When Canada was negotiating the Free Trade Agreement with the United States in 1987 (CUSFTA), one of the final sticking points was Canada’s insistence on having an exemption for cultural industries. Canada won that battle and (mostly) preserved the right of Canadian governments to develop and implement a range of cultural policy measures. We have content quotas, financial subsidies, public cultural agencies, investment measures prohibiting non-Canadian ownership of certain firms, requirements for broadcasters (which became profitable behind CRTC protections) to contribute financially to Canadian content production, and many others. The purpose of our policies is not to be exclusionary. We remain the most open market in the world for cultural works from abroad. Rather, they seek to ensure our storytellers have the capacity and opportunity to bring high quality works to the market and to ensure audiences, in Canada and abroad, have access to these works.
When Mexico joined the club in 1994, the cultural exemption was included by reference. NAFTA provides that Canada’s relationship with the United States is governed by CUSFTA and Canada’s relationship with any other NAFTA party will be identical. The cultural exemption, of course, came with a caveat: the “notwithstanding clause,” which authorizes commercial retaliation against measures that “would have been inconsistent with this agreement,” but for the cultural exemption. It also has a definition of cultural industries appropriate for 1987.
The CUSFTA-NAFTA cultural exemption has served us well in the last 30 years. It has been the basis for exceptions/exemptions Canada has negotiated in virtually every bilateral agreement concluded since then. And there was only one serious threat of retaliation. In June 1994, the CRTC licensed New Country Network, a Canadian-owned service directly competitive with the U.S. Country Music Television and removed authorization for carriage of CMT effective January 1, 1995 (in accordance with rules in place when CMT was licensed). After efforts to overturn the decision failed in Canadian courts, the United States launched an investigation, which quickly escalated to threats of retaliation. The dispute was resolved when CMT and New Country Network reached a commercial agreement to launch CMT (Canada), with the Canadian partner holding a sufficiently large stake to permit licensing as a Canadian service.
Somewhere along the way to the NAFTA renegotiating table, however, Canada agreed to the Trans-Pacific Partnership (TPP), an agreement that’s been embraced by the Trudeau government. When the U.S. tabled its objectives for NAFTA renegotiation on July 17, it confirmed that they see the TPP as being the benchmark for the revitalized NAFTA. This could be disastrous for Canadian culture.
The mechanism used to exempt Canada’s cultural industries from TPP obligations is to list existing non-conforming measures and specifically to reserve the right to implement cultural policies in various TPP chapters. However, a reservation is not nearly as strong as an exemption. Canada’s approach is a unilateral declaration of intent rather than an agreement between the parties. Also, in international trade law, non-conforming measures may only be “continued” or promptly “renewed.” If a measure is, for any reason, not achieving the policy objective, it cannot be strengthened because this would “decrease the conformity” of the measure. There are also explicit limits in various TPP provisions on Canada’s right to implement new policies.
When you consider the U.S. NAFTA objectives it’s clear where pressure will be on Canada. The U.S. will seek rules that apply to all services sectors, including rules prohibiting discrimination against foreign services suppliers. Further, “where any exceptions from core principles are needed, the negotiation, on a negative list basis, of the narrowest possible exceptions, with the least possible impact on U.S. firms.” This potentially affects all cultural sectors, including audiovisual services, broadcasting, publishing, music, and visual and performing arts. The U.S. is positioned to seek the elimination of Canada’s general exemption for cultural industries and to replace it with an agreement to permit strictly-specified existing measures in the media we know today.
The U.S. also seeks to “ensure non-discriminatory treatment of digital products transmitted electronically and guarantee that these products will not face government-sanctioned discrimination based on the nationality or territory in which the product is produced.” Under this TPP-inspired provision, Canada would retain the ability to impose requirements on over-the-top services like Netflix, but it could do so only if it applies the same rules to both domestic and foreign OTT services. Addressing a particular challenge may necessitate discriminatory requirements because these may be the most appropriate – and fairest – policy mechanism.
The U.S. will also seek to “establish rules that reduce or eliminate barriers to U.S. investment in all sectors in the NAFTA countries.” Without a general cultural exemption this would include foreign ownership limits Canada maintains in broadcasting, cable television, film distribution, telecommunications and book publishing. While ownership limits in certain areas may no longer be relevant, in others, such as broadcasting and cable, these remain important to achieving objectives related to Canadian content.
Many other U.S. objectives may also challenge important cultural policies.
Prime Minister Trudeau and Foreign Affair Minister Freeland continue to say that Canada supports progressive, gold standard trade agreements. For culture, this is not the TPP. For culture, a progressive, gold standard NAFTA would result in:
- Maintaining the cultural exemption.
- Strengthening it by updating the definition of cultural industries. This can best be done by putting a focus on the artist and the creative work that provides the cultural content produced and distributed by the cultural industries rather than on the medium used.
- Securing fully our policymaking space by eliminating the “notwithstanding” clause which authorizes retaliation.
This is the only way to make certain we have the capacity to maintain, adapt and implement the policies we need to ensure Canadian content can thrive in the digital era.
Garry Neil is a former Executive Director of the Council of Canadians. Mr. Neil has been associated for 40 years with ACTRA (Alliance of Canadian Cinema, Television and Radio Artists), currently as a policy advisor.