For the past 40 years a nationalist vision of protection and preservation has captured policy-makers in Canada’s cultural industries. While some commentators have presented opposing views, until recently they were largely peripheral players, when they were players at all. Like the Northern Alliance in Afghanistan, the opposition to protectionism was confined to a small part of the terrain where it could do little harm to the dominant regime. Circumstances are changing, however. As in Afghanistan, technology is in part responsible for upsetting the status quo, and an international coalition may be required if last- ing change is to be achieved.

The purpose of this article is to assess where Canada and a number of other countries stand in the debate over the treat- ment of trade in the cultural industries. At the moment, Canada’s position can be characterized as complexity border- ing on confusion, as we show more than one face to the world. Canadian consumers demonstrate that they favour greater lib- eralization by watching a wide array of foreign material, but at the same time vote for parties that pursue protectionist policies. For their part, most Canadian producer groups are not nearly so riven: they generally opt for continuing protection.

The trade and culture debate is mainly about the so- called ”œcultural industries,” which are actually defined in NAFTA, though in most discussions there is disagreement over where the boundary should be drawn, especially as ”œnew media” firms come up with applications relating to print, sound and video and mega-mergers and acquisitions create conglomerates that combine telecommunications and the Internet with more traditional cultural activities. Canada’s current position on trade and culture can be traced from the passage of the Canada-U.S. Free Trade Agreement (CUFTA) in 1988, through NAFTA in 1993, and the WTO agreement in 1995. Prior to this, trade in cultural goods was subject to the General Agreement on Tariffs and Trade (GATT) enacted in 1947. Bilateral free trade agree- ments with Israel and Chile also include culture clauses and Canada has a web of co-production treaties for film and tel- evision programs that condition our trading relationships by giving preferences to some countries over others. The wording of each agreement differs, which gives some plaintiffs the option to ”œforum shop” in the event of a dispute.

In the WTO, cultural goods are subject to the disciplines of the GATT, though theatrical screen quotas have been exempted since the GATT was negotiated in 1947. Cultural services are gov- erned by the provisions of the General Agreement on Trade in Services (GATS), though countries accrue obligations regarding market access and national treatment in a sector only if they commit to. The GATS sector most closely related to culture is audiovisual services, where fewer than 20 countries, including the U.S., have made partial or complete commitments to be governed by the rules. Like most other countries, Canada has not yet opted in. The GATS says nothing about what happens when a good is packaged with a service, an issue that arose in the dispute with the United States over magazines and which has also played a role in some non- cultural disputes.

Drawing on wording in the CUFTA, NAFTA’s provisions on cultural trade have three components:

  • Article 2005(1) states that cultural indus- tries are exempt from the provisions of the agree- ment except as specifically provided.

  • Article 2005(2), the retaliation clause, states that a party may take measures of equiva- lent commercial effect in response to actions that would have been inconsistent with the agree- ment but for Article 2005(1).

  • Exceptions to Article 2005(1) relate to: the removal of certain tariffs; the assurance of receiving fair market value in cases of forced divestment required to meet foreign ownership restrictions; the removal of a requirement that magazines be typeset and printed in Canada for a company to be able to deduct advertising in the magazine as a business expense; and the intro- duction of a retransmission royalty scheme for broadcast signals.

In the Canada-Chile and Canada-Israel Free Trade Agreements an exemption is provided for measures taken by each country with respect to the cultural industries and no provisions for retaliation are included. In the ongoing negotia- tions for a Free Trade Area of the Americas, Canada’s position is to seek a cultural exemption based on the model of the Canada-Chile and Canada-Israel agreements. Canada has also pro- posed language for the preamble of the FTAA in support of cultural diversity.

Negotiations are currently underway on serv- ices in both the GATS and in the FTAA. In the GATS talks, Canada’s position is that the agree- ment does not and will not limit Canada’s ability to promote its culture: ”œThe preservation and promotion of cultural identity is one of our core objectives. We will not make any commitment that restricts our ability to achieve our cultural policy objectives until a new international instru- ment can be established that is designed to specifically safeguard the right of countries to promote and preserve their cultural identity.”

The proposal for this new international instrument originated in the 1999 report of the cultural Sectoral Advisory Group on International Trade (or SAGIT). The government responded to the proposal by stating that the purpose of such an agreement would be to enable Canada to maintain its cultural policies ”œwhile respecting the rules of the international trading system and ensuring markets for cultural exports.” More recently, the Minister of International Trade stated that the government was keeping all options open on the most appro- priate forum for negotiating such an instrument, had not ruled out the WTO and believed that if the discussions were to have any credibility, the United States should be included in them. The Minister of Canadian Heritage subsequently stat- ed in an interview that ”œCanada has taken a lead on the creation of a new international instru- ment outside of the WTO because we do not want culture traded on the table of WTO.” The SAGIT report neither provided details of the wording of the proposed instrument nor stated where it should be located.

A final aspect of Canada’s cultural trade pol- icy resides in the web of co-production treaties that exist with individual countries. Content pro- duced under these treaties often gives producers preferential access to government funds in Canada and abroad and allows the material to be counted as national content in both countries.

In sum, Canada now presents several faces to the world:

  • a cultural exemption with possible retal- iation rights with the U.S. and Mexico,

  • a cultural exemption without retaliation rights with Chile and Israel and in negotiations with countries of the FTAA””which of course include the U.S., Mexico and Chile, and

  • commitments on cultural goods but no commitments on audiovisual services via the GATS with countries of the WTO””which includes all the countries mentioned so far.

Canada has stated that it will make no commit- ments on cultural services in the GATS until the signing of a New International Instrument on Cultural Diversity (NIICD).

Promotion of a NIICD has been spearheaded on two fronts, by a ministerial grouping of rele- vant ministers of culture, heritage or communi- cations, and by a grouping of associations of artists and creative professions. The ministerial grouping is called the International Network on Cultural Policy (INCP) while the artists are grouped into the International Network for Cultural Diversity (INCD). In its self-description the INCP says it is ”œan international forum through which culture ministers can exchange views on emerging cultural policy issues… born out of an idea to create an informal, internation- al venue where national ministers responsible for culture could explore new and emerging cultural policy issues and consider integrated ways to pro- mote cultural diversity in our increasingly global- ized world.” As of March 2001, the INCP had 45 member countries with a steering committee made up of nine countries, including Canada.

For its part, the INCD describes itself as:

a world wide network of artists and cultural groups dedicated to countering the homoge- nizing effects of globalization on culture. The INCD represents individual artists and cultural activists, cultural organizations and creative industries. We come from all continents, sectors and disciplines of the cul- tural community, ranging from new media artists to traditional artisans. Organizations from more than 50 countries belong to the network.

The INCD is established as a not-for-profit corporation under the laws of Canada and receives funding from governments in Canada, Switzerland, Korea, South Africa, Greece and Sweden and from institutions such as the Rockefeller Foundation and Arts International. It has members from 53 countries, and a steering committee of 14, including one American and two Canadians, Megan Williams of the Canadian Conference of the Arts, and Mireille Gagné, Director of the Canadian Music Centre (Quebec). The U.S. does not belong to the INCP although it can be invited as an observer by the government hosting a meeting. It was invited to earlier INCP meetings in Ottawa and Mexico City but not to recent meetings in Greece and Switzerland.

Both the INCP and the INCD met most recently in Lucerne, Switzerland in September 2001. The tenor of discussion in these groupings is that an instrument should be created under the auspices of some organization other than the WTO. The wording of an instrument is currently being drafted. Its objective would be the preser- vation of cultural diversity and its provisions would have to deal with the rights and obliga- tions of countries regarding matters such as sub- sidies, content quotas, ownership restrictions, the use of public enterprises, protection of intel- lectual property and competition policy issues as they relate to the cultural industries.

In the WTO, the ongoing services negotia- tions have led to position papers being filed on audiovisual services by the United States, Brazil and Switzerland, with interest expressed by Japan and Hong Kong (see www.wto.org). While the countries’ positions differ, there is a common desire to move ahead with negotiations on audio- visual services. This is in contrast to Canada’s position of no negotiations until the introduc- tion of a NIICD. Canada’s approach appears to be an attempt to negotiate a cultural exemption from trade agreements that has significant inter- national backing.

The uncertainty surrounding Canada’s cur- rent position is due to the different stances we have taken in different trade agreements, and our preference for the status quo in the GATS, failing negotiation of a satisfactory new instrument. Differences also arise as to the preferred location of a NIICD, with the Minister of International Trade wanting it inside, and the Minister of Canadian Heritage outside the WTO. Our several conflicting positions present opportunities for those negotiating with Canada to play off one interest against another.

What about other countries? France is usu- ally thought to be an ally in cultural mat- ters and many people seem to think Mexico, the other junior partner in NAFTA, will be equally supportive. The truth is more complicated, how- ever.

Mexican film and television producers see the Spanish-speaking market in the U.S. as a major opportunity for their creative artists that in large part offsets any domestic cultural threat from the United States. Any restrictions on access to this market that might result from Mexico’s support for special cultural carve-outs in the WTO or else- where would therefore be seen as counterproduc- tive. Spanish-language telenovellas also sell well in Russia and other Eastern European markets. In contrast, Canadian government rhetoric on behalf of its creative artists sees the gigantic

English-speaking U.S. market as a threat rather than an opportunity. Many private producers, such as Alliance Atlantis, Lions Gate Films, and Corus’ Nelvana, whose film and television portfo- lios are replete with co-productions with U.S. net- works, no longer share this view. Even in Canada, it seems, government rhetoric is less and less con- sistent with private sector reality. The same is true in other cultural sectors, where politicians press for continuing protection while at the same time praising the success of Canadian artists in foreign film, television, music and publishing markets, all of which would be hurt if other countries placed restrictions on these Canadian exports.

As for France, even here there are signs of change. At the government level, France declined to support Canadian wording proposed for the WTO declaration at Doha that would have referred to the need to address the issue of cul- tural diversity. France apparently regards no men- tion as being the best way to maintain the status quo. At the same time, it has supported discus- sion of a NIICD, though in some other forum. In the private sector, Vivendi’s ownership of Universal Studios means that influential French corporate interests will see the benefits of main- taining open markets around the world for American film, television and music interests. To the consternation of the French cultural estab- lishment, Mr. Messier, the CEO of Vivendi, has recently suggested that the French cultural exception in trade and investment agreements is dead. On copyright-related trade issues, France is likely to be allied with Germany, with France act- ing for Vivendi and Germany for Bertelsmann.

There also seems to be growing appreciation in France of the adverse or unintended conse- quences of protectionist cultural policies. For instance, Patrick Messerlin, a Professor of Economics at the Institut d’Études Politiques de Paris and one of twelve special advisors to the Director General of the WTO, has noted that:

When supporters of the quotas and subsi- dies say that these instruments work, they simply mean that quotas have been enforced and subsidies have been spent … [but] these instruments, even when zealously enforced, as in France, have not produced the effects desired by their supporters …Being protected from American films, French film-makers have tried to direct and produce quasi- American films … French film policy has led to an accelerated ”œAmericanisation” of French film production””from soap operas to sitcoms for teenagers and hard thrillers …

Tiny cracks are thus appearing in the support of a nation that Canadian cultural nationalists have long thought of as a reliable ally.

Similar criticisms have previously been expressed elsewhere in Europe. A 1994 EU report was critical of costly policies that have not stim- ulated European audiovisual production. It con- cluded that the financing schemes used to pro- vide subsidies have in fact been largely responsi- ble for the commercial failure of European films and television programs. The Movie Game by Martin Dale, published in 1997, was equally crit- ical of UK film policies:

The state now decides the cultural agenda of the nation and appoints the key commis- sioning editors whose editorial remit makes it very difficult for them to make popular films. At best, commissioners are excellent film professionals who do their best to make good films within the limits that have been placed on them. At worst, commissioning is the result of bribery and corruption and the films that are made are mediocre.

Mike Figgis, a British director, comments even more directly: government policy is ”œso inundated with class snobbery and nepotism that all the talent that is waiting there to be used, waiting to be involved, waiting to be creative”” and I have no doubt that it is there, it’s there in spades””is not welcome, is not brought in.”

At the same time UK pop signers and musi- cians have international recognition and some of their films””The Crying Game, Three Weddings and a Funeral, The Full Monty””have had considerable success in foreign, including the U.S. markets. Even the UK’s public broadcaster is actively pro- moting its interests abroad. BBC Canada and BBC Kids have been licensed recently as new digital services in Canada. The former is the television equivalent of the ”œsplit run” that Canada has made strong efforts to discourage in the case of periodicals.

Another country that typically has been sup- portive of the official Canadian line is Australia, but like Canada the Australian indus- try has divided loyalties. Some players are eager to maintain facilities that help support export earnings from foreign location shooting for American films and television programs””the state of Queensland is a particular beneficiary. Canadian and Australian film and television stu- dios and their employees would be hurt if these activities were reduced, as appears possible if a new complaint by certain unions in the U.S. against the subsidies and tax incentives offered by Canada for film and television productions should succeed.

As for the United States, it provides an inter- esting case. The U.S. continues to oppose protec- tionist measures and sees its cultural industries as providing commercial entertainment that should be subject to the international trade disciplines governing any other industry. The U.S. attitude may be changing, however. Although it is a staunch opponent of cultural protectionism””in wording supported and possibly crafted by the MPAA””there is now official recognition that there may be some merit to the arguments for preserving cultural diversity, the term used by cultural nationalists in arguing their case. The U.S. argues, however, that diversity is enhanced by open markets and that there is little to fear from moving in this direction. A further interest- ing development is the financial support given to the INCD by the Rockefeller Foundation and the attendance at its meetings of a representative from the Smithsonian Institution, which suggests sympathy for the initiative exists in at least some parts of the U.S.

While in many countries the rhetoric of cul- tural nationalism has not abated, there are signs that increasing numbers of players are finding it less persuasive. In their actions, many governments and firms are revealing a preference for exports and more open markets. At a recent conference in Ottawa, the Minister of Canadian Heritage announced a program to assist the export of Canadian cultural products. A move toward more openness is not surprising given that protectionist arguments have a weak logical foundation, based as they are on what former OECD economist David Henderson calls ”œdo-it- yourself-economics,” his term for the arguments made by those who have no use for economic doctrines except the ones they create through intuitive economic reasoning in order to support their case (see his 1985 Reith Lectures).

For example, most economists would argue that countries with small domestic markets need access to international markets and a rules-based system to adjudicate international disputes if their producers are to flourish. They would point to firms based in countries with small domestic markets like Sweden, Switzerland and the Netherlands that have nevertheless thrived because of exports. Canadian firms such as Alcan and Nortel are local examples of firms that earn most of their revenues in foreign markets. Nortel may currently be in trouble but it probably never would have been heard of at all had it relied sole- ly on the Canadian market. In the same way, new-media firms will have little chance of success unless they are able to sell abroad. And, as shown, Canadian cultural producers like Alliance Atlantis recognize the logic of open markets gen- erating increasing revenues from abroad.

As is now becoming clear, do-it-yourself eco- nomics (DIYE) has not been a very good friend of the cultural industries. This suggests a need to re-examine the logic of existing cultural policies in general and those linked to trade disputes in particular.

  • Does it make sense, as DIYE would have it, to maintain ownership restrictions when the most pressing need is to attract more investment to the cultural industries?

  • Does the nationality of an organization’s ownership make any difference to the type of films, television programs and music made? Did it make any measurable difference when Canadians owned Universal Studios and Cineplex-Odeon? Is there any significance to the fact that major American studios are owned by Vivendi, Viacom, News Corp. and Sony?

  • Do content quotas for radio and televi- sion mean that audiences willingly consume more domestic content or is it just that more such material gets made at taxpayers’ expense?

  • Is it possible to brand radio and television programs and books on the basis of nationality?

  • Are content quotas effective at a time when more content is being distributed over the Internet, as well as by cable and satellite? The CRTC appears to think quotas are not effective in the case of the Internet.

  • Does the statistic that Canadian films occupy less than five per cent of theatrical screen time have the significance that cultural national- ists want it to have, or does it have more to do with the limited appeal of the films produced, often with subsidies, in Canada?

  • What is the role for the public broad- caster at a time when many of the markets that it has been mandated to serve are now supplied by other interests?

Subsidies have always received the strong endorsement of DIYE and in some instances they may even make sense. They also received the stamp of approval of the WTO in the periodicals dispute, at least under certain circumstances that include greater transparency. Taking advantage of this decision, Canada has now introduced a new subsidy arrangement in the Canadian Magazine Fund that provides support for editorial content. The first recipients of these monies have now been listed””350 of them””and they include along with Maclean’s and l’Actualité such titles as Airports Americas, Bar and Beverage Business Magazine, Canadian Pizza Magazine, Electrical Business, Sanitation Canada and Today’s Trucking. Contributions range from $12,000 to $1.4 million per magazine. The exact contribution to Canadian culture of these trade magazines is unclear but at least now the taxpayer knows where the money is going (see http:// www.cana- dianheritage.gc.cult_ind/cmf/2000-2001-list.htm).

There is little doubt that Canadians want a society that promotes the creativity of their citi- zens. They are also aware that the arts, especially the so-called high arts, have always needed private or public sponsors. Markets do not provide suffi- cient funds. The issue that begs to be discussed is the development of policies that achieve these objectives. The issue that is usually discussed is how to maintain the policies that support the iron triangle of special interests and their champions in the bureaucratic and political worlds. Trade dis- putes result from protectionist domestic policies. Designing a NIICD should follow, not precede, an examination of which domestic policies Canada and other countries might want to maintain.

 

The subject of this article was discussed at a November 28th, 2001 conference in Ottawa on Trade and Culture organized by the Centre for Trade Policy and Law. The original conference papers can be found at http://www.carleton.ca/ctpl/completed.htm. The author is grateful for comments on earlier drafts from Keith Acheson, Bill Dymond, Geoffrey Elliot and Elizabet Filleul. The text draws on research co-authored with Keith Acheson listed at http://members.rogers.com/ c.maule/c.maule/publications.htm.

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