By Paul Weinberg
TORONTO, Jan 21 1997 (IPS)

Canada faces an onslaught of trade challenges by the United States regarding its efforts to protect the Canadian magazine industry against dumping by U.S. competitors.

A panel of the World Trade Organisation (WTO) has, in an interim ruling, upheld a U.S. complaint that measures taken by Canada to maintain the production and distribution of Canadian magazines, books, films, music, video, television and radio amount to unfair protections.

A final ruling is expected next month. But last week’s finding focuses on a raft of Canadian content requirements, quotas, subsidies, incentives, and tax breaks all contained in a 30-year policy that aims to keep the country’s magazine industry alive. But the ramifications of the ruling go beyond the issue of U.S. domination of its northern neighbour.

Countries around the world, including France and Australia, have adopted measures to maintain support of various sectors, including film and music.

They, too, could be vulnerable to U.S. trade challenges, says Paul Audley, president of Paul Audley & Associates and a former advisor to the Canadian government.

“Most countries have cultural policies,” he adds, including the United States, where politicians have denounced the Japanese purchase of Hollywood movie studios.

Other countries, including China, Malaysia, and Singapore, have expressed concerns with the overflow of U.S. television programmes via satellite into their societies.

The difference is that in countries like Canada, France, and Australia, government policy involves improving the distribution of local creative works, rather than any outright censorship of the flood of popular U.S. culture.

Nevertheless, Canadian efforts have been met with outright hostility from successive U.S. governments, which have traditionally taken the position that items like books, magazines, television programmes, or movies are simply products that should meet the full test of the marketplace.

What is not appreciated by U.S. officials is that a society’s democracy is compromised if its citizens lack easy access to information that reflects a local point of view, says Dennis Browne, a former Canadian trade official who now heads the Centre for Trade Policy and Law in Ottawa.

“A culture is a shared value-system. And if you don’t have it, democracy cannot work,” says Browne.

None of the disputes have been as lengthy and rancorous as the one involving Canada’s magazine policy.

With newsstands in English-speaking parts of Canada largely filled with U.S. publications, Ottawa, under Liberal and Conservative governments, has sought to discourage U.S. publishers from printing “split-runs”. Under such an arrangement, U.S. publishers, who serve a gigantic market of more than 200 million readers, provide additional copies of their magazines dressed up as so-called “Canadian” editions for a smaller market of 30 million people.

These split-runs contain the same articles as their U.S. counterparts but with some Canadian content. They are designed to attract scarce Canadian advertising dollars with cheaper rates than those offered by Canadian magazine publishers.

In an attempt to protect the Canadian magazine industry, the Liberal government of Prime Minister Jean Chretien imposed an 80 percent excise tax on split-runs. The tax came when it appeared that Ottawa’s ban on these “Canadian” editions was being undermined with electronic computer technology by the giant U.S.- based Time Warner Inc. and its Sports Illustrated magazine. The government also offered favourable postal rates to Canadian magazines in an effort to stem the drain on Canadian advertising dollars.

But a WTO panel, in an interim decision, has agreed with a U.S. complaint that the Canadian regulations, including the split-run ban, excise tax, and favourable postal rates, all constitute restrictions in the trade of goods and thereby a violation of the legal intent of the international trade agreement.

Canada is likely to cite this point as the basis of its appeal when the WTO makes its final decision available in a month. That decision is expected to echo the interim ruling, says Browne, noting that the party launching the appeal has 60 days to forward a claim before the trade body.

Canada will probably argue that magazines, as a category, constitutes a “service,” not a good, and is therefore covered by the General Agreement on Trade in Services (GATS), which has less of a blanket approach to individual national regulatory regimes, suggests Browne.

Browne is optimistic that Canada has a better chance at the WTO appeal panel, which should make a decision on the entire matter of split-runs by the summer. He says this body, made up of “highly qualified people, like retired judges,” is more appreciative of the subtleties of Canadian policy than a dispute panel, “with its loosey-goosey approach.” The latter comprises former trade diplomats and academics.

Browne adds that the traditional Canadian policy of seeking an exemption for culture in multinational trade agreements has in hindsight not worked out. Ottawa has obtained such exemptions in its free trade agreements with the United States and Mexico and assumed they would be recognised by a more comprehensive WTO.

With the trade in information becoming an increasingly important commodity around the world, and culture and entertainment part of the equation, Browne says it is better that trade agreements contain clear rules on appropriate culture protection measures.

“If you don’t have rules, you end up trying to resolve a dispute politically. And Canada as the little guy doesn’t have the clout in any trade conflict with the U.S.,” states Brown.

But Paul Audley differs, stating “that negotiating agreed rules doesn’t get you anywhere (either). We should focus on exemption.”

Canadian cultural measures have tended to be conservative and not as sweeping as U.S. critics have suggested, says Sandy Crawley, president of the Alliance of Performers of Cinema, Television, and Radio. While Canadian films, for example, receive public financial assistance, their availability on local theatres is still limited because of the domination of both the distribution and production of the movie business in Canada by the major Hollywood studios, he notes.

The major studios have successfully fought back any suggestion to establish a Canadian quota in film distribution, adds Crawley, because “it would undermine their efforts at promotion where they spend more money than in the actual production.”

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