Creative Services Alternative

Existing frameworks for how trade is facilitated between countries in this sector

The arrangements described in this section are examples of existing arrangements between countries. They should not be taken to represent the options being considered by the Government for the future economic relationship between the UK and the EU. The Government has been clear that it is seeking pragmatic and innovative solutions to issues related to the future deep and special partnership that we want with the EU.

The basis for international trade in services, including among the Creative Industries,is the WTO’s General Agreement on Trade in Services (GATS). GATS provides a framework for trade in services among WTO members setting out the general principles and obligations which members must abide by as well as the commitments each member has made to open and non-discriminatory trade in relation to particular service sectors.

Additionally, WTO members have agreed a range of further sector agreements – including rules on IP (the multilateral Agreement on Trade-Related Aspects of Intellectual Property Rights, or ‘TRIPS’). A further agreement among 23 WTO members including the EU, the US, Australia and Japan, to liberalise trade in services – the Trade in Services Agreement (TiSA) – is not yet signed. Both are pertinent to the facilitation of trade in the creative sectors.

However, there are limited precedents for agreements with the EU on culture due to the ‘cultural exception’, an exception to WTO rules, first introduced by the EU during 1993 negotiations on the General Agreement on Tariffs and Trade. The cultural exception enables cultural goods and services to be treated differently to other goods and services in trade agreements. It is not uncommon for culture to be excluded from Free Trade Agreements altogether.

As far as the EU’s international agreements are concerned, the EU-Canada Comprehensive Economic and Trade Agreement (CETA)26 grants exceptions inchapters on investment, subsidies, government procurement, cross border trade in services and domestic regulations with respect to audiovisual services for the EU and to cultural industries for Canada (broadly the publishing, musical and audiovisual 26 EU-Canada Comprehensive Economic and Trade Agreement (CETA) industries). Elsewhere CETA recognises the Parties’ rights to regulate domestically in order to protect and promote cultural diversity. The CETA chapter on IP aligns with the WIPO Copyright Treaty and is important for creative industries based in the EU wishing to provide their services in Canada or vice versa.

Moreover, the Deep and Comprehensive Free Trade Agreement between Ukraine and the EU27 includes a chapter on culture, which is intended to promote cultural cooperation and foster cultural exchanges. It also encourages the development of cultural industries in the EU and in Ukraine and aims to implement properly the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions of 200528.

The EU-[South]-Korea agreement 29 includes a protocol on on cultural cooperation, which contains provisions to to facilitate co-operation between the Parties in relation to audiovisual works and services 30 (this is explained more fully in the broadcasting report) and in relation to the performing arts, publications and cultural heritage sites and historic monuments. The proposed Transatlantic Trade and Investment Partnership agreement 31 includes a chapter on regulatory cooperation, which touches on cultural diversity and state aid.

Switzerland also has a series of bilateral agreements with the EU. One agreement enables it to participate in the MEDIA strand of Creative Europe, an EU fundingprogramme governed by its own EU Decision. Additionally, the UK has a number of Memoranda of Understanding on culture worldwide with countries such as Brazil, China, India and Indonesia.

Priorities for a UK-EU FTA

173.Witnesses questioned whether a UK-EU FTA could provide access to the Single Market equivalent to that currently enjoyed by the sector. Discovery Communications Europe Ltd said that “a free trade deal equivalent to EEA membership will be challenging for the UK negotiators to achieve”,230 while Ms Enders said: “It is extremely difficult to ask businesses in the creative industries to invest for a future trade agreement that does not exist yet and whose provisions with respect to the audio-visual industry would seem at first glance anyway to be difficult to obtain.”231
Access to the Single Market in broadcasting

174.The Government has said it will focus on ensuring the “freest possible trade” between the UK and the EU, including “supporting the continued growth of the UK’s broadcasting sector”.232 The Audiovisual Media Services Directive, which underpins the Single Market in broadcasting, is described in Box 9.
Box 9: The Audiovisual Media Services Directive (AVMSD) 2010/13/EU

The Directive governs the EU-wide coordination of national legislation on all audiovisual media, including both traditional (referred to as ‘linear’) broadcasts and on-demand (‘non-linear’) services. The Directive establishes minimum regulatory standards that Member States and national regulators must implement, which aim to preserve cultural diversity, protect children and consumers, safeguard media pluralism, combat racial and religious hatred, and guarantee the independence of national regulators.

The Directive uses the ‘Country of Origin’ principle, meaning that a broadcaster only has to obtain a license and observe regulatory standards in any one Member State in order to be able to offer its services in the others without being subject to any additional requirements. Member States cannot restrict which broadcasts the public can receive or what programmes broadcasters from other Member States can retransmit in their country. This removes the obligation for broadcasters to meet multiple regulatory regimes when trading across borders.

The Directive requires broadcasters to promote the production of, and access to, ‘European works’, both for linear and on-demand services. The Directive defines ‘European works’ as audiovisual works that either originate in EU Member States, or in states party to the European Convention on Transfrontier Television. Works that are co-produced between the EU and third countries are also included.

For linear (television) services, the Directive requires Member States to ensure that broadcasters, “where practicable”, reserve a majority proportion of their transmission time for European works, excluding the time allotted to content such as news, sports events and advertising. Broadcasters should reserve at least 10% of their transmission time, or alternately allocate at least 10% of their programming budget, for European works created by independent producers. Member States are given flexibility as to how they choose to promote European works, and there is wide variation. The Directive is to be reformed as part of the Digital Single Market Strategy. One proposed change is to require non-linear, online and on-demand broadcasters to preserve 20% of their content for European works.
Source: European Commission, ‘Audiovisual Media Services Directive (AVMSD)’ (10 June 2016): [accessed 24 February 2017]

175.Enders Analysis said the EU’s ambition to boost the production of audio-visual content had been “a fantastically successful effort … since 1990, the development of the UK’s [audio-visual] group has been greatly stimulated by the implementation of the Single Market for [audio-visual] in the UK and in other EU Member States, along with tax credits and EU funding programmes.”233

176.Discovery Communications Europe Ltd described the UK as “the pre-eminent hub for international broadcasting in the EU”.234 Adam Minns said that “we are something in the region of double or maybe triple our nearest competitor in the number of channels that are established and based here in the UK”. He added that “by very conservative estimates” the UK had 1,100 channels licensed by Ofcom, and that “the next biggest country in Europe is France, which has 400”. Mr Minns pointed out that 650 channels were “licensed not for the UK at all but for non-domestic markets. They are based here, employing people here and investing here, but broadcasting into other European markets”.235 This critical mass created “a cluster effect that attracts further investment”.236

177.Witnesses told us that continuing access to the Single Market in broadcasting would be vital. In the absence of such access, Sky warned that “broadcasters are unlikely to be able to rely on their Ofcom licences to broadcast” to other Member States.237 Discovery Communications Europe Ltd said broadcasters would need “a local broadcasting licence and establishment of a local office every time a channel was launched”, which would be “prohibitively expensive”.238 Moreover, Article 2 of the AVMSD states that a firm “shall be deemed to be established in the Member State where a significant part of the workforce involved in the pursuit of the audiovisual media service activity operates”.239 As Ms Enders pointed out, this is “not just about having a brass plate on the continent. It is about having people, resources, the regulatory people, the whole nine yards”.240 Mr Minns noted that “there is an obvious direct risk to jobs in the UK”. He knew of “at least one international company that is looking at moving people from the EU to the UK”, but added that there was now “a question mark over whether that would happen going forward”.241 We recognise that other Member States may have an interest in attempting to attract these businesses away from the UK.

178.Ms Enders acknowledged that the cluster effect, to which we have referred, would be “very helpful” in “insulating us to some degree” from the impact of reduced market access, but noted that this effect was “the product of the very regime that we are moving away from”.242 Pact noted that audiovisual services were excluded from almost all EU trade deals, due to the ‘exception culturelle’ (or cultural exception), which is outlined in Box 10. 243
Box 10: The cultural exception

During the Uruguay Round of negotiations, the EU and Canada wished to exempt any product or service that was related to culture from the WTO agreements (such as the GATT, the GATS and the TRIPS). Although the texts of the WTO agreements do not mention the ‘cultural exception’, member countries used the flexibility allowed in determining their schedules under all three agreements not to list restrictions, and not to commit to liberalisation, in those ‘cultural’ goods or services. Under the GATS, this meant that countries decided not to remove restrictions on the use of quotas or government subsidies. The WTO Secretariat has commented as follows: “Audio-visual services is one of the sectors where the number of WTO members with commitments is the lowest (30, as of 31 January 2009).” The ‘cultural exception’ extends beyond WTO trading rules to FTAs, and explains why the EU has been reluctant to include audiovisual media services in FTAs.
Source: Mira Burri, Trade versus Culture: The Policy of Cultural Exception and the World Trade Organization, in Pauwels, Donders and Loisen (eds.), Palgrave Handbook of European Media Policy, Palgrave Macmillan, (2013) pp 479–492 and written evidence from Enders Analysis (TAS0052)

179.Ms Enders pointed out that even in CETA (“the most ambitious FTA for services”), the EU’s negotiating mandate made it “clear that ‘audiovisual and other cultural’ services were excluded” from negotiations.244 Discovery Communications Europe Ltd said that the only exceptions to this had been the inclusion of audiovisual media services in the EU-South Korea FTA and the CARIFORUM-EU EPA.245 Even these included only “limited and specific concessions around market access for animation and other content—falling far short of the access broadcasters currently enjoy under the Single Market regime”.246

180.Mr Hancock said the Government wanted “as open as possible a deal with the rest of Europe”, and there were “big advantages to the rest of Europe in having as open a deal as possible in this space with us”.247 Asked about the risk that businesses might relocate outside the UK to maintain their ability to trade with EU Member States, Dr Norman told us:
“It is very easy for people to say that if Brexit goes wrong, these people can be relocated … [but] I do not think they have any idea how difficult it is even to take the culture of a factory floor, which is highly automated, with a set of existing investments and union relationships, and transport that to another country. Try to do that in the broadcasting world, where people interact in the most intimate way and choose to cluster together—it is extraordinarily difficult.”248
Support for content production

181.As well as provisions for broadcasting, witnesses also said the Government should support UK collaboration with EU partners on production of content, through co-production treaties. Such bilateral treaties permit the co-production of audiovisual content producers from two states. Mr McVay told us that “the UK has been very good at signing co-production treaties with major territories”, for example by selling “formats” for programmes such as Masterchef internationally.249 Ms Enders agreed that this was an important form of market access, but noted that it would mean collaboration, rather “than the sort of product that would be 100% UK-made”.250

182.In relation to content production, Mr Hancock said: “I am confident that we can remain this amazing, globally leading country for content production that we have developed into over the last 15 or 20 years”. He argued that the UK’s success had been “driven by our cultural values and investment in cultural institutions, by our system of education, by the hubs that we have built up … [in] different parts of the industry”. While Europe was “an important market”, it was “only one”. The UK’s film industry was global and it was aligned with the US and China—it was not a sector “where we have to focus only on the EU relationship”.251

183.COBA told us it was important that “UK-made television programmes continue to qualify as ‘European works’ for the purposes of EU quotas”,252 and Pact agreed that ensuring that “UK-originated content continues to count towards [EU] broadcasting and video-on-demand quotas” would mean that “broadcasters and buyers across the EU will continue to invest in UK content”.253 Without this, UK-created content would be in direct competition with other third country providers, including the US.

184.In response, Mr Hancock said: “I can be cheerful on that … [as] the Prime Minister likes to say, we are leaving the EU but we are not leaving Europe. In this case, that is not only physically true … but is actually technically true.” He concluded that the Government had “no intention to change” the definition of European works.254 We note that this will also be a matter for the EU, and that it will be subject to negotiation.

Protecting UK fashion designers and intellectual property rights

185.The British Fashion Council described the EU legal regime for protecting intellectual property (IP) rights as “a highly effective and efficient framework for [the] registration, exploitation and enforcement of IP rights”.255 A key part of this legal regime is the EU’s Regulation on Registered and Unregistered Community Design, which is explained in more detail in Box 11.
Box 11: Regulation on Community Designs 6/2002/EC

The Regulation established a one-off procedure for registering designs with the European Union Intellectual Property Office (EUIPO), granting exclusive rights to the use of those designs for up to 25 years across the EU for those who register.
The Regulation also provides for Unregistered Community Designs (UCD), which under certain conditions can also benefit from protection from deliberate copying without prior registration with the EUIPO. This right can cover the appearance of the whole or part of a design, including lines, contours, colours, shape, texture, materials, and features of ornamentation. Many cases brought before the courts (or which are settled between the parties) relating to copycat designs are based on UCD. In both cases, to be eligible for protection, designs must be new and must have an individual character.
Source: European Union Intellectual Property Office, ‘FAQ -Community Design’: [accessed 24 February 2017]

186.The British Fashion Council said the protection afforded by UCD was particularly important to the fashion industry, because all designs were protected “automatically, thereby saving on the costs of registering all designs across a portfolio (which can be substantial)”. After the UK’s withdrawal, they were particularly concerned that UK designers would only be able to benefit from the EU’s protection for registered and, more importantly, unregistered designs, if the “relevant designs are first disclosed in the EU”. This could lead to “effectively closing down London Fashion Week as a platform to promote British businesses”.256 The Creative Industries Federation agreed that this was a possibility: “Companies would enjoy less protection by first showing their work in the UK than in the EU.”257 The British Fashion Council added that asking designers to register design rights in the EU before a fashion show would be “costly across an entire portfolio, making that option uncompetitive”.258

187.Witnesses also felt that the domestic protections for intellectual property were weaker than those in the EU. The Design Council said that the UK’s equivalent to the UCD right was “not an equitable right for UK designers”, because it did not protect novel surface design (for example, the look of a shirt rather than how that shirt was made). The Creative Industries Federation added that loss of UCD rights would “leave a gap in protection for our design and fashion businesses”.259

188.Witnesses also emphasised enforcement. The British Fashion Council said the enforcement regime for intellectual property rights in the EU was efficient and effective: “Such rights can be enforced in a single action and may lead to pan-EU relief in the form of an injunction (and/or damages) across the EU.”260 Mr McVay told us:
“Enforcement should be part of all future free trade agreements. It is very important. We are a society that will be increasingly trading on IP-based products that are licensed. … We may not be making more cars but we will be licensing intellectual property rights to developing markets, which, unfortunately, do not often respect those rights.”261

Access to skills

189.Witnesses from the creative services sector echoed other sectors in underlining the importance of maintaining continued access to the EU’s labour market to address skills shortages and to support continued growth. The Creative Industries Federation said the Migration Tier 2 Shortage Occupation List included 17 creative industries occupations, and that EU nationals made up 6.1% of the sector’s employed workforce.262 The Design Council said an inability to hire the same levels of skilled workers was “likely to cause short term market challenges, and may lead to longer term reductions in economic outlook”.263

190.Mr Hancock said: “Undoubtedly, attracting the brightest and best in the creative industries and in digital is the main concern we picked up from industry, but that process must be managed properly so that the immigration system serves the national interest.” This meant “having control over the numbers”. Alongside this, he said, “We must make sure that we have domestic training in place and perhaps an extra focus on that.”264