Group mounts defense to stop Canada's incentives.

In what may prove the most significant effort to date to stem runaway film production, the Studio City based Film and Television Action Committee (FTAC) is preparing a petition for investigation into whether the subsidy program offered to American filmmakers in Canada violates U.S. trade laws.

If successful, the petition would give attorneys for the U.S. Trade Representative authority to demand that Canada either do away with the subsidies or face serious retribution under World Trade Organization agreements, which could include tariffs on Canadian goods coming into the United States.

FTAC, formed in December 1998 to address the issue of runaway film jobs, has hired a high-powered Washington, D.C. law firm specializing in international trade law to draft what is called a "301 petition" that will be presented to the office of the U.S. Trade Representative (USTR). The petition will specifically request an investigation into whether Canadian subsidies paid to American film makers who bring their projects across the border violate U.S. subsidy agreements under World Trade Organization policies established in 1995.

Many U.S. corporations have used the 301 petition process in the past for help with industry trade disputes with other countries. But this would mark the first one attacking Canadian film subsidies and, if successful, could be invoked again to go after other countries, such as Australia, where film incentives are also impacting entertainment industry jobs in the San Fernando Valley and nationwide.

"We firmly believe, and our lawyers believe, that the subsidies offered by Canada are in fact a direct violation of U.S. trade laws because they are taking jobs away from American workers," said FTAC's Chairman, Brent Swift.

Swift's organization represents roughly 180,000 workers nationwide, including many members of the country's top unions and workers who are employed in ancillary businesses in and around the Valley that have been affected by runaway production.

While confident the USTR will agree to launch an investigation into the subsidies, the group concedes that the process is very expensive. Swift said his group has raised about $75,000 so far, but needs another $150,000 just to cover the filing fees. He anticipates the case itself to cost about $1 million.

Once the petition is filed, it will be up to the USTR to determine whether it has merit. Should the USTR decide it does warrant their intervention, and attorneys say that's likely to be the case, the agency would then order Canada to stop the subsidies. If Canada fails to comply, the issue would be handed over to the WTO, and, if it Canada still doesn't comply, the U.S. Government could take legal or other trade actions.

According to Bill Finnell, an attorney with the law firm of Stewart and Stewart representing FTAC, if the WTO takes over and Canada resists orders to halt the subsidies, the U.S. government could then impose tariffs on Canadian goods as one potential punishment.

Finnell said the USTR will have 45 days after it receives the petition to launch an investigation and notify the Canadian government. If, after 60 days of consultations with Canada, no resolution has been reached, attorney's for the USTR would step up to represent the United States under the WTO's Dispute Settlement Understanding and prepare to file a lawsuit, which could take up to a year to be resolved.

Finnell said his firm is confident the investigation will take place because neither the USTR nor the WTO have supported subsidies in the past.

"This is an exciting case because of its uniqueness," Finnell said. "But we are very confident that it will be taken seriously and we will get the result we are after. In our view the subsidies do cause harm to a domestic industry and would fall under a classic violation of subsidy agreements settled back in 1995."

The FTAC's actions have captured the attention of the Valley Industry and Commerce Association (VICA), which has spent several years lobbying in both Sacramento and Washington, D.C. for support on measures that would offer incentives to filmmakers who keep their projects on American soil.

However, 2002 was not a good year for VICA: both the state and federal bills the group had hoped to see pushed through have been killed.

Although VICA is lobbying for reintroduction of the state bill this year, budget woes are likely to push it to the back burner once again, so the group is now considering throwing its support behind FTAC, including outreach and fundraising efforts.

"Our efforts to get incentive bills through at the state and federal levels have failed," said Greg Lippe, who heads VICA's runaway film committee. "At the state level, we got hit by budget cuts and in Washington there just wasn't a tax bill we could get our bill attached to. So we are looking into the possibility of supporting FTAC. We have not made a decision yet. It's a long, drawn out process, but we think it may be a solid alternative. We also know FTAC doesn't have a lot of resources to pay for the filing, and they are going to need some help with fundraising efforts."

Swift said he believed a VICA endorsement would be "advantageous" because the runaway issue impacts businesses of all types and sizes in the Valley. He also indicated that FTAC would be looking for support from the local chambers of commerce.

Meanwhile, the Film California First program, launched in 2001 by Gay. Gray Davis, which is supposed to provide incentives for filmmakers who keep their projects local, is also being threatened by budget cuts and could be eliminated altogether once a final budget is in place.

Davis' current proposal calls for cutting 2003 funding for the program down from $15 million to $7.9 million. But there is concern that once lawmakers each take their turns at whittling down their budgets in order to keep pet projects on the table, the program may be eliminated.

Lippe said VICA has already launched an aggressive outreach campaign to keep that from happening.

"That's the only program that's really worked to help keep filming here in California," Lippe said. "So we at VICA are supporting efforts and writing letters, asking our legislators to please not reduce or eliminate the benefits of the program."

The Los Angeles City Council also voted unanimously Jan. 28. to call on the legislature to keep funding for the program flowing.