The federal government has spurned a request by Hollywood unions and below-the-line workers to investigate Canadian film production incentives.

U.S. Trade Representative Susan Shwab announced Friday she would not launch a formal probe into the legality of Canada’s government film and TV subsidies designed to attract American productions. The Screen Actors Guild, the Film & Television Action Committee and other orgs had filed the petition last month, contending that the incentives have been used illegally to cut into employment in film and TV in the U.S., forcing below-the-line workers to leave the industry.

“Based on a thorough review of the economic data, other facts, and legal arguments set out in the petition, the interagency committee unanimously recommended that the USTR not accept the petition because a dispute based on the information and arguments set out in the petition would not be effective in addressing the Canadian subsidies,” said Gretchen Hamel, a spokeswoman for Schwab.

“Ambassador Schwab has accepted this recommendation, and has decided not to initiate a Section 301 investigation in response to the petition,” Hamel said.

Such an investigation allows industry groups to file a petition asking the U.S. Trade Representative to investigate whether an unfair trade practice has occurred and to initiate negotiations with Canada to remove its subsidies. Advocates contend the filing — backed by the threat of intervention of the World Trade Organization — represented the most effective way of putting the brakes on productions fleeing to less-expensive locations outside the U.S.

Canadian officials have long asserted that their subsidies are legal.

SAG said it was “extremely disappointed” in the finding, adding, “We believe it is imperative to seek every remedy possible to fight runaway production while protecting and improving the wages and working conditions of our members.”

FTAC, an org of below-the-line workers founded in 1998, has spent most of its energy since 2001 on prepping the 301 petition. Besides SAG’s backing, the initiative received support over the years from an array of Teamster and Intl. Alliance of Theatrical Stage Employees locals plus city councils in Burbank, Glendale and West Hollywood.

But the issue has been divisive in Hollywood and the filing didn’t receive support from other unions such as the Directors Guild of America, AFTRA and the IATSE’s top leaders or from orgs such as the Motion Picture Assn. of America and the Independent Film & Television Alliance. Opponents have long contended that such a strategy could backfire by leading to a trade war and further loss of jobs.