Paris seeks cultural exception in EU-US trade pact

LUXEMBOURG France entered a meeting of EU trade ministers on Friday bent on keeping its movie and television industry out of hotly anticipated free trade talks with the United States. The move could delay the formal start of negotiations next week.

Endorsing the start of transatlantic trade talks was meant to have been one of the big events of President Barack Obama's trip to Europe next week. But going into Friday's European Union talks in Luxembourg, Paris was sticking to its "cultural exception," insisting that state subsidies and restrictive quotas for movies and television shows are not up for negotiation.

All other EU nations have vowed to protect the culture industry as well, but the large majority nevertheless wants it to be part of the talks. They fear that removing it would set off tit-for-tat claims on both sides.

The 27 EU nations want to enter the sweeping talks with a unanimous mandate, giving France, the bloc's second biggest economy, major sway over the outcome.

"Now, France has to move a bit," Germany's trade state secretary Anne Ruth Herkes said. "Sometimes we all have to do this. Now, it is France's turn."

The proposed free trade talks between the EU and U.S. have raised expectations of a big boost to growth and jobs by eliminating tariffs and other barriers that have long plagued economic relations. A free trade pact would create a market with common standards and regulations across countries that together account for nearly half the global economy.

For most, the potential gains are too important to let the talks slip at this early stage.

"An EU-U.S. agreement could potentially represent 400,000 jobs in the EU, so that's a prize really worth working for," said Irish Enterprise Minister Richard Bruton, who chaired Friday's EU meeting.

An EU-commissioned study shows that a trade pact could boost the 27-country bloc's economic output by 119 billion euro ($159 billion) a year and the U.S. economy's by 95 billion euros ($127 billion). Another estimate showed eliminating tariffs alone would add $180 billion to U.S. and EU gross domestic product in five years' time while boosting exports on both sides by about 17 percent. That could add about 0.5 percent annually to the EU's GDP and 1 percent to the U.S.

For Europe in particular, that extra growth would be crucial to help pay high public debt and bring down unemployment, which is at record highs.

Tariffs between the EU and the U.S. are already relatively low, averaging 5 percent to 7 percent. But the pact would have huge benefits because of the sheer size of the market bilateral trade is worth $1 trillion annually, the largest commercial relationship in the world.

The prospects sounded so good that all seemed aligned for a launch of the talks during Obama's European visit. Both the U.S. and Britain said they wanted to announce the opening of negotiations by the G-8 summit on June 17-18, with talks expected to start around the beginning of July.

But France and Hollywood have always had a fraught relationship. Paris has for years sought to protect its cultural industries with lavish subsidies and quotas as competition grew from other countries particularly the U.S., whose exporters are helped by having a massive domestic market and the use of English, the world's pre-eminent language.

And since the EU is a patchwork of often tiny countries with their own languages and cultures, such protection has become a fully acceptable practice in the bloc.

Because of this, France says the EU is so unlikely to give up such protection that there is no point in even including it in the negotiations.

EU Trade Commissioner Karel De Gucht said that the negotiating mandate includes ironclad guarantees that such protection would be maintained, so there is no reason to keep the sector out.

Finnish Foreign Trade Minister Alexander Stubb said that with such guarantees "there's absolutely nothing that threatens the French or the European film industry and I shall certainly continue to watch all of my beloved French movies even after this free trade negotiation has been finalized."

De Gucht fears that if the EU excludes the cultural industry before the talks begin, the U.S. will do the same for another sector, such as public procurement or aviation. The U.S. says nothing should be taken off the table before negotiations begin.

As the summit drew closer, however, some of the most divisive issues in trade relations appeared as intractable as ever. Besides the issue of culture, deep differences remained over agriculture, food safety, climate change legislation, financial deregulation and intellectual property enforcement.

The best-case timetable for completing the pact is the end of 2014. However, for many experts, that is overly optimistic and the consensus is it will take a few years.