Entertainment Industry Sends U.S. Trade Office a NAFTA Negotiation Wish List

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Donald Trump hopes to put up a wall between the United States and Mexico, but film studios and broadcast companies are eyeing opportunities south of the border. They hope that the president's stated intention to renegotiate the North American Free Trade Agreement becomes a vehicle to tear down ownership limitations, screen quotas, advertising rules and Mexican performer mandates. In letters last week to the Office of the U.S. Trade Representative, the entertainment industry's wish list also included some bold intellectual property reforms, including curtailing safe harbors that protect Internet service providers from intermediary liability.

The MPAA and other entertainment trade associations suffered a setback when the U.S. withdrew from the Trans-Pacific Partnership shortly after Trump took office. Discussions on tinkering with the Clinton-era NAFTA present some jeopardy for the industry, but also new opportunity, and these entertainment groups want a seat at the table. The Motion Picture Association of America and the Recording Industry Association of America are among those hoping to testify at a USTR public meeting on July 27, and in advance, they've spelled out their needs to the government agency.

A June 12 letter from Anissa Brennan, senior vp international affairs and trade policy at the MPAA, complains about how Mexico is protecting its domestic entertainment industry by limiting foreign films and TV shows allowed to be shown.

"For example, although Mexico has a non-conforming measure for a 30 percent screen quota, over the years, this quota has been lowered to ten percent," she writes. "Because of the ratchet clause, Mexico cannot raise its screen quota above ten percent; this is the appropriate starting point for modernization negotiations. The same is true of Mexico’s NCM requiring that the majority of each day’s live broadcast programs must feature Mexican nationals; this impractical market access limitation is no longer reflected in Mexican law. The U.S. should work with Mexico to update its Annexes to reflect today’s marketplace."

Another priority is getting the Mexicans to allow more foreign ownership in the country's broadcast networks. A perhaps under-noted development in the U.S. was the FCC's approval Feb. 23 of an application from an Australian couple who wished to take over licenses of radio stations in Alaska, Arkansas and Texas. This cleared the way for full foreign ownership of American broadcast outlets. The MPAA and others now seek reciprocation, hoping to use a NAFTA renegotiation to increase the 49 percent foreign equity cap for broadcast networks in Mexico. The National Association of Broadcasters, in its own letter, also highlights Canada's 20 percent foreign equity cap.

Speaking of Canada, big American broadcasters want to require that their northern neighbors obtain consent to retransmit U.S. television signals. At the moment, Canadian outlets enjoy a statutory license scheme, but the NAB wants more negotiation, which presumably would lead to greater compensation.

"U.S. broadcasters who undertake the significant investment in content, transmission infrastructure and technology innovation, are effectively unable to yield any return in the Canadian market from their investments," writes NAB general counsel Rick Kaplan. "Instead, the entire economic benefit is captured by Canadian cable and satellite TV distributors who charge Canadian consumers for access to U.S. broadcasters’ signal streams."

There's also complaints about everything from discriminatory tax treatment of U.S. advertising expenditures to the way the retransmission scheme limits collection of advertising money. For example, the National Football League thinks it can make more money from the Super Bowl if Canadian rules change. In its letter, the pro football league speaks to how "Canada took the remarkable step of severely restricting advertising revenue in Canada with regard to the Super Bowl broadcast" and the way in which this has allegedly harmed the league.

According to the NFL's letter, "Although the Obama Administration raised this issue several times, Canada refused to withdraw its discriminatory measure regarding the Super Bowl, and the NFL has already suffered significant damage to the value of its intellectual property rights as a result of Canada’s actions. The NFL is hopeful that the Administration will use all available paths to ending Canada’s discriminatory treatment of the NFL."

Sure to be controversial are entertainment industry stances toward intellectual property.

The MPAA calls for more criminal sanctions on pirates, the availability of statutory damages for copyright liability, recognition of copyright in temporary copies and more. The one thing that studios don't wish to see is "rote recitation of Section 512 of the U.S. Digital Millennium Copyright Act," referring to the way that ISPs like Google and Facebook are safe from copyright liability so long as they satisfy certain conditions such as expeditiously removing  infringing works upon notice.

"[W]e have in recent years seen other countries more effectively and nimbly respond to online piracy in their markets through site blocking, notice-and-stay-down, and injunctive relief," writes the MPAA's Brennan. "As such, we recommend a new approach to this important trade policy provision by moving to high-level language that establishes intermediary liability and appropriate limitations on liability."

The Directors Guild of America agrees and arguably goes even further.

Recommending that online service providers should be forced to do things like maintain a repeat infringer policy, the guild's letter states, "NAFTA should not provide Internet Service Providers with anything akin to the overbroad safe harbor from copyright liability found in Section 512 of the U.S. Copyright Act."