In one of his first acts in office, U.S. President Donald Trump has signed an executive order withdrawing the United States from the Trans Pacific Partnership. With the U.S. out of the TPP, the agreement cannot take effect as it requires ratification from both the U.S. and Japan to do so. Last week, new International Trade Minister Francois-Philippe Champagne said that Canada would consider all its options with the remaining TPP countries, but the reality is that Canada should follow the U.S. lead and abandon the agreement.
The need for U.S. and Japanese ratification for the TPP to take effect is no accident. For most of the countries in the TPP, access to those two markets were the reason they were willing to sign in the first place. For example, Canada came late to the TPP negotiations in part because it saw limited value in better access to markets such as Australia, Vietnam, Malaysia, and New Zealand. Trade with those countries is relatively minor and would not justify making significant policy concessions. The decision to join the negotiations was sparked by concern that preferential access to the U.S. would be undermined if Canada was left out of the TPP and by a desire to strike a trade agreement with Japan. Once Japan shifted its focus from bi-lateral discussions to the TPP, Canada pushed for inclusion in the deal. With the U.S. out, one of the foundational arguments for joining the TPP is gone.
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The CBC’s report that the Canadian government is considering extending goods and services sales taxes to foreign-based digital services has sparked yet another round of articles and coverage of a possible “Netflix tax.” Some Conservative MPs were quick to pounce with claims the Liberals are pursuing a Netflix tax, yet the reality is a bit more complicated. At issue is not the culture contributions payment that is often called a Netflix tax. Despite calls for that form of Netflix tax, Canadian Heritage Minister Melanie Joly has been consistent in saying that the government will not extend mandatory Cancon contributions to Netflix.
In fact, this proposal is not targeted specifically at Netflix at all. Rather, it envisions the possibility of extending GST/HST to foreign-based digital services that are currently exempt from collecting and remitting sales taxes. While the law technically requires Canadian consumers to self-declare the sales tax they owe on those purchases, few are aware of the requirement and presumably even fewer actually do it.
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With the Super Bowl only a few weeks away, an unusual coalition comprised of the National Football League, Bell Media, Canadian advertisers, and an actors’ union have launched a full lobbying blitz aimed at overturning a 2015 ruling that will allow Canadians to view both the U.S. and Canadian feeds of the game. The change addresses longstanding frustration with Canadians’ inability to view U.S. commercials during the Super Bowl, since simultaneous substitution policies dating back to the 1970s allow Canadian broadcasters to block U.S. signals and substitute their own feed and commercials.
My Globe and Mail opinion piece notes that the fight to block the U.S. feed has led to some unlikely arguments. CRTC critics who typically call on the regulator to get out of the way are now calling on it to impose the simultaneous substitution rules. Meanwhile, in an odd role reversal, the NFL is emphasizing the Canadian culture benefits of blocking its U.S. broadcast and ACTRA, which issued a press release calling the Super Bowl ruling balanced and protective of the public interest when it was first unveiled, is going to bat for Canadian coverage of a U.S. sporting event.
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The CRTC released its much anticipated Talk Broadband ruling yesterday, declaring Internet access a universal service objective, shifting the local voice service subsidy to the Internet, and setting much-improved speed targets of 50 Mbps download and 10 Mbps upload. The decision sparked a wide range of responses: Open Media labelled the decision historic, but business analysts largely shrugged, calling it “immaterial” and “neutral” for the telecom carriers. How to reconcile the competing perspectives?
From a big picture perspective, those that have advocated for a forward-looking Canadian digital policy that places universal Internet connectivity as the foundation have good reason to be pleased. The CRTC’s recognition of Internet access as a basic service is an important development that is long overdue. While critics downplayed the importance of the formal recognition for years, updating Canadian policy to include access to broadband Internet services provides an important signal to the market and the basis for further regulatory and policy steps if needed.
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The Canadian Heritage consultation on Canadian content in a digital world recently concluded and the department has now posted the responses. There are few surprises with many creator groups supporting Netflix and Internet taxes, while Internet providers and consumer groups oppose them (my submission can be found here). The Ontario government was the only provincial government to file a response. The Ontario Ministry of Tourism, Culture and Sport’s submission acknowledges that there is “no evidence of an overall Cancon policy failure that would justify revolutionary policy reform”, but leaves little doubt that the government is open to new Internet taxes to fund Canadian content.
The Ontario government previously worked toward a Netflix tax as part of the CRTC’s Let’s Talk TV consultation. Given the controversy that generated, it is a bit more cautious this time but its support is not difficult to discern. Its starting point is that all industry players in the Canadian media market be required to contribute to Cancon. The submission states:
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