The US Enters the Chat, Expresses Concern Over Bill C-11

The US government is now getting involved in the Bill C-11 debate. The US has directly expressed concern about the legislation.

Already, the Canadian government has been backed into a corner. Officials might claim that anyone who suggests that Bill C-11 regulates user generated content is just spreading “misinformation“. Yet, CRTC Chair, Ian Scott, admitted that it does regulate user generated content. When the opportunity presented itself to remove user generated content from the bill, the Liberals, NDP, and Bloc all voted against that measure, hammering the point that this is actually the whole point of the legislation.

As time dragged on, more and more talking points went down in flames. The remark that the legislation doesn’t change algorithms went down in flames when the CRTC chair confirmed that the legislation does manipulate outcomes of algorithms. Another talking point is that the legislation would generate $1 billion additional revenue. Government officials later admitted that the figure was only “illustrative” (meaning, they completely made it up). Additionally, some have said that the CRTC is well positioned to safeguard freedom of expression. Those same people found themselves criticizing the CRTC for not doing so in another case.

While the defences have been comically bad, it would be hilarious if the consequences weren’t so very real. Digital first creators have found themselves in a complete panic over what to do should this legislation pass. Some have openly suggested that they would move out of the country for the sole purpose of saving their own careers. Digital rights organizations see the massive negative consequences of the legislation from a free speech perspective and have been actively fighting against it.

Recently, supporters of free speech and the open Internet got a major assist in all of this: the United States of America. The Biden Administration has reportedly expressed concerns surrounding Bill C-11. It has led some to believe that should this bill pass, it could result in retaliatory trade tariffs as well. From Michael Geist:

Bill C-11, the government’s online streaming legislation, has caught the attention of the U.S. government, which raised it as a concern during a recent meeting between U.S. Trade Representative Katherine Tai and Canadian Minister of International Trade Mary Ng. The issue is cited in the U.S. readout of the meeting, though the Canadian readout of the same meeting notably excludes any reference to the issue. The readout specifically states that “Ambassador Tai expressed concern about Canada’s proposed digital service tax and pending legislation in the Canadian Parliament that could impact digital streaming services.” The reference to concerns with a digital services tax has been raised before, but the inclusion of Bill C-11 is new. The concerns may reflect Canadian Heritage Minister Pablo Rodriguez’s decision to regulate user generated content, an approach not found in any other country in the world.

The creation of a new trade irritant with Bill C-11 could prove extremely costly as it opens the door the possibility of hundreds of millions of dollars in retaliatory tariffs. Those tariffs can target any sector, meaning they could be levied on dairy, steel or other sensitive economic sectors. Minister Rodriguez has claimed that the bill could result in $1 billion in new revenues, though his own officials have since admitted that the number is only an “illustrative estimate.” Whatever the number, the CUSMA would allow the U.S. to levy tariffs of an equivalent commercial effect in the event of a violation of the treaty.

Put simply, the agreement permits Canada to violate the non-discrimination provisions for the cultural sector, but it grants the U.S. the right to levy “measures of equivalent commercial effect” in response. This provision is often referred to as a culture “poison pill” as it designed to discourage the use of the exemption. Since the provision does not limit retaliation to the cultural sector, the U.S. may levy equivalent tariffs on its choice of Canadian products or services. This was its strategy when it responded to a French plan to levy a new digital tax, which led to threats to impose US$2.4-billion in tariffs against French goods such as wine, cheese and handbags.

From a Canadian perspective, the CUSMA cultural exemption allows for discriminatory policies but at a price with Bill C-11 opening the door to U.S. retaliatory measures that would be designed to match any new benefits dollar-for-dollar. With the U.S. now signalling its concern with the legislation, the risks of pushing ahead with the unprecedented regulation of user content just got much bigger.

Indeed, Bill C-11 provides for a framework to start demanding money from these streaming sources. That money would go in to a fund for the creation of Canadian content. Bill C-11 doesn’t actually have a mechanism to set aside money or charge platforms, however, a regulator like the CRTC could use this legislation to start implementing a system of charging large streaming platforms at a later time. This is part of the possible implementation process. While this is a bit convoluted, it would match up with the previous instance where the US threatened trade retaliation.

For those with impressive memories, the last time the US threatened trade retaliation was back in December of last year. At the time, Canada was actively pushing through a tax on large tech companies. The idea of how other businesses have to charge GST, but big tech does not, sounds like a straight forward problem with a straight forward solution. The US’s response showed that such an issue doesn’t exist in a vacuum, however. The US threatened trade tariffs should Canada move forward with taxing the large tech companies. Simply put, the US is no fan of anything that would hurt US companies, potentially bringing an unfair disadvantage to them. “Big Tech” would certainly fall into this category given their US connections.

Bill C-11 would set the stage of repeating this potential trade irritant. If Bill C-11 passes, the CRTC could actually start implementing mechanisms to say that a site like Amazon now owes several million dollars to be put into a fund. That means dollars are leaving Amazon simply so that they could continue to do business. It’s, once again, a policy that goes after American companies. What that process would look like remains shrouded in mystery since the Canadian government refuses to disclose how it intends on directing the CRTC to implement the forthcoming potential law. Still, if Meta, Google, or Amazon chooses not to act against this legislation now, they will have missed the window to fight against it. So, acting now is a prudent move.

At any rate, the fact that the US is basically telling the Canadian government, “Not so fast” does come off as a bit of good news for digital first creators. The rushed process so far has shown that digital first creators have become completely ignored along with the experts and observers who back them. The problem with this is the fact that regulating user generated content could still become a thing should the US get its way.

For instance, the Canadian government could very easily forge ahead with regulating speech on the Internet, but back off of the plans to demand payments from the streaming platforms. It might still annoy American creators, but is that enough to continue going after Canada after the issues surrounding payment are resolved to a satisfactory level? Hard to say at this point. Regulating speech is a mission critical objective for the Canadian government at this point, so it is definitely possible that the government could drop provisions that would pave the way for payments while still retaining the speech regulations. At that point, the speech regulation provisions would eventually get challenged and (hopefully) tossed out as unconstitutional.

Indeed, the US does have a lot of influence in Canadian politics. So, if the US tells Canada, “Don’t you freaking dare”, more often then not, the Canadian government is going to listen. There are, of course, instances where the Canadian government doesn’t listen, though the general reaction to when Canada forges ahead on its own is often met with surprise and eyebrow raising. So, no, that doesn’t happen all that often.

Ideally, the US telling Canada to knock it off would stall the legislation dead in its tracks. Given how shoulder to the wheel the Liberals have been throughout all of this, that is a low probability at this stage. Going into the Summer break, the Liberals have been very clear that they are going to let nothing get in the way of their crackdown on the Internet. So, simply modifying the law seems to be the more likely response in all of this.

For digital first creators, the silver lining in all of this is that this additional wrinkle in the trajectory of the legislation will mean further delay. Any delay for this legislation is good news for digital first creators, free speech enthusiasts, and anyone who likes watching live streams and video clips online. It’s hard to say how this angle will play out in the debate, but at the very least, it makes things a bit more interesting.

Drew Wilson on Twitter: @icecube85 and Facebook.

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