Increasing globalization and its effect on cultural protectionism

In chapter 1 of this thesis, I delineated the position of trade openness in economics.

However, other aspects of everyday life are affected by trade liberalization and associated globalization as well. The country by opening up allows not just goods, services, and new technologies to enter the country but also new ideologies, new cultures, or even new illnesses. Consequently, situations like the fast spread of illnesses, economic crises, or imperialist cultures create a feeling of fear from national vulnerability. In this chapter, I concentrate on the effect of globalization on culture and how it affects the trade trends of nations. Moreover, it will be stressed that non-economic aspects of trade liberalization, such as cultural homogenization, should not be taken lightly because they may lead to deflection from trade openness policy that is, for now, the most beneficial one.

As I indicated before, trade liberalization goes hand in hand with globalization which first appeared in the era of the scientific revolution in the 15^th century. Since then, this phenomenon was interrupted just by World War I, postwar protectionism, and World War II. After that, with the establishment of new institutions (GATT, World Bank, IMF, or UN), globalization gained again its strength. Nowadays, in our digital age, the interdependence of the world’s economies, cultures, and populations achieved extreme size (Kolb 2018). Thinking about the means that provide globalization, cross-border trade, flows of capital, free movement of people and information are the most common ones. They bring attractive opportunities and benefits which nowadays are seen as a matter of course but at the same time, they cause fear from making the country vulnerable.

Events as the financial crisis, global pandemics, or extensive cultural imperialism initiate doubts about the optimality of the free trade regime. Such doubts have a strong impact despite the overweighting benefits of trade liberalization. One of the reasons for that is a psychological phenomenon called negative bias, which describes the tendency of adults to use negative information far more than positive. Moreover, adults learn from it and transmit such knowledge with a negative connotation to the next generations (Vaish et al.

2008). In this way, the negative judgement persists longer and may cause severe changes in the preferred policy. The result of such a process is also cultural protectionism.

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Cultural protectionism arose as a safeguard in times of national adaptation to globalization. Since the trade openness and an international specialization took place also in the cultural industries, citizens, government officials and journalists started to fear, that the promotion of similar behaviors, purchases and similar lifestyles will erode national cultural heritage. The fright from distortion of national cultures was strengthened by the fact that cultural industries like cinematography, musical industry or publishing are directly reflecting and promoting the producer's culture. This thinking is nicely promoted by French film producer Cohen, who said: “Sound and pictures have always been used for propaganda, and the real battle at the moment is over who is going to be allowed to control the world's images, and so sell a certain lifestyle, a certain culture, certain products, and certain ideas.” (Baughn & Buchanan 2001, p. 6) His perspective is consistent with the so-called cultivation theorists. On the other hand, there are also theorists, who understand globalization as a mean to unite people. They see the trade with cultural goods as the provision of alternatives to the domestic cultural products and as a birth of the opportunity to form a new hybrid version of culture, which fuses previously existing and through trade offered cultures. The process of such a cultural fusion is called glocalization and the example of the union of countries that approaches it is the European Union (Bekhuis et al. 2013).

Aforementioned discussion suggests that there are diverse opinions about globalization and trade liberalization in the sector of cultural products. In my point of view, this polarity is caused by a distinct understanding of the character of cultural goods supported by the cross-country differences in culture. By looking at the character of cultural products, there are two aspects through which it is possible to perceive them. One is that the cultural products have specific cultural characteristics, they reflect the sense of national and cultural identity and that their distribution allows diffusion of cultural values and ideas (Voon 2007). Consistently with the previous description, the Universal Declaration on Cultural Diversity issued by UNESCO in 2001 defines cultural goods and services as

“vectors of identity, values and meaning, which must not be treated as mere commodities or consumer goods.” (Voon 2007, p. 39) On the other hand, cultural products have an economic side as well. They are goods and services providing entertainment for consumers and their selling is generally motivated by profit. Because of this dual

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character of cultural goods, it can be hard to distinguish between economically motivated protectionism and the restrictions motivated by the incentives of cultural preservation.

However, on the side of the supporters of cultural protectionism, there is the fact that various market failures are related to the cultural industries. It means, that there is a need for certain protectionist policies that will prevent such failures. One of the lapses related to cultural goods is that they provide positive externality. The demand for domestic cultural goods reflects just the benefits of the present generation and does not consider the benefits to future generations. It also does not consider the indirect benefits that the consumption of cultural products brings. For example, the encouragement of social bonding or increased motivation of consumers to contribute to their community is caused by the promotion of local culture through cultural products. It may also improve the reputation of a country internationally. Nevertheless, since the consumers are unwilling to pay for these indirect benefits, either because they do not know about them, they do not care, or they just enjoy the free-riding, the cultural products embodying local culture may be at risk of insufficient consumption and production (Voon 2007).

In addition, the production of cultural products and preservation of the national culture was due to the globalization threatened by the dominance of larger countries with wealthier domestic markets, which allowed them to dominate the market for cultural products. One of such countries is the USA that thanks to the easy and cheap copyability of cultural products, and their property of being used by multiple consumers simultaneously, could dominate the market of audiovisual products. The producers from larger domestic markets tend to count with greater potential revenues because the revenue is mainly driven by the quantity sold and not the price. Due to that, they could work with higher production budgets and enjoy the tendency of worldwide consumers to prefer movies with bigger production budgets. In turn, the globalization and accessibility of large international markets caused that the revenues from the audiovisual industry increased exponentially and the USA could easily dominate the international market of audiovisuals. The result of the USA´s dominance for its trade partners was that smaller domestic film producers were pushed out even from their markets (Voon 2007). However, the United States had two additional benefits that played them in cards. First, transaction costs of international distribution of their movies are in general smaller because there is no need to translate the movies to another language since English is a leader in linguistic

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imperialism. In 2001 English was “… the primary language of only 380 million people

… [but it was] used by approximately 1.6 billion.” (Baughn & Buchanan 2001, p. 7)² Second, the USA´s comparative advantage in the information technology sector enables cheaper, and more effective program creation, distribution and delivery systems which reduce the overall production costs in USA´s audiovisual industry (Baughn & Buchanan 2001).

However, these advantages are not exclusive to the United States. China has become to be strong competition for the USA. The trade liberalization, among others, allowed China´s fast economic development, and it caused that China splits, since the year 2000, the leader position of globalization with the USA. Moreover, from 2008 China dominates even in the export of cultural goods. As you may see in Figure 2, there are huge differences in the redistribution of total cultural exports of the top 20 cultural exporters between 2004 and 2013.

Figure 2: Distribution of total exports of cultural goods between 2004 and 2013 (% of total exports proceeding from the 20 largest exporters of cultural goods in these years)

Source: Own Elaboration, The Journal Of UNESCO Institute For Statistics (2016).

2 The fast and large extension of the English language began in times of colonization and continues until these days. The main promotors of English in recent times are globalization and its almost exclusive use in international scientific circles. Moreover, its global use is reflected on the Internet as well, where ¾ of the whole content is in English. (Baughn & Buchanan 2001)

0%

5%

10%

15%

20%

25%

30%

35%

2004 2013

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In the year 2004, there was the proportion between exports of cultural goods among these countries equilibrated, except for the United States (17%) and the United Kingdom (15%). However, in the year 2013, there is undoubtedly one dominant leader. China´s exports of cultural goods represented 33% of total cultural exports among these countries.

It means that China´s export increased by 22 percentage points over 9 years. This significant change raised concerns about cultural preservation even in the case of the United States, the second most dominant “cultural emperor”. Nevertheless, in countries where the export of cultural goods means big revenues, cultural protectionism is accepted in a little bit contradictory way.

Let us assume the example of the United States that receives remarkable revenues from the export of audiovisual products. To prevent protectionism in this sector, the USA during The Uruguay Round of General Agreement on Tariffs and Trade (GATT) negotiations (1986-1994) tried to eliminate Article IV of GATT which captures the exemptions for cultural protectionism. Due to strong opposition formed by European nations and the need for the successful signing of The Uruguay Round of GATT the US intents were unsuccessful. On the other hand, in times when the USA faced cultural imperialism, its reaction was quite opposite. When the Columbia Pictures and MCA were purchased by Japan´s companies Sony and Panasonic, the USA strongly protested against these acquisitions and made a great effort to gain them back. Similarly, the United States reacted protectively when they faced extent immigration of Latin Americans, who brought with them their language and culture. The USA initiated the “English only”

movement which was in addition supported by the installation of V-chips to televisions that allowed to block undesired programming (Baughn & Buchanan 2001). In more recent years, the USA shows an inclination towards protectionism again. This was reflected in the election of Donald Trump, who won the presidential elections with the famous slogan

“Make America Great Again”. He was supporting trade protectionism, justifying it through its positive effect on job positions in manufacturing, the possibility of renegotiation of trade agreements, and protection of national security. Donald Trump promoted international interdependence and specialization as a threat to national security.

Moreover, he paid attention mainly to traditional American industries as the automobile industry or heavy industry that already formed a part of the United States’ culture. The combination of fear from possible national vulnerability and the loss of traditional

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industries was one of the aspects why proud American society supported this candidate and the following wave of extensive protectionism³ (Gertz 2020).

All these examples indicate that the preservation of national culture and state independence really matters for everyone, even for significant exporters of cultural goods.

Nevertheless, the extent and form of embodied protectionism depend on various cross-country characteristics. To show some specific examples of implemented protectionist policies outside the USA, Table 1 presents a few of the adopted barriers to cultural products from the audiovisual industry.

Table 1: Examples of trade restrictions on a cultural sector of audiovisuals

Country Cultural protectionism in film/cinema and broadcast/television

Australia There is a rule that 55% of all the television programming broadcast between 6:00 a.m. and midnight must be of Australian origin.

Canada

In Canada, the foreign acquisitions of Canadian-owned film distribution firms are prohibited. Moreover, the government subsidies the Canadian-controlled production companies. In television broadcasting the foreign content is limited to 40% as maximum and the privately owned broadcasting firms are obligated to broadcast at least 50% of Canadian production during evening hours.

Egypt

Film distributors are limited to the importation of three prints unless they obtain special approval from the Chamber of Cinema to import more. In addition, the entertainment tax on foreign films is 40% instead of the 20% tax for Arab movies.

France In France, the government provides substantial subsidies to assist local film producers. Of the feature films and total transmission times allocated to audiovisual

3 The fear from the loss of a leading position in some industries or the fright from cultural imperialism are some of the external factors that enhance countries' protectionist tendencies. Another example of such an external factor is the pandemic of Covid-19. To prevent the spread of this disease, countries all over the world after decades closed their borders. This represented, among others, a strong negative shock to international trade. Such a protectionist strategy was from the epidemiologic point of view a reasonable step and when these regulations were not needed the international trade should have returned to its original volume. Nevertheless, the question is whether the negative impact really expired so fast. At the beginning of this chapter was discussed, that events as Covid-19 remind the potential negatives of globalization and they stress the vulnerability which the country´s openness brings with itself. These consequences may then cause that protectionist tendencies persist longer. The reason whether, why, or in which country, the negative effect takes longer represents an interesting topic for further research.

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works, 40% must be of French origin and an additional 20% (60% total) must be of EU origin.

Spain EU works, by rule, must comprise more than 50% of the whole broadcast time and at least half of them must be originally filmed in Spanish.

Hungary

State-owned channels must commit 70% of programming to European works of which 51% must be Hungarian. For private national television, there is an annual quota of 35% (excluding commercials, films, news, sports, and quiz shows) must be Hungarian.

Mexico

Under NAFTA, Mexico reserves the right to prohibit English-language advertising on television. Every cable operator and direct-to-home (DTH) satellite television service must provide at least 15% of Mexican programming.

Source: Own Elaboration Based On The Article Baughn & Buchanan (2001, p. 10–11).

In addition to a regular list of restrictions, it is interesting to notice the common procedure for countries from European Union (EU). The examples show that by the rule, each of the countries from the European Union is obligated to reserve more than 50% of the broadcasting time to work proceeding from the EU. Nevertheless, the countries can choose the upper limit and they can add additional restrictions related to the minimum content of their domestic work. The examples reflect that in neither of the three mentioned European countries, the restriction just to European work is sufficient. France reserves the most (40%) of the audiovisual work to its domestic origin (Baughn & Buchanan 2001). The existence of cultural protectionism inside of the European Union is important because it suggests that the members of the EU might not support the glocalization and in times of intense globalization, they try to protect their national cultural heritage. Such observation indicates that the EU membership could be one of the cross-country characteristics that are related to stronger cultural protectionism.

The specific case of cultural protectionism in the European Union was studied also by Bekhuis et al. (2013). They understand the EU as an ultimate test case of the effects caused by intensive globalization. In the case of the member countries of the European Union, globalization achieves even greater levels as in global merits. In general, as is shown in Figure 3, worldwide globalization increases almost constantly during the observed period. However, the dominance of de facto globalization over de jure

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globalization has changed.⁴ Before the year 1990, globalization was provided mainly through trade in goods and services and its increase was moderate. The de facto globalization increased by 5 points in these 20 years and the de jure index by 6 points. On the other hand, after 1990 the legislative regulation started to lead the global integration and boosted the rise of both types of globalization. During these following 28 years, de jure globalization increased by 23 points and de facto globalization by 14 points. Even though, the gap between these two types of indexes increased a little, compared to the evolution of cultural globalization it achieves very small volumes.

The evolution of cultural globalization is captured by the right graph of Figure 3. In this case, the cultural de jure integration dominates the de facto globalization throughout the whole period. Its increase moreover reflects relatively constant speed compared to aggregate globalization. However, it cannot be said the same about de facto cultural globalization. In the period 1979-1992, the level of de facto cultural integration exhibits decreasing trend, which means that the actual transmission of culture was restricted. After this year it has begun to rise again however, the average gap between de jure and de facto measure increased to 13 points. Such a huge gap indicates that even the cultural protectionism is not the key point in international agreements (agreements promote cultural integration), the real transmission of culture through traded cultural goods is much more limited. This supports the statements of cultivation theorists who claim that countries understand the increasing globalization as a threat to the preservation of their cultural heritage.

4 Globalization is measured by the KOF index, so a country´s level of globalization is expressed on a scale from 0 to 100. Moreover, the index differentiates the de facto globalization (measured through the actual volume of traded goods and services) and de jure globalization (index based on the quantity of customs duties, taxes, and trade restrictions). The differentiation between these two types of globalization is important because they provide integration through very distinct channels. The de jure globalization provides the integration between countries through laws or multilateral agreements but the liberalization at this level does not secure real globalization provided through actual trade. For example, the earlier mentioned “English only” movement limited the real globalization but did not affect the de jure globalization. The additional benefit of the KOF index is that it also allows separating cultural globalization on its own. It enables a profound analysis of the eligibility of culturally motivated protectionism (Gygli et al. 2019).

15 Source: Own Elaboration, Gygli et al. (2019).

In addition to the world´s globalization, I constructed a separate graph capturing just the evolution of globalization in Europe. Figure 4 captures the fact, that the globalization of European countries is stronger than the world´s average globalization.

Source: Own Elaboration, Gygli et al. (2019).

Source: Own Elaboration, Gygli et al. (2019).