2: Protection of European Film Industries

Schemes for the protection of European-made films were, of course, the direct result of the invasion of American films in the 1920’s. This exportation threatened industries abroad to such an extent that one study, for example, states: “by 1927 the British film industry was well on the way to extinction.”¹ After the initial shock of penetration, European countries gradually raised barriers to the circulation of American films. Germany, in 1925, was the first to do so. Great Britain and France followed quickly.

But World War II destroyed to a great extent the protective measures developed during the 1920’s and 1930’s, and most European countries had to begin again to guard their industries. These barriers confronted the American film trade at a time when it could least afford hindrance to its foreign operations. Production costs were mounting, the domestic audience was diminishing, the backlog of films never shown abroad was large, and Europe represented a lucrative market. It was inevitable that American companies would try to sell their products abroad. As Eric Johnston told a Senate committee:

Immediately after the cessation of the Second World War, there was a tremendous backlog of pictures that had not been shown in most foreign countries, and these pictures flooded in, even more than the countries could absorb. This is a perfectly natural commercial phenomenon. You can’t blame the companies for doing that.² (Italics mine)

The effects of this “natural commercial phenomenon” were evaluated in a report prepared for UNESCO. Its authors wrote:

The large number of cheap American films available (initially increased, except in the United Kingdom, by the films which could not be shown during the war) apart from adding to the dollar deficit, is only one of the factors prejudicing the development of national film production industries. These industries, unable to recover their outlay on the films which they produce, are stunted in growth and become unable to meet the demands of the national market. The exhibitors, therefore, are driven to depend for their existence upon foreign, largely American, films.³

When a domestic industry which is a vehicle for national culture is severely threatened by foreign competition, a significant problem is posed. The sentiments of Europeans are convincingly summed-up in a question once raised by a British government official. “Should we be content,” he asked, “if we depended upon foreign literature or upon a foreign Press in this country?”⁴ When persuasion fails as a tool, a more powerful method must be used to resist unbalanced competition. That way is through protective measures which control the foreign industry’s access to the local market.

Through such a policy, it is hoped that a portion of the market will remain for exploitation by domestic films and that national production will be able to survive and thrive. There is another rationale for the policy of restricting the circulation of foreign (chiefly American) films in a country. It was mentioned in the UNESCO report, and while not bearing solely on film, it has worked as a barrier to film trade. This is the balance of payments problem which weighed heavily in Europe after World War II. These two concerns have been the moving ideas behind restrictive measures.

Regarding the balance of payments issue: after the second war, European nations, in debt and with little or no dollar reserves, could not afford the questionable luxury of importing American pictures when their peoples and businesses demanded more essential commodities; these nations believed that dollars not spent on American films could be used to alleviate more pressing needs.

There were essentially two alternative means of restriction. First, they could reduce importation of American films, assuming that fewer American pictures on the market would result in fewer dollars exported. Superficially reasonable, the argument fails to recognize that there is no one-to-one correlation between films and earnings. However, in the long run and when applied to American films, this policy could be expected to conserve critical supplies of currency.

Belgium exemplifies this expectancy. With a small population and two official national languages, the country produces few feature films. Nevertheless, the Belgian government negotiated with the Motion Picture Export Association of America to limit imports of American films. The agreement decreed that MPEA companies could bring into Belgium only about 240 films annually. Since 1960, this restriction is no longer in force and Belgium is a free market. A shortage of dollars, not protection of local film production, was sufficient reason for the nation to restrict entry of American pictures.

The second alternative relates to the earnings of American films and has two variations. The first is a tax or duty on the value of each imported film—”value” meaning the expected earnings of a film. This step was taken by Great Britain. By 1947, American film companies were taking more than $60,000,000 annually out of the country. During the summer of that year, the balance of payments problem became so severe that the British government was forced to cut imports from hard currency areas. While films accounted for only about 4 percent of British dollar expenditures to the United States, they could hardly be overlooked in the general retrenchment. On August 6, 1947, the British treasury announced a customs duty of 75 percent on the value of each imported film, regardless of nationality. Because American films, by and large, were the only ones imported, the duty fell mainly on them. On August 9, the MPEA retaliated by announcing an indefinite suspension on all further shipments of films to Britain. This boycott, which lasted seven months, represented an important plank in the American industry’s foreign policy platform. The reasons prompting the 75 percent duty were stated by the Financial Secretary to the Treasury, Glenvil Hall:

I want to make it clear that neither is [the duty] intended to obtain additional revenue nor is it an aggressive act against Hollywood in the interests of our own British film industry. The step has been taken simply and solely because the country cannot afford to allocate the dollars necessary to pay for the exhibition of American films in this country at the present time.⁵

The duty, which resulted in the MPEA’s withdrawal from the British market, gave virtually full protection to British film production and offered it its first really important opportunity to get a hold on the home market. By contrast, the blow to exhibition was great as theatres found their chief supply of films cut off. (Interestingly, when in 1964 the British government levied a 15 percent surcharge on imports, motion pictures and some other goods were exempt.)

The second variation regarding American earnings becomes apparent if we follow in detail events in the United Kingdom. During the boycott the MPEA and the British Board of Trade began negotiating for an agreement which would bring American films back to Britain without being subject to the 75 percent duty. The result of these negotiations was revealed in March, 1948, with the announcement that an Anglo-American Film Agreement had been concluded. The pact covered many points, some pertinent to our present interests. The duty was to be removed (and it was, on May 3). Concerning the earnings of American films in Britain, the pact stipulated that for two years beginning June 14, 1948, American companies could withdraw only $17,000,000 annually from the country. All other American earnings were blocked or “frozen” and could not be taken out. Aside from reducing the serious drain on dollars, this feature encouraged American companies to spend their blocked earnings in Britain. The pact permitted them to be used for producing films, for acquisition of rights to films and stories, for payment for costumes, props, equipment, printing and advertising, and for the purchase of real estate and studios, but not film theatres.⁶ The pact permitted the free importation of American films but limited the amount of money the American companies could withdraw from the market.

France’s policy on dollar spending was similar to that developed by Britain. The Franco-American Film Agreement of September, 1948, restricted the number of imported films and permitted limited remittance of American earnings up to $3,625,000 annually, leaving about $ 10,000,000 blocked each year. The pact listed several ways in which these frozen funds could be spent: joint production of films with French companies, construction of new studios, acquisition of distribution rights to French films, acquisition of story rights in France, etc.⁷ Thus, the agreement regulated the number of American films entering France and partially restricted remittances.

Other restrictions and protections have their roots specifically in film industry economic policy. It was mentioned earlier that protection per se aims to prevent unbalanced competition from destroying or seriously injuring a domestic film industry. This idea can be developed and qualified by relating it to the size of the potential market available to a domestic industry.

The smaller nations of Europe—Switzerland, Belgium, the Netherlands, Ireland, and the Scandinavian countries—have no restrictions on film importation which can be linked with the need to preserve their national film production. None of these nations has an extensive industry, at least in quantitative terms. With limitations on available capital, and with inherent restrictions on supplies of talent because of small populations, these nations have not had to face the problem of preserving their native films. Even if protective barriers were erected, it is questionable whether local production could expand to fill the vacuum. In the situation actually prevailing, some film production has managed to survive, often based on the rarity value of local films, the portrayal of predominantly local humor or traits, and the fact that, for instance, “people will pay to hear Danish spoken from the screen.” Moreover, there seems to be prestige value for a country of a few million people in having a film running at a theatre where it can compete successfully with one from the United States. While the production might not be as slick, and the editing might be a bit rough, to the local audiences it is “our” film.

The need for protection, then, is likely to exist in the larger nations which have the potential capital, talent, and audiences to form a base for a greater volume of film making. While some production might continue without protection, the aim is to provide the atmosphere in which something more substantial than minimal production predominates. Protection also seeks to safeguard local investments in production facilities and to serve as an outlet for the creative talents within the country. This would be important to the United Kingdom, France, Italy, West Germany, and perhaps Spain. Of these West Germany alone did not have a formal scheme of protection. Although the need for it was recognized, exterior forces worked with such vigor there that plans were never realized.

Two types of protective schemes, based on different assumptions, have worked successfully in the larger European markets. The first is a screen quota which reserves a portion of each theatre’s screen time for domestic films. The quota may declare that a given percentage of a theatre’s films, measured over a year, must be local in origin or that a certain number of weeks out of each quarter must be devoted to the exhibition of national films. In either case, the object is to free a share of screen time so that domestic producers will have the opportunity to fill it. The screen quota is not concerned with the number of foreign films brought into a country and made available for exhibition. In practice, any amount may be imported but they must find their own place in the unreserved portion of screen time.

The second restrictive plan places a quota on the number of films imported. It is a positive step in that it limits the quantity of competitive films brought in and made available to exhibitors. As a long range policy, the import quota is also effective because it limits the rapid buildup of a pool of old foreign films. In a country with only a screen quota, an exhibitor who fulfilled his obligation to show domestic films could turn to this rerun reservoir which could be offered at prices below those for any excess new local films not shown in the reserved portion of screen time. The import quota alone, however, does not provide assurance that local productions will be able to find their way to the screens. If imports prove to be very popular with audiences and warrant long runs in theatres, then domestic films, even if numerically greater, could still have difficulty in achieving exhibition.

Neither restriction by itself offers sufficient multilevel protection for a domestic industry. The import quota is somewhat more effective than the screen quota, a point substantiated by the MPEA when a spokesman declared the screen quota to be “the least undesirable method of affording protection to domestic film industries….”⁸ Nonetheless, the key to protection exists in applying both. Specific development and use of protective measures, and their relation to the American industry, can be illuminated by examining and contrasting them in France, Italy, Spain, and the United Kingdom.

Before World War II, France produced about 120 films annually. During 1946, even though studio equipment was judged inadequate for large scale production, the industry completed ninety-six films. It seemed that in spite of great difficulties, the French industry was making a comeback and that with reequipped facilities, production could be brought to prewar levels. This miniature boom, however, was due to end.

In May, 1946, an agreement was reached in Washington on the importation of American films into France. The pact was signed by Léon Blum, representing the French government, and by James Byrnes, the American Secretary of State. The agreement, going into effect in July of that year, annulled the prewar import quota which had limited imports of American films to 120 per year.⁹ France became a free market as far as the American industry was concerned and there was nothing in the agreement to restrict dumping of old films. In place of the import quota, the pact initiated a screen quota which reserved four weeks during each quarter year for the exhibition of French films. In contrast to the British screen quota, which had been fixed generally above its industry’s production capacity, the French quota “was retrogressive and fixed far below the actual possibilities of home production.”¹⁰ The quota was approximately 31 percent of each theatre’s screen time, while the actual French share before the war had been running at 50 percent.

A crisis within the French film industry was the immediate reaction to the Blum-Byrnes Agreement. In 1947, with production falling to only seventy-four films, discontent was so widespread that committees for the Defense of the French Film were organized, and brought the case to public attention. By the end of the year, more than half of the French studios were said to have suspended operation, and unemployment reportedly rose to more than 75 percent in some branches of the industry. These conditions were called to the attention of the Assembly in early 1948. Negotiations with the United States were resumed in an effort to modify the Blum-Byrnes Agreement and to alleviate the serious downward spiral in which the French industry found itself. The talks were concluded with the signing in September, 1948, of a five-year agreement.

This accord was more favorable to the French industry in that it resurrected the import quota and raised the portion of screen time reserved for French films. According to the agreement, of 186 dubbed films to be imported annually, 121 could be American. Eleven import licenses were to be given to each of the following American companies: Columbia, Loew’s (M.G.M.), Monogram, Paramount, R.K.O., Republic, Twentieth Century-Fox, United Artists, Universal, and Warner Brothers. Independent American producers were to receive the remaining licenses. The screen quota was raised from four to five weeks per quarter, an effective increase from 31 to 38 percent of screen time.

The terms of the import quota were such that while 121 American films could be brought in, the rest of the world’s producing countries were limited to a total of only 65 imports. When this small amount was divided among nations, it was evident that the restriction on them was severe. Producers in Great Britain, for example, protested the small number of films they were permitted to send to France. The British Film Producers Association tried vigorously to obtain more licenses for its pictures. As its annual report for 1948-49 declared:

In spite of all efforts by the [British] Government and by the Association’s representatives, only 18 licenses were allocated to this country for [the year beginning July 1, 1948]. The Association accepted this meager allocation under protest and renewed its plea to the Government to secure a better allocation for the year 1949-50. A minimum of 20 was all that could be obtained [from French authorities].

Such experiences are not encouraging and reflect to some extent the poor bargaining power of sterling against dollars and the powerful effect of Marshall Aid upon the economy of so many countries.¹¹ (Italics mine)

We can note the relation of Marshall Plan aid to the exportation of American films. It has been contended that the aid was used as a lever to open and maintain markets for American films in the critical years after the second war. While the aid was supposed to strengthen faltering economies against risings from the left, American films were seen as propaganda vehicles for strengthening western European minds against pleas from the left. The argument to foreign governments was: If you take our dollars, you can take our films. Considered in these terms, it is not surprising that American films received advantageous terms in many western European markets at the expense of competitors.

Pacts similar to the one initiated in 1948 guided the film trade between the United States and France for more than a decade. The French, however, remained adamant in allocating to MPEA companies only no import licenses for dubbed films each year. Certain bonus plans were operative but these did not materially change the flow of American films to France. The French market until 1960 limited importation from America in an effort to prevent unbalanced competition from seriously injuring French film production.

Events in 1959 and 1960 helped to modify this policy. Included in a broad program to liberalize trade in general was a more generous allocation of import licenses for American pictures. The film pact between the French government and the MPEA, signed in June, 1960, may be viewed as an indication of this change in commercial policy. One American trade newspaper commented:

Recently concluded film agreement between France and the U. S. is a milestone, not only because it liberalizes film trade with France, but because it marks a drastic change in French policy that will have beneficial effect on the policies of other countries which, like France, have long been guided by restrictive principles….

New French pact is a reflection of the French government’s recognition that the country needs a new approach to business, especially [a] recognition that the French film business now seeks foreign market expansion [and therefore must offer reciprocity at home].¹²

The 1960 pact, retroactive to July, 1959, and in force for three and a half years from that date, allocated 446 licenses for the importation of dubbed American films, increasing the number each year during the period. Another feature eliminated barriers to the free remittance of American earnings in France. The accord represented a revision of former policy and on the surface permitted more American films to enter France. Subsequent agreements between the MPEA and the French government allocated 140 import licenses annually. However, even by 1960 American film production had fallen considerably and fewer new American films were available for export. As the danger from the quantity of American films declined, the number of pictures permitted to enter France increased.

The postwar development in Italy of a screen quota and an import quota is slightly different from that in France. While the need for both types of quotas was recognized early, restrictions on imports were initiated later in Italy than in France but were coupled with a scheme to support domestic film production.

The closing of the Italian market to the American industry during the second war caused a great backlog of pictures to be built up which entered at an unprecedented volume when the war ended. In 1946, for example, six hundred American feature films were exported to Italy. There was nothing to hinder this because Italy had neither an import quota nor a screen quota. Other film producing nations, also searching for markets, exported to Italy and this aggravated the situation. During the three postwar years, imports averaged close to eight hundred films annually. The magnitude of importation prompted an Italian government official to declare that Italian films “had to fight their way” on a home market which was “literally swamped.” He blamed this saturation chiefly on the “output of America.”¹³

An early step to check the indiscriminate importation of films was the law of July 26, 1949, the Andreotti Act, which inaugurated a novel system of taxing imports to support local production.¹⁴ For each dubbed film imported, the distributor had to deposit 2,500,000 Lire (about $4,000) with the government’s semi-official banking agent, the Banca Nazionale del Lavoro. Later, the sum was increased to 5,500,000 Lire (about $8,800). The money from the dubbing certificate, as it was called, went into a fund from which Italian producers could borrow capital at low interest rates for film production. The law further provided that a distributor could have his deposit returned, but without interest, after ten years upon presentation of the certificate to the Banca or its representative. In essence, the Andreotti Act devised a scheme of compulsory interest-free deposits to form a pool of capital for local producers. The law did not technically restrict importation of films, as a distributor could import as many as he wanted provided he acquired a dubbing certificate for each one.

One might think that such a law would bring retaliation against Italian films abroad. This was not the case, however. The Italian government offered exemptions from the dubbing fee in return for more import licenses for Italian films. Thus it would grant an exemption for one French film when France issued an import license for an Italian picture. As the United States had no formal restrictions on film importation, the American industry was unable to take advantage of this reciprocity.

The screen quota had a modest beginning in Italy. It went into effect in December, 1949, and required that eighty days be set aside each year for the compulsory exhibition of Italian films. (This was increased to one hundred days in 1956.) These eighty days amounted to only 22 percent of screen time, a figure lower than the first postwar screen quota in France. To qualify as a film which could be counted toward quota fulfillment, a picture had to be of Italian nationality, at least two thousand meters long (approximately sixty-five hundred feet), and of sufficient technical standards to be approved by a quota council. This last feature attempted to discourage the making of “quota quickies”—those films of little artistic merit produced solely for the purpose of filling the reserved portion of a theatre’s screen time. There is evidence to suggest that this did not altogether bar such films from being counted toward quota. A UNESCO report published at the time noted that “there appears to be a departure from the spirit of the law, for it seems to be a widely held opinion that … many films are of very poor quality.”¹⁵

By 1950, Italy had been able to establish a token screen quota and had taken moderate steps toward controlling excessive importation of films. While these measures did reduce American importation to about four hundred films in 1950, Italian authorities felt that even this amount was still too great for the market to bear. To resolve the problem, negotiations were opened between the MPEA and ANICA, the central organization representing the Italian industry. ANICA proposed cutting imports from the United States by at least a fourth. The MPEA, of course, rejected the idea, for to accept a reduction at this time without a fight meant an acknowledgment of Italy’s position. Moreover, to draw negotiations out over months gave the American companies more opportunity to dispose of their films on the Italian market before restrictions could be imposed. The state of the market can be judged from an interview with Giulio Andreotti as reported by a trade journalist.

Extent to which the Italian market has been “glutted” by foreign imports, Andreotti said, is indicated by the fact that 580 films were available for domestic distribution last year when “only from 300 to 400 pictures could be absorbed.” Of the total, he declared, 400 features came from the U. S., 80 more from various other countries, while Italian production amounted to 100 films.¹⁶

The importation problem was not resolved until May, 1951. The MPEA signed an agreement whereby eight American companies agreed to limit to 225 each year the number of their films brought into Italy to be dubbed. The pact, valid for two years, applied only to M.G.M., Twentieth Century-Fox, Paramount, Columbia, R.K.O., Universal, United Artists, and Republic. An additional sixty American films could be imported into Italy by Italian distributors, making a maximum of 285 dubbed American pictures annually. Although this may appear to be more than the one fourth reduction the Italians had hoped to achieve, the pact did not significantly hinder exportation to Italy. For the most part, the stock of American films unshown in that country had declined, and from 1951 production in Hollywood began to decrease. The MPEA’s agreement to limit exports can be viewed as an attempt on its part to bring stable operating conditions to the Italian market and to relieve uncertainty. As Variety commented in discussing the features of the 1951 pact: “From the American viewpoint, it was necessary to come to a conclusive agreement ‘to protect American pictures in Italy,’ according to the document.”¹⁷ The quota was tied to other features, chiefly details on the remittance of American earnings in Italy, and, without a doubt, this prompted the MPEA to accept some limitations rather than be faced with harsher terms.

The 1951 agreement later was renewed for an additional period and was terminated on August 31, 1954. The new 1954 pact provided for a further cut in the number of dubbed American films imported into Italy. The MPEA companies were limited to only 190 pictures each year and an additional fifty-five permits were allocated to independent companies.

Periodic film agreements continued to be negotiated until the early 1960’s. The 1956 pact set annual imports from MPEA companies at 192 with an additional contingent for independent producers. This agreement was replaced in 1959 by one authorizing only 185 imports annually from MPEA members; independents also received a limited number of licenses. The import quota was abolished in 1962 and at that time Italy again became a free market for American films. The elimination of the quota undoubtedly was influenced by the decline in Hollywood’s production.

In Spain, protection is exemplified by the baremo, a way of allocating import licenses to distribution companies. The scheme judges each company on a number of scales, and awards points according to this measurement. The number of points earned by a company determines the number of licenses granted to it. The conflict which gave birth to this unique system can be outlined in these terms: the Spanish film industry was anxious to penetrate the American market, and the American industry was anxious to solidify its own position in the Spanish market.

Events leading to the baremo began with the expiration of the 1954 film agreement between the MPEA and the Spanish government. Negotiations in early 1955 gave little encouragement that a solution to problems could be reached. As the basis for a new agreement, Spain proposed a reduction from one hundred to about eighty in the number of films American companies in Spain could import annually. Of these sixty-eight could be dubbed and the remainder could be shown with subtitles. In addition, an increase was proposed in the tax on imported dubbed film, especially for special process films such as those in CinemaScope. These demands were not very different from those made in other countries where the MPEA was doing business. The proposal which caused concern to the MPEA was a demand for reciprocity—the Spanish industry wanted MPEA members to distribute a number of Spanish films in the United States. The MPEA’s reaction to this suggested rule was concisely stated in Variety.

American [executives] were surprised at the reciprocity demand put forward by the Spaniards. It called for the American companies with offices in Spain to handle between them eight Spanish features in the U. S. and Canada. Furthermore, the U. S. [distributing companies] in Spain would have to agree to handle one Spanish [motion picture] locally for each five imports. Neither of these demands is acceptable—either in principle or practically-—to the MPEA.¹⁸

These terms are reminiscent of the 1951 agreement between the MPEA and the Italian industry. Through it, the MPEA, in effect, subsidized the limited importation and distribution of Italian films in the United States. The MPEA, unhappy about that arrangement and concerned about the precedent it established, later thwarted similar requests from France. Now the Spanish industry was asking for reciprocity and the MPEA had no desire to retreat from the position it had taken in dealing with the French. Because the Spaniards would not modify their demands and the American companies had no intention of accepting them, the MPEA initiated a boycott of the Spanish market.

With MPEA companies refusing to distribute their own pictures, Spanish distributors found themselves with little competition from either American films or American companies. This general condition existed from the summer of 1955 to March, 1958, when the MPEA lifted the boycott and decided to resume shipping films to Spain. During this grace period, Spanish distributors reorganized themselves, acquired a substantial share of the market, and bought out a few American distributing companies operating in Spain. When the boycott ended, the MPEA found itself in the unenviable position of trying to relocate itself in a market which had undergone structural and policy changes. Because some American companies had closed their offices and had franchised Spanish distributors to handle their films, the MPEA ranks were reduced to Paramount, Twentieth Century-Fox, Warner Brothers, M.G.M., and Columbia.

The terms under which the American industry resumed doing business in Spain were more stringent than those proposed by the Spanish authorities before the boycott. Although the demand for reciprocity was dropped, the Spaniards remained adamant on the import quota for dubbed films and continued to adhere to their policy of requiring a local distributor to handle a Spanish picture for every four foreign films imported. Moreover, the baremo was inaugurated. An American journalist resident for many years in Spain and active in film affairs has written:

To many film observers, the Baremo was conceived as a fool-proof device to protect expanded gains of these Spanish [distributors] developed during the … MPEA embargo years. Thus Baremo is, in a sense, a penalty brought on the Americans by their own previous “strike.”

Spanish government film authorities accepted the premise that new Spanish firms formed when American companies pulled out of the local scene and companies that mushroomed from regional to full national status during the same period merited the protective element the Baremo affords.¹⁹

The concept of the baremo went one step beyond being a mere import quota, for American imports as well as the business of American distributors were limited. Around the world, the MPEA had traditionally claimed the right to receive one lump sum of import licenses which it would divide and allocate to member companies. The baremo struck at the roots of this policy because under it division and allocation were removed from American hands and became a function of the Spanish government.

The baremo, to amplify the description, is a system of calculation by which distribution companies are awarded points according to certain standards, the points becoming the basis upon which the government allocates import and dubbing permits. The more points a company has, the more foreign films it is permitted to import and distribute. Each company is measured on a series of scales which have included the number and type of Spanish films it has distributed, the age of the company, the amount of capital, the annual turnover, the number of employees, and the number of branch offices it maintains in Spain. The most important factor, yielding the greatest number of points, is the number and type of Spanish films distributed. On this scale, the baremo obviously favors companies which have aggressively sought and distributed domestic pictures. However, the catch is that Spanish films, on the whole, have not been great money earners in Spain. American films are the important box office attractions. As a case in point, although American pictures represented only about one-third of the films on the market in 1962, they accounted for almost two-thirds of the total box office receipts. While Spanish films are generally equal in number to the American films, their share of the market earnings can be no greater than one-third. In actuality, Spanish films represent one-fourth or one-fifth of total box office receipts. Clearly, a distribution company would be more anxious to handle American than Spanish films, but it can receive authorization to import the former only after it has actively distributed the less popular and less rewarding Spanish films.

To the businessman, the baremo works in a circle. If he does not receive many import licenses, he will not need, nor can he probably afford, a large staff with many branch offices. Thus, when his points are computed on the basis of his small business, he will not receive many import licenses and his business is likely to remain small. To escape from the circle he must distribute many Spanish films and be willing to sustain a probable decrease in business revenue, or a possible deficit, for a time. By handling a large volume of Spanish releases, the distributor can obtain more import licenses, particularly for the more popular American films. When this level is reached, the revenues from American pictures can be used to support the distribution of Spanish films.

American distributors have not fared too well under the baremo. As we have said, only five American companies maintain regular offices in Spain; the others have either franchised local distributors to handle their films or keep only token representative staffs.²⁰ Even if a company has a regular office, there is no guarantee that it will be able to distribute all the American films it may have at its disposal. As an example, the manager of one American company stated that during a certain year his company had Spanish distribution rights to twenty-two American films. Under the baremo, however, the company was permitted to distribute only two of these pictures and the remaining twenty had to be handled by Spanish distributors if they were to be shown at all in Spain.

The competitive position in which the American companies find themselves in Spain is indicated in Table 1, which presents data for the first five years of the baremo’s operation. From 1958 through 1962, quotas restricted the total importation of dubbed foreign films to 901. Of these, film agreements between Spain and the MPEA permitted only 394 American films to enter Spain. And of these 394, the baremo allocated only sixty-six, or 17 percent, to American companies with regular offices in Spain. Considering American and other foreign films as a whole, American companies were authorized to distribute only 114 out of 901, about 13 percent. Excluding American films from the importation figures, 507 non-American pictures were imported, but American companies were permitted to distribute only forty-eight of these, about nine percent. The balance of the distribution business fell to Spanish companies. It is clear that while the import quota works to limit the number of American films imported, the baremo functions to channel the greatest number of American (and non-American) films away from American distributors. The baremo continues to achieve this objective because in the 1964-1965 season 104 licenses were allocated to American films. Of these, Metro received four, Fox three, Warner Brothers two, and Paramount only one. The remainder went to Spanish distributors. Columbia Pictures, at that time, was not doing business in Spain due to government restriction.

The baremo, retaliation for the MPEA boycott of the Spanish market, has severely hindered American operations in Spain and has cost American companies a conservatively estimated $10,000,000 in business. This condition was brought on, according to one observer, by company presidents in New York who “completely misinterpreted” the Spaniards. The accomplishment of the baremo is that it treats equally all distributors of equal size regardless of nationality. As the president of the Spanish Distributors Association has written:

Charges have been levelled at Spanish authorities and against Spanish distributors for pursuing a nationalist policy. The truth of the matter is that the Spanish government, without opposition from Spanish distributors, has been giving the same consideration to MPEA companies as it has to all Spanish companies. This cannot he termed a nationalist policy.

MPEA has always claimed extra privileges for its member companies via special agreements that gave more [import] licenses to them than to Spanish companies equally important in size, influence and marketing organization. This position is neither just nor reasonable.²¹

TABLE 1

Authorizations Granted Under the Baremo to American Companies with Full-scale Offices in Spain for the Importation and Distribution of Dubbed Foreign Feature Films

In contrast to Spain, the United Kingdom imposes only the more conservative screen quota as a protective device. This measure has its roots in the Films Act of 1927 which authorized an exhibitor’s quota beginning in October, 1928. It was extended by the Films Act of 1938 which was in force for ten years. Between 1928 and 1948, the acts provided for a gradually increasing quota. Beginning in 1928 exhibitors were obliged to reserve a minimum of 5 percent of screen time for British films, but by 1938 exhibitors had to reserve 20 percent. When the Films Act of 1938 became effective, there was an initial drop in quota to 12.5 percent, but by 1947 the quota for long feature films was to be 25 percent.

The drop from 20 to 12.5 percent requires a short explanation. The 1938 Act, in part, aimed to reduce production of “quota quickies.” The Act initiated a cost test which determined whether a given film could be counted as part of the “quota” for theatres. When the law was written, it was felt that the new legal minimum cost level would result in an initial drop in total film production. The reduction in compulsory screen time took this expected decline into account.

World War II nullified the intentions embodied in the 1938 Act. Due to wartime restrictions on film production in Great Britain there had to be departures from the law, and from October, 1942, until October, 1947, the screen quota, as stated in the Act, was abandoned. In practice then, the quota was in effect for only five years during the ten year life span of the 1938 Act.

The Films Act of 1948 modified the established screen quota. Under the previous acts, the quota had been set in advance for ten year periods. The new law specified that the quota was to be set annually and only after consultation between the government and the film industry. A government spokesman declared at the time that there was a need to have the annual quota correspond to the number of films likely to be available. This was a clear reference to the 1942-1947 period when there were not enough films produced to fill the quota established in 1938. The writers of the 1938 Act, of course, could not have foreseen this difficulty brought on by the war.

In the first year of the 1948 Act the quota was set at 45 percent for first feature films and 25 percent for the supporting program. The 45 percent quota, effective in October, 1948, and running until the end of September, 1949, was a sharp increase over the previous year’s figure of only 20 percent for first features. The new quota cut dramatically into the market for American pictures, as in the years preceding the 1948 Act, American films had managed to acquire from 75 to 85 percent of screen time.

The MPEA protested the 45 percent quota and issued a statement which, in part, declared:

The Board of Directors of the Motion Picture Association of America … asked Eric Johnston … to request the State Department to make a vigorous protest to the British Government against the new British 45 percent film quota….

“This screen quota is excessive and unnecessary,” said Mr. Johnston. “Its requirement obviously cannot be fulfilled by British producers. We can therefore only consider it as a gratuitous affront to the American Motion Picture Industry. We shall immediately ask the State Department to protest on the highest level in Great Britain….”

At the same time the State Department will be asked to protest against the elimination of American representation from the Cinematograph Films Council Advisory Group to the Board of Trade. This Council, after eliminating American representation, recommended the high quota adopted by the Board of Trade.²²

These protests had no immediate effect: the quota remained at 45 percent.

Were theatres able to fulfill their obligations? The answer must include a brief account of how quota fulfillment is calculated. The 1948 Act provided that under conditions of great competition an exhibitor could apply for quota relief, and if granted, his theatre’s quota would be lowered from the statutory 45 percent to a figure the Board of Trade considered reasonable. During the 1948-1949 period, of the 4,182 operating theatres, close to 1,500 were granted reduced quotas ranging from 40 to 10 percent. When these reliefs were computed with those theatres which had to adhere to the 45 percent quota, the national average quota was only 37 percent for first feature films. This average quota was achieved.

In early 1949, discussions were resumed between the British film industry and the government for the 1949-1950 quota. Although the British Film Producers Association (BFPA) recommended that the quota remain at 45 percent, the Board of Trade ordered a 40 percent quota. The BFPA stated in its annual report that “this must be regarded as a temporary set-back to continued expansion in the production field.”²³ While the statutory quota was 40 percent, reliefs reduced it to an average quota of 33.6 percent. But even this mark could not be reached and British films managed to fill only 30.4 percent of average national screen time. Failure to achieve quota was caused primarily by a decrease in film production brought on by numerous unsuccessful ventures in the home market and by limited success in penetrating foreign markets.

In the following year, the 40 percent quota was reduced to a statutory 30 percent for first features, where it remains today. From 1956 the statutory quota has been continuously exceeded while the average quota (computed on the basis of reliefs) has been exceeded every year since 1951. It is interesting to note how the quotas have been achieved. Although British film production has remained fairly constant from year to year, quota fulfillment on the part of exhibitors has increased. This seemingly impossible situation has been brought about predominantly by the closing of theatres. As opposed to approximately 4,600 theatres operating at the end of 1950, there were less than 1,700 operating by 1966. With fewer theatres for British films to play in today, and given a relatively steady film supply over the years, each theatre is able to exhibit more British films than seventeen years ago.

The forty years of screen quota have worked successfully to assure the industry that “British” films will have the chance to be exhibited even in the face of competition from America. The experiment of the first quota from 1928 to 1938 demonstrated, according to one study, “that official support was not to be a temporary expedient but that henceforward, if production was to survive, then it could only do so as a protected industry.”²⁴ It can be said parenthetically that the screen quota is something of a paradox in Great Britain today due to the extensive American investment in British film production. In one sense, the quota guarantees American companies producing in Britain a reserved place on British screens!

What is happening to European protective measures in the 1960’s? Protection was needed in the past because of the great threat from the productive capacity of the American industry and the postwar shaki-ness of European production. However, American production has declined markedly, and, as far as Europeans are concerned, so has the threat. With fewer new American films available for export, European producers realize that their own competitive position has improved somewhat. Moreover, European industries have achieved some measure of economic stability. The import quota is virtually obsolete today because the production decline has eliminated the surplus of films which had often flooded the market. Table 2 shows that the production imbalance in the major countries has tended to level off.

TABLE 2

Feature Film Production in Selected Countries

In some respects, the movement toward trade liberalization in Europe has helped reduce barriers to film circulation. This is clearly the case in France where the old policy of protection has been replaced by one of cooperation. This new climate prompted a representative of an American distribution company to declare that today the import license is only “theoretical” and that almost all films can be brought into the country.

Neither should one overlook the liberal importation policies generated by the substantial American investment in French and Italian production. European authorities realize that American money flowing into local film production has helped to keep studios open, to provide jobs, and to supplement local sources of finance. This assistance to local production has been rewarded, at least in one way, through relaxation of trade barriers.

The screen quota is also becoming superfluous. British first features now occupy about 40 percent of screen time even though the statutory minimum is 30 percent. In Italy, exhibition of national films greatly surpasses the legal minimum of one hundred days each year. Authoritative people there believe the screen quota is not important now because local production can exceed it. The screen quota in France has been exceeded every year since 1955, and only narrowly missed in the two preceding years. By contrast, Spain, with a less developed film industry, not only has maintained its screen quota but increased it. By a government order in January, 1967, the quota was set at one day of Spanish films for every three days of dubbed foreign films. Previously, the ratio was one to four. Original version foreign films and those with subtitles are not covered by the decree.

The American policy on film importation also bears on liberalization in most European countries. Eric Johnston once declared:

Now, we feel that this international market is so important to us that if we tried restrictions in America we would simply get further restrictions on our films overseas. If that should occur, then our dilemma would be a very serious one.

So we feel that the best thing for us to do is to set an example, the right kind of example, and then urge our Government to try to get other countries to follow that example. In a sense we have been successful because when we started this policy back in 1946, the restrictions abroad against American motion pictures were infinitely greater than they are today.²⁵

American policy has been against the establishment of any official barriers to foreign films. There has never been an import quota or a screen quota in the United States.