CCIA Issues White Paper Explaining Bill C-11 Violating USMCA is “Beyond Dispute”

The CCIA has laid out the ground work for why Bill C-11 violates the USMCA. All but ensures Canada/US trade war.

Canada’s Bill C-11 – the social media censorship bill – violates Canada’s international trade obligations including the obligations in the USMCA/CUSMA. This has been the messaging for nearly a year now, but it’s also messaging the Canadian government worked very hard to ignore and pretend doesn’t exist. As we always say, though, reality has a way of breaking through denialism one way or another.

Canada has had quite a long time to react to the threat of sparking a trade war with the US – a trade war that Canada is basically destined to lose save for some unlikely unforeseen outcome. Back in July of last year, the US warned Canada that Bill C-11 violates the USMCA. Canada reacted by ignoring not only the threat of a trade war, but also ignoring that the US even made these warnings in the first place.

As Bill C-11 got closer to complete passage, the US renewed their concerns in early December. Canada, once again, refused to even acknowledge that the US raised these concerns, going so far as to leave the topic out of their own communique entirely. This over top of denying that Bill C-11 violates Canada’s international trade obligations.

Then, just two weeks ago, the US warned Canada a third time that Bill C-11 and other pieces of legislation violates the USMCA. Canada finally took a slightly different approach and acknowledged that the US is taking note of Bill C-11. Still, Canada took the approach that the US just needed to have the lawmaking process explained and continued to deny that Bill C-11 actually violates Canada’s international trade obligations. Put it another way, Canadian officials think that the US officials are just stupid and don’t know what they are talking about. This in spite of the fact that the US actually does know full well what they are talking about and have been, all this time, gently nudging Canada away from making a completely idiotic move in the most diplomatic way possible while still raising their concerns.

It seems that Canadian officials approach of trying to wish away the problem is not working. The CCIA (Computer & Communications Industry Association) issued a white paper (PDF) explaining very clearly that Bill C-11 violates the USMCA and that it does, indeed, open Canada up to trade tariff’s and even paves the way to a full blown trade war. The executive summary reads as follows:

In June 2022, Canada’s House of Commons passed Bill C-11 (commonly known as the Online Streaming Act), a proposal to amend the Broadcasting Act. The Senate Transport and Communications Committee completed its review of the bill on December 14, 2022, offering several minor changes and teeing it up for possible Senate passage on a consolidated bill in early 2023. If passed, the new law will have an adverse economic impact on U.S. cross-border suppliers of online content by subjecting them to prescriptive obligations to ensure the production and promotion of Canadian content, an obligation currently imposed only on licensed Canadian broadcasters.

While many of the specific measures will require subsequent rulemakings by the Canadian Radio-television and Telecommunications Commission (CRTC), the new grant of authority, in both mandate and directive, is explicitly discriminatory, designed to require foreign (mainly U.S.) suppliers to fund or otherwise promote Canadian audio and audiovisual production. Although the U.S.-Mexico-Canada Agreement (USMCA) recognizes Canada’s interest in promoting Canadian content through an exception for “cultural industries,” this exception includes guardrails to ensure that its exercise will not adversely affect U.S. trade interests. Given the near-certainty of such an effect, C-11 would, accordingly, be actionable under Canada’s trade obligations in the U.S.-Mexico-Canada Agreement (USMCA).

If Canada proceeds with C-11 as currently drafted, it will be incumbent on the United States to assess the scope of likely violations of USMCA rules, the degree to which its trade interests are harmed, and consider what steps are appropriate in response. If the Canadian government declines to withdraw this legislation extending onerous broadcast-based obligations to the online realm, or exclude U.S. suppliers from its application, it must recognize the significant differences between traditional domestic broadcasters and global streaming services, setting requirements accordingly in the least trade-restrictive manner.

This is very clear language that Bill C-11 does open Canada up to trade retaliatory measures from the US. In fact, the CCIA goes so far as to say that the violations are “beyond dispute” later on:

While the text of C-11 is subject to change and many of the more prescriptive requirements that C-11 envisages must be implemented through future CRTC rulemaking, the outlines of the proposed regime are clear, and its inconsistency with core trade obligations is beyond dispute.

Now, you might recall during the 14th senate hearing on Bill C-11 witnesses and even one Senator saying that they couldn’t figure out how Bill C-11 violates the USMCA. One witness went so far as to say that no one was able to explain how Bill C-11 violates the USMCA and even boasted that one organization hired a (now permanently anonymous no doubt) top law firm to look into the matter only to come back and tell him that Bill C-11 doesn’t violate the USMCA.

I still burst out laughing just recalling that moment because it took me a mere 5 minutes of Google searching and sifting through the provisions in the agreement to find the provision that Bill C-11 violates. That, of course, is article 19.4 which made it very clear that Bill C-11 obviously violates the USMCA. It was during that analysis that I recommended that a refund should be sought by whoever hired that anonymous ‘top law firm’ because that law firm clearly failed that organization on something so basic – and law is not even my personal primary focus in expertise. If 5 minutes of free searching from some random Internet guy can completely outperform this top law firm, the law firm in question should find the whole situation to be a complete embarrassment.

Now, it wouldn’t be a surprise that die hard Bill C-11 supporters would probably look at that and say that I must be completely wrong on that assessment. However, it seems that the CCIA actually 100% agrees with my assessment and even goes so far as to use Article 19.4 as a major point of evidence supporting their whole white paper:

The digital products rule of USMCA is more straightforward in its application, obligating Canada to ensure that it does not discriminate (i.e., accord less favorable treatment) to “digital products” on the basis of, inter alia, place of production or nationality of authorship, the very factors Canada uses to define content that is Canadian. The rule reads:

No Party shall accord less favorable treatment to a digital product created, produced, published, contracted for, commissioned, or first made available on commercial terms in the territory of another Party, or to a digital product of which the author, performer, producer, developer, or owner is a person of another Party, than it accords to other like digital products.

All three provisions cited above—3 (1) f (1), 3 (1) (q), and 3 (1) (r)— are clearly and specifically designed to provide more favorable treatment to content deemed Canadian and are thus inconsistent with this rule.

Now, to be fair, I’m not the only one who have been pointing out that Bill C-11 violates the USMCA. Other observers have been making the same warnings beyond just the United States government. Still, it would appear to be yet another case of “Drew Wilson was right” and darn rights I’m going to feel smug about this situation right about now. The call to greatly water down or completely withdraw the legislation from the CCIA was really the chef’s kiss on top of it all.

Of course, the Canadian government has a very long history of ignoring evidence, well intentioned warnings, and outright calls to pull back from the brink. So, it’s unclear if the government will finally treat these warnings seriously or just add this latest development to the ignore list as they barrel through and ram this legislation through the government process, damn the consequences. The odds of that are quite good given that there’s not very many steps left between where the legislation sits now and Royal Assent. Still, at the very least, when those trade retaliations hit (which seems to be a pretty safe bet at this point), everyone can say that the government was repeatedly warned and the government willfully ignored those warnings. At that point, the Canadian government would have no one to blame but themselves for the situation they put themselves in.

(Via @Mgeist)

Drew Wilson on Twitter: @icecube85 and Facebook.



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