NAFTA and the Cultural Exception

photo credit: http://www.cbc.ca

As we enter another frantic week of NAFTA negotiations between Canada and the US designed to keep Canada in a trilateral accord after Mexico and US concluded their own bilateral agreement in late August, the old chestnut of culture has once again resurfaced. For Canada “culture” in trade terms means the ability to maintain discriminatory provisions in the areas of ownership, subsidies and regulation in order to protect Canadian “cultural industries”. Cultural industry is a flexible term but in trade terms generally refers to broadcasting and publishing–although clearly culture goes well beyond these industries.

The cultural exception goes back to the original Canada-US Free Trade Agreement negotiated in 1988. At the time, there was a great deal of opposition from various circles within Canada to free trade with the US. Nationalist groups like the Council of Canadians denounced the accord as a sell-out to US business interests that would undermine Canadian sovereignty and result in the eradication of Canadian culture, among other things. It was considered a political necessity by the government of the time to show that it was standing up for Canadian culture, a “fragile plant” allegedly threatened by Canada’s proximity to the cultural and content powerhouse of the United States. The problem was that what Canada considered to be a “cultural industry” was viewed in the US as an entertainment or publishing business. The result was the classic ambiguous compromise.

Article 2005 of the Canada-US FTA stated that;

“1. Cultural industries are exempt from the provisions of this Agreement” (with minor exceptions)

“2. Notwithstanding any other provision of this Agreement, a Party may take measures of equivalent commercial effect in response to actions that would have been inconsistent with this Agreement but for Paragraph 1”.

 

In other words cultural industries (unspecified) were exempt but if Canada applied any discriminatory measures that violated the agreement in the name of culture, the US was fully within its rights to retaliate with measures of equivalent value. The same provision was carried over into NAFTA. Given this standoff it is not surprising that the cultural exemption has never been invoked.

At the time that NAFTA renegotiations were launched last year, among Canada’s ten main negotiating objectives was protecting the cultural exemption. However, the attention soon turned to other more thorny issues, like auto trade, Canada’s protected dairy market, a NAFTA sunset clause and the US desire to claw-back the NAFTA-specific dispute settlement mechanism (Chapter 19). It was not until last week that culture suddenly resurfaced as an issue when Prime Minister Justin Trudeau raised it, indicating that Canada would not sign an Agreement that did not protect culture, including the news media. He used the example of a US network buying a Canadian broadcaster as an illustration of what should not be allowed to happen.

While it is true that in its annual National Trade Estimates report on Foreign Trade Barriers, the US Trade Representative’s Office listed several “barriers” in the cultural field, namely Canadian content requirements, lack of simultaneous ad substitution for the NFL Superbowl Game (for a fuller explanation of the intricacies of this arcane issue, see my earlier blog here), and concerns of some US border broadcasters that their signals were being rebroadcast in Canada (under a compulsory licence) without their consent, yet the issue of investment restrictions prohibiting ownership of Canadian broadcasting entities was not mentioned. (There is one reference to ownership restrictions on “the cable TV industry, a major competitor for Internet access services” in the context of concerns about investment restrictions in telecommunications services, but this is a different issue).

The annual National Trade Estimates report is a “laundry list” of every conceivable barrier or potential barrier to US exports globally and hardly constitutes a negotiating mandate. In fact if you comb through the 18 pages of the US NAFTA negotiating objectives published by USTR you will be hard-pressed to find the word culture mentioned even once. (I couldn’t). Why then did the cultural exemption suddenly rear its controversial head again last week?

There is speculation that the Trudeau government’s sudden discovery of the need to protect Canadian culture is more about politics than policy. It is useful to set up a potential “win” in the (likely) event that Canada will have to make some compromises on dairy access and possibly dispute settlement in order to clinch a deal. The risk is that while eliminating the cultural exemption may not have been very high on US Trade Representative Robert Lighthizer’s “to do” list, by making it a key element that it has to retain, Canada has just put a bullet into the chamber of Lighthizer’s gun. It may now have to make some additional concessions to keep the exemption. The real question, however, is whether Canada needs a cultural exemption or is this really just about optics?

The experience of how culture was handled in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which Canada has yet to ratify, is instructive. As I noted in a commentary back in late 2017 when Canada was seeking to leverage more last-minute concessions out of its ten CPTPP partners–to the point that Canada almost sunk the deal and only got back on board when it became clear that the other negotiating partners were prepared to move ahead without it–in the original TPP Canada had fully retained its ability to protect and subsidize cultural industries by successfully negotiating chapter-by-chapter exceptions. There was no need to make any changes in the revised CPTPP Agreement. Nonetheless, at the last moment Canada put a demand for a full cultural exception on the table, probably to strengthen the political credibility of then-Canadian Heritage minister Melanie Joly who was taking a lot of criticism over her handling of the Netflix file. This was all about optics rather than substance. In the end, Canada did not get a cultural exception override clause but negotiated bilateral side deals with each of the CPTPP partners allowing it to take discriminatory measures to promote Canadian content, if necessary.

Getting back to the fundamental question as to whether Canada really needs a cultural override in NAFTA in order to promote Canadian cultural industries, I was surprised to read Michael Geist’s latest blog where he states that a blanket culture exemption in NAFTA is unnecessary. For once, and on this point, I agree with Dr. Geist although I take issue with his conclusion that giving up this demand would allow Canada to focus on other digital issues, such as resisting the move to a longer term of copyright protection. In fact, this is something that would be in Canada’s interest and would put Canada in line with a measure adopted by all developed and many developing countries.

Practically, however, I suspect that no Canadian government will allow itself to be accused of “selling out” Canadian culture, even if an exemption is unnecessary. Canadians already are prolific consumers of US content, and that is not going to change. In fact, with digital access becoming more and more prevalent, outdated measures like simultaneous substitution of local commercials into cable feeds of US produced programs become increasingly irrelevant. Maintaining a walled garden where Canadian content is fertilized with funds skimmed from Canadian broadcasters is a practice that is increasingly being challenged by technology, with Netflix being the most obvious example.

None of that is going to change the current political need in Canada to find a few “wins” in an increasingly difficult NAFTA negotiation where the negotiating partner holds most of the cards. One of those wins at the end of the day may well be maintaining the status quo on the cultural exception. But does it really matter?

© Hugh Stephens 2018. All Rights Reserved.

Tips for e-Book Authors: When the Pirates Get Nasty, Reach for “Blasty”

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My brother is a published author. He has written several e-books that are available on Amazon. (Yes, our last names are different but that’s another story). E-book writing is not his full- time occupation but provides a nice supplement to his retirement income. I am jealous, because he has the concentration to write a full-length book whereas my attention span is limited to a 1500 word blog. But all is not happy in the world of e-book authors, either for those that rely on the e-book trade for a living or part-time authors like my brother. And that, perhaps not surprisingly to readers of this blog, is because of piracy. Continue reading “Tips for e-Book Authors: When the Pirates Get Nasty, Reach for “Blasty””

NAFTA and Copyright: What Happens Next?

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As I sit writing this blog on Labour Day (or Labor Day if you are south of the border), I am conscious of the fact that by the time it gets published, things may well have changed. NAFTA negotiations between Canadian and US negotiators are set to resume on Wednesday morning, September 5, after a well-deserved break for the long weekend. The lead up to this weekend was beyond hectic, with the US and Mexico announcing at the beginning of the week that after five weeks of bilateral negotiations they had reached agreement. Canada was then invited to rejoin the negotiations and, with a gun at its head, was given exactly three days to sign on to the US-Mexico agreement. The fact that Canada had been shut out for the past month or more from direct participation in the discussions, and that some of the issues of concern to Canada are of no interest to the Mexicans (so of course they were not obstacles to an agreement as far as Mexico was concerned) made things even more difficult. And then to add insult to injury, the Toronto Star reported confidential comments that President Trump made to Bloomberg News that he was not prepared to make any compromises whatsoever to reach a deal with Canada and that any agreement had to be “totally on our terms”. Continue reading “NAFTA and Copyright: What Happens Next?”

What’s Cooking in the Copyright Kitchen?

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This is the time of year for cookouts and gatherings with family and friends, and the sharing of traditional family recipes. What’s the secret behind Uncle Mac’s perfect grilled steak (the marinade, the rub or the technique?) or that special dessert whipped up by your sister-in-law? And this invariably leads to the request, “You must give me your recipe”. Most people are flattered when asked, and willingly comply, but what if your livelihood is based on creating recipes? Continue reading “What’s Cooking in the Copyright Kitchen?”

Fighting Digital Copyright Piracy: A Tripartite Solution (Rights-Holders, Technology Firms, Governments) is Needed.

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In the ongoing struggle in the digital world between the creators of content and those who apparently believe that it is their right to take for nothing what others are expected to pay for, in the process depriving the whole value chain of creativity from author to performer to producer to investor to distributor of their right to earn a return on their investment (creative or financial), there is the never-ending debate as to the most effective way to combat this world-wide problem. Solutions vary, with opponents of any anti-piracy or enforcement measures arguing that if only content owners would make their content more easily available, the entire problem of piracy would just go away. This argument, which dates back to the early days of digital music piracy, has little credence these days as content producers have invested heavily in developing alternative delivery models (most of which involve payment in one form or another) and in releasing and distributing content sooner and more widely. Continue reading “Fighting Digital Copyright Piracy: A Tripartite Solution (Rights-Holders, Technology Firms, Governments) is Needed.”

The WIPO Internet Treaties: New Zealand Will Soon Join 97 Other Countries as a Member (Thanks to the CPTPP)

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Now that India has announced that it will join the World Intellectual Property Organization (WIPO) Internet Treaties (the WCT and the WPPT)[i], the number of acceding states will reach 97. Many emerging economies and virtually every OECD country (Iceland, Norway and New Zealand being the exceptions) is a member. And New Zealand is about to become a contracting party, pushing the total even closer to the one hundred mark. Continue reading “The WIPO Internet Treaties: New Zealand Will Soon Join 97 Other Countries as a Member (Thanks to the CPTPP)”

Brexit and Copyright: An Update on the Road to D-Day

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As Britain staggers to the finish line of the Brexit process—a line that is still moving as this is written—many, many uncertainties remain. As but one thorny example, how can the now-invisible border between the Republic of Ireland and Northern Ireland continue in its present form after Brexit if Britain is no longer in the EU? This is a demand that Ireland is insisting on as part of the Brexit negotiations. Northern Ireland could be given a “special status” within Britain but then that would mean creating a barrier between the north of Ireland and the rest of the United Kingdom, an outcome that is anathema to the dozen Ulster Unionist Members of Parliament who are propping up Prime Minister Theresa May’s government. Continue reading “Brexit and Copyright: An Update on the Road to D-Day”