- If President Donald Trump wants to advance his “America First” agenda, he should tune into the Academy Awards on March 4.
- Movies and music are cultural exports that help to narrow America’s trade deficits.
- These cultural and artistic services are part of the wider “creative economy,” which have generated trade surpluses in recent years.
President Donald Trump is trying to make good on his “America First” agenda by instituting steel tariffs, a move which may lead to a global trade war.
But if he wants a smarter way to advance his policies, he should tune into the Academy Awards on March 4. He will see actors and directors who represent an industry that employs 2 million people and generates $121 billion in income.
Movies and music are cultural exports that help to narrow America’s trade deficits. These cultural and artistic services are part of the wider “creative economy,” which generated trade surpluses of $11 billion in 2011 and $26 billion in 2014, (the most recent data available) according to the National Endowment for the Arts.
Among developed countries, the United States is the leader in cultural exports with 8 percent market share, with Germany second at 6 percent. In 2012, trade in U.S. arts and cultural goods and services yielded a trade surplus with China, which has become America’s largest export market for these items.
“Trump has made a sport of criticizing the likes of Meryl Streep, Whoopi Goldberg, Samuel L. Jackson, Alec Baldwin, and Arnold Schwarzenegger.”
During his presidential campaign, Trump lambasted America’s trade deficits with other countries and avowed to correct, or at least improve, these imbalances. For example, he decried the U.S-Korea Free Trade Agreement as a “job killer,” and in June 2017, told South Korea’s president “the United States has trade deficits with many, many countries, and we cannot allow that to continue.”
His administration is preparing to vacate the agreement, causing concern among South Korean business leaders. Despite his attempts to narrow the overall trade deficit, it’s actually on track to increase on the back of strong U.S. demand for imports.
Hollywood’s trade numbers present an opportunity for Trump, who has frequently cited China as taking advantage of America through trade. To his credit, Trump has sought better terms for Hollywood films abroad.
At a bilateral summit in April, he reached an agreement with Chinese President Xi Jinping to boost the number of American movies that are released in China from thirty-eight to a number to determined later.
As part of a 2012 agreement, China limited the number of US film imports so that Chinese movies could thrive at the box office. All told, Chinese moviegoers generated $1.8 billion in revenue for twenty well-known Hollywood films in 2016. Of course, Hollywood studios are keen to gain a bigger share of the Chinese box office market, which is on track to be the world’s largest by 2020.
Make an offer China can’t refuse
But this can only happen if Trump makes China an offer it can’t refuse. He should seek to raise the cap on US films in China to one hundred. If twenty films generated around $2 billion in revenue, then one hundred might create $10 billion, an increase of 400 percent. The Chinese would likely balk at such an agreement, but they should be reminded that they’ve had almost unfettered access to America’s film business.
For example Dalian Wanda, a Chinese firm, owns AMC Theatres, the largest cinema operator in the U.S. If the Chinese don’t go along with Trump’s offer, the US could threaten to slow or stop future Chinese business dealings in the American film business.
Trump might be able to pressure Chinese officials, because American studios lose significant amounts of revenue because of piracy and bootlegging in China. By agreeing to raise the cap, China would enable Hollywood studios to recover some of their losses. Moreover, China would give Trump a symbolic win and ingratiate him to make concessions in other areas.
Because of Hollywood’s high visibility, such a deal with benefit President Trump’s America First economic agenda by helping to narrow the trade deficit. He would also appear magnanimous, and he could cite these concrete actions he has taken to help a vibrant industry when he is attacked by naysayers in Hollywood.
Instead, Trump has made a sport of criticizing the likes of Meryl Streep, Whoopi Goldberg, Samuel L. Jackson, Alec Baldwin, and Arnold Schwarzenegger. Even though his chiding of these individuals plays well among his base, he shouldn’t be so swift in dismissing Hollywood and its leading lights. Because in order for Trump to deliver on his “America First” economic agenda for his supporters, he needs the help of the very people and industry that he continues to
[This article was also published in CNBC]
Commentary by Kabir Sehgal, a Multi-Grammy Award winning record producer and bestselling author. He is a former vice president at JPMorgan Chase. Follow him on Twitter @kabirsehgal
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