It is as if the movie credits write themselves. Reality has become stranger than fiction. Jy ken mos. Die movie star ding, as Sipho Sepamla’s poem suggested. It is that age of diplomacy.
As I write this, news arrives of US President Donald Trump planning a 100% levy on films produced in foreign lands. Like an industrial policy for Hollywood. We kind of have one too in SA, where movie makers get offsets and rebates. There are a lot of jobs on film sets. It makes sense. But we don’t tax Nollywood “flicks” or Japanese karate dramas. We don’t even levy import taxes on most cinematic film reels or any other video recording equipment. To “penalise” Americans for streaming K-dramas is like calling the app the “bioscope”. Ancient. Old.
Yet some suggest it is a “cultural” deepening of the trade war as the White House looks to experiment with “services” tariffs on foreign films. As if they come in a circular reel or VHS tape? It is an interesting if not “funny” symptom of something more “serious”. The US is actually a “services” behemoth with 80% of its national output comprising services rather than goods trade. It complains of no trade “deficits” in the films, software, games, subscriptions, professional services and other elements of the services trade. It is not alone.
The UK similarly has a large services share of its GDP. James Bond films, Oxbridge enrolments, visits to Stonehenge and the “value” generated by the suits in London’s financial district far outweigh what comes out of Liverpool’s Victorian fabric quarters or the steel coming out of Scunthorpe. The House of Commons suggested that the UK exported £153bn more in services than it imported in 2023. On the goods side, it imported £204bn more than it exported. It is the story of the Group of Seven (G7) nations.
These nations accounted for more than two-fifths of world output 25 years ago. They now account for under 30%. The rise of “the rest” (primarily India and China) in the goods trade is the main story of the past two decades. Brics+ nations now account for more than a third of global GDP, up from just more than a fifth in 2000. It is this, at a fundamental level, that is the cause of the Western “nostalgia” for dominance in the goods trade. That ship some suggest, has long left the harbour.
Gustav von Schmoller of the German “historical school” of economics suggested that “the very idea of international law is a protest against the excesses of national rivalry”. To the extent that the “international law” overseeing the global trading system has sought to “police” the goods trade and has had a nearly three-decade moratorium on levying taxes on electronic transmissions, it has failed to catch up to the “servicification” of the West. Wittingly or unwittingly. In so doing, it has allowed for the recasting of interstate rivalry on the basis of merchandise trade when the “services trade” accounts for two-thirds of global output.
The “foreign film duty” threat is not only a response to the earlier retaliation by China, which included curbs on US films. It is an early foray into trade regulation of “services”. Ostensibly to protect Hollywood. From what? It is unclear. It seems, however, that the Trump tariffs may have been a mechanism to irreversibly reorganise merchandise goods supply chains to access favourable export market access for services firms (whose value flows constitute more than three-quarters of the American economy).
However, it is clear that if such a tariff on foreign films were to be levied, it would open the proverbial Pandora’s box on import duties on services. In so doing, it may give many net service-importing nations such as SA and others in the developing world pause to think about the World Trade Organisation (WTO) moratorium on electronic trade differently. In time for the Cameroon ministerial of the WTO next year maybe? Only time will tell.
• Cawe is chief commissioner at the International Trade Administration Commission. He writes in his personal capacity.
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