me when I faced obstacles, helping me develop my research question over and over again, taking care of me when I did not have time to take care of myself, editing my work with eagerness and patience, and most importantly supporting and believing in me every time I was down. What he did for me is invaluable and it is never enough to say thank you, “Thank you so much”.

I also want to express my gratitude to my beloved family, especially my father and my mother, who always give me encouragements, and love. I owe my thanks to many friends for supporting and making me feel better when I trapped in stress. Thank you very much, P’Ei, P’Hoong, P’Ta, P’Peng, P’Gig, Vinny, Fang, Tinyu, Eri, Ling, Angie, the Erasmus friends, and many friends at home. And lastly, I would like to thank Chang for inspiring me with the topic, and giving me consultationsalways.

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Contents

Chapter 1...................................................Introduction8

1.1 Statement of Problem..........................................81.2 Rationale and Justification...................................91.3 Research Objectives and Research Questions. . .10

Research Objective:........................................................10Research Questions:.......................................................10Sub-questions:................................................................10

1.4 Research Methodology and Analytical Framework10

1.5 Research Methods..............................................111.6 Limitations.........................................................11

Chapter 2.............The Tension of Culture and Trade12

2.1 Cultural Products, Cultural Industries and International Trade........................................................12

2.1.1 What are Cultural Products?.................................122.1.2 Audio-visual products............................................132.1.3 What are Cultural Industries?...............................132.1.4 Nature of Cultural Industries................................142.1.5 The Change in Cultural Industries........................152.1.6 Dichotomy of Cultural Products Values.................152.1.7 What do we mean by international trade?.............16

2.2 Culture and Trade Relation...............................172.3 Culture and Trade Tensions...............................18

1.) Cultural commodification: Cultural Industry Theory, Mass Production, and Homogenization of Cultural Products..............................................................................................18

2.) Market Failure..........................................................193.) Cultural Imperialism.................................................214.) Globalization: Cross-Border and Transcended

Exchange of Cultural Products.............................................23Culture and Trade Relation and Tension in the Present

world.....................................................................................24Chapter 3.Culture and Trade in Global Governance

Regimes 263.1 Trade Governance on Cultural Industry: WTO and

its Agreements........................................................263.1.1 Norms of trade governance regimes and their

relevance to the cultural industry: GATT, GATS and WTO:. 263.1.2 WTO and Cultural Products...................................27

3.2 The Rise of Cultural Diversity Protection and Promotion.......................................................................29

3.3 Cultural Governance on Cultural Industries......313.3.1 About UNESCO.....................................................31

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3.3.2 The Convention on the Protection and Promotion of Diversity of Cultural Expressions (The UNESCO Convention)..............................................................................................32

3.3.3 What is Cultural Diversity?....................................33Scope of the UNESCO Convention.................................34Rights and Obligation of Member States.......................34

3.4 Global Trade Governance vs. Global Cultural Trade Governance...........................................................35

3.4.1 Cultural Diversity and Free Trade.........................353.4.2 Clash of the Global Governance Regimes?............363.4.3 The End of Culture and Trade Tension?................36

Chapter 4The Film Industry: Korea as a Case Study38

4.1 The film industry: Cultural Imperialism............384.2 Korean Film Industry.........................................39

4.2.1 History of Korean Film Industry and the Screen Quota System........................................................................39

4.2.2 Culture and Trade Tension in Korean Film Industry: Free Trade Agreement vs. Screen Quota System.................41

4.3 Global Governance Regimes and Korean Film Industry’s ..............................................................Tension

42Chapter 5......................................................Conclusion

44Notes………………………………………………………………….

46Reference……………………………………………………………

..48Appendices…………………………………………………………

…52

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List of Acronyms

FTA Free Trade Agreement

GATS General Agreement on Services

GATT General Agreement on Tariff and Trade

NT National Treatment

MFN Most Favored Nation Treatment

The US The United States

TRIPS  Agreement on Trade-Related Aspects of Intellec-tual Property Rights

UN-ESCO

United Nations Educational, Scientific and Cul-tural Organization

WTO World Trade Organization

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Abstract

Cultural industries have become increasingly important in today’s global economy. But, as they become more significant, the tension that always lies underneath between culture and trade has grown stronger. The tension between culture and trade is grounded on the dual-value nature of cultural products, i.e. commercial value and cultural value. The tension will rise when there is imbalance recognition of both values, which can happened in various forms depending on the relationship between culture and trade. At the level of international trade, the tension is resulting from the neglect of cultural value in an international trade governance regime of WTO, which is the most important international trade rules reference. This tension leads to the demand for the new global governance regime that including cultural value in international trade sphere. As the result, the UNESCO Convention on the Protection and Promotion of Cultural Diversity of Cultural Expressions was established in 2005. The Convention holds “cultural diversity” of cultural expression norm and legitimizes government interventions for protecting this norm. This Convention has become a hope of many countries that want to protect their cultural industries from liberalization agenda of WTO and other trade agreements that construct in the same norm as WTO.

This paper is questioning thepotential and ability of the UNESCO Convention as the global governance that can solve the tension between culture and trade. It argues that as long as there is no cooperation between culture governance regime and trade governance regime, or if the enforcement powers of the two separated regimes are not equal,the tension cannot be solved. The paper uses the case of Korean film industry to illustrate the existing tension between culture and trade, and the argument.

Relevance to Development StudiesCultural products are the most important form of cultural expressions nowadays. They are not only generating economic prosperity, but also important means for social communication, individual’s identity identification, and self-understanding of the nation. Therefore, cultural products are important tools for development, and the study about

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the tension between culture and trade under international trade governance regime is necessary.

KeywordsCulture and Trade, Audio-visual Products, GATT, GATS, WTO, UNESCO, The Convention on the Protection and Promotion of Cultural diversity of Cultural expression, Cultural Diversity, Cinematographic film industry,

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Chapter 1Introduction

Nowadays, cultural industries become strategic industries in “New Economy” worldwide. During 1994-2003, these industries accounted for more than 7% of the world’s Gross Domestic Products (GDP) and their international trade had dramatically increased from USD 38 billion in 1994 to USD 60 billion in 20021. However, the trade in core cultural products represented only approximately 1% of the total trade in 2000 (UNESCO-UIS 2005: 36). The consumption of the products is spreading all over the world but the production is concentrated in a few countries, which are high-income economies with a large number of producers and consumers (ibid.). Those countries are the United Kingdom, the United States of America, and China (ibid.). Although, in general, cultural industries account for a minor international trade value, many countries are increasingly interested in these industries.Some countries such as Korea and the UK shifted their focus from heavy industry to cultural industry as they considered it as a new leading sector to generate growth and prosperity for their countries. However, as the cultural industries have become increasingly significant in world economy, the tension that always lies underneath relationship between culture and trade has also changed and become stronger.

1.1 Statement of ProblemThe relationship between culture and trade has changed over time through out human history. In the early age, cultural products were honoured as being precious. They cannot be traded as commercial objects, particularly to foreign countries. Culture and trade were standing on different edge, such that no one believed that they could ever be together. The tension between them was mainly created from “cultural commodification” effort, especially for international trade purposes. As technologies in cultural production and distribution became more advance, cultural value in cultural products was turned into commercial value, which is an incentive for cross-country trade. In addition, due to their differentiation, the cultural products from one country became more valuable in others as well. Accordingly, international trade in cultural products then became important and experience dramatically growth,

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especially audio-visual cultural products. As a consequence, the relation of culture and trade has changed from “culture vs. trade” to “culture and trade”, hence, a transformation of culture and trade tension.

Tension between culture and trade is rooted in a dual value nature of cultural products, i.e. commercial value and cultural value. The trade-off between these values will lead to the tension. These days, cultural industries are mainly driven by international trade, which is governed under the General Agreement on Tariff and Trade (GATT), and General Agreement on Services (GATS) of the World Trade Organization (WTO). WTO’s trade governance regime undertakes neoliberal agenda, in which cultural products are not different from other commercial products, and are best allocated by market mechanism. In order to enhance the market system, the international trade has to be integrated and liberalized. However, the increasing in international trade integration is often accompanied with, what Formentini and Lapadre (2007) call, the protection and promotion of non-economic objectives, for example, food security, labour standard, and environmental conditions. Regarding cultural industries case, “cultural diversity” has been promoted to re-establish cultural value recognition. The neglect of cultural value under global trade regime of WTO has boosted the demand for new global governance regime for cultural diversity. Consequently, the United Nations Educational, Scientific and Cultural Organization (UNESCO) established the Convention on the Protection and Promotion of the Diversity of Cultural Expressions (henceforth the UNESCO convention) in October 2005 as the new cultural global governance regime to resolve the tension between culture and trade. However, whether the UNESCO convention can really reduce the tension between culture and trade is still questionable, especially when it is applied to a context of a specific country.

In the case of Republic of Korea, cultural and trade tension manifests itself in cinematographic film industry. Korea has remarkably promoted its film industry in the past decade. The industry has become one of the country’s strategic industries since 1995, and has been highly intervened by Korean government. This is the character of “developmental state”, in which the government leads the development of selective industries and uses policy measures to create a friendly environment of them to grow. The tension between culture and trade has revealed since

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1980s but become a controversial issue since 2006, when screen quota system, one of the most important measures that protect the industry from foreign competitive, was forced to be eliminated by the U.S in the Free Trade Agreement (FTA) negotiation. Korean government at the time decided to cut the quota into half from 146 to 73 days per year. The decision has led to massive movements that demand cultural diversity protection. They support the UNESCO Convention’s norm and hold it as their solution for the tension.

1.2 Rationale and JustificationAs mentioned above, cultural industries havedramatically increased its importance in the past few decades. It is also the controversial trade area due to the unique nature of cultural product, particularly the trade of audio-visual products, on which this paper will focus.

Cultural industries are worth studying because they do not only significant in term of economic, but also social development aspect. Cultural value of cultural products helps people in a society build up their identities, which enhance their self-understanding (Baker 2000). This process is a basis of social communication that promotes democracy (ibid.). The study of the relationship between culture and trade, nature of their tension, and their problems under global governance regime, will provide one a better understanding of the situation and its debates.

The reader will see that the global governance regimes in relationto the issue cannot solve the tension, but instead become a part of the problem to some extents. This leads to an open question of what should be developed atglobal governance level to help mitigate the tension. Moreover, this trade dilemma can also be applied to other issues such as environmental and food security. As a result, the study of this paper might be useful as a reference for studying tensions between trade and other non-trade issue.

1.3 Research Objectives and Research Questions

Research Objective: To study the tension between culture and trade in

cultural industries under global governance regimes.

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To study the potential the limits and potential of the UNESCO Convention on the Protection and Promotion of Cultural Diversity of Cultural Expression.

Research Questions:Can the UNESCO Convention on the Protection and Promotion of Cultural Diversity of Cultural Expressions, as the global cultural governance regime, solve the current tension between culture and trade in the international trade of cultural products?

Sub-questions:1. What constitute the tension between culture and

trade?a. How does the relationship between culture

and trade change? And what are the factors?2. How do the global governance regimes, which related

to cultural industries regulations, interact with the tension between culture and trade?

a. What are their norm and standard? b. How do they perceive cultural audio-visual

industries and their products? c. What are the implementations of each

governance regimes? And how do they interact to each other?

3. Can the UNESO Convention solve the tension between culture and trade in Korean film industry?

a. Why has the UNESCO Convention become attractive to Korean film industry community in their attempt to counterbalance the free trade agenda, and can it help Korea solve the tension in its film industry?

1.4 Research Methodology and Analytical Framework

This paper will draw on the theoretical literatureconcerning the relationship between culture and trade, and the tension between them.They can be explained by four different frameworks (chapter 2). The first framework is cultural industries theory of Theodore Adornor and Max Horkheimer (1979/1947). This theory explainsthat the tension is created from cultural commodification and mass media industrialization, which lead to the homogenization of cultural products that degraded their cultural value. The

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second framework is market failure thesis. This framework explains how cultural products market fails to recognize and include their cultural values. The third framework is cultural imperialism thesis, in which the tension is caused by dominant cultural industry from one particular country in international market. And lastly, the tension will be explained by globalization thesis, which characterizes by “cosmopolitan culture” that creates the common culture value across the world.

The relationship and the tension between culture and trade will be used as a framework to analysis global trade governance regime of WTO and cultural governance regime of UNESCO (chapter 3). And it will also be applied to explain the tension and cultural movements in case of Korean film industry (chapter 4).

1.5 Research MethodsThis paper is conducted by reviewing the existing literatures in the filed of culture and trade theories; global trade governance, especially WTO; global cultural governance of UNESCO; and history and current situation of Korean film industry. Moreover, the paper also uses the primary materials such as the documents of GATT and GATS, UNESCO Convention on Cultural Diversity, and expressions of Korean film industry community.

1.6 LimitationsSince the UNESCO Convention was just adopted in 2005 and was ratified in 2007, there is no enough evidence on its implementation in practical cases. As the result, the analytical part about the Convention in this paper can only be based on the paper of the UNESCO convention and the interpretation in existing literatures. Despite this limitation, the paper can still achieve it objective and answer the research question in theoretical level, which will be helpful for the further empirical research in the future when there are sufficient evidences.

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Chapter 2The Tension of Culture and Trade

2.1 Cultural Products, Cultural Industries and International Trade

As chapter 2 will discuss the tension of culture and trade, it is important to understand some basic terms for the discussion. This subsection, 2.1, investigates these details. The characteristics of the cultural product, and audio-visual product in particular, will be discussed in subsection 2.1.1. and 2.1.2. ,respectively. Then the cultural industries, their nature, and the change in them will follow in subsection 2.1.3 to 2.1.5. Dichotomy of cultural products values will be illustrated in subsection 2.1.6. The final subsection, 2.1.7, briefly discusses the term 'international trade'.

2.1.1 W2hat are Cultural Products?“Cultural products” are symbolic products in which primary economic value is derived from the cultural value (O’connor 1999: 5). They can be seen in various forms such as books, architecture, cinematographic films, visual and performing arts, recorded music, etc. There are two general groups of cultural products -“cultural goods”, and “cultural services”. According to UNESCO, the term “cultural goods” refers to,

“Consumer goods that convey ideas, symbols and ways of life. They inform or entertain, contribute to build collective identity and influence cultural practice. The result of individual or collective creativity – thus copyright-

based – cultural goods are reproduced and boosted by industrial processes and worldwide distribution. ” (UNESCO 2000: 12)

Cultural services are traditionally understood as “those activities aimed at satisfying cultural interests or needs. [However, they] do not represent material goods in themselves but facilitate their product and distribution”(UNESCO-UIS, 2005). Cultural services are described as activities that support cultural practices, for example, promotion of performances arts and cultural events, cultural information as preservation of books, recording and artefacts (libraries, documentation centres, and museums), etc (UNESCO-UIS 2005: 12-13, UNESCO 2000: 14).

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Cultural products are “doubly articulated” as Silverstone, Hirsch, and Morley (1992) described (Sinclair 1994). Their “hardware” is meaningful as well astheir “software”–“cultural contents” or the “information”. Both are essential and have to be encompassed together. For example, a consumer who consumes music requires the hardware such as CD and CD player to access to the software or the music and its contents. In sum, the cultural products are vehicles for cultural exchange and dissemination within and across societies. Their best form that can best describe the nature of these industries is the “Audio-visual goods and services” such as television and radio programs, pre-recorded audio and videocassettes, CD and cinematographic films (Sinclair 1994: 36).

2.1.2 Audio-visual productsAudio-visual product sector has grown very fast in the recent decades. It is one of the important and dynamic sectors in international trade. Audio-visual products are the most significant expression of cultural activities. They are also a dominant source that delivers information and entertainment to a large part of population (Guerrieri and Lapadre 2005).

The industries have become more concentrated and are dominated by very few large players at the global level. This is due to the nature of audio-visual industries that are characterized by economy of scale and economy of scope together with the change in technology. As a result, these industries have become the most controversial area in international trade negotiation. Therefore, this paper would like to pay its attention mainly to these industries, especially to cinematographic industries.

2.1.3 What are Cultural Industries?There are many definitions of cultural industries introduced by a number of authors. Among them, the one developed by Nicholas Garnham can picture the industries the mostclearly;

“It see culture, defined as the production and circulation of symbolic meaning, as a material process of production and change, part of, and in significant ways determined by, the wider economic process of society

with which it shares many common features.

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Thus, as descriptive term, “cultural industries” refers to those institutions in our society which employ the characteristic modes of production and organization of industrial corporations to produce and disseminate symbols in the form of cultural goods and services, generally, although not exclusively, as commodities. ”(Garnham 1990: 155-156 cited in Sinclair 1994)

Regarding the definition, cultural industries include the processes that transform cultures into cultural products through production of symbols and distribute them to the audience. In other words, they are commercialization process of culture that is driven by economic incentives. This concept is consistent with the definition of UNESCO,

“[Cultural industries] combine the creation, production and commercialization of contents that are intangible and cultural in nature. These contents are typically protected by copyright and they can take the form of goods and services” (UNESCO 2000: 11-12)

Definition of “cultural industries” given by Garnham has been interpreted by John Sinclair as a concept that holds different form of symbolic production. The concept is different from the abstract category of “culture industry” and open to more empirical approach (Sinclair 1994: 32). Each form of cultural industries has its own characteristic and cannot be generalized. For example, cinematographic film industry has different market structure and distribution strategies from television industry, which has been advanced by satellite broadcasting technology.

2.1.4 Nature of Cultural IndustriesAn important part of cultural industries is creativity. Therefore the industries may be referred to as “creative industries” (UNESCO 2000). This term is defined as “the activities that have their origin in individual creativity, skill and talent and which have potential for wealth and job creation through generation and exploit intellectual property” (Blair G cited in Cunningham and Hartley 1997: p.3)”. Most of the creative products produced from creative industries are embedded by cultural value and can be considered as cultural products. The industries generate various kinds of products by transforming culture into goods and services through creative process. Hence

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creativity needs to be promoted in order to flourish cultural industries.

Another nature of cultural industries, especially the audio-visual productions such as cinematographic films, television programs, and music records, is that they have a very high production cost but low reproduction cost (David Hesmondhalgh 2002 and N.Granham1990 cited in Kim J. 2007). In other words they are characterized by “Economy of Scale”. The cultural products have high fixed cost because their value primarily lies in attractiveness and differentiation (Sinclair 1994). Their productions are rooted in “culture”, which has accumulated through history, and “creativities”, which are scarce inputs produced by high-skilled labours. In contrast, their reproduction costs are low. For example, in music industry, a producer needs to hire musicians, songs writers, stylists, which are highly skilled and, the most importantly, creative. They are not only producing songs or CDs but also have to create an “artist” who delivers contents and styles. Hence, the cost of music production is very high and requires a lot of skills. On the other hand, CDs production itself has relatively low cost. Regarding the economy of scale, a firm can spread its cost over a large volume of output (ibid.). The more the additional units produced, the lower the average cost, hence, the higher profit. Thus these firms in cultural industries have an incentive to seek the profit by increasing numbers of audiences at domestic, regional and global level through strong distribution strategies, and business integration, both vertical and horizontal (ibid).

Moreover, the production of cultural industries represents an “Economy of Scope” characteristic. This means that the production of a cultural product can generate a range of other cultural products by which risk and cost can be spread (Sinclair 1994). For example, when the music records are produced, the firm can later organize a series of concerts, publishing artist posters, or even rearrange the songs into new versions many years after. The economy of scope gives an incentive to the firms to integrate the business horizontally and make the cultural industries become more and more important in global economy.

2.1.5 The Change in Cultural IndustriesIn their early age, cultural industries were organized under “patronage model”, and then,changed into ‘network’ model

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(Singh 2008). Under the patronage model, a producer of cultural products was honored as an “artist” and his works were branded as aesthetically superior (ibid.). The creation and production of these works depended mainly on “loyal patronage” system. Patrons are those who loyally support particular artists as a long-term relationship, cover the artists’ fixed productioncost and help the artists solve uncertain demand problem (ibid.). The creative products under this model are “scarce commodities”(ibid.), which were owned by particular individual or groups of patrons.

The patronage model had then been replaced by the “network model” with the rise of mass production and new technology. Under this model, creative products are no longer scarce, but owned and consumed by wide range of people. They are perceived as normal commodities that are subject to the logic of market, driven by demand-supply rules. The key strategy of firmsto boost their profitis to focus on distribution and retailing network to increase demand and accessibility.

However, both models still exist together in cultural industries practices nowadays. For example, The French film industry–is funded by its government agency CNC–has developed its own distribution networks particularly in Francophone countries (Singh 2008) Likewise, the Hollywood film industry, which is based on mass production that spreading its products all over the world, has been recognized by the authors like Nye and Scheneider(2002 cited in Singh 2008)as benefiting from the ‘loyal patronage’ of the United States’ government which use cultural products as “soft power” and “cultural diplomacy” (ibid.).In the other words, no government has ever let the cultural industry be subject to ‘pure market logic’ since spreading country’s cultural norms has always been part and parcel of diplomacy and trade.

2.1.6 Dichotomy of Cultural Products ValuesCultural products, such as cinematographic films, paintings, performance arts or books, are different from normal goods and services because they hold a specific character of “dual-value” nature (PÈrez de CuÈllar 1996, Galperin 1999, Neuwirth 2004, Moghadam and Elveren 2008). On the one hand, they have economic value that makes them tradable like other commercial products. From a Marxist perspective, the economic value comes from commoditization process, which creates worth, merit and

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exchange values through marketing. On the other hand, these products also contain cultural value by way of representation: they help individual ‘cultural producers’ and the nation to which they belong build an identity – often perceived as an essential element for social development because it enhances the producers’ stance in the global community of cultural production. Cultural feature of such products is also a vehicle for social communication and self-understanding of nation, which are very important in creating and enhancing democracy (Baker 2000 cited in Sauve and Steinfatt 2003).

Both values of cultural products should be recognized as being interconnected. If one of the values is promoted over the other, the tension between them will rise. Especially, when economic value is emphasized over cultural value, it will trigger a counter-movement that promotes and protects cultural value. This tension is a reflection of the real underneath pressure of “Culture” and “Trade”, especially in international trade arena.

2.1.7 What do we mean by international trade?This paper focuses on international trade in cultural products because it has been the most disputed area in multilateral trade negotiation for half a century. International trade refers to the transaction of goods and services between nations. In the early Greek and Roman era, an international trade was mainly for non-economic purpose (Howse and Trebilcock 2005). Merchandising and commercial activities with foreigners were accused to “disrupt domestic life by exposing citizen to the bad manners and corrupt morals of barbarians.” (ibid.: 1). However, the idea about international trade had gradually been accepted by the change of thoughts and acknowledgement of the gain from trade through specialization and division of labours. Philosophers and theologians (such as Plutarch) in the early centuries AD had develop a doctrine of “universal economy”, which believes that geographic separation and diversity endowment of the world was created by God to encourage the interaction between people from different part of the world through trade (ibid.).

The idea of “universal economy” was restored in the seventeenth and eighteen centuries to support and justify “free trade” agenda. The international trade changed its priority to economic basis during mercantilism in Britain

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and the Continent (ibid.). However, they preferred an unbalance trade not “free trade” i.e. they aggressively reinforced exports but imposed restriction on imports (ibid.). In 1776, Adam Smith slashed trade principle of mercantilism, especially the argument of restricting trade. He argues that “gain form specialization in domestic economic activities applies equally to specialization in international trade”(ibid.:2) and will strengthen the principle of “free trade”. The argument of Smith was developed and enhanced subsequently by a number of economists.

Market mechanism has become the best instrument for governing international trade. Therefore all the barriers that would deter free flow of trade should be reduced and eliminated. Free trade agenda has then become a core doctrine of international trade in every level – namely bilateral, regional, and multilateral – and has been embedded in global trade institution such as the WTO.

2.2 Culture and Trade RelationThe relationship between culture and trade has change over time throughout history. This relationship is not simple. It is fluid, dynamic, non-linear and diverse. The interactions vary in different societies and countries, depending on idea, perspective and concept of culture and trade they are holding.Rostam J. Neuwirth (2004) has framed the relationship into three different ideas – dichotomy, quandary, and synergy.

The basic interaction of culture and trade is “dichotomy”. Culture and trade are standing on a different side under this relationship and cannot be together. From this point of view, culture means “high culture” which is grounded on pure aesthetic and moral basis. It is sacred and has to be excluded from commercial transaction that will destroy its great value. This line of idea was evident since Roman era in the legal writing of the Roman jurist Gaius (130-180 AD) (Neuwirth 2004). Regarding Rostam’s interpretation, the concept of cultural property falls into the category of “things that cannot be the object of exchange or of any legal commercial transaction” (ibid: 8). These things have to be excluded from buying and selling because they are subject to divine dominion (ibid.). The similar cultural perspective can be seen in the “cultural industries” theory of Frankfurt School - Theodor Adornor and Max Horkheimer. For them culture and industry, which based on

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commercial purpose, are contradiction in terms (Sinclair 1994). Industrialization is perceived to be a threat to cultural value in cultural products through “standardization” that serves the “mass consumption”(ibid.). Accordingly, cultural products should be protected from the industrialization and excluded from international trade regulations that acknowledge cultural products as other commercial products.

The second idea of the interaction is “quandary”, which can best describe the present situation of culture and trade affair according to Neuwirth (2004). Regarding this idea, culture and trade are not excluded from each other but they can be together, for instance, in the form of cultural industries. However, the result of this combination is still ambiguous. On the one hand, commercialization of culture encourages the production and reproduction of the cultural products that contain cultural value. The exchange across societies leads to richness of culture diversity within each country, which flourishes choices and freedom of the people. And more importantly, it also inspires the creativity in producing and reproducing cultural products. On the other hand, the contributions of cultural value in those goods and services are not reflected in market price, which is the key mechanism underlying trade. This leads to the debasement of culture and the tension of culture and trade, especially in the international trade arena. This idea is illustrated in the UNESCO booklet on Culture, Trade, and Globalization in the year 2000 (cited in Neuwirth 2004),

“The issue of ‘culture and trade’ has now acquired prime strategic significant. Cultural goods and services convey and construct cultural values, produce and reproduce cultural identity and contribute to social cohesion; at the same time they constitute a key free factor of production in the new knowledge economy. … When culture is put on the table, it often prompts complex discussion on the relationship between the economic and non-economic value of things, that is, the value attributed to those things that do not have an assigned price… (UNESCO, Paris, 2000: 9)”

Respecting this type of interaction, the commercialization of culture is acceptable. However the tension between culture and trade underneath is caused by imbalance recognition of cultural and economic. Therefore, cultural value of cultural products needs an alternative regulation that can promote and protect them.

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The last idea of culture and trade relationship is characterized by “synergy”, which represents in harmonious and mutually enriching interaction (Neuwirth 2004). From Neuwirth point of view, the type of relationship is “too deeply embedded in the centre of life” (ibid: 10). Their relationship is undetectable and complicated.Culture and trade have been interacting with each other for a long time. Consequently, in order to investigate their relationship, we have to look back through the human history. Accordingly, trade regulation on cultural products should develop through the understanding of custom and usage of culture in the history.

2.3 Culture and TradeTensionsNowadays, the relationship between culture and trade at international level has become more complicated due to change in perception on culture and evolution of global trade structure. The cultural and tradetensions have also changed overtime, regarding the change of their relationship.They have led to different movement of anti-trade and cultural protection. Focusing on the audio-visual sector, the tensions are grounded on four main factors: cultural commodification, market failure, cultural imperialism, and globalization.

1.) Cultural commodification: Cultural Industry Theory, Mass Production, and Homogenization of Cultural Products

In the early age of audio-visual trade, the industry was characterized by “Cultural Industry” theory. The first critique of the “Cultural Industry”was found in the theory of scholars in the Frankfurt school, which explains the experience of cultural industries during 1940s to 1950s (Adornor and Max Horkheimer1979/1947). These scholars held the view that transformation of cultural industry from “Artisanal Stage” into “Industrial Stage” endangers the cultural value of cultural goods and services (During 1999). They argue that the industrialization of cultural industry had reduced the variety and entity of cultural products by homogenizing the products and allowing them to dominate customer preferences. In Adornor and Horkheimer’s view, the cultural products moved from artistic into commercial and then to industrial based of production and distribution

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by the force of economic incentive. The process “commodifies” cultures into commodities and enhances their economic value through means of trade. In order to gain high profit, the change into the industrial stage (mass production and distribution) was necessary due to nature of the cultural industries, especially audio-visual products, which firms can enjoy great profit from the benefit of “Economy of Scale” and “Economy of Scope”. Under mass production, the products become uniform and standardized to reduce costs, and serve a large number of consumers who share the same demand. The taste of the consumers becomes the actual predominant factor. The strategies of cultural producers are to sustain the mass and overweight what consumers need by creating a “style” that can be easily imitated (Adornor and Horkheimer1979/1947).

From this perspective, the overemphasis on economic value of the cultural products leads to the change of the productions and distribution that, consequently leads to the homogenization of the products. The homogeneity of the cultural products under industrial stage poses a threat to their cultural value. In industrial stage, cultural goods and services within and across the countries will become alike and they will represent the same cultural value that is predetermined by producers to generate mass consumption. As a result, individual will imitate the same identity by consuming those homogenous cultural products. Eventually, the individual identity will be characterized by ‘generality’ meaning “Pseudo Individuality” (Adornor and Horkheimer1979/1947). It means that the individuals will lose their real identity and adopt the illuminated one that serve the logic of mass production of the industrial stage, which will in turn affect national identity. Consequently, economic value promoted by industrial production eventually oppresses cultural value by way of mass production, which homogenizes the domain of ‘cultural identity’.

The culture and trade relationship underneath this theory is “dichotomy”. Cultural industrialization, which is the foundation of international trade in cultural products, was perceived as a great threat to culture. Regarding the tension created by the commodification of culture and the homogenization, culture should be preserved and prevented from the industrialization and each nation state should have sovereignty power to protect itself from the danger of cultural homogenization that spreads by international trade. This theory of ‘cultural industry’, though valid in

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some respect, did not anticipate the changes triggered by technology and globalization. These changes had led to the formation of the new relationship between culture and trade.

2.) Market FailureThe cultural industrialization has many forms. Theodor Adornorrecognized two different modes of cultural industrialization(Sinclair 1994). One of them is the transformation of culture by industrial and institutional process, which can be considered as “preindustrial cultural forms” (ibid.:32). This mode of cultural industrialization is the main focus of the cultural industry theory. In the other mode, the cultural products are in industrial form since their origins such as television programs (ibid.). Under this mode of cultural industrialization, cultural products are recognized as normal commodities and subject to market mechanism as the others.

From neoliberal perspective, market is perceived as the most efficient mechanism for resource allocation. Neoliberal norms–introduced since 1980s–emphasize the freedom and rights of individuals and enterprises, and create an institutional setting that enables the free market to flourish. Trade barriers and state intervention are perceived as undesirable and as a source of inefficiency of resource allocation. WTO and the other trade agreements are the institutional backbone of Neoliberalism and its international trade regimes. Trade in almost every goods and services, including cultural products, has been pushed into liberalization agenda, which eliminate trade barriers and reduce the role of government.

The values of cultural product under the market regime are determined by the rules of demand and supply. However, their cultural value is not primarily considered. The lack of regard to the cultural value poses a new problem: their special features are such that the market fails to regulate them (Footer and Graber 2000, Sauve and Steinfatt 2003). First of all, cultural products are categorized as semi-public goods (Hesmondhalgh 2007) – their use is non-rival3 but excludable4. For example, the example given by Hesmondhalgh (2007) – if one person listens to a CD and passes it to another person, that other person experience on it is not altered by the consumption of the first person. But not everyone can consume the cultural products because the producers can create a barrier for

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some consumers by, for example, price setting or a certain type of technology. This means that the economic values of the cultural products are not determined by their scarcity as other commodities. Hence, the producer has to limit the access to cultural products by artificial means to achieve the scarcity that gives value to them (ibid.). In other words, theproducts cannot be regulated by the market only, because their market prices are artificial and do not represent their real value. Given these specific characters, producers in cultural industries tend to maximize the audiences, instead of profit, by overproducing the products (Hirsch 1990/1972 cited in ibid.).

Secondly, cultural products have externalities from consumption: they create positive or negative effectsafter consumption on persons other than the consumers (Sauve and Steinfatt 2003). For example, the import of western cultural products can create positive externality by raising cross-cultural understanding and bringing the notion of ‘liberty’ or ‘democracy’ through the consumption of those commodities (ibid.). Those externalities are not reflected in the market price. Therefore, the prices are not representing total cost and benefit of the products. This means that allocation of cultural products is not efficient under the market mechanism.However, the Neoliberal norms have undertaken the market regime in the form of international trade system, such as the legal body of trade rules under WTO. Thisis a source of the tension between culture and the international trade.

At this point, the explanation of the relationship between trade and culture departs from that of the Frankfurt school, in which the relationship is dichotomy. Culture and trade can be together since the commodification of culture is acceptable as the cultural products are produced in industrial manner from the beginning, according to the modes of production discussed above. In addition, the result of interaction between them can be both positive and negative to the cultural essence of the products. This relationship is“quandary”. On the bright side, trade encourages the cultural production, reproduction and exchange across societies. On the dark side, the core cultural values of the products have been eclipsed by economic value under the regulation of market mechanism. The market has failed to incorporatethe cultural values that contribute the social benefits into the products’ price. Hence, the production and consumption of cultural products cannot reach an optimum point that

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would bring the welfare and benefits to the society as a whole. Regarding two side effects of culture and trade interaction under the market regime, two different movements are triggered–promoting market regime, on the one hand, and opposing it, on the other.

3.) Cultural ImperialismAccording to John Tomlinson, imperialism is “the notion of powerful project which intends to spread a social system from one center of power across the global”(Hesmondhalgh 2008: 96). Regarding his interpretation, cultural imperialism is the strategy to resolve an over-accumulation problem of capitalism by restrucuring the Neoliberalism (ibid.). This domination of culture throughout the cultural industries all over the world can be seen often in the case of audio-visual industries, such as cinematographic films, television and music industries. And in most cases, American cultural industries are the ones that dominate the global market.

Cultural imperialism is characterized by an unequal flow of cultural products exchange in the international trade arena. Nordenstreng and Varis (1974) together with Schiller (1992) called this trait as “one-way street” (ibid.). According to “the theory on the flow of cultural products”, the relationship under global cultural industry exchange is represented by “core-periphery” relationship (ibid.). In other words, cultural products have one-way flow from core country–which have greater economic power and much greater competitive advantage over those particular cultural products–to the periphery countries without any flow back to the core. These lead to the domination of core culture by which periphery cultures can be destroyed. In the worst case, it will bring about homogenization and monopolization of culture as the core culture spread through regional and international trade (ibid.). As shown in the case of Hollywood, the American film industry has become “cultural empire” and dominated other countries’ film industry. However, the flow theory of cultural product has been subject to criticism of “cultural discount theory” by Huskins and Mirus (1988) (ibid.). They argue that in reality the homogenization and imperialism of culture does not happen because there are barriers of language and customer preference: people would prefer cultural products similar to their local culture such as their neighbours in the

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same region over those from other region with which they have no cultural relations.

Nevertheless, there are at least three causes of Cultural Imperialism, namely, nature of the cultural industries, technology of production and distribution, and competitive advantage of language. First of all, cultural imperialism is encouraged by economy of scale and economy of scope in cultural industries’ production and distribution. The economy of scale is a consequence of mass production and distribution in which the average cost is lowered when the more products are produced, hence, the lower price. It contributes tothe spread of cultural products from one dominant country to the rest of the world. On the other hand, economy of scope brings about a wide range of cultural product forms that share the same core culture. It leads to a horizontal integration of cultural industries, which promotes the power of the firms and countries that originate that the culture.

Secondly, the changes in cultural industries are attributed to the technology of production and distribution. The country that is capable of holding the newest technology in the industries can gain higher profits and dominate the market. In other words, cultural imperialism is promoted by “first-mover advantages”. It is the practice in which the first player who can penetrate the market and develop new technology before other players gains higher benefit than the latecomers (Hoskins and McFadyen 1991: 214 cited in Sinclair 1994: 42). Those first-moving firms are also able to adjust and cope with the problems emerging in the industries better than the others. For example, in cinematographic film industry during the 1970s, European film industry faced the audience crisis in which cinema audience all over Europe had dramatically decline due to the popularization of television (Cowen 2002). This was resulting in deterioration of European film industry. While, during that period, American cinematographic film industry did not face that crisisbecause it had experience the similar crisis much earlier during 1946-1956 (ibid.). It did not face the audience crisis in 1970s is that This is due to the advance and high growth of television industries in the United States, which made television become common in the U.S. ten years before Europe (ibid.).

The third factor that leads to imperialism in cultural industries is the competitive advantage of language. Language is acting a means of cultural transmission. It contains the content of culture and delivers it to consumers.

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Therefore, the cultural industries that operate by means of language that is widely used and accepted as English can enjoy the competitive advantage than others. Wildman and Siwek use the concept of “domestic opportunity advantage” to explain the domination of English cultural products in the global markets (Sinclair 1994). They notice that the country with large domestic market where people using the same language, such as the US, have a great opportunity to grow and enjoy the profit. They also apply this concept to other countries that they called “geolinguistic region”–all the countries in the world that use the same language (ibid: 42). Hence, the US, which dominates English-speaking world, can expand its cultural industries worldwide and enjoy great profits. Wildman and Siwek give an explanation in the case of cinematographic film and television program that the large natural-language markets give the industries a financial incentive to produce high budget products that are more appeal to the audiences (cited in Sinclair 1994: 42-43).

The relationship between culture and trade under “cultural imperialism” theory is “quandary”. The industrialization and internationalization of culture is acceptable. Culture and trade can be together. However, due to the nature of cultural industries, especially audio-visual sector, international trades of cultural products have been dominated by cultural empire, which is the American cultural industry in most cases. For these reasons, an international tradeof cultural products has been opposed from many countries all over the world, except the countries with strong and dominant cultural industries such as the US. Most of the movements related to anti-unequal flow of cultural products are grounded their arguments on cultural sovereignty right of each national states and the importance of protection and promotion of “cultural diversity”. They are demanding for an international recognition of the legitimacy of state intervention to protect and promote their cultural industries from the threat of cultural imperialism.

4.) Globalization: Cross-Border and Transcended Exchange of Cultural Products

Globalization has increased cross-border flows of goods, investment, people, money and ideas between countries (Scholte 1997,Bhagawati 2004). It has flourished a cultural international exchange, both in term of cultural products,

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and in term of ideas, norms and styles. Territorial barrier of cultural flow has been reduced by the advancement of technologies. People from one part of the world can easily adopt and exchange with the others’ culture by consuming cultural goods and services such as movies, music, or books, and receiving information from all over the world through channels that greatly reduce transaction cost such as internet or satellite television. Moreover, under the globalization, the production of cultural products becomes rootless. Tyler Cowen elaborates the picture of globalization of culture in the world today as,

“A typical American yuppie drink French wine, listen to Beethoven on Japanese audio systems, use the Internet to buy Persian textiles from a dealer in London, watches Hollywood movies funded by foreign capital and filmed by European director, and vacations in Bali, ….. A teenager in

Bangkok may see Hollywood movies starring Arnold Schwarzenegger (an Austrian), study Japanese, and listen to new pop music from Hong Kong and China, in addition to the Latino singer Ricky Martin… ”(Cowen, 2002: p.4)

Globalization does not only raise cross-border flow of exchange but it also merges the world together. It is an increase of trans-border relation, which represents in “De-territorialization” and “Supraterritoraility” (Scholte 1997). Hence, this “global” phenomenon has made the world become a “single place” (ibid.), at least to the extent that they refer to the ‘winners of globalisation’. The cultural products do not onlyflow acrossborders but also fall within “transworld” market under globalization (ibid.). The production is changed to mass production and operating across several countries to serve the global market demand, in which consumers are sharing the same preference. The identity of people all around the world has been reconstructed. The new form of culture ethos under globalization is hybrid, synthesized and rootless. This new characteristic of “global common culture” is so called “cosmopolitan” (Cowen 2002). From this perspective, there is no purely dominant culture but it is rather mixedwith and adaptedto other cultures includinglocal cultures in each country. However, cosmopolitan culture can be considered as the homogenization of culture. Although there is a room for local culture to stand, but the core value of cosmopolitan culture is homogenous and dominated by culture of the country that has powerful cultural industries such as the US. One of the reasons is that culture needs to be standardized and universalized to cope with the

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complexity of globalization (Gellner 1983 cited in Sasstelli 2002: 438).

Scholte points out that the main driver of globalization is economic factor. From his explanation, the globalization connects to the dynamic of capitalism and capital accumulation that seeks for the new opportunities for accumulation (Scholte 1997). One of the opportunities is in the area of cultural products whose economic value is also highlighted. However, the effects of this phenomenon on the cultural domain remain debatable. According to Moghadam and Elveren (2008), globalization dimension of culture is divided into two approaches. On the positive approach, globalization makes the world better off by increasing cultural exchange across societies. The widespread of exchange gives an opportunity for cultural value to be expressed (Cowen 2002) and stimulate creativity, which is an important element of cultural value. On the other hand, the negative approach of globalizationis represented by the homogenization of culture due to the diffusion of Western cultural products (Moghadam and Elveren 2008). In this perspective, globalization endangers local cultural value and the diversity of culture in the world by accelerating cultural imperialism.

The culture and trade relationship under globalization is “quandary”. Whether the cultural values and culture diversity are enriched or degenerated by globalization is still debatable. It might promote them through the exchange or degenerate or replace them by the homogenous "cosmopolitan" culture. The homogenization could lead to the tension between culture and trade

Culture and Trade Relation and Tension in the Present world

In an international trade arena, the culture and trade relationship is not ‘dichotomy’ anymore but rather “synergic” as they have been interacting throughout history. It is not linear but complex and different in each country. In the recent decades, cultural industries and international trade in cultural products have been dramatically growing and become one of the significant industries in the world due to their contribution to both economic and social aspects. Thus, culture and trade are inseparable in this context. They coexist with more harmony and synergy than before. Nevertheless, their exact relationship is still very difficult to define. Each society holds a different perspective on the relationship, regarding

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their histories, norms and social contexts, because of which international trade disputes are repeatedly occurred.

There are two main perspectives on culture and trade relationship in the dispute. One is the stance of the US that perceives cultural products as other commodities. This point of view is based on neoliberal agenda, which believes in individual freedom and effectiveness of market mechanism. Accordingly, trades in cultural products should follow international trade norms and legal system of WTO, which undertake neoliberal agenda, in the same way as other products.

Another perspective is of those who recognize the uniqueness of cultural industries and products, for instance, Canada, France, and European Union. From this standpoint, culture is not excluded from trade but it should not be acknowledged as mere commercial objects and should be protected from any threat such as cultural imperialism. They demand the nation states sovereignty and autonomy rights to use measures to protect and promote cultural value and “cultural diversity”. Consequently, an international movement to protect and promote cultural value in cultural trade and exchange was initiated. They aim at creating an international legal frame to be a standard and norm for cultural protection. Later on, the UNESCO Convention on Cultural the Protection and Promotion of the Diversity of Cultural Expressions was established as a reference on cultural protection and promotion that relevant to the issue of international trade on cultural products.

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Chapter 3Culture and Trade in Global Governance Regimes

Up to the present, there are two main separated global governance bodies that regulate the issue of culture and trade. On the one hand, rules and regulations of WTO, especially GATT and GATS,hold the world most important norms and standard of international trade system. On the other hand, the UNESCO, an international organization that has been working on cultural issue and development, has recently established the Convention on Cultural the Protection and Promotion of the Diversity of Cultural Expressions (henceforth the UNESCO convention). This convention is multinational legal standard for cultural protection and promotion. These two global governance regimes are standing on the different norms and values. Their scopes of interests are different and they do not cooperate with each other. However, cultural industries and their international trade issue are related to both of them. Regarding the change of the relationship and tension between cultural and trade that becomes more complex and synergic; the world may need more cooperation between the two global governancesor the new governance regime that can release the tension.

3.1 Trade Governance on Cultural Industry: WTO and its Agreements

3.1.1 Norms of trade governance regimes and their relevance to the cultural industry: GATT, GATS and WTO:

GATT has been regulating the international trade in goods since 1948. In 1995, after the Uruguay Round negotiation, WTO was founded as a body of trade rules. WTO is an international organization where governments from all over the world can negotiate agreements on trade and settle their trade disputes (WTO 2008). It contains a set of legal ground rules for international commerce on which a number of member countries agree and bind their trade policies with these rules (ibid.). WTO have also expanded to the area of servicesand of intellectual properties such as invention, creation and design (ibid.), by establishingGATS

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and Agreement on Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS), respectively.

The international trade rules of WTO are influenced by neoliberal agenda, which aims at promoting individuals and enterprise freedom by establishing institutional framework that ensures individual’s rights and enrich free market. Market mechanism is perceived as the best means to promote human well-being(Harvey 2005). The role of government is limited only to preserve and create institutions that enhance the free market. Rachel Turner points out four beliefs that characterized neo-liberalism as follows: 1) importance and necessity of market; 2) commitment to the rule of law; 3) minimal state intervention; and 4) security of private property and ownership (Turner 2008).

The neoliberal agenda has become the norm underpinning WTO trade regulations. WTO has positioned itself as an organization for liberalizing trade (WTO 2008). In order to bring about human well-being, market needs to be freed. Trade barriers and discriminations that obstruct the free flow of international trade have to be eliminated. In other words, the international trade has to be liberalized. To achieve this goal, WTO has set principles of the trading system as follow (ibid.).

1.Trade without discriminationUnder this principle, which is known as “Most-

Favoured-Nation treatment (MFN) ”, all member countries have to operate their trade without discrimination among their trade partners, i.e. the countries cannot give a special treatment to their trade partner without granting it to all other WTO members. The MFN is so important as it is a priority in GATT, GATS and TRIPS. Moreover, the WTO’s members have to abolish discrimination treatments between their own and foreign goods and services. In other words, “imported and locally produced goods should be treated equally” (WTO 2008:11). This principle is called “National treatment (NT)” and has been adopted by all agreements of WTO.

2.Freer TradeThis principle aims at reducing trade barriers as a

means of encouraging trade. The area of concern includes tariffs and non-tariffs barriers on imported goods and services. WTO uses the negotiation process to decrease its members’ trade barriers. However, it

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considers that each country needs time to adjust its system;therefore it allows member countries to free their trade gradually by “progressive liberalization”.

3.PredictabilityUnder neo-liberalism agenda, freedom and rights of

an individual and enterprise needs to be ensured. Only reducing trade discrimination is not enough. An international organization that governs global trade rules such as WTO has to make trade environment stable and predictable as well. When member countries agree to liberate their market under WTO agreements, they have to “bind” their commitments (WTO 2008: 12) and cannot change them without negotiation. In addition, WTO also encourages their members to have transparent trade policy by disclosing their policies to public or notify them to WTO.

4.Promotion of fair competition WTO believes in the benefits of competitive market. It

does not prohibit protectionism measure of the member countries entirely but establish international trade rules that promote an open, fair and undistorted trade competition (WTO 2008).

3.1.2 WTO and Cultural ProductsSome of the cultural products are goods–such as

books, CDs, painting, films and handicrafts–and some are services–for example, singing, performing, screening and painting (Hahn 2006)–therefore, they are regulated by GATT and GATS, respectively.Trade governance under WTO holds their economic value beyond their cultural value and has brought them into neoliberal agenda. It requires cultural industries to reduce and eliminatetrade barriers and discrimination that deter trade flow, which means the countries are subject to MFN and NT principles. However, there are some exceptions and flexible practices for international trade rules of in these products.

Cultural Product as GoodsIn the early years of GATT, cultural value of cultural goods was recognized. When the GATT was drafted in 1947, specificity of cinematographic films as cultural goods was covered under Article IV, which legitimized member states to use screen quotas for “exhibition of cinematograph films of national origin during a specified minimum proportion of

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total screen time actually utilized”5(Kakabadse 1995). This authorization of screen quotas in this case is known as principle of “cultural exemption” i.e. the exemption of cultural goods from trade liberalization rules (ibid.), or “French exception” since it was France that started the cultural exemption movement in GATT (Vincent 2005). By this principle, cultural goods are treated differently from ‘normal’ commercial goods due to their dual-value nature. The recognition of cultural value in cultural products such as cinematographic films can be illustrated clearly in the argument made at the time (Kakabadse 1995),

“The case of films…brings in a very important cultural consideration such as does not come in the case of other commodities. We think it is quiet clear that countries will not allow their own film production which affects their culture and ideas, to be swamped by imported films simply because the latter happen to be better organized commercially. Some perfectly reliable method of safeguarding domestic film production is needed and will in fact be insisted on by a great many countries. The method of the screen quota is much the most effective …We must therefore preserve our right to use this method.”6

Cultural Products as ServicesThe rules of trade agreement of GATS cover all international trade in services. Many of cultural products that are controversial in international trade dispute are categorized as “audio-visual services” under GATS. The audio-visual sector includes “motion picture and videotape production and distribution services, motion picture project services, radio and television services, radio and television transmission services, and sound recording”7. This sector is a sub-sector of “communication services” in GATS Services Sectoral Classification list8. However, GATS has no special exception clause for cultural or audiovisual services(Kakabadse 1995). Cultural services are perceived as other normal services, even though there was a movement for cultural exemption in GATS negotiation twice. The first attempt was made by French government. They used the Article XIV of GATS9 (the clause about general exception) as a reference for the cultural exemption but it was rejected after the negotiation (ibid.). The second attempt was for the recognition of the “cultural specificity” by the European Commission . The EC wanted special treatments for audio-visual services in progressive

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liberalization process (not exempting it from GATS) but this proposal was rejected by the US (ibid.).

Under GATS, MFN principle is applied to all services, however, special temporary exemptions are allowed in the case that a country had already made a preferential agreement of trade in services with its trade partners (WTO 2008). The agreement gives them rights to continue those favourable treatments by listing them in “MFN exemption”10 list separated from the first set of their GATS commitment (ibid.). But thelist can be made only once and will last no more that ten years (ibid.). On the contrary, member countries have to apply NT treatment only in areas that they made commitment. They can negotiate to open specific sectors at the level of openness they will engage. The commitment will be in form of “schedule” that listed service sectors according to three principles: market-access commitment; market-access limitation; and exception to the national treatment (ibid.). This principle is known as a “positive list”.

In sum, there is no commitment for any service sectors under GATS to liberalize their market access (Kasabadse 1995). The country has a degree of flexibility to choose the sectors and level of liberalization. The only commitment they have to make is to follow the MFN principle. In other words, GATS allows domestic regulations and autonomy to intervene their service sectors by giving them freedom to make a commitment (Zampetti 2003). Until 31 January 2009, there are only 30 countries committing their audio-visual services to GATS11. It is one of the lowest committed sectors of GATS.

3.2 The Rise of Cultural Diversity Protection and Promotion

Although the international trade rule of cultural products under WTO allows some freedom and exceptions for the products to the member countries, but the countries cannot escape further liberalization agenda. Under GATT, only the screen quota system of film industries is allowed, the other goods still have to follow MFN and NT principle. In the case of GATS, even though the countries can enjoy the freedom to commit in the agreement, but that freedom is limited, as stated in Article XIX (4.) of GATS that “The process of progressive liberalization shall be advanced in each such round through bilateral, plurilateral or multilateral negotiations directed towards increasing the general level

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of specific commitments undertaken by Members under this Agreement”.12

The force of liberalization agenda under global trade governance has raised the tension and imbalanced recognition of economic and cultural value of cultural products–in favour of economic value. The tension has recently surfaced in international trade global governance regime. Rooted in the attempt to integrate cultural products into the international trade regulation, this tension has led to an international movement for protection and promotion of “cultural diversity”. The movement has created an attention on cultural diversity concern at global level, particularly in multilateral trade agreement such as GATT and GATS under WTO. It has been trying to create a space for cultural concern in international trade regulation regime by establishing global governance body that would support the protection and promotion of cultural diversity. To this effect, in 2005 the UNESCO convention was introduced as a frame of reference to assert the issue of cultural diversity into international trade agenda.

Since the attempts to assert “cultural exception” practice into international trade governance under WTO were failed, Canada, France and European Union had led the movement to seek for a new supranational governance regime, which authorized the countries to protect their cultural industries. These countries are sharing the same perspective that cultural products are special and different from products because they contain cultural value that needs to be protected and promoted. The new regime that they were seeking is not based on the cultural exception practices anymore, but “cultural diversity”. This norm of cultural diversity is believed to refine the relationship between international trade governance and domestic cultural measures (Chen-Tibergien 2007). Their first movement to minimize the impact of WTO trade rules on domestic cultural policies was to create two international representative associations - the International Network on Cultural Policy (INCP); and the International Network for Cultural Diversity (INCD). These two associations have then played role in proposing a “New International Instrument on Cultural Diversity (NICD) ” to UNSECO as a ground for cultural diversity convention (Acheson and Maule 2003).

In 1998, leading by Canadian Minister of Heritage, Sheila Copps, INCP was founded by ministers of culture from over 40 countries at a meeting in Ottawa (Chen-Tubergien 2007). This meeting was a consequence of the

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UNSECO conference earlier that year in Stockholm, and recognized an importance of culture as the end and means of development that will flourish human existence, not a means to material process (INCP 2004). Parallel to INCP, Canadian Ministry of Heritage had organized a non-governmental organizations network forum to complement INCP. As consequence, in 1999, INCD was created. The INCD encompasses cultural ministers from 53 countries and a group of individual artists, cultural activists and cultural NGOs from about 70 countries (Acheson and Maule 2003, Chen-Tubergien 2007). Both organizations work on the same agenda to promote cultural diversity but in different ways. INCP focuses on political aspect, while INCD takes civic and participatory aspect of cultural diversity (Acheson and Maule 2003).

The efforts to create space for cultural diversity issue at global level became a concrete success when UNSESCO announced the “Universal Declaration on Cultural Diversity” in 2001, after the Council of Europe’s Declaration on Cultural diversity in 2000. This declaration is the first legal instrument that recognizes cultural diversity as a “common heritage of humanity” and legitimizes its safeguarding as “concrete and ethical imperative, inseparable from respect for human dignity”13.

Even though the cultural diversity declaration of UNESCO was issued, the mission of INCP and INCD were not accomplished. Their goal was to push UNESCO to establish an international governance body that could give permanent legal framework for cultural diversity (Neil 2003 cited in Chan-Tibergien 2007). Finally, in the 2003 UNESCO General Conference, the Director-General was requested to draft and submit the Convention on the Protection of the Diversity of Cultural Content and Artistic Expression by October 200514. This request was a consequence from the movement of its member countries. The convention has been changed to “the Convention on the Protection and Promotion of the Diversity of Cultural Expressions” and was adopted by the 33rd General Conference of UNESCO in October 2005 with 151 votes in favour of it, 2 votes against from the U.S. and Israel, and absence of Australia, Honduras, Nicaragua, and Liberia (ElverenMoghadam 2008). It has been enforced since 18th March 2007 after ratification of 30 member countries.

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3.3 Cultural Governance on Cultural Industries

TheUNESCO Convention has been established as an international legal framework that creates political space for culture in global level by recognizing the importance of “cultural diversity”. Regarding the Convention, “cultural diversity” is “a defining Characteristic of humanity (UNESCO 2005: 1)” and “link to the human rights and fundamental freedom (UNESCO 2007) ”. The Convention is “cultural governance” that “creates an enabling environment in which the diversity of cultural expressions may be affirmed and renewed for the benefit of all societies.” (ibid.: 5). Toaccomplish this objective, it constructs an international cooperation as a keystone to ensure cultural diversity at global level and to reaffirm the sovereign right of states to use their domestic policies that will protect and promote the diversity within their territory.

The convention has contributed to a great change of global perspective on the culture-trade relationship–from culture vs. trade, to culture and trade–that redefines the definition of culture, and shifts the movement of “cultural exemption” to “cultural diversity”. This transformation is so important as it changes the position of cultural movement and reflects the new relationship between cultural and trade.

3.3.1 About UNESCOUNESCO is the United Nation Agency that aims at building peace through education, science and culture. The organization was founded on 16thof November 1945 with the purpose to reconstruct education systems and embody culture of peace after the Second World War. It had been spurred by vision of France and the UK that “this new organization must establish the intellectual and moral solidarity of mankind and, in doing so, prevent the outbreak of another world war.15”. Nowadays, UNESCO has become an organization that promotes multidisciplinary exchange and mutual understanding (Elveren and Moghadam 2008) by being“a laboratory of ideals and a standards setter to forge universal agreements on emerging ethical issues16” and as a “clearing house for the dissemination and sharing of information and knowledge17”.

UNESCO is working on five main areas: education; natural science; social and human science; communication

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and information; and culture. On the cultural pillar, UNESCO takes position on creating conditions for international dialogue which on the respect of specificity and equal dignity of all civilization and culture, as it states in its “Major fields of action and priority” that,

“Preserving and respecting the specificity of each culture, while ensuring that its preserves and respects the specificities of another culture, and involving it in an approach that brings them together and extends beyond them in a more interactive and interdependent world. Is the challenge which must be met by the international community and, on its behalf, by UNESCO and its partners.18”

UNESCO believes in the world with cultural diversity. It has dual mandates to promote “fruitful diversity of cultures” and “free flow of ideas by word and image” (UNESCO 2007). This is in line with its goal of “ensuring the orchestration of separate cultures, not into uniform but into a unity-in-diversity, so that human beings are not imprisoned in their separate cultures but can share in the riches of a single diversified world culture”(Report of the Director-General, 1974). The three main priorities of UNESCO on cultural pillar are as follow19,

Promoting cultural diversity, with special emphasis on the tangible and intangible heritage.

Cultural policies as well as intercultural and interfaith dialogue and understanding.

Cultural industries and artistic expressions.To fulfill its goals and actions as a standard-setter,

UNESCO has established “binding international legal instruments” - in four core areas of creative diversity; which are cultural and natural heritage, moveable cultural property, intangible cultural heritage and contemporary creativity – by drawing seven conventions 20(UNESCO 2007). One of which is the Convention on the Protection and Promotion of the Diversity of Cultural expressions (2005).

3.3.2 The Convention on the Protection and Promotion of Diversity of Cultural Expressions (The UNESCO Convention)

The heart of the UNESCO Convention is on “cultural diversity” of cultural expressions. It is not only concerned with expressions of cultural heritage of humanity but also

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expressions of diverse mode of artistic creation, production, dissemination, distribution and enjoyment, whatever means and technologies used (UNESCO 2005:5). The Convention contents are based on the UNESCO Universal Declaration on Cultural Diversity that was announced in 2001. This is the first reference of international cultural diversity norms. Under the Declaration, cultural diversity, for the first time, has been raised to the level of “the common heritage of humanity” and “as necessary for humankind as biodiversity is for nature”(UNESCO Declaration on Cultural Diversity, 2001). However, the Convention does not cover all aspects of cultural diversity in the declaration but deals only with a specific field addressed in the declaration, which are the followings (UNESCO 2007),

The need to recognize that cultural products convey identity, values and meaning and consequently cannot be considered as mere commodities or consumer good21.

The need for state to take all appropriate measures to protect and promote diversity of cultural expressions while ensuring the free flow of idea works22.

The need to redefine international cooperation, the keystone of the Convention, as each form of creation bears the seeds of a continuing dialogue23.

The main objective of the Convention is to “strengthen the five inseparable links of the same chain; namely, creation, production, distribution/dissemination, access and enjoyment of cultural expressions … ” (ibid.: 5) by focusing on the protection and promotion of the diversity of cultural expressions. Regarding its primary objective, the Convention’s mission is to create enabling environment that affirms and renews the diversity and ensure international cooperations over cultural issue (ibid.).

3.3.3 What is Cultural Diversity?According to Article 4–Definition–of the UNESCO Convention, “cultural diversity” means “the manifold ways in which the cultures of groups and societies find expression. These expressions are passed on within and among groups and societies.24”.This is a new concept for legitimizing cultural protection. It replaces the concept of cultural exemption, which attempted to exclude culture from trade sphere. The change from cultural exemption to

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cultural diversity concept reveals the change in relationship and tension between trade and culture. As discussed in Chapter 2, culture and trade relationship has changed from dichotomy to synergy. According to this type of relationship, culture and trade are not two separate entities. Cultural products, which spread worldwide through international trade, are important means for cultural expressions. However, only trade itself cannot ensure the diversity of cultural expressions, so that each nation-state needs autonomy to intervene their cultural industries.

The cultural diversity, according to the UNESCO Convention, does not refer to the static quantitative of culture existing in the world–“objective diversity”–, but rather an “operative diversity”, which focuses on the culture that people can effectively enjoy (concept by Cowen 2002: 14-15). Therefore the Convention focuses on the diversity of “cultural expressions” not “culture” itself. “Cultural expressions”, mentioned in Articles 4 (3.), are “the expressions that result from the creativity of individuals groups and societies, and that have cultural context.”25. Cultural diversity by itself is not meaningful without the expression and dialogue between cultures.

According to Cowen (ibid.), the concept of cultural diversity is multiple and divergent (p.14). It can be interpreted in many ways and used by different parties. For example, from Cowen’s perspective, cultural diversity can, at least, be divided into “diversity within” a society and “diversity across” societies. The former refers to the richness of cultural choice within a particular society, while the latter the difference of culture of each society (Cowen 2000: 14-15). The diversity within society reflects the belief in an individual’s freedom of choices. This concept is taken by the US to support the free trade agenda in cultural products. On the other hand, diversity across societies is based oncollective concept and identity of each society. Regarding this perspective, it is important to protect the cross-societies cultural differences from the threat from homogenisation. Identity building with culture root is more important than the individual choices in this concept. However, this concept of diversity has been criticized by the US that it is protectionism and against the freedom of individuals. Nevertheless, the Convention takes both concepts of cultural diversity into account and recognizes the diversity of cultural expressions that “pass on within and among groups and society”. Therefore, the convention

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is not promoting protectionism but encouraging cultural exchange and expression of all culture with equal interactions, as states in Articles 4 (8) about the concept of interculturality,

“Interculturality refers to the existence and equitable interaction of diverse cultures and the possibility of generating shared cultural expressions through dialogue and mutual respect” (UNESCO 2005: 5)

Scope of the UNESCO ConventionThe UNESCO convention is unique and different from other conventions of UNESCO because it is focusing specifically on the diversity of “cultural expressions”, which is transmitted by “cultural activities, goods and services” (UNESCO 2007). This means that the Convention pays the specific attention on all processes that contribute to thecultural expression through cultural activities, goods and services. This includes the process of creation, production and distribution of cultural products in cultural industries.

By highlighting on this particular area, the UNESCO Convention is playing on the same filed as GATT and GATS of WTOin which the cultural goods and services are also covered. Regarding the Convention, cultural products have a dual-value nature (economic and cultural value), so that they cannot be considered as mere objective to trade negotiations (ibid.: 4). Consequently, the Convention does not scope its focus on the economic aspect of the cultural products, but rather uses multidimensional approach that cover both cultural and economic aspects (ibid.). 26

Rights and Obligation of Member StatesThe UNESCO Convention’s provisions are based on the respect for human rights and the fundamental freedom of individuals. As a result, any risks of violation against the Convention, which infringe human rights and fundamental freedoms, have to be eliminated (ibid.). The Convention gives the rights and obligation to each member state.It allows the member states to determine the situation “where cultural expressions on their territory are at risk of extinction, under serious threat, or in need of urgent safeguarding” (ibid.: 7) and take all proper interventions to protect and promote cultural diversity. Regarding Article 1 (h.), the Convention has legitimized the sovereign rights ofthe member states to “maintain, adopt and implement

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policies and measures that they deem appropriate for the protection and promotion of the diversity of cultural expressions on their territory”.

However, it does not mean that the UNESCO Convention establishes a state monopoly but rather constitutes “an interaction between individual and institutional stakeholders in sharing responsibility” (UNESCO 2007). TheConvention has recognized thatthe cultural expressions can be created by individuals, groups or societies only if they contain cultural content. In particularly, it emphasizes the role of civil society as it states in the Article 11 that “Parties acknowledge the fundamental role of civil society…Parties shall encourage the active participation of civil society in their efforts to achieve the objective of this Convention.” Moreover, the Convention does not stop its focus only on the stakeholders within each state. It also realizes benefits from external stakeholder as well. This is clearly illustrated in one of the convention principle that an international cooperation is a keystone to accomplish its objectives. It addresses in Article 12, that “Parties shall endeavour to strengthen their bilateral, regional, and international cooperation..”.

3.4 Global Trade Governance vs. Global Cultural Trade Governance

3.4.1 Cultural Diversity and Free TradeIt can be said that the concept of cultural diversity, as taken by the UNESCO Convention, is actually based on the same norm as free trade agenda undertaken by WTO’s agreements. Basically, both of them celebrate the freedom of individual and choices under the neoliberal norms. While free trade agenda promoted the freedom of entrepreneurs and consumers under the market regime, cultural diversity is trying to promote freedom of cultural expressions of each society. Both of them are not tolerate to any barriers that obstruct the freedom. However the means ensuring those norms are not the same. For WTO, it uses multilateral agreements that set legal standard for member countries to follow, in order to enhance market mechanism. In other words, WTO believes that market is the best mechanism to ensure the entrepreneurs and individuals freedom that will bring an effective resource allocation and welfare for people. On the other hand, the UNESCO Convention

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believes in state mechanism that protects and promotesthe diversity of cultural expressions from any threat. Hence, the Convention does not have binding condition for member states to follow, but it rather recognizes legitimacy of states’ actions. Under this, member states have flexibility to take any actions as long as they are in line with the Convention principles.

Regarding the unique characteristics of cultural industries, the market mechanism alone cannot confirm the diversity of cultural expressions. What being neglected from market regime is the concept of “equality”. Even though, the market, under idea of Neo-liberalism, has recognized the freedom of expressions, but they are subject to the market competition. But, cultures are different. They are important for identity building of each society. And, most importantly,a culture cannot be substituted by others. Instead of being subject to the competition, they should be promoted on an equal scheme.

The cultural diversity concept of the UNESCO convention emphasizes the equitability as well as the freedom of expression. Regarding the Principle of equitable access in Article 2 (7.) of the convention, each culture should have “an equitable access to the means of expressions and dissemination constitute important elements for enhancing cultural diversity”. It also recognizes an equal dignity of and respects for all cultures as one of its principles in Article 2 (3.). Regarding this principle, all culture including those of minorities or indigenous people should be respected and have an equal opportunity to express, even though they are valueless under the market scheme.

3.4.2 Clash of the Global Governance Regimes?Although, the UNESCO convention was initiated to resolve the culture–trade tension triggered by liberalization agenda of GATT and GATS, but this does not mean that the Convention has an intension to oppose the international trade regulation of WTO. According to Article 20 (2.) of the Convention: “nothing in the Convention shall be interpreted as modifying rights and obligations of the Parties under any other treaties to which they are parties.”27 The Convention takes the practice of complementarity and mutual supportiveness. It recognizes a good faith of other treaties as well as of itself; therefore they can be pursued in a compatible and complementary manner (UNESCO 2007;

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appendix p.11). However, under this manner the Convention is not subordinate to others, regarding Article 20 (1.), or has any intention to violate GATS and GATT. On the contrary, it takes the roles of WTO agreements into account along with its roles. The Article 20 reflects the recognition of the dual economic and cultural nature of cultural products, which is the main objective of the convention (UNESCO 2007; appendix p.11).

Nonetheless, some government actions to protect and promote cultural diversity, which are legitimized by the Convention, can result in conflicts with rights and obligations of GATT and GATS (Hahn, 2006: p.542). For example, some specific quota systems will violate Article I of GATT (ibid.). In the case of GATS, most of thegovernmentactions are still compatible because of the temporary exemption clause provided in GATS(ibid.). However, when the exemptions of GATS are over, the conflict of rights and obligations between the Convention and WTO rules would reveal.

3.4.3 The End of Culture and Trade Tension?The UNESCO Convention seems to be the hope for culturalism to retaliate progressive liberalization agenda of WTO. However, in practice, the Convention cannot make differences as much as expected. Its major contribution is that it creates the recognition of cultural diversity in international trade sphere, and, moreover, notices the legitimacy of state intervention in cultural industries. From Acheson and Muale’s (2004) point of view, the Convention will improve bargaining power of member states in the WTO, especially in GATS, in which cultural concern can fall into “National Policy Objective” exemption under Article XIX:2 of GATS (cited in Voon, 2006).

However, some other authors – namely, Hahn (2006), Eleren and Moghodam (2008), and Burri-Nenova (2009) - do not agree with them due to a number of reasons. First of all, the Convention does not provide sufficient mechanism to protect and promote cultural diversity. It is a non-binding agreement, which only establishes norm and standard without enforcement tools, such as duties or punishment, to force its member states (Burri-Nenova 2009). For example, it only allows its parties to use and maintain protectionism measures for cultural protection purpose, but does not require them to do so (Hahn, 2006: p.542). It leaves the

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consideration whether to take actions to member states. Secondly, the Convention does not modify the rights and obligations of the member states under their other existing treaties (Burri-Nenova 2009: 10), regarding the Article 20 of the Convention. This means that the parties would take only the Convention’s provision that relevant to its previous treaties, especially WTO’s, into account. As the result, the Convention might not be able to make any difference in solving the tension between culture and trade. Garry Neil noticed that the outcome of culture and trade dispute negotiation under WTO might be identical, although the Convention is introduced. Lastly, the lack of consensus, particularly the US consent, has become the weakness of the convention (Hahn 2006). The US is the biggest exporter among countries with cultural industries, especially the audio-visual sector; hence without its consent, the Convention could not make the real impact.

Consequently, the tension between culture and trade does not disappear by the establishment of the Convention. The real tension in the international trade scheme lays on liberalization movement of WTO that neglects the new relationship between culture and trade. As mentioned above, culture and trade, nowadays, are inseparable due to their synergic relation. The regulations of WTO have taken economic value of cultural products without considering their cultural value. However, even though the UNESCO Convention is inserting cultural concerns into the global governance regime, but it could not make any significant effect on WTO trade regulation regimes, which are the most powerful global governances regimes for international trade. As long as the global governance regimes of trade and of culture are working separately, the tension will not be solved. Regarding synergic relationship between culture and trade, The UNESOCO Convention needs stronger enforcement mechanism that make it comparable with WTO rules, or the world might needs a governance regime by which trade and culture can be synchronized with one another.

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Chapter 4The Film Industry: Korea as a

Case Study

4.1 The film industry: Cultural ImperialismAmong all the audio-visual industries, cinematographic film industry is the most problematic area in international trade due to its nature and market structure that has been influenced and dominated by Hollywood producers. The film industry involves all kinds of activity related to the production and distribution of motion pictures for entertainment. This industry is categorized as cultural industry, creative industries, or audio-visual industry but the unique characteristics of cinematographic films are such that the term “cultural industry” is the most appropriate, due to their dual value nature: economic and cultural (PÈrez de CuÈllar 1996, Neuwirth 2004)

Although the tension of cultural industries under the international trade has changed due to the technological change and globalization, but that of cinematographic film industry is still characterized by “cultural imperialism” of Hollywood film industry. Jeremy Tunstall has mention that film industry with the domination of Hollywood is the only case of media imperialism (McAnany and Wilkinsun1996)The domination of Hollywood is attributed to advantages from economy of scale and economy of scope in production, the first mover advantage, and the competitive advantage of English language, as described in Chapter 2. The economy of scale is the reason of the dominant strategy in most film industries worldwide that are trying to penetrate the regional and global market by focusing on the distribution channels and retails. The Hollywood is using the “network” model of distribution to spread its products throughout the world market. It internalizes the transaction costs of production and distribution through studio system, which has network all over the world (Singh 2008).

Despite all of those characteristics, Hollywood film industry has a unique domestic market helping it dominate the international film market (Cowen2002). According to Hoskin and McFadyen (1991), Hollywood has a competitive advantage due to its huge domestic market that can cover all the fixed cost of each film production (KimJu. 2007). The

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unique nature of American domestic film market gives Hollywood an opportunity to enjoy the economy of scale by expanding number of audiences at regional and global level (ibid.). And since cinematographic films are expensive to produce, the advantage of gigantic domestic market enables Hollywood to produce high budget films using new technology that no other country can compare. Nevertheless, Cowen argues that Hollywood is not dominating the world film industry directly because of its advantage from large domestic market, but because it can afford to produce better products with a lot of investment and high technology, which make consumers assess its products as superior (Cowen 2002). Regarding the large domestic market, Hollywood becomes specialized in movie making, especially in entertaining kind which have high global appeal (ibid.:74-75). The special characteristic of Hollywood movies is that they contain cosmopolitan culture that attracts global audiences (ibid.:75). Since the US is one of the first countries in cinematographic film business, Hollywood is dominating the preferences of audiences all over the world. In addition, the fact that Hollywood started developing its industry long before any other film industries elsewhere, especially its competitor–European film industry–enables it to step forward beyond its competitors and bypassed crises in the industry, i.e. the dramatic decline of film audiences due to the rising popularity of television during 1955 – 1962, more easily (ibid.).

Today Hollywood films account for about 80% of the international film market share (KimJu 2007). Despite that, Hollywood has set standard of film production and universal value of high quality film among the audiences (Cowen, 2002). These standards have later on been adopted and imitated byfilm industries from all over the world.

4.2 Korean Film IndustryThe film industry of Republic of Korea (henceforth Korea) is the world’s fifth biggest box office market, after the US, Japan, the UK, and France (Frater and Paquet 2006 cited in Jin 2008: 10). The industry has experienced a dramatic growth since 1960s. The success story of Korean film industry is claimed to be the result of Korean government’s interventions, in other words it is a consequence of “Developmental State” (CDMI2003, Ryoo 2005,Jin 2006 and Shim 2008). Korean governments used many forms of instruments, for example, tax incentive for domestic

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capitals, foreign films imports quota, and the most controversial mechanism–the screen quota system.

The screen quota system is a 43-year-old cultural measure that secures Korean film industry from foreign competition by enforcing local theatres to screen domestic films at least up to the minimum days set by government. This system is also being used in many countries such as France, Hungary, Italy, Brazil, Mexico, and Spain (Jin, 2008). The screen quota system is perceived as the key success of Korean film industry, particularly from people in the industry. They claim that the system has protected the industry from the domination of foreign movies, especially Hollywood films, and helped the country preserve its national identity. However, the system is being challenged by the international trade liberalization agenda of WTO and, most importantly, the Free Trade Agreement (FTA) negotiation with the US. This liberalization movement is creating a tension between culture and trade in Korean film industry. Consequently, there are series of domestic movements to maintain screen quota system. Most of them argue that Korean film industry is not strong enough to compete with foreign industries, and that the screen quota system is an important cultural policy to enrich Korean cultural identity. They have used the UNESCO Convention as main reference to protectthe industry.

4.2.1 History of Korean Film Industry and the Screen Quota System

Culture has been an important factor in Korean economic development since the period of President Park Chung-hee government 1963-1973. During his period culture and education were “Second Economy” that supported other economic policies (Yim 2002). Film industry, which is one of the cultural industries, had been highly supported by President Park government during that period (Duangklad 2009). In 1962, the Motion Picture Law was introduced as the first formal and permanent regulation on film industry in the post-colonial period of Korea (Yecies 2007). This law consists of series of regulations, for example, a registration system that requires film companies to register with the government under prerequisites condition such as permanent studio and full-time director (Hyae-joon 2007); import license that allows domestic distributors to import one foreign films only if they produce four domestic films; a

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strict censorship regulation; and Screen Quota System (Yecies 2007, Duangklad 2009: 3).

The screen quota system, which was first introduced in 1966, required domestic theatres to screen domestic films at least 90 days per year (Yecies 2007). According to Motion Picture Law Article 28, the system was designed to prevent the domination of foreign movies that would squeeze out the domestic films from Korean cinemas (Jin 2008). The policies led the industry to its golden age, in which a number of film produced had been increasing from 15 to 108 and 299 in 1995, 1959, and 1969, respectively (ibid.:8). However, in 1970s, the industry faced recession due to growth of TV era (ibid.) and the negative effect of import quota that turned out to be “quota quickie” in which film producers were producing films as mandate in order to get thequota to import foreign films without considering quality of the movies they produced (Yecies 2007 cited in Duangklad 2009:3). This dark age of Korean film industry was resulting in the revision of Motion Picture Law in 1984 and 1986, especially on cinematographic films import policy and the need to intensify screen quota system. Consequently, in 1985, the quota was increased from 90 to 146 days per years (Jin 2008), in order to protect the industry.

The stories of high degree of intervention of Korean government made the U.S. feel unsatisfied. In 1983, the United State Trade Representatives (USTR) used section 301 of the Trade Act 1974 to accuse Korea for export dumping in films, tobacco, wine, and insurance (Sakong 1993: 130-131 cited in Jin 2008). Reacting to the US pressure, President Roh Tea-woo government decided to permit direct import and distribution of foreign film in Korea in 1987 (Duangklad 2009: 4). The Korea film industry itself was not strong enough to compete with Hollywood at that time because of the lack of substantial capitals to produce quality films (Jin 2008). Therefore, after the permission, Hollywood films had dominated Korean film industry. Many authors such as Dal Yong Jin (2006), Doobo Shim (2008), and Lee Moo Heang (2004) claimed that this decision of Korea government led to deterioration of Korean film industry due to the influx of Hollywood movies, as shown by the lowest market share of domestic films in the history– 15.9% of market share in 1993 (Korean Film Council: KOFIC 2003). Consequently, screen quota system was considered by Korean film industry as the necessary measure to protect their industry.

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Korean film industry then turned into a new age in 1995. President Kim Young-sam government had initiated Segyehwa policy in the late 1994 (Jin 2006), which raised an acknowledgment of globalization on Korean economy and also on cultural industries (Yecies 2007). The policy suggested that Korea should use proactive policies to interact with the spread of globalization. Regarding the effects of Segyahwa policy on film industry, Presidential Advisory Board on Science and Technology had given an advice to the president that films and media industry can become the new leading industry for Korean (Shim 2008). By this advised, which is known as “Jurassic Park Factor”, the government pushed films and media industry into its strategic sectors along with its prior heavy and chemical industries (ibid.). Focusing on an economic contribution of film industry, President Kim Young Sam government has enacted Motion Picture Promotion law in 1995, which aims at liberalizing the industry in order to compete with global market (Duangklad 2008). However, the industry has not been completely liberalized but it was shaped for domestic capital groups - Cheabol28capital investment, which is believed to be the key factor of industrial development under the developmental state of Korea.

4.2.2Culture and Trade Tension in Korean Film Industry: Free Trade Agreement vs. Screen Quota System

Regarding the history of Korean film industry, cinematographic films have been recognized by Korean governments as an economic commodity that can bring wealth to the country, rather than a cultural product that is important for country’s identity. However, due to the heavy promotion and protection from foreign threats, the tension between trade and culture had not been revealed. Screen quota system is not the only government measure to protect the film industry in term of economic, but also a tool to maintain nation’s cultural sovereignty and identity in the eyes of Korean people. As a result, when the screen quota system is violated, the tension is disclosed.

The movements to eliminate screen quota system are mainly from the US with the force of Hollywood industry. Form their perspectives; movies are merely economic commodity, which are pure entertainments (Vincent 2005). The Motion Picture Export Association of America (MPEAA) forced the US government to negotiate with Korean

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government to abolish its screen quota many times. In 1998, the US made another effort by using Bilateral Investment Treaty (BIT), in which the US demanded Korea to reduce or eliminate the system as a part of the agreement. However, the treaty has never been finalized because Korean government, who was forced by domestic film community, insisted to keep the quota (Seo 2005). But the force of the U.S. was strong enough to influence Korea government in the late 1990s. Korean government established the Motion Picture Promotion Ordinance in 1996. This act allowed local government to reduce the number of screen quota days to 126 in large cities and 106 in small cities (Jin 2008). The strategy was recognized as a change to comply with the WTO system (Lee 1996 cited in Jin 2008). With this change in screen quota system, Korea became the world’s biggest film importing country in that year (Hwang 1998 cited in Jin 2008). The influx of Hollywood films into Korea led to massive demonstrationsconsisting of film directors, actors, college students, and civil organizations (Jin 2008). They were afraid that the change in screen quota system would destroy Koran film industry and the nation’s cultural sovereignty.

The most recent attempt of the US was in 2006 when it required Korea to cut the quota into half as a prerequisite for the FTA between them to prove its political capability to compromise. In order to pursue the FTA, Roh Moo-Hyun government decided to eventually cut the screen quota into half–from 146 days to 73 days per years–in 2006. This decision boosted oppositions from many parties. Since the Roh government started the FTA negotiation with the US, there have been massive demonstrations of Korean film industry community with alliances from auto industry and semi-conductor industry (Jin, 2008). The demonstrations were supported by Korean politicians as well. For example, the ministry of Culture and Tourism of Korea stated that screen quota is essential to maintain cultural sovereignty (Dong-Albo 2002 cited in Jin 2008).

The change in screen quota system clearly revealed Korean government’s perspective on the cultural industries. For the governments, cultural identity is not priority (Jin 2008). Cultural products such as films are not different from other commodities. Film industry is another strategic industry that promises wealth for the country. They have imitated Hollywood system (Kim 2007) and spread their products over East and South East Asia.

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However, perspective of film industry community and culturalists is different. For them, cinematographic films are cultural goods that contain and transmit Korean cultural identity. Hence, the film industry should not be subject to FTA, and used as a “bargaining scapegoat” (Jin 2008) in any trade negotiation. After had been overshadowed by heavy protectionism measures for many years, the tension between culture and trade in Korean film industry was increasingly more visible.

The tension in Korea is caused by an imbalance promotion of cultural value and economic value of cinematographic films by Korean government. The commodification of culture for trade purpose is acceptable in this case as the movies are produced for commercial purpose from the beginning. However, because the relationship between culture and trade is “quandary”, therefore it can be either supportive or negative. In the case of the Korean film industry, the relationship is negative, i.e. trade adversely affect culture. This is because the international film market has been imperialized by Hollywood film industry, which causes the unequal flow of movies, hence, the tension between trade and culture in the industry. This has raised a concern for the losses in film industry, as well as the losses of cultural identity and cultural value of the country.

4.3 Global Governance Regimes and Korean Film Industry’s Tension

Under GATT, cinematographic films are exempted from the National Treatment principle (stated in Article IV of GATT) (Zampetti 2003). The dual-value nature of films is recognized, and the screen quota system is allowed. However, under GATS, cultural products do not have any privilege. Cinematographic films are audio-visual products, which have to be liberalized progressively. Despite that, GATS allows some level of flexibility. The member countries can specify their commitment in the respective schedule that indicate what products they are willing to liberalized, and how much they want to liberalize (ibid.).

In order to comply with GATS, Korea makes a schedule of commitments for audio-visual services liberalization, engages all its broadcasting and audio-visual services to MFN (Article 11.4 and 12.3) with performance requirement (Article 11.8) (GATS Annex II-Korea: 30). It reserves “the right to adopt or maintain any preferential co-production

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arrangement for film or television productions” of cross-border trade (ibid.:30). However, the commitments under GATS do not create as much tension as what the FTA does for Korean film industry.

To interact with the government decision on screen quota reduction, Korean film industry communities has supported the UNESCO Convention. They agree with the norm and principle of the Convention, and argue that screen quota cutting goes against it. Nevertheless, neither Korea nor the U.S. has joined or ratified the UNESCO Convention. The community has been trying to push Korean government to adopt it. Gi Hwan Yang, the Executive Director of Korean Coalition for Cultural Diversity states that;

“The Convention on Cultural Diversity is the only alternative to prevent this tragic loss of cultures and to open the way to coexistence and mutual exchanges of culture…we believe that the development and adoption of a Convention on Cultural Diversity should not be delayed any further29.”

The Convention is attractive to Korean film industry communities because it perceives film different from mere commodities goods. For the communities, films are “aspect of the culture that hold the soul of its recourses” (CDMI, 2003). Due to the cultural imperialism by Hollywood in the film industry, the communities need screen quota to protect the industry and its cultural value. They believe that the Convention would help the country maintain the quota and keep the industry away from free trade agenda. However, Gary Neil argues that even if Korea were joining the convention, there would be no different in the result because the screen quota cutting is a consent agreement between Korean and the US (Jin 2008). The Convention gives autonomy to government, not civil society, to use public measures. Although, Article 11 of the Convention asks for civil society participation but the main decision is still with the government.

Unfortunately, Korean government would make the same decision even though it joins the Convention, regarding the perception on cinematographic film, which lay on commercial perspective. As a result, the UNESCO convention cannot solve Korean tension between cultures and trade in film industry. The conclusion is clear from Korean case that if the norm of culture and trade are not synchronized and embedded together in the global governance regimes and becomes the reference of

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international trade practices for each countries such as the WTO trade rules, the tension between culture and trade will not be solved.

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Chapter 5 Conclusion

This paper aims at studying the tension between culture and trade of cultural industries under global governance regimes, in order to find out whether cultural governance regime under the UNESCO Convention on cultural diversity can solve the tension in the case of Korean film industry. The tension between culture and trade is rooted in the dual-value nature of cultural products. It can appear in different forms due to the relationship between culture and trade. Regarding the literatures on culture and trade theory, the relationship between culture and trade has changed overtime and is different from sector to sector in cultural industries, and from country to country. However, their relationship can be framed into three forms, according to Neuwirth (2004), namely, “dichotomy”, “quandary”, and “synergy”. The three relationships lead to different tension between culture and trade. Under dichotomy relationship, culture and trade cannot be together, so that the tension is created from the attempt to turn culture in to commodities for trade purpose as explained in cultural industries theory. Whereas in quandary relation, the commodofication of culture is acceptable but the effects of trade on culture can be both positive and negative. On the one hand, trade can promote cultural exchange across societies and enrich cultural diversity. On the other hand, due to the specific factors such as market failure, and cultural imperialism, cultural value of cultural products is threatened. Lastly, under synergic relationship, culture and trade are believed to be harmonized and complicatedly interacting with each other throughout history. The tension under this relation is complex depending on the custom and usage of cultural products of each society. The example of source of tension under this relationship is globalization.

At the global governance level, culture and trade are in the synergic relationship and the tension between them lies on the liberalization agenda under WTO trade governances that neglect the cultural value of cultural products. Under WTO norm, cultural goods and services are not different from other commercial products, which are best allocated by market. This unbalanced recognition of the dual-value of cultural products leads to the movement for alternative governance regime that encompasses cultural concern. As a result, the UNESCO Convention on the Protection and Promotion of Cultural Diversity of Cultural Products was

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established in 2005. This convention recognizes the uniqueness of cultural products and legitimizes government intervention to protect and promote cultural value under the “cultural diversity” norm. However, in practice the Convention cannot stop the tension created by liberalization agenda under WTO governance due to its Article 20 that limited their implementation on the existing agreement that its parties have made. Since the relationship between culture and trade is not on dichotomy anymore, the separation of culture and trade global governance regimes has become part of the tension. In conclusion, the tension between culture and trade cannot be solved if there is no cooperation between both governance regimes, or if the enforcement power of the two separated regimes is not equal.

This conclusion can also be applied in Korean film industry case. Its tension between culture and trade is rooted in cultural imperialism, which is accelerated by liberalization agenda from FTA between Korean and the US. This tension reflects the different perspectives of Korean government and Korean film industry community on cinematographic films. While films are only commercial products for the government, they are cultural products for Korean film industry community. The community has used the UNESCO Convention as the reference to support it norm and claims that, if the government adopt the Convention, its film industry will be protected. But, due to Korean government perspective on films and its trade negotiation situation, it has not joined the Convention yet. However, in practice, the Convention itself cannot protect Korea film industry from liberalization and cultural imperialism threat, as it cannot change the norm of FTA or WTO. Moreover, it does not have an effective enforcement mechanism that can change the country’s norm practices as WTO do. Consequently, the Convention might not be helpful to the community even if it were adopted by the Korean government.

In sum, if the norm of culture and trade are not synchronized and embedded together in the global governance regimes, and become the reference of international trade practices, the tension between culture and trade will not be solved. As a result, the world might need the new global governance that takes the new relationship between culture and trade into account, and can actually affect norm and practice of each country.

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Notes

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Appendices

Appendix A.: The seven conventions of UNESCO in the area of creative diversity (UNESCO 2007: 3-4)

1. The Universal Copyright Convention (1952, revised in 1971)

2. The Convention for the Protection of Cultural Property in the Event of Armed Conflict (1954) (first protocol in 1954, second protocol in 1999)

3. The Convention on the Means of Prohibiting and Preventing the illicit import, Export and Transfer of Ownership of Cultural Property (1970)

4. The Convention concerning the Protection of the World Cultural Natural Heritage (1972)

5. The Convention on the Protection of the Underwater Cultural Heritage (2001)

6. The Convention for the Safeguarding of the Intangible Cultural Heritage (2003)

7. The Convention on the Protection and Promotion of the Diversity of Cultural Expressions (2005)

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Appendix B.: Main Principles of the UNESCO Convention on Cultural DiversityThe Convention does not have specific regulation to regulate its member states, but it has guiding principles, as references, for them to follow. Overall, there are eight guiding principles addressed in the Article 2 of Convention(Article 2 –UNESCO 2005: 3-4),

1.Principle of respect for human rights and fundamental freedoms

Cultural diversity can be protected and promoted only if human rights and fundamental freedoms, such as freedom of expression, information and communication, as well as the ability of individuals to choose cultural expressions, are guaranteed. No one may invoke the provisions of this Convention in order to infringe human rights and fundamental freedoms as enshrined in the Universal Declaration of Human Rights or guaranteed by international law, or to limit the scope thereof.

2.Principle of sovereigntyStates have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to adopt measures and policies to protect and promote the diversity of cultural expressions within their territory.

3.Principle of equal dignity of and respect for all cultures

The protection and promotion of the diversity of cultural expressions presuppose the recognition of equal dignity of and respect for all cultures, including the cultures of persons belonging to minorities and indigenous peoples.

4.Principle of international solidarity and cooperation

International cooperation and solidarity should be aimed at enabling countries, especially developing countries, to create and strengthen their means of cultural expression, including their cultural industries, whether nascent or established, at the local, national and international levels.

5.Principle of the complementarity of economic and cultural aspects of development

Since culture is one of the mainsprings of development, the cultural aspects ofdevelopment are

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as important as its economic aspects, which individuals and peoples havethe fundamental right to participate in and enjoy.

6.Principle of sustainable developmentCultural diversity is a rich asset for individuals and societies. The protection, promotionand maintenance of cultural diversity are an essential requirement for sustainabledevelopment for the benefit of present and future generations.

7.Principle of equitable accessEquitable access to a rich and diversified range of cultural expressions from all over theworld and access of cultures to the means of expressions and dissemination constituteimportant elements for enhancing cultural diversity and encouraging mutualunderstanding.

8.Principle of openness and balanceWhen States adopt measures to support the diversity of cultural expressions, they shouldseek to promote, in an appropriate manner, openness to other cultures of the world and toensure that these measures are geared to the objectives pursued under the presentConvention.

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1 Statistic from “the International Flows of Selected Cultural Goods and Services, 1994-2003” by UNESCO2

3 Non-rivalry means “The consumption of that goods and services by one person does not reduce the amount available for consumption by others ” (Sauve and Steinfatt 2003: 7)4 Excludability means that the consumption that public goods can be prevent or excluded by the producer, for example, by setting a certain price that some consumer cannot afford.5 Quoted in Article IV (a.) of The General Agreement on Tariffs and Trade (GATT 1947)6 United Kingdom delegate’s debate. Quoted in Note by the GATT Secretariat for the Working Group on Audiovisual services, 4 October 1990 (MTN.GNS/AUD/W/1) (cited in Kakabadse 1995)7 http://www.wto.english/tratop_e/serv_e/audiovisual_e.htm8 WTO doc. MTN.GNS/W/120 cited in Hahn (2006)9 Article XIV: General Exceptions: “…Nothing in this Agreement shall be constructed to prevent the adaptation or enforcement by any member of measures: (a.) necessary to protect public morals or to maintain public order; (b.) necessary to protect human, animal or plant life or health; etc. ”. (http://www.wto.org/english/docs_e/legal_e/26-gats_01_e.htm)10 from Annex on Article 2 of GATS11 http://www.wto.org/english/tratop_e/serv_e/audiovisual_e/audiovisual_e.htm12 http://www.wto.org/english/tratop_e/serv_e/4-prolib_e.htm13 UNESCO website: http://portal.unesco.org/culture/en/ev.php-URL_ID=2977&URL_DO=DO_TOPIC&URL_SECTION=201.html14 http://portal.unesco.org/culture/en/ev.php-URL_ID=30872&URL_DO=DO_TOPIC&URL_SECTION=201.html15 http://portal.unesco.org/en/ev.php-URL_ID=6207&URL_DO=DO_TOPIC&URL_SECTION=201.html16 ibid.17 ibid.18 http://portal.unesco.org/en/ev.php-URL_ID=6406&URL_DO=DO_TOPIC&URL_SECTION=201.html19 ibid. 20 see the Appendix A.21 This norm has been adopted from Article 8 (Cultural goods and services: commodities of a unique kind) of the UNESCO Declaration on Cultural Diversity.22 This norm has been adopted from Article 9 (Cultural policies as catalysts of creativity) of the UNESCO Declaration on Cultural Diversity.23 This norm has been adopted from Article 10 (Strengthening capacities for creation and dissemination worldwide) and Article 11 (Building partnership between the public sector, the private sector and civil society) of the UNESCO Declaration on Cultural Diversity.24 UNESCO 2005: 425 ibid.: 526 see Main Principle of the Convention in Appendix B. 27 UNESCO 2005: 1128 family-owned large conglomerate capital group, for example, Samsung, Hyundai, Deawoo and SK (Jin 2006). 29 From M. Gi Hwan Yang Speech on “Why UNESCO Should Adopt a Convention on Cultural Diversity” at the International Liaison Committee of Coalitions for Cultural Diversity Seminar, September 12, year??