Month: February 2024

Image: Shutterstock

For those of you who may have missed it, this is “Fair Use and Fair Dealing” week, sponsored once again this year by the Association of Research Libraries in the US and the Canadian Association of Research Libraries in Canada. I have written blog posts on fair use/fair dealing for the past couple of years, (here, and here), trying to provide some perspective on the topic given the annual “celebration” of this feature of copyright law by the library community. Yes, it is an important feature of copyright, a defence to infringement in the US and declared to be a “user’s right” by the Supreme Court in Canada. It is an essential part of the copyright landscape, a limitation on the exclusive rights an author enjoys over their work, and is designed to allow reasonable, permissionless and uncompensated (i.e.  unlicensed) use of copyrighted works in order to achieve and preserve certain public policy objectives, such as the encouragement of learning and dissemination of knowledge.

Fair use and fair dealing also enable some essential features of a modern democracy, for example by allowing news reporting and artistic criticism to function effectively as well as by facilitating some other specified uses, such as parody and satire. All this has been baked into copyright law for a century or more in Canada and the UK and for longer than that in the US through jurisprudence. However, while fair use and fair dealing permit a relatively wide range of uses of copyrighted materials without licensing, there are limits set by legislation and the courts with regard to the amount of content used and the purpose to which it is put. Each time a new technology comes along, those limits are tested. And AI is severely testing those limits today.

AI is not the only challenge faced by rights-holders as a result of the ambiguities of fair use and fair dealing. The continued uncompensated and unauthorized widespread use of copyrighted and licensable materials by Canada’s education sector, particularly post-secondary institutions, under the pretext of education fair dealing is one current example. The unlicensed and unauthorized digital scanning of copyrighted published works under the invented, contentious and ultimately legally unsustainable theory of “controlled digital lending”, which I wrote about here and here, is another. AI, however, is the unlicensed use where the financial stakes are the highest, running into billions, if not tens of billions of dollars. It is remarkable that the US high tech industry and generative AI developers have tied their substantial investments to a very shaky interpretation of fair use. In effect, they have admitted to permissionless (i.e. unauthorized/unlicensed) reproduction of copyrighted works by resorting to a fair use defence. If there is no potential infringement through unlicensed reproduction and distribution (i.e. no copy has been made, or the copying is de minimis or does not reproduce the protectable expression of a work), there is no need to invoke fair use, yet that is what OpenAI, StabilityAI, Midjourney and other generative AI developers that are being sued by rights-holders (ranging from individual authors and artists to the New York Times, Getty Images and Universal Music) have done. What is the basis of this fair use defence? From the perspective of the generative AI developers, it is that the infringing uses are “transformational”, producing something new that is not a derivative nor a commercial substitute for the original.

This is a line of legal argument that has some traction in the US. While not enshrined in any US legislation, the “transformation doctrine” has nonetheless been relied on by US courts in recent years to justify fair use rulings, (when combined with consideration of the other three factors used in the US to determine fair use). One of the most notable of such transformative use decisions was the Google Books case (Authors Guild, Inc v Google Books, Inc), where a US court found that Google’s unauthorized scanning of the plaintiff’s copyrighted works was a fair use because the sampling index it produced was different from the original works and did not directly compete with them commercially.  This is the line of argumentation the AI developers are counting on to justify their unauthorized ingestion, through reproduction, of hundreds of thousands of copyrighted works. But will this carry the day? The situation today looks a lot less certain than when the Google Books case was decided in 2015.

The Association of Research Libraries (ARL), the sponsor of fair use week in the US, has gone on record to declare that, in its view, training generative AI models on copyrighted works is a fair use. (The librarians should be careful what they wish for as AI has the capacity to do as much damage to the library sector as it threatens to do to authors.)  The ARL cites the Google Books case as well as others in support of its position. However, there are other more recent cases that make it far from obvious that this transformational use argument will prevail in the case of AI, or at least in some AI cases. Two recent cases in particular have cast doubt on the “open season” on creators that overly broad interpretations of the transformation doctrine have brought about in recent years.

The first was the Internet Archive v Hachette case in 2023 (now under appeal) that dismissed the arguments of the Internet Archive that its unauthorized scanning (copying) of a number of copyrighted works (127 in total, represented by Hachette and three other publishers), and the subsequent lending of those works in digital format, was a transformational fair use. While the court’s decision in favour of the publishers was not based exclusively on a rejection of transformative use for the works in question, this was a big part of the decision. The second case, also decided in 2023, (on appeal to the US Supreme Court), Warhol Foundation v Goldsmith, resulted in the Andy Warhol Foundation being held responsible for infringing the copyright of photographer Lynn Goldsmith by licensing one of Warhol’s remakes of her iconic photograph of musician Prince as a magazine cover. The Warhol Foundation had sought a ruling that Warhol’s use of Goldsmith’s photo to create a series of coloured silkscreen artworks, including the “Orange Prince” print that was licensed as a magazine cover, was transformational and thus a fair use. While the district court had originally found in favour of Warhol, this was overturned on appeal and sustained by the Supreme Court, which held that the licensing of Warhol’s “Orange Prince” work (based directly on Goldsmith’s photograph of Prince) was not transformational because it substituted for the original in the commercial market.

The same could be said of an AI generated image or work that is substantially similar to an original work it has been trained on, (i.e. it incorporates protected elements of a copyrighted work), and which then substitutes for or competes with the original commercially.

The Supreme Court’s Warhol decision seems to have sent a chill through the world of appropriation art, as I noted in a recent blog regarding the willingness of appropriation artist Richard Prince (no relation to the musician, who died in 2016) to reach what amounted to a public settlement (final judgment) over a longstanding lawsuit with two photographers whose works he had appropriated to produce what amounted to derivative works. Artist Prince agreed to conditions that prevent him from “reproducing, modifying, preparing derivative works from, displaying, selling, offering to sell or otherwise distributing” the works based on the plaintiff’s photographs, while paying the photographers five times what he had earned from selling the derivative works, plus covering the plaintiff’s legal costs. Total payments amounted to almost a million dollars. This case was significant, and could well have ramifications for pending AI lawsuits.

The AI industry has staked a lot on a very thin reed, particularly given the welcome swing of the fair use pendulum back to a more balanced position by US courts. Uttering the words, “transformative use” is no longer an automatic get-out-of-jail-free card when works are copied holus-bolus. While it is true that not all generative AI outputs reflect or are substantially similar to the works they were trained on, sometimes they are, as we have seen in the New York Times v OpenAI case. If the AI output is very similar to the original work, and substitutes in the market for it (e.g. artwork promoting….in the style of….), what is transformational about that?

A lot can depend on what prompts are entered, as OpenAI is arguing. But that is putting the responsibility for the infringement on the user, i.e. the human creating the prompts, rather than on entity that did the infringing in the first place by reproducing the copyrighted work without permission. Moreover, it is not enough to say, as OpenAI has argued, that there was a “bug” in their system that they will fix in future iterations. Past infringement is still infringement. You can’t just say, “Sorry, I won’t do it again”. If you infringed, you infringed and there is no guarantee that it won’t happen in future. If the product wasn’t ready for prime time, it should not have been launched on the public.

While neither of the previous cases I have referred to are dispositive of all the issues, and each case must be decided on its own merits, there is nonetheless a compelling trend suggesting that the “transformative use” free ride is coming to an end. If I were an AI developer who had staked hundreds of millions of dollars on the shaky premise that my unlicensed appropriation of copyright protected expression would be found to be a fair use, I would be worried, very worried.

The key message is that while fair use is an important facet of copyright law, it has its limits. This is an important message worth repeating during fair use week. Those limits are being tested by AI developers who have been following a “ask forgiveness after rather than permission before” approach. They may get an unpleasant surprise.

In sum, when it comes to fair use and fair dealing, let us by all means acknowledge its importance, but also remember the other side of the coin. Its limits. What exactly fair use means in the age of AI remains to be determined by the courts, but it is important to remember that it is not a blank cheque based on some mystique of transformation. Along with fair dealing, it is a set of exceptions that gives users plenty of scope for unlicensed uses–but is not a licence for unlimited free-riding and unfair competition with the copyrighted output of creators. That’s a good takeaway for Fair Use and Fair Dealing Week.

© Hugh Stephens 2024. All Rights Reserved.

This post has been updated to clarify that invocation of fair use is a de facto admission of unlicensed reproduction and distribution of a copyright protected work, and thus a potential infringement.

Screen Australia Drama Report

At a time when streaming services (also referred to as subscription video on demand, or SVOD) are growing internationally at a frenzied pace, various countries are pondering how to deal with this phenomenon, particularly when it comes to local production. Streaming has some of the characteristics of broadcasting yet operates on a different business model. Everyone thinks of Netflix or Amazon, but there are many streaming players both large and small, ranging from Disney+, HBO, Paramount+ and Apple among US players, to Britbox, Stan in Australia and others such as CanalPlus in France and Crave in Canada. Broadcast regulators, who for the past few decades have habitually regulated what is transmitted over the airwaves and cable through their licensing powers, have tried to get their arms around this new, husky kid on the block. However, instead of providing incentives to stimulate more local production, many have decided the streamers are a potential cash cow that can be tapped to fund domestic drama. Various regulatory options are being floated.

In this rush to regulate, national authorities need to be careful not to kill the golden goose (t0 mix a metaphor) of funding for local production coming from offshore, mostly US, producers. The streamers operate in a global environment and can always shift investment elsewhere if costs get out of line in a specific market. As a result, the degree and type of regulation instituted by smaller but important players like Canada, Australia, and others, is critically important. Regulators need to be careful to avoid creating a domestic cost base that is uncompetitive or else both the domestic industry and consumers could suffer. Denmark is a case in point where its proposed 6% levy on streaming revenues, combined with a contractual standoff between unions, producers and the streamers, has led to a catastrophic drop in production of Danish series. That is the risk currently playing out both in Canada, with Bill C-11, and in Australia, with the government’s consultation process for Australian screen content requirements on streaming services.

In Australia, the streamers are currently the leading source of production funding for Australian adult drama. Streaming services now invest more in this genre than public, commercial and subscription broadcasters combined, despite having no legal obligation to do so. Expenditures on streaming productions increased from A$371 million in 2018/19 to A$680 million in 2022/23. As a result of this record level of investment, local production costs have shot up, with labour costs rising more than 40% over the past five years. Because of rising costs, and the relative newness of the industry (which has resulted in a scramble for subscribers and market share), most streamers are currently losing money. The Australian and New Zealand Screen Association (ANZSA), which represents the MPA studios as well as several local screen businesses, estimates that its members collectively lost A$3.6 billion in the past year. Looking just at the traditional Hollywood studios, that loss was a stunning $A12.6 billion globally, a margin of minus 21%.

The industry will undoubtedly settle down to a greater equilibrium once the initial phase of market establishment is over, including rationalizing and becoming more efficient in production costs. However, one of the models being proposed by the Australian government is to impose a required contribution to Australian scripted drama (excluding any financial contribution made to other forms of Australian content) of up to 30%, based on the previous year’s amount of expenditure on programming. There would be a sliding scale dependent upon the number of Australian subscribers. Given the constant flux and evolution in the industry, there is no business logic in basing required contributions on program expenditures at a given moment in time, when labour costs are inflated, and streamers are temporarily running unprofitable businesses in order to secure market share. It is not only an unfair burden based on an unsustainable expenditure pattern but will lead to expectations that whatever contributions are made in a given year will constitute a floor and should grow. In short, to lock that formula into long term legislation is like taking a snapshot in time and setting it in amber.

A possible alternate formula proposed for financing the production of Australian scripted drama is to base the contribution on revenues. This is even more problematic from a business point of view. Revenues are growing but so are expenditures. Remember all the red ink referred to earlier? At the present time, revenues are not a good proxy for the state of the industry and would negatively affect younger services, or those yet to launch. Moreover, the contribution expected from streamers based on revenue is disproportionate when compared with commercial and subscription broadcasters. Streamers are expected to contribute 10% of revenues (less sports programming revenue) whereas the current contribution from traditional broadcasters is between 1 and 2% of revenues. Not only that, but the consultation paper also indicates the 10% would constitute only a floor for Australian drama expenditure. It could be doubled to 20% over time.

Both of these proposed formulae threaten to place an unsustainable burden on the industry. For example, the 6% revenue levy in Denmark compares unfavourably to other countries in the EU where levies on revenue range from zero to the 1.5 to 2.5% percent range in Greece, the Netherlands and Germany. The Australian proposal is to start at 10% and moves up from there!

What will be the result? Who will the losers be? While the Australian government’s desire to increase spending on the production of local content is understandable, every policy initiative needs to be examined in the light of possible consequences. Australia is a big and important market so, frankly, it is unlikely but not impossible that the streamers will pull out (as happened with Amazon in Vietnam or with Warner Bros in Denmark, in terms of production), but a certain result is that new streaming services will be reluctant to enter the market. If the expenditure model is adopted as proposed, with increasing tiers of contribution dependent on number of subscribers, there will also be a perverse disincentive to avoid growing the subscriber base. Instead, businesses will be encouraged to raise subscription fees to keep the number of subscribers constant while maintaining needed margins. The big loser will the Australian consumer, who will have fewer or more expensive viewing options, as well as the Australian production industry as streamers take steps to control expenditure on productions to minimize compulsory contributions to one relatively narrow genre of content. Increased costs have to be covered somewhere and if costs of production in Australia soar owing to government intervention, they will either be underwritten in the final analysis by the Australian consumer, or production will seek more competitive environments.

Given the current rate of investment by the streaming industry in Australian content, one wonders what problem the Australian government is trying to fix. To box in an evolving industry, one that is offering plenty of local content to Australian consumers and providing lots of well-paying jobs to the local production industry, seems to me–to say the least—very short-sighted. The streaming industry clearly has incentives to invest in Australian content. Those incentives are the good production values that exist in Australia, good stories serving both local and international audiences and a growing subscriber base that will one day be sustaining from a business perspective, as well as a reasonably competitive market from the perspective of production costs. To impose a disincentive on this virtuous circle by distorting investment decisions through the imposition of an inflexible formula mandating a significant investment to support only specific forms of production is a good way to undermine this positive scenario.

Australia, like other “middle countries” such as Canada, need to be careful not to be regulating in ways that are unsustainable for the market. Canada has just had to swallow hard and put a considerable amount of water in its wine to come to a deal with Google over payment for accessing news content, and has had to watch Facebook block news for Canadian subscribers. Australia managed to reach more successful deals with these large internet giants, although there are reports that Facebook might not renew the deals it made in Australia. Having been bloodied once, the web giants subsequently decided to hold the line in Canada lest the “contagion” spread. While the comparison with Google and Facebook is not exact, (these companies dominate their digital industry in a way that no streaming service does), the streaming industry is not an inexhaustible cash cow to be milked dry; it should be expected to contribute a fair share to domestic production, but it operates on a global scale and overly restrictive demands from any one country can upset the balance of models that contribute to win/win outcomes. Getting that balance right is critical, especially in a mid-sized economy like Australia.

In the meantime, the streamers have been asked to provide input into the Australian consultation paper issued in November. This paper identifies the costs/challenges and likely benefits of each of the two proposed models, based on either program expenditure or gross revenues. From the industry’s perspective, this is like having to decide whether it’s better to be shot or to hang. Surely Australia can do better. It is not too late to dial this back to find a balanced solution that works for everyone–Australian consumers, the Australian production industry, and the international streamers.

© Hugh Stephens, 2024.

By Leoboudv-Own Work, CC BY-SA 3.0 https://commons.wikimedia.org/w/index.php?curid=6733224

The issue of reconciliation with Indigenous peoples will remain a front-burner issue in Canada in 2024 so I think it appropriate to post a good news story on this topic early in the year. I should note, however, that while it may qualify as good news now, it is built on decades of bad news. The story is that hereditary chiefs and other representatives from a First Nation on the northern tip of Vancouver Island have declared their intention to reclaim 17 carved masks and other regalia currently held by the Royal BC Museum in Victoria. The Nation is building a new “bighouse” on their land near Port Hardy and will hold a week-long potlatch where the returned items will be honoured in dance and ceremony for the first time in many decades. According to hereditary chief Henry Seaweed, some of the masks were carved by his grandfather, Willie Seaweed (Sewid), known to be a master carver.

The story of these and similar ceremonial objects is a painful one. Many were carved in the late 19^th century or early 20^th century and were variously acquired by collectors and museums. Some of the most culturally insensitive acquisitions were seizures of cultural properties from Indigenous groups as a result of the outlawing of potlatching. The potlatch, according to the Canadian Encyclopedia, “is a ceremony integral to the governing structure, culture and spiritual traditions of various First Nations living on the Northwest Coast and in parts of the interior western subarctic. It primarily functions to redistribute wealth, confer status and rank upon individuals, kin groups and clans, and to establish claims to names, powers and rights to hunting and fishing territories.” But to the power brokers of the time, the missionaries, educators and government agents, it was a “wasteful, immoral and heathen practice”, to cite the words in the history section of the website maintained by the U’Mista Cultural Centre of Alert Bay, BC. Alert Bay is the site of the most egregious example of culture clash and disproportionate power that resulted in the confiscation of cultural artefacts from the native population. The potlatch was outlawed by the federal government as early as 1884, becoming a misdemeanor punishable by up to six months imprisonment, but enforcement was lax. However, the law was progressively tightened and zealous Indian agents, particularly the one in Alert Bay, William May Halliday, were determined to stamp out the potlatch. In 1921, a native leader Dan Cranmer, organized a potlatch at Village Island, a small island between Vancouver Island and the mainland not far from Alert Bay. This was the opportunity for Halliday to swoop in, supported by Sgt. Angerman of the BC Provincial Police Forty five people were arrested, but sentences were suspended if those charged agreed to give up their potlatch ceremonial paraphernalia. Halliday took custody of the items. Those who refused were sent to prison in Vancouver.

The travesty didn’t end there. According to the account published by U’mista, Halliday later sold 33 pieces to a collector, although whether this was for personal gain or to raise funds for the community is not clear. In any event, he was reprimanded by the Department of Indian Affairs for taking this action. The greater part of the collection was crated and shipped to Ottawa to what at the time was called the “National Museum of Man” and to the Royal Ontario Museum. As for Sgt. Angerman, he ended up with a few of the pieces in his private collection, eventually donating them to the National Museum of the American Indian in Washington, DC.

After the eventual repeal of the potlatch ban in 1951, efforts began to get the items repatriated. By the mid-1970s the museum authorities in Ottawa and Toronto had agreed to return the artefacts provided that a suitable museum was built to house them. Since then other items that had been scattered in the US and UK have been returned to the U’Mista Cultural Centre, a modern and well curated museum established in Alert Bay. The Kwakwa̱ka̱ʼwakw of Alert Bay have thus been able to reclaim their cultural heritage, although it has been a long journey. Now the Gwa’sala-‘Nakwaxda’xw people, originally from Smiths Inlet and Blunden Harbour, but relocated to the Port Hardy area by the Department of Indian Affairs (as it was then called) in the 1960s, are now trying to do the same thing.

Blunden Harbour, on the BC mainland, was a thriving community for many years and the site of a noted carving school. One of the noted west coast artist Emily Carr’s most famous paintings, Blunden Harbour, which was painted in 1930, is based on a 1901 photograph of totem poles in front of longhouses. Sadly, Blunden Harbour was burned to the ground by the Indian Affairs Department to prevent members of the nation from returning to it after they had been relocated as part of the Department’s plan to provide better health and education services. We all know how that turned out.

Quite apart from the contentious issues of relocating native communities and requiring native children to attend residential schools, a long and sad story, the issue of where “appropriated” art should reside is a hot one these days, whether it is Indigenous carvings or the Parthenon marbles. In Canada, there finally seems to be a consensus that cultural objects should be returned to the community from which they came, as long as they can be properly cared for.

When cultural objects are returned to an Indigenous community, they are considered to belong to the entire community, rather than any one individual, even though they may have been carved by a specific artist. In the case of the Gwa’sala-‘Nakwaxda’xw, it would appear that a number of the masks were carved by Willie Seaweed (1873-1967) who resided at Blunden Harbour, known to the Nakwaxda’xw as Ba’a’s. If Seaweed’s works were protected by copyright, would his descendants have a claim against any unauthorized reproductions of his works, such as postcards or prints sold by the Royal BC Museum? In fact, did he or his estate grant permission for his works to be displayed in public, as is required by the Copyright Act? As noted by this legal website, in Canada, “the owner of copyright has the sole right to produce or reproduce a work (or a substantial part of it) in any form, and the sole right to exhibit the work in public.” (This latter provision did not become part of Canadian copyright law until the 1988 revisions, however). Is a carved mask an “original artistic work”? I think it is. Whether Seaweed had rights to his expropriated art, based on copyright law, is an interesting question. Under Canadian copyright law at the time of his death, his works would have been protected until very recently, until January 1, 2018, with the rights exercised by his estate. Of course, that didn’t happen.

I am certain that no-one cared about Seaweed’s rights under copyright law any more than they asked his permission to have his work held in the Museum collection. The current reassertion of the rights of the community over the carvings is based on general principles of fairness and reconciliation rather than copyright law, although the legalities of acquisition may in some cases be questioned, as in the case of the cultural objects seized at Alert Bay in the 1920s.

The question of how copyright laws fit with the issue of Indigenous cultural expression is not a new one. I have written about it here and here. In 2019 two Parliamentary Committees reviewing the Copyright Act with a view to recommending changes noted the impact that copyright can have on native artists and traditional indigenous expression. The INDU Committee noted, in particular, that;

“…in many cases, the Act fails to meet the expectations of Indigenous peoples with respect to the protection, preservation, and dissemination of their cultural expressions. The Committee also recognizes the need to effectively protect traditional arts and cultural expressions in a manner that empowers Indigenous communities, and to ensure that individual Indigenous creators have the same opportunities to fully participate in the Canadian economy as non-Indigenous creators.”

At the same time, in the international sphere, the World Intellectual Property Organization (WIPO) has been working on a Convention on Traditional Knowledge, Cultural Expression and Genetic Resources for many years. In May of this year WIPO will host the Diplomatic Conference in Geneva aimed at concluding an International Legal Instrument focusing on genetic resources and traditional knowledge. If this is successfully concluded, it will be the first step toward a broader convention protecting Indigenous Cultural Expression as well. Whether this will happen is another question, but work is ongoing and appears to be moving toward fruition after many years of inconclusive discussion.

Meanwhile, Canada and other countries with significant Indigenous populations are trying to come to grips with decades of cultural exploitation. While repatriation of cultural artefacts is taking place on a much larger scale today, Willie Seaweed could have done with some copyright protection for his works back in the day. Sadly, access to legal assistance was no doubt a remote possibility if not impossible when he was active as an artist. However, the fact that the Hamatsa masks of the Gwa’sala-‘Nakwaxda’xw will be going home is encouraging, correcting long-overdue justice through the repatriation of these cultural icons.

© Hugh Stephens 2024.

Image: Shutterstock

Canadian visual artists, who have been hoping for the establishment of an Artists Resale Right (ARR) as part of a successful conclusion to the Canada-UK Free Trade Agreement negotiations, may become collateral damage if the talks breakdown completely. As I wrote in a blog post a year or so ago (“Will the “Artists’ Resale Right” Come to Canada and the US”), it had been expected that an ARR would be included as a reciprocal obligation in the bilateral trade agreement between Britain and Canada that, until the end of this January, was under negotiation. Canada is one of a handful of countries that does not have a resale provision that allows artists to earn a small financial return from sales of their works when they are resold through galleries. The ARR exists in Britain, but British artists would welcome expansion of the regime to Canada, thus expanding its reciprocal nature and allowing them to benefit from resales of their work in Canadian galleries. For their part, Canadian artists have long pushed for the institution of a resale right in Canada and saw the trade negotiations with Britain as a likely vehicle to make this happen, especially given language in the 2021 mandate letter for the minister responsible for the Copyright Act that he should work, “…to further protect artists, creators and copyright holders, including to allow resale rights for artists.” If an ARR was included as a trade agreement commitment with Britain, as it was in the UK-Australia and UK-New Zealand trade agreements, it would require both countries to provide reciprocal benefits to artists from either country. For Canadian artists, this would give them access to ARR provisions in Britain as well as resale royalties when their works were sold in Canada, a positive double whammy.

But all this was thrown in doubt when, on January 25, the UK announced it was suspending the trade talks because of an impasse over access to the Canadian market for British cheese. After Britain’s myopic and misguided departure from the EU through Brexit, it lost the access to the Canadian market that it had enjoyed under CETA, (the Canada-EU bilateral trade and economic treaty). However, to allow time for the negotiation of a standalone Canada-UK Agreement to replace Britain’s CETA obligations and benefits, a transitional arrangement was put in place known as the TCA (Trade Continuity Agreement). The TCA is meant to bridge the gap until such time as a formal bilateral Canada-UK Free Trade Agreement can be reached. However, some of the provisions of the TCA sunset after a period of time, and one of those provisions is the allowance for British cheeses to enter Canada under the preferential EU quota. That special import provision ended on December 31, 2023.

Canada’s dairy market is highly protected under a supply management system whereby production of dairy products is controlled through production quotas allocated to a privileged few producers in order to “stabilize prices”, i.e. keep prices and thus incomes high for these producers at the expense of consumers. In my view, it is a short-sighted and counterproductive policy that benefits a small cadre of dairy producers not only at the expense of all Canadian families, but also to the detriment of other Canadian export sectors which are disadvantaged when Canada is weakened in its goal of opening foreign markets because it has to pay a price for blocking dairy imports. Yet the dairy lobby, centred in Quebec, is highly organized and influential politically. To limit competition and prevent lower priced imports from undercutting the government-sanctioned prices of the dairy cartel, Canada imposes punitive import tariffs on dairy products, including cheese. Of course, Canadians like imported cheeses as much as anyone else, so limited import quotas at manageable tariffs have been negotiated. Under CETA, the EU (of which Britain was a member at the time) was able to negotiate a “tariff rate quota” (TRQ) of 16 million kilos of cheese to Canada annually at a lower rate of duty. Cheese imports falling outside the TRQ are subject to tariffs of over 200%. However, the clock has run out on Britain’s free ride on the EU cheese quota, and negotiations to establish a new, separate quota for Britain have gone nowhere.

Both countries share some of the blame; Canada because, under domestic political pressure from the dairy cartel, it refuses to make any further concessions on dairy and Britain, because it refuses to “earn” concessions from Canada through offsetting benefits in other agricultural areas, such lowering barriers to Canadian beef exports. This is another longstanding issue. Most Canadian beef cattle are given artificial growth hormones in their feed. Britain refuses to allow imports of beef treated with artificial growth hormones, in company with the EU. Growth hormones are commonly used in many beef growing countries (Canada, US, Australia for example) to enhance production without any apparent negative impacts on human health, but there is consumer resistance to hormone-enhanced beef in Europe. Both Canada and the US export hormone-free beef to the EU, but certification can be cumbersome and costly, negatively impacting costs and export volumes. Canada and the UK are now caught up in the same issue. Whatever the rights and wrongs (and this is often in the eye of the beholder), in an attempt to pressure Canada, British negotiators have now suspended negotiations.

Normally, one would consider this as a negotiating tactic and would expect negotiations to resume at some point. This is of course a possibility, something that would be welcomed by the artistic community if it gets the agreement back on track. But Canada and the UK have already agreed on another set of binding commitments that will bring predictability and tariff free trade in many areas through their joint membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in company with ten other states. The Artists Resale Right does not figure in the CPTPP.

Although the CPTPP framework will not resolve the issue of access for British cheese or Canadian beef it, along with the parts of the Trade Continuity Agreement that remain in force, may provide a sufficient framework for continued UK-Canada trade and investment. And if that happens, the artistic sector will have been left by the wayside as roadkill.

It is too early at this stage to say what will happen. Of course, the Canadian government could decide to introduce a resale right without any reference to Britain or a bilateral trade agreement, but trade negotiators have a way of hanging on to “coinage” (what the other side may consider as a concession) in the event that it may need to be used on a future occasion. If this is the case, the ARR may be held hostage to the UK-Canada standoff over dairy, and Canadian visual artists will become yet one more victim of Canada’s ridiculous supply management system. That would really cheese me off.

© Hugh Stephens 2024. All Rights Reserved