I am proud that UNCTAD, together with UNESCO, has taken the initiative to promote this debate among policy makers in the area of audiovisual services.
Audiovisual services are a powerful instrument for promoting culture and education at the national level and possibly the most important vehicle for cultural exchange among nations. They can be very effective in nation-building, helping to ensure respect of cultural diversity, values and heritage and strengthening unity and social cohesion. At the same time, with the help of the telecommunications revolution - the major force shaping globalization -audiovisual services themselves have become powerful carriers of globalization.
In this context, I would like to raise some aspects of the trade perspective of developing countries in audiovisual services trade and to highlight a few substantive issues for further debate.
Until quite recently, the interests of a few developed countries have driven the debate on audiovisual services. The position of developing countries has been understated and often remained clouded, but now this is changing. Some developing countries have begun to express their positions in the ongoing GATS negotiations, and it is our hope that today´s debate, along with the discussions among experts over the next three days, will help to improve our awareness and understanding of the issues.
On the basis of preliminary research by UNCTAD, the problems and concerns of the audiovisual services sector cut across the development divide and are common to countries at all levels of development. These problems have more to do with globalization than with classic North-South issues. It should thus be possible to seek a consensus and an outcome that is balanced from the standpoint of both the exporters and the importers of these services.
A number of developing countries have achieved success in one or another segment of audiovisual services. Some countries in Latin America, especially Mexico, Brazil, Colombia, Chile, Venezuela and Argentina, are exporting telenovelas worldwide. For developing countries as a whole, however, domestic market sales remain the top priority in developing a viable audiovisual services industry. India is a leading producer of films, and in 1999 produced about 150 more feature films than the United States. The difference is that the main source of India´s revenues are from domestic exhibition: over 14 million Indians go to the movies every day, whereas in the US, 11 of the 20 top-grossing films earned more abroad than at home (in 2000). In value terms, sales by the Indian film industry are around 1 per cent of the world total, but production costs need to be considered, and in India they can be up to 100 times lower than in the US. Trade has great potential for generating revenue in India, as attested by the 80 per cent growth in Indian film export revenues between 1998 and 1999.
A word of caution, however, from the past: the 1940s and 1950s saw a thriving and vibrant film industry in Argentina, Mexico and later Brazil, but this gradually disappeared. A similar fate befell the film industry in Italy and Europe in general, with the exception of France.
Developing countries are becoming increasingly cognizant of the important link between domestic productive sectors and trade. Brazil, for example, where audiovisual services account for 1 per cent of the GDP, has a half-billion-dollar deficit in international transactions and is taking a number of steps to reactivate and increase the sector´s contribution to the economy. These include setting up a trust fund to finance production, creating a producers´ association and skills development programmes, strengthening distribution networks, implementing a new trade-related policy for monitoring imports with respect to their pricing and in view of antidumping measures, and promoting exports and co-production agreements.
Within this positive context, however, we must not forget the weakest of the developing countries. In the year 2000 it was estimated that less 2 per cent of those living in sub-Saharan Africa had ever seen an African film, which is not surprising given that the region has produced only 600 feature films over the past nine decades.
Audiovisual services, and especially the music industry and multimedia products, such as music videos, are a way of integrating new talents of humble origin into non-traditional economic activities with possible access to global markets. In the 1940s, music helped to promote Afro-American talents and creativity in the US. Similarly, music from Latin America has been penetrating world markets. The question remains as to how this commercial success can be translated into positive trade balances for developing countries, and in this regard the TRIPS Agreement raises some important issues for the services negotiations on audiovisuals.
Trade in audiovisual services is closely interrelated to trade in goods, and its potential is virtually untapped by developing countries. Estimates suggest that for a film to break even, it must earn at least twice as much at the box office as the total costs of development and production, a goal achieved by only two thirds of big-budget films. However, the bulk of profits, reportedly some 82 per cent, now stem from post-theatre markets, such as home video, pay TV, broadcast TV, international TV, video sales and merchandising, for example in licensing fees for toys, books and T-shirts. Disney´s "The Lion King" (1994), which cost $ 55 million to produce and generated $ 313 million in the US and $ 450 million abroad in box-office receipts. These figures are dwarfed by the $3-billion sales of Lion King merchandise and the $ 500 million in videos, again demonstrating the potentially important interlinkages between negotiations on services and negotiations on goods.
Here again, however, I must raise another cautionary note: many of these opportunities will arise only in sophisticated markets - that is, in advanced developed economies.
Technological advances - particularly those made possible by the "convergence" of telecommunications and media - have provided greater opportunities for the production and export of audiovisual services, while challenging some of the traditional approaches taken by cultural policy in this sector. Some countries, however, risk being excluded from these opportunities because they lack satellite uplinks or the latest PC software or technology. The introduction of new standards may also call for new technologies to be used that, at least at the outset, may often be available only in the standard-setting country.
The growth in audiovisual trade and technological convergence is taking place in a non-neutral environment. The United States maintains its undisputed global dominance of the feature film and TV industries, boasting a 70 per cent share in most markets. India and Nigeria are the rare exceptions, as they succeeded in nurturing strong domestic markets. Nigeria has developed a local film and video industry based on low budgets. In addition, the industry focuses exclusively on local content, to which Nigerians can easily relate.
But audiovisual services remain highly regulated, as countries seek to safeguard the integrity of their culture and cultural values. Since 1995, the public has become increasingly aware of - and sensitive to -- the impact of globalization in general, and the WTO Agreements in particular, on cultural identity.
Promoting trade is a priority in developing countries, but so is the promotion and protection of their cultures. GATS is an international instrument for ensuring progressive trade liberalization. The question remains whether other international instruments - developed in the WTO or elsewhere - are necessary to ensure the preservation of cultural diversity at the global level, and here I wish to stress the key role played by UNESCO in such efforts.
Looking back at the history of the GATS, audiovisual services have probably been the most sensitive and complex sector for negotiators. These negotiations have delayed the accession of a number of the newest WTO members, such as Latvia, by as much as a year. In fact, the sector has some of the fewest commitments of any sector in the GATS schedules, as many countries simply invoked MFN exemptions and did not schedule specific commitments. Cultural exceptions appear in regional (e.g. NAFTA) and bilateral (e.g. Canada-Chile) trade agreements. This outcome reflects the reluctance of many countries to treat culture as a commodity, and also demonstrates their willingness to defend their culture. In the ongoing GATS negotiations, some WTO members have circulated negotiating proposals for liberalizing the sector. The negotiating process is currently in the request-and-offer stage, and audiovisual services are a part of these bilateral negotiations.
The audiovisual services sector is sui generis, and the GATS mechanism may not be sufficient to take care of its specificities. In order to achieve progress in the negotiations, an additional sectoral mechanism may be necessary to address national concerns. The outcome of negotiations could result, for example in a protocol that would establish the following:
Conditions under which the use of subsidies can be justified in this area;
Links with TRIPS;
Provisions on how to protect culture through linkages with relevant cultural agreements; and
Effective implementation of GATS Articles IV and XIX:2 by addressing such issues as anti-competitive practices that act as barriers to effective market access for developing countries.
Progress in the debate on trade-related aspects of audiovisual services should be seen in the context of the Doha agenda. Respect for public policy concerns and an equitable balance in the distribution of benefits from trade liberalization is one of the most critical issues to be addressed in this area. May I close by encouraging all panellists to take advantage of this opportunity to put forward innovative suggestions on the options available in advancing the debate on this important services sector.