U.S. business groups warn CRTC’s CanCon rules could worsen trade conflict

Groups representing U.S. businesses and big tech companies are warning the CRTC its moves to modernize Canadian content rules could worsen trade relations with the United States. A person navigates to the online social-media pages of the Canadian Radio-television and Telecommunications Commission (CRTC) on a cellphone in Ottawa on May 17, 2021. THE CANADIAN PRESS/Sean Kilpatrick

Groups representing U.S. businesses and big tech companies are warning the CRTC that its efforts to modernize Canadian content rules could worsen trade relations with the United States.

They say the CRTC’s measures to implement the Online Streaming Act, which updated broadcasting laws to capture online platforms, could lead to retaliation from the U.S.

“Now is not the time for Canada to invite retaliation on trade issues from the incoming administration,” the U.S. Chamber of Commerce said.

Those warnings — found in documents filed as part of a CRTC proceeding on a new definition of Canadian content — come as U.S. President Donald Trump threatens to impose 25 per cent tariffs on imports from Canada, possibly as soon as Feb. 1.

The U.S. Chamber of Commerce took aim at an earlier decision by the CRTC under the Online Streaming Act to require big foreign streaming companies to contribute money toward the creation of Canadian content. The streamers are challenging that decision in Federal Court.

The chamber said the Online Streaming Act is adding to “mounting trade frictions” and is likely to trigger retaliation under the Canada-U.S.-Mexico Agreement (CUSMA).

The National Foreign Trade Council, whose board of directors includes Google, Meta and Amazon, said the CRTC’s regulatory modernization plan may contravene the CUSMA trade pact.

It said that while CUSMA has an exemption for Canadian cultural industries, the deal allows the United States to respond with measures that would have an equivalent commercial effect.

“It is critical that the CRTC avoid these unintended consequences that could invite retaliation, particularly given the incoming administration’s objective of addressing unfair trading practices,” the council said.

Multiple groups argued in their submissions before the CRTC that foreign companies should be able to own the intellectual property for programs that qualify as Canadian content.

“Preventing foreign online undertakings from owning IP in Canadian programs will result in smaller budgets, fewer jobs and, by extension, less exportable content,” the National Foreign Trade Council wrote.

It said the “outcomes of this consultation should recognize that one doesn’t have to be Canadian to effectively tell Canadian stories.”

The U.S. Chamber of Commerce said the “streaming industry is deeply concerned about the potential negative impact on investment in Canada’s creative sector.”

It argued foreign investment supports nearly 60 per cent of “income paid to Canadian creative workers.”

Mirabella Salem, a spokesperson for the CRTC, said in an email that it would be inappropriate for the government agency to comment on discussions related to international trade.

The office of Pascale St-Onge, the minister of Canadian Heritage, said the legislation is about “fairness and opportunities.”

“It levels the playing field and encourage foreign streaming companies to increase their support for Canadian creations,” the office said in a statement. “We will continue to work hand-in-hand with all partners, but we won’t waiver from the belief that more Canadian content choice for consumers at home and around the world is good for everyone.”

The Information Technology Industry Council, which also represents large U.S. tech companies, said the CRTC’s new definition of Canadian content should “facilitate a pro-investment environment that enables companies to make decisions based on what the companies perceive consumers to want, rather than what is necessary for meeting regulatory requirements.”

The CRTC has issued a preliminary position suggesting it keep a version of the points system that has long been used to determine whether content is considered Canadian, which considers what kind of financial and creative control of a production is held by Canadians.

In its notice of consultation, the regulator noted the current definition doesn’t have any “express requirements” on intellectual property rights. It suggested a “modernized approach where intellectual property rights retention in the program is applied” and asked for input on what that model could look like.

In its response to the proceeding, Paramount said requiring “Canadian financial control would serve as a major deterrent to the production of large-scale Canadian programs that Canadians, much less international audiences, want to see.”

Amazon argued that an “inflexible framework” where financial or creative control, IP ownership or specific creative positions must be held by Canadians would disincentivize foreign streamers to spend on Canadian productions, and that would in turn “deprive Canadians of the high-quality, large-scale programs made possible only by the scale and reach offered by foreign online undertakings.”

This report by The Canadian Press was first published June 21, 2024.