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Number 630, 2001 by Amy Johnston |
Runaway Movie Production 
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Number 630, 2001 by Amy Johnston |
Runaway Movie Production
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General Information
Legal Cluster Bio-Geographic Cluster Trade Cluster Environment Cluster Other Clusters |
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Runaway
Movie Production:
From Hollywood to Canada
I. Identification 1. The Issue
On June 25, 1999, the Screen Actors Guild (SAG) and the Directors Guild of America (DGA) issued a report conducted by the Monitor Group on the economic impact runaway production has had on the entertainment industry in Hollywood. Runaway productions as defined in the report are productions "which are developed and are intended for initial release/exhibition or television broadcast in the U.S. but are actually filmed in another country." (1) While the United States' film industry has runaway productions in several countries including Australia and the United Kingdom, the majority of runaway production goes to Canada and therefore is the main recipient of the United States' retaliation. Members of SAG and DGA have been aware of runaway production since the early 1990's and have been actively lobbying Congressmen in California, Florida and Illinois to take up their cause. They believe runaway production to be a serious and potentially crippling problem not only for the entertainment industry but for other industries such as catering and transportation. The Monitor Report served as a useful tool in drawing attention and lending credence to the plight of the entertainment industry, prompting the supporting Representatives to submit a resolution asking the United States Trade Representative Charlene Barshefsky to address at the 1999 World Trade Organization (WTO) Seattle talks, on the issue of runaway production as well as that of cultural content restrictions.
2. Description
The camera follows a car speeding along a winding road, catching glimpses of the countryside--lush mountaintops overgrown with pine trees, rocky cliffs lining the coast and clear shots out to sea. The person in the car is traveling up Northern California and completely unaware of his surroundings, desperate to reach his destination. But is this really California? And more importantly, can the audience tell the difference? The answer to both these questions is a resounding no.
It is exactly these answers that frighten Hollywood. Can Canada become a permanent
substitute for film production? Realizing that the problem of runaway production
was growing, SAG and DGA commissioned the Monitor Company, a global management
consulting firm, to conduct a study on the economic impact of runaway production
on Hollywood. The report, entitled "US Runaway Film and Television Production
Study Report" (hereinafter referred to as the Monitor Report), helped bring
credibility to Hollywood's accusations that Canada was luring film and television
production across the border.
SAG and DGA have used the Monitor Report, along with Canadian tax incentives
and quotas, as evidence of the growing problem of runaway production. With this
evidence in hand they were able to successfully lobby Congressmen Mark Foley
(Florida), Henry P. "Buck" McKeon (California), Jerry Weller (Illinois),
Gary Condit (California), Robert Matsui (California), and Xavier Becerra (California)
to take up their cause. In turn the lobbying efforts of these Congressmen led
to a study conducted by the US Department of Commerce on runaway production.
Contributing Factors
Hollywood has indisputably the most sophisticated and technologically advanced
film industry in the world. It has evolved from the silent films of the 1920's
into the technological mastery of films like Jurassic Park. How then does an
industry that is over eight decades old find itself losing its hold on a market
it had invented? There are many contributing factors to Hollywood's decline,
such as tax incentives offered by Canada and Canada's cultural preservation
to name a few. Hollywood has recently been trying to fight back against runaway
production. With help from Hollywood-friendly politicians, SAG and DGA have
been able to bring the media's and the US government's attention to their plight.
Cultural Preservation
With the emergence of global information societies (GIS) and the advent of new technologies such as the Internet and the world wide web, Canada has felt increasing pressure to protect its cultural industries. In 1999 the Cultural Industries Sectoral Advisory Group on International Trade (SAGIT) released the document "New Strategies for Culture and Trade: Canadian Culture in a Global World" detailing the issues that globalization had thus far brought to the forefront. The report acknowledges the benefits of these new technologies, namely the fact that the evolution of old technologies (broadcasting, cable, satellite, and telecommunications) into new ones will make for easier distribution of Canadian cultural products both domestically and internationally. (2)
SAGIT, however, feels the negatives such as the increase in multinational corporations and the subsequent vertical distribution of good and services far outweigh the positives. Add to this the constant battle Canada has been waging against the United States' cultural imports, a battle that dates back to 1928. That year a report on radio broadcasting was submitted by the Minister of Marine and Fisheries to the Privy Council. The report noted that radios and the programs broadcast were fast becoming popular with Canadians. It also forewarned the Council that Canada's who had access to American radio stations often chose to listen to them instead of Canada's broadcasts. The report cited "inadequate coverage provided by Canadian radio stations and the alleged superior quality of programs from the United States" (3) as reasons for concern.
As a result of this report, the Canadian government appointed a Royal Commission on Radio Broadcasting (known as the Aird Commission) that same year. The next year the Aird Commission released its findings in a report consisting of recommendations for the government on broadcasting issues. One of its recommendations was for the creation of the Canadian Radio and Broadcasting Corporation (CRBC). The CRBC was replaced in 1936 by the Canadian Broadcasting Corporation (CBC). CRBC and later CBC were to act as protectors and promoters of Canadian cultural products. This recommendation and others were enacted by the Canadian Radio Broadcasting Act of 1932. (4)
In 1952 the wide distribution of television brought forth new concerns about cultural preservation, as once again Canadians with access to American programs chose them over their own domestic shows. In 1958 the Broadcasting Act was passed, allowing for the regulation of "the operation of broadcast networks and the activities of public and private radio and television stations. It also has a mandate to promote greater use of Canadian talent and to ensure the continued existence and efficient operation of a high quality national broadcasting system, essentially Canadian in content and character." (5) The 1958 Broadcasting Act was the first law to include content control, requiring Canadian broadcaster to fill a quota of 45% Canadian content on television. (6)
Canada has long felt inundated with American cultural
products, from magazines to television shows and singers. When making a comparison
between the two countries it is easy to view the United States as the older,
more successful brother and Canada as the younger brother who is constantly
trying to catch up, creating a feeling of resentment. Coupled with this resentment
is the fact that both countries share an expansive border allowing for the relatively
easy transport of American products across the Canadian border.
In 1991, in order to further protect and promote its own cultural industries, Canada's government adopted the 1991 Broadcasting Act of Canada. The Broadcasting Act is to serve as "a public service essential to the maintenance and enhancement of national identity and cultural sovereignty." (7) In order to do this the Broadcasting Act sets forth the following provisions for the Canadian broadcasting system:
(i) serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada,
(ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view,
(iii) through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society. (8)
In order to achieve this, Canada feels that it has to monitor the amount of
Canadian content shown on television and heard on the radio. It does this through
content requirement. As a result of the Broadcasting Act of 1968 at least 60%
of all broadcasts must contain Canadian content. (9) This is determined
by a point system which was established in 1971. (10) Each broadcast
earns a number of points for every director, producer, main actor, singer in
a band etc. who is Canadian. These points are added up and used to find out
whether or not a show or song has enough Canadian content to be broadcast as
such. This not only serves to protect Canada's cultural industry, but helps
to foster new shows and musicians within Canada.
The Canadian government realizes that to have a majority of the television shows
broadcast be Canadian is an expensive venture. It estimates that it costs around
$1 million to produce an hour-long program. (11) In 1997 the CRTC created
the Canadian Television Fund (CTF) in order to offset the costs of production.
This requires that all broadcast distribution companies donate at least 5% of
their gross annual earnings to the CTF to fund the making of prime time television
projects. (12) Another requirement of the Broadcasting Act is to have
programs available in both French and English. This is also a costly project
and one that is funded in part by Parliament. Parliament allots CBC a budget
of roughly $1 billion to be used in the production of both television and radio
programs in both languages. (13)
It is the point system that makes the entertainment industry in Hollywood upset.
If Canada has such tight guidelines on what is acceptable to air in Canada and
what is not, why is it allowing foreign films to be produced there? Hollywood
feels that not only is Canada restricting its access to Canadian markets but
is also luring away film and television production, costing Hollywood and the
state of California billions of dollars each year. It is interesting that when
the tables are turned and Canada can begin to make a profit from America's film
industry it does not hesitate to do so; in fact it has applied a similar point
system to the production of foreign films and television shows in Canada. Both
the Canadian government and the provincial governments have offered tax incentives
to filmmakers who use a set amount of Canadians on the set.
Tax Incentives
Canada, seizing the opportunity Hollywood's filmmakers were presenting, began offering tax incentives in order to, as Hollywood sees it, entice American film companies and directors to film in Canada. The Canadian Audio-Visual Certification Office (CAVCO), a division of the Department of Canadian Heritage, on October 16, 1998 released a set of guidelines for the Film or Video Production Services Tax Credit (PSTC) which was passed on June 18, 1998. Under the PSTC, film companies, both foreign and domestic, can receive a tax cut of "11% of qualified Canadian labor expenditure for services provided in Canada by Canadian residents or taxable Canadian corporations for the production of an 'accredited production'" (14), essentially rewarding those companies who hired Canadian citizens. This, the Canadian government felt, would work out for everyone; employment rates would increase in Canada and movie production companies benefit from the tax breaks.
Tax incentives are not limited to the federal government; some of Canada's provinces have also offered tax breaks in an attempt to keep film production within their borders. British Columbia, located above the state of Washington in the US, offered a tax incentive effective on April 1, 1998, two months before CAVCO's. The incentive package, titled the Film Incentive BC (FIBC), was created to encourage movie and television production in BC.
The package is composed of three main incentives: to help BC producers (BASIC INCENTIVE), assist production efforts outside of Vancouver (REGIONAL INCENTIVE) and aid in the development of workers within the industry (TRAINING INCENTIVE). The BASIC and REGIONAL incentives are calculated at 20% and 12.5% of eligible labor costs respectively while the training incentive is 30% of eligible labor costs or 3% of the trainee salaries, which ever is less. (15)
The catch to FIBC is that the corporation claiming the tax credit must be Canadian (easy to get around with partnerships forged between Americans and Canadians), the production must prove to be Canadian by earning 6 out of 10 points, 75% or more of the production and post-production cost must be incurred in BC and paid to companies and residents of BC, 75% of the principle photography must be shot in BC, and the production has to be distributed by a Canadian company and released in Canada within two years of completion. Because the tax break is higher than CAVCO's, FIBC's requirements are more restricting. (16)
These tax incentives are well advertised by the Canadian government, often by government officials who will fly to Los Angeles or New York City to attend events or meet with filmmakers. (17) Revenue Canada, the Canadian IRS and co-supporter with CAVCO on the PSTC, was represented at the Locations '99 show in L.A., advertising its tax incentives. (18) Because of this blatant advertising, Hollywood is calling foul and hoping the US government will do something about it.
The Monitor Report
In addition to defining the term runaway production, the report identified two
types of runaways: "creative" and "economic." Creative runaways
are those filmed in another location when a substitute for that place just won't
do. This happens, for example, when filming a historic film like "The Last
Emperor."
This film, as the title suggests, is about China's last emperor, Puyi, who came into power when he was just three years old. The movie's director, Bernardo Bertolucci, decided to film on location in China and within the Forbidden City, home to China's royalty. Bertolucci's decision to film on location helped to make this movie a masterpiece. As Roger Ebert, film critic of the Chicago Sun-Times, points out, it was necessary for the film to be shot in China because it added to the story, making it an epic, in spite of the fact that there is no traditional hero involved such as Ghandi to inspire the audience. Ebert writes,
It probably is unforgivably bourgeois to admire a film because of its locations, but in the case of "The Last Emperor" the narrative cannot be separated from the awesome presence of the Forbidden City, and from Bertolucci's astonishing use of locations, authentic costumes and thousands of extras to create the everyday reality of this strange little boy....There aren't a lot of action scenes in "The Last Emperor," and little enough intrigue....As in "Gandhi," great historical changes take place during "The Last Emperor," but unlike Gandhi, the emperor has no influence on them. His life is a sad irony, his end is a bittersweet elegy. But it is precisely because so little "happens" in this epic that its vast and expensive production schedule is important. When we see those thousands of servants bowing to a little boy, for example, the image is effective precisely because the kowtowing means nothing to the boy, and the lives of the servants have been dedicated to no useful purpose. (19)
The "economic" runaway, on the other hand, happens when a production
is made in another location in order to save money on the overall production
of the film or television series. The Monitor Report, which focused just on
economic runaways, was able to provide confirmation that the American entertainment
industry was indeed suffering serious losses because of runaway production.
According to the report, in 1998, of the 1,075 movies and television productions
developed in the United States, 285 of them fell into the economic runaway category,
up from just 100 in 1990. These productions caused the industry to lose $10.3
billion that same year. (20)
Political Intervention
As can be seen from the initial date of Canada's point program, tax incentives
and subsequent runaway productions are nothing new. Why then does the United
States feel this is a problem worthy of WTO attention? SAG and DGA claim they
have known about this problem since 1990. Indeed concern over runaway production
can be traced back to 1945 when memos addressing this same topic were written.
(21) In fact in 1957 a report similar to the Monitor Report was written
titled "Hollywood at the Crossroads: An Economic Study of the Motion Picture
Industry." (22) Again the topic was broached in 1963, this time
in an article written by actress Joan Crawford for the Screen Actor's Magazine
titled "Runaway Americans." In the article she points out that American
film makers and actors who go to foreign countries to make films end up hurting
Hollywood and the United States financially. Why then, if this is a problem
that has spanned several decades, did SAG and DGA wait until 1999 to commission
a study? What has changed since then?
Former President Bill Clinton and Vice President Al Gore had many supporters in Hollywood. Clinton was famous for the many "sleepovers" at the White House where his famous guests slept in the Lincoln bedroom. Many of these celebrities contributed generously to Clinton's presidential campaign, establishing guanxi, the result of two people sharing a common bond, as significant as family or as superficial as coming from the same town. Now Hollywood was calling in its favor and it succeeded. Not only were several Congressmen working to lobby on its behalf but Vice President Gore took up its cause as well.
While representatives Foley, McKeon, Weller, Becerra,
Conduit and Matsui were instrumental in getting the Department of Commerce to
realize the need for a report on the economic impact of runaway production,
it was a phone call from Al Gore that cinched the deal. His decision to do so
can be seen as a campaign move on his part. Knowing he needed to win the state
of California to better his chances of winning the election over George W. Bush,
Vice President Gore pushed for the report to be finished. Officially, of course,
it was said Gore's actions were on behalf of the administration and not made
as a presidential candidate. (23)
3. Related Cases
4. Author and Date: Amy Johnston (May 11, 2001)
II. Legal Clusters5. Discourse and Status: Disagreement and In Progress
6. Forum and Scope: WTO, bilateral and multilateral
In November of 1999 fourteen Congressmen submitted a resolution to Charlene Barshefsky, US Trade Representative, about runaway production and the economic incentives countries are using to entice filmmakers abroad. Their purpose in approaching Barshefsky was to have her place the issue on the agenda for the 1999 WTO talks that were held in Seattle, Washington. By doing this they hoped that the issues surrounding economic runaways would be addressed, particularly the issues of unemployment, cultural content and cultural sovereignty. (24)
7. Decision Breadth: 2
8. Legal Standing: Treaty
III. Geographic
Clusters9. Geographic Locations
a. Geographic Domain: North America
b. Geographic Site: Canada
c. Geographic Impact: Northern North America
10. Sub-National Factors:
11. Type of Habitat: Temperate
IV. Trade Clusters12. Type of Measure: Subsidies
13. Direct v. Indirect Impacts: Indirect
14. Relation of Trade Measure to Environmental Impact
a. Directly Related to Product: Yes, Entertainment
b. Indirectly Related to Product: Yes, Services
c. Not Related to Product: No
d. Related to Process: Yes, Culture
15. Trade Product Identification: Movie Production
16. Economic Data
Economics play a big role in the drama that surrounds runaway movie production. When it comes down to the bottom line, if it were cheaper to film movies in the United States than in Canada or overseas filmmakers would do everything in their power to make the soundstages of Hollywood compatible with the movie being filmed. Many in the film business agree but would rather the public think foreign production was chosen for the location alone. (25) But location cannot account for the dozen or so films shot every year in Toronto, the twin city to Everytown, USA. Toronto has been used as a substitute for such diverse locations as Manhattan in "American Psycho," New Haven in "The Skulls," and Washington, DC in "Dick."
Many times the producers and directors have no other choice but to film in Canada because the studios that back their films will not allow for a big budget. This was the case for the movie "Frequency" starring Dennis Quaid. The producer, Hawk Koch, felt that the film should have been filmed exclusively in New York like the other movie he worked on, "Keeping the Faith." He explains,
Frequency should have been shot all in New York. Nothing against Canada, but the reason is pure economics....It's just that this was specifically a New York movie. It's just like when we made the deal with Spyglass Entertainment for "Keeping the Faith," we had the luxury [of shooting in New York] on that movie because we had the power of Edward Norton. On this movie [starring Dennis Quaid and Jim Caviezel], we didn't have that kind of power. They gave us a budget and said this is how much you're going to make the movie for, which is a lot less than the average Hollywood film. The only way to make it for the price we had was to go to Canada. (26)
SAG and DGA are not only concerned about the economic impact runaway movie production has on the US economy but on the jobs of its members. When a movie is filmed abroad, practically all of the crew members are citizens of the country where the filming takes place. This is cheaper and more time efficient to hire production staff while on location than it is to bring over someone from California. The only time exceptions would be made were if a person had a skill that was unique and therefore had to perform his/her duties himself/herself. The Monitor Report estimates that 10-30 supporting actors or stunt performers and 40-150 production staff who are citizens of the country where the film is being shot are hired to perform the tasks that would normally go to American citizens had the film never gone abroad. (27)
The Monitor Report also makes note that it is hard to
measure exactly what impact runaway movie production has on the jobs of "below-the-line"
employees, those who work behind the scenes of a production such as carpenters,
makeup artists and costume designers, stating that these are indirect job losses
as a result of runaway production, not direct such as when a factory shuts down.
(28) The Monitor Report estimates that in 1990 6,900 jobs were lost compared
to 23,500 in 1998. (29) Over the past ten years, the Monitor Report estimates
that 125,000 full-time jobs were lost as a result of runaway production. (30)
17. Impact of Trade Restriction: High
18. Industry Sector: Film and Television Industry
19. Exporters and Importers: Main: US and Canada, Secondary: US and England, Australia and several other countries.
V. Environment
Clusters20. Environmental Problem Type: Cultural
21. Name, Type, and Diversity of Species
Name:
Type:
Diversity:
22. Resource Impact and Effect: Low and Product
23. Urgency and Lifetime: Low and N/A
24. Substitutes: Digital Manipulation, Blue Screen
Is there a solution to the problem of runaway production? Can the advancement of technology replace the need to shoot on location? Digital manipulation and blue screen technology were used in "Forrest Gump," standing in for many of the locations in the film. Can the same be done for other movies? What would "The Last Emperor" look like if shots were taken of the Forbidden City and China, with the actors added in later in scenes shot on a soundstage? Would it still have the same feeling of opulence? Some would argue yes, but it is unlikely the same feeling could be conveyed. One could tell from watching "Forrest Gump" that there was obvious digital manipulation, yet its point was not to set a mood with scenery. The other side of the argument is that there is no substitute for the real thing. The artists vision must also be taken into consideration. Should an artist have to sacrifice his/her vision because of the lack of adequate funds? For many filmmakers it is the lesser of two evils to film a movie in Toronto that is supposedly set in Chicago than it would be if the movie were completely done with computers.
VI. Other
Factors25. Culture: Yes
26. Trans-Boundary Issues: Yes
27. Rights: No
28. Relevant Literature
Endnotes
(1) The Monitor Group, "US Runaway Film and Television Production Study Report", 2, 1999.
(2) SAGIT, "New Strategies for Culture and Trade: Canadian Culture in a Global World", 2, February 1999.
(3) CRTC, "A Short History of the CRTC and Broadcasting Regulation in Canada." http://www.crtc.gc.ca/ENG/info_sht/g15e.htm
(4) Ibid
(5) Ibid
(6) "Canadian Cultural Soverignty--Timelinge of Events 1920-Present." http://www.media-awareness.ca/eng/issues/cultural/timeline/timeline.htm
(7) Canadian government. "Broadcasting Act of 1991", Article 3.1d.
(8) Ibid
(9) Ibid, Article 10.
(10) "Canadian Cultural Soverignty--Timelinge of Events 1920-Present." http://www.media-awareness.ca/eng/issues/cultural/timeline/timeline.htm
(11) SAGIT, "New Strategies for Culture and Trade: Canadian Culture in a Global World", 8, February 1999.
(12) Ibid , 12.
(13) Ibid, 8.
(14) CAVCO, "Film or Production Services Tax Credit: Guidelines", 1, October 1998.
(15) British Columbia Ministry of Small Businesses, "British Columbia Film Tax Credit Programs--Overview", 1-2.
(16) Ibid, 2.
(17) The Monitor Group, "US Runaway Film and Television Production Study Report", 21, 1999.
(18) Ibid.
(19) Roger Ebert, "The Last Emperor", Chicago Sun-Times, December 9, 1987.
(20) The Monitor Group, "US Runaway Film and Television Production Study Report", 2, 1999.
(21) Miki Turner, "Hogtown Verus Hollywood: Toronto has Become one of the World's Top Centres of "runaway" film production", The Ottawa Citizen, D1, December 14, 2000.
(22) Ibid.
(23) "Gore Joins Hollywood Battle Over Canadian Film Production", Canadian Press Newswire, January 6, 2000.
(24) United States House of Representatives, Resolution HRES 384 IH, November 17, 1999.
(25) Cynthia Amsden, "Runaway to the Great White North [American film production in Canada]", Take One, 12-15, June 2000.
(26) Ibid.
(27) The Monitor Group, "US Runaway Film and Television Production Study Report", 16, 1999.
(28) Ibid.
(29) Ibid.
(30) Ibid.
