Lee Stranahan had a podcast on the issue last week and I think we are making progress. Let me go over what he talked about and what I agree and disagree with and what works best for vfx artists.
Lee points out that subsidies in the tax code have always been used to influence behavior.
I agree and think it’s a good thing. Lee was given an incentive to do his film work in New Mexico so he moved his family to the state for that. That’s a good thing for everybody. If a car factory or stadium did the same thing that is good too.
However, pertaining to Hollywood studios, they don’t have to make any commitment to any authority for the subsidy. A good example is Transformers 3. The first two were shot in New Mexico because the incentive was there but for the third film, they have chosen Michigan for it’s larger 42% subsidy.
Lee believes that the rise in the creative class is more sustainable than other industries.
Again, I agree with this also. Places where creative people work and live are better for the economy. They are attractive to governments because those industries create very little pollution and need very little investment in infrastructure.
Ironically, the subsidies undermine the creative class in regards to vfx workers since studios move productions from country to country and state to state for the next big subsidy. This causes artists of all kinds of experience and disciplines to live out of their suitcase in various parts of the world. The creative class is unable to root itself in a particular area because of this volatility. This also delegitimizes the domestic film industry a state or foreign country creates as they become maquila operations.
Lee proposes a federal Plus One subsidy to resolve competiting subsidies race.
I think this is a good idea. Lee recognizes that as governments offer competing subsidies, they are in a race to the bottom and the playing field is not level. He proposes that the federal government pass a law where they will help states match overseas subsidies plus 1 percent on top of that.
So if Canada offers a 35% subsidy, the US will introduce a subsidy that effectively is 36%. This takes away other countries ability to offer a higher subsidy as they will know that the US will introduce a higher subsidy.
Is this possible? I have my doubts. Lee points out how divided the California legislature is and this isn’t exclusive to just the state. The federal government is still deeply divided and Republicans would quickly attack the proposal as a bailout. So what can we do? I have a suggestion to resolve the subsidy issue and it can be answered in essentially 3 letters.
The World Trade Organization is the authority whose responsibility it is to resolve this issue. While I’m no expert in trade law, Lee’s proposal is essentially a countervailing measure where the US government must pay a duty on subsidized goods to keep the playing field level. Canada, UK, and another countries are signatories to Subsidies and Countervailing Measures agreement. If they are found the be in violation of the agreement, the WTO will work on a resolution where the subsidy would be reformed, or the studios would be obligated to account for it when comparing work bids.
The process for filing the petition to the WTO is done through the US Trade Representive Ron Kirk. Therefore, you can bypass the gridlock of congress. If it is proven that US companies and jobs are being injured, the USTR will file a petition for the WTO to look at. This a common thing the WTO does. Most recently it is resolving a dispute between US company Boeing and European company Airbus for subsidies offered in airplane contracts.
How George W Bush Destroyed The US VFX Industry
This is not the first time such a petition was filed for the film industry. In 2007, the Screen Actors Guild, after witnessing much of their member’s work go overseas, heavily lobbied for a petition to be made with the WTO. The trade law professor involved in making the case was on strong ground. Unfortunately the Bush administration rejected the petition on unspecified ground and the bleeding of jobs overseas accelerated.
The Obama administration’s main weakness right now is their ability to create jobs. Yes, the stimulus money helps but it costs money and Republicans have attacked every attempt he has made to create jobs. I am pretty sure that the new administration would be open to filing a new petition. The infrastructure and talent is here, the cost to file is very little, it wouldn’t have to go through congress, and jobs would relatively come back quickly.
The elephant in the room is the failure of vfx facilities and workers to organize. There need to be a body that represents the interest of the vfx facilities and one that represents the workers. We are all being injured by this and react to it with a fierce urgency of “um whatever”. Contact Ambassador Kirk and let him know your story.
In the meantime soldier on,