111. Memorandum of Conversation1

SUBJECT

  • Italian Film Law

PARTICIPANTS

  • Mr. William H. Fineshriber, Jr., MPEAA
  • Mr. Leo Hochstetter, MPEAA
  • Mr. G. Griffith Johnson
  • The Honorable G. Frederick Reinhardt, American Ambassador to Italy
  • Mr. David R. Thomson, E/OT/GCP, Department of State

Mr. Fineshriber and Mr. Hochstetter emphasized that Italy today is the most important non-English-speaking market for U.S. films. They briefly reviewed the post-World War II history of access to this market. Tight restrictions have gradually been liberalized, and the Italian market is now substantially open to U.S. competition, as shown by the fact that American films earn over 50% of total gross receipts in Italy. Liberalization has been a function of greatly increased collaboration between the United States and Italian film industries, particularly with respect to production and financing.

Mr. Fineshriber and Mr. Hochstetter noted the strong political factors which had influenced the motion picture bill as recently reported out of the Parliamentary Commission. According to their information, the bill will probably come up for action in the Chamber of Deputies by late May.

The MPEAA’s over-all assessment of the bill was that it provided for entirely too much government regulation, and that it contained too many elements of discrimination against foreign films. They noted, however, that some of its undesirable features would have little significance unless enforced by the Italian authorities in a restrictive way. The manner of future implementation might depend in part upon U.S. attitudes toward the new law. I.e. if the United States should make a big issue of the law, the Italian film authorities could be expected to react by enforcing it strictly, instead of by relaxing its controls where this is left open to their discretion.

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Specific Unfavorable Features of the Bill

Rebates on admission tax for showing national films (Article 6 and other articles of bill). Ambassador Reinhardt assured the group that he was familiar with the manner in which this rebate has been in violation of Italy’s international trade commitments since 1949 (see CA-5560, 11/24/64).2 It was noted that the new rebate formula was much more complex than the provision which had been in effect since 1949, and that one could not say offhand whether the general incidence of discrimination would be higher or lower. However, one change would clearly sharpen the extent of discrimination; namely, the fact that films from other EEC countries would henceforth be eligible for the rebates.

Copies of films for National Film Library (Article 23). The MPEAA representatives expressed some concern about the new requirement to provide free of charge a copy of each new feature film for possible “educational and cultural” showings after 5 years. They recognized that the requirement apparently did not discriminate between foreign and domestic films, and that it presumably did not violate international commitments by Italy. Nevertheless, it did represent a new form of government intervention.

Government intervention in terms of film rental contracts (Article 41). The law permits the Ministry of Tourism and Entertainment to fix the terms of private contracts, e.g., between distributors and exhibitors, if the interested private parties do not reach agreement. This was not a new feature of Italian legislation on films, the MPEAA representatives noted, but it left open a wide field for possible abuse by the Italian authorities.

Cinema screen quota (Article 5). In the latest version of the bill, Mr. Hochstetter reported, the screen quota reserving time for films which qualify as national has been raised from the traditional 25 days per quarter (about 28%) to 30 days per quarter (about 33%). Under current market conditions, he said, the increased quota would probably not hurt American exports any more than the previous quota, since films currently qualifying as domestic were able to command about 45% of the Italian market. Mr. Hochstetter had some impression that this increase would be inconsistent with Italy’s commitments under the GATT. Mr. Thomson explained that this was not so, since this quota had never been bound in trade negotiations.

Television screen quota (new Article 56). Another restrictive new feature affecting television had been added to the bill, Mr. Fineshriber reported. The bill would require that, of screen time devoted to the broadcast [Page 233]of feature films (and this is normally a very small fraction of total screen time), at least 50% must be reserved for national films. Mr. Thomson commented that this provision, assuming its enactment, would be a curious new departure, in that countries with state television monopolies usually preferred to conceal trade-restrictive practices in this field and to hide behind the fact of operation by the state.

A brief overview ensued of the compatibility of these provisions with Italy’s international trade commitments. As the MPEAA representatives were aware, the American Embassy in Rome has already taken the position in discussions with Italian officials, by instruction (CA-5560), that any rebate of this type was incompatible with the GATT (Article III), the U.S.-Italian FCN Treaty (Article XVI), and with the OECD Code on Current Invisibles.

As for the proposed increase in the cinema screen quota, it was noted that this action would be compatible with what the EEC Commission had recently prescribed in its Second Directive on films (Article 5—see Brussels ECBUS A-722, 4/15/65).3 Assuming that the new law would go into effect at an early date, the Italians would thus be complying with this directive in advance of the required date (December 31, 1966), by providing national treatment for the films of other EEC countries under the screen quota (Article 18 of the draft Italian law) and by using their “option” to make a corresponding increase in the height of the quota. It was noted that the GATT did not provide a basis for protesting such an action, although the United States had already presented to the EEC Commission arguments against the desirability of such increases, particularly on a “proportional” basis.

With regard to the reported new TV screen quota, and possibly also to the increase in the cinema screen quota, Mr. Thomson noted that Italy had undertaken a standstill commitment with respect to restrictions affecting printed films, in the OECD Code of Liberalization of Current Invisible Operations. The United States, he noted, could argue that both measures were inconsistent with this commitment. However, Mr. Thomson added, there was still no agreement in the OECD as to whether the standstill covered screen quotas.

MPEAA Position

In summarizing their views about the bill, the MPEAA representatives made it clear that they were concerned about many of its features, but that they were also highly concerned about safeguarding their companies’ high volume of business in Italy and anxious to avoid aggravating the situation unnecessarily.

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In view of the political history of the bill, and regardless of Italy’s international commitments, the MPEAA regarded it as unrealistic to expect to achieve any change in the bill as reported out by the Parliamentary Commission which would be in a more liberal direction.

They felt, nevertheless, that it would be desirable at this point for the Ambassador to make a high-level approach on the matter, preferably to Corona, the Minister of Tourism and Entertainment. The main idea they would like to see put across would be on the following lines: the Italians would be jeopardizing future cooperative relations in the film field if they should try to go any further along the path of official discrimination against foreign films. The U.S. film industry could reluctantly learn to live with the provisions of the bill as presently drafted, but the Italians could expect “real trouble” from the American side if they should allow this discrimination to go even a single step further, or if—in areas where the authorities have any discretion—they should implement the law in a restrictive manner. The MPEAA representatives also made it clear that they wanted the U.S. position on the legal issues involved to be put “on the record.”

Ambassador Reinhardt said he intended to make such a démarche, and that he would consult further with Mr. Hochstetter after they had both returned to Rome. The Ambassador said he had in mind a three-stage presentation:

(a)
With regard to the legal issues raised by international agreements, he would make sure that the Italians understood that the U.S. Government does not condone Italy’s departures from its commitments.
(b)
He would ask Corona to give him a frank statement of Italian intentions with respect to U.S. film interests. E.g., under what circumstances would the Italians invoke the discretionary measures? Do they still place any value on future cooperative relationships between Italy and the United States in the field of motion pictures? Have they decided to revert to general policy of protectionism in this area? Etc.
(c)
He would bespeak the cooperation of high Italian officials in preventing matters from getting any worse.

In connection with the last part of this proposed démarche, the Ambassador indicated that he would take into consideration the entire scope of our trade and other interests. He said that, if specific trade injury was being felt, he might make use of any figures which the MPEAA could supply him. However, he had found in dealing with certain other trade issues involving Italy that in some cases you simply could not estimate accurately the extent of such injury. Mr. Fineshriber said that the MPEAA might respond to a previous suggestion from Mr. Thomson that it make a rough estimate of the actual effect upon remittances from Italy to the U.S., attributable to (a) the previous 20% rebate, and (b) the proposed more complex rebate. However, he indicated it would not be possible to say anything definite in [Page 235]this regard, particularly under present favorable market conditions in Italy.

Future possibilities were noted for dealing with this matter in international forums, such as the OECD, in addition to bilateral representations to the Italian authorities. Ambassador Reinhardt felt that, for the time being, it would be advisable to confine U.S. representations to the bilateral channel and to reserve any U.S. actions in international organizations until such time as circumstances appear to call for them.

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 5 IT. Limited Official Use. Drafted by Thomson on April 29. The conversation was held at the Motion Picture Association of America headquarters.
  2. Not printed. (Ibid., INCO MOTION PICTURES-IT)
  3. Not printed. (Ibid., ECIN 3 EEC)