The French claimed a “beautiful victory” Tuesday when the explosive issue of audiovisual trade was scratched from the impending world trade agreement.

Under intense pressure to settle differences as zero-hour approached, chief U.S. negotiator Mickey Kantor said the U.S. and Europe “had agreed to disagree” over audiovisual in the General Agreement on Tariffs and Trade.

It is unclear whether continued growth in U.S. exports of moviesand TV shows to Europe will be hampered by the lack of a GATT accord on the issue. Much will depend on whether the Europeans become even more protective of their entertainment industries or whether, as is more likely, the prevailing free-trade winds sweeping other industries will have a liberalizing effect on showbiz.

At any rate, the audiovisual issue will be set aside as the finishing touches are put on the GATT global accord by today’s U.S.-imposed midnight deadline. Although the focus has been on U.S./European negotiations, GATT is an ambitious trade plan involving 116 nations around the world.

The failure to get a deal on films, movies and music means that such audiovisual services will not be included in the GATT rules, one of four big service sectors to be bypassed. Financial services, telecommunications and shipping were also left out of the agreement or included in a stripped-down fashion.

Some believe audiovisual could be subject to a separate U.S.-European deal outside of GATT, though late Tuesday it remained unclear when that would be debated — or what form it would take.

But a few suggested that the squabble between the U.S. and Europe will continue to fester: Hollywood is pressuring for ever greater freedom to do business in Europe; the Euros are increasingly adamant that a bigger invasion of Hollywood blockbusters would devastate its film industry and corrupt its culture.

U.S. movies hold 60% of the market in France and 72% across the EC. By contrast, French films account for less than 1% of the U.S. market — their distribution in part limited by an assumption that American viewers dislike subtitles and dubbing.

U.S. TV shows make up approximately 25% to 30% of small-screen schedules across Europe, while European shows, mainly imports from Britain, are relegated to a few slots on Public Broadcasting Service and high-brow cable channels in the U.S.

Put differently, audiovisual products are the United States’ No. 2 export after commercial aircraft, and estimated annual sales of U.S. films, TV shows and videocassettes to the EC total $ 3.7 billion. The EC’s annual audiovisual exports to the U.S. amount to an estimated $ 300 million.

Whatever the U.S. negotiators in Geneva might say about it’s being “a draw” rather than a defeat, the French were delighted. “We got what we wanted from the start, which is basically the cultural exception,” said French communications minister Alain Carignon.

Citing a victory for those who wanted to preserve European cultural identity, Carignon said, “Everything which is audiovisual, everything which touches on culture, will not be in the free-trade market, will not be included in GATT.”

Valenti irked

Meanwhile, Motion Picture Assn. of America president Jack Valenti, who lobbied hard for audiovisual’s inclusion in GATT, was furious. He said there was a “deliberate strategy” on the part of the EC to leave audiovisual to the end of the talks and a “lamentable” refusal to seriously negotiate.

“At 3 a.m. this morning, they put their final offer on the table and it was a joke,” said Valenti. “It was so porous, so full of holes, of words with no meaning. They offered quotas capped at 51%, with France and Belgium grandfathered at 60%. Then there would be a committee with vague duties and mandate which would consult on any disputes between the U.S. and the EC, but with no timetable.”

The U.S. negotiating team had attempted to freeze the current TV quotas and confine them to terrestrial television. They also sought the eventual elimination of Euro production subsidies and new rules for future technologies such as pay-per-view TV.

France, like all European Community countries, already has quotas for foreign (primarily American) TV shows — no more than 40% of a station’s programming can be made outside the 12-nation EC. France has no quotas on movie theater offerings but subsidizes its film industry with an 11% surcharge on box office receipts and levies from sales of blank videotapes.

U.S. negotiators had hoped to scrap the surcharge and modify the TV quota to allow cable and satellite channels to be quota-free.

French culture minister Jacques Toubon said that “as of now, Europe is totally free to develop its audiovisual policy.”

French director Jean-Jacques Beineix warned, however, that Euro producers had won only “a respite. The enemy troops have not yet been able to launch the final assault, but they will.”

Kantor vowed that the U.S. would continue to use “every tool” to pry open European markets to U.S. audiovisual goods. Valenti said he didn’t blame Kantor for the failure to reach an agreement with the EC on audiovisual products.

Uphill battle

“You can’t negotiate with somebodywho doesn’t want to negotiate,” he said.

On Kantor’s controversial demand for American access to Euro blank-tape levies, Valenti said the Americans made a late proposal intended to break the deadlock. “We proposed that the monies should be paid to American (companies) and performers, and that we would keep all the money ($ 60 million-$ 65 million annually) that goes to U.S. companies in Europe for production. They never made a counter offer.”

Valenti said business for non-EC companies in Europe will shrink as a result of audiovisual’s exclusion: “The consequence is that some of these new technologies won’t be available in Europe.”

Sources said the decision to cease hostilities on audiovisual came as early as late Sunday night, after French prime minister Edouard Balladur received a call from President Clinton. It is not known what the president said.

“This negotiation has nothing to do with culture, unless European soap operas and gameshows are the equivalent of Moliere,” said Valenti.

GATT chief Peter Sutherland expressed relief that the U.S. and Europe had “cleared the air.” Despite work still to be done, he was confident the full treaty could be concluded today.

GATT negotiators have twice before missed completion deadlines because of U.S.-E.C. disputes and Sutherland had put both sides on notice that they faced a heavy responsibility for not letting the same thing happen again.

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