Culture and the TPP has yet to garner much attention, but that is a mistake. The TPP departs from longstanding Canadian policy by not containing a full cultural exception and creates unprecedented restrictions on policies to support the creation of Canadian content. The Canadian position on trade and culture has been consistent for decades with successive governments requiring a full exemption for the cultural industries. The exemption, which is found in agreements such as NAFTA and CETA, give the government full latitude to implement cultural policies to support the creation of Canadian content.
The TPP’s approach to culture is different from Canada’s other trade agreements. Rather than include an exception chapter or provision, the TPP contains several annexes that identify “non-conforming measures.” This allows countries, including Canada, to list exceptions to specific TPP rules. Without an exception for the cultural industries, the TPP rules banning local presence requirements and national treatment for service providers would place Canadian cultural rules at risk. Annex II includes a Canadian exception for the cultural industries. The exception is promoted in the government’s summary of the TPP, which claims that the agreement:
includes a broad reservation under Services and Investment for existing and future programs and policies with respect to cultural industries that aim to support, directly or indirectly, the creation, development or accessibility of Canadian artistic expression and content.
That led to media coverage reporting that Canada had obtained a full exception to protect cultural policies. A closer look at the actual text, however, reveals that Canada did not obtain a full cultural exception. Rather, there are two notable exceptions to the general cultural exception, which state:
Canada reserves the right to adopt or maintain any measure that affects cultural industries and that has the objective of supporting, directly or indirectly, the creation, development or accessibility of Canadian artistic expression or content, except:
a) discriminatory requirements on services suppliers or investors to make financial contributions for Canadian content development; and
b) measures restricting the access to on-line foreign audiovisual content.
As someone who has argued against Netflix regulation or expanded Cancon rules, there is an appeal to these exceptions to the exception. Yet it is shocking to find the Canadian government locking itself into rules that restrict its ability to consider expanding Cancon contributions to entities currently exempt from payment or adopting rules that limit regulatory jurisdiction over foreign online video providers that target Canadian consumers. Expanding Cancon payments may be a bad idea today (the Ontario and Quebec governments along with the CBC have suggested it is a good idea), but as the market evolves it is certainly possible that some form of regulation will be contemplated tomorrow.
The TPP provision appears to be a permanent ban on a “Netflix tax” or virtually any expansion of Cancon contributions to currently exempt services. The Conservatives campaigned against such a levy and no opposition party expressly supported required payments for providers such as Netflix. However, the Liberals did promise during the election campaign to gather data on online video services “with particular focus on consumer habits, the availability of Canadian films, and revenues and expenses associated with these services.” That is useful information, but its value is diminished if the government is committing itself through the TPP to never explore certain policies to benefit Canadian content development. In fact, the scope of the provision goes far beyond just online video: the music industry and publishing industry would face similar restrictions.
The exception may be limited to “discriminatory” Cancon payment requirements, but currently exempt providers (such as online video services) will argue that any Cancon payments would be discriminatory against them, because they do not enjoy many of the protections and benefits that go to the Canadian companies that make Cancon contributions as part of a regulatory quid pro quo (Netflix raised the concern when it appeared before the CRTC in 2014 and in its submission that was removed from the record). This would include development funding, production funding, and multiple windows for achieving Cancon requirements. Assuming those services argue that any mandated Cancon contribution is discriminatory if they do not also receive the benefits accorded to established broadcasters or broadcast distributors, the TPP will effectively ban applying Cancon contributions to exempt entities. That might be a sensible policy for the moment, but the TPP removes the ability to revisit the issue and essentially freezes the Cancon system in its current form.
There are similar concerns with measures restricting access to online foreign audiovisual content. Given its popularity, few would want to restrict access to Netflix (indeed, the opposite is true as many want access to more Netflix). But what if foreign services have unfair advantages over Canadian-based competition? What if a foreign music service (with videos) targets the Canadian market in a manner that raises legal concerns? What if the government seeks to negotiate better opportunities for Canadian content on a foreign service? The TPP would seem to block the ability to take action, since new rules may restrict access to foreign content or constitute the discriminatory requirements.
Why did Canada depart from longstanding cultural policy in the TPP?
I asked Global Affairs Canada for answers several times over the past week, but did not receive a response [Update 1/28: I received a response late yesterday. The government did not respond to questions about why the TPP departs from longstanding cultural trade policy. A spokesperson for the Minister of International Trade did confirm, however, that the TPP contains two exceptions to the cultural exception]. Perhaps the answer lies in U.S. opposition to Canada’s entry into the TPP negotiations. I’ve already highlighted several of the restrictive conditions faced by the Canadian delegation. But it is worth noting that the cultural exception was opposed by U.S. lobby groups, who warned that the TPP would not contain Canada’s traditional cultural exception:
IIPA is also concerned about the significant market access barriers to U.S. copyrighted materials that Canada maintains pursuant to the “cultural exception” in its FTA with the U.S. Canada has interpreted this exception to be unreasonably broad, even to encompass discriminatory application of its copyright law, and has insisted on this misinterpretation of the exception in similar provisions in other trade agreements. IIPA strongly opposes the inclusion of any such cultural exclusion in the TPP, and the Canadian government must understand that TPP will not admit of such exceptions.
Perhaps the carve out was another part of the price of admission. Or maybe the Conservative government was looking for a way to restrict the possibility of expanding Cancon payments or to block a Netflix tax forever. Regardless, the TPP creates significant cultural concerns for those that support a cultural policy that includes mandated contributions to support the creation of Canadian content. Moreover, it represents a major departure from longstanding Canadian trade policy that sought a full exception to ensure full flexibility in implementing Canadian cultural policy.
(prior posts in the series include Day 1: US Blocks Balancing Provisions, Day 2: Locking in Digital Locks, Day 3: Copyright Term Extension, Day 4: Copyright Notice and Takedown Rules, Day 5: Rights Holders “Shall” vs. Users “May”, Day 6: Price of Entry, Day 7: Patent Term Extensions, Day 8: Locking in Biologics Protection, Day 9: Limits on Medical Devices and Pharma Data Collection, Day 10: Criminalization of Trade Secret Law, Day 11: Weak Privacy Standards, Day 12: Restrictions on Data Localization Requirements, Day 13: Ban on Data Transfer Restrictions, Day 14: No U.S. Assurances for Canada on Privacy, Day 15: Weak Anti-Spam Law Standards, Day 16: Intervening in Internet Governance, Day 17: Weak E-commerce Rules)