Chapter 6 - Local Media Content
The Agreement - Annex I & II (Non-conforming measures)
6.1
Under the AUSFTA,
there are a series of Schedules contained within the Annexes that deal with
non-conforming measures. Annex I-14 & I-15 and Annex II-6 to 8 & II- 9
relate to the following sectors: broadcasting, broadcasting and audiovisual
services and advertising services. The obligations relevant for these sectors
are national treatment, most-favoured nation treatment (although Annex II-6 to
8 also includes market access, while II-9 obligation is only most-favoured
nation treatment) and performance rights. The measures relevant to those
sectors are: Broadcasting Services Act
1992 and Radiocommunications Act
1992.
6.2
The relationship
between 'obligations' and ' measures' as they apply to the above-mentioned
sectors are important because Annex I sets out, in accordance with Articles
11.13[510] and 10.6[511], a Party's existing measures that
are not subject to some or all of the obligations imposed by the following
Articles:
-
10.2 or 11.3
(National Treatment);
-
10.3 or 11.4
(Most-Favoured-Nation Treatment);
-
11.9 (Performance
Requirements); or
-
11.10 (Senior
Management and Boards of Directors).
6.3
Annex II sets
out, in accordance with Articles 10.6 and 11.13, the specific sectors,
sub-sectors or activities for which that Party may maintain existing, or adopt
new or more restrictive, measures that do not conform with obligations imposed
by the following Articles: 10.2 or 11.3; 10.3 or 11.4; 10.4; 10.5; 11.9; or
11.10. (Note that these Articles are
the same Articles listed above for Annex I.)
6.4
Under Annex I and
Annex II, a Party reserves the right to maintain existing non-conforming
measures[512] that are specifically
identified in its Schedule. One difference between these two annexes is that
Annex I cannot make the measures more restrictive whereas Annex II can; and it
can adopt new non-conforming measures as long as the measures have been
identified in the relevant schedule.
6.5
The DFAT background
paper detailing the outcomes as they apply to AUSFTA's local content provisions
for audiovisual explains the Annexes as follows:
Under the AUSFTA, Annex I can be used to reserve the right to
maintain existing non-conforming measures that are specifically identified in
that Annex. Annex II can be used to
identify certain sectors, sub-sectors or activities where a Party reserves the
right to maintain existing non-conforming measures, to make these measures more
restrictive, or to introduce new non-conforming measures.[513]
6.6
Importantly,
measures under Annex I are subject to a 'ratchet mechanism', which means if a
Party liberalises a measure, making it less inconsistent with the obligations
of the relevant Chapter, it cannot then became more restrictive. (i.e. the liberalised
measure becomes bound as part of the AUSFTA commitments). For example, if the existing level of the
mandated Australian television local content transmission quota were to be reduced,
say, from 55% down to 40%, it cannot be returned to the former level (55%) in
the future.
6.7
In Australia, programming content is regulated by compulsory
standards determined by the Australian Broadcasting Authority. Pay TV drama
channels are also regulated by a compulsory standard requiring expenditure on
minimum amounts of Australian drama programs. Furthermore, an additional
licence condition on some regional commercial television licensees specifies
that licensees broadcast minimum amounts of local content within their local
broadcast areas[514].
6.8
The Australian
Film Commission is the Australian government agency responsible for supporting
the development of film, television and interactive media projects and their
creators. It focuses its efforts on the independent production sector, namely
companies and individuals who are not affiliated with broadcasters or major
distribution and exhibition companies[515].
6.9
The Film Finance
Corporation Australia is the Government's primary agency for funding screen
production. It invests in a diverse range of feature films, adult television
drama, children's television drama and documentary. It aims to strengthen
cultural identity by providing opportunities for Australians to make and view
their own screen stories. It invests only in projects with high levels of
creative and technical contribution by Australians[516].
6.10
As stated in the
Committee's interim report the key issue for media and broadcasting is whether
the AUSFTA allows sufficient flexibility for the Australian government to
pursue cultural objectives through local content regulations now and in the
future.
6.11
Representatives
of Australia's film industry were passionate about the likely
long-term effects of the Agreement on the industry and the audiovisual market, in Australia:
What is in this agreement for the United
States of America? One might ask how much
bigger a share of the Australian audiovisual
market US companies want, or is this free trade agreement with Australia
more about setting a precedent for negotiating with the European Union? From
the start of this process of negotiation with the United States, our
organisations have sought to work in good faith with the government to ensure
that the outcome of a free trade agreement with the US is of overall benefit to
the nation but does not result in adverse effects on the audiovisual
sector, a position which we understood was shared by the government. We have
now had the opportunity to study the text of the agreement and we have found
that there is no economic benefit to the audiovisual
sector from this agreement. Australia
will not gain any greater access to the US
audiovisual market. The US
has no tariff or non-tariff barriers that could be removed by this agreement,
yet it will remain one of the most closed markets for audiovisual
product in the world. The size of its domestic market and the inward-looking
nature of its cultural production make it both entirely self-sufficient and the
world’s largest net exporter of audiovisual
products and services.
The agreement will severely constrain the ability of this and
future Australian governments to determine cultural policy, giving to the
government of the United States a much stronger role in the determination of
that policy. We will be moving from a position of being solely in charge of our
own cultural policy to one where we must consult with the largest cultural
producer in the world, and our dominant trade partner, on how we determine our
future.
The constraints on government policy mean that in the longer
term, over the next 10 to 15 years, the audiovisual
sector will be worse off than it is today. This agreement is not a blueprint
for growth. It is not a vision for an expanding audiovisual
sector encouraged by sensible and astute policy intervention. Instead, it
represents a declaration by Australia
of its declining aspirations for what it can achieve in the promotion of its
culture. This is the most disappointing aspect of the agreement. Much has been
made by the government of its success in retaining current Australian content
standards for commercial television, despite the fact that they cannot be
increased and will likely be rolled back in future years. However, as one reads
the text it is clear that much lower targets have been set for newer and
still-to-be-developed media.[517]
6.12
The Minister for
Trade, however, presented a very different view of the provisions of the
Agreement in this area:
We knew that the US
would push us very strongly in relation to the audio-visual
sector, as this is an industry of great economic importance and political clout
in the US.
The Australian Government, however, made it clear from the
outset of negotiations that any outcome in this area must protect Australian
culture.
The end result on audiovisual
was, in fact, excellent. It:
-
preserves
all existing local content requirements on free-to-air and Pay TV;
-
allows
the Government flexibility to significantly increase local content on
free-to-air TV if it moves to digital multichannelling;
-
allows
the Government to increase the existing 10% expenditure quota on drama channels
on Pay TV up to 20% if necessary, and to introduce similar expenditure quotas
of up to 10% on four additional program formats (the arts, children's
programming, documentaries, and educational programming);
-
allows
the Government to intervene in the future on interactive media platforms to
ensure Australian content is readily available on those platforms.
The bottom line is these commitments give Australia sufficient
flexibility to not only maintain the current amounts of local content available
to Australian audiences as new media services
become more important, but to actually increase these amounts.[518]
Adequacy of Levels of Local Content
6.13
The government
has stated consistently, during this inquiry and in published DFAT advice, that
the outcome of the negotiations on audiovisual and broadcasting services
preserves Australia's existing local content requirements and other measures
and ensures Australia's right to intervene in response to new media
developments, subject to a number of commitments on the degree or level of any
new or additional local content requirements.
6.14
Although the
Australian industry seems satisfied with the requirements for local content on
free-to-air television, industry witnesses were concerned that the Agreement
does not allow for any increase in quotas. They are also concerned that these
levels are likely to be rolled back in the future.[519]
6.15
Any diminution of
local content would presumably result from the 'ratchetting' provision applying
to cross-border trade in services that is contained in Article 10.6.1(c) of the Agreement. As explained earlier in this
chapter, that provision would prevent an Australian government, if it reduced
the transmission quota for free-to-air television from its current level of 55
percent, from later increasing the quota back up again from the new, lower
level.
6.16
Several
submissions and witnesses argued that the agreed quotas for new or
still-to-be-developed media are too low. Each of these areas is discussed
below. The general tenor of the criticism was conveyed to the Committee by the Media Entertainment and Arts Alliance
(MEAA):
In subscription television the market share target will be
frozen at 10 percent, or possibly 20 percent, for Australian drama. In new
media no targets at all have been set, but the strong implication of the
agreement language is that they will be small and will have to meet rigorous
tests over which the United States
will have a large say.[520]
Sub-quotas
6.17
In its interim
report the Committee stated that it had heard conflicting views about the
government's ability to change existing sub-quotas or institute new sub-quota
requirements for specific program types within the 55 percent content
requirement.
6.18
MEAA considers
that the wording of Article 10.6.1(c)
'would not allow for the introduction of additional sub-quotas nor for an increase
in transmission hours for existing sub-quotas'. It suggested that if the Annex
I-14 reservations were made Annex II reservations, this would remove the impact
of the 'ratchetting' provisions on the sub-quotas.[521]
6.19
The AUSFTA
Backgrounder published by the DFAT states that, 'Subquotas may also be applied
within the 55% programming quota'. The Committee notes that it is silent on how
those subquotas may be applied, and therefore silent on whether they may be
increased.
6.20
In evidence that
tended to dispel concerns of the kind raised here by the MEAA, the Australian
Broadcasting Authority (ABA) informed the Committee that it had been advised
that sub-quotas are not caught within the 'ratchetting' rule and that they can
be altered and possibly increased provided that overall the 55 percent cap is
adhered to.[522]
6.21
In the
Committee's view, the matter will probably only be clarified in the event that
a dispute arises in this area. The government's view, however, is very clear, and
DFAT has published the following statement in relation to the final outcome on
audiovisual:
Ensures that Australia
maintains sufficient freedom to introduce new or additional local content
requirements in relation to:
-
Possible digital multichannelling on free-to-air
commercial TV.
-
Interactive audio and/or video services.
This outcome was a carefully negotiated one. Its key aspect was the maintenance of Australia’s
right to intervene in response to new media developments, subject to a number
of commitments on the degree or level of any new or additional local content
requirements.[523]
Lower Quotas
6.22
As indicated
earlier, the industry has expressed concerns that the standstill agreement on
local content, allied with the 'ratchetting' provision, will result in lower
local content requirements. The industry argues that while the quotas are now
at their highest levels, they have been significantly lower in the past when
the networks were not making profits. If the networks were again to become
unprofitable, there would be pressure to lower their costs. Because local
productions are expensive compared with the imported product, there would be an
incentive to request lower quotas for local content.
6.23
Moreover, the
industry argues that as subscription television gains market share, the
discrepancy between the 10 percent expenditure quota for subscription
television (possibly 20 percent for drama) and the 55 percent transmission
quota also will lead the networks to pressure the regulator to lower the
free-to-air quota.
6.24
The difficulty for
the industry is that, once lowered, the 'ratchetting' provision will prevent
any later increase in local content quotas. In the words of Create Australia:
In our accepting this constraint upon our freedom to act
the USA has
gained from Australia
not just agreement to 'stand still', but also to be the basis upon which Australia
can be pressured into moving towards progressive liberalisation.[524]
Subscription Television
6.25
Under Annex II
Australia is allowed to impose a local content requirement of 10 percent of a
provider's expenditure on the arts, children's, documentary, drama and
educational services. Provision is made for an increase in the drama quota to
20 percent of expenditure if the Australian government finds 'that the
expenditure requirement for the production of drama is insufficient to meet its
stated goal for such expenditure'. The Annex further states that, 'Such a
finding shall be made through a transparent process that includes consultations
with any affected parties including the United States. Any increase imposed shall be non-discriminatory and
no more burdensome than necessary'.
6.26
The industry's
concerns with these provisions, as expressed by MEAA, are that the quotas are
too low, essentially token,[525] and
that consultation with the United States is 'completely inappropriate'.[526]
6.27
It is suggested
that the expenditure quota of 10 percent, especially as it applies to drama,
would result in only about three and a half percent of actual programming. Even
an increase to 20 percent would translate only into about a 7 percent
transmission quota.[527] These figures
compare unfavourably with the requirements for local content on free-to-air
services. MEAA stated that the quotas also compare unfavourably with those
imposed in overseas countries. Canada, for example, is said to have a 60 percent content
quota on some channels.[528]
6.28
DFAT argues,
however, that (a) expenditure quotas relate to new programming, which
translates into new money for the industry, and that (b) programming quotas
would allow channels to schedule reruns to meet the quotas. The department
informed the Joint Committee on Treaties that:
That is why we think what we have here is a very good outcome.[529]
6.29
It can be argued
that, because there will be many subscription channels, a 10 percent
expenditure quota imposed on a large number of them would add up to a
significant amount of money[530] for
programming and production, and hence result in more work for the local
industries. MEAA asserted, however, that because each subscription channel
spends relatively little on programming, the local industry would have the
capacity to meet not only the agreed quotas, but also higher quotas. MEAA
stated that:
Essentially we believe that the argument that says we cannot
make it [product] because there would be too many channels is simply not true. [531]
6.30
As stated above,
the industry is also concerned that the agreement provides that the drama quota
may be increased only after consultation with the United States. MEAA informed the Committee that the United States would oppose any increase in quota above 10 percent,
and submitted a statement made by the Motion Picture Association of America to
support this assertion.[532] MEAA
recommended that the words 'that includes consultations with any affected
parties including the United States' and the sentence, 'Any increase imposed shall be
non-discriminatory and no more burdensome than necessary' should be deleted
from the Agreement.[533]
6.31
The Select
Committee notes, however, that it is standard practice in trade agreements to
consult with affected parties where changes are sought, and also to proceed on
the basis of measures being 'non-discriminatory and no more burdensome than
usual'.
Multichannelling
6.32
While a
reservation has been negotiated for local content for multi- channelled
free-to-air commercial broadcasting services, the future of this technology is uncertain
and it is not clear whether the reservation will have any beneficial effects
for the Australian industry. One witness informed the Committee that:
We cannot see any example around the world of a successful
free-to-air multichannelling operation. The BBC's Freeview operation is
supported by very significant funding with the licence fee that the BBC has. In
Australia we
saw that the ABC's attempt at multichannelling had to be shut down because they
could not afford it.[534]
6.33
According to MEAA
the most likely use of multichannelling will be the provision of subscription
channels[535] and the low quotas
relating to that medium would apply, rather than the more generous quotas that
relate to free-to-air services.
6.34
The industry has
two other concerns about the agreement on free-to-air multichannelling. First,
the industry claimed that it had not been consulted actively and that the Agreement
in that regard had been unexpected.[536]
Second, it is not clear what the effects of the agreed quotas will be, given
uncertainties about how the media might develop.
6.35
MEAA stated that
if the technology were to develop so that 24 free-to-air channels became
available, the Agreement would require that only three of those channels should
carry any Australian content. One witness stated that, 'If that were to emerge,
we would be really concerned'.[537] The
Committee notes, however, that the Agreement in fact specifies the 55%
transmission quota for no more than 2 channels (or 20%)- whichever is the
greater) for any individual broadcaster.
This seems to imply that if there were 3 multichannelled broadcasters, each
with 8 channels, then two channels per broadcaster - that is, six channels-
would be subject to 55% local content rules
6.36
MEAA is also
concerned about sub-quotas for multichannelled television. It has suggested,
consistent with its concerns about quotas for other free-to-air television
broadcasting, that the words 'in a manner consistent with existing standards'
in the reservation would prevent the introduction of new sub-quotas or changes
to existing sub-quotas. It has proposed that the words be deleted from Annex
II-6(a).
Advertising
6.37
AUSFTA provides,
in Annex I-14, that transmission quotas for local content imposed on
advertising that is broadcast by free-to-air commercial television broadcasting
services shall not exceed 80 percent of advertising time transmitted annually
between 6.00
am and midnight. Because the reservation is contained in Annex I, the
'ratchetting' provision applies if the quota requirement is lowered.
6.38
There is no
agreed quota for advertising on any other current or future broadcasting
medium. The ABA submitted that networks seldom exceed half of the 20
percent of imported product permitted under the Australian Content in
Advertising Standard which came into effect in 1992. This
suggests that local advertising enjoys a level of natural advantage against
imported product.
Interactive audio and/or video services
6.39
MEAA is concerned
that the term 'interactive audio and/or video services' may be too restrictive
to enable future governments to regulate for Australian content on all future
technologies. MEAA stated that it:
- notes that the use of
'interactive audio and/or interactive video services' remains unchanged from
the draft text to the final text. It is of real concern that if, as previously
advised, this terminology was intended to cover new media-currently known and
yet to be devised- that it was not possible for certainty to be achieved by
the inclusion of a definition.[538]
6.40
MEAA has proposed
that the words of the reservation in Annex
II-7(f) be changed to 'interactive audio and audiovisual services and all
other audio and audiovisual services not yet regulated now known and yet to be
devised'.[539]
6.41
DFAT informed the
Committee that the wording of the reservation had resulted from close dialogue
with the industry during the negotiations and that the wording had been used
deliberately to leave open what type of mechanism would be used if governments
were to choose to use them.[540] DFAT
also stated that if an audiovisual service is not interactive, if it is
broadcast or if it is pay television, it is covered by other reservations under
the agreement.[541]
6.42
The evidence is
that both the industry and the negotiators were intent on ensuring that
Australian governments would continue to be able to regulate for Australian
programming content, whatever media might be developed. The issue is whether
the wording of the reservation in Annex
II-7(f) will achieve that end. The latest advice from DFAT on these matters
was presented at the least hearing of the inquiry.
The local content arrangements we have at the moment are
all based on forms of media where the viewer really has no control over what is
broadcast. The whole point with free-to-air TV as we have historically known
it, or with radio, is that someone else has the role of programming it and the
audience has very little role in controlling it. So we have particular types of
mechanisms. The whole point of that particular category [interactive audio
and/or interactive video] was to recognise that, yes, the whole environment is
changing. We do not even know what type of local content requirements we would
use on interactive media. The whole point of the way in which that part of our
reservation is worded is that we have deliberately left open what type of
mechanisms we would use if governments were to choose to use them.[542]
Public Broadcasting
6.43
The government
has consistently reiterated its assurances that nothing in the Agreement will
affect in any way the government’s right to support the cultural sector through
the allocation of public funding. Nor
will it affect public broadcasting via the ABC or SBS, including the amount of
Australian programming on their channels.
6.44
The Australian
Broadcasting Corporation (ABC) submitted that while the Agreement apparently is
intended to exclude public broadcasters, the text may not have that effect.[543]
The ABC has drawn attention to the definition of 'a service supplied in
the exercise of governmental authority' which is, 'any service which is
supplied neither on a commercial basis, nor in competition with one or more
service suppliers'.
6.45
The Corporation
informed the Committee that while it does not compete with the commercial broadcasters
for advertising contracts, it is in competition with them for both audiences
and programs, and that a High Court judgement had found that its position is
not materially different from a commercial broadcaster with whom it competes.[544]
6.46
The ABC suggests
that the matter could be resolved if the definition of 'services supplied-'
were amended to clarify beyond doubt that public service broadcasters are
exempt from the operations of Chapter 10. If the ABC's operations could be
caught under the operations of Chapter 10, then so would those of the SBS which
carries advertisements. MEAA has also noted that the ABC operates retail
outlets, music and book publishing arms, merchandising and video and DVD sales.
MEAA suggests that an additional clause should be added to Annex II-6 to
specifically exempt national and community broadcasters.[545]
DFAT has stated that because nothing in the Agreement affects the ability of either Party to
provide public services, and subsidies and grants are explicitly excluded from
the scope of the Chapter, reservations are not required in Australia's
schedules in relation to publicly provided cultural activities, such as the
public broadcasters (ABC and SBS), public libraries or archives, or in relation
to Government funding available to Australian artists, writers and performers.