You may recall an effort led by Daniel Lay (VFX Soldier) to hire a law firm to try and enact countervailing duties on visual effects shots being done in subsidized areas. While duties are routinely applied to physical goods, there was very little in the law concerning electronic goods. The thought was: Visual effects are done in subsidized areas then electronically transmitted to the US for assembly into the show and color correction. If these were physical goods there would likely be duties applied as the market was distorted by the subsidies, harming US companies.

The case would require a high powered law firm and significant funds to proceed. The law firm thought there was a good case but with the lack of a trade association for Visual Effects, the fund raising efforts concentrated on artists, who did not provide enough funding and the effort was unsustainable.

We have heard over the years from artists who were forced to move to cities around the world to continue their careers – moving to subsidized areas that the studios demand vfx facilities locate in. One of our favorite stories is one where an artist was forced to move to Vancouver, only to discover the machine they were working on was located in Culver City! Clearly the laws concerning trade were written before such things were a possibility. Subsidies are so pervasive that in the current film Wonder Woman there are credits for four countries who provided tax incentives.

It seems the issue has now attracted the attention of the Office of US Trade Representative and the following has been released:

The Office of the United States Trade Representative (USTR) seeks comments on digital trade issues and potential remedies for NAFTA negotiation.

Statement from Daniel Lay, Co-Founder of the Association of Digital Artists, Professionals, and Technicians

In 2013 Daniel Lay, the writer behind the industry blog VFX Soldier started ADAPT to help fund and direct a trade effort to curtail the use of subsidies in the Visual Effects industry. The hope was to hire a DC-based law firm specializing in international trade to help prosecute a case in international trade court. The goal was to levy anti-subsidy duties against countries like Canada who offered massive government subsidies to US studios like Disney and Warner Bros. that can cover up to 60% of labor costs for visual effects work on many blockbuster films. This has led to many US VFX professionals to lose their jobs and many VFX facilities to go out of business or move to Canada. Ultimately ADAPT was unable to raise the funds to prosecute the case as many supporters simply could not afford to donate after losing their jobs.

Support for trade action by representatives

While ADAPT could not continue to prosecute the case, the damage to the US VFX industry has continued to be substantial with a recent report by Film LA showing a 50% drop in VFX productions in California over the last four years. At the time, ADAPT’s trade effort quickly gained media attention and successfully gained the support of the California legislature:

It is the intent of the Legislature to urge the United States Department of Commerce and the International Trade Commission to investigate aggressively and impose sanctions, including tariffs, on productions and elements of production, including visual effects, virtual photography, and music scoring, that are digitally distributed and electronically transmitted, in its definition of “articles” protected by the Tariff Act, to combat unfair and illegal competition caused by international subsidies to these articles of commerce, and to urge the United States Congress to take other appropriate actions.

Even the Motion Picture Association of America, one of the most powerful lobbying groups in the world reluctantly admitted the validity of ADAPT’s case:

“The VFX guys have been smart frankly about turning this around in [on] us”

ADAPT’s effort was encouraged by supporters who responded to statements by our current and previous Presidents:

President Trump:
“I’m going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using, to harm you, the American worker.”

President Obama:
“I will not stand by when our competitors don’t play by the rules… It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized.”

Commerce Secretary Wilbur Ross (on why NAFTA has become obsolete):
“The economies of the U.S., Mexico and Canada are quite different from what they were when NAFTA was started. [NAFTA] doesn’t address digital, doesn’t really address services very much, had very weak enforcement provisions, had a whole lot of things that you would never put in a present agreement. “

U.S. Trade Representative Robert Lighthizer:
Renegotiation of NAFTA should “add a chapter on digital trade”

Call to action and instruction

A request has been made by the USTR to report evidence, either by way of personal accounts, studies, or articles, that issues have arisen distorting digital trade markets including subsidies in visual effects, and caused the loss of jobs in the U.S. They have asked that people use a submission form posted in response to The United States’ intent to “commence negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement (NAFTA).”

From the Federal Register:

In particular, the Trade Policy Staff Committee (TPSC) invites comments addressed to:
General and product-specific negotiating objectives for Canada and Mexico in the context of a NAFTA modernization.

Treatment of specific goods, including comments on:

• Product-specific import or export interests or barriers
• Experience with particular measures that should be addressed in negotiations
• Relevant digital trade issues that should be addressed in the negotiations
• Relevant trade-related intellectual property rights issues that should be addressed  in the negotiations
• Relevant trade remedy issues that should be addressed in the negotiations”

The form allows anonymous submissions and attachments, and can be found here:

The due date for comments is June 12, 2017.

They have requested that links to online content not be used if possible; rather that we copy/paste the text of any linked content with appropriate sources listed. For any large blocks of text over the 5000 word max or images/graphs, an attached file such as PDFs, or jpg screen captures of online content, etc, will suffice.

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