As Parliament continues its review of legislation designed to implement the Canada-U.S.-Mexico Trade Agreement (CUSMA), I have had the honour to appear before both the International Trade and Industry, Science and Technology committees to discuss the digital implications of the trade agreement. While Members of Parliament have expressed concern with copyright term extension that could cost millions of dollars and restrictions on future privacy safeguards, the issue that has sparked the greatest surprise arises from a provision frequently promoted as a “win” during the negotiations.
My Globe and Mail op-ed notes that the inclusion of a cultural exemption was viewed as an important policy objective for the government, with Prime Minister Justin Trudeau insisting “defending that cultural exemption is something fundamental to Canadians.” The USMCA does, indeed, feature a broad cultural exemption that covers a wide range of sectors. The exemption means that commitments such as equal treatment for U.S., Mexican and Canadian companies may be limited within the cultural sector.
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Janet Yale, the chair of the Broadcasting and Telecommunications Legislative Review Panel, appeared earlier this week before the Standing Committee on Canadian Heritage to provide an update on the report. Her opening remarks directly addressed concerns regarding the regulation of news, claiming that there has been some confusion on the issue. Yet far from clearing up any “confusion”, Yale proceeded to inaccurately describe the state of news regulation in Canada and advocate for an expansive regulatory framework for Internet-based news aggregators:
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The Motion Picture Association – Canada this week promoted the Canadian link to Sonic the Hedgehog movie, the top grossing movie in the world at the moment. Much of the movie was filmed in British Columbia, generating millions in production spending and creating nearly 1,500 jobs. Normally, this would be viewed as a good news story and indicative of the global competitiveness of film and production in Canada. Yet the Broadcast and Telecommunications Legislative Review Panel report downplays the importance of this production, crafting policy recommendations that emphasizes the importance of supporting Canadian stories as a critical aspect of its approach.
Indeed, the willingness to violate net neutrality norms, impose discoverability requirements, and establish a global levy system for websites and services around the world is primarily based on the argument that Canadian policy must work to promote the production of Canadian content. This policy goal is framed as the need for Canada “to continue to assert its cultural sovereignty and Canadians can continue to express their identity and culture through content.”
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The Broadcast and Telecommunications Legislative Review Panel report calls for a massive overhaul of Canadian communications law – leading to increased consumer costs, violations of net neutrality, news regulation, CRTC intervention into discoverability, and USMCA violations – due in large measure to concerns about support for the creation of Canadian content. While the data confirms fears about the Canadian film and television sector have been overblown with record setting production in Canada, the panel insists that measures are needed to preserve Canadian jobs.
Yet what the panel did not disclose – in either its report or subsequent comments – are the results of benchmarking research on the Canadian television production sector it commissioned from Nordicity. That report was made available yesterday to those who asked (all the commissioned research can be requested from panel secretariat) and it reveals that Canada ranks first among peer countries with respect to expenditures on television production per capita, expenditures on domestic television production (ie. Cancon or equivalent domestic production) per capita, hours of television production per capita, and employment in film and television production per per capita. In other words, the panel had data that Canada spends more on television production, produces more hours of television programs, and employs more people per capita in the film and television sector than peer countries yet said nothing about the findings in its report.
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In the months leading up to the release of the Broadcast and Telecommunications Legislative Review Panel report, there was considerable focus on whether it would recommend a “Netflix tax”, a catch-all term that has come to mean digital sales taxes, corporate taxes, and mandated contributions to support the production of Canadian content. The report contains a curious paragraph in its overview in which it claims that the panel is not recommending a Netflix tax. It states:
We want to be clear that we are not recommending that Canadian content be supported by the so-called ‘Netflix Tax’ – charging consumers an extra levy on subscriptions to such services as Netflix. It is more appropriate to establish a regime that requires such online streaming services that benefit from operating in Canada to invest in Canadian programming that they believe will attract and appeal to Canadians. This approach would ensure a meaningful contribution to Canadian cultural policy objectives and the production sector. It need not result in higher prices for consumers.
The reference to a Netflix tax in the overview is the only such reference in the 235 page report. It was likely included in the overview in the hope that media coverage would jump on the claim and seek to re-assure Canadians that there was no Netflix tax or higher prices likely for consumers as a result of the report’s recommendations.
Yet the reality for anyone that reads beyond the overview is that the panel’s report not only recommends what would widely be considered a Netflix tax but proposes perhaps the biggest Internet cash grab in the OECD with mandated payments and levies on thousands of Internet services with Canadian users.
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