Film incentives are trade protectionism

If we follow Australia down the road of trade protectionism for movies, then we all lose out.  What do I mean?

Well the incentives for trade protectionism is a prisoner’s dilemma.

As Peter Jackson says, if Australia starts subsidising movies we need to do the same or we will miss out on productions – as a result our best response to their protectionism is more protectionism.  Furthermore, if we start subsidising and Australia doesn’t then we get a relatively larger share of the movie industry – assume that this occurs to the point where the tax revenue from the movies exceeds the cost of the subsidies.  In this case our best response is to ALWAYS subsidise.

However, there are two issues.  Firstly it is in Australia’s interest to subsidise (it is also their “dominant strategy”).  And secondly, the decision to subsidise pays off because it hurts Australia.  In the end both countries end up subsidising movies, and both sets of taxpayers end up worse off than in the case when neither country subsidises.

This is the issue, not only with the subsidies on movies, but on all trade protectionism.  That is why we need international co-operation to avoid this type of beggar thy neighbour behaviour.

  • Yes it is not a very attractive situation to anyone but the movie producers. There does need to be some types of regulations preventing this back and forth competition.

  • steve

    Normally I would agree not to subsidise industries, that both countries are worse off. However there are additional benefits to films being produced here. Such as tourism. No doubt NZ has seen a significant boost because of lord of the rings. Because film makers don’t recieve the benefit of additional tourism, it is in the tourism industry’s interest to subsidise film makers. In this case it is facilitated by government.

  • I don’t see any upside to films being made here if the films had to be subsidized to do it. How about the production companies cut back like the rest of the world has? We have celebrities putting in their two cents to nearly every political question these days. Why do we care? As if the idea that they make 20 million for making a movie makes them some kind of an oracle about life. If it weren’t for some big break most of these folks would be waiters or waitresses and nobody would care. Come to think of it, I would be alright if no movies were made at all for a year. I could do without them just fine.