The departure of six leading indie labels from CRIA is timely given that my Lawbytes column this week (Ottawa Citizen version, homepage version) focuses on Canada's growing cultural deficit.  Late last month Statistics Canada released data on Canadian trade in cultural services.  The data tracks the import and export of cultural services such as film production, television broadcasts, and music royalties. The latest report reinforces the economic importance of cultural services – imports and exports total nearly $5 billion per year in Canada – as well as the apparent inability to reduce the "culture deficit."  That deficit, which reflects the gap between the amount of money flowing out of the country relative to the amount coming in, now stands $546 million dollars, up from $477 million the year before. 

Virtually the entire deficit stems from copyright royalties and broadcasting fees.  The copyright royalty deficit, which stands at $358 million, comes from nearly every cultural sector. Two dollars of copyright royalties exit the country for every one that enters in the writing market, three dollars exit for every one in the music industry, and four dollars exit for every one in the film industry. The broadcasting industry is the most lopsided.  Reflecting the enormous popularity of U.S. television shows in Canada and the limited success of Canadian television productions outside the domestic market, Canada faces a broadcasting fee deficit of $363 million as well as a broadcasting copyright royalty deficit of $150 million.

The growing deficit signals the need for industry leaders and policy makers to rethink how Canada develops and promotes cultural services. Domestically, it is readily apparent that stronger protection – whether in the form of Canadian content regulation or copyright law – is of limited value.  After decades of stronger content controls with steadily increasing Canadian content requirements for television and radio broadcasters, Canadians still spend far more on foreign cultural services than they do on their own culture.  Moreover, with the availability of a seemingly unlimited array of foreign content on the Internet, this gap will only grow in the coming years.

Similarly, stronger domestic copyright rules provide marginal benefit to Canadian artists since the Statistics Canada data reveals that there currently is a disproportionate benefit to foreign artists leading to more dollars leaving the country (which helps explain why the United States closely links intellectual property protection with its national trade policy).

The experience of the film industry does illustrate, however, that government support for cultural services can yield benefits to the country.  Policy makers would do well to replicate the film industry's success by considering new tax initiatives such as tax relief for copyright royalties and incentives for the use of Canadian music and television programming on emerging delivery channels such as wireless and the Internet.

The best way to address the cultural deficit is not to endeavour to decrease spending on foreign culture in Canada, which invariably fails, but rather to increase foreign spending on Canadian cultural services.  It is this aspect of the data that is the most disappointing since it illustrates that Canadians have failed to fully capitalize on the Internet and new technologies to broaden global interest in Canadian culture. 

With Canadian books previously missing from bookstore shelves now readily available in foreign markets through online booksellers, Canadian music accessible worldwide from a host of online music channels, and Canadian broadcasts open to new Internet-based distribution models, there is an unparalleled opportunity for Canadian culture to find success in the global marketplace.  In order to reverse the cultural deficit, Canada must be prepared to drop the protectionism of the past by embracing the technological promise of the future.