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VFX Industry Rescue Could Come From WTO Rules

U.S. f/x industry could benefit from existing anti-subsidy duties

Foreign subsidies on visual-effects work may be enough to trigger World Trade Organization “anti-subsidy duty” rules that would impose a tariff on those vfx when they’re imported into the U.S., according to a panel presentation at the Siggraph conference on Thursday.

Lawyer David A. Yocis of  Picard Kentz & Rowe of Washington, D.C., presented the findings of a feasibility study looking at the idea of using WTO rules to end or limit the foreign subsidies that have decimated the visual effects business in California and turned its much of its workforce into global nomads. Yocis said that if the domestic vfx industry chooses to pursue such a remedy, the best route is the use of “countervailing duties,” or CVDs.

WTO rules permit member governments to impose those duties when they find that foreign governments have subsidized their own producers and caused injury or threaten to injure domestic producers. Such injury can include loss of jobs.

Subsidies for vfx work have built up f/x companies in the U.K., Canada, Australia and New Zealand, among other territories, while their U.S. counterparts have struggled. The dutiess would counteract the benefit of those subsidies for producers, reducing their incentive to take work outside the U.S.

However, Yocis warned the law “was not designed for a digital world” and would be hard to use. It would cost the industry hundreds of thousands of dollars, perhaps millions, in legal fees, he said, and would not provide a long-term, comprehensive solution to the problem of subsidies.

But, he said, “We think that if you want to try to take a trade law approach, this is the way to do it. This could change the incentives … and could really open the door to working out some more comprehensive arrangement going forward.”

“The most important question is ‘Does the law even apply? Does it apply to digital products made overseas, where the value is not in the digital file but to the copyright attached to it?’ That’s something that has never come up before,” Yocis said. “We think the answer is yes.”

The advantage of the CVD approach, he said, is that if the government conducts an investigation and finds that the foreign subsidies injure the domestic vfx industry, the duties are triggered automatically. The  laws and treaties for the duties are already in place; no new act of Congress would be needed. Collecting the duty might prove difficult, he said, “But the thing to remember is that if you get to that point, you’ve succeeded. The goal isn’t to have a tax to be collected, it’s to change behavior.”

The American vfx industry would have to present a united front to the government in favor of an investigation and countervailing duties. However, such a duty would almost surely increase the cost of production, since studios and producers would lose the benefit of those vfx subsidies. Therefore the AMPTP and its member companies would likely lobby against such an effort.

Moreover, two major American vfx companies are owned by studios: Sony Pictures Imageworks and Industrial Light & Magic (Disney). That wouldn’t doom the effort, however, Yocis noted. ” If someone in the U.S. industry is opposing it because they’re getting the subsidy and benefiting from it in some way, the government has the option to disregard that.”

And those corporations might find some dissension in their own ranks if they oppose a CVD investigation. An exec from one of those studio-owned vfx companies told Variety after the meeting “I wouldn’t oppose that.”

Read the full feasibility study here.

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