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The CUSMA Cost: My Appearances Before the Standing Committees on International Trade and Industry, Science and Technology

Over the past month, I’ve had the opportunity to appear before two House of Commons committees – International Trade and Industry, Science and Technology – to discuss the digital law and policy implications of the Canada-U.S.-Mexico Trade Agreement. My opening remarks were nearly identical and focused on four issues: copyright term extension, the cultural exemption, privacy and data protection, and Internet platform liability. The Standing Committee on International Trade yesterday released its report on Bill C-4, the bill implementing CUSMA, with no changes, meaning that lobbying pressure to immediately extend the term of copyright was rejected.

My opening remarks:

Appearance before the House of Common Standing Committee on International Trade, February 19, 2020

Good afternoon. My name is Michael Geist.  I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law, and I am a member of the Centre for Law, Technology, and Society. My areas of specialty include digital policy, intellectual property, privacy and the Internet. I appear in a personal capacity representing only my own views.

As you know, the typical approach before committee on a bill study is to examine the bill and identify provisions to support and areas for amendment.  In this case, however, what really matters is not what is in the bill, but what is not.  Indeed, the most notable issues from a digital policy perspective won’t be found in Bill C-4. Rather, they are found in the new NAFTA itself and they typically limit Canada’s policy options for future reforms rather than require immediate legislative action.

This raises a significant challenge since the flawed aspects of the deal cannot be fixed in Bill C-4. Rather, they require change in a trade agreement that is largely presented as a take-it-or-leave it deal.

I’d like to briefly discuss four issues along these lines: copyright term extension, the cultural exemption, privacy and data protection, and Internet platform liability.

1.    Copyright Term Extension

The intellectual property provisions in the agreement raise some significant concerns, but none more so than a requirement to extend the term of copyright protection from the international standard of life of the author plus 50 years to life plus 70 years. The additional 20 years is a reform that Canada rightly resisted for decades. By caving on the issue, the agreement represents a major windfall that could run into the hundreds of millions of dollars for rights holders and creates the need to recalibrate Canadian copyright law to restore the balance.

The independent data on copyright term extension is unequivocal: it results in less access to works, higher costs for consumers, and no incentive for new creativity. In the words of Paul Heald, one of the leading researchers on the effects of term extension, it represents a tax on consumers to the benefit of publishers with no obligations to benefit the public.

The copyright review conducted an extensive review into the issue and concluded that extension should only occur if part of a trade agreement ratification. In such a circumstance, it recommended establishing a registration requirement to obtain the additional 20 years of protection to mitigate against the disadvantages of term extension and increase overall transparency of the copyright system.

Copyright term extension does not appear in the Bill C-4 because the government negotiated a 30 month transition period to address the issue. The government rightly has not rushed into term extension and it should take full advantage of the transition period to follow the copyright review recommendation by establishing a registration requirement for the additional 20 years. This would allow those rights holders who want the additional protection to get it, while also ensuring that many other works enter the public domain after their term of protection expires after life plus 50.

2.    Culture Exemption

Much like copyright term extension, there is no reference to the cultural exemption in Bill C-4. This is because the exemption does not require any legislative reform. However, the exemption is one of the most poorly understood aspects of the agreement.

Consistent with government claims, the cultural exemption covers a broad range of sectors with a near-complete exemption for Canada. While the government has emphasized its broad scope, it rarely speaks of Article 32.6(4) which comes immediately afterward. That provision was the price of the exemption and it permits the U.S. to levy retaliatory measures of “equivalent commercial effect” where Canada relies upon the exemption.

The retaliatory measures provision means that the U.S. is entitled to levy tariffs or other measures that have an equivalent commercial effect in response to Canadian policies that would otherwise violate the new NAFTA if not for the exemption. Since the provision does not limit the response to the cultural sector, the U.S. can be expected to target sensitive areas of the Canadian economy such as dairy or steel in order to discourage its use. This was the U.S. strategy when responding to a French plan to levy a new digital tax, which led to plans to levy US$2.4 billion in tariffs against French goods such as wine, cheese, and handbags.

How could this play out for Canadian policy?  The recent Broadcasting and Telecommunications Legislative Review panel report – the so-called Yale Report – contains many ill-advised recommendations on regulating the Internet and online news services such as news aggregators.

Should the government adopt the broadcast panel recommendations on content, the U.S. would have a strong case permitting retaliation with measures of equivalent commercial effect. Panel proposals that may violate the new trade agreement include requirements to pay levies to fund Canadian content without full access to same funding mechanisms enjoyed by Canadian firms, licensing requirements for Internet services that may violate new NAFTA standards, and discoverability requirements that limit the manner that information is conveyed on websites and services.

I emphasize that this is bad policy that should be rejected. However, for the purposes of this review of the new NAFTA, note that the policy flexibility to enact reforms in this area is severely limited by the agreement, which establishes the possibility of retaliatory tariffs for cultural policy.

3.    Digital Charter and Privacy

The limitations on new Canadian policy also arises in the context of privacy and data protection. Unlike the cultural exemption, which permits violations of the treaty subject to potential retaliatory tariffs, on the issue of privacy, Canada would run the risk of being offside its commitment under the new NAFTA.

Note that once again there is no provision on point in Bill C-4. There is no need for one, since the new NAFTA prohibits certain privacy-related provisions, rather than requiring them.

For example, the new NAFTA includes a provision prohibiting data localization, which refers to measures requiring data be stored within Canada. The new NAFTA features a more restrictive provision than that found in the CPTPP. There are some general exceptions that build in GATS-related rules, but the Canadian government will clearly be restricted in its ability to establish localization requirements under the agreement.

The implications of this limitation are far-reaching. Consider the wide range of policy issues associated with data right now: there is Canada’s Digital Charter and its proposed privacy and data reforms, concerns about data sovereignty, AI-related issues, and fears about the competitiveness of Canadian businesses in relation to Canadian data.

The Canadian government itself has establish localization requirements as part of its cloud computing policy. Indeed, there is a recognition that data localization may be needed in some circumstances. Yet under this agreement, Canada has severely limited its ability to regulate.

The same is true on the issue of data transfers as the new NAFTA also limits the ability to restrict them. As we enter into a discussion with the European Union about the adequacy of Canadian privacy laws, there are concerns that the data transfer provision could leave Canada between a proverbial privacy rock and a hard place: the EU demanding certain restrictions and the new NAFTA prohibiting them.

4.    Internet Platform Liability

A similar dynamic arises in the context of Internet platform liability, which raises the question of what responsibility lies with Internet companies for third party content on their sites. This issues captures large players such as Google and Facebook alongside anyone that offers user comments or content. There is no provision on this issue in Bill C-4 either. Once again, the reason is that the new NAFTA restricts policy in the area rather than requiring a new provision.

The new NAFTA includes a legal safe harbour for Internet intermediaries and platforms for content posted by their users. The rule is designed to provide Internet platforms with immunity from liability both for the removal of content as well as for the failure to remove content. Contrary to some claims, the rule does not mean that “everything goes”. Sites and services are still subject to court orders and the enforcement of criminal law. Further, intellectual property rights enforcement is also exempted.

However, some argue that the responsibility of Internet intermediaries should go further, with potential liability for failure to act even in cases of harmful, albeit legal, content. That position raises important freedom of expression concerns and questions about how to balance free speech safeguards and protection from harm.

The issue for a review of Bill C-4 is not to debate where Canada should land. The Broadcast panel recommended liability for online harms, even if the content is legal. Others, myself included, would argue that liability should rest with illegal content, but to create liability for legal content is to render Internet companies judge and jury over what remains online, thereby further empowering large Internet companies as well as limiting competition and freedom of speech.

Yet the key point is that there is a policy debate to be had. Under the new NAFTA, Canada has already committed to a position – one that restricts our ability to establish liability for third party content.

I look forward to your questions.

One Comment

  1. The government rarely speaks of Article 32.6(4) concerning retaliatory measures of “equivalent commercial effect” because this article or its equivalent have been in our trade agreement with the United States since the Canada-US FTA of 1987 – with no untoward effects. The United States has never undertaken such measures. To try to remove this article now would be practically impossible.

    Trotting out objections to the recommendations of the Broadcasting and Telecommunications Legislative Review panel report based on a belief in Internet exceptionalism does not change anything. None of the panel report’s proposed policies to which Michael Geist objects discriminates against US (or Mexican) corporate interests in particular. They have implications for non-Canadian interests as do, by their very nature, almost all Canadian cultural policies. The policy flexibility contained in the new agreement is no more limited than it has been since the FTA of 1987.

    As if to confirm his prejudice, in the section on the digital charter and privacy, Michael Geist says that the cultural exemption “permits violations of the treaty”. Canadian cultural policies are exempted from the treaty and therefore not “violations” of it!