OVERVIEW OF MPAA AND GLOBAL MARKETS, MPAA OPINION ON

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OVERVIEW OF MPAA AND GLOBAL MARKETS, MPAA OPINION ON Powered By Docstoc
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                    MOTION PICTURE ASSOCIATION OF AMERICA, INC.
                                   1600 I Street NW
                                Washington, D.C. 20006
                                     202.293.1966



                                             March 11, 2009


Carmen Suro-Bredie
Trade Policy Staff Committee
Office of the US Trade Representative
600 17th Street, NW
Washington, DC 20508

                                                          Re: Request for public comment on the proposed
                                                          Trans-Pacific Partnership Free Trade Agreement

Dear Ms. Suro-Bredie:

These are the comments of the Motion Picture Association of America (MPAA) in response to the Office
of the US Trade Representative (USTR) January 26, 2009, Federal Register notice inviting submissions
from the public on the proposed negotiations for a Trans-Pacific Partnership (TPP) Free Trade Agreement
with Singapore, Chile, New Zealand, Brunei Darussalam, Australia, Peru and Vietnam.

The US motion picture industry plays a pivotal role in expanding the US economy. It is one of the few
industries that consistently generates, even in these difficult economic times, a positive balance of trade.
In 2007, that surplus was $13.6 billion. The industry distributes its films to over 150 countries around the
world and in 2007, 46 percent of MPAA’s member companies’ revenue came from overseas.

The motion picture industry is a major US employer. Over 180,000 people are employed in studios,
independent production companies, or in core industry suppliers, such as film labs, special effects and
digital studios, location services companies, prop and wardrobe houses, research services and film stock
houses, video duplicating service companies and stage rental facilities. The industry employs another
231,000 workers, including actors, directors, writers, and technical or craft specialists. The average salary
of those directly employed in the industry are higher than the average salary nationwide. The industry
also generates nearly 1 million indirect jobs.

To enhance opportunities for growth and provide consumers with more choices, overseas markets must be
open, non-discriminatory, and secure. MPAA strongly supports the negotiation of trade agreements that
protect intellectual property, lower market access barriers to US audiovisual products and services, and
promote legitimate electronic commerce.

The United States currently has free trade agreements with four of the proposed seven TPP FTA partners
-- Singapore, Chile, Australia, and Peru. These agreements should serve as the foundation for the TPP
FTA. The TPP should not be limited by these agreements. The US should aim to include disciplines
achieved in more recently negotiated FTAs – such as the anti-camcording discipline – that address the
evolving challenges confronted by the US motion picture industry.
MPAA’s interests in the TPP FTA cut across several FTA chapters including intellectual property,
services and investment, electronic commerce, customs, and goods. Below are MPAA’s specific
comments on some of the TPP’s proposed elements.

Goods

MPAA member companies export a range of filmed entertainment products, delivering US produced
content to theaters, video rental stores, retail establishments, and free and pay television operators. These
products represent the life cycle of filmed entertainment, all phases of which must be promoted if the US
filmed entertainment industry is to maximize its contributions to the US economy. Below are the
harmonized tariff codes of some of the products that MPAA members export:

Cinematographic film – 3706.10 and 3706.90
Magnetic tape – 8524.40 and 8524.53
Optical disc media – 8524.32 and 8523.29

MPAA seeks the elimination of tariffs on the above and other products exported by its members.
Following the model of the Australia FTA, the TPP should eliminate tariffs on all tangible digital
products.

Customs

MPAA members frequently find that customs officers assess ad valorem duties based on potential
royalties generated rather than solely on the value of the carrier medium, i.e. the physical materials which
are being imported. The economic consequence of such policies can mean hundreds of thousands of
dollars per film. Moreover, such policies are burdensome, subjective and create unfair taxation. Because
royalties are subject to remittance, withholding and income taxes, such duties are also a form of double
taxation. The International Chamber of Commerce recognized in a policy statement, The impact of
customs duties on trade in intellectual property and services, that such a practice distorts markets,
increases costs for suppliers and buyers, depresses commercial activity, and impedes the availability of
intellectual property in the country imposing the tariffs.

MPAA notes, for instance, that in January 2007, Singapore’s assessed duties on home entertainment
products went from approximately $.50 per unit to an adjusted $7.00 per unit. This $7.00 is purportedly
representative of product cost, freight and royalty. (The actual product cost is under $1.00.) While this
policy was ultimately repealed, it is indicative of the challenges MPAA members confront around the
world and underscores the necessity of eliminating tariffs on US filmed entertainment exports.

While specific duties on filmed entertainment products would address the studios interest in
predictability, MPAA understands that some economies will continue to apply ad valorem duties. In such
cases, MPAA firmly believes that TPP members should agree that any ad valorem duties will be assessed
on the value of the carrier medium. It is notable that a zero tariff on the products exported by the US
filmed entertainment industry would nullify this problem.

MPAA further believes that the TPP FTA must include a discipline prohibiting the assessment of duties
on electronic commerce.

Services and Investment

To best ensure a comprehensive scope and secure market access for evolving and future business models,
MPAA believes that the TPP FTA must follow the negative list format adopted in the Chile, Peru,
Australia, and Singapore FTAs.



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The TPP must avoid “cultural exceptions,” and rely on the flexibilities built into FTAs to promote
economies’ cultural interests. Such exceptions are an unhelpful precedent and suggest that cultural
promotion and open markets are incompatible, fostering protectionist inclinations that rear their heads in
the other international fora.

It is imperative that the agreement opens and locks in access for U.S. suppliers of films and television
programming to the TPP markets over a range of media, including theaters, cable, satellite and the
Internet.

Vietnam holds significant growth potential and MPAA is pleased to see it included in the TPP FTA. For
Vietnam to meet this potential, however, the TPP must address several key market access barriers.

First, the TPP should aim to remove or narrow Vietnam’s film import and screen quotas, as well as its
broadcast quotas. These quotas are fundamentally discriminatory and foster an unstable and an
unpredictable business climate. A more predictable, open market where consumers dictate the competitive
balance of the market would benefit both Vietnamese consumers and foreign service providers.

Second, Vietnam’s FAFILM maintains a monopoly over video importation and distribution which has
obvious disadvantages including a lack of competition. FAFILM’s video monopoly is antiquated and
should be eliminated, allowing for unimpeded video importation and distribution of creative content in
Vietnam.

Third, imported films are subject to censorship by the Ministry of Culture and Information (MOCI)
Department of Cinema. MOCI strictly censors films’ content, especially foreign films. While
governments are entitled to regulate in the public interest, regulation must be non-discriminatory.
However, due to the broad discretion delegated to the reviewing authority, which results in unpredictable
and arbitrary results, the process inevitably becomes highly dependent on personal relationships. Films
that are determined to require editing are subject to a re-review. The film importer bears all costs relating
to the reviewing process. The review process is not transparent and the importer’s right of appeal is not
assured. In addition, the MOCI may use its discretionary powers to censor the content of films and to
restrict the number of imported films. The implementation of a classification and rating system would be
preferred for the development of the theatrical market in Vietnam as opposed to its existing censorship
process.

It is of the utmost importance that the TPP investment chapter captures all forms of investment, including
intellectual property. The TPP should include disciplines that assure US investors the opportunity to
establish, acquire, and operate investments in TPP economies. It is important that investors are provided
national treatment.

MPAA observes that the Australia FTA does not include an investor-state dispute settlement mechanism
whereas US FTAs with Peru, Chile and Singapore do include this important discipline. This discipline is
particularly important in FTAs where judicial systems may not be fully mature, ensuring US investors
have access to a neutral and fair international legal system.

Transparency and Anti-Corruption

The TPP should follow the Singapore FTA example and include not just institutional transparency
provisions but also include specific provisions for transparency in the domestic regulatory processes
including licensing decisions. This is particularly important for the US motion picture industry that
occasionally finds itself subject to discriminatory licensing regimes in foreign territories. Robust
transparency provisions would provide the US motion picture industry with some recourse should such
discriminatory practices arise in the future.




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MPAA notes that the Australian FTA, unlike the Peru, Singapore and Chile FTAs, does not include the
requirement to publish new final regulations prior to their effective date. It is imperative that the TPP
FTA follow the model of the Peru, Singapore and Chile FTAs, allowing US industry the opportunity to
make its case to regulators.

Finally, the anti-corruption principles included in recent FTAs usefully address industry’s ability to
conduct business openly and fairly.

E-Commerce

Integral to the emerging business models of MPAA’s member companies is electronic commerce, which
continues to transform MPAA member companies’ production and distribution processes. MPAA places
high priority on ensuring that this critical means of distribution and production is not jeopardized by
discriminatory regulations.

It is imperative that the TPP includes a stand-alone e-commerce chapter that prevents the application of
customs duties on electronically delivered digital products, assures non-discriminatory treatment of digital
products, and addresses the valuation of physically delivered digital products to ensure that customs
duties are applied on the basis of the value of the carrier medium.

The Australia FTA includes an exception for audiovisual products. While not wholly problematic given
Australia’s obligations under the services chapter, MPAA firmly disagrees with the inclusion of such
exceptions which are incompatible with the reality that open markets fuel cultural diversity and
consumers’ access to diverse content and ideas.

Intellectual Property Rights

The Peru, Singapore, Australia and Chile FTAs include significant advances to these countries’ IPR legal
and enforcement frameworks. MPAA believes that this template should be extended as starting point for
the TPP IPR chapter.

MPAA and its member companies place the highest priority in securing both the legal and practical tools
necessary to protect intellectual property rights in the digital age. Internet piracy has emerged as the
fastest growing threat to the filmed entertainment industry.

The entertainment industry is working with consumer electronics companies, software developers, and
computer manufacturers to create an environment that will provide creators technological protection of
their content. In addition, the MPAA and its members are investing tens of millions of dollars each year
to investigate piracy of filmed entertainment.

At the same time, however, MPAA believes government has a vital role to establish adequate legal
protections for copyright owners, and to enforce those laws in an aggressive and effective manner,
including:

       adequate notice and takedown provisions,
       clearly defined Internet service provider (ISP) liability guidelines,
       protection of temporary copies,
       availability of statutory damages,
       full and effective implementation of the global minimum standards embodied in the WCT and
        WPPT,
       extended term of protection for copyrights to match US law,
       “making available” right, and
       provisions against circumvention of technological protection measures.


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These protections are essential elements of a legal framework capable of responding to the demands of
the digital environment. Without these protections, the industry’s viability will be undermined, no matter
what it might do on its own. These protections serve both to protect an important US economic asset, and
deter harmful activity in host countries, including tax evasion, consumer fraud, and unfair competition –
activities that threaten local cinema owners, video store proprietors, and broadcasters, too.

The TPP FTA should also capture the improvements the US has achieved in more recent FTAs, such as
an anti-camcording measures, the protection to encrypted cable signals, and criminalizing those situations
where a signal – cable or satellite – is lawfully decrypted but subsequently retransmitted, for commercial
advantage, without the authorization of the lawful signal distributor. These improvements offer U.S. right
holders similar protections as found in the U.S. Family Entertainment and Copyright Act and the U.S.
Communications Act and US motion picture industry strongly encourages their inclusion in the TPP. In
addition, the IPR chapter should include legal incentives to facilitate cross-sectoral cooperation to combat
online piracy.

Closing

The six major studios of the MPAA generate billions of dollars annually from filmed entertainment
distributed around the globe. Notwithstanding this singular achievement, the U.S. movie industry faces
daunting barriers in many markets as well as relentless challenges to the integrity of its product,
challenges extracting an increasingly unbearable cost. The economic and cultural vitality of the creative
industries is one of our nation’s most valuable assets.

MPAA supports negotiation of a TPP FTA that will open and secure market access for the US motion
picture industry and protect the intellectual property that fuels the development and success of this
industry.

MPAA appreciates the opportunity to comment on the proposed TPP FTA and is ready to provide further
information or answer questions as required.


Sincerely,




Greg Frazier
Executive Vice President and Chief Policy Officer
World Wide Government Affairs




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