6: The Foreign Policy of the American Film Industry: Representation and Revenue

Revenue from foreign markets is so essential to our film production companies that, as we have noted earlier, Eric Johnston once declared: “any action that would materially cut down on this foreign income would … threaten economic disaster for the American motion picture industry.”¹ Thus the securing of favorable operating conditions abroad has become an essential policy consideration of American companies. One way of achieving these conditions is through membership in foreign industry trade associations. But while American companies generally are members of European film groups, European industries have no representation in American trade organizations. This indicates the relatively small business done in the United States by foreign films, and that European producers who reach the American market have their films distributed by American companies.

Membership in a foreign industry association has important implications. A clue to these is evident if a situation is imagined in which, say, the French industry were a major supplier of films for the American market and these regularly obtained at least a 40 percent share of the market revenue. By virtue of its position in the United States, the French industry would have substantial representation in the Motion Picture Association of America and (assuming the French also were shooting films here) in the producers’ association. The French, seeking to consolidate their position in the American market, would actively pursue a policy within these associations which would contribute to maintaining or increasing their security and their share of the box office revenue. Because they were powerful, the French would be consulted within the American market on such policy matters as distribution procedures, rental terms, censorship problems, taxation, advertising regulations, relations with television, import restrictions, and policy recommendations to the American government. French opinion also would be solicited on production matters which could comprise employment of non-American actors, directors, producers, and technicians, labor union problems in general, and export procedures for joint Franco-American productions. In effect, the French would be partially (and perhaps occasionally completely) responsible for policy decisions affecting the American industry and the American market. In addition, because of exhibition dependence upon their films, the French would be able to extract compromises so that the French position in the market would not be threatened.

This is a hypothetical situation for the American market, but it represents quite accurately the conditions in many European countries. It would be untrue, of course, to claim that the American voice is dominant everywhere in European industry affairs and that it is directed solely against interests of local competitors. In some instances, American membership in trade groups is compulsory. Moreover, American interests may run parallel to local interests and a triumph for the American view is a triumph for all. This is usually true in regard to film distribution and rental terms. In disputes with European exhibitors, American distributors align themselves with their European counterparts and the unity of view may be more than exhibitors can cope with.

The alliance of American and local interests has worked, on occasion, for the mutual gain of both parties. Italy, perhaps, typifies this most clearly. In 1954, Eitel Monaco, the director of Italy’s film industry association, ANICA, expressed the hope that the cordial relationship between the American and Italian industries would develop from “a simple commercial interchange to a happy status of genuine co-production.”² Since that time, relations between the two industries have developed extensively. Not only have American companies done a considerable amount of shooting in Italian studios, but they have participated directly in making Italian films by providing production financing and also by distributing them. The same general conditions would hold true for Anglo-American film relations, although those have a longer history.

The advantages to be gained by belonging to a trade association are rather uneven when one examines the entire European industry. American membership in these groups can be compelled, and this is a means of controlling the activities of the American companies. Spain provides an example of this, because all distributing companies must belong to the Grupo Sindical de Distribucion Cinematografica. If a company is not a member, it receives no permission to distribute films and cannot operate. The Grupo is also the organization which recommends to the Spanish government how baremo points should be allocated and how import licenses should be distributed to members. Representatives of American companies declare that they really have little weight in formulating internal policy in Spain. In talking about Spanish distributors, one American representative stated that “they dominate everything, they are dominant in their own market.” The situation in Spain is such that even the MPEA does not maintain a formal organization, office, or staff there. When conditions warrant, the MPEA will have its representative in another country go to Spain temporarily for negotiations or it will attempt to resolve difficulties by working through the American embassy in Spain.³ It is said that Spanish authorities do not like “little groups” and want to have all the distributing companies within a single organization. The only connection among the American companies operating in Spain is an MPEA “informal board” which meets as required to consider the American position in the country and to develop a common opinion among the member companies. Nonetheless, the American industry has little to say directly about what is being done in the Spanish market. The evidence to support this is the baremo system by which the American companies receive consideration no different from that accorded to Spanish distributors.

The Netherlands is another country where membership in the local film industry organization is compulsory. The difference from Spain, however, is that the Netherlands has a much smaller film production industry and that controls on the distribution of American pictures have not reached the level they have in the Spanish market. The overall industry association in the Netherlands is the Bioscoop-Bond, essentially a “closed shop” as far as trade and business are concerned. The Bioscoop-Bond brings together, under a single roof, production, distribution, and exhibition. Members are pledged to do business only with members. If American companies do not belong to the Bioscoop-Bond, Dutch theatres will not exhibit their films. Organizing and regulating the film trade in the Netherlands in this fashion insures economic stability of the local industry by controlling the number of theatres and the distribution terms on which films are offered. The strength of the Bond is such that it can bargain effectively with the American industry. In the late 1940’s, tension developed between the MPEA and the Bond, resulting in an MPEA withdrawal from the Bond. Rather than risk losing this market, American companies returned, outside the formal MPEA structure, and became members of the trade association.

Policy within the Bond’s distributors’ section has been determined by balloting, one vote per office. An American company with only a single office is given one vote while a small Dutch distributor with, say, two offices would receive two votes. By means of this system, local companies which may have a business turnover less than that of American distributors actually have a greater voice in determining policy. In the same way, the Bond’s Board of Directors has had a membership of nine, but only two of them have been representatives of American companies. A source within the Netherlands declared that the Americans always will have a minority voice because “things are arranged that way.” The result, as far as policy and business are concerned, is that Americans “cannot do what they want to.”

To discover whether the American view is necessarily at odds with that of a local industry one must take into account the structure of the film industry itself. Interests of producers and distributors generally are opposed to those of exhibitors because the latter want to keep as great a share as possible of the box office revenue, while the former want to obtain as much as possible. A struggle often results with producers and distributors aligned against exhibitors. These general points can be illustrated by referring to conditions in France.

The distributors’ group, Fédération Nationale des Distributees de Films, is composed of three types of distributors: American companies, French companies serving the entire country, and the many smaller French companies serving regions or small areas. As France is a major overseas market for American films, one would expect that difficulties often would arise between French and American interests and that the distributors’ association would be the place where they were aired. This has not been the case, however. Officials within the French film industry declare there are few policy differences between American and French distributors because all distributors have common aims, and nationality really makes no difference. Their interests are sufficiently alike to generate uniform objectives and strategy. When conflict does appear, it often is between distributors and exhibitors.

A form of block booking, for example, is not practiced by the Americans only or by the French distributors only. Both nationalities have used it, and for the same purpose—to guarantee the placing of as many of their films as possible. Concerning rental terms, distributors regardless of nationality prefer to offer films on a percentage basis, while exhibitors prefer to rent pictures for a flat fee. Thus, many differences which do exist within the industry would be there even if American companies were not present, because they are built into the structure of it. The battles are between wholesaler and retailer.

But this does not deny that American companies are powerful and can be instrumental in affecting policy decisions. When movements are started which could threaten their position in overseas markets, they are resourceful and can bring sufficient pressure in the appropriate places to reduce the potential harm. The role American companies play in financially supporting foreign trade associations is one through which such pressure can be exerted. In Belgium, for example, the Chambre Syndicale Beige de la Cinématographie receives more than half its operating funds from American companies which belong to it. This association is composed of three units: American companies, French companies, and local independents. Each member contributes to the association a fee based on its business turnover. In recent years, American companies have contributed about 60 percent of the association’s operating funds, the French companies about 25 percent, while the remainder has come from the independents. The voting process within the organization is not based on revenue contributed; rather each of the three groups has one vote on the council which makes final decisions on distribution policy questions. Although American companies are numerically inferior as far as number of offices maintained is concerned, they have a one-third voice in determining policy for the organization, and the same weight in balloting as the three dozen French companies.

While this is true for the formal structure of the organization, the American voice is even stronger if the association is considered on an informal basis. An American industry representative in Europe declared that officials of the association clearly recognize the power and position the American companies have in the Belgian market. He noted that the association’s leadership is aware of the American companies’ opinions and has not actively pursued matters which would work against their interests. This spokesman felt the money contributed by American companies for support of the association was a factor which carried great weight with its leadership. In addition, when policy was developed for all distributors, it was observed that it generally originated with American companies and that others merely followed, recognizing that what was good for Americans also would be good for them. It seems that because American companies supply the most films and are the greatest money earners in the Belgian market, they are in a position to deal more effectively with exhibitors than the smaller and weaker French and independent distributors.

The drive by American distributors for higher film rental fees has been linked in some cases with their membership in local trade associations. As the number of American produced films declined and the investment in them increased, American companies found that returns from box offices across Europe were inadequate to support this more costly style of production. While rental terms of 30 or 35 percent of the exhibitor’s gross may have sufficed when film budgets were small, they have been deemed inadequate for multimillion dollar pictures. So, American distributors have pressed for greater portions of the total box office revenue.

In Switzerland in the early 1960’s the exhibitors’ and distributors’ associations were locked in battle for more than three years over film rental fees. Exhibitors had agreed among themselves not to accept a film for which rentals would be more than 50 percent of gross receipts. This rate was the ceiling for “special” films, generally longer, more extravagant, and more costly than “regular” pictures which were rented at a lower percentage. While exhibitors had established this ceiling, distributors were engaged in trying to destroy it completely, or at least moving it to a higher level of, perhaps, 60 or 70 percent. When negotiations between exhibitors and distributors reached an impasse, the matter was taken to Swiss courts by the distributors’ association. It is reported in Switzerland that about half the funds collected to support the campaign came from American distributors. In the Association Suisse des Distributeurs de Films, however, there were some forty members but only seven of these were American distributors or representatives of American distributors. These companies, by virtue of American leadership in the realm of expensive film making, had the most to gain from a victory and were the greatest financial contributors to the action.

The campaign for higher rental terms also has existed in Norway. Immediately after World War II, there was a drive among Norwegian distributors for an increase in the rental fee which was 30 percent of the exhibitors’ gross regardless of the type of film being offered. American films were entering Norway on a restricted basis due to currency exchange difficulties within the country but were also being rented for 30 percent.

In late 1946, an American request for a higher rental percentage was rejected, but rather than lose the market completely, American companies continued to send films to Norway on the prevailing terms. But agitation for higher terms continued, and in the early 1950’s, as one source stated, the MPEA “officially” joined the fight by calling on the American State Department and the American embassy in Oslo for assistance. Extensive discussions were held on the governmental level, several steps above the usual distributor-exhibitor level. Involved were representatives of the State Department and embassy and representatives of the Norske Bank, and the Norwegian government. After what has been called “strenuous negotiation,” the rental fee was increased from 30 to 40 percent of the exhibitor’s gross with a possibility that “special” films could receive 45 percent. This price structure became effective in 1953 and has prevailed since that time.

When the increase of rentals was approved by the Norwegian government, it had to instruct theatres to accept the new terms distributors would be asking. The theatres, many of them municipally owned and operated, had no choice but to agree to the new rental structure. Tied to the higher fees was a stipulation by the Norwegians that American films offered in other markets would be offered in Norway. This meant that a film which might be rented for 65 percent elsewhere had to be offered in Norway even though it could receive no more than 45 percent. There were occasional attempts by American companies to withhold films from Norway because of this ceiling. One American major elected to withhold a film, but the municipally-owned theatres countered by refusing to exhibit all other films from this distributor. As a result, the company was out of the market for several months, but finally returned and agreed to offer the film for the maximum rental.

The successful campaign for higher rentals can be attributed largely to the activities of the American companies and the assistance they received from the American government. American distributors were able to muster enough force in appropriate places, something which Norwegian distributors were not able, or did not want, to do. However, the change in the price structure has benefitted both American and Norwegian distributors. The feeling within the film industry in Norway is that the change in rentals never would have happened without pressure by the American companies. One person, in fact, declared that “we have to thank them [the Americans] for what they have done.”

The Norwegian episode was mirrored a few years later in Denmark and in that campaign the American industry revealed another plank in its program for foreign operation—the boycott. The drive in Denmark began very much as it did in Norway. American distributors asked local exhibitors for an increase in film rentals from the 30 percent rate which prevailed. Danish exhibitors refused. The position of the MPEA was that the price structure in Denmark was below that existing in Norway and Sweden and that it would be difficult to continue to get 40 percent in those markets when Danes were getting the same films for 30 percent.

Discussions between American distributors and Danish exhibitors brought little result. To break the deadlock, the MPEA declared that its members would no longer offer films for exhibition in the Danish market. This move, announced in May, 1955, was based on the belief that starving the theatres in Denmark would bring them quickly into line. The MPEA felt that withholding American films from the market would create a shortage, that attendance would fall, and that admission revenue also would tumble. The American companies believed they could sacrifice the returns they were getting from Denmark (about $1,000,000 a year), but that Danish exhibitors could not cope with the lack of American films. American distributors expected the boycott to last three months at the longest.

The MPEA, however, failed to recognize several points. First, the production of Britain, France, and Italy was substantial enough to fill that portion of screen time which had been occupied by American films. In effect, the boycott did not create a shortage of films; it only created a shortage of American films. Second, while MPEA members were obliged not to do business in Denmark, there was no such restraint on American independents. The boycott, therefore, did not completely block the exhibition of American films because independents successfully rented a limited number of them. Finally, the shortage of American films gave added incentive to Danish producers. Without competition from a great number of American pictures, local producers captured a greater share of box office revenue which strengthened their position in the market.

The mechanics of resolving the problem in Denmark were strikingly similar to those in Norway. When distributor-exhibitor negotiation failed, the MPEA took its case to higher levels—the Danish government. The argument reportedly employed by the MPEA was that American films actually helped strengthen the local film industry. Perhaps the words used were the same as those spoken by MPEA executive vice president Ralph Hetzel when he told an industry conference in the United States that

… the time has come, now that the post-war era of distorted economies is coming to a close, to make it clear to those countries who represent the overseas market for American films that the export of U. S. films provides a healthy and much-needed stimulus for their own economies.

Mr. Hetzel believed that when it is demonstrated to “responsible foreign officials that a free flow of American films is a boon to the native theatrical industry” by providing it with more exhibition revenue, then “their attitude towards American film imports will become much more liberal.”⁴

Termination of the boycott has been attributed largely to discussions between the American ambassador to Denmark on the one hand, and the Danish Prime Minister, Finance Minister, and head of the exhibitors’ association on the other. They yielded an increase in rentals whereby Danish threatres were to be divided into three classes, the first to pay 40 percent, the second 36, and the third 30. In addition, each company could offer two pictures per year on a freely negotiable basis with rentals as high as 70 percent of the exhibitor’s gross.

The boycott of the Danish market ended in May, 1958, three years after American companies withdrew. It had lasted considerably longer than anyone might have imagined and while it achieved its goal of higher rentals it revealed that boycotts, if they could be used at all, were risky. The trade press reported that the “bitter fact is that the industry can no longer afford to impose embargoes” because it can no longer “muster the kind of unity that’s needed [and] can’t afford to take the kind of losses which the quitting of markets entails.” The report observed that the boycott of Denmark (and the simultaneous one of Spain) exposed “a growing weakness of MPEA” and the fact that “it’s possible to play the various companies against one another.”⁵ What the report did not mention, but what is equally valid, is that the decline in American film production meant there were fewer American pictures to withhold from markets. The numerical dependence upon American films is diminishing and future boycotts will be ineffective if the purpose is to starve foreign exhibitors for the American product.

While the campaign in Denmark was conducted outside the distributors’ association and centered on increasing rentals, American membership in local trade groups has been used in other countries to head-off moves which could hinder activities of American distributors. The importance of belonging was brought to light as early as 1950 when American distributors in West Germany applied for membership in the Spitzenorganisation der Filmwirtschaft (SPIO), the central trade association for the German film industry. American companies felt membership in SPIO would be vital for their position in the market because the association’s

job is to make recommendations to the German government on all things affecting films. The Americans, as members, have a full vote equal to that of any of the German delegates and thus have a right to cast a veto, as all decisions must be unanimous.

In addition to voting power, American companies thought of other benefits. Belonging to SPIO meant that Americans

at all times know what the German industries are thinking and planning and can head off any recommendation to the Reich government that appears dangerous to American interests. It amounts to a veto before the fact, and the companies are very pleased that they have been able to get into SPIO at all.

American distributors were convinced that their joining SPIO would “result in improved German-American film relations”—especially because the Germans “have always been leaders in … protecting their own industry at the expense of Hollywood.”⁶

These statements are not mere theoretical observations of the power American companies could hold in the German market. On the contrary, they demonstrate the technique American distributors have used to secure a firm position there. While the above comments were made in 1950, the following decade of activity demonstrated that belonging could be a useful tool in the American industry’s foreign policy. In 1960, the MPEA representative in West Germany told a trade journalist that there were “continuing efforts on the part of some protectionists to curb our position” in Germany. However, he went on to declare:

I feel that while we have to be alert against any moves to trim our position, nonetheless we can be reasonably confident that we can thwart any such moves.⁷ (Italics mine)

More recently, an American representative in Germany declared that if there were ever a showdown in the distributors’ section of SPIO, American members could block any policy they felt was unfavorable to their interests. This source indicated that through annual dues paid to the distributors’ section, American companies were indirectly supporting SPIO.

The advantages of association membership also were demonstrated in the United Kingdom when the government and the industry were drafting the 1960 Films Act. This legislation was to replace earlier laws which regulated the film industry in the United Kingdom. An important part of the Act was the definition of a “British” film, for on it hinged the subsidy allocated to producers. On this point, American companies had a direct interest, for their subsidiaries in Britain were making pictures which at that time were meeting the official and legal requirements for being labeled “British.” As such, they were eligible for government-approved subsidization. Any modification in the definition of a “British” picture which would make it more difficult for films of American companies to acquire this label would work against the interests of American producers.

In 1958, the British Film Producers Association (BFPA) submitted a memorandum to the Board of Trade setting forth its position on the proposed legislation. Among other points, the BFPA felt the “British” label should not be awarded on the same basis as it had been in the past. The Association believed that employment of non-British directors and producers should be more limited, and that this, when applied stringently, would make it more difficult for the productions of some companies to be declared “British” and have access to the aid fund. The BFPA declared it was improper for all films to have the advantages of the production subsidy, an implicit attack upon American companies who produced “British” films and drew payments from the production assistance fund. The Association believed the subsidy should be used in the way in which it was originally intended—to support the production of British films, not to support overseas shooting by American companies. The BFPA recommended to the Board of Trade that in order to have a film declared “British”

… all the producers and directors of a film, except one, by whatever titles they may be described, must be of British nationality wherever domiciled, or if not of British nationality, ordinarily resident in the Dominions. We also urge that if one person on his own fills the position of sole producer and sole director, he must fulfil one or the other of these requirements; i.e., he cannot be the one person as mentioned above who need not fulfil them.⁸

This suggestion struck at American companies who, although employing the legal minimum number of British technicians and actors in their films, had often used American producers and directors. It meant that British nationals, nominally at least, would have more control over “British” film production and perhaps that more British producers and directors would be employed. According to an American industry representative in London, the BFPA recommendation was “dead against our interests” for it would have placed new obstacles in the path of drawing on the British subsidy fund.

That this was the intent of the suggestion was apparent when the Federation of British Film Makers (FBFM) submitted its recommendations to the Board of Trade. The FBFM, criticizing the Association’s memorandum, stated it was designed to “impede Anglo-American co-operation” and could be regarded as a “retrograde step” for the British film industry. In outlining the need of occasionally employing more than one foreign producer and director, the Federation declared:

There are some cases, not large in number but generally of considerable importance, when finance will be available for a film with a foreign producer and a foreign director but will not be available otherwise. We think it quite unreasonable that drastic action should be taken because of a handful of cases…. We simply cannot afford to drive away from our studios these important [Anglo-American] productions.⁹

The key to understanding the position taken by the Federation, ostensibly an organization for British producers, is contained in the group’s annual report for 1958-59:

A second reason for the formation of the Federation was the feeling that an important body of makers of British films had been isolated because they had American finance or distribution. With a membership that includes representatives of some of the major Anglo-American organisations, the Federation has helped greatly to influence the climate of opinion and to reduce the old suspicions and hostility. In its submission to the Board of Trade last year, in the further submissions of this year, and in many detailed ways the Federation feels confident that it has done a great deal to encourage the development of Anglo-American co-production.¹⁰ (Italics mine)

It would seem that the organization was a vehicle for the dissemination of opinion favorable to American interests in the United Kingdom.

With the Federation taking a public stand opposing the BFPA’s recommendation, other parties were at work on different levels. The trade press reported in December, 1959, that Board of Trade officials had been meeting with certain unnamed “leaders from various sections of the British film industry” who explained to the Board that the BFPA’s proposal could be “interpreted as having un-American connotation.”¹¹ To make certain that the BFPA’s suggestion would not be adopted, pressure was brought to bear directly on the Association. A film industry source in Britain has revealed that a statement was presented to the BFPA by an influential American representative. It is reported to have pointed out that certain American companies had recently joined the Association and it requested the BFPA to amend its position regarding employment of foreign producers and directors. A short time later, the Association withdrew its recommendation to the Board of Trade and the proposed limitation did not find its way into the 1960 Films Act. Some of the companies which joined the BFPA between March, 1959, and March, 1960, are Twentieth Century-Fox Productions Ltd., Walt Disney Productions Ltd., United Artists Corporation Ltd., and Warner Brothers Productions Ltd.¹²

While rental fees and foreign legislation have been important, blocked earnings also have received priority attention in the American industry. The serious balance of payments situation in the decade after World War II caused European governments to prohibit American companies from withdrawing the money their films had earned. When it is remembered that some markets could yield more than $20,000,000 annually, it is apparent that sizable amounts of earnings were blocked overseas. Initially, this created a problem for American producers because they were denied access to their earnings—the money required to repay loans, to pay for future production costs, and to show a profit.

The industry dealt with the problem in several ways which included using frozen revenue for investment in foreign non-film industries, for investment overseas in film production and allied industries, and for the support of overseas offices and business operations. Another way of disposing of blocked earnings was through what the industry termed compensation deals. This was a broad heading embracing various methods of exchanging blocked currencies for other currency and eventually American dollars. The exchanges were not based on par value but involved certain discounts which a middleman took as commission for arranging the transfer. The companies lost some money, but on balance, felt they had most of the revenues their films had earned. In many cases, the compensation deals became elaborate and, in addition to exchanges of money, included the buying and selling of goods unrelated to the film business.

The extent to which American companies have gone to withdraw their frozen revenue was disclosed in a dialogue between Eric Johnston and Senator J. William Fulbright in 1953.

SENATOR FULBRIGHT: I was a little surprised that you were able to sell $200,000,000 worth of movies. I don’t know where they get the dollars for that when there are so many things that they want…. Mr. Johnston: As you know, Senator, we carry on very extensive trading operations all over the world in order to get our money out. We have done such things as buy wood pulp in Scandinavia for kroner, shipped it to Italy in exchange for lire, and there we have used the lire to build or rebuild ships to go overseas to be sold for American dollars; we even raised a sunken French tanker in the harbor of Marseilles and repaired it, paying for it with French francs, and shipping it to the United States where it was sold for dollars; we have made Scotch-type whisky in Chile, sold it in America for American dollars. All in all, we have a very extensive organization constantly working to get our dollars over the hurdles that beset you nowadays in foreign trade.

SENATOR FULBRIGHT: You are very ingenious.

MR. JOHNSTON: We have to be. That is the only way we can get our money out, I will assure you.¹³

Other arrangements with blocked earnings centered on the shipbuilding business in Italy. Beginning in 1953, as part of film agreements between the Italian and American industries, provisions were made for the use of blocked American revenues. The initial agreement provided that about 25 percent of these earnings could be invested by American companies in Italy’s semi-official shipbuilding company, Finmeccanica. The company then guaranteed to repay a certain amount of American dollars, but at a discounted rate, which was reported to be about 14 percent. Evidence suggests that the American companies used this arrangement on several occasions and for substantial sums. By July, 1954, American companies were said to have just completed their third compensation deal with Finmeccanica for $1,000,000.¹⁴ Fourteen months later, it was reported that deals with Finmeccanica had yielded around $6,000,000 for the Americans and that negotiations were under way for additional transfers of $3,000,000.¹⁵

This method of withdrawing funds was perpetuated and written into later film agreements. The pacts permitted American companies to dispose of their blocked Italian earnings not only through the building of ships but also in the construction of hotels or other works of national interest to Italy.¹⁶ The agreements, as did earlier ones, authorized American companies to spend their blocked funds by investing in Italian film production. That American companies at that time were disposing of sizable portions of their earnings through compensation deals, and not through local film industry investments, was apparent when the director of ANICA brought the situation to light. In early 1958, Eitel Monaco suggested that compensation deals through Finmeccanica be ended because blocked earnings, originally intended for financing local film production, were being absorbed by shipbuilding and other non-cinema efforts. The problem eventually was resolved as Italy began to liberalize the remittance of American earnings, and by 1960 it was reported that hardly any American revenues were still blocked. In the same year, a source in Italy revealed that during the preceding ten years American film companies had channeled as much as $40,000,000 through shipbuilding deals.¹⁷

In other countries where earnings were frozen, American companies had opportunities to convert their funds through non-film-industry channels. In Great Britain, as a provision of the film agreements, American companies had permission to use their earnings for the “acquisition of real estate, the construction or renovation of buildings, participation in approved industrial or commercial enterprises, construction, acquisition and operation of hotels” and for participation “in travel and transportation agencies designed to facilitate and encourage tourist travel.”¹⁸

The 1948 film trade agreement between the French and American governments also provided for the disposal of blocked American earnings in other than film industry enterprises. Frozen funds could be used for the “purchase of long term stock shares,” the “purchase of French industrial values …, investment in French industrial or commercial businesses,” and for the “purchase, with a view to export, of goods and materials … considered by the French government as being profitable to the French economy.”¹⁹ In the case of Great Britain and France, it is believed that the largest share of blocked earnings was used for film industry purposes including the expenses of American location shooting and direct investment in British and French film production.

The American film industry’s foreign policy, as it pertains to matters of representation and revenue, has brought the companies into contact with overseas trade associations, into conflict with foreign economic interests, into close quarters with European governments, and into involvement in noncinema industrial activities. The American film industry is truly an international business.