Tag: canada

No Surprise:  Ontario Court Asserts Jurisdiction in Canadian Media Lawsuit Against OpenAI

A judge sitting at a bench in a courtroom, wearing a black robe with a red collar, Canadian flags in the background.

Image: Shutterstock

The Ontario Superior Court has ruled it has jurisdiction to hear the case against ChatGPT owner OpenAI brought by a consortium of Canadian media companies led by the Toronto Star. The media enterprises, who include the Globe and Mail, PostMedia, CBC/Radio Canada, Canadian Press and Metroland Media Group, are suing the US company for copyright infringement, circumvention of technological protection measures (TPMs), breach of contract, and unjust enrichment as a result of OpenAI’s scraping of their websites to obtain content to train its AI algorithm. The allegations also cover OpenAI’s use of Retrieval Augmented Generation (RAG) to produce contemporary search results from paywall-protected content that augment ChatGPT’s AI-generated responses. When the suit was brought in November 2024, OpenAI had challenged the Ontario court’s jurisdiction on the basis, among others, that it had no physical presence in Canada. As pointed out by this legal blog, a court may presumptively assume jurisdiction over a dispute where one of five factors is present:

  • The defendant is domiciled or resident in the province.
  • The defendant carries on business in the province.
  • The tort was committed in the province.
  • A contract connected with the dispute was made in the province.
  • Property related to the asserted claims is located in the province.

The court found that OpenAI carries on business in Ontario notwithstanding its lack of a physical presence and was a party to contracts in Ontario as a result of tacitly accepting the terms of service regarding access to the media companies websites when it scraped them.

OpenAI wanted the venue of the litigation changed to the United States to take advantage of developments in US law regarding unauthorized reproduction of copyright protected content for use as AI training inputs. To date, while many cases are still ongoing, US courts have tended to support a fair use argument by AI developers allowing them to access copyrighted content without permission on the basis that the end use is “transformational”, resulting in a new product that does not compete with the original work. In Canada, the fair use doctrine does not apply and exceptions to copyright protection are either explicitly laid out in the law (e.g. for law enforcement or archival preservation purposes) or are governed by the fair dealing provisions of the Copyright Act. These require that an unauthorized use fall into one of eight categories (research, private study, education, parody, satire, criticism, review and news reporting) that is in turn subject to various court-interpreted criteria such as amount of the work copied, the purpose of the copying, market impact etc. AI developers have been lobbying for the introduction of a text and data mining (TDM) exception into Canadian copyright law, but so far this has been successfully resisted by Canada’s creative community. All this to say that it is more difficult for AI companies to avoid liability for unauthorized use of copyright protected material in Canada than in the US, thus the importance of whether the Ontario court has jurisdiction.

Back in September, on the basis of previous Canadian court rulings where courts ranging from provincial courts to the Supreme Court of Canada asserted jurisdiction over large digital US companies operating virtually in Canada, such as Google (who challenged Canadian legal authority over them on the basis of lack of a physical presence), I predicted (guessed would be a more accurate term) that the Ontario court would be loath to surrender jurisdiction simply because the company was headquartered in the US. The earlier cases were for defamation rather than copyright infringement, and my “prediction” was based more on a hunch than legal analysis, but I am satisfied that I called it right. OpenAI has no compunction about selling services and collecting revenues in Canada and presumably (I hope) pays taxes here, although it is not subject to the Digital Services Tax (DST) that the Carney government threw overboard in a vain attempt to placate Donald Trump. Recall that Trump had threatened to terminate trade talks if Canada proceeded to implement the long-planned DST, so Canada blinked. Trade talks resumed until Trump found another excuse to end the talks, in this case the anti-tariff ads on US television placed and paid for by the Ontario government to which he took offence. But there is no doubt that OpenAI does business here; it just doesn’t want to be subject to Canadian law and Canadian courts. It can’t have it both ways.

While this is a victory for Canadian sovereignty, just because the Ontario Superior Court has confirmed its jurisdiction, this doesn’t mean that once the substantive proceedings begin copyright infringement will be found. Lawyer Barry Sookman, in an analytical  blog post on this topic, has noted that in determining whether the alleged copyright infringements occurred in Canada, “the court relied heavily on the Supreme Court decision in SOCAN for the proposition that the territorial jurisdiction of the CCA (Canadian Copyright Act) extended to where Canada is the country of transmission or reception.” However, “SOCAN applied the real and substantial connection test to the communication to the public right” whereas the alleged copying involved the right of reproduction.

Sookman continues;

“…that test does not apply to the reproduction right. (The Federal Court has) held that the only relevant factor is the location in which copies of a work are fixed into some material form. The locations where source copies reside or acts of copying onto servers located outside of Canada, are not infringements” (according to the cases cited).

Inside baseball information but important when it comes to determining copyright infringement. On the other hand, it seems to me that the infringement involved not just, potentially, the reproduction right (the copying) but also the communication right, because OpenAI, through Microsoft, provided RAG content to users in Canada and elsewhere purloined from behind the paywalls of the media companies. So, we will have to see. Lots of fodder for IP lawyers.

In the meantime, deep-pocketed OpenAI will appeal the jurisdictional ruling—and will likely lose again. The appeal will buy time for it to negotiate licensing deals with the complainants. This is increasingly the model in the US as AI developers, including OpenAI, are reaching licensing agreements with content owners, particularly media organizations. To date, OpenAI has signed licensing deals with the Associated Press, the Atlantic, Financial Times, News Corp, Vox Media, Business Insider, People, and Better Homes & Gardens, among others, while being sued (in addition to Toronto Star et al), by the New York Times and a collection of daily newspapers consisting of the New York Daily News, the Chicago Tribune, the Orlando Sentinel, the Sun Sentinel of Florida, San Jose Mercury News, The Denver Post, the Orange County Register and the St. Paul Pioneer Press. Even META, that arch-opponent of paying for media content–which it claims adds no value to its users– has struck a media deal with news publishers, including USA Today, People, CNN, Fox News, The Daily Caller, Washington Examiner and Le Monde. (One wonders if this will cause it to rethink its position of thumbing its nose at Canada’s Online News Act, where it “complied” with the legislation by blocking all Canadian news links).

In another content area, OpenAI and Disney have just agreed on a three-year output deal, allowing it to use Disney characters (subject to certain limitations) in its AI creations. (Meanwhile Disney is suing Google for using its characters in Google’s AI offering). Open AI is currently facing 20 lawsuits, including the Toronto Star case, and needs to resolve these legal challenges before its expected public offering next year or 2027. The spectre of impending lawsuits will inevitably lower the IPO price.

Most if not all of these lawsuits are going to end in settlements via voluntary licensing agreements, but that will only happen if OpenAI thinks the alternative (losing a major lawsuit) is a worse outcome. If it can wriggle out from the Toronto Star case by invoking some specious argument related to jurisdiction, it will. If it can’t it, will eventually open its chequebook and provide the Canadian media outlets some compensation for the valuable curated content it has hijacked. Canadian courts need to stay the course to help ensure that this happens.

© Hugh Stephens, 2025. All Rights Reserved.

The CRTC’s “Rube Goldberg” Definition of Canadian Content (CanCon): More Complicated..but Also More Flexible

An old television displaying the words 'CANCON REDEFINED' over a background of the Canadian flag.

Since it is frequently in the news, it’s worth asking the question. What is Canadian Content (Cancon)? It can be many things to many people. Unlike pornography, you don’t always know it when you see it. Blogger Michael Geist illustrated the problem well a few years ago with his Cancon quiz. If you want to do well in the quiz, select just about any production that the general public is likely to regard as Canadian– i.e. based on a book written by a Canadian, starring a prominent Canadian actor or notably taking place in Canada–as not qualifying as certified Cancon. Then select all the obscure productions you have never heard of including several with no identifiable connection to Canada as certified Canadian content. You will be a winner! This perverse outcome is because of the way the system is set up, as I have written about in previous blogs, such as this one (Unravelling the Complexities of the Canadian Content (Cancon) Conundrum).

In brief, up to now Cancon has been primarily defined by the number of points (out of 10) that a production accumulates, in addition to other factors such as the requirement that it be produced by a Canadian and reach a minimum 75% production expenditure in Canada (except for co-productions). Cancon is defined in regulation by no less than three entities, Telefilm Canada for co-productions, the Canadian Audio-Visual Certification Office (CAVCO), part of Heritage Canada, to determine eligibility for subsidies, and the broadcast regulator, the CRTC, with respect to meeting Cancon broadcast quotas. All use the points system, with some productions requiring 10/10 to obtain maximum subsidies, while most others  meeting a minimum 6/10 requirement. Points are awarded for the positions in the production filled by Canadians, such as the writer, director, performers, director of photography, production designer, music composer and picture editor. For CAVCO productions, the copyright must also be held by a Canadian producer for a minimum of 25 years. The actual story and its setting are completely irrelevant. In short, it is more of an industrial than a cultural policy, based on the assumption that if Canadians are in charge, they will produce content that reflects Canada. It often doesn’t work out that way.

Now the CRTC has updated its definition of Cancon as part of the implementation of the Online Streaming Act, which brings streaming services in Canada under the oversight of the broadcast regulator. Foreign streaming services over a certain revenue threshold are being required to make a financial contribution to Cancon (although they are challenging this in court) and may be required to promote Cancon on their services (“discoverabilty). The CRTC cannot impose broadcast quotas on an à la carte streaming service, whether domestic or foreign, thus the financial contribution and likely discoverability requirements. The survival and promotion of Canadian content, both domestically and internationally, is at the core of the legislation. Thus, the CRTC’s new definition of Cancon is very relevant.

If you thought the definition was going to get simpler, think again. However, it has been updated to incorporate new positions in productions, like a showrunner, plus those responsible for costume design, make-up artists, and hair artists. But not all productions, especially those in Québec, have all these positions, especially the new category of showrunner. As a compromise, having a Canadian showrunner will be worth an optional 2 bonus points, but if you don’t have one you won’t be penalized. What exactly is a showrunner? There is a lengthy CRTC definition related to the position being the creative leader of a production, managing the production process etc. With respect to costume design, make-up and hair artists, if collectively all these positions are filled by Canadians the production will garner another bonus point. If a production does not utilize all of these positions, it must fill the ones that it does with Canadians to get the optional point. Is Canadian makeup and hair design different from non-Canadian? I wouldn’t have thought so, but there you go. As I said, it is an industrial policy as much as a cultural one.

Here is another example of what is starting to look like very much like a Rube Goldberg machine, with add-ons, exceptions, secret doorways and special conditions. For animated productions, the Commission will now award 2 points (instead of 1 point) for each of the key creative positions Director, and Scriptwriter and Storyboard Supervisor, when filled by Canadians. There are various other tweaks; for animated productions, the Commission will award the points noted below for the following key creative positions, when filled by Canadians; Director (2 points; previously 1 point); Scriptwriter and Storyboard Supervisor (2 points; previously 1 point); and First Voice (or first lead performer) and Second Voice (or second lead performer) (1 point each; previously 1 point for one or the other, but not both). It goes on. For animated productions, the Director OR Scriptwriter and Storyboard Supervisor, and either the First Voice (or first lead performer) OR Second Voice (or second lead performer), and Key Animation AND Camera Operator must be Canadian. There’s more, adding Visual Effects Director and Special Effects Director to the list of key creative positions in a film, adding one bonus point if both are Canadian.

If all this has your head spinning, be assured that this stuff is of intrinsic interest to the industry but of not much relevance to Canadian consumers. What Canadian consumers want are Canadian stories in Canadian settings. On this score, there is a bit of a breakthrough, recognizing the importance of these factors for the first time. It is only a small opening but is the first time that location depicted in a film has been included as a factor in assessing Canadian content, as well as points for the source of the story.

The Commission will award 1 bonus point where identifiable Canadian characters and identifiable Canadian settings are included in a production, but all lead characters (up to 5 main fictional characters in dramatic productions) must be identified as Canadian or members of First Nations, Inuit or Métis in Canada and all persons on screen in non-dramatic productions (presenters, musicians, dancers) might likewise be Canadian, First Nations, Inuit or Métis (as if the latter were not, by definition, Canadian). As for location, “The location of the story must be set in Canada. The story or narrative must take place entirely in an identified Canadian city/region/province/territory. The location can be identified by a Canadian landmark or by identification on screen or otherwise identified overtly in the narrative or text of the program.”

All this for one lousy point! If you want to incorporate a visual reference to a place outside Canada (for example, one’s homeland for immigrant Canadians) could you do it in a dream scene if the dreamer’s bedroom has a shot of the CN Tower through the window. Not clear. But it is a start toward recognizing that settings, characters and stories are relevant to Cancon. A bonus point will be awarded for a production based on a Canadian story and another point for using Canadian music.

Finally, on the copyright front where the current CAVCO policy requires a Canadian to control the copyright for 25 years, there is mixed news. In a recent blog post, I argued that the CRTC should not impose a Canadian copyright restriction if the goal is to get foreign streamers to produce more Cancon for distribution abroad. Content is softpower. Content exported abroad not only helps cover the cost of production, it projects an image of Canada to the world through Canadian stories. To penalize foreign producers by preventing them from acquiring copyright in productions they have financed or partially financed, should they wish to acquire it, is shortsighted in my view. The CRTC took account of this concern but also had to listen to the instructions it received from government requiring it to consider the need to support Canadian ownership of intellectual property.

The end result is a compromise; Canadians must retain at least 20% of the copyright ownership in a program. In other words, up to 80% of the copyright in a production can be held by a foreign enterprise. In such cases, however, the production must accumulate at least 80% of possible points and the director and screenwriter must be Canadian. Where there are greater degrees of Canadian copyright ownership, some of these requirements are relaxed. There will be no minimum copyright retention period. A recent blog on MediaPolicy.ca goes into more detail on this.

Finally, there is the question of AI, just about the only point in the CRTC decision picked up by the mainstream media. The new positions created to increase the point count have to be staffed by humans, not AI. The rest of the CRTC package was likely too difficult to compress into something readable for the average news consumer.

What does this all add up to? An incredibly complex and bureaucratic system yet that is, believe it or not, a bit more flexible with respect to defining Canadian content than previously. It is a result of the classic compromises that must be made between idealism and reality, between promoting Canadian content in a bubble and ensuring its presence in the real, competitive world. It attempts to strike a balance between heavy lobbying by domestic constituencies such as Canadian independent producers and licensed broadcasters, and the foreign streamers that increasingly dominate the market. It tips the balance a bit more toward being a cultural than an industrial policy, but from the point of view of the average Canadian, is about as arcane as a bureaucratic process can get.

As noted, it is a Rube Goldberg machine with many levers needing to be pulled to get to the desired end, often by the most complicated route possible. But the Commission had little choice given that the current Cancon policy was clearly outdated. Maybe at the end of the day, we will actually get more recognizable Canadian content that finds audiences both domestically and internationally, on a variety of platforms. And while purist Canadian nationalists may disagree, if the new policy encourages additional investment in Cancon from the streamers, that can only be a benefit to Canada.

© Hugh Stephens, 2025. All Rights Reserved.

If anyone is not familiar with Rube Goldberg and his penchant for drawing overly complicated solutions to simple problems, this link will provide more detail.

We need more Canada in the Training Data, but through Licensing not Loopholes

Canada Has a Choice When it Comes to AI Training Content

Scrabble tiles arranged to display the words 'LOOPHOLES' and 'LICENSING' on a game board.

Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa has argued, in an appearance before the Heritage Committee of the House of Commons, that “we need more Canada in the training data”. He is absolutely right, but just not in the way he proposes. Dr. Geist is what I would call a well-known skeptic when it comes to the intrinsic value of copyright, a copyright “minimalist” if you will (probably an understatement).

With respect to the unauthorized and uncompensated use of copyrighted content for AI training, he states that “in the context of AI, the application of copyright isn’t clear cut. The outputs of AI systems rarely rise (to) the level of actual infringement given that the expression may be similar or inspired by another source, but it is not a direct copy of the original.” Whether the outputs mirror the inputs is not the sole issue. In some cases, such as when music and images have provided the inputs, they do. This is an infringement of the reproduction right, and likely also an infringement of the distribution right and the right to produce a derivative copy (under US law). In Canada the right to create another work from an original work comes from the right of adaptation. However, even without a mirrored output, full reproduction still takes place at the input stage, creating an infringement unless the copies meet a fair dealing purpose and fulfill fair dealing criteria, even if the copies are later deleted. As Keith Kupferschmid, CEO of the Washington DC based Copyright Alliance has pointed out in a recent blog post discussing the copyright principles that apply in AI training cases,

“Some people mistakenly believe that in order to establish an infringement during the input stage, the copyright owner needs to establish substantial similarity between the ingested copyrighted work and AI-generated output and if no substantial similarity exists there is no infringement in this stage. That is incorrect.”

Even without mirrored outputs, full non-transitory copies of copyrighted works are being made at the ingestion stage of AI training. That is an infringement, just as making a photocopy of a complete work, such as a book, would be an infringement unless covered by an explicit exception such as preservation purposes by a library or archive. 

Dr. Geist’s second line of argument is that if Canada makes it more difficult or costly to develop large language models, AI development will shift outside the country. This is a tried-and-true but tired pretext frequently employed by those seeking to justify the appropriation of copyright protected content in the name of “innovation”, as I pointed out in an earlier blog post. (CanLII v CasewayAI: Defendant Trots Out AI Industry’s Misinformation and Scare Tactics -But Don’t Panic, Canada). This is a race to the bottom, throwing the content industry under the bus on the pretext that everyone is doing it, even though that is untrue. One provision that has been selectively incorporated into the laws of some jurisdictions, like the UK and the EU, is an exception for “text and data mining” (TDM). Dr. Geist states this is why Canada also needs to introduce a similar statutory exception to promote AI.

However, not everyone is engaged in this race to the bottom. In fact, there are increasing doubts that establishing a statutory TDM exception for AI training is the best way to go. Australia has just firmly rejected the creation of a TDM exception in its copyright law even though it is also grappling with the same issue of how to incentivize AI training and research in that country. The UK’s current TDM exception is limited to non-commercial research purposes and in the face of strong opposition from its creative sector, Britain has put proposals to expand TDM on hold. Even the EU’s TDM law, which has two aspects, one limiting the data mining to non-commercial scientific research conducted by scientific research organizations or cultural heritage institutions while the other is a general purpose TDM that is open to commercial organizations, has guardrails. These include an opt-out provision whereby rightsholders can block ingestion of their content through technical measures, contract provisions or other means, in which case the TDM exception does not apply.

While opting-out by rightsholders is one way to limit the damage of unrestricted text and data mining, this is controversial because it places the onus on the rightsholder to take action whereas normally a party wanting to use someone else’s property would have to obtain permission in advance. Opting out is not a preferred solution for the creative community. It doesn’t work well in practice as rightsholders often lack the technical means or awareness to apply their opt-out rights. Because of this, the European Parliament’s Committee on Legal Affairs has just published a study examining how generative artificial intelligence interacts with European Union copyright law. The study recommends moving from opt-out to opt-in for rightsholders.

Thus, far from TDM being or becoming the norm, it is being rejected or constrained in a number of countries where the AI industry has been pushing it as the ultimate solution. The Canadian creative community, like the creative sector in Australia,  has spoken out strongly against introducing a TDM exception into Canadian law. Indeed, there is no need to do so as licensing solutions allowing AI training and text and data mining are becoming more and more common, including in Canada. For example, the Writers Union of Canada is studying a proposed agreement between select nonfiction authors, HarperCollins, and Microsoft to license full texts for the purpose of training artificial intelligence. Licensing agreements have taken off big-time in the US and elsewhere as the AI industry begins to understand this is the safest way to protect their investments. Canadian creators risk being left by the roadside if Canada brings in a TDM exception that would allow AI developers to steam ahead, appropriating content without payment or permission and ignoring licensing requirements by hiding behind a TDM exception.  The surest way to kill a nascent and growing licensing market is to give the AI sector a TDM loophole to exploit, removing any incentive to reach licensing agreements with rightsholders.  The solution is licensing, not loopholes.

Dr. Geist stated in his testimony to the Heritage Committee that AI developers would take the view that if they had to pay for (i.e. to license) content from Canadian creators, they would simply exclude it. The record of licensing deals being reached elsewhere suggests this is completely off base. Instead, the record shows that when AI developers want reliable, curated content to make their product better than the competition, they are ready to pay for it. But they will never pay for it if they are given a blank cheque through a legislated loophole. He also claims the position of the creative community is “Don’t use my stuff”. Again, the record of licensing deals to date and in the pipeline disproves this characterization in spades. Rather than blocking use of their content, creators are saying, “If you want to use my content, let’s talk”. Finally, Dr. Geist managed to completely mischaracterize the position of the creative community with regard to licensing. He said in his testimony that creators are advocating for a change to copyright law to mandate payments for AI training use. On the contrary, the creative community is simply asking that existing copyright law not be gutted. There is no need to create a mandatory payment requirement; existing copyright law is fit for purpose in dealing with how those wishing to use copyrighted content for purposes that fall outside fair dealing can do so. Negotiate a licence.

If any proof is needed of how the creation of a loophole will kill a licensing market is, all one needs to do is look at the sorry state of educational publishing in Canada. The industry has been decimated, and many authors have lost their livelihood because of the ill-conceived educational exception that was introduced into Canada’s Copyright Act in 2012. With that loophole in place, educational institutions across the country, with the notable exception of Quebec, began to tear up the reproduction licenses they had held from Access Copyright, the copyright collective representing authors. The educational exemption as part of fair dealing criteria could still be fixed, but the educational sector, facing severe financial pressures, has a powerful lobby working against it. The financial pressures are real, but taking a free ride on educational publishers and authors is wrong.

What happened with educational publishing is a cautionary tale for Canada. It should not make the same mistake twice. The way to promote a strong AI industry, alongside vibrant content industries, is licensing, not loopholes. Building a robust AI/TDM licensing market is the way to get more Canada into the training data, not giving the AI industry a blank cheque to help itself to the proprietorial content of others. With voluntary licensing everyone benefits. AI developers get secure access to quality content; the creative sector is rewarded for its efforts and becomes a partner in developing responsible AI. It’s a shame that the Canada Research Chair at the University of Ottawa doesn’t understand this.

© Hugh Stephens, 2025. All Rights Reserved.

Australia Stands Up for its Creative Sector: A Useful Lesson for Canada and Others

Two coffee mugs side by side, one featuring the Australian flag and the other featuring the Canadian flag.

Image: Shutterstock

Australia just took an important stand in the tug-of-war being waged in many countries over whether, how and to what extent tech companies can use copyrighted content (text, music, images and so on) to train AI platforms by reproducing the content and extracting its essence without permission or compensation to rightsholders. Attorney-General Michelle Rowland has announced that while Australia will be undertaking consultations on revisions to its copyright laws to help address the needs of the AI industry, a Text and Data Mining (TDM) exception has been ruled out. Some countries, like the UK, have TDM exceptions for limited purposes (such as research and non-commercial use) in their laws while several other countries have TDM under review. Existing TDM exceptions allow reproduction of copyrighted content without the authorization of the rightsholder for research, data analysis, and in some cases for AI training purposes.

There is currently no TDM exception in Canadian law but as I noted in a recent blog post (“Canada’s Creative Sector Uneasily Awaits the Carney Government’s Next Steps on AI Training”), pressure is building from the AI sector to incorporate TDM into Canada’s Copyright Act. The government currently has yet another consultation paper on AI out for public comment and the Canadian cultural sector is organizing to protect creator’s rights, specifically calling on the Canadian government to “ensure that the Copyright Act is not modified through an exception permitting Text and Data Mining (TDM) or any other exception allowing technology developers or users to use protected works…to train generative AI systems without authorization or compensation…”. In doing so, it is taking a leaf from the book of Australian creators who mounted strong opposition to a proposal from the Productivity Commission, (PC) an independent research and advisory body created by an Act of Parliament some 25 years ago, that proposed in a report in August that Australia adopt a TDM exception. To say that this proposal put the cat amongst the pigeons would be an understatement.

The Commission has a reputation for denigrating the value of intellectual property and seeing it as an obstacle to industrial development rather than as an essential partner. In 2015 it proposed shortening the term of copyright protection from the current life of the author plus seventy years (“life plus 70”), a generally accepted international standard, to just “life plus 15”, (far lower than the Berne Convention minimum and a standard not adopted anywhere) while introducing a US-style fair use regime into Australia. There was strong pushback then, (it didn’t happen) and there was strong pushback this year (see here and here, for example) when the PC proposed introducing a TDM exception. It was particularly criticized for its lack of consultation with the creative industries in developing this proposal.

Now the Australian government has put its foot down, ruling out TDM but indicating that it will look at alternative solutions. These include examining whether to establish a new “paid collective licensing framework” under the Copyright Act for AI, or whether to maintain the status quo through voluntary licensing, clarifying how copyright law applies to material generated through the use of AI (i.e. whether there should be copyright protection for outputs produced by or with AI) and looking at the establishment of a new small claims forum to address lower-value copyright infringement matters.

It is generally accepted that AI is here to stay and will continue to need vast amounts of content for training. In most cases, copyrighted content is the kind of curated, high value work that AI developers need but until now, have preferred to appropriate without permission rather than pay for through licensing. In effect they have decided to ask for forgiveness after rather than permission beforehand. This has led to a plethora of lawsuits globally, including the recent $1.5 billion settlement that Anthropic has agreed to pay out to settle a class action suit brought by authors in the US. “Forgiveness” can be expensive. Inside the US, AI developers are arguing their copying is fair use, although at the same time they are beginning to hedge their bets by licensing content from a number of sources, ranging from media to music to image companies. Outside the US, AI companies have been beating the TDM drum, hoping that creation of wide TDM exceptions will obviate the need to negotiate with content owners. Nonetheless, voluntary licensing is growing globally. However, the surest way to kill a nascent licensing market is to give the tech industry a “get out of jail free” card by introducing a broad TDM exception. Australia has just rejected that option. Canada and others considering introducing new, or broadening existing, TDM loopholes should do the same.

It is not clear where Australia’s AI and Copyright review will end up, other than to note that it will not include TDM. As I have noted above, among other things it will be considering “collective licensing”. Collective licensing could help address the problem of remunerating individual rightsholders, in contrast to licence agreements signed between AI developers and corporate entities like media companies. However, Australia needs to steer clear of compulsory licensing which strips away the rights of copyright owners. Compulsory licences authorize use upon payment of a statutory or negotiated fee but remove the right of a copyright holder to withhold consent for use, or to impose specific limitations. A voluntary licence framework is fair to everyone. Compulsory licensing is not.

Canada and Australia have many things in common, (as well as a number of differences of course, beyond poutine vs vegemite). Among their commonalities is the desire to protect and foster a unique cultural identity in the face of global cultural homogenization. This is even more important in Canada given the realities of the struggle faced by 6 or 7 million Francophones to preserve their culture in a sea of 375 million Anglophones. Canada followed Australia’s lead (although less successfully) in requiring major online platforms to contribute financially to (i.e. pay for the use of) news media content. It should do the same by putting the idea of a TDM exception firmly to one side and instead focus on encouraging the development of voluntary licensing market for copyrighted content when used in AI training.

© Hugh Stephens, 2025. All Rights Reserved.

US Retaliation Against the Online Streaming Act: How Real is the Threat?   

Illustration of the Canadian flag overlaid with yellow caution tape labeled 'TARIFFS', featuring American flags, symbolizing trade tensions between Canada and the USA.

Image: Shutterstock

As CRTC hearings on implementation of the Online Streaming Act (formerly Bill C-11) grind slowly forward as part of the Commission’s deliberations as to how foreign audiovisual and audio (music) streaming services may be required to meet Canadian content (Cancon) and discoverability requirements, while determining the extent of their financial contribution to various funds supporting Canadian content, affected US industry players are not sitting on their hands. As you would expect, they are deploying a range of tactics to fight back using their industry associations, the Motion Picture Association (MPA)-Canada, representing Netflix, Disney, Sony, Paramount, Universal, Amazon Prime and Warner Bros. Discovery, and the Computer & Communications Industry Association (CCIA), representing among others Amazon, Apple, Google and Meta, as their vehicles of choice.

MPA-Canada is currently appealing to the Federal Court the CRTC decision that its members must contribute 1.5% of annual revenues to the Independent Local News Fund, arguing that the studios do not produce news and should not be required to contribute to a line of business in which they are not active. Apple, Spotify and Amazon are also appealing the full 5% payment on the grounds it is a tax the CRTC is not mandated to apply. The 1.5% contribution to news is part of the CRTC’s initial decision that the streamers should, as a “downpayment”, contribute 5% of revenues to fund Canadian production.  The MPA has also undertaken a lobbying campaign to point out how much its members already contribute to production in Canada, (CAD$6.7 billion in 2023, more than the CBC, Canadian Media Fund and Telefilm Canada combined) even though much of that content does not count as CanCon under current rules.

To this “positive” argument, the CCIA by contrast has added a more hard line, “negative” approach, releasing a study that calculates the amount the CRTC’s compulsory contributions will purportedly cost the US industry. Assuming the levy stays at 5% of revenues (by no means an assured outcome as Canadian broadcasters are urging the CRTC to impose contributions of 20 to 30%, similar to the obligations they face), CCIA estimates this will cost US streamers between $2.19 billion and $6.96 billion (all figures USD) by 2030. The estimate of losses is bundled with CCIA’s claim that the financial obligations constitute a violation of the CUSMA (known as the USMCA in the US) because it creates a preferential regime for Canadian content “thereby discriminating against content classified as American or from a third country”. In the eyes of the CCIA, actions under the Online Streaming Act violate the principle of “national treatment” in which Party A agrees to treat the products and services of Party B “no less favourably” than its own products and services. In support of this claim, CCIA cites the Investment and Digital Trade Chapters of CUSMA/USMCA, Chapters 14 and 19 respectively. According to CCIA, the Online Streaming Act’s “inconsistency with core trade obligations is beyond dispute”. Given this “indisputable” fact, CCIA states that “if challenged, Canada can be expected to invoke its cultural industries exception (Article 32.6) as a basis for justifying the inevitable discrimination….”

Article 32.6 is part of the General Exceptions Chapter of the CUSMA/USMCA. It states, in part, “This Agreement does not apply to a measure adopted or maintained by Canada with respect to a cultural industry…” The production, distribution, sale, or exhibition of film or video recordings as well as audio or video music recordings are included in the definition of a cultural industry. As I have written elsewhere (NAFTA and the Cultural Exception) Article 32.6, while in theory exempting defined cultural industries from the obligations of the Agreement (the NAFTA provision was essentially rolled over into the CUSMA), has a sting in its tail. If Canada applies any discriminatory measures that violate the agreement using the cultural exclusion as the pretext, the US is fully within its rights to retaliate with measures of “equivalent commercial effect”, in any sector. The CCIA’s $2.19 billion or $6.95 billion numbers need to be viewed in this context.

The first question, therefore, is would Canada need to resort to Article 32.6 to justify measures taken under the Online Streaming Act? I argued in an earlier paper I wrote for the School of Public Policy at the University of Calgary that given the current structure of the obligations, Article 32.6 would not be in play because the measures in question are not inconsistent with CUSMA, given the Agreement’s precise wording. You can read the detailed arguments in the paper, but essentially my position is that neither the Chapter 14 Investment reference nor the Chapter 19 Digital Trade provision cited by CCIA are relevant because content streaming is covered by a separate part of the Agreement, Chapter 15, Cross-border Trade in Services. The terms of the Online Streaming Act, as applied by the CRTC provide “national treatment” to foreign streaming services. In fact, they impose lesser requirements on foreign streamers with respect to carriage of Cancon than they do on Canadian streamers.

But this interpretation is only my personal view. I have no idea is this is the interpretation of the trade policy gurus at Global Affairs Canada (I haven’t spoken to them and even if I did, they would be unlikely to tell me what their position would be on a hypothetical trade case) and is almost certainly not the interpretation favoured by officials in the Office of the US Trade Representative (USTR). And certainly not by CCIA. CCIA’s position is that a show or track streamed in Canada is a digital product, (even though it describes its members as providing “streaming services”). The Agreement is clear that there should be no discrimination against digital products of the other Party i.e. they should be accorded “national treatment”, although domestic products can be subsidized. On the other hand, if streamed content is not considered a digital product (nor an investment, which according to CUSMA cannot be subject to “performance requirements” as a condition of allowing the investment) but rather a cross-border service, the conditions applicable to delivery of the service are what counts. National treatment needs to apply to service delivery, and insofar as the Online Streaming Act is concerned, it does.

Whether streamed content is a digital product or a cross-border service clearly matters. If the US brought a CUSMA trade complaint against Canada–and if the CCIA view were to prevail–Canada would either have to change the way it treats US digital products carried by streaming services or defend its actions on the basis of the cultural exception, Article 32.6. If it did the latter, it would be opening itself to trade retaliation by the US, at an equivalent commercial level. In my experience and judgement, Canada would be most unlikely to resort to the exception to justify its actions precisely because of the consequences. The US would retaliate not just against the cultural sector, but in other areas that would set one industry or part of the country against another. To avoid this, the government would instead find some other way to comply with the Agreement by modifying the offending provision (as little as possible but as much as necessary), but doing so in a way, if possible, that still met all or most of its policy objectives.

It is also just possible, however, that Canada would be prepared to absorb the retaliation, calculated by CCIA to be between $400 and $500 million annually if the CRTC mandated contribution remains at 5% of revenues. This sounds like a big number but the random way the Trump Administration has been imposing tariffs on a range of Canadian products such as steel and aluminum (50%), lumber (45%), and autos (25%), industries where Canadian exports total tens of billions of dollars annually, makes $400 million in possible retaliation seem relatively minor. In effect, Trump’s erratic punitive behaviour has normalized trade retaliation–and devalued its effectiveness as a threat. But whatever response the Canadian government took, the first step would be to determine whether Canada was in fact in violation of the Agreement. If one Party considers that “an actual or proposed measure of another Party is or would be inconsistent with an obligation of this Agreement”, it can resort to the dispute settlement process. In the first instance, this involves consultation and if no resolution is reached, sometimes the constitution of a panel to decide the issue. (CUSMA/Article 31).

The CCIA itself cannot charge Canada with non-compliance, although it can raise the spectre of retaliation as it is doing. Only the US Government can bring a complaint, and at this stage it is not clear if it would be willing to do so. Given the range of trade disputes between the two countries, including unilateral tariffs on Canadian exports imposed by the Trump Administration on the basis of specious claims that Canada is a major source of fentanyl exports to the US (last year 0.2% of all fentanyl seized at the US border came from Canada; over 90% was from Mexico), or equally questionable grounds that exports of Canadian products ranging from aluminum to kitchen cabinets pose a national security threat to the US, the bilateral trade relationship hardly needs more issues. It will depend on the extent to which the streamers in the US have the ear of the Trump Administration. Given Trump’s insistence that Canada drop its planned Digital Sales Tax if it wanted to keep the current bilateral trade talks going , it is certainly within the realm of possibility that USTR would take up the CCIA’s case.

There is one other wrinkle to the cultural exception clause. Even if Canada does not justify its actions on the basis of Article 32.6, potentially the US could unilaterally declare it considers Canadian measures to fall under that provision and move to initiate retaliatory measures. If it did so, Canada would then be entitled to demand a panel to determine whether Article 32.6 is applicable, and if so, whether the retaliation met the “equivalent commercial effect” test. However, the key issue would still be to determine whether Canada had violated its commitments under the Agreement. If there is no violation of CUSMA’s terms, the cultural exception is moot. If all this has your head spinning, welcome to the green eyeshade world of trade practitioners.

CCIA, in pushing back against the provisions of the Online Streaming Act, has resorted to the threat of trade retaliation as one more tool in its policy toolbox. That is to be expected. With this in mind, the CRTC will be carefully reviewing how much leeway it has in trade policy terms and needs to keep Canada’s CUSMA commitments in mind when implementing policy. In a following blog posting I will outline what I think Canada and the CRTC need to consider.

© Hugh Stephens 2025. All Rights Reserved.  

Canada’s Creative Sector Uneasily Awaits the Carney Government’s Next Steps on AI Training

Blasting a Wide TDM Hole in the Structure of Copyright is Not the Answer

A cartoon-style illustration showing a fist breaking through a brick wall labeled 'COPYRIGHT', with the fist wearing a band labeled 'TDM', surrounded by explosive graphical effects.
Image: Author (via DALLE-E)

The ongoing wrestling match-cum-dance between the creative sector and AI developers over the uncompensated and unauthorized use of copyrighted content for AI training is being played out in different ways in different countries. In the US it is largely a legal play in the courts at the moment, with mixed results for both sides. However, President Trump has made concerning public comments siding with the AI industry, saying it is impractical for AI developers to pay copyright holders for AI training (and besides, China doesn’t do it). Congress is still considering its options. In Australia, the Productivity Commission, never a friend of intellectual property, has just issued an interim report recommending the adoption of a Text and Data Mining (TDM) exception in Australia to boost development of the AI industry locally. The Australian creative sector mobilized quickly and has pushed back hard against this proposal, with the government now saying that it has no plans to amend the Copyright Act. In the UK, where there is a TDM exception but only for non-commercial purposes, the Starmer government quickly adopted a pro-AI strategy, part of which was to propose an expansion of TDM to include commercial purposes, although subject to an opt-out for rights-holders. That ignited a major storm among leading British creatives from Paul McCartney and Elton John on down. Through a unified campaign, British creators were able to gain support in the Upper Chamber (House of Lords) to slow down the legislation. As a result, the TDM issue has now  been earmarked for further consultation and study. One thing is certain, the creation of a wide TDM exception is a sure way to stifle a nascent but rapidly developing licensing market for copyrighted content used for AI training.

It seems as if TDM, or more permissive TDM, is testing the boundaries of copyright just about everywhere. So, what about Canada? Canada has no TDM exception in its copyright law and, unlike the US, has clearly defined fair dealing exceptions that do not lend themselves to expansive court interpretation. Like other countries, it is trying to figure out how to not get left behind as the AI race accelerates. Canada initially had a first mover advantage in terms of AI research, given the work of Geoffrey Hinton, Yoshua Bengio and others, but recently it has been falling behind, notably lacking native startups. The cluster effect is not happening, with Canadian innovation going elsewhere for commercialization. To address these challenges, the new Carney government has appointed a dedicated Minister of Artificial Intelligence and Digital Innovation, former journalist Evan Solomon. This is the first time such a position has existed. One of Solomon’s first acts was to accelerate launch of an AI strategy beginning with a new consultation released on October 1 (closing at the end of this month), in the form of a survey to “help define the next chapter of Canada’s AI leadership”. This survey asks many relevant questions regarding AI and how it could be best developed in Canada but manages to mostly steer clear of the thorny question of AI training and copyright. The only question tangentially related to this issue is the following;

“Which infrastructure gaps (compute, data, connectivity) are holding back AI innovation in Canada, and what is stopping Canadian firms from building sovereign infrastructure to address them?”

Clearly this consultation is not going to turn over the TDM rock, at least not directly.

In the past couple of years, the government has issued two consultation papers on AI, one in 2021 and another last year as well as a “What We Heard” report. This report, issued earlier this year, summarizes the “great divide” between AI developers and the content industry. It’s first observation was that “Creators oppose the use of their content in AI without consent and compensation” but then goes on to say that “User groups support clarifications that TDM does not infringe copyright”.

After a couple of other observations about the centrality of human authorship and the need for transparency surrounding the use of copyright-protected works in the training of AI, the paper observed that there is “no consensus about whether existing legal tests and remedies are adequate”. That is the nub of the issue. There is no consensus, and while the courts are struggling with this issue (including in Canada, as I wrote about here and here), what Canadian creators fear is the introduction of a wide TDM exception in the name of maintaining “Canadian competitiveness”.

The launch of the new AI strategy and the evolution of the way in which copyrighted content is described in government consultation documents is indicative of the pressures on the government to shore up Canada’s AI strategy. It is interesting to note the shift in the definition of TDM from 2021 to today.

The definition provided in the 2021 consultation document described TDM as follows;

“The process of conducting TDM may require the making of reproductions of large quantities of works or other copyright subject matter to extract particular data and information from them. This process may be carried out using scientific or text-based data, as well as images, sounds, or other creative works.”

In the most recent consultative document, that definition has evolved;

“Text and data mining (TDM) consists of the reproduction and analysis of large quantities of data and information, including those extracted from copyright-protected content, to identify patterns and make predictions.”

Note the shift from “works” to “data”.[i]  It’s a subtle difference but is hugely significant because data and facts are not protectable under copyright whereas the creative elements of original works are. The cultural sector is rightly concerned.

The Coalition for the Diversity of Cultural Expressions (CDCE), a major arts and creatives lobby group, is currently pressing Ottawa on a number of cultural issues, including AI. Among its AI asks are to;

  1. Ensure that the Copyright Act is not modified through an exception permitting Text and Data Mining (TDM) or any other exception allowing technology developers or users to use protected works…to train generative AI systems without authorization or compensation;
  2. Adopt national legislation on generative AI that requires developers of generative AI systems to disclose the training data they use; and
  3. Adopt legislative provisions requiring public identification of content that is purely AI-generated.

Against these demands is the pressure coming from AI advocates who will argue that if the US loosens restrictions on use of copyrighted content for AI training, Canada will have no recourse but to follow. In other words, as goes the US, so goes Canada (or for that matter, the UK, Australia and others). Thus, what is happening in the US courts, and perhaps in Congress, is of critical importance for the creative sector everywhere including, in particular, Canada.

The issue of AI training on copyrighted content will need to be resolved sooner or later. Licensing solutions are developing quickly and if Canada can wait a bit longer it may be able to adopt licensing as the preferred solution (although the “What We Heard” report noted that “Some (intervenors) argued that licensing is an unnecessary burden because it may not be clear that copyright is engaged or that works used in TDM are being reproduced in the first place.”). There is pressure on the Carney government to take early action since AI industry developments are moving at lightning speed. With the TDM train gaining momentum in Canada and elsewhere, Canadian creators are understandably uneasy about what is likely to happen next.  

As the CDCE notes, culture is a major economic and social pillar in Canada. In 2023, it generated $63.2 billion in value added and employed 669,600 people. Throwing all that under the bus in the name of remaining competitive on AI is a flawed choice, a point also made by the creative sectors in the UK, Australia and elsewhere. However, with the AI horse well out of the barn, copyright cannot be seen as an obstacle to innovation, an accusation freely levelled at it by some in the AI industry. Rather, it must be seen as a partner in innovation, which is where licensing comes in.

Blasting a wide TDM hole in the protection and incentive structure that copyright provides the creative sector is not the answer. The creative sector is watching and waiting anxiously.

© Hugh Stephens, 2025. All Rights Reserved

[i] I am indebted to Erin Finlay, partner at Stohn Hay Cafazzo Heim Finlay LLP for drawing these changing definitions to my attention

Canada and the Digital Services Tax (DST): A Humiliating Climbdown to Mark Canada Day

A black coffee mug with the text 'Proud Canadian from Eh to Zed' and decorative moose antlers, displayed on a shelf.

Photo: Author (in Agnew’s General Store, Wilberforce, ON)

Mark Carney’s first Canada Day as Prime Minister (Canada’s 158th) was supposed to mark a milestone; the end (or at least the beginning of the end) of federal-provincial trade barriers, the enactment of legislation to fast-track major projects, and passage of tax relief. All were achieved by the July 1 deadline, no small feat for just a couple of months in office. But just two days before Canada Day, one more action took place that Mr. Carney surely had not planned for when celebrating the birthday of the True North Strong and Free. This was the decision to rescind Canada’s Digital Services Tax (DST) late on Sunday, June 29, after a phone call between Carney and President Trump, subsequent to Trump’s post on Truth Social that he was immediately suspending trade and security negotiations with Canada owing to the imminent imposition of the tax. The DST, enacted into law in 2024 but with an 18 month “advance notice” period prior to actual implementation was supposed to go into effect on June 30, with taxes owing backdated to 2022. It was estimated that companies like Google, Amazon, Uber, META, AirBNB and others were on the hook for back payments of about two billion dollars, with more to come in future years. Not surprisingly, these companies weren’t happy and enlisted the support of the Trump Administration, as indeed they had sought support from Joe Biden earlier.

The DST was controversial in Canada. It was opposed by, among others, the Canadian Chamber of Commerce and the Business Council of Canada. Reasons for opposition were several; it was a tax that the tech giants and could and would pass on to consumers (Google has already imposed a 2.5% “digital tax” on its customers to compensate for the anticipated impact of the DST—don’t count on getting that money back), but the main argument against the DST was it painted a big target on Canada’s back. The DST had already attracted significant opposition from the tech industry in the US during the Biden Administration and was certain to provoke an unpredictable Donald Trump at a time when disruption on the Canada-US trade file was already endemic.

Is important to remember what the DST is and why it is on the tax agenda. It is not a sales tax, nor a tax on profits. It is a three percent tax on revenues generated in Canada from specific services provided by large digital companies that have global operations. In the case of Canada’s DST, companies that are “in scope” to pay the tax must earn a minimum of $20 million in revenues in Canada from specified services such as sales of digital advertising, online marketplaces, social media services or sale of user data (significantly, however, not content streaming), plus have worldwide income of more than 750 million Euros, about one billion CAD. Canada’s DST legislation was passed in 2023, came into force on January 1, 2024 (when taxes began accumulating retroactive to January 1, 2022), with first payments due on June 30, 2025. Due, that is, until it was announced, just a few hours before the payment deadline, that the legislation would not be enforced and would be ultimately rescinded. The fact that legislation duly passed by Parliament that had been in force for a year and half could be rescinded within 48 hours of the US President opposing it in a “tweet” says it all. How did Canada paint itself into this corner from which there was no reasonable escape?

It is important to note that the Canadian legislation, as well as DST legislation in other countries, does not specifically name US tech giants as the targets, (a small number of Canadian companies would have also been required to pay the tax in Canada) but targetting the “GAFAMs” (Google, Apple, Facebook, Amazon and Microsoft etc.) is the import of digital service taxes generally. This is because these are the companies that dominate the digital space–and which have been accused of manipulating profits to minimize and avoid paying tax in countries where their revenues are generated. It is argued that having disrupted the business environment (by upending the advertising market, for example), the companies should at least contribute tax revenues in the jurisdictions where they have a digital presence. It is no secret that most of these companies have exploited the fact they have little or no physical presence in many of the countries where they generate significant revenue. Although headquartered in the US many of them have set up offshore operations to conduct their global business, ensuring that their operations in third countries are barely profitable. This allows them to pull back the proceeds to the low-tax offshore jurisdiction (like Ireland) from where they ostensibly conduct international operations.

Profitability is reduced by legal techniques such as charging high fees to the local subsidiary for its use of the intellectual property in the technology platform, thus ensuring that profits are attributed back to the office registered in the tax shelter location. It is no accident that if you book accommodation through AirBNB in Canada, your payment goes to AirBNB Ireland, 8 Hanover Quay, Dublin. Your refund, if any, comes from the same source. The Library of Parliament published a detailed research paper on the tax avoidance phenomenon in 2020. To counteract these manoeuvres governments have deployed various measures to plug the loopholes. One of these is a tax on revenues instead of profits. Note however that it is a blunt instrument because it captures the just and the unjust alike. A company may have low profits for a variety of reasons, such as being in start up phase, not just because of tax avoidance. Additionally, it is normal when DSTs are applied that no credit is provided for other taxes paid, disincentivizing good tax behaviour.

Be that as it may, the DST is one way for governments to fight tax venue shopping by multilateral corporations engaged in digital trade, although it is not the preferred way of dealing with the problem of tax avoidance. Since 2013 the OECD, ostensibly with US cooperation, has been trying to find a multilateral solution that would provide for an agreed reallocation of digital revenues, as well as application of an alternative minimum tax. However, since this could result in it losing out on some revenues that would be dispersed to other countries, the US has slow walked the process. While the Biden Administration agreed in principle, it did not submit the OECD “Global Tax Treaty” to Congress for fear of defeat. On assuming office in 2025, Donald Trump tore up all previous US commitments to the OECD tax reform process.

In 2021, an interim agreement was reached. The US agreed to continue to engage in the treaty negotiations provided that other countries contemplating introduction of a DST agreed to pause implementation (ie. there would be a moratorium on the introduction of new DSTs) pending conclusion of a final agreement. However some countries, notably Austria, France, Italy, Spain and the UK, had already implemented a DST and were therefore “grandfathered”. Thus, they enjoyed the tax revenue from digital companies all the while the OECD was dithering over next steps. Canada looked on with envy.

Canada appears to have felt it missed the boat by not introducing legislation earlier (it was first mooted by the Trudeau government in 2019), which would have allowed it to benefit from grandfathering. The Canadian position was that it would introduce legislation only if the OECD treaty process did not move forward as planned (which is what happened in 2023, when it stalled). While agreement was not reached, there was broad consensus on extending the DST moratorium. Canada opposed an extension, the only OECD member to do so. It then proceeded to introduce its own DST legislation, backdated to 2022 (to capture the revenue it thought it should have been receiving all along), with collection including arrears to begin on June 30 of this year. No doubt the anticipated $2 billion in revenue had already been “booked” by the Department of Finance against the budget deficit.

On one plane—the fiscal plane–this all makes sense. However, looked at from the perspective of Canada-US trade relations, it was asking for trouble. Why be the “tall poppy” when you could stick with the pack and wait out the process, especially given the asymmetry in Canada-US economic power and Canada’s dependence on the US market? Why impose an ill thought-out retroactivity provision? Why be the threatened breach in the DST dam, inviting a disproportionate response to head off others who may have the same idea? Add in the re-arrival of Donald Trump on the political scene and you have a crisis waiting to happen.

Although the implementation of the DST at the end of June, 2025 had been well publicized for a couple of years (and was the subject of a USMCA/CUSMA dispute settlement case under the Biden Administration), it seems to have only caught Donald Trump’s attention on the eve of the scheduled implementation date. Coming right in the middle of an agreed 30-day self-imposed window to reach a bilateral agreement, a timeframe agreed between Carney and Trump at the G7 summit earlier in June, Carney had no choice but to back down. The DST was not the hill to die on.

How did the government allow itself to be so backed into a corner that craven capitulation was the only reasonable outcome? Why not simply suspend the DST’s implementation for a few weeks, kick the can down the road and roll the DST into the bilateral agreement? At worst, use it as negotiating coinage. My guess is that it would likely have ended up on the cutting room floor but at least that concession could have been potentially offset against some other issue of benefit to Canada in the new agreement. What has happened now is that Canada has given up a key card simply for the privilege of being able to stay at the table with the US. What is to stop Trump from announcing next week that something else has to go or else negotiations will end? With his zero-sum approach to negotiations, he could in theory continue to pry concessions out of Canada item-by-item well before any deal is reached, if one is reached at all. It used to be that “nothing is agreed until everything is agreed”. This has now been changed to allow the dominant partner to cherry pick concessions just for the “concession” of keeping talking. We have gone from “elbows up” to “hit me”.

This is the lesson, if any was needed, as to what happens when you are dealing with someone like Donald Trump who has never heard of “principled negotiation” (defined by Google’s AI Overview as “a collaborative approach to conflict resolution that focuses on finding mutually beneficial solutions while preserving relationships”) or “win-win”. It’s all about raw power and today’s deal.

No sooner was the announcement made about rescinding the DST than the pundits jumped in. The University of Ottawa’s Michael Geist crowed that the government had “caved” (on this he was right) and went on to point out all the times in the past he had warned the government this would happen. If there was ever an “I told you so” moment, this was it. (Gee, Michael, if only they had listened to you). He offers the obvious point that the US tech industry doesn’t like paying taxes, especially to little old Canada, so be careful how hard you poke the bear, but offers no solution as to how to deal with the tax avoidance issue. Mind you, as far as I can tell, there has never been much daylight between Dr. Geist’s positions and those of the US tech industry, so I am not surprised. On the other hand, Canadian nationalists like former Foreign Minster Lloyd Axworthy (a member of the same Liberal Party as Mark Carney no less!) called it “forelock-tugging diplomacy”. Commentators Perrin Beatty and Fen Hampson appropriately described it as an “own goal we could do without”.

Personally, I had hoped for a better strategy from this new government. There is no need to gratuitously pull the eagle’s feathers but at the same time, recognizing reality, ensure that when you pick a fight, you don’t find yourself alone in the corner. Or if you have to be pummelled, make sure it is about something fundamental, not just stubbornness over the means of bringing the tech giants to heel. Canada still needs to deal with both disruptions to Canada-US goods and services trade as well as how to appropriately regulate and tax digital services. Caution and realism are important watchwords, but so is sovereignty.  Let’s learn a lesson from this sad chapter and do better next time.

© Hugh Stephens, 2025. All Rights Reserved

The Online Streaming Act Was Already Complicated and Controversial Enough, But Now Quebec Enters the Fray (No Surprise: It’s Happened Before)

An illustration depicting a tug-of-war scenario, featuring a Canadian flag on one side and a Quebec flag on the other, symbolizing the cultural and political tensions between Canada and Quebec.

Tug of War Image: Shutterstock (modified)

Welcome to Canada, where the difficult can become the intractable when you add the inevitable additional ingredient of federal-provincial politics to any policy issue. Throw in the survival of the French language and Quebec culture in Canada and you have another classic Canadian drama. How to ensure that in protecting majority interests you don’t damage minority interests, or put another way, how to govern in the national interest without making a special exception for Quebec that will undermine the federation, especially now that some other provinces, such as Alberta, are playing the “Quebec card”. It has always been a delicate dance to keep the two linguistic groups rowing in the same direction, often accomplished by providing concessions to Quebec that have managed to meet its unique needs while maintaining provincial interoperability and minimum national standards. The latest challenge is broadcasting, or more specifically, streaming—which may or may not meet the definition of broadcasting.

It has been a well-established principle for decades that broadcasting in Canada is regulated by the federal government, although this was initially contentious (as it is once again). Perhaps not surprisingly, the original challenge came from Quebec which passed its own Broadcast Act in April 1929, before any federal legislation in the broadcast space had been enacted. A Royal Commission on Radio Broadcasting had been established by the federal government the year before to examine British and US systems (one leaning heavily toward a national public broadcaster, the other taking the lightly regulated commercial broadcasting route). Quebec quickly seized the initiative before any recommendations were issued by passing its own legislation. The Royal Commission’s findings, known as the Aird Report after Chief Commissioner Sir John Aird, former President of the Canadian Bank of Commerce, were finally issued in November of 1929.

That report recommended a public broadcasting system and laid the foundations for the establishment of the CBC/Radio-Canada. The stock market crash and ensuing Depression delayed action, along with a change of government, but by 1931 the R.B. Bennett government was ready to act. Quebec further forced the issue by passing a provincial Radio Act relating to licensing of receivers and transmitters. The federal government then referred the jurisdictional issue of broadcasting to the Supreme Court of Canada which ruled, 3-2, that broadcasting was a federal responsibility under Section 92(10)(a) of the BNA Act on the grounds that broadcasting was an undertaking, like the telegraph, that extended beyond provincial boundaries. Quebec appealed, but the Privy Council in London upheld the Supreme Court’s decision. The Bennett government then established the Canadian Radio Broadcasting Commission (CRBC), the forerunner of both the public broadcaster, the CBC, and the broadcast and telecoms regulator, the CRTC (Canadian Radio-Television and Telecommunications Commission). Originally national broadcasting was in both official languages but to meet criticisms from Quebec, the CRBC launched French language programming unique to Quebec in 1934, marking the beginning of Radio-Canada’s French language service. An excellent summary of the history of Canadian broadcasting, produced by the Canadian Communications Foundation, can be found here.

Given the fractious history over who should regulate the airwaves, particularly given the importance of communications when it comes to cultural and linguistic identity, it is not surprising that differences have arisen with regard to streaming. The key question is whether streaming constitutes broadcasting. The federal regulator, the CRTC, has always maintained that mass communication transmitted digitally (new media) is a form of broadcasting although for many years it declined to regulate it on the grounds that there was no current need and that regulation might stifle innovation. In 1999, it issued a New Media Exemption Order, the main conclusion of which stated;

“…pursuant to subsection 9(4) of the Act, the Commission exempts persons who carry on, in whole or in part in Canada, broadcasting undertakings of the class consisting of new media broadcasting undertakings, from any or all of the requirements of Part II of the Act or of a regulation thereunder. New media broadcasting undertakings provide broadcasting services delivered and accessed over the Internet,…”

The Exemption Order was extended in 2009, but all that changed with the introduction in 2023 of the Online Streaming Act. That legislation amended the Broadcasting Act to specifically bring streaming content under the purview of the regulator, thus allowing the application of many provisions regarding streaming content, a number of them controversial. In particular it extends CRTC authority over foreign based streamers distributing programming in Canada. While the legislation gave authority to the CRTC (the Commission) to implement key parts of the Act, this will be a slow process as extensive hearings are required. Nonetheless, the Commission fired the first shot almost exactly a year ago, even before hearings had commenced, by requiring “base contributions” of 5% of Canadian revenues from (mostly foreign) streaming services for the creation of Canadian content, including funding to support local news broadcasting in Canada. This occurred prior to the CRTC’s review of how to define Canadian content, and determining who is entitled to claim a Canadian content credit for its creation. In the meantime, the foreign streamers have gone to Federal Court to fight the mandatory “contributions”, and so far not a nickel has been paid.

Another element of the CRTC’s deliberations will be deciding how to implement measures to ensure “discoverability” of Canadian content on streaming platforms. “Discoverability” in a broadcasting/streaming context goes beyond the plain English use of the word. Canadian Heritage (now the Ministry of Canadian Culture and Identity) has published a whole research paper on the technical aspects of discoverability. The paper offers a general definition (“…how content can stand out in order to reach an audience in a universe of hyper choice, where the catalogues of major cultural dissemination platforms offer tens of thousands of titles and products to users..”), but then goes on to point out the difference between content discoverability based on actions aimed at target audiences (such as highlighting certain content), and the use of technical tools or automated systems to showcase content and make it more findable (such as modifying or influencing algorithms). In short, it is a complex issue.

Discoverability was one of the most controversial and misinterpreted aspects of the Online Streaming legislation, then known as Bill C-11. Amendments introduced during the legislative process to encompass user-generated content, requiring that from a platform perspective it too be subject to the discoverability rules, were wildly and inaccurately criticized as internet censorship. Some groups purporting to represent the creative and user communities criticized the discoverability requirements as interfering with market forces and altering algorithmic results. But the Bill passed, including the discoverability requirements, the details of which remain to be established by the CRTC. While this process is underway, Quebec just threw a grenade into the room through the introduction of its own legislation, Bill 109, ”An Act to Affirm the Cultural Sovereignty of Québec and to Enact the Act Respecting the Discoverability of French-Language Cultural Content in the Digital Environment.”

Michael Geist of the University of Ottawa has described the Quebec bill as “unconstitutional, unnecessary and unworkable”, which is a pretty damning but largely accurate indictment. The problem that Quebec is trying to address, as MediaPolicy.ca blogger Howard Law has pointed out, is the “drastic underconsumption of French-language music on streaming platforms, a stunning 4.6 per cent of the top 10,000 song streams in Quebec, a province that is 80 per cent native French speakers.” Compare this to the French-language content requirements imposed by the CRTC on French-language radio stations. These stations must devote at least 65% of all popular music broadcast each week to French-language selections. The CRTC policy, whether it is Canadian content or French-language content, is based on the same premise; if you don’t require a minimum of Cancon/French-language content, the stations will default to non-Canadian, non-French language content. This will deprive Canadian anglophone and francophone artists of exposure and hinder development of “desirable” cultural content. And possibly contribute to weakening the French language in Quebec.

The cultural libertarians would say, so be it. If quotas are required to ensure that Cancon or French-language content gets consumed, then maybe it is not worth listening to or watching. Let the consumer decide (which is essentially how streaming works; the consumer chooses what to consume rather than consuming what is offered). The counter policy argument is that the content industry is so dominated by (take your pick; Hollywood, the major US labels, English language content, etc) that countermeasures are required to balance the playing field and ensure that local cultural content has a chance to breath before it is suffocated by the dominance of outsiders. In a society like Quebec, that represents roughly 7 million francophones in a sea of well over 350 million anglophones in North America, this is an especially critical issue. Will regulating discoverability requirements change the listening or viewing habits of Quebecois, especially young people. I have my doubts, but what is the alternative?

Governments regulate markets in many ways for the greater good, so why not cultural content? In Canada, the whole premise of broadcasting (going back to the 1920s and 1930s), and now streaming, has been to preserve and encourage Canadian voices, whether they be anglophone or francophone. How that should be done and who should do it has always been a tricky question and at times has required a delicate balancing act, sometimes between Canada and the United States, and sometimes between the Canadian federal government and Quebec. It would seem that we are in the midst of another one of those moments. Quebec’s desire to put its thumb on the scale to protect the French language is not new and should not be a surprise, although whether Bill 109 is constitutionally legal and, if it is, whether it will be effective, are valid questions. But we have been here before. As I said at the outset, welcome to Canada.

© Hugh Stephens, 2025. All Rights Reserved.

Copyright, Cultural Issues and Canada’s General Election, 2025

Image: Shutterstock (AI generated)

As we complete the first few days in what is the shortest election campaign in Canadian history, the minimum 37 days required by law, where do the copyright and cultural industries stand with respect to electoral platforms and public consciousness? Given the overwhelming focus on dealing with economic and even potential political disruption coming from south of the border, along with traditional bread and butter issues like the cost of living, especially food and housing, one could be tempted to say that cultural and copyright issues are largely invisible. Party platforms have not yet been released (and are probably still being worked on) and by the time they are made public, the election will be well underway. So while there still may be a couple of small references to copyright issues in party platforms (as occurred in the 2021 election, none of which led to any substantive legislation), they will simply be part of a laundry list of possible actions in many disparate areas. However, that has not stopped the cultural sector from outlining its policy proposals, which have been laid out articulately by the Coalition for the Diversity of Cultural Expressions (CDCE), an umbrella group that represents more than 350,000 creators and artists, and more than 3,000 cultural enterprises. Despite the fact that copyright issues are not at or even near the top of the agenda, there is a strong undercurrent of Canadian nationalism in this election that will inevitably have an influence on policies in the cultural sector.

In 2021 the governing Trudeau Liberals included a promise to “protect Canadian artists, creators and copyright holders by making changes to the Copyright Act including amending the Act to allow resale rights for artists”. They were re-elected but did nothing. The Conservatives for their part undertook “recognize and correct the adverse economic impact for creators and publishers from the uncompensated use of their works…”. They weren’t elected so the commitment was meaningless. This time proposed changes to copyright legislation are unlikely to move the needle for any party although the issue of the unauthorized use of copyrighted content to train AI still needs to be resolved, since AI will become a front-burner issue for any party elected. The CDCE’s paper addresses this issue, among others, in its 9 recommendations. Broken down into 4 buckets, the CDCE’s proposals address (1) International Trade and Cultural Sovereignty (2) Broadcasting and CBC/Radio Canada (3) Copyright and (4) Artificial Intelligence and Culture.

The CDCE proposal under “International Trade” is to insist that the cultural exemption clause be retained if the CUSMA/USMCA is renegotiated, and that cultural activities, goods and services be excluded from all future agreements. The cultural exemption clause, (Article 32.6 of the CUSMA) is based on a similar exemption in NAFTA and the original US-Canada bilateral trade agreement of 1989 but is more of a political fig-leaf than a real protection since if the provision is invoked, the US can retaliate with equivalent effect in any trade sector. However, it provided comfort to the cultural sector at a time when free trade with the US was seen to make Canada vulnerable culturally. Thirty plus years of bilateral, and now trilateral, trade proved that fear to be unfounded—until now—and the cultural exemption has never been used. During the period from 1989 to the present, even through the ups and downs of Trump 1.0, the fundamentals of the initial bilateral Free Trade Agreement, then NAFTA, and now the CUSMA/USMCA were basically respected by all parties. Under Trump 2.0 this has all been called into question. If the Trump Administration is going to disavow the basic elements of the CUSMA, having a cultural exemption clause becomes less than meaningless.

On April 2, the US will unveil its “reciprocal tariff” regime. It has arrogated to itself the right to include, in addition to tariffs imposed by other countries, self identified non-tariff measures in its calculations. Among these may be various cultural support measures imposed by Canada on foreign entities operating in Canada requiring them to make financial contributions to Canadian content. If that happens, the US will be violating yet again the provisions of the CUSMA/USMCA as it has already done with regard to the imposition of tariffs on some products on the specious grounds of fentanyl trafficking from Canada to the US, (less than 20kg in all of 2024). However, given the surge in Canadian nationalism as a result of the tariff threats but more particularly the verbal diarrhea coming daily from President Trump about Canada becoming the 51st state, it is unlikely that any Canadian government would throw Canada’s cultural identity under the bus for the sake of preserving tariff-free access to the US market for some commodities. Thus, seeing Canada sacrifice cultural support measures that may annoy some US businesses operating in Canada (like online streaming content providers) in return for a degree of tariff relief is an unlikely outcome in the present circumstances.

This surge of nationalism relates to the second of the CDCE’s “demands”, protecting the CBC and the Canadian broadcasting environment. Ever since Pierre Poilievre became leader of the opposition Conservative Party, one of the Party’s mantras has been “defund the CBC”. There is no question that the CBC business model is in need of reform, particularly its English language entertainment television service which captures a very small market share, but CBC radio, CBC news broadcasts and CBC’s French language service, Radio-Canada, remain highly relevant, as this CBC explainer attempts to show. Given the need to protect national identity in the face of the Trumpian onslaught, and the recent rediscovery that perhaps Canada is not so “broken” after all, if ever there was a need for this national institution, it is now.

The third basket of issues raised in the CDCE position paper relates to copyright concerns, which get very little traction among the general electorate but are important to the creative and cultural community. Once again, the CDCE reminds parties of the lack of an Artists Resale Right in Canada (noting previous promises to establish this measure), as well as some other longstanding issues like fair remuneration for writers and publishers for the use of their works in the education sector and extending the private copying regime to electronic devices. This would impose a small levy (about $3) paid by manufacturers and embedded in the cost of a smartphone to compensate for unregulated widespread copying of music on these devices, with the funds flowing back to music creators.

The final bucket deals with Artificial Intelligence (AI) and copyrighted content. At the present time there are some 40 lawsuits in the US pitting rightsholders against AI developers, and even a couple of cases in Canada. Canada has been slow off the mark in addressing this issue; at the moment there is no Text and Data Mining exception in Canadian copyright law and both rightsholders and AI developers are not clear on the ground rules. The CDCE is asking that a legislative framework be adopted that includes the key principles of (1) Authorization (by the rightsholder) (2) Remuneration (payment for use of copyrighted content) and (3) Transparency (the establishment of disclosure rules as to what training data is used in AI systems and ensuring that all AI-generated content is clearly identified). These are reasonable asks but there is no guarantee they will be respected.

In the US, AI developers are pushing the Trump Administration to give them a pass on respecting author’s copyright, notwithstanding the cases before the courts, using the argument that the US will lose the AI race to China if US developers cannot help themselves freely to the content of others. OpenAI (which is being sued by the New York Times) and Google argued in submissions to the US government that giving them unfettered access to data, including content owned by others, is essential for national security. Described by blogger David Newhoff as “tech bro bombast”, OpenAI’s attempt to wrap itself in the national security blanket is a cynical ploy to get around the inconvenient fact that it and other AI developers are hijacking the creative work of authors, artists, and musicians without permission or compensation while creating outputs that in a number of cases can compete with or even displace the original works that contributed to their training. A similar situation is developing in the UK where the creative community is pushing back against the original copyright carte blanche that the UK government seemed inclined to give to the tech community, in the name of AI competitiveness. Canadian governments are not beyond succumbing to the siren calls of the AI community and it is timely to establish some guiding principles, of which Authorization, Remuneration and Transparency are a good place to start.

However, while AI and copyright are not going to become election issues, national identity, which is closely intertwined with cultural sovereignty, surely is. Indirectly, copyright will be important as it is one of the foundation stones of cultural sovereignty, an issue that would have played second fiddle to economic issues like food inflation, carbon pricing, cost of housing, fuel and utility costs etc until Donald Trump started spouting his annexationist nonsense.

Frankly, had Trump really wanted to absorb Canada (eventually) he should have brought Canada inside the US economic tent and made the country even more reliant on the US market, by providing it with an exception to his attempts to take on the world trading system. Instead, he has woken Canadians from a restful, dependent slumber brought on by three decades of relatively uncontroversial free trade and economic integration and made them realize that they have no one to depend on but themselves. In doing so, he has revitalized a sense of nationalism that will play out in this election. Who can best defend Canadian interests has become the litmus test for Canadian voters, leading to a remarkable resurgence for the Liberal Party under new leader Mark Carney after the political corpse of Justin Trudeau was removed from the electoral scene. This may or may not change during the course of this short campaign. One thing is certain; while copyright issues per se will not get much profile, cultural identity issues will certainly be in the spotlight. This is a shift in emphasis that in the long run is likely to benefit the creative sector.

© Hugh Stephens, 2025. All Rights Reserved.

Donald Trump’s Tariff Threats: Their Potential Impact on Canada’s Cultural Industries

Image: Shutterstock.com

With a general election in Canada now set for April 28, attention will be focussed south of the border to see what Donald Trump says and does next. Apart from his tiresome and insulting trope about Canada becoming the 51st US state, how best to deal with the economic fallout from the imposition of unilateral US tariffs on Canadian exports to the US will be the big election issue. Indeed, the drumbeat of tariff threats emanating from self-proclaimed “Tariff Man” is becoming overwhelming, both in terms of tariffs already applied, but also regarding potential future tariffs. As we have already seen, the uncertainty and almost daily changes, (government by tweet), are roiling markets and undermining investor confidence. With respect to Canada there have been repeated threats of what is to come while some tariffs, such as those on steel and aluminum that were applied globally, are already in force. Then there are the threatened 25% tariffs on all Canadian (and Mexican) imports, except for energy products which will be taxed at a 10% level, imposing additional costs on US consumers. (The example of potash, an essential product needed by American farmers is an interesting case study. It is basically only available from Canada, unless you import it from Russia, Belarus or China. The US does produce a small amount but 85% of US potash consumption comes from Canada. So much for President Trump’s mantra that Canada has nothing the US needs. When US farmers squealed loudly, the duties on potash were suddenly lowered from 25% to 10% and then suspended completely under an exemption for all products covered by CUSMA).

The 25% tariffs designed to hinder the export of automobiles and car parts (amongst other products) manufactured in Canada from being shipped to the US —a measure which incidentally contravenes the terms of the US-Canada-Mexico Agreement (USMCA/CUSMA)—are temporarily on suspension given the representations made by US auto manufacturers who had to explain to the White House how integrated North American supply chains work, but any products not covered by USMCA/CUSMA are still subject to the 25% tariff. The pretext for this violation of a ratified trilateral trade agreement is supposedly the “national emergency” created by the flow of fentanyl and illegal immigrants from Mexico and Canada. The only problem with this rationale is that, in the case of Canada,  there is a greater flow of illegals from the US to Canada than vice versa, and the seizures of fentanyl at the northern border by US officials in 2024 totalled less than 20 kilos, less than one percent of the amount seized on the southern border. Thirteen grams (that’s less than half an ounce) were seized in January. This year, US border officials have caught more people smuggling eggs from Canada into the US (where the price of eggs has shot up owing to avian influenza in US poultry flocks) than fentanyl. But the facts appear irrelevant to the Trump Administration; what is important is to create a pretext to violate the USMCA.

That pretext was used to trigger the International Emergency Economic Powers Act (IEEPA). This legislation allows the President “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States”. It was first enacted in 1977 and is designed to deal with acts of terrorism or other threats to the security of the United States. It confers wide, albeit temporary, powers on the Executive Branch and has been used in situations like the Iran hostage crisis in 1979, the Soviet invasion of Afghanistan and to deal with various identified terrorist groups. Using it to punish Canada because under 20 kg (43 lbs). of fentanyl were seized in the course of a year at the Canada-US border is clearly an abuse of the intent of the Act. Notwithstanding, that is what Trump used to impose USMCA noncompliant tariffs on Canada.

The temporary suspension of the 25% tariffs on Canadian (and Mexican) imports will apparently end on April 2, when Trump plans to impose reciprocal tariffs on a global basis. How these will be calculated is anyone’s guess. The President has indicated that in addition to whatever tariff irritant he can find, he might also include other measures in US calculations that in his view discriminate against US goods and services. Thus, while most US products enter Canada tariff free (with the notable and unfortunate exception of most dairy products, which are subject to Canada’s outdated supply management system), Trump could take aim at other policies he doesn’t like. For example, while many US banks operate in Canada, none of them are full-service retail banks allowed to take deposits (but nor are they required to have the same capital requirements). Then there is the fact that Canada, like the EU, imposes a value-added tax (VAT) on most products (basic foodstuffs being the primary exception), called the GST (Goods and Services Tax). This is another potential target even though it is applied without discrimination to US, Canadian or products from any other country. Likewise, longstanding measures that provide protection and subsidies for Canadian cultural industries, like broadcasting (AV and music) content quotas or more recent mandatory financial contributions to Canadian content funds, along with funding obligations to support local journalism, could potentially become targets.

Would Google try to reopen the commitments it finally made to support Canadian journalism in order to avoid designation under the Online News Act? Will the mandatory “contributions” to Canadian content creation that the CRTC has imposed on foreign streamers become an issue? A prominent US trade association, the Computer and Communications Industry Association (CCIA), went so far as to claim that ”the CRTC’s structure of mandatory contributions contravenes Canada’s commitments to the United States under CUSMA”. While I think that claim is doubtful, if the Trump Administration regards the CUSMA as just a piece of paper to be ignored at will, US industries should think twice about using it as a lever against Canada. In any event, in my view the best approach is to continue to stress the value of cooperation and mutual benefit, as Canada has been trying to do by explaining to the Trump Administration why tariffs are self-defeating. In terms of AV production, the contribution that US content producers make to the Canadian production industry is significant even if there are disagreements about the extent to which US production in Canada helps or hinders creation and distribution of Canadian content.

It is important to note that all countries impose investment or trade restrictions of one sort or another, and the US is no exception. These restrictions are weighed in terms of the balance of reciprocal benefits when trade agreements are negotiated, including the current USMCA/CUSMA signed by Trump himself in his first term. But if you are not inclined to respect the commitments you have made, and intend to ignore carefully negotiated and signed treaties, then any domestic measure can become a target. Uncertainty as to what could happen next is a major concern. Two Canadian cultural industries that are keeping their heads down and hoping for the best are art dealers and book publishing.

Earlier this month, the Globe and Mail reported that art dealers and galleries are facing slowdowns in the face of the uncertainty brought about by the Trump tariff threats. Books, art and other informational materials were granted an exemption when Trump first imposed the tariffs on Canada, using the excuse of fentanyl trafficking. Buried within the legislation used to suspend USMCA/CUSMA obligations, (the IEEPA referred to in paragraph 3 above) is a provision that creates certain exceptions, amongst which is “any information or informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds”, unless controlled by some other authority. (Section 1702 (b)(3)). While US Customs noted the exception when publishing its Notice of Implementation, the on-again/off-again tariff implementation has created anxiety and uncertainty, not least of which is the possibility that any random Customs officer can hold up a shipment based on an individual (mis)interpretation of the regulations. Compounding the issue is the announcement by Canada of 25% retaliatory tariffs that include, among other things (the targets of the retaliation are wide covering everything from toilet paper to drones), “Paintings, drawings and pastels, executed entirely by hand”.

Book publishers are also exempted under the IEEPA and are keeping their heads down, as noted by another article in the Globe. Many Canadian publishers do not ship much to the US but some do, including companies that are exclusively printers rather than full service publishers. In the case of Friesens Corp, a printer in Manitoba, the bulk of their business is from US customers. However, now a new threat has risen for Canada’s independent book sellers. Books have been included on Canada’s retaliation list, and if books from the US are subjected to a 25% retaliatory tariff, the cost will be passed on to bookstores, and ultimately consumers. Independent bookstores already work on very thin margins and an additional charge will likely affect sales. Harm to Canadian business and consumers is the flipside of punishing US exporters, just as harm to US consumers will result from US tariffs on imports. Surely it would be best to leave a cultural product like books out of the trade war.

What happens next with regard to tariffs on exports to the US, from Canada or elsewhere, seems to depend on Donald Trump’s mood of the day. The expected announcement of “reciprocal tariffs” on April 2 will create further uncertainty and likely retaliation, further feeding the spiralling trade war. The fact that import tariffs are levied on the importer and are largely passed on to consumers seems not to have registered with the Trump Administration. They can certainly raise revenues, but if the end goal is to impede imports so that all production is reshored to the US, then presumably the revenue windfall (largely ultimately paid for by US consumers) will ultimately disappear. To depend on tariff revenues to fund more tax cuts in the US is ultimately a self-defeating strategy. In the meantime, the US economy will have suffered the impact of increased prices on all imported goods.

The Trump tariffs have had the effect of causing maximum disruption and chaos, and if that was the goal, then Donald Trump has succeeded. In the meantime, Canadians have until April 28 to figure out which political party and leader is best equipped to help navigate the treacherous waters ahead. Whatever happens, copyright and cultural industries are unlikely to escape getting wet.

© Hugh Stephens, 2025. All Rights Reserved.

This post has been updated to include reference to potential Canadian retaliatory tariffs on US book imports and the impact this will have on independent bookshops in Canada.