5: The Foreign Policy of the American Film Industry: Monopoly and Free Trade

For many American industries, export trade is a sideline. This is not the case for the American motion picture industry, because without the foreign market the American film industry as we know it today would collapse.

To facilitate operation overseas and to secure markets, the American industry has had to develop a foreign policy and to build and structure an organization to carry out this policy. These measures have been developed over decades, many through trial and error, others through positive planning. The industry has explicitly stated little about its foreign policy. Yet a policy is clearly evident when one studies the foreign operations of the industry, for certain principles, objectives, and tactics appear and reappear.

Aside from field offices maintained abroad by individual companies, foreign affairs of the major American companies are centered in the Motion Picture Export Association, an arm of the Motion Picture Association of America. The MPEA was organized as a legal cartel and registered in 1946 under provisions of the Webb-Pomerene Export Trade Act of 1918. This act provides qualified exemptions for American business from prohibitions in the Sherman Act of 1890 and the Federal Trade Commission and Clayton Acts of 1914, but only insofar as the business of the associated enterprises relates to export trade. The MPEA is one of the more than two-hundred associations and organizations which have registered during the last fifty years with the Federal Trade Commission under the Webb-Pomerene Act Generally, a registered association can act as the sole export sales agent for its members, set prices and terms of trade for sale of its members’ products abroad, and make arrangements for the distribution of these products in overseas markets.

The MPEA facilitates overseas activities of its members in a variety of ways by expanding and keeping open foreign film markets, expediting transfers of earnings to the United States, reducing restrictions imposed on the distribution of American films through direct negotiations and “other appropriate means,” disseminating information of interest to members about trading conditions abroad, negotiating film import agreements, and in some cases, negotiating rental terms.¹ The association has been referred to as “The Little State Department” because its functions, scope, and methods are not unlike those of the Department of State. It maintains an office in the United States as well as an extensive network of offices in key film markets. It negotiates, compromises, threatens, and bargains to achieve its objectives. It tries to win friends and to influence local policy. It even has been known to give “foreign aid” in the form of loans and subsidies and to bolster employment in foreign industries by virtue of American film production in those countries. The MPEA embodies the interests of businessmen and diplomats (some who have actually represented our government), whose principles and methods have clashed occasionally: on the one hand, business may be demanding a swift resolution of a particular problem; on the other, diplomacy would call for negotiation and compromise. The blend of these viewpoints has not produced uniform success for the MPEA in overcoming foreign difficulties for statesmanship—has, on occasion, given way to the approach favored by company management.

To be effective in its foreign activities, the American film industry has to present a united front, ideally in the form of the MPEA whose mission is to represent the companies belonging to it. Solidarity is essential in negotiation, as only in this way can the MPEA hope to achieve the best possible operating conditions for its members. When ranks are split, the MPEA bargaining position is weakened, as it ceases to speak for an entire industry. The opponent of the MPEA, whether it is the French Centre National de la Cinématographic, Italy’s ANICA, or another comparable body, recognizes when unity is lacking among the Americans, and is better able to press its demands without compromise.

Disunity within the MPEA can be fatal, especially when major markets are at stake which can yield $20,000,000 or $30,000,000 annually for American films. On a worldwide scale, the lack of a solid front can be more costly. More than a decade ago, Eric Johnston, the late president of the MPEA, claimed that American companies would lose $100,000,000 a year if ever they resorted to individualism in dealing with foreign countries. He was quoted as stating:

Our pictures fill about 60 percent of the screen time in foreign countries. When any one of them wants to impose restrictions I can go to the Finance Minister, not threateningly, but to simply state that our films keep more than half of the theatres open. This means employment and a bolstering factor for the economy of whichever country is involved. And I can tell the Finance Minister of the tax revenue which these theatres yield.

But if only two or three American companies were to accept the restrictions on their own, my argument with the Finance Minister would lose its weight. My position would be an impossible one if our ranks are to be broken. We must have the uniformity of policy.²

It would seem that not only is uniformity necessary for the execution of policy, it has become a policy in itself. The MPEA has stressed this point continuously, although momentary economic gains for individual companies have sometimes overridden the MPEA’s call for a solid front. The trade press has observed that even though the American companies are joined in the MPEA framework they often maintain an individual and competitive manner of operation. The observation added that this type of policy is

absolutely geared to the need of the instant moment, without much consideration either for the overall European pattern, the benefits of unity or the economic shape of things to come.

… With the squeeze on harder than ever to produce revenue, the companies in Europe aren’t beyond pulling the rug from beneath one another’s feet.³

This is illustrated, perhaps, by events which occurred during the MPEA’s boycott of the Danish and Spanish markets. The official declaration of the MPEA was that member companies were halting all shipments of films and that they would no longer distribute American pictures until grievances had been eliminated. The plan was to withdraw American films from the market, create a product shortage, and cut heavily into exhibition revenues. The idea, however, did not function as conceived because some American companies franchisee! Spanish distributors to handle their films, while in Denmark a number of films were made available to a Danish distributor by an American company.

Uniformity of view is complementary to the monopoly foundation upon which the MPEA operates, for the organization, under the Webb-Pomerene Act, is entitled to represent overseas the combined interests of American film companies who are supposed to be competitive in the United States market. While the MPEA strives toward monopoly in its activities, it also pursues the doctrines of competition, free trade, and free enterprise. These tenets are not necessarily at odds with monopoly for, in reality, they work to create market conditions overseas which are healthy for American companies. Free trade slogans and certain activities of the MPEA work to eliminate restrictions on the importation and circulation of American films in foreign markets. Reduction of barriers means easier access to the market for American pictures and a greater opportunity to exploit them. The unified export activities of the industry, when and where they can be obtained, facilitate a greater hold on the market and also operate to discourage any subsequent restrictions which might be contemplated.

The companies view screen quotas and import quotas as restrictions on free trade, that is, restrictions on the free flow of American films into markets. There is also evidence to suggest that companies have, at times, looked unfavorably upon programs of foreign governments which support local film production through subsidies and rebates to producers. The belief was that the combination of quotas and production assistance permitted foreign industries to operate with a competitive advantage over American films brought into these markets. Quotas limited importation and reserved a portion of exhibition time for local films, while subsidies permitted local producers to make films which could compete with American products.

The vice president in charge of foreign distribution for United Artists discussed these measures before a United States Senate committee in 1956. He dealt specifically with Italy, as an example, and revealed how Italian film producers benefit from a subsidy program. The vice president said that this “has not served to create a healthy industry.” He added:

It is my considered opinion that subsidies and artificially created market conditions only serve to subsidize mediocrity, and the public will not patronize such a medium to the extent necessary to keep it healthy. The freer the market in all phases of its operation, the healthier is the state of affairs that will exist. Only a free market allows ability to be the test of whether a producer, distributor or exhibitor can meet competition and prosper or fail according to the results of his efforts.⁴

This verbalization of the free enterprise philosophy applied on an international scale calls for a completely free marketplace in which goods of different origin can compete for public favor. In centering purely on economic and business considerations, the view overlooks the fact that film is, in addition, a vehicle of creative and cultural expression. The film has been turned into a business commodity by those people who have come to control it, but this does not, and cannot, negate its role as a carrier of images, ideas, and ideals. In many countries, due to economic factors which have been imposed on the film, it has perforce been considered in business terms only. From an economic view, film production in these countries may not be a “healthy industry” but the value of film as a nationalizing medium makes it worthy of state support in order for production to continue.

The contention that “a free market allows ability to be the test” may seem plausible, but only in a business context. The American industry, in its campaign against restrictions in overseas markets, is clearly following its own economic interests, because these restrictions have been devised almost solely to protect foreign industries from being crippled or put out of business. The MPEA, legally empowered to monopolize export business for its members, in combination with demands for free trading in foreign markets, has become a two-pronged instrument of policy. On the one hand, there is pressure for the elimination of trade barriers, and on the other there is an organization whose purpose it is to enter and secure foreign markets for American films. With restrictions inoperative and foreign industries in a poor competitive position, the organized American industry could become as strongly entrenched abroad as it has been in its own domestic market.

The development of the European Economic Community (EEC) has posed a problem for the American industry. In general, the Common Market aims to reduce barriers over a period of years so there can be an increased flow of goods, services, capital, and labor among its members. A key objective of the Community is the elimination of internal trade restrictions, which is to provide the impetus for augmenting the circulation of commodities. In the First and Second Directives pertaining to film of the EEC Council, steps have been taken in this direction. Import quotas applying to films made by member nations were eliminated by the end of 1966 while mandatory screen quotas applying only to national films were expanded to include films made in any EEC country.

The American industry constantly has favored elimination of restrictions and on this point it could be said that the aim of the Community is seemingly parallel to that of the American industry. However, the problem exists as to how the Community will treat American films (or other non-Community films) and, more importantly, American investment in Community pictures. Indeed, EEC policy on these points is still in the developmental stage. The response of the American industry to the EEC has not been uniform because the trade policies of the Community could both favor and work against the interests of American companies.

Eric Johnston strongly endorsed the principle of the Common Market in a speech in 1958. He declared that expanded American economic activity depended, in part, upon the functioning of the European Economic Community. Not only did he support the EEC, but he went further and advocated similar trade blocs in Asia, Africa, and Latin America. It is not clear whether Mr. Johnston was speaking as president of the MPEA or as an economic advisor to President Eisenhower—he held the two positions simultaneously. The position of the MPEA, however, has been that any measures which contribute to greater overall economic stability and security in Europe must in the long run benefit American business, including American film business.⁵

Unofficial industry opinion in the past has not been as optimistic, since it realized that reduction of western Europe’s internal restrictions could mean an increase of external restrictions. But this has not materialized in the realm of the film. Nonetheless, a belief within the American industry has been that those people in Europe who favor applying Community principles to film would like to better their competitive position at the expense of the American film. In 1959, Variety reported that MPEA executives

are now acknowledging more or less publicly what heretofore was strictly private opinion, that is, that the real purpose of the Common Market re films was a united defense against the domination of the LI. S. motion picture on the European screen.⁶

The article disclosed that one MPEA executive claimed he did not see what the Common Market could hope to obtain for the betterment of the European film industry that might not be attained as easily outside the Community structure. He believed the only things EEC could provide were the mechanics and rationale for imposing more restrictions on the importation of American films. The executive was reported as saying that film industry people in Europe

aren’t really interested in liberalizing trade. They’re principally interested in building up some kind of defense against U. S. films. Despite all the talk, neither tariffs, nor quotas, nor taxes, is the bugaboo. The bugaboo is the U. S. film.⁷ [Italics mine]

While a defense against American films might have been important a decade ago, the more pressing problem today is a defense against American economic control of European production and distribution. Although the American companies may be influential when individual European countries generate policy for their own film industries, their influence on a supra-national level is not as great and they can only assume the role of powerful, interested observers. Because of this, and the uncertainty which has prevailed concerning the film industry’s position within the Community framework, the American industry has recognized that it must adapt itself to probable changes in the European film industry’s structure.

American film companies have one overriding raison d’être: they are in business to make motion pictures which make money. They owe allegiance to the profit motive as long as it does not conflict with the laws, policies, or wishes of the American government. Loyalty to profit does not put them beyond producing pictures in foreign countries; in fact, it encourages them. This being so, they find themselves free to shoot films abroad as well as to invest in foreign-made films which are legally not American but “French” or “Italian,” for example. This is important as far as the Common Market’s application to the film industry is concerned, for it is one method by which American industry can coexist with an organization which might have initiated policy unfavorable to the importation of films from the United States.

The American industry’s policy vis-à-vis the Common Market has not been developed as a frontal assault on trade barriers which the Community could erect. Rather, it has been aimed at bypassing possible restrictions by a flanking movement. This entails direct and indirect investment in European film production, which removes the “American” label from a film and substitutes the nationality of the country in which the film was made. By this means, American companies can have their films, their revenues, but not the restrictions which may apply to them. While the threat of Common Market restrictions has not been the primary motive for this new stream of investment, it undoubtedly has been one of the contributing reasons for it.

How demands for free trade and a monopolistically organized export business work together is evident from events which have occurred in Africa and its newly independent nations. While colonial policies were in force, the African market was serviced from parent countries in Europe. As the colonial status was erased and African dependencies became nations, the flow of motion pictures began to restructure itself and opportunities appeared to develop new markets. The American industry’s attention to Africa, however, did not start when new nations were born. This only added new interest and urgency to a plan which had been under consideration for almost a decade and which had been developed under a different rationale.

As early as 1952, Eric Johnston noted that American companies should begin considering how to exploit new markets rather than rely solely on existing ones for revenue. He felt that some markets were then yielding as much as they could and that American companies should not exhaust themselves trying to extract a few additional dollars when the effort could be applied better in virgin areas. Mr. Johnston declared that American companies would do well to look to such markets as Africa and the Far East where, as he emphasized, the theatre-going habit was still in its infancy. He believed that these areas offered potentially wealthy markets.⁸ A year later, Mr. Johnston stressed the point again, saying that while Europe was still a major source of revenue, it was rapidly becoming a static market. In discussing Europe’s ability to yield revenue, he declared that “we have to fight for it, but we should begin to concentrate more attention on other great markets like South America, Asia, the Middle East and Africa” even though initially “they may be low income areas.”⁹

Significant action apparently was not taken on these proposals until 1959—a fact which suggests that the companies’ policy might have been decidedly short range in contrast to that of the administrative and diplomatic side of the industry, which had urged action at least seven years earlier. In 1959, MPEA representatives were authorized to make an inspection tour of the west African market. According to the association, the annual revenue accruing to American companies from that market at the time was around $125,000. It was believed that with proper handling, the area could be made to yield a good deal more. (The prediction was well-founded, because by 1966 the west African market was worth close to $500,000 to American companies.)

During 1960, Eric Johnston toured the African market to survey exhibition facilities and to contact African government officials. One reported purpose of the tour was to study measures which might work to restrict the circulation of American films in the area. In noting that independence meant a restructuring of the film distribution process, Variety reported:

With the coming of independence, and the rising tide of nationalism, these old distribution patterns are bound to change, and the result could be chaos unless the U. S. film industry can convince local government chiefs of the economic importance of trade as unrestrictive as possible. In Guinea, for example, [an American executive] said, there already have been moves by the government to take over all film distribution as a government function.

“In such a situation,” [the executive] asked, “doesn’t it make sense to have someone like Johnston go right to the top man and talk the matter over? In many cases, there’s no one beneath the top man who is empowered to handle the problem.”

In this case, the MPEA pressed for elimination of restrictions, whether they were actual or potential. Variety continued to report this anonymous American executive’s remarks, and in discussing trade barriers, added:

Typical of the kind of “protectionist” and/or unrealistic thinking in many of these areas … was that to be found in one newly independent African country … which has decided to build its own film industry by placing prohibitive taxes on all foreign distributors….

The Johnston tour is designed to check this sort of situation, if possible, before it starts.

The anonymous executive was quoted as saying that “we have to make them aware of the U. S. film industry and of the fact that we are interested in the futures of their countries.”¹⁰

After his tour, Mr. Johnston indicated that Africa offered a substantial opportunity for the development of a new American film market and predicted that revenue could be considerably larger than it was at the time. Before 1960 ended, the MPEA had authorized a committee to consider developing a corporation for exploiting the west African market. The major functions of the new association were to be distributing films of member companies, developing exhibition facilities, and initiating a program of government relations. The last point can be construed as including attempts to head-off threatened restrictions on American films and to reduce those barriers which already existed.

In less than nine months’ time, a new company was born and incorporated under Delaware laws. The American Motion Picture Export Company (Africa), was established and registered under the Webb-Pomerene Export Trade Act to coordinate the export business of the American film industry in the west African market. Participating companies included Columbia, M.G.M., Paramount, United Artists, Twentieth Century-Fox, Buena Vista, and Warner Brothers. While technically separate from the MPAA and the MPEA, AMPEC-Africa drew its officials and administrative personnel from these organizations. The expressed function of AMPEC-Africa was the distribution of American pictures in Liberia, Nigeria, Gambia, Ghana, and Sierre Leone, although the company could move into other areas by unanimous vote of its directors. Member companies licensed the corporation to distribute their films in this market and to act as the sole bargaining agent and representative. The new company had the power to accept or reject rental offers from exhibitors and to control the number of films on the market.¹¹ The structure of AMPEC-Africa is such that it works to monopolize the supply of American pictures and can turn the flow on, or off, as conditions warrant.

The importance of the African market to the United States today is probably not as much economic as it is political. This follows indications from American industry sources that the United States government has not been entirely passive while the film industry has been trying to gain and maintain a foothold in west Africa. It has been suggested that propaganda considerations of the American government were part of the motives behind the American film companies’ movement into this area.

AMPEC-Africa’s activities, when viewed not only in economic but in political terms, offer a contrast to what many believe are more pressing needs in Africa. In January and February, 1962, a meeting at the UNESCO Headquarters in Paris discussed informational needs on the African continent. The official report declared that the participants

agreed that concerted action should be taken to develop the media [press, radio, television, and film] in all African countries, particularly in rural areas, and promote their effective use as a means of information and education for the people.¹²

Specifically concerning film, the report suggested that African countries wishing to develop film production should study “problems of policy and priorities in view of the aims to be achieved and the resources at their disposal.” The report recommended that “policies should be determined chiefly in the light of the contribution which films could make to education,” considering the “urgency of educational problems in Africa.”

In discussing film production in Africa, the report declared that “encouragement and support to national film units” should be given “in order to promote rapid development of the production and distribution of films that are truly African in style and content.” The UNESCO conference did not ignore ways and means of supporting local film production. It recommended:

Governments should take all possible measures to assure the expansion of national film production. They might consider levying an import tax on foreign films commercially distributed in their countries.

While UNESCO was suggesting an import duty, American companies were working to prevent the implementation of such a measure. The same anonymous American film executive cited earlier mentioned this point. He said that because most national markets in Africa were too small to make it feasible to supply each with their own prints of Hollywood films,

… it is vital that distribs be able to send prints from one area to another without payment [of] horder taxes or duties. If they should be imposed—and it’s always a danger since such duties look like an easy source of income—film trade in such areas would come to a halt.¹³ (Italics mine)

The stake the American companies have in this problem is evident. The more they have to pay for duties and taxes, the less they can withdraw from the market. Furthermore, if such levies were used to support local film production, the American companies would be indirectly assisting small potential competitors.

The monopolistic element in the American industry’s foreign policy is detectable in another geographic area. While it is not a major market, the experience the American companies gained there perhaps was useful for the move into west Africa.

Malta, a tiny island with some 300,000 inhabitants, has about three dozen film theatres, and the market is clearly too small for the major distributors to set up their own offices there. Following World War II, two small Maltese companies managed to acquire control of the cinema business on the island. It is said they illegally acquired prints of films and were distributing these without making payments to the films’ producers. Because Malta is a British-controlled island and had been serviced with films from distributing companies in London, British distributors decided to press the case and regain the market. The Kinematograph Renters Society (KRS), an organization of British distributing companies, brought action against the two Maltese firms, and, in effect, put them out of business. To secure control over the island, KRS established the Malta United Film Company in 1947 to organize and monopolize the flow of films into the market. The company, however was not a strictly British undertaking, as American distributing companies have subsidiaries in Britain which are members of KRS. In practice then, the Malta Company was a joint venture between British distributors and the United Kingdom subsidiaries of American distributors. The MPEA was not officially involved in the venture, although individual companies were free to become parties to it.

The members of KRS, which account for virtually all the business in the British market, license the Malta Company to distribute their films in the Maltese market. In exchange for this service, the company receives a commission on the rental fees. With few exceptions, the Malta Company handles all English-speaking films entering the market and, as a trade source stated, has a monopoly of the film distribution business in Malta worth about $400,000 annually.

An earlier chapter (2) concerning European restrictions of film importation reserved discussion of West Germany until later. That market can be considered now to see how events there coincide with the American industry’s foreign policy. By 1950, difficulties facing the German film industry had grown to such magnitude that ways were sought which might bring any measure of relief. Credit for production was hard to obtain as banks were lending money at high interest rates for industrial purposes with less risk than film production. In West Berlin alone, forty-three out of fifty-seven production companies had not made a single film by 1950.¹⁴ Moreover, on a number of occasions, film studios in Munich had been idle for months at a time because no company had the capital to produce. Film importation was high, the United States being the chief supplier, and little screen time was available for German pictures even if they could be produced. The high importation of films alarmed the German industry and the Spitzenorganisation der Filmwirtschaft pressed the government for measures to regulate the number of imports.

In March, 1950, the West German government proposed that importation of American films be curtailed sharply and demanded that American companies limit themselves to bringing only one hundred pictures into the market annually. Shortly before this, the American distributors had agreed on a yearly ceiling of about 160 films. The reduction asked by the government threatened to hinder the operations of the American companies and was construed by the latter as a move to block their easy access to the West German market.¹⁵ At this time, the Allied High Commission maintained authority over the West German parliament’s legislative powers. The Commission could veto items approved by the parliament if it felt they did not contribute to the reconstruction and rehabilitation of Germany, or if they violated the Commission’s own laws.

The occupation statutes, enacted in September, 1949, included Law Five on “Freedom of Press, Radio, Information, and Entertainment.” The proposal of the West German government was brought to the Commission’s attention and in June, 1950, the High Commission rejected the parliament’s plan for officially limiting importation of American films. In its rejection, the Commission declared that film was an information and entertainment medium and that Law Five applied to matters concerning film importation. This appeared to end the immediate threat of governmentally imposed quotas on American feature pictures.

Law Five, however, was vague in its reference to film and did not refer explicitly to importation. Article I of the law provided that:

The German press, radio and other information media shall be free …, [and that the] Allied High Commission reserves the right to cancel or annul any measure, governmental, political, administrative, or financial, which threatens such freedom.¹⁶

The law did not give the Allied High Commission power to reject West German government proposals for import quotas when such imports were threatening economic hardship for that country’s film industry. Moreover, the law did not make it mandatory for the Commission to invalidate measures pertaining to film approved by the West German government. Thus, the Commission’s right to decide against import quotas was questionable and there was no assurance the Commission would repeat its action if the West German government brought the matter up again.

This apparently was recognized by the American film industry, for its subsequent activities demonstrated that it was not entirely satisfied with the June decision of the High Commission. In October, 1950, representatives of the MPEA visited the State Department in Washington to impress upon it the propaganda value of American films for rebuilding West Germany. An implicit aim of the mission was to win State Department approval for the principle of unrestricted access to the West German market. By couching the matter in a political and propaganda framework which was closer to State Department thinking, the film executives hoped to get official support for their campaign. If free access to the West German market could be guaranteed, then the economic aims of the film industry, and the political aims of the government, would be fulfilled.

The MPEA argued that “Germany is the focal point in the current battle of ideologies” and that while millions of dollars were being spent on Voice of America programs, it would be “illogical to restrict the powerful message that American pictures could carry to the Western Zone” of Germany.¹⁷ MPEA representatives declared this message was in danger of being hindered in West Germany through the desire of its industry to protect itself against Hollywood competition. They felt that if the State Department really wanted to assure maximum exposure of the American message, then the Department would have no alternative but to instruct the High Commission to prohibit any further measures which would restrict importation of American pictures. The MPEA contended that unregulated importation would not mean a flooding of the West German market as the Germans insisted.

Shortly after, the State Department instructed the U. S. High Commission that it preferred to see no quota on the importation of American films. This reinforced the June decision of the High Commission and set a policy for future action. It also meant that Hollywood’s economic interests were bound inextricably with Washington’s political interests and that both parties could work together, when they wanted to, with mutual support. The State Department’s decision further indicated that governmental policy, at least in this case, was implicitly in favor of supporting the export business of American companies even when it seemingly threatened to bring hardship to foreign competitors in a country the United States was trying to rebuild.

Without an official quota, the industry was at liberty to determine what it thought constituted a suitable number of American pictures in West Germany, considering the box office potential and the general economic state of the market. While the American government opposed on political grounds West Germany’s initiating a quota, the American industry was free to impose on economic grounds a quota itself.

As MPEA representatives were presenting their case in Washington for a quotaless West German market, other MPEA representatives were negotiating with the Spitzenorganisation der Filmwirtschaft to reach a voluntary quota on American films in Germany. The number agreed upon was approximately two-hundred, a small increase over the previous year’s amount and substantially more than the West German government thought the market could absorb. This informal self-controlled importation, known as the “Gentlemen’s Agreement,” called for the MPEA to try to keep annual imports to the agreed-upon ceiling, although there was no penalty if imports exceeded it. From the standpoint of the West German industry, “this was not successful,” according to one writer. Henry P. Pilgert, in a publication of the U. S. High Commissioner for Germany, declared that “foreign competition continued to plague the German motion picture industry … since many of the companies did not adhere to their self-imposed quotas….”¹⁸

The agreements executed after 1950 generally were negotiated in an atmosphere of stress. Groups within the West German industry, notably producers, demanded that the MPEA voluntarily agree to restrict imports to below the two-hundred figure. The MPEA, backed by the State Department and its representatives in West Germany, rejected such proposals on economic and political grounds. In 1954, for example, the German industry asked that American imports be limited to 160 and that certain taxes be levied on the earnings of American pictures in the market. Neither proposal materialized. In later years, West Germany tried to set an age limit on American films to discourage the importation of old pictures previously unreleased in the West German market. This plan also was thwarted. In addition, the West German industry hoped to obtain reciprocity by being guaranteed the distribution of German films in America, or a subsidy which would enable the industry to establish a distribution and publicity office in the United States. This proposal, to quote an American industry representative, was “shot down immediately.”

The success of the American program is evident because at no time has the importation of American films officially been limited in West Germany. The only restriction which has ever applied was the “Gentlemen’s Agreement,” a voluntary measure permitting American companies to bring into the German market almost twice the number of films they had been bringing into France where import controls were officially operative. In reality, the American industry had free access to the German market. The campaign in Germany was of a preventive nature, designed to head off restrictions before they could become official.

This should not imply that efforts against potential restrictions were unique to the West German market or that they functioned only in the immediate postwar years. The 1959 film agreement between the MPEA and Italy, for example, called for similar protection in that market. An appendix to the agreement bound Italian film authorities to take all steps necessary with the Italian government to insure that there would be no changes in Italian film legislation which would affect unfavorably activities of the MPEA and its members in Italy. Moreover, the Italian film industry, through ANICA, pledged to abstain from demanding legislative measures which would further restrict or place new burdens on the importation, dubbing, or distribution of films belonging to MPEA member companies.¹⁹

In 1953, Henry P. Pilgert wrote that “the German motion picture industry is still in a state of uncertainty and insolvency.”²⁰ That statement could be made now with as much truth. The second war, in destroying the German war machine, also largely destroyed the film industry which had helped to support it. The absence of film strength in postwar West Germany gave the American industry an opportunity to attempt imposing its own conditions in the market. One writer, formerly attached to the headquarters of the United States Forces in the European Theatre, has contended that the

[American] industry, through its European representatives in Paris and on the staff of Military Government in Germany as distribution experts, made serious efforts to convince occupation authorities that it be allowed to establish what would in effect have amounted to a monopoly of not only motion picture distribution, but of production and the ownership of theatres as well. The industry even interposed objections to the showing of German films for fear of competition. The industry was induced to oppose the showing of German films by a desire to have its own control of the market in Germany.²¹

When the last twenty years of European film history is reviewed today, the usual conclusion is that West Germany has failed to show a vital artistic and a viable economic production force. Ordinarily, this is attributed to the flight of film people from Germany in the 1930’s, the moral drain on the country due to the war, and the reconstruction difficulties after the war. However, one must add to this list the foreign policy of the American industry, for it too was significant in shaping the postwar film climate in Germany, as well as in other nations.