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Korea: US links big investment treaty to more US movies

Asia Times, Hong Kong

5 August 2004

US links big investment treaty to more US movies

SEOUL - The economic benefit of reducing South Korea’s cinema screen quota system - as a condition for signing a big bilateral investment treaty with the United States - has been questioned by experts opposing the further opening of the local film market.

Some say the US is just playing hardball, other’s call it bulying.

Other experts quoted Wednesday, however, support reducing the quota system, saying the US demand to open South Korea’s film market to Hollywood, and thus signing the treaty that could bring in $1 billion to the financially strained nation. Korea relies heavily on exports, consumer buying is stagnant and it desperately needs more investment.

South Korea maintains a quota system that compels local cinemas to fill 40% of their programs with domestically made movies in order to protect the local industry from Hollywood.

The US is demanding that the quota be halved and eventually scrapped, and ties this to the signing of a bilateral investment treaty. South Korea needs US investment to reinvigorate its stagnant economy.

An unofficial study shows that a bilateral treaty with Washington would bring in US$1 billion in fresh investment.

The business industry is campaigning for a gradual abolition of the quota system, while critics argue that the domestic film industry is still weak and needs protection.

In an article in the August issue of Country Economy, a policy research paper published by the state-run Korea Development Institute, scholars and a renowned actor argued that the positive effect of liberalizing and opening up the country’s movie market may not be as big as advertised.

"Movies are becoming a means to create national wealth and should be protected in the same manner as other manufacturing and service sectors," Won Yong-jin, a communications and media professor at Seoul’s Sogang University, said in the article.

Won said the screen quota system was not just a means to protect South Korean culture but should be seen as a tool to nurture a budding cash-cow industry.

He insisted that just as the Office of the US Trade Representative reflects the position of US filmmakers, South Korea should think of its own interests first.

Ahn Sung-ki, a well-known film star, said that no other country in the 30-member Organization for Economic Cooperation and Development (OECD), of which South Korea is a member, has established a bilateral investment treaty (BIT) with the United States.

"If other countries have not signed BITs, it shows that this agreement does not necessarily translate into benefits," said Ahn who represents the actors’ association opposing the reduction and abolition of the quota system.

He also pointed out that US investment continues to flow into other OECD countries, although they have no bilateral investment treaty signed with Washington.

Film industry workers also defend the quota system, saying that it helps maintain and encourage the expertise and entrepreneurial spirit of actors and production companies so that they can make more blockbusters in the future.

"Korean films have around a 40% market share now because the screen quota allows a means to nurture talent and entice investment," said Kim Mi-hyun, a local film critic and industry analyst.

Opponents of the quota system say that South Korea can reap more economic benefits from an investment treaty with the United States.

"It is time for the government to take a firm stance on this issue and explain the benefits that can be earned," said Ro Jae-bong, a researcher at the Korea Institute for International Economic Policy.

Sangmyung University professor Cho Hee-moon said that the screen quota system has helped build up the country’s film industry, but pointed out that the gradual liberalization that began in 1988 also has helped raise market competitiveness.

The art college professor said that it was imperative for the movie industry to expand foreign cooperation in order to move up to the next level.

(Asia Pulse/Yonhap)