The impact of cultural exceptions: audiovisual services trade and trade policy

ABSTRACT

Audiovisual services such as music and movies in digital formats have gained substantial importance over the last decade, while remaining one of the sectors with the lowest number of commitments by WTO members. Based on a novel data set, this article analyses the role of trade restrictions on audiovisual services in a gravity model. We find that countries with WTO commitments trade more audiovisual services, while both exports and imports are lower for countries which impose policies to curb inflows of foreign cultural services.

KEYWORDS:

• International trade
• audiovisual services
• trade barriers
• trade policy

JEL CLASSIFICATION:

• F14
• F15
• Z10

Acknowledgement

We are very thankful to Danielle Kedan, seminar participants at the CEPR conference Globalization, Investment and Services Trade 2012, University of Sassari, the European Workshop for Cultural Economics 2013, Ljubljana, and the European Economic Association Annual Meeting 2014, for insightful discussions and comments. We thank Benjamin Jakob and Julia Koerner for excellent research assistance. We are very thankful to Chung Joo for sharing his data on bilateral hyperlinks. The views expressed are those of the authors and do not necessarily reect those of the European Central Bank.

Notes

¹ In the United States, digital album sales accounted for 37% of all album purchases in 2012 compared to 5.5% in 2006 (Nielsen Company & Billboard’s 2012 Music Industry Report).

² Only 30 countries (out of 159 WTO member countries) had made commitments to free trade in audiovisual services by January 2009.

³ Our country sample is reported in Table 3. Out of this sample, WTO commitments were made by: Armenia, China, Georgia, Hong Kong, India, Israel, Japan, Korea, Malaysia, Mexico, New Zealand, Panama, Saudi Arabia, Singapore, Taiwan, Thailand and the US.

⁴ We obtain a negative coefficient on physical distance and consistently positive and significant coefficients for common language, population and GDP per capita (as e.g. in Hanson and Xiang 2009; Marvasti and Canterbery 2005). Moreover, the bilateral stock of migrants also has a positive and significant effect (at the 1% level) on audiovisual imports (in line with Hellmanzik and Schmitz 2015) reflecting migrants’ persistent cultural preferences across residences, resulting in cultural imports from their home countries.

⁵ These variables are indicative of a country’s state of modernity, openness and access to new technologies (both retrieved from the World Bank’s World Development Indicators).