It seems that US lawmakers haven’t forgotten about the discriminatory nature of Canada’s Online Streaming Act (formerly Bill C-11).
The media attention might be slowing with coverage of the Online Streaming Act, but that doesn’t mean major developments aren’t happening with the new law. In recent days, the legislation has already sparked a lawsuit from Google as they try and keep the cultural elite from stealing ad revenue from digital first creators. What’s more, the CRTC was forced to delay their implementation timetable by a whole year after it became extremely apparent they had no shot at making their self-imposed deadlines. Definitely quite a hit to the regulators ego considering that they bragged to senators during the hearings how regulating the internet was a trivial little matter that was no big deal.
While screwing over Canadian creators has rightfully been the main focus of concern for this legislation, there are other areas of concern with this legislation that have been percolating in the background. One of those issues is the fact that the Online Streaming Act is a violation of Canada’s international trade obligations. Specifically, it violates CUSMA/USMCA. As worded, the legislation targets the larger platforms as it tries to steal the audience and revenue of other creators and redirects both towards legacy Canadian media players. The pattern, however, is that a vast majority of those platforms just so happen to be American owned. As a result, the legislation inherently discriminates against US businesses.
This problem didn’t go unnoticed by US lawmakers. As a result, there have been calls by powerful US lawmakers to slap trade sanctions against Canada. The US ambassador has warned Canada of retaliatory measures not once, not twice, not three times, but at least 4 times that if Canada doesn’t reverse course on this and the Digital Services Tax, that trade sanctions were going to hit Canada.
What’s more, US Senators sent a bi-partisan letter to the United States Trade Representative (USTR) to apply even further pressure on Canada should they move ahead with the Digital Services Tax, Bill C-11, and Bill C-18. A second letter was issued nearly a year later.
The Canadian government, in response, basically took a head in the sand approach. The hope was that if Canada ignored all of this, the problems would go away on their own. That approach was especially pronounced during the Senate hearing when Global Affairs was asked about this. Global Affairs essentially responded by downplaying the barrage of complaints and said that the only contact they got from the US was just questions about the process in which a law is created. They then insisted that then Bill C-11 was totally in line with all of Canada’s trade obligations and the trade sanction concerns aren’t real (LMAO!).
Well, that approach of trying to ignore the problems and hope it all goes away on its own didn’t really work. Late last year, the Canadian government was forced to back off of their timeline with the Digital Services Tax. The new tax seemed to be stuck in a back and forth tussle ever since over whether or not it is on.
With the “ignore the problem” approach not working with the Digital Services Tax, it seems that the same could be said with the Online Streaming Act. According to the Globe & Mail, US lawmakers are continuing to pressure the US ambassador to address the discriminatory nature of the Online Streaming Act:
The bipartisan group of American lawmakers, including eight Democrats and 11 Republicans, say in the letter to Ms. Tai, dated Thursday, that they fear the implementation of the act “will result in trade barriers” for the U.S. music streaming industry. All are members of the powerful House ways and means committee.
They said the legislation brings music streaming services under the regulatory framework of Canada’s Broadcasting Act, which in their opinion is designed for a different era. The Broadcasting Act “requires Canadian radio broadcasters to program about 35 per cent of their airtime with Canadian music as part of the government’s efforts to ensure the availability of Canadian content,” the members of Congress write.
“We are concerned that under the new law, Canada will apply the logic of quotas designed for terrestrial broadcasters to modern music streaming services. Global online streaming services are not the same as domestic broadcasters, and we believe these provisions clearly discriminate against American content, interfere with consumer choice, and harm American artists and rights holders.”
Furthermore, they write, “The new law also gives the regulator power to condition market access for music streaming services on making financial contributions into certain government-linked funds intended for the domestic music industry, which, if put in place, would constitute new nonconforming measures restricting cross-border digital trade.”
The members of Congress urge Ms. Tai to resolve the matter with Canada. “The Office of the United States Trade Representative’s engagement with the Canadian government is crucial to ensure that the way forward is not to make the consumer experience on music streaming services worse for Canadian consumers and American artists alike, but to arrive at a flexible system respecting consumer choice and the interests of the U.S. music industry and artists.”
One thing is for sure, the Canadian governments digital policies have really strained Canada’s relationship with the US. As the government tries to move ahead with these policies, it seems that pressure to retaliate from the United States continues to grow.
There’s been some debate over whether the Canadian government’s excuse of this falling under a cultural exception. Experts seem to agree that this isn’t that viable of a defence for the Canadian government thanks to the CUSMA poison pill provisions designed to discourage its use. Here’s an article by Michael Geist back in 2020 discussing this:
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.
Yet the cultural exemption did not come without a cost. The government rarely mentions it, but the agreement also includes a culture “poison pill” designed to discourage use of the exemption. It grants the U.S. the right to levy retaliatory measures of “equivalent commercial effect” in response to Canadian policies that would otherwise violate CUSMA if not for the exemption.
Since the provision does not limit retaliation to the cultural sector, the U.S. can be expected to target sensitive areas of the Canadian economy such as the dairy or steel sectors. This was the U.S. strategy last year when responding 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.
Unfortunately, the Canadian government has, for years, continued to ignore warnings about its digital agenda from experts and online stakeholders. Those experts and stakeholders were routinely dismissed as, among other things “shills for Big Tech” for daring to say that the Liberal’s approach was anything other than perfect in every way. Those warnings have largely come to fruition. News links got blocked on Meta as warned in the Online News Act. Trade tensions are on the rise as warned in regard to the Digital Services Tax, the Online Streaming Act, and the Online News Act. Litigation has happened as warned in the Online Streaming Act. Implementation of the Online Streaming Act and regulating the internet is an extremely complex matter (to put it mildly) leading to the CRTC delaying the process as warned. Ultimately, as time goes on, more and more predictions are going to come true. As things stand now, unless something unexpectedly occurs in this saga, it’s looking like Canada is marching itself straight into a losing trade war battle with the US.
This is what happens when expertise gets ignored. Being belligerent and threatening anyone who isn’t part of the cult-like mentality of those pushing the Canadian governments digital policy won’t magically make the problems magically go away. Sooner or later, the reality bubble is going to burst and real world consequences are going to come barging in. All people like us can recommend is rescinding these terrible laws so that things can return to a more sane normal. That is unlikely going to happen, so all we can do is shake our heads and roll our eyes as the Canadian government deals with an increasingly massive mess of its own making.
Any retaliation from the US should include the Canadian cultural sector. The cultural sector lobbied for this law so its only fair that they suffer the consequences of their actions. Retaliatory measures could include import duties on content made in Canada, export duties on American content sold to Canadian networks, and no longer issuing Green Cards to Canadian actors, directors, etc.
Been meaning to reply to you, heh.
There are definitely different ways to retaliate that would put the squeeze on politicians. One interesting way is to target ridings of politicians who supported these laws in response. Strategies like that lead to some… rather interesting combinations of seemingly unrelated industries, but this isn’t exactly an unknown tactic, but essentially, it’s an effort to target industries that are hugely important in those specific ridings. So, for instance, maybe a politician who supported Bill C-11 would suddenly see their local car manufacturing plant hit with tariffs, putting massive pressure on the politician to try and work to lift those tariffs. Attaching doors to cars may seem completely unrelated to people posting video’s on YouTube, but it is an interesting pressure tactic.
Another one is to target a specific industry that is already weakened by other economic forces. Hitting them with tariffs would force the government to find ways of subsidizing them while they get heavily pressured to appease the US government (or appeal those tariffs, whatever action the government deems necessary under the circumstances). This way, it ensures the issue hits the papers and broadcast news cycle, ensuring maximum noise is made in the process.
Obviously, your suggestion is perfectly viable as well. Target the entertainment sector in the US? Get hit with tariffs that put strain on Canada’s entertainment sector. That way, the numbskulls that pushed for this law directly feel the consequences of their actions.
Those are definitely three possibilities that the American’s could theoretically try. There’s probably other ways the American’s could theoretically slap tariffs on Canada to get the Canadian government to back off of the Online Streaming Act. I think if it comes down to the US hitting Canada with trade sanctions, it’ll all depend on how the US feels is an appropriate political strategy. What is considered a proportionate or appropriate level of retaliation and where would that pressure work best, etc.
Obviously, to be clear, I hope it doesn’t come down to the US sanctioning Canada. Hopefully, this gets settled in diplomatic channels and the Online Streaming Act never ends up getting enforced on online creators at all (negating any possible need for YouTube to implement their revenue pass through policy), but I also know that the Canadian government, when it comes to their terrible policy making on the internet, can be quite stubborn and have a history of refusing to listen to reason.
DB: As an American who appreciates Canadian Actors, Directors, and even Canadian films, the US would suffer immensely for not having access to Canada’s wonderful talent. I mean, Denis Villeneuve, Kawennáhere Devery Jacobs, Elliot Page, Ryan Gosling, and far too many more I can’t name off the top of my head would lead to a massive loss in the US entertainment industry.
Sometimes sacrifices have to be made in order to achieve goals. Preventing Canadian actors and directors from working in the US would hurt the Canadian cultural sector far more than it would Hollywood. Besides you could always get Danny DeVito to play Ken instead of Ryan Gosling.