The World Trade Organization and Preferential Trade Agreements: The Case of Cultural Goods and Services

The World Trade Organization and Preferential Trade Agreements: The Case of Cultural Goods and Services Dr. Gilbert Gagné Full Professor Department of Politics and International Studies Bishop s University 2600 College Street Sherbrooke, Québec, Canada J1M 1Z7 E-mail: gilbert.gagne@ubishops.ca Paper presented at the 23 rd World Congress of the International Political Science Association Montreal, Québec, Canada 19 24 July 2014 1

The World Trade Organization and Preferential Trade Agreements: The Case of Cultural Goods and Services Abstract The treatment of cultural goods and services has long led to a debate in international economic relations. While for countries such as the United States cultural products should be treated like any other products, Canada and France in particular have insisted that they be subject to an exception. With the impossibility to agree on the treatment of cultural products at the multilateral level and the stalemate in the Doha Round, the main protagonists of the trade and culture debate have concluded their own preferential trade agreements reflecting their policy preferences. The resulting diverging provisions pertaining to cultural products at the bilateral/regional level may further hinder the possibility of an agreement on the treatment of cultural products within the World Trade Organization. I. Introduction Two opposite perspectives on the treatment of cultural goods and services in international trade law have proved ever more salient since the early 1990s and in light of the digital revolution. For countries such as the United States cultural goods and services should be considered like any other products, whereas for Canada and France in particular they should be subject to an exception to the principles and rules of economic liberalization. Between these extreme positions, most countries seem favourable to a more or less pronounced form of cultural exception. In view of the difficulties in expanding liberalization commitments on cultural products at the multilateral level and the stalemate in the Doha Round, the main actors in the trade and culture debate, i.e., Canada, the European Union (EU), and the United States, have each concluded their own preferential trade agreements (PTAs) with many third countries throughout the world. This paper argues that the ensuing divergent treaty rules at the bilateral/regional level relating to cultural products may well render even more unlikely a multilateral agreement and even any advances on cultural products under the auspices of the World Trade Organization (WTO). This can be explained primarily by the fact that PTAs provide Canada, the EU and the U.S. with a more suitable venue than the WTO to secure their policy preferences on the treatment of cultural goods and services in international trade law. The structure of the paper is as follows. After this introduction, the second section summarizes the issue of cultural products in international relations and the General Agreement on Tariffs and Trade (GATT)/WTO. The third section puts in perspective the PTAs concluded by the three main protagonists of the trade and culture debate. The fourth section considers more specifically the treatment of cultural goods and services in U.S. PTAs. This is followed, in the fifth section, by the treatment of cultural products in Canada s and EU s PTAs. The sixth and concluding section further discusses the key reasons why PTAs may further hinder the possibility of progress within the WTO on the treatment of cultural goods and services. 2

II. Cultural Goods and Services in International Relations and the GATT/WTO The tensions over the treatment of cultural goods and services in international trade law are not new. Cultural goods and services include visual, performing and literary arts, as well as newspapers, magazines, books, movies, video and music recordings, radio and television. At the beginning of the 20 th century, fearing for their culture, Canada and European countries adopted measures to protect their cultural industries from U.S. entertainment exports. In the mid-1920s, as four U.S. magazines had larger circulations than the leading Canadian periodical, Canada in 1930 applied a tariff on U.S. magazines. 1 As for European countries, they resorted to screen quotas in the 1920s in order to protect their film industry from an influx of U.S. movies. During the GATT negotiations shortly after the Second World War, the United States requested free or at least enhanced access to the European audiovisual market. Yet, devastated by the war and fearing an invasion of U.S. movies, European countries, especially France, secured a screen quota for cinematographic films (GATT Article IV). 2 There have been tensions over cultural products throughout the history of the GATT, albeit of varying scope and intensity depending on the period. Such tensions certainly increased during the Uruguay Round of multilateral trade negotiations between 1986 and 1993 as services for the first time were on the negotiating agenda. Since, the debate over the treatment of cultural goods and services in international trade law has involved a few key actors and revolved around two opposing perspectives. For one, primarily advocated by the United States, culture is an economic sector like any other and should be liberalized. Public policies aimed at protecting and promoting cultural products, known as cultural policies, constitute a form of protectionism. For the other, although cultural goods and services have commercial value, they are not mere commodities as they carry symbols and values and, therefore, touch on the very fabric and identity of states. Mostly defended by France and Canada, it gave rise to the notion of cultural exception, for which culture should either be exempt from economic liberalization or subject to specific provisions. This perspective was expanded and is now known as cultural diversity, as a result of growing apprehension that economic globalization may have an adverse impact on the world s cultures. 3 At the end of the Uruguay Round, Canada did not make any commitments with respect to cultural services, while the EU did not make any specific commitments with regard to the audiovisual sector. In other words, with the question having been put on the back burner, the debate remained completely open. 4 In preparation for the Doha Round, in its proposals on audiovisual services, the United States acknowledged the special characteristics of culture in 1 John Herd Thompson, Canada s Quest for Cultural Sovereignty: Protection, Promotion, and Popular Culture, in Stephen J. Randall and Herman W. Konrad (eds), NAFTA in Transition, Calgary: University of Calgary Press, 1996, p. 396. 2 Ivan Bernier, Cultural Goods and Services in International Trade Law, in Dennis Browne (ed.), The Culture/Trade Quandary: Canada s Policy Options, Ottawa: Centre for Trade Policy and Law, 1998, p. 109. 3 For more on the trade and culture debate within both the WTO and PTAs, see: Mary E. Footer and Christoph Beat Graber, Trade Liberalization and Cultural Policy, Journal of International Economic Law, Vol. 3, No. 1, March 2000, pp. 115-144; Gilbert Gagné, Une Convention internationale sur la diversité culturelle et le dilemme culturecommerce, in Gilbert Gagné (ed.), La diversité culturelle: vers une convention internationale effective?, Montreal: Fides, 2005, pp. 37-62; Tania Voon, Cultural Products and the World Trade Organization, Cambridge: Cambridge University Press, 2007; Lilian Richieri Hanania, Diversité culturelle et droit international du commerce, Paris: La documentation Française, 2009; Rostam J. Neuwirth, The Future of the Culture and Trade Debate : A Legal Outlook, Journal of World Trade, Vol. 47, No. 2, March 2013, pp. 391-420. 4 Bernier, op. cit., p. 110. 3

fulfilling important social policy objectives and pointed to flexibility to respond to such specific concerns. 5 Yet, in view of its size, the competitive advantage of its cultural industries and their importance in terms of export revenue, the United States remains the chief proponent of the liberalization of the cultural sector, at most accepting some specified and circumscribed exceptions. Launched in 2001 the multilateral negotiations of the Doha Round have known serious difficulties to the point of being stalemated. A very limited number of countries have made commitments regarding audiovisual and cultural services so as to expand the scope of the WTO General Agreement on Trade in Services. Hence, in 2005, only six countries had made liberalization offers concerning the audiovisual sector. 6 In 2013, a group of 22 WTO members (involving most industrial states, with the EU counted as one) undertook negotiations on a Plurilateral International Services Agreement. Yet, as far as audiovisual and cultural services are concerned, the main protagonists of the trade and culture debate, i.e., Canada, the EU, and the United States, are unlikely to change their respective positions. 7 The concerns over the cultural impact of globalization led to the adoption in 2005 of the Convention on the Protection and Promotion of the Diversity of Cultural Expressions (hereafter Cultural Diversity Convention) within the United Nations Educational, Scientific and Cultural Organization (UNESCO) with the near unanimous approval of 148 states, the opposition of the United States and Israel, and four abstentions. Primarily sponsored by Canada and France, the Convention became effective in March 2007 and, in the summer of 2014, had been ratified by 133 states. Its provisions notably recognize the specific character of cultural goods and services, which must not be considered as mere commodities, and entitle states to resort to a wide array of policy instruments in the pursuit of cultural policies. State measures adopted as part of cultural policies usually fall into two broad categories: financial and regulatory. In the first category, there are grants, low-interest loans, loan guarantees, and tax concessions. Measures of regulation refer, among other things, to those restraining the property and/or control of cultural enterprises to nationals or imposing quotas, as is the case with respect to domestic content requirements in public radio and television. Within state cultural policies, a preference to national citizens also generally applies. 8 III. U.S., Canadian and EU PTAs in Perspective The United States has remained determined to push the trade liberalization agenda forward, most recently with the renewal by the U.S. Congress in 2002 of the Trade Promotion Authority (TPA), formerly known as fast track. A series of PTAs, all in the form of free trade areas, have been concluded with different countries, most from the developing world. In fact, 5 World Trade Organization, Council for Trade in Services, Special Session, Communication from the United States, Audiovisual and Related Services (S/CSS/W/21), 18 December 2000, p. 2. 6 World Trade Organization, Special Session of the Council for Trade in Services: Report by the Chairman to the Trade Negotiations Committee, Doc. TN/S/20, 11 July 2005; Martin Roy, Juan Marchetti, and Hoe Lim, Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS?, World Trade Organization, Economic Research and Statistics Division, Staff Working Paper No. 7, September 2006, p. 38, http://www.wto.org/english/res_e/reser_e/ersd200607_e.pdf. 7 Plurilateral Services Negotiations Set to Begin As Early As March 2013, Inside U.S. Trade, Vol. 30, No. 49, 14 December 2012; USTR Says it Will Seek To Cover New Services in Plurilateral Agreement, Inside U.S. Trade, Vol. 31, No. 3, 18 January 2013. 8 For further considerations on cultural policy measures, see Footer and Graber, op. cit., pp. 122-126. 4

PTAs have proved a central element to secure liberalizing norms and provisions that the United States is resolved to see adopted at the international level. Such PTAs, most of these bilateral, fit into the great liberalization principles contained in the multilateral agreements under the aegis of the WTO. However, they often go beyond rules agreed upon in the WTO agreements. The essential U.S. objective is to secure concessions in sectors considered crucial, such as cultural and audiovisual services, from which to set precedents for its next trade liberalization endeavours. 9 Before the 2002 TPA, the United States had concluded a bilateral PTA with Israel, Canada, and Jordan. The one with Canada was superseded in 1994 by the North American Free Trade Agreement (NAFTA) which also includes Mexico. Apart from the PTA which, with the United States, comprises Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua (CAFTA-DR), the bilateral PTAs negotiated between 2002 and 2007 are with Chile, Singapore, Australia, Morocco, Bahrain, Oman, Peru, Colombia, and South Korea. In all, 11 U.S. PTAs, with 16 countries, were concluded under the 2002-2007 TPA and are all effective. 10 The bilateral character of PTA negotiations, coupled with the asymmetry of the negotiating parties, make them an interesting, if not better, venue for ensuring U.S. liberalization objectives, such as those on audiovisual and cultural services. Within the past years, in line with the idea of cultural exception/diversity, Canada has concluded a series of 12 PTAs with countries from various continents, including the Canada-U.S. Free Trade Agreement (CUSFTA), now superseded by the NAFTA which includes Mexico, as well as with Israel and Chile. Since 2000, Canada has concluded PTAs with 11 countries, i.e., Costa Rica, the members of the European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway, and Switzerland), Peru, Colombia, Jordan, Panama, Honduras, and South Korea (the latter two not yet in force); is in negotiation with 10 groupings and countries, notably the EU, the Trans- Pacific Partnership (TPP), India, and Japan; and is trying to modernize those concluded before 2006, with Israel, Chile, and Costa Rica. 11 All the PTAs concluded by Canada include an outright exemption for cultural industries. 12 As for the EU, audiovisual services used to be excluded, as in the case of its PTA with Mexico. 13 However, since 2007, the PTAs concluded by the EU have contained or been accompanied by a protocol on cultural cooperation, as in its PTA with South Korea. 14 At the end 9 For a discussion on the implications of growing bilateralism for the international trading system and a comparison of U.S., European, and Asian approaches to PTAs, see Kenneth Heydon and Stephen Woolcock, The Rise of Bilateralism: Comparing American, European and Asian Approaches to Preferential Trade Agreements, Tokyo: United Nations University Press, 2009. For an overview and comparison of states liberalization commitments in the services sector more specifically, see also Roy, Marchetti, and Lim, op. cit. 10 From the website of the Office of the United States Trade Representative, http://www.ustr.gov, in which the text and provisions of all U.S. PTAs can be accessed. Note that the TPA expired in 2007. When the TPA is renewed, one should expect more PTA negotiations being launched or revived. 11 From the website of Foreign Affairs, Trade and Development Canada, http://www.international.gc.ca/tradeagreements-accords-commerciaux/agr-acc/fta-ale.aspx?lang=eng. 12 See, for example, Canada-Chile Free Trade Agreement, 5 December 1996, Article O-06, Annex O-06, http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/chile-chili/chap-o26.aspx?lang=en. 13 European Union, Economic Partnership, Political Coordination and Cooperation Agreement between the European Community and its Member States, on the one part, and the United Mexican States, of the other part, Official Journal of the European Communities, L276, 2000. 14 On the EU s rationale for cultural cooperation protocols, see: Antonios Vlassis, Gilbert Gagné, Accord de libreéchange entre l Union européenne et la Corée du Sud: Inclusion d un protocole de coopération culturelle», Accords bilatéraux et diversité culturelle, Vol. 4, No. 9, November 2009, p. 2, http://www.ieim.uqam.ca/img/pdf/bulletinnovembreceim.pdf; Jan Loisen and Ferdi De Ville, The EU-Korea Protocol on Cultural Cooperation: Toward 5

of 2012, the EU had 28 PTAs in force, among which, those with South Africa, Chile, Peru, and Colombia, as well as two finalized, but not yet effective, with Central America and Singapore. The EU is currently negotiating PTAs with an impressive number of groupings and countries, including Canada, India, the Association of Southeast Asian Nations (ASEAN), the Common Market of the South (MERCOSUR), the Gulf Cooperation Council (GCC), Japan, Morocco, and the United States. 15 Interestingly, there has been a debate in the delayed negotiations between the EU and Canada for a Comprehensive Economic and Trade Agreement (CETA). As it had done in the CUSFTA and later in the NAFTA, the Canadian government wished to exempt all cultural industries. As the EU has historically sought to only exclude audiovisual services, it considered the cultural exemption requested by the Canadians to be too far-reaching. It now transpires that both sides agreed to a specific reference to the Cultural Diversity Convention and on their motives for exempting culture. 16 IV. The Treatment of Cultural Goods and Services in U.S. PTAs The texts of the U.S. PTAs negotiated between 2002 and 2007 under the TPA conform to a standard model and, thus, are quite similar, except for the lists of exceptions and, at times, some precedents. Insisting on wide-ranging liberalization, as well as on predictable and clearly defined trade rules, U.S. PTA negotiations use the top-down or negative list approach, whereby sectors and measures, in the fields of services and investment, not specifically excluded are covered by liberalization commitments. This must be contrasted with the bottom-up or positive list approach used for the WTO negotiations on services and in the EU PTA negotiations, where only sectors and policy measures that are specifically included are subject to liberalization commitments. The latter approach ensures greater flexibility for the exclusion or particular treatment of sensitive sectors, such as audiovisual services. 17 Hence, what is mainly relevant in U.S. PTAs with regard to countries ability to pursue cultural policies are the lists of exceptions, in annexes, which include the policies and measures that states parties have secured for the conduct of cultural policies. Two types of lists are provided. Exceptions in Annexes I allow the maintenance and renewal of non-conforming measures to the provisions of a PTA in a specific domain. However, any modification to these measures must not diminish their conformity to the liberalizing obligations. Hence, when including an exception in its Annex I, a state constrains its capacity to intervene in a sector, because any renewed or revised measure could not be more Cultural Diversity or Cultural Deficit?, International Journal of Communication, Vol. 5, 2011, pp. 254-271. For the text of the protocol, see European Commission, EU-Korea Free Trade Agreement, Protocol 3: Cultural Cooperation, 6 October 2010, http://trade.ec.europa.eu/doclib/docs/ 2009/october/tradoc_145194.pdf. For the text of the whole EU-Korea FTA, see http://trade.ec.europa.eu/doclib/press/index.cfm?id=443. 15 European Commission, The European Union Explained: Trade, Brussels, September 2013, pp. 11-12, http://europa.eu/pol/pdf/flipbook/en/trade_en.pdf. 16 Antonios Vlassis, Gilbert Gagné, Négociations de l Accord de libre-échange entre l Union européenne et le Canada: l exception culturelle menacée?, Accords bilatéraux et diversité culturelle, Vol. 6, No. 2, March 2011, pp. 2-3, http://www.ieim.uqam.ca/img/pdf/bulletinmarsceim-2.pdf; Charles Vallerand, Exemption culturelle Trouver un accord avec les Européens, Le Devoir, 30 March 2013; Antonios Vlassis, Gilbert Gagné, Négociations commerciales: entre nouvelles approches et voies stratégiques déjà expérimentées, Culture, commerce et numérique, Vol. 8, No. 3, April 2013, pp. 2-5, http://www.ieim.uqam.ca/img/pdf/oif-volume8-numero3-avril- 2013.pdf. 17 Heydon and Woolcock, op. cit., p. 7. 6

restrictive than the existing one. On the other hand, exceptions contained in Annexes II are much broader, as states can not only maintain existing, but adopt new or more restrictive, measures in a sector. In the preambles of U.S. PTAs there is no reference to trade in cultural goods and services or to the importance of preserving cultural diversity. Five chapters in the U.S. PTAs are particularly relevant with regard to cultural policies: those dealing with services, investment, electronic commerce, telecommunications, and intellectual property. As far as cultural goods are concerned, tariffs and quotas on items such as books have usually not been among the main instruments of national cultural policies. All PTAs concluded by the United States include a small chapter on electronic commerce, which mainly pertains to trade in digital products. 18 With an economy increasingly based on services and knowledge, it is a domain in which the United States enjoys a strong competitive advantage and has made a priority to prevent any trade restrictions. Trade in digital products indeed represents growing economic opportunities and is to profoundly alter the ways in which cultural contents are created, distributed, and accessed. 19 The U.S. concern for seizing the economic opportunities offered by the digital revolution is also manifested in the measures of liberalization contained in the chapters on telecommunications, a field, until recently, often the preserve of public monopolies. As for intellectual property rights (IPRs), since these are meant to sustain creativity and innovation, they have a role in the creation, distribution of, and access to, cultural contents. The United States is the first producer and exporter of products to which IPRs apply and loses more revenue from the infringements of such rights than any other country. This explains the U.S. insistence on strengthening the protection and enforcement of IPRs, especially copyrights in the digital media. 20 U.S. PTAs constrain, often significantly, the ability of states parties to carry out public policies benefiting the cultural sector. This is the case as a result of U.S. insistence on removing measures of regulation of cultural activities. The latter have historically been denounced for constituting unfair barriers to trade and investment, as they limit the capacity of the U.S. information, communication, and entertainment industries to access foreign markets. Financial 18 Digital products refer to computer programs, text, video, images, sound recordings, and other products that are digitally encoded and produced for commercial sale or distribution, regardless of whether they are fixed on a carrier medium (CD, DVD or other) or transmitted electronically. 19 Most cultural products, including books and newspapers, and more particularly audiovisual products, such as movies, television programs, multimedia productions and music, are now available in digital format. The digitization of cultural products is almost fully achieved in the case of music and multimedia production and well under way in the case of television and films. For a more thorough discussion on trade in digital products, see Mira Burri-Nenova, Trade versus Culture in the Digital Environment: An Old Conflict in Need of a New Definition, Journal of International Economic Law, Vol. 12, No. 1, March 2009, pp. 17-62. 20 Nam D. Pham, The Impact of Innovation and the Role of Intellectual Property Rights on U.S. Productivity, Competitiveness, Jobs, Wages, and Exports, U.S. Chamber of Commerce, Global Intellectual Property Center, 26 April 2010, http://www.theglobalipcenter.com/impact-innovation-and-role-ip-rights-us-productivitycompetitiveness-jobs-wages-and-exports/; Stephen E. Siwek, Copyright Industries in the U.S. Economy: The 2011 Report, International Intellectual Property Alliance, 2 November 2011, http://www.iipa.com/pdf/2011copyrightindustries Report.PDF; United States, Department of Commerce, Economics and Statistics Administration and United States Patent and Trademark Office, Intellectual Property and the U.S. Economy: Industries in Focus, March 2012, http://www.uspto.gov/news/publications/ip_report_march_2012.pdf; Office of the United States Trade Representative, 2013 Special 301 Report, May 2013, http://www.ustr.gov/sites/default/files/05012013%202013% 20Special%20301%20Report.pdf; U.S. Intellectual Property Enforcement Coordinator, 2013 Joint Strategic Plan on Intellectual Property Enforcement, Executive Office of the President of the United States, June 2013, http://www. whitehouse.gov/sites/default/files/omb/ipec/2013-us-ipec-joint-strategic-plan.pdf. 7

measures, however, have generally been tolerated, and so they have in U.S. PTAs, as they are not considered to affect markedly the economic interests of American cultural industries. Although important, financial instruments constitute only a segment of cultural policies. Unlike measures of regulation, they necessarily involve expenditures on the part of states. For developing countries this could be problematic, because of other, often more pressing, needs. Some specific exceptions as regards a varying array of regulatory measures, mainly in the form of national content quotas in public radio and television, have nevertheless been included in some U.S. PTAs. This is the case of the U.S. PTAs concluded with Australia, Chile, Costa Rica, the Dominican Republic, and South Korea. Yet, as Bernier points out, such exceptions almost invariably pertain to traditional instruments of cultural policy. They are then tolerated by the United States because, owing to technological developments, they are to become increasingly obsolete. They are also generally conditioned upon the absence of restrictions concerning the electronic commerce of digital products. 21 V. The Treatment of Cultural Goods and Services in Canada s and EU s PTAs In the CUSFTA negotiations, Canada insisted, despite U.S. pressure, on exempting cultural industries. Hence, Article 2005.1 of the CUSFTA stipulates that (c)ultural industries are exempt from the provisions of this Agreement. Yet, the United States reserved a right to retaliate. The second paragraph of CUSFTA Article 2005 provides that a party may take measures of equivalent commercial effect in response to actions that would have been inconsistent with this Agreement but for paragraph 1. This broad and outright conditional exemption of the cultural sector was later incorporated into the NAFTA, under which it also applies between Canada and Mexico (NAFTA Article 2106, Annex 2106). As in the case of U.S. PTAs, the negotiations of Canada s PTAs are marked by the resort to the negative list approach. This does not have much implications for the cultural sector, however, as Canada has systematically exempted cultural industries from all its PTAs. Moreover, unlike the CUSFTA/NAFTA, such an exemption of the cultural sector is unconditional, as it does not provide for the possibility of retaliation. 22 With respect to the EU, it has historically sought the exempt the audiovisual sector from liberalizing commitments. Unlike Canada, which has worked to exclude the whole of cultural industries from trade liberalization, Europeans have been essentially concerned with audiovisual services. More recently, with a view to implementing the Cultural Diversity Convention, the European Commission has concluded with the EU s PTA partners protocols on cultural cooperation. These provide a framework for cooperation, mainly relating to audiovisual 21 Ivan Bernier, Les accords de libre-échange conclus récemment par les États-Unis en tant qu exemple de leur nouvelle stratégie relativement au secteur audiovisuel, April-June 2004, pp. 2-3, 15-16, http://www.diversiteculturelle.qc.ca/fileadmin/documents/pdf/conf_seoul_fra_2004.pdf; Gilbert Gagné, René Côté, and Christian Deblock, Les récents accords de libre-échange conclus par les États-Unis: une menace à la diversité culturelle, Report submitted to the Agence intergouvernementale de la Francophonie, June 2004, pp. 67-68; Gilbert Gagné, Free Trade and Cultural Policies: Evidence from Three US Agreements, Journal of World Trade, Vol. 45, No. 6, December 2011, p. 1282. 22 See, for example, Canada-Colombia Free Trade Agreement, 21 November 2008, Article 2206, http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/colombia-colombie/chapter22- chapitre22.aspx?lang=eng. 8

coproduction arrangements, flexible enough so as to be easily modified to adapt to circumstances. 23 It might be of interest to mention that, at Canada s request, the EU for the first time used the negative list approach in the CETA negotiations. Yet, with regard to the cultural sector, this did not have a significant impact, as both sides have been in favour of cultural exception/ diversity. What is likely to have more implications is a new approach that Canada and the EU have adopted with a view to agreeing on the terms of an exemption for the cultural sector. This new approach includes three elements. First, the preamble to the CETA refers explicitly to the Cultural Diversity Convention and to the motives for which the two partners agree to a cultural exemption. Second, Canada inscribes its definition of cultural industries as found in all its other PTAs. Third, an exemption of the cultural sector is demanded in all CETA chapters (about six) that are relevant for the cultural policies of the two sides. This approach chapter by chapter is apparently motivated by a concern to leave less margin of interpretation in case of disputes or arbitration and to ensure links with other issues covered by the CETA, notably intellectual property. 24 In the PTA negotiations between the EU and the U.S. for a Transatlantic Trade and Investment Partnership (TTIP), significant divergences were already noticeable before the onset of the talks. While the European Commission would have preferred not to exclude a priori any sector, France finally obtained that audiovisual services be excluded from the negotiating mandate of the Commission. This exclusion, however, is subject to review at a later stage. For its part, the United States has threatened France of economic sanctions if no openings were made with regard to the cultural sector. 25 VI. Multilateral versus Regional/Bilateral Treatment of Cultural Products The existing, sometimes pronounced, divergences in the principles and rules concerning cultural products within the WTO, on the one hand, and PTAs, on the other, raise a lot of questions. A key one is whether such divergences associated with the proliferation of PTAs may further jeopardize the likelihood of an agreement, or even of some progress, on the treatment of cultural goods and services within the WTO. In this regard, there are two different views in the literature on the relationships between economic regionalism/bilateralism and multilateralism. On the one hand, as some states further liberalize their trade, the overall outcome of PTAs is freer trade, as long as these do entail further barriers to trade with third countries and trade creation (consumption shifts from high cost producers to low cost producers within the 23 For a discussion of U.S., Canadian, and European different conceptions on the trade and culture debate as translated in PTA negotiations, with emphasis on the EU s cultural cooperation protocols, see Lilian Richieri Hanania, Cultural Diversity and Regional Trade Agreements The European Union Experience with Cultural Cooperation Frameworks, Asian Journal of WTO & International Health Law and Policy, Vol. 7, No. 2, September 2012, pp. 423-456. 24 Antonios Vlassis, Gilbert Gagné, Accord Canada-UE: la nouvelle approche d exemption culturelle et ses implications, Culture, commerce et numérique, Vol. 8, No. 9, November 2013, pp. 2-4, http://www.ieim.uqam.ca/img/pdf/oif-volume8-numero9-novembre-2013ceim.pdf. 25 EU and US Free-Trade Talks Launched, bilaterals.org, 13 February 2013, www.bilaterals.org/?eu-and-us-freetrade-talks; After Internal Battle, Commission Includes AV Services in Draft Mandate, Inside U.S. Trade, 21 March 2013; EU Commission Attempts to Calm French Fears Over Audiovisual Services, Inside U.S. Trade, 25 April 2013; Spanish Official Sees Cultural Issues As Only Serious Mandate Obstacle, Inside U.S. Trade, 2 May 2013; À quoi sert l Europe?, Le Devoir, 21 June 2013. 9

union, leading to an increase in efficiency) outweighs trade diversion (consumption shifts from low cost producers outside the trading bloc to high cost ones within it, leading to a decrease in efficiency). Also, to the extent that the trade principles and provisions at the basis of such PTAs are essentially similar and consistent with WTO rules, and PTAs now involve nearly all countries, this would result in de facto multilateral liberalization. PTAs would then act as vanguard of trade liberalization, which could later be more easily emulated and formally multilateralized. 26 On the other, to the extent that PTAs necessarily involve discrimination vis-àvis third countries and result in trade diversion, they hinder world trade. Moreover, as various PTAs have their own particular scope and content, usually reflecting the objectives and interests of their most important states parties, thus allowing these states preferences to be more easily pursued, this would complicate, if not prevent, the possibility of such differences to be later harmonized at the multilateral level. 27 It is this latter view that is particularly worrisome with respect to the trade and culture debate. PTAs have proved for the United States, Canada and the EU a more suitable venue than the WTO to secure their policy preferences on the treatment of cultural goods and services in international trade law. Consequently, it appears increasingly unlikely that the main protagonists of the trade and culture debate would accept to see their respective positions being compromised by multilateral negotiations when they have successfully pursued their preferences in the bilateral/regional setting with an ever greater number of partner countries. 26 See Richard E. Baldwin, Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade, The World Economy, Vol. 29, No. 11, November 2006, pp. 1451-1518. 27 See Jagdish Bhagwati, Termites in the Trading System: How Preferential Agreements Undermine Free Trade, New York: Oxford University Press, 2008. 10