Online Streaming Act – Hugh Stephens Blog

US Streamers and Canadian Content: What is the Role of Copyright? (A Clarification)

A stylized film clapperboard with a Canadian flag design and a letter 'C' in the center.

Image: Shutterstock (adapted)

Last week I commented on the news that the Carney government intends to eliminate even the 5 percent base contribution of revenues required of US streaming services to fund Canadian production, rolling back a requirement imposed in 2024 by the CRTC as part of the first phase of implementing the Online Streaming Act. The story was broken by the Wire Report, which learned of this decision through a letter filed with the Federal Court by the Attorney-General for Canada (AGC) on behalf of the government. The Federal Court is currently hearing an appeal launched by the streamers against the CRTC’s base contribution edict.

The operative paragraph of the AGC letters reads as follows;

“We are instructed to inform the Court that the Government’s intention is to eliminate the base contribution requirement on streaming services and to provide government funding to replace these contributions. We are further informed that the Government expects the direction…to be published for consultation…in the coming weeks.”

In other words, a new policy direction is coming, so stay tuned. The Wire Report stated that the office of the Minister responsible, Hon. Marc Miller, confirmed the streamers will still be required to “reinvest” an unspecified portion of revenues under new policy directives under the Online Streaming Act, which remains in force. How that will be done is far from clear.

I then offered my opinion that if the Carney government wants to replace the current system with a policy alternative which is more likely to attract the support of the streamers (and perhaps lesson the pressure coming from the US Government generated by the streamer’s lobby), it should consider waiving or modifying the regulation that prevents the streamers from obtaining the full rights to the Canadian content in which they are required to invest. Specifically, I said;

I thought I was clear in what I was saying, but in retrospect maybe I was not as clear as I could have been.

After I’d posted the blog, a knowledgeable observer of the Canadian media scene wrote to me saying I was mistaken because I had suggested that the current Canadian policy–to the extent that it requires Canadian producers to own the copyright in their production– is inconsistent with requiring foreign players to fund domestic producers to create Canadian content. My correspondent noted that any Canadian content requirement imposed on foreign platforms simply requires them to contribute a percentage of their annual Canadian broadcasting revenues to “Canadian programming expenditures” or CPE. CPE could be “direct”, i.e. direct investment in Canadian programs (commissioning and production of content), acquisitions of Canadian programming, or expenses relating to dubbing in Canada using Canadian human resources, or “indirect’, namely contributions to production funds. They pointed out that a foreign platform can meet its CPE requirements by simply buying specific rights to a Canadian program, e.g, to show the program on its service in Canada or in other countries. CPE doesn’t require the foreign platform to acquire the copyright in the program.

If my correspondent misinterpreted what I was saying, then that is on me, so let me clarify.

Firstly, I am in full agreement with what my critic said. The regulations do not require the foreign platform to acquire the copyright in the program. (I wasn’t suggesting that they did, but it seems I wasn’t sufficiently clear on this point). Indeed, the current regulations prevent it. There are two ways the foreign platform can meet its CPE requirements. The first is by simply paying into a fund (termed an “indirect CPE contribution”) over which it has no control and no access. That is basically how the initial 5% base contribution (now repudiated) was treated by the CRTC. No less than 11 different Canadian funds were eligible to draw funding from the base contribution pot of money. Some of the production was in fields, such as local news, that the streamers do not even produce. This was one of the grounds for the appeal to the Federal Court.

The other way in which the foreign platform can meet its CPE obligations under the current regulations is by investing in, commissioning, or acquiring the rights for Canadian programming, as noted by my correspondent. Canadian programming is defined by an arcane set of criteria that I have discussed elsewhere. It requires a certain number of Canadian inputs, from key creative positions and performers all the way down to make-up artists and hairdressers. But there is one key kicker. The IP rights, the ©, must be held by a Canadian for a set number of years, or else the program does not qualify as Canadian with respect to CPE obligations. In other words, the foreign platforms that are commissioning, investing in and funding the production in order to meet their direct CPE targets cannot own the rights. If they do retain the rights, the funds spent on creating content do not count against CPE requirements. Yes, foreign platforms can license a production to obtain distribution rights, but they must negotiate with a Canadian rightsholder to so–even if they have funded the program. Under normal industry practices, the platform would be free to hold the bundle of rights conferred by copyright if they wished to do so. This is often the case as it leads to a better return on investment.

To be clear, I was not saying that the copyright restriction prevents foreign streamers from investing in Canadian production. Indeed, they are obliged to do so regardless of whether or not they can control the rights (which they cannot). Rather, the copyright restriction discourages the streamers from making any effort to go beyond the minimum legal requirement to fund Canadian production because they have no incentive to do so. Why invest in a production in which you can’t own the rights—unless you have no choice. The streaming industry works on the basis of different acquisition models, but for commissioned production or production where the bulk of the production cost is underwritten, the normal practice is to acquire all the rights through control of the copyright in the work. This allows for international distribution as well as control of subsequent release in different formats. If Canada is now going to replace the mandated CPE contributions with something else, it would make sense to find ways to encourage the streamers to “re-invest” in Canada. A positive step forward, in my judgement, would be to loosen the copyright chokehold.

I have no way of knowing for certain whether this would result in increased expenditure on Canadian production by the streamers. Many factors go into production decisions, including regulatory requirements. But a regulatory requirement is a stick. The current CPE requirement assumes that the only reason a foreign platform would invest in a certified Canadian production is because it is required to. But carrots can also be used. A well used carrot is a production subsidy. Canadian producers would no doubt scream bloody murder if Canadian taxpayer funds were used to subsidize US productions of Canadian stories. Yet, taxpayer funded subsidies are routinely used to encourage US studios to produce US content in Canada for US audiences. Foreign Location Shooting (all those Netflix, Disney or Hallmark and other productions made in Canada where Vancouver substitutes for Seattle or Toronto for some large US city) is big business and is heavily subsidized by Canadian taxpayers through both provincial and federal incentives.

If the objective is to keep workers in the Canadian film industry employed while facilitating the telling and indeed the export of Canadian stories, then why not let the streamers, who are skilled at production and international marketing, get full credit for the funds they put into Canadian production by allowing them to hold the rights and determine how the product will be used? If it is Canadian policy to increase the production and international distribution of Cancon (using the current criteria but without the copyright restriction), why not apply the euphemistically titled film “tax credits” to Cancon regardless of whether the IP rights are held by an international company or a Canadian entity? Such an approach is likely to give Cancon much wider exposure than currently.

Some will say this is naïve; that the US studios have no interest in promoting Canadian stories. They only want to dumb down any expression of Canadian identity. I would respond with two points. First, a lot of what already qualifies as CanCon has no recognizable Canadian identity but provides sustenance for Canadian creatives, directors, showrunners, even hairdressers. Second, the studios will produce what sells. They are neither for nor against Canadian identity. If a good story is enhanced by a being set in a Canadian background–in other words if there is a business case to be made–then it will be produced. If a financial incentive is available for a foreign studio that jumps through all the hoops necessary to obtain CanCon certification, this might be the factor that tips the balance toward greenlighting a production. Canadian stories are not just produced for the limited Canadian market. They can have broad international appeal, including to US audiences, if they are crafted and marketed properly, just as Korean, Nordic, Spanish, British, Australian and other content has enjoyed success internationally.

It is also worth noting that streaming is a competitive business. Costs are going up, as consumers will have noted. While the industry is big, if it is regarded as an unlimited cash cow whose function is to fund every variety of Canadian content, from local news to Indigenous production to minority Official Language groups, then it is not surprising there will be pushback. If the forthcoming policy change results in a more flexible Canadian content policy by waiving or eliminating the Canadian ownership requirement for foreign platforms, while creating incentives for them to produce CanCon rather than punishing them if they do not, this could open the way to a better outcome for the foreign platforms, for consumers and for Canadian creators.

How to Get the US Streamers to Invest in Canadian Content

Image: Shutterstock

It was an unusual, almost clumsy way to disclose an important policy change (or, at the very least, a key policy refinement/clarification). The Carney government has revealed, via a previously undisclosed letter to the Federal Court, that it no longer intends to require foreign streaming services, i.e. Netflix, Disney+, Amazon Prime Video, and others, to make even the base level contribution of 5% of its annual Canadian revenues to support production of Canadian programming. This percentage, which amounts to approximately $200 million annually, was imposed by the CRTC back in 2024 as the first step in its mandated implementation of Bill C-11, the Online Streaming Act (OSA). It was described as a “down payment” on streamer contributions, with the final amount to be announced when the CRTC had completed its hearings and deliberations. As I commented at the time, just about anyone who could get their nose into the broadcasting support trough was to get a piece of the action with no less than 11 entities eligible for a piece of this streamer-funded pie. In response, the levy was challenged in Federal Court by a number of the streamers and studios and as a result, pending a decision which the Court has yet to reach, payment was suspended.

Two years later, in late May of this year, the CRTC finally announced its decision on total streamer contributions. The large US streaming services would be required to contribute 15% of revenues (including the initial 5% base contribution that was under challenge in Court). The outcry was immediate and predictable, with the streamers calling on the government to overrule the CRTC decision (which technically it could not do). Critics claimed the required contribution was a violation of CUSMA and could only be justified by invocation of the Cultural Exception clause, which would legitimize US retaliation. I challenged this assertion but noted that the OSA would be on the table along with many other Canadian policies if CUSMA was to be renewed and renegotiated. Then, just a couple of days later, the government declared it would be issuing instructions to the CRTC to review its decision on streaming contributions, simultaneously announcing the intended creation of an annual $600 million dollar fund to replace the contributions initially expected from the streamers. While the rollback of the CRTC mandated contributions was the key point of the announcement, there was—to say the least—a lot of uncertainty as what obligations would be imposed on the streamers in lieu. Heritage and Identity Minister Marc Miller, the point person on the file, noted that the OSA remains in effect and while streamer contributions would not amount to 15% of annual Canadian revenues, they would not be zero. There is a lot of wiggle room between zero and $600 million. Miller also noted that the initial $200 million payment by the streamers was still held in abeyance because of the Federal Court challenge, and was therefore unavailable to the industry. Keeping the OSA in play while providing an immediate subsidy to the Canadian industry as well as announcing a review policy of options for streamer contributions provides some negotiating room for the upcoming CUSMA talks.

In the world of trade law, replacing the “missing revenue” from the streamers with a taxpayer-funded subsidy is cleaner because a domestic subsidy to a non-exporting industry is far less problematic than a levy on a imported product. At this particularly fraught period in Canada-US trade negotiations, clearing away immediate obstacles to reaching a broader agreement seems to be part of the Carney playbook. Perhaps the government realizes that sacred cows like the NAFTA/CUSMA cultural exception and even dairy supply management will need to be modified in the pursuit of the greater good. Carney’s public explanation—that the government has decided to overturn the CRTC contribution framework because it would result in additional costs to Canadian consumers when the streamers pass on the additional cost to their customers—is about as disingenuous as it gets. If anyone thinks that their Netflix, Disney +, Paramount +, or even Crave subscription is not going to increase over time, then they must be living on some other planet. Moreover, there is about to be an industry shakeup. Once the Paramount takeover of Warner Bros is finalized, watch what happens to HBO in Canada, currently licensed on Bell Media’s Crave service.

Canadian policy makers and the Canadian industry have failed to grasp that you cannot, or should not, require foreign players to fund domestic producers to create Canadian content (CanCon) while simultaneously denying those same foreign entities the right to own or control the marketing and distribution of these productions. That is the current Canadian policy which, for the most part, defines Canadian content not only by who, how and where it was produced, but also by who controls the IP in the production. Even though the CRTC tweaked the definition of CanCon last year to encourage more co-productions (allowing foreign funders up to 80% control), it backtracked on that in its announcement in May of this year.

The IP control issue is fundamental. From the perspective of those in the Canadian content industry (and those who want to build up the industry), it is necessary to retain control of the IP in a “Canadian” film or series, even though someone else (a foreign studio) is paying for it, in order to build a domestic base through control of back catalogue. From the perspective of the foreign streamers, this is taking a free ride. Eating your cake and having it too.

And then there are the terms of CUSMA. However, whether the funding model laid down by the CRTC is CUSMA-compliant or not is really no longer the point. US interests have argued it is not but given the careful wording of CUSMA, a successful legal challenge would be difficult to mount, as I have argued elsewhere. Nevertheless, the Trump Administration has made it clear that anything in CUSMA, or any other agreement for that matter (such as the revenue sharing arrangements for the Canadian-financed Gordie Howe Bridge between Detroit and Windsor) are targets and can be ignored or re-opened. How much pain can Canada take? This is not a respectful negotiation between trading partners, each with interests to protect, resulting in a compromise both can live with over the longer term, but is instead a one-sided shakedown. As perceived by the current US administration, the US can do pretty much what it wants, and will find any pretext do so (fentanyl, national security, forced labour standards, smoke?) because its pain threshold is higher than Canada’s. Getting the US studios on board by creating an outcome that meets both their commercial needs and Canada’s cultural objectives (by strengthening Canadian production) would be a timely initiative.

Coming back to the recent revelation that even the base contributions mandated by the CRTC in 2024 are no longer supported by the Canadian government, the means of disclosure was obtuse even though the result probably shouldn’t have been a surprise. The letter itself was a clarification requested by the Court to determine whether continuing to hear the appeal launched by the streamers was moot. Maybe the government was concerned the challenge from the studios would be upheld, and the $200 million annual payment never paid. Or maybe it has decided there could be a better way to get the streamers to contribute to Canadian production (as opposed to production in Canada, i.e. US content filmed in Canada). The Canadian Association of Broadcasters claims it has been assured during discussions with officials that contributions (in some form) will still be required from the US streamers. At this point, all the government will say is that policy is under review. The necessity to clarify its position to the Federal Court seems to have been the action-forcing event that made the government come clean on its intent to dispense with the base contribution as well as the CRTC’s additional 10 percent. What will replace these contributions is the big question.

Because of the regulatory process and requirements of law, new guidelines will have to be provided to the CRTC. This will take a while and then the slowrolling, grinding work of the Commission will begin, with hearings and policy papers. Don’t look for quick results. Much of the work the Commission has done on the OSA over the past two to three years has just gone down the drain. Meanwhile, the creative community is nervous. The palliative of $600 million in taxpayer funds in lieu of locked-in streamer contributions is not unwelcome, but “he who giveth” can also take away. A government fund is subject to all sorts of pressures—budgetary deficits resulting in cutbacks or freezes, change of government, etc.—whereas a funding mechanism tied to industry revenues is much more likely to survive over the longer term.

The Carney government has a difficult needle to thread. It needs to keep the Trump Administration engaged as it tries to determine if a reasonable outcome to CUSMA is possible instead of the ongoing, perpetual review (i.e. regular blackmail) apparently favoured by the US, while being seen to stand up for Canadian culture and identity. In terms of building and sustaining a vibrant creative sector, is it in Canada’s interests to require foreign streamers to fund Canadian production while denying them the means to fully exploit the potential of the content they have been required to invest in? Or, is there a better way? Canada has outstanding talent, a strong production base, and interesting stories to tell. The streamers need content for their global platforms. With a policy rethink, hopefully the Carney government will devise a means to encourage and incentivize major international players to invest in and distribute Canadian content. This would be to Canada’s advantage, and to theirs as well.

The CRTC Streaming Announcement, and CUSMA: An Update (It’s Changing by the Day)

Flags of Canada, the United States, and Mexico arranged together.

Image: Shutterstock

Scarcely was the ink dry on the blog I posted on Monday, June 1, when things began to happen. The next day Canada officially informed the US and Mexico that it wished to renew CUSMA, and Dominic Leblanc, Minister responsible for Canada-US Trade (among several other responsibilities) went to Washington to meet with US Trade Representative Jamieson Greer. There he was given the laundry list of US grievances which surely included the Online Streaming Act (OSA) and in particular the CRTC decision to impose a 15% levy on the Canadian revenues of large foreign (read US) streamers to fund domestic Canadian production (only some of which the streamers could use at their discretion). The day after that, June 3, the Carney government announced that it would be providing “direction” to the CRTC to review its decision, on the basis that additional costs imposed on the streamers would likely be passed on to Canadian consumers.

To sweeten the pot, the government announced the creation of a $600 million annual fund to “provide stability and immediate support to Canada’s audio and audiovisual sectors”. This is to offset the funding the streamers may no longer be contributing, including the initial five percent contribution still held up in the courts owing to a legal appeal. Six hundred million dollars is a good chunk of change; it’s about the same amount the streamers would have contributed based on CRTC calculations estimating that the original five percent levy (currently suspended pending a decision from the Federal Court) would have generated $200 million annually. This would suggest either that the streamers may not be expected to make financial contributions or that their contributions will be additional to the base amount. Even though the government has thrown a lot of money at the problem, this has not satisfied the cultural sector however. The Coalition for the Diversity of Cultural Expression (CDCE), a major cultural industries umbrella group, has just issued a press release calling Ottawa’s request for the CRTC to reverse course “a major setback for cultural sovereignty”. The CDCE doesn’t mind the offer of $600 million. It’s just that such funding is at the whim of the government of the day whereas embedded funding through regulation of online streamers would be part of the broadcasting regulatory framework and thus more predictable and reliable.

As for the argument that a levy on the streamers would be passed on to consumers, Howard Law in his blog MediaPolicy.ca points out that “Netflix upped the price on its standard plan from $14 monthly to $15 in 2020. Then to $16.50 in 2022. Then to $19 in 2025. That was twice the rate of inflation.” But of course, no-one could blame the government for these increases. That was just greedy old Netflix. The streamers will price their product at whatever level is optimal from their perspective, just like any other business. If they price themselves too high, people will find alternatives, either a competing service or (horror of horrors), a pirated feed. The industry is well aware of the limits of consumer tolerance, particularly in this age of stressed household finances. Nonetheless, the Carney government’s “concern” for consumers is good politics.

Why didn’t the government just tell the CRTC what rate to set? By statute the government does not have the authority to reverse or overrule CRTC decisions in matters other than the issuance of broadcasting licences (the CRTC being an independent quasi-judicial body), but the government does have the authority to issue policy directives as to how legislation is to be implemented. What that guidance will be, Heritage Minister Marc Miller (the point person on this file), was not willing to say except that the amount of the streamer’s contributions would be reduced. By how much, we do not know. However, he hinted they would still be required to contribute. Once again, the CRTC will need to consult stakeholders and hold hearings. There is lots of wiggle room (or room for further negotiations with the streamers).

There was no mention of the CUSMA negotiations being a factor in the government’s decision but if you don’t think CUSMA was in play, you have been living on another planet. Nonetheless, the action the government has taken suggests it has learned a lesson from its previous policy reversal on the Digital Services Tax, when it scrapped the legislation on the very eve of implementation to appease the Trump Administration and get CUSMA negotiations back on track. That concession achieved absolutely nothing. In the case of the Online Streaming Act (OSA), it will continue in force as legislation for which the CRTC is required to develop implementing regulations. The government has signalled flexibility but has not rescinded the authority of the CRTC to regulate streaming services in Canada, nor has it definitively exempted the streamers from making a financial contribution or meeting discoverability requirements. It thus retains the OSA as a bargaining tool, something it could have done with the DST if it had only suspended the imminent application of the tax instead of withdrawing it completely. Once burnt, twice shy. Its action on the CRTC decision is exactly what it should be doing, signalling flexibility but retaining the essentials of the policy as a bargaining chip.

The other significant development on the trade negotiations front, announced coincidentally on the day that Leblanc and Greer were meeting in Washington, was the announcement by the US Trade Representative’s Office that they will be imposing tariffs ranging from 10 to 12.5 percent on over 60 sixty countries who allegedly either don’t block goods produced with forced labour or do so inadequately. Canada is one of half a dozen countries in the latter category, along with the EU. Everyone else completely fails on this score, according to USTR. Not a single country is exempted although “only” 60 of the US’s major trading partners are targeted. There will be hearings to examine the USTR announcement but the results are a foregone conclusion.

I mentioned in my earlier blog post this week that the Trump Administration will do whatever it takes to justify its unilateral imposition of tariffs, whether or not this is in violation of bilateral and multilateral treaties. Once its “fentanyl tariffs” imposed under the International Emergency Economic Powers Act (IEEPA), were overturned by the US Supreme Court, the Administration resorted to whatever other excuse it could find, including using both national security (Section 232 of the Trade Act of 1962) and balance of payments (Section 122 of the US Trade Act of 1974) as pretexts. These are “temporary” measures authorized by Congress to address specific emergencies. The Trump Administration has made a mockery of these remedies, employing them on the flimsiest of pretexts. But even these measures are time limited, (although for some the time can be measured in years). However, the Section 122 tariffs imposed in lieu of the IEEPA tariffs after they were overturned will expire in July so Trump and USTR had to come up with another justification in US domestic law to maintain their import tariffs. The answer was trade in products produced with forced labour. Suddenly, most of the world’s trading economies are accused of allowing goods produced with forced labour to undermine international markets, so sixty countries must be punished by the US through the imposition of tariffs on their exports to the US. This ludicrous misuse of Section 301 of the US Trade Act is clearly for purposes other than dealing with forced labour.

While the US does have a robust regime to block the import of products produced with forced labour, it is far from perfect itself. According to the Canadian Centre for Policy Alternatives, a labour oriented self-declared “progressive” publication, last year the Trump administration cancelled around $577 million from the Bureau of International Labor Affairs (ILAB) in grants allocated to various programs meant to promote labour rights abroad. Also, products produced for private companies by prison labour in the US have been a concern. Last year, the University of Toronto produced a report “Uncovering US Prison Labour in Canadian Supply Chains” that concluded “the Canadian supply chain has many likely linkages to prison-made goods from the US, particularly in the automotive and food sectors.”

Canada’s hands aren’t completely clean either. Prime Minister Carney has just announced his government will introduce new legislation this month to strengthen the current Canadian ban on imports made with forced or child labour. However, while forced labour is a real issue, the USTR action is not only hypocritical, it also demonstrates the lengths to which the Trump Administration will go to use any pretext or legal loophole it can find to impose tariffs. Even if Canada had the tightest regime in the world to prevent the import of products produced with forced labour, this would not stop the US from using this, or some other pretext, to fill the tariff gap created by the collapse of the fentanyl tariffs. When the fentanyl tariffs were first announced, Canada responded by creating a “fentanyl czar” and equipping the RCMP with new Blackhawk helicopters for improved surveillance, among other measures to beef up border security. While useful, this did not exempt Canada from US tariff punishment. It wasn’t about fentanyl; it was about imposing tariffs on a trading partner that had naively expected CUSMA rules to be followed.

This has been one of the problems with CUSMA. While—remarkably considering what has been going on in Washington– much of the trade conducted between Canada, Mexico and the US under the CUSMA/USMCA/TMEC agreement continues tariff-free (for now), the sectoral exceptions introduced by the US based on contrived grounds (e.g. the imports of fentanyl from Canada) raise the question of whether the US really intends to honour what it has agreed to, or will agree to in future. That is also a point I made in Monday’s blog when examining the issue of the Cultural Exception to CUSMA (Article 32.6) and whether the US would try to use it to impose retaliatory tariffs on Canada. Using Article 32.6 against Canada would likely fail “legally” (i.e., the OSA is not a violation of the terms of CUSMA, and therefore Canadian action to implement the legislation would not need to be justified by Article 32.6), but then the US could find another excuse if it really wanted to take action. Fentanyl, national security, forced labour, smoke from Canada. Take your pick.

Assuming the US agrees to extend CUSMA/USMCA through renegotiation, a lot will be up for grabs. For example, the US apparently wants to further increase the percentage of US and North American content in automobiles traded under the Agreement. While a good idea in principle, will it make US or North American vehicles more competitive? Maybe Article32.6, the Cultural Exception that applies only to Canada, will disappear. While in theory cultural industries in Canada can be exempted from the terms of the Agreement, the penalty for doing so is so draconian that the Exception is really more of a political fig-leaf than a policy reality, although it may salve Canadian pride. Canada for its part will want some assurances that the sectoral “national security” tariffs on steel, aluminum and lumber will be lifted and not reimposed on a whim. Whatever eventually happens, some sense of economic certainty and security will be the goal.

Right now, things are changing by the day. Stay tuned for the next update. It could be tomorrow!

The Recent CRTC Decision on US Streamers and CUSMA

Will the CRTC Decision Requiring US Streamers to Make Additional Financial Contributions to Canadian Production Lead to Retaliatory US Tariffs Impacting Other Sectors because of CUSMA’s Cultural Exception Clause?

Should Canada Rescind the CRTC Decision Now to Facilitate CUSMA Negotiations?

Summary

Since this is a long post on a complex subject, here is the very short version of my answers to these two questions, the Executive Summary if you will. On the first question, I posit that the CRTC decision is not a violation of the terms of CUSMA, and therefore Canada does not need to justify the CRTC measures by using the shield of the Cultural Exception, which if applied could legitimize US tariff retaliation. That is not to say that I agree with the CRTC decision in all its aspects, nor that the Online Streaming Act might not become a bargaining chip in the renegotiation of the Agreement. For the US to justify tariff retaliation on the basis that Canada was using the Cultural Exception as a shield would require a determination by a trade panel. That is most unlikely to happen. Given the general US disrespect for the CUSMA Agreement since the advent of Trump 2.0 and the way in which the US has ridden roughshod over the protections that the Agreement was supposed to provide, the niceties of its text seem largely irrelevant. US streamer’s hopes of securing protection under the CUSMA have been undermined by aberrant US trade policy. As for whether the Carney government should walk back provisions of the Online Streaming Act to facilitate CUSMA renegotiation, the Digital Services Tax climbdown illustrates well the folly of unilateral concessions. The US can wield a big stick, but Canada is not without cards to play. When you are playing with a master bluffer, don’t fold your hand early. That’s the short version. For more detail, read on.

The CRTC Announcement

Since the CRTC announced on May 21 that, among other requirements, it will increase the mandatory contribution to be made to Canadian productions by large foreign streamers (those generating in excess of $100 million annually in Canada) from 5 percent of their Canadian revenues to 15 percent, commentary—largely in the form of criticism– has come from all sides. The CRTC decision itself is not the easiest to understand even with its embedded graphic. The Motion Picture Association-Canada did not mince words;

“The Motion Picture Association strongly condemns the CRTC’s decision to impose unprecedented, unnecessary, and discriminatory investment obligations on American streaming services operating in Canada. This burdensome framework unfairly targets global streamers with requirements that directly violate Canada’s obligations under the United States-Mexico-Canada Agreement (USMCA).”

MPA-Canada and some individual streaming services have already challenged the initial five percent “downpayment” levy on the basis that the requirement for streamers to pay for local news (one of the allocations of the initial levy, not repeated in the new CRTC regulations) is a discriminatory measure exceeding CRTC authority because none of the streamers even produce news coverage. The plaintiffs also argue that the levy constitutes a tax, which is beyond the competence of the CRTC. Indeed, the taxation angle was repeated by Opposition Leader Pierre Polievre who accused the CRTC of imposing a tax that would ultimately be paid by Canadian consumers. He demanded that the Carney government overrule the CRTC, something the government says it does not have the authority to do. If pushed, however, it could of course amend or withdraw the legislation, the Online Streaming Act, that is behind the CRTC actions.

Others were also quick to criticize, including University of Ottawa professor Michael Geist who published the day after the CRTC announcement, pointing out that the Online Streaming Act is already in the crosshairs of the US in the lead up to negotiations to renew the CUSMA/USMCA. Indeed, US Ambassador Pete Hoekstra, who seems to be unable to fathom why Canadians might be upset at a US Administration that has routinely broken the rules it agreed to under Trump 1.0 with the renewal of NAFTA (not to mention the 51^st state nonsense), immediately called the CRTC decision “making a bad situation worse”. Geist followed up with another post titled “From Levy to Liability: Why Canada Risks Facing Hundreds of Millions in Retaliatory Tariffs Due to the CRTC’s Online Streaming Act Ruling”.

Copyright Ownership Issues

Now, I am not here to try to justify the CRTC’s Canadian program expenditure announcement, which is a complicated beast. While I believe a legitimate argument can be made that participants in the Canadian broadcast space should be expected to support Canadian content and Canadian production to a certain degree, I have a problem with the requirement that prevents the funders from owning and exploiting, as they see fit, the product they have invested in. I know this view is not shared by many in the Canadian content industry. Part of the CRTC decision involves an obligation to spend 30 percent of their contribution on what is described as “enhanced partnerships”. This is CRTC-speak for production partnerships where Canadians hold the majority of the copyright in the programming.

This would seem to reverse the flexibility in defining Canadian Content (CanCon) that was introduced by the CRTC late last year. As I explained in a blog post last November, the revised CanCon definition outlined by the CRTC for broadcasting and streaming purposes allowed for up to 80% of the copyright in a production to be held by a foreign enterprise, subject to some other CanCon requirements such as the director and screenwriter both being Canadian. This was designed to encourage co-productions, and was a slight relaxation of the hardline rules that required foreign streamers to contribute to Canadian productions but then denied them the right to own and exploit the copyright (including distribution rights) in those productions. Now whatever flexibility that was introduced has been rolled back; at least one streamer production contribution dollar in three must be invested in a production where the rights are held by someone other than the funder, with that person having to be a Canadian. This is despite the fact that the production might have qualified as Canadian (story, director, location, music etc) in every other way. The purpose of the levy is clearly not to promote Canadian content but Canadian production.

Do the CRTC Measures Violate CUSMA Obligations?

While I, like Michael Geist and others, have concerns that the CRTC decision has flaws, and may be indeed become an additional irritant to be dealt with during the forthcoming CUSMA negotiations, my main quibble is with the argument that Canada will face millions in retaliatory tariffs under the CUSMA framework because of the CRTC mandated contributions. Prof. Geist and others are recycling the argument put forward by a US industry group, the Computer & Communications Industry Association (CCIA), claiming that the CRTC decision violates the terms of CUSMA, specifically, Article 14.10 that refers to investment performance requirements;

“No Party shall, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment of an investor of a Party… impose or enforce any requirement, or enforce any commitment or undertaking…to achieve a given level or percentage of domestic content”

CCIA argues, echoed by Michael Geist, that given this situation, Canada will therefore be required to defend its action by means of the Cultural Exception clause (Article 32.6). This is an “escape clause” that says;

This Agreement does not apply to a measure adopted or maintained by Canada with respect to a cultural industry.

Broadcasting meets the definition of a cultural industry. However, if the CCIA is right and Canada falls back on the Cultural Exception, this is itself a problem because in that case the US would be entitled to retaliate (take a measure of equivalent commercial effect) in any sector. In other words, the automotive, aluminum, steel, mushroom or maple syrup industries, or any other, could be lumbered with retaliatory US tariffs as a result of measures applied to US streamers that are discriminatory or otherwise non-compliant with CUSMA.

If the measures are non-compliant or discriminatory, that is. If they are not, Article 32.6, the Cultural Exception, does not apply and therefore there would be no grounds for the US to retaliate. (Not that the need to respect the terms of CUSMA would stop them, as I discuss below). In the past, I have argued that the Cultural Exception is not applicable. This is because Article 14.10 refers to investment (Chapter 14) whereas streaming services fall under a different chapter of CUSMA, cross-border trade in services (Chapter 15). National treatment (non-discrimination) applies to cross-border services, and the streamers are in fact treated more favourably than their equivalent Canadian streaming counterparts. You can read all about it here.

But what if I am wrong? My interpretation has not been tested in “trade court”, which in the case of CUSMA (Chapter 31) allows for a state-to-state dispute settlement process through establishment of arbitration panels. The US could call for such a panel but could also simply assert that Canadian actions were in contravention of the Agreement and that Article 32.6, the Cultural Exemption, applied. This would allow for the application of retaliatory tariffs. However, under the terms of the Agreement, Canada could challenge the US assertion, and so, in effect there could ultimately be a panel review to determine the outcome.

US Trade Actions to Date

That is how the Agreement is supposed to work, but that process is now effectively irrelevant given that the US has violated both its terms and spirit several times, basically arrogating to itself the right to do anything it pleases. The so-called “fentanyl” tariffs were the first such example, where the US imposed a 25 percent tariff on Canadian goods on the specious pretext that Canada was responsible for “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl” which “constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA)”, according to an announcement issued by the US Embassy in Canada. Quite apart from the fact the US is responsible for enforcing its own border security, not Canada or Mexico, Canada was the source of less than 1 percent (between 0.1 and 0.2 percent in fact) of illegal fentanyl flowing to the US. More fentanyl probably flowed the other way. The IEEPA tariffs were subsequently struck down by US courts as being an unjustified usurpation of the taxing power of Congress.

Not daunted, the Trump Administration has turned to other legislation, such as Section 232 of the US Trade Act of 1974, to impose tariffs on Canadian steel, aluminum, cars, furniture such as kitchen cabinets, and lumber on the basis that such imports threaten US national security. In addition, Canadian goods that do not have a CUSMA certificate of origin are subject to tariffs under Section 122 of the US Trade Act that deals with balance of payments issues. Then there is the Canadian financed Gordie Howe Bridge that the Trump Administration seems to want to keep in limbo because the owner of the competing bridge is a large Trump donor. I could go on, but the point is, the terms of the USMCA/CUSMA seem to exercise very limited restraint on the Trump Administration. Therefore, why would the Administration care whether Canadian measures imposing a levy on US streamers to fund Canadian productions fall under the Cultural Exemption or not? They don’t. If they want to impose a tariff, they’ll find a pretext.

Should Canada Rescind the CRTC Ruling to Facilitate CUSMA Renewal?

From a trade negotiating perspective, for Canada to roll back the CRTC decision now would be a tactical mistake. Look what happened to the planned implementation of a Digital Services Tax. Long planned, with an implementation date well publicized a couple of years in advance, and with the revenue already booked, the Carney government got cold feet and at the last minute cancelled the tax. This was supposedly to get CUSMA negotiations restarted. As I described it at the time, it was a “humiliating climbdown” to mark Canada Day, 2025. Yes, negotiations resumed for a few weeks until the US pulled the plug once again to signal its displeasure with Ontario Premier Doug Ford’s TV ads during the Super Bowl that enlisted Ronald Reagan to fight tariffs. The DST climbdown achieved nothing. That lesson appears to have been learned. The Canadian Government has made it clear it is not prepared to pay an “entry fee” to begin CUSMA discussions, and will not make concessions simply to get to the table. So, from a trade policy perspective, why should it pull the Online Streaming Act, or intervene with the CRTC?

This is not to say the CRTC got this decision 100 percent right. It is also not to say that, hypothetically, elements of the Online Streaming Act might not be on the chopping block as part of an eventual CUSMA 2.0 deal. That is assuming the US can be trusted to implement what it agrees to. As the smaller partner, Canada has always relied on the US sense of justice, respect for the rule of law and a willingness to surrender some sovereignty for greater overall economic and political security as reasons to expect that the US will honour what it agrees to. Under the Trump Administration, that faith has been shaken. The US streaming industry has every right to invoke the supposed protection of CUSMA and to seek protection under the Agreement. The problem is that the current US Administration has so brutally abused the CUSMA framework as to make it scarcely credible. The streamers are being sideswiped by the aberrations of US trade policy.

But back to the topic at hand. Will the CRTC decision on streaming lead to the imposition of hundreds of millions of dollars in retaliation by the US? Probably not, although such an outcome is not impossible. If it happens, it won’t be because of the Cultural Exception clause in CUSMA, but because the US can wield a big stick and will do so if it suits the mood in the White House at any given time. Canada, however, has some cards to play, to use a Trumpian analogy, and those cards (energy security, critical minerals, lower-cost inputs to US industry such as aluminum, specialty steel, and car parts) are important to the US. The Carney government is playing a waiting game on CUSMA negotiations and renewal. The decision on US streamers is just one more element in this high-stakes poker game. When you’re playing with a master bluffer, you don’t fold your hand before the game is over.

Broadcasting Policy Beyond Broadcasting: Canada’s Online Streaming Act and the U.S. Response

By Christine Rose Cooling

(This is an occasional guest post. I am delighted to publish this analysis by Christine Rose Cooling, whose bio you will find at the end of the post).

An illustration featuring a smartphone displaying digital media platforms, a clipboard with media and broadcast regulations, a gavel on a wooden block, and a computer screen with hands holding microphones, labeled 'Online Streaming Act'.

Image: Shutterstock.com (modified)

When then-Minister of Canadian Heritage Pablo Rodriguez introduced Bill C-11, the Online Streaming Act, in the House of Commons in February 2022, he invoked earlier optimism about the Internet as a space for democratic participation and cultural opportunity. This sentiment recalls John Perry Barlow’s 1996 “Declaration of the Independence of Cyberspace,” which infamously imagined the Internet as a space beyond the sovereignty of nation-states, where the “weary giants of flesh and steel” would have no power. That naïve idealism has since given way to emerging concern about the role of global streaming platforms in shredding Canada’s cultural fabric. Left unregulated, Rodriguez suggested, these services risk weakening Canadian sovereignty.

More than three decades after Canada’s last modernization of the Broadcasting Act in 1991, debates about Canadian broadcasting policy returned with renewed intensity. With Royal Assent granted in April 2023, the Online Streaming Act extends the Canadian Radio-television and Telecommunications Commission’s (CRTC) regulatory authority to streaming services operating in Canada, requiring them to contribute to Canadian content (CanCon) production and support the discoverability of Canadian programming.

The Online Streaming Act represents both policy modernization and inertia in an effort to extend broadcasting policy beyond national broadcasting systems. Although the Act incorporates streaming platforms into the Broadcasting Act as “online undertakings,” these services differ fundamentally from traditional broadcasters—think spectrum allocation, scheduled programming, and territorially bounded signals.

Canada is not alone in attempting to retrofit twentieth-century broadcasting frameworks to the regulatory challenges posed by twenty-first-century streaming platforms. What distinguishes the Canadian case is the degree to which such efforts unfold within a trade environment shaped by structural dependence on access to U.S. markets, making Canadian cultural regulation unusually susceptible to bilateral pressure. Further, the Act operates within a volatile geopolitical arena in which platform regulation is being interpreted through the language of free trade and industrial competition rather than longstanding cultural logics.

Enter Stage Left: The U.S. Response

In June 2024, the CRTC announced that major online streaming services would be required to contribute five per cent of their Canadian revenues toward domestic production funds supporting Canadian and Indigenous content, including genres the streamers do not produce, such as news reporting. The decision has since been the subject of dispute by Apple, Amazon, and Spotify as well as the Motion Picture Association-Canada, though streamers will likely be prepared to pay some amount.

More recently, on March 19, 2026, Congressman Lloyd Smucker introduced the Protecting American Streaming and Innovation Act in the U.S. House of Representatives. This draft legislation, if adopted, would direct the U.S. Trade Representative (USTR) to investigate whether the Online Streaming Act discriminates against American streaming companies. The bill sets the stage for retaliatory action under Section 301(c) of the U.S. Trade Act of 1974 if such discrimination is found and if Canada does not remedy the discriminatory measures within 180 days, although use of Section 301 would violate the Canada–United States–Mexico Agreement (CUSMA).

Article 19.4 of CUSMA requires that countries treat digital products from other member states no less favourably than their own. In principle, this national treatment provision applies to streamers operating in Canada. However, Article 32.6 creates a broad exception for cultural industries, allowing Canada to adopt cultural policy measures affecting broadcasting and audiovisual production even if they conflict with the agreement. While specific U.S. industry interests have argued that Canada may need to rely on Article 32.6 to justify the measures it is taking under the Online Streaming Act, it is important to note that to date the U.S. government has not formally adopted this position. That said, the exemption does not eliminate the possibility of U.S. retaliation; indeed, it explicitly legitimizes it. Under CUSMA, the United States may respond with measures of equivalent commercial effect in any sector if it determines that Canadian cultural policies disadvantage American firms. Canada can, however, challenge whether Article 32.6 is applicable. Also, an argument can be made that the way in which the Online Streaming Act regulates streaming services is not discriminatory, i.e. it does not violate national treatment obligations.

Although Congressman Smucker’s Protecting American Streaming and Innovation Act may never see the light of day as it is but one of many bills introduced into Congress to highlight issues of concern to U.S. industry interests, it nonetheless renders the politics of broadcasting policy quite visible. Smucker’s unlikely counter-legislation—decrying the Online Streaming Act as an attack against U.S. companies, creators, and workers—makes it blatantly clear how debates about cultural regulation increasingly extend beyond national institutions. Such actions function less as the basis for dispute settlement than as policy posturing intended to exert bilateral pressure on Canada.

From Signals to Streaming

Canadian broadcasting policy has long been shaped by historical disputes, cultural tensions, and geopolitical pressures. From the early licensing of commercial radio stations in the 1920s to the establishment of the Canadian Broadcasting Corporation (CBC) that we know (and at least some of us love) today, Canadian broadcasting policy developed not just as an industrial response to spectrum scarcity but also as cultural protectionism against American dominance over Canadian airwaves.

Conundrums aside, legacy regulatory strategies like Canadian content (CanCon) requirements and ownership rules remain measures through which broadcasting policy has sought to pursue cultural objectives beyond economic ones. The Online Streaming Act extends this analog-era regulatory philosophy into the digital age, transforming unresolved debates over the legitimacy of Canadian cultural regulation.

We should also remember that the transformation of broadcasting policy in Canada did not emerge suddenly with the Online Streaming Act. During the CRTC’s Let’s Talk TV hearings between 2013 and 2014, the Commission heard from Netflix representative Corie Wright who argued that online streaming services primarily supplemented rather than replaced traditional broadcasting services. Netflix declined to provide evidence supporting this claim, and the Commission ultimately ruled the argument as anecdotal. This line of uncertainty later informed the work of the Liberal-appointed Broadcasting and Telecommunications Legislative Review panel, whose 2020 report Canada’s Communications Future: Time to Act recommended restructuring communication legislation to reflect a new networked environment. Among its most consequential recommendations was the proposal to extend regulatory authority over online streaming services operating in Canada.

Concerns about the trade implications of regulating online streaming services are, likewise, not new at all. Early in 2020, Professor and Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, Michael Geist, warned that requiring foreign streaming services to contribute to Canadian production funds without equal access to those funds could invite retaliatory trade responses. Similar concerns surfaced in 2022 before the bill passed, when former U.S. Trade Representative Katherine Tai officially took notice of the Online Streaming Act during a CUSMA meeting with Canada’s former Minister of International Trade, Mary Ng.

Despite the unlikelihood of its adoption, Smucker’s Protecting American Streaming and Innovation Act represents less a sudden escalation than a continuation of a contested shift in how cultural regulation is interpreted both within and beyond Canada. This is entirely unsurprising, as platform infrastructures shaped by recommendation systems, black-box algorithms, and cross-border media flows increasingly blur the boundaries between cultural forms and digital markets.

Biography

Christine Rose Cooling is a PhD student in Communication & Culture at York University whose research examines how Canadian cultural policy continues to shape cultural expression in a platform-mediated media environment. Her work focuses on broadcasting regulation, streaming platforms, and the cultural significance of live music within contemporary debates about national identity and cultural sovereignty.

The Online Streaming Act or Dairy Supply Management: Which one should Canada Surrender to the US in CUSMA Trade Negotiations? Or is it a Question of Putting Some Water into the Wine of Both?

A person pouring water from a ceramic jug into a large clay pot.

Image: Shutterstock

Should Canada give up the Online Streaming Act (OSA) in forthcoming CUSMA negotiations in order to preserve dairy supply management, as a former Vice Chair of the CRTC, Peter Menzies, suggested in a Globe and Mail oped earlier this month? Perhaps he was just being deliberately provocative although the question hits one of the raw nerves of Canadian politics. The cultural community– particularly in Quebec–would be enraged if this happened. But then if supply management is watered down to allow more imports from the US, especially in dairy, the dairy farmers–particularly in Quebec–will be equally enraged. Which group has the greater political clout? In both cases, Quebec-based interest groups have a card to play denied to others in Canada. It is called the Bloc Quebecois, and if enough support bleeds from the Liberals to the Bloc, that could just open the way to the Conservatives to form the national government they so desperately crave. The cultural mavens in Toronto have little choice; either support the Liberals or face a worse fate when those Conservative cowboys from Alberta take the reins of power.

The Quebec cultural community which insists that measures are needed to ensure that foreign streamers both contribute financially to support Canadian content (Cancon) and ensure that Cancon (when expressed in French) is “discoverable”, has yet another card up its sleeves. It is called Bill 109, Quebec legislation (that is probably ultra vires since broadcasting clearly falls within federal jurisdiction) that purports to regulate the discoverability of French-language cultural content in the digital environment. If Canada gives way on the Online Streaming Act in CUSMA negotiations, watch Quebec fill the void. So where does all this leave the Carney government? Between a rock and a hard place.

It is true, as Menzies has pointed out, that the CRTC has been very slow, plodding even, in dealing with implementation of the OSA. It may even be overwhelmed, with inadequate staff as he suggests. The fact that implementation is still a work in progress makes it easier for the US government to bring pressure to stop or at least to modify rollout of the legislation, whereas other objectives mentioned in recent USTR hearings, such as changes to the Bank Act to benefit US financial institutions or measures to terminate supply management would require significant legislative and regulatory change to undo measures that have been in place for decades. Best to nip it in the bud, or to kill it in the egg, as they say in Quebec.

Canada’s planned introduction of a Digital Services Tax (DST) is a prime example of a nipped-in-the-bud policy. A DST deals with tax avoidance measures implemented by large digital multinationals by taxing their in-country revenues rather than their manipulated profits. Some countries, such as the UK, France, Spain, Italy etc had already implemented a DST before Trump’s return to office and seem to have got away with it, even though Google, Microsoft, Amazon, META and others of that ilk have the Trump Administration’s ear. Canada intended to implement a DST several years ago but dithered and dragged its feet, finally passing legislation in 2024 that would have brought a DST into effect on June 30, 2025, backdated to 2022 when the law should have been put into effect in the first place. Unfortunately for Canada, the implementation date fell right in the middle of the Trump tariff war and Canadian efforts to negotiate some relief. But rather than postponing implementation yet again–and using the possibility of a future DST as negotiating collateral–Canada “bravely” announced it was going ahead with implementation (regardless of the consequences). Until it wasn’t. Trump tweeted that he was cancelling trade negotiations with Canada because of the DST and voilà, over a weekend, the DST was cancelled (on June 29, 2025).

Trade talks resumed and actually appeared to be making some progress with respect to sectoral tariffs such as steel until the next excuse Trump found to end them. This time it was over Ontario’s World Series free trade ads that ran on US television, using Ronald Reagan’s words from a 1980s era speech praising free trade and condemning protectionist tariffs. The content of those ads may have been accurate, but the result was one of Canada’s more prominent “own goal” moments. While Doug Ford may have derived some brief satisfaction from getting under Donald Trump’s skin, the steelworkers of Sault Ste. Marie, who might have benefited from a rumoured sectoral deal on steel, have been paying the price. I think this fiasco helps explain the public anger of US Ambassador to Canada Pete Hoekstra (who surely wins the 2025 “Bull in a China shop” award) who crudely vented his frustration that a deal so close to fruition got blown out of the water through Premier Doug’s ill-considered initiative.

But what about supply management? Canada should be taking a long, hard look at the wisdom of continuing to defend this 1970s policy that almost every other country has since abandoned. Instead, it should use the CUSMA negotiations as the reason to ditch a monopoly that protects a few chosen producers of supply managed commodities at the expense of consumers and the rest of the economy. Unfortunately, that won’t happen because of Canadian political realities but there is still scope for some wiggle room. In recent years, Canada has been forced as part of its trade negotiations to open slivers of the dairy market to EU countries, CPTPP trading partners, and to the US through the CUSMA. The dairy industry screamed blue murder but was paid off for having to face a bit more competition. As part of liberalizing as little as possible, Canada routinely plays games with its commitments by awarding import quotas to the same domestic dairy industry with which exporters of dairy products to Canada are competing. Some additional foreign cheese and dairy products become available to consumers but in effect the fox is in charge of deciding which chickens get let in, and at what price. Even though this policy is an albatross around Canada’s neck, such is the power of the dairy industry (which is reputed to control the outcome of no less than eight ridings in Quebec) that all political parties support keeping supply management off the table in all trade negotiations, and passed legislation to this effect. In a political environment where the government is one vote short of a majority, risking the ire of Quebec dairy farmers is a risky business.

Does that mean that supply management is completely off the table and instead there should be another sacrificial lamb, such as domestic broadcasting and cultural policy, as Peter Menzies has suggested? This is a doubtful proposition. Despite all the posturing about supply management being “off the table”, there will almost certainly be some concessions to the US, even if it is only in the way the tariff free import quotas are managed. The Carney government will claim it is defending supply management, while making some tweaks to the system. It can do the same for cultural industries. Defend the essence but find compromises that US industry can live with.

Like supply management, the Online Streaming Act also has wiggle room in its implementation. Already we have seen the CRTC announce changes to Cancon definitions that introduce greater flexibility and go some way toward meeting the concerns of the (largely US-based) content streamers, while preserving elements of protection for Canadian production. (Canadian makeup and hair design artists will be happy as use of their services adds an element of “Canadianness” to a production that could be useful in meeting the Cancon definition. This just goes to show that you can never discount the influence of a specific lobby). While the US has laid out some maximum wish-list objectives, including withdrawal of the Online Streaming Act (as well as the Online News Act), there are domestic political realities in Canada that will constrain Canadian trade negotiators from sacrificing the cultural sector to gain other objectives, just as there are with regard to supply management. The US may hold a big stick in the negotiations, but Canada is not without cards to play. It just has to be careful how to play them, and when mobilizing support inside the US to do so in a way that does not offend the touchy amour-propre of Donald Trump.

The end result for Canada will not be water or wine, but rather how much water to allow into the wine. Some dilution will be necessary but at the end of the day, for domestic political reasons (particularly in Quebec), the liquid in the glass still will still have to resemble wine more than water. This applies equally to cultural industries and broadcasting as well as to supply management. It is far from an either/or situation.

The Online Streaming Act: Dealing with US Industry Concerns (The Cancon Factor)

A vintage television set displaying the Canadian flag.

Image: Shutterstock

Last month I wrote about the spectre of US trade retaliation against measures impacting or possibly impacting US streaming services as the Canadian Radio-Television and Telecommunications Commission (CRTC) proceeds with implementation of the Online Streaming Act (formerly Bill C-11). The Computer & Communications Industry Association (CCIA), a US trade association that includes, among others, Amazon, Google, Meta and Apple, has taken aim at this process, claiming it is discriminatory and violates Canadian commitments under the CUSMA/USMCA, the trade agreement that replaced NAFTA. A core element of CCIA’s argument is that the very concept of Canadian content (Cancon) is discriminatory because it violates Article 19.4 of CUSMA which calls for “national treatment” of a digital product;

“No Party shall accord less favorable treatment to a digital product created, produced, published, contracted for, commissioned, or first made available on commercial terms in the territory of another Party, or to a digital product of which the author, performer, producer, developer, or owner is a person of another Party, than it accords to other like digital products”

What is Article 19.4 intended to cover? As an example, if rules are imposed prohibiting digital products from causing harm to children, the same rules should apply to both domestic and foreign products. However, do special requirements regarding Cancon audiovisual or music products (such as airtime quotas on radio or possible “discoverability” requirements for streamers) constitute discrimination against US digital products? Maybe. Is all music and AV content fungible or is Cancon somehow different, i.e. not a “like digital product”? If Cancon is “different”, what is it that differentiates it? That is not an easy question to answer because of the many criteria that go into determining whether a product is considered Canadian for regulatory purposes.

I took a stab a couple of years ago at explaining how Cancon is defined (“Unravelling the Complexities of the Canadian Content (Cancon) Conundrum”). For AV products, it is basically a combination of four elements; production control, copyright and distribution rights, creative positions and production spend. The CRTC definition and the definition used by the Canadian Audio-Visual Certification Office (CAVCO), which distributes certain tax credits, are slightly different with the latter being more stringent. For music there is the MAPL system. As explained by the CRTC, to qualify as Canadian content, a musical selection must generally fulfil at least two of the following conditions: M (music): the music is composed entirely by a Canadian; A (artist): the music is, or the lyrics are, performed principally by a Canadian; P (performance): the musical selection consists of a live performance that is recorded wholly in Canada, or performed wholly in Canada and broadcast live in Canada, and L (lyrics): the lyrics are written entirely by a Canadian. The CRTC is proposing that the “P” criteria be dropped owing to changing patterns in the music industry, notably the many Canadian artists recording outside Canada, such as in Nashville.

Qualifying as Cancon is complicated, but it has value. Cancon certification provides access to various subsidies and funds as well as providing a product that meets airtime and broadcast obligations, where and when they exist. In the aftermath of the enactment of the Online Streaming legislation, a key question is whether streamers (like broadcasters) will be required to meet certain content quotas, if indeed it is even feasible to impose content quotas on streamers. The different delivery model, where it is the consumer who “pulls” content from a broad menu rather than a broadcaster who “serves up” a given offering, makes it almost impossible to impose content quotas. Theoretically, you could require a streamer to make available a specified inventory of Cancon, or even to promote Cancon (referred to as “discoverability”), but there is no way of making consumers actually watch or listen to Canadian productions. Trying to apply a 20th century broadcast model of regulation to 21st century streaming is not a good fit. Regulators around the world are grappling with this reality. One of the arguments for imposing an expenditure requirement on streamers, both domestic and international, to support the creation of Cancon is to compensate for the lack of applicability of content quotas in a streaming environment.

A core feature of certified Cancon at present is that it cannot, by definition, be produced by a non-Canadian regardless of whether all the creative talent (writers, directors, performers, designers, composers etc.) and production spend would otherwise meet Cancon criteria. There is a complicated formula that awards points for creative roles filled by Canadians, with a specified number of points required to qualify under different programs. The fact that a non-Canadian production may be a Canadian story filmed in Canada with Canadian actors is irrelevant with respect to Cancon certification. In short, the colour of the money (the production company) is a determining factor. Additionally, under CAVCO rules, a foreign studio or producer cannot hold the intellectual property, (the copyright) in a Cancon production. A Canadian production company must be the copyright holder for all commercial exploitation purposes for a minimum of 25 years.

As part of implementing the Online Streaming Act, the CRTC was instructed to review the definition of Cancon. The Commission subsequently held public hearings in which ownership of copyright became a key issue. Opinions ranged from expanding the CAVCO requirements to all forms of Cancon to eliminating copyright ownership as a factor. The streamers, who now have (contested) financial obligations to fund Cancon, generally prefer to own copyright in productions. It is not a surprise that they object to being required to fund Cancon productions while being denied the opportunity to own and exploit the rights. Supporters of a more restrictive Cancon definition point out that foreign streamers are free to license Cancon qualifying productions from the Canadian rightsholder. However, a restrictive definition tied to financing and copyright ownership eliminates the possibility of direct financing by foreign streamers and could mean they would in effect be paying twice, first by contributing to the Fund that financed the production and second, by paying to acquire the rights. Moreover, there is no guarantee that the rights would be available on acceptable terms.

Those advocating for a comprehensive Cancon definition that includes financing and IP ownership as factors argue this is necessary to create and maintain a viable Canadian industry. But such restrictions have two effects. First, if copyrights must be retained, this removes from Canadian producers/rightsholders the ability to sell the rights at a time of their choosing (and possibly use the funds to produce more Cancon). Not all productions will have a sustaining revenue stream over time. It should be left to the producer to judge whether to cash out now or license the product while retaining ownership. Second, requiring that the producer be Canadian for a production to be certified as Cancon disincentivizes foreign streamers from self producing content showcasing Canadian stories, artists, locations etc. They can do so but are denied all Cancon credit for such productions. The cost of such productions does not count against their required financial contribution (currently 5% of revenues) nor does the production qualify as Canadian content in terms of meeting existing (or possibly future) content quotas. If a goal of Cancon policy is to promote expressions of Canadian culture through creation of financially viable productions, disincentivizing foreign producers from putting their toes into the Cancon lake makes no sense. Production of Cancon by global enterprises like the streamers will help ensure global distribution, meeting both cultural projection objectives as well as exposing Cancon to new markets.

There is also the question of subsidies provided to producers of Cancon. Under current definitions, the US studios are not eligible to access funds earmarked to produce Cancon (even though they are required to contribute to these funds). This could be dealt with giving foreign studios “contribution credit” for self-financed Cancon productions. It’s worth noting the studios are already offered generous subsidies–euphemistically referred to as tax credits–to undertake non-Canadian production in Canada, and no-one complains about that, except Donald Trump. Trump has been rattling the chains over so-called “runaway production” and has threatened to impose tariffs on movies made outside the US.

While I think many of the concerns of the foreign streamers could be addressed through a more flexible definition of Canadian content, I am not confident the CRTC will see it this way given the policy instructions it received from the government at the time the legislation was proclaimed. Can it comply with this guidance while not painting itself into a CUSMA corner? The Commission is directed to take international commitments into account, although there is no specific reference to CUSMA, only the 2005 UNESCO Convention on Cultural Diversity.

From my perspective it is not realistic for US streamers to expect a free ride (and they probably don’t) but Canada and the CRTC need to avoid being too greedy. They should also be flexible in defining Cancon, focussing more on the promotion of Canadian stories, music and talent and less on maintenance of an industrial policy that relies on protectionism for a favoured few. A policy that calls on foreign streamers to invest in Canadian creativity, given the revenues that they generate in Canada, is not unreasonable; denying them the ability to take a direct ownership stake in the products to which they contribute funding would be short-sighted. The policy straitjacket that exists with respect to Cancon sets up a search for draconian solutions, like the CCIA’s threats. In short, remove the Cancon handcuffs and keep the required contributions reasonable. Give credit for funds expended on content that meets Canadian artistic and cultural criteria. I think this would help blunt the frontal attack from US audiovisual streamers. Music is more complicated. Meanwhile, Canada needs to be careful not to negate any trade obligations it has taken on and avoid being forced into the Article 32.6 “cultural exemption” corner.

But wait, I have an idea! If all else fails, there is also CUSMA Article 32.2 (b). “Nothing in this agreement shall be construed to…. preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to …the protection of its own essential security interests.” If Donald Trump considers that importing kitchen cabinets from Canada threatens the national security of the United States perhaps it is not such a stretch to conclude that the preservation of Canadian culture (whatever that is) is just as essential to Canada’s national security, justifying any measures one chooses to employ. Is this a serious option? You decide.

In writing this opinion piece, I have drawn on my background both as a former Canadian government official who has had some dealings with international trade issues over the years, as well as past experience as an executive with one of the US companies which, at the time, controlled a major Hollywood studio. (Time Warner). However, whatever “solutions” I have proposed to address US industry concerns regarding Cancon are mine alone. I hope they are a useful contribution to the debate, but I want to be clear that I do not speak for the CCIA or the streamers.

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.

Tag: Online Streaming Act

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