A Consideration of the Validity of Cultural Protectionism with Reference to the Multifunctionality of European Farms and the Canadian Magazine Dispute

Term Paper , 2002 , 25 Pages , Grade: 1.3 (A)

Business economics - Economic Policy

This paper adresses how the defence of local culture is becoming an increasing concern in the current era of globalisation, as diminishing transport costs and new forms of communication are enabling worldwide dissemination of products and ideas. The import of cultural goods from nations with disparate values and traditions is investigated, which could potentially cause the destabilisation of national or local communities. Indeed, these cultural goods may displace existing products and result in cultural homogenisation.

Also, this paper looks at measures designed to protect culture which are exempt from WTO consideration and disputes between nations are negotiated bilaterally. As a result, fears that larger economies, such as the US, are able to dominate the cultural industries of smaller nations are investigated.

Finally, this paper makes two main recommendations concerning domestic policy and concerning international trade policy. Through the development of a methodology which can develop agreements on more easily recognisable cultural interests - those less clouded by economic motivations - such a body would be able to tackle the more complex and problematic issues, with the aim of separating economic and political issues from genuine cultural concerns.

Table of Contents

1 EXECUTIVE SUMMARY

2 INTRODUCTION

3 PROTECTIONISM
3.1 NEW VS. OLD PROTECTIONISM
3.2 JUSTIFYING PROTECTIONISM

4 CULTURAL PROTECTIONISM
4.1 INTERNATIONAL TRADE POLICY AND CULTURAL PROTECTIONISM
4.2 CULTURAL PROTECTIONISM POLICY IN THE CONTEXT OF CRITICAL DEBATE

5 CASE STUDY I: THE MULTIFUNCTIONALITY OF EUROPEAN FARMERS
5.1 THE POSITION OF EUROPEAN FARMERS
5.2 THE VALIDITY OF EUROPEAN FARMING SUBSIDIES
5.3 CONCLUSION: MULTIFUNCTIONALITY OF EUROPEAN FARMERS

6 CASE STUDY II: THE CANADIAN MAGAZINE DISPUTE
6.1 THE EMERGENCE OF THE CANADIAN MAGAZINE DISPUTE
6.2 NATIONAL OR INTERNATIONAL POLICY MATTER?
6.3 CONCLUSION: CANADIAN MAGAZINE DISPUTE

7 CONCLUSION AND RECOMMENDATIONS
7.1 RECOMMENDATIONS

LIST OF REFERENCES

1 Executive Summary

The defence of local culture is becoming an increasing concern in the current era of globalisation, as diminishing transport costs and new forms of communication are enabling worldwide dissemination of products and ideas. The importation of cultural goods from nations with disparate values and traditions could potentially cause the destabilisation of national or local communities. Indeed, these cultural goods may displace existing products and result in cultural homogenisation. Another potential threat is that posed to cultural industries, where competitive foreign firms may be able to dominate, again resulting in a reduction in cultural diversity.

However, while it is widely agreed that local culture should be preserved, the term "culture" is a subjective construct open to varying interpretations by different groups and institutions, including national and international policymakers. It is difficult for governments to legislate the link between trade and culture, since the latter is a concept often used to further a country’s own political and economic interests. Many critics have contented that cultural protectionism, the intervention of the state in trade in the defence of local culture, is merely economic protectionism in disguise. This report examines the claim in the light of two case studies: the multifunctionality of European farms and the Canadian magazine dispute.

The concept of multifunctionality rests on the assumption that the continuing existence of local farms is vital in order to preserve the local way of life, that production generates diverse benefits and forms a cultural heritage. The argument follows that protectionist measures are justified to protect an industry that would otherwise be unable to compete following trade liberalisation. The Canadian government, during the 1990s, claimed that their protectionist measures, implemented in retaliation to competition from the US magazine industry, were warranted since American cultural goods threatened to displace an important domestic cultural industry. The US contested these restrictions, arguing that they were based upon an economic agenda and were therefore illegal under WTO rules.

Currently, measures designed to protect culture are exempt from WTO consideration and disputes between nations are negotiated bilaterally. As a result, there are fears that larger economies, such as the US, are able to dominate the cultural industries of smaller nations. This paper makes two main recommendations: the first is for a change in domestic policy, arguing that government measures to halt the intrusion of foreign culture would be better directed by using subsidies, education and training to promote local cultures; the second is for international trade policy, based upon the establishment of an independent body to deal with cultural issues. Through the development of a methodology which can develop agreements on more easily recognisable cultural interests - those less clouded by economic motivations - such a body would be able to tackle the more complex and problematic issues, with the aim of separating economic and political issues from genuine cultural concerns.

2 Introduction

The reduction of barriers to trade and the current era of globalisation has led to intensified economic interaction between nations, posing a threat to national and local culture. This has resulted in government intervention and a trend towards cultural protectionism: the erection of trade barriers intended to defend local cultures.

This paper will first examine the theory behind economic protectionism and the benefits to society of maintaining a diverse, intrinsically valuable cultural base. The cultural concerns resulting from globalisation will then be discussed in relation to government trade policy, and their economic validity examined. Two case studies will be used to assess the arguments raised in the context of current issues: the multifunctionality of European farms and the Canadian magazine dispute. Finally, the conclusion will consider whether these cases are in fact economic protectionism in disguise or a legitimate non-trade concern, and make recommendations as to how both international and domestic trade policy can deal effectively with these contentious issues.

3 Protectionism

3.1 New vs. Old Protectionism

Protectionism can be regarded as the intervention of the state in the process of trade between nations. This intervention manifests itself in the set of actions and measures taken by governments to restrict the importation of foreign goods and defend domestic producers.

The traditional policy instrument of protectionism is the import tariff, which historically has been the most important aspect of commercial policy. In 1947, the world’s 23 major industrialised nations drew up the General Agreement on Tariffs and Trade (GATT). The GATT organisation became the spearhead for international trade liberalisation by "limiting tariffs, controlling the use of non-tariff barriers, and eliminating discriminatory treatment in international commerce"^[1]. Carmody (1999) states that, "they believed they were creating a trading system in order to make a better material world, a better world that could be distinguished from, and co-exist with, cultures, rather than change them forever."

In the mid-1970s, a new form of protectionism proliferated, slowing the progressive liberalisation of international trade. This new form of protectionism relied on new forms of non-tariff trade barriers and was commonly referred to as the ‘New Protectionism’. To combat this, in January 1995, mainly as a result of the Uruguay trade round and the subsequent Marrakech Declaration^[2], GATT was transferred into a permanent intergovernmental body, the WTO, dealing with trade between (member) nations through multilateral agreements. The WTO embodies the principle of the "Most Favoured Nation" (MFN) clause, which requires member states to treat nationals of other countries no less favourably than their own, and treat all nations equitably (McDonald and Burton 2002). However, during this round, "no agreement was reached, and member countries were left to deal with culture on the basis of bilateral negotiations" (Carmody 1999). This left culture excluded from formal consideration in WTO dispute negotiations and gave countries a justification for protectionism on cultural grounds.

3.2 Justifying Protectionism

Economic arguments for protectionism centre around a common theme: governments need to assist domestic industries that are either in their infancy or in decline. Such infant industries need government’s protection to help them get off the ground, and then gradually develop in the sheltered domestic market until they are ready to compete internationally. Declining industries may need state support to ease transition into this phase of the industry life cycle.

Governments also impose trade restrictions for non-economic reasons. This may be on moral grounds, for example countries imposing sanctions against countries whose political regime they oppose. The state may try to distort trade on the grounds of externalities, i.e. where the importation of a good can have negative effects upon society. An important phenomenon is the act of retaliation between states - this takes the form of a response to the protectionist practices of another nation.

However, any intervention from the state is a movement away from free trade. The arguments of Smith, Ricardo, Hecksher and Ohlin, and others demonstrate that free trade leads to an increase in the economic welfare of both participants. As shown in Diagram 1 the effect of a tariff on imports of a particular good is to increase the domestic price of the good. This does lead to an increase in domestic supply, producer profits and government revenue but at a greater cost to the consumer. As a result there is a net welfare loss, indicated in the diagram, as "these areas represent gains from international trade and specialisation that are lost because of the tariff" (Lindert and Pugel 1996). It is therefore in a country’s interests to concentrate its efforts on those industries in which it has comparative advantage and not resort to protectionist measures.

[...]

---

^[1] This is contained in the WTO Agreement, supra note 6, preamble at 1144 (Carmody 1999)

^[2] For a more thorough discussion about the origins of the WTO, please refer to the UNESCO website at http://www.unesco.org/culture/industries/trade

• College: University of Manchester (Manchester School of Management)
• Grade: 1.3 (A)
• Authors: Ben Beiske (Author), L. Cai (Author), J. Murray (Author), S. White (Author)
• Publication Year: 2002
• Pages: 25
• Catalog Number: V15452
• ISBN (eBook): 9783638205566
• ISBN (Book): 9783638643948
• Language: English
• Tags: Consideration, Validity, Cultural, Protectionism, Reference, Multifunctionality, European, Farms, Canadian, Magazine, Dispute