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CHAPTER 8:
CULTURE AND CULTURAL DIVERSITY IN THE AMERICAS
We believe it's very important to develop a cultural covenant that would
define culture not simply as a commodity but as a matter of national importance
and to be able to remove it from whatever international trade agreements
are developed. That would include, of course, the FTAA. [Megan Williams,
32:1535]
Culture, Diversity and Policies
In Chapter 2 the Committee referred to and provided statistics on the
diversity of societies of the Western Hemisphere and, except for wealth
diversity, the Committee wishes these diversities to remain much the same.
As we understand it, what is being proposed in the Free Trade Area of the
Americas (FTAA) is greater economic integration, not political integration
or cultural assimilation. Consequently, as the Americas become more economically
integrated, it is important that the hemisphere's countries retain strong
domestic cultures to ensure their sovereignty and sense of identity. Indeed,
the Committee holds that culture is the heart of a nation and that this
is as true for other countries as it is for Canada.
UNESCO defines culture to include cultural heritage, printed matter
and literature, music and the performing arts, cinema and photography,
radio and television, and socio-cultural activities. Using this definition,
the revenues of Canadian cultural industries are conservatively estimated
at $20 billion (1994-95), representing about 3% of the country's gross
domestic product, and employing 610,000 persons on a full- and part-time
basis.
The Government of Canada, as steward of our national identity, has invested
public funds and other resources in the cultural sector as a method of
nation-building and of promoting a multicultural society. The government
has thus accepted the argument advanced by the cultural community that
Canada's small market cannot by itself support world competitive firms
of distinctively Canadian products. These companies simply cannot spread
the large up-front financial outlay wide enough in the domestic market
to be competitive on a world scale and, at the same time, be profitable
given the market and financial risks they bear. Only when these Canadian
products attract large foreign audiences can they be put on a world competitive
basis, but this wider acceptance often requires that these products compromise
or tone down their Canadian cultural content. By definition, such a competitive
market means the prospects are not good for the more successful export-oriented
Canadian products to cross-subsidize distinctly Canadian cultural products.
Distinctly Canadian cultural products marketed exclusively for the domestic
market can only exist with large government financial and regulatory assistance,
which are increasingly coming under attack from foreign interests in the
wake of Canada's international trade commitments.
The Committee heard witnesses spanning the entire cultural community
expressing the positive strategic value of this assistance in preserving
Canadian culture and of impending demise should it be withdrawn.
Canadian authors compete very well in the world marketplace. This reflects
the merit of their work, but it also reflects the cultural encouragement
they've received in the formative stages of their development. The increasing
pressure to roll back existing Canadian government initiatives to protect
and encourage its cultural diversity, however, threatens this formative
sovereign environment in which creators learn and develop their craft.
... [Barry Grills, 32:1600]
In the formative years of Canadian cultural policies, the government
almost exclusively provided subsidies, both direct and indirect, and tariff
protection to achieve its cultural objectives. With time and technological
developments in production and distribution, tariffs gradually disappeared,
while the number and dollar amounts of subsidies increased substantially
until the most recent federal budget cutbacks. Government subsidies have
also of late been complemented by attractive tax and investment measures,
along with regulatory measures in television, film, music and book publishing
sectors.
Trade Policy Arenas and Canadian Commitments
International trade agreements vary in their treatment of cultural products
and in the disciplines they impose on their signatory countries. At the
multilateral level, the World Trade Organization (WTO) administers the
General Agreement on Tariffs and Trade (GATT) and the General Agreement
on Trade in Services (GATS). Countries that are signatories to the GATT
have further negotiated the Agreement on Subsidies and Countervailing Measures
(ASCMs) and the Agreement on Trade-Related Investment Measures (TRIMs)
that impose a few more disciplines on them. Canada is signatory to all
of these agreements, as well as to regional and bilateral agreements, most
notably the North American Free Trade Agreement (NAFTA) and the Canada-United
States Free Trade Agreement (CUSFTA).
The GATT 1994 subjects all goods to non-discrimination disciplines (i.e.
most-favoured nation (MFN) and national treatment), although it recognizes
two exceptions for cultural goods. Article IV of the GATT permits countries
to establish quotas for the exhibition of domestic films, and Article XX(f)
permits measures related to the protection of national treasures of "artistic,
historic and archeological value." The ASCMs establishes three categories
of subsidies for goods: those that are prohibited, those that are actionable
and those that are non-actionable. Prohibited subsidies would be those
conditioned on export performance or on the use of domestic rather than
imported inputs. Subsidies must also be paid directly to the producers,
as in the case of postal subsidies to periodical producers. This means
that tax credit schemes that are widely used to support audiovisual production
may be considered in contravention of national treatment provisions. TRIMs
prohibits the establishment of certain performance requirements as a condition
for foreign investment.
The GATS subjects services, including cultural services, to its provisions.
However, in this case, countries are allowed to opt out of certain national
treatment and MFN obligations. Canada has taken an exemption from MFN under
Article II for coproduction treaties for film and television production
that it has with a number of countries. Canada, on the other hand, did
not take an MFN exemption for its film distribution policy, one that grants
more favourable treatment for certain U.S. distribution companies. Under
Part III, Canada made no market access or national treatment commitments
for any cultural services and none in the wholesale trade services sector
for musical scores, audio and video recordings.
Clearly, these multilateral agreements are becoming increasingly pervasive
in their coverage of traded products, expanding beyond tariff barriers
to govern most forms of non-tariff barriers. This coverage has become so
encompassing that some measure of overlap between agreements has created
confusion over the obligations of signatories. In terms of cultural products,
for example, the WTO decision on periodicals (split-run magazines) has
brought to the fore the question of whether culture is a good or a service
and which trade agreement applies when the product in question combines
a good and a service. It has come to light that some cultural products
are also considered intellectual property subject to the Agreement on Trade-Related
Intellectual Property (TRIPs). The resolution of this confusion and other
related matters is clearly important to Canada's cultural community, but
it is also necessary for the optimal design of a country's domestic policies.
In regional and bilateral agreements, Canada has negotiated a cultural
exemption. The treatment of cultural goods in the NAFTA (Annex 2106) is
conditioned by Article 2005 of the CUSFTA which provides for exemption,
except when there is a specific provision. The parties are thus free to
intervene in support of their cultural industries at the possible cost
of retaliation of "equivalent commercial effect." This exemption
applies to cultural industries between Canada and the United States, and
Canada and Mexico, but not between the United States and Mexico. In terms
of cultural services, there are no obligations and no recourse to retaliation
since there is no mention of them in the services chapter of the CUSFTA.
The Committee has two observations to make on the treatment of culture
in the NAFTA and the CUSFTA that would directly relate to matters of the
FTAA. The first would be that Canada was obviously unable to secure Mexican
support in the NAFTA for culture as something more than a tradable commodity,
perhaps because Mexico wishes to exploit the large Latino market in the
United States and that the language barrier presents a formidable obstacle
that allays any Mexican fears of being dominated by Hollywood or other
U.S. industry interests. The second observation would be that the exemption
instrument, which according to many cultural groups is an unsatisfactory
compromise, is a direct result of the lack of a meeting of minds between
Canada and the United States. Our agreement to disagree on culture may
have produced the exemption clause, but this instrument has limitations,
since any solution pursuant to it is not governed by established rules,
but by the relative power of the disputants - something we, as a mid-sized
open economy, are trying to avoid.
Exempting culture from trade agreements does not exempt cultural issues
from international discipline. Without an effective institutional framework
within which international trade and investment in the cultural industries
takes place, Canada will experience a rising number of bilateral cultural
disputes with larger and wealthier countries or blocs. In the past, the
United States has taken a tough stance in cultural disputes with Canada
because it was concerned with domino effects on the policies of other countries.
[Keith Acheson, 96:1025]
A case in point would be the split-run magazine dispute. In the end,
a negotiated solution to this dispute was found, but it involved emasculating
the more discriminatory aspects of Bill C-55.1
It also led Canada to shift its protectionist strategies away from restrictions
on foreign products and towards the direct subsidization of Canadian products.
The exemption option did not, therefore, exorcise protectionist cultural
policies from Canadian international trade agreements and commitments.
New Technologies and Organizational Structures
In the advent of the microchip and the digital revolution, along with
increasingly liberalized national markets, two predominant socio-economic
transformations are taking place. These changes are globalization and convergence.
Their impact has been felt in virtually all sectors of the economy, but
predominantly in the cultural sector, which includes telecommunications
and broadcasting industries.
Appendix 1 describes the nature and the foreseen consequences of globalization
in some detail, but it suffices to say that for the cultural sector it
means firms must reposition themselves to prosper in the so-called "Information
Age." Cultural firms of all stripes are, directly through mergers
and acquisitions and indirectly through the formation of alliances and
consortia, expanding beyond their national borders to bring products to
world markets. Foreign market penetration for an industry characterized
by a huge up-front fixed cost structure, which means the first unit produced
is very expensive while all subsequent units are a pittance by comparison,
fits well into its current market-maximization, product-distribution strategies
of firms. Cultural firms cobbled together in this fashion, which has also
spawned multinational cultural firms, are, therefore, simultaneously breaking
down national borders and "raising the bar" for commercial success.
The transmission of data, information, audio and video by digital code
and compression techniques over new, higher capacity media (fibre-optic
cables and the radio spectrum) is fostering the convergence of once quite
distinct sectors: telephony, cable television, broadcasting (radio and
television), and microprocessing industries. It has also turned the sector
somewhat upside down as the longstanding perceived problem of spectrum
scarcity has become a problem of content scarcity. The dominant corporate
repositioning strategy to date seems to be both horizontal and vertical
mergers and acquisitions. These strategies appear to be reengineering quite
distinct products (books, magazines, music, film, television and radio
programming, etc.) into multimedia products, while, at the same time, they
attempt to transform quite distinct distribution systems (coaxial cable,
telephone wire, satellites, Internet, etc.) and networks into an integrated
"Information Highway."
On the cultural side, apart from lowering the cost of producing traditional
products, quite a number of new cultural products are being developed in
the process. Artists of all sorts are now able to express their talents
through CD-ROMs, video games, virtual reality, digital animation, and interactive
programming, education and training. Moreover, an online magazine or book,
which is less expensive to produce than hard copy versions, will be able
to integrate sound and film, thereby redefining the reading experience.
A film may also have many different plots and endings that will allow interactive
choice and participation by the audience, obviously redefining the film
viewing experience. On the negative side, these new technologies and products
increase the opportunity for theft or unauthorized use, forcing policy-makers
to refocus their efforts on upgrading our domestic intellectual property
laws and the TRIPs agreement. These new product forms also increasingly
put into question their status as a good or service and the applicability
of alternative trade agreements.
Adaptation, Strategic Responses and Policy Instruments of the Future
This new globalized environment not only imposes unique challenges on
the sector, it also demands greater attention from Canadian cultural policy-makers.
As one witness put it to the Committee:
The problem is we've built up this huge and very successful Canadian
broadcasting industry - production industry, music industry, movie industry
- ... based on [the existing] structure ... The Internet is coming, and
we're not going to be able to control what's on the Internet. So for a
period of time we need to make sure we allow the Canadian industry to transform
itself, so it goes from being the broadcasting industry it is today to
a new media industry that will compete on a global basis, because we're
not going to be able to control ... what is brought into Canadian homes.
[Willie Grieve, 124:925]
What this witness is suggesting is that Canadian regulatory policies
designed to have foreign products cross-subsidize Canadian products, as
orchestrated by the Canadian Radio-television and Telecommunications Commission
(by way of Canadian content rules, product bundling strategies, "must
carry" requirements and other licensing conditions), as well as other
public policy instruments will become less effective with greater program
choice and expanded bandwidth signal delivery systems. This inability to
effectively regulate the content and transmissions of cultural products
over the Internet has consequences and, in the event of producers migrating
to the less burdensome systems, a rejigging of public policies is advised.
The Canadian content imperative shifts, therefore, from ensuring access
by regulation to ensuring access by fostering firms with solid reputations
for quality productions. According to one expert in the field, we, as a
nation, may be losing ground precisely because we appear improperly focused.
The issue ... is the lack of attention being paid in Canada to the need
to develop a strong content industry on our own terms. While we worry about
international agreements, it may well be that all our efforts are irrelevant
if we can't take advantage of the new opportunities the new economy has
to offer. It should be of concern that while we in Canada worry more about
content, the U.S. is actually doing more to ensure that they have a strong
content industry. [Ken Stein, 32:1550]
Certainly, cultural policies based on quite distinct sectors will have
to be redesigned in the face of the blurring of their traditional boundaries.
Indeed, more attention will have to be paid to providing a "level
playing field" between once distinct industries, as policy leakages
may arise when some foreign producers choose to circumvent the more restrictive
product markets and distribution methods for the least restrictive ones.
Canada could only be the loser if genuine business entrepreneurship is
diverted in this way to socially wasteful bureaucratic entrepreneurship.
From a proactive policy perspective, selective cultural instruments
ripe for the increasingly internationalized market environment have been
suggested:
Excise taxes or user fees can be used on a non-discriminatory basis
to provide user-pay funding to cultural creators. This approach is already
embodied in the Canadian Television Fund and could likely applied to other
cultural sectors as well. GATT Article IV provides for domestic film screen
quotas in movie theatres. This article has never been practically applied,
but the concept has been carried over into radio and television domestic
content requirements, so far without any clear rules and without unanimous
approval within the trade organizations. Nonetheless, the concept of reserving
some cultural shelf space for domestic content does exist, and it needs
to be refined and embedded in a new instrument. [Dennis Browne, 96:1000]
Finally, Canada's cultural policy-makers can no longer rely so heavily
on traditional protectionist measures, as many Canadian firms are likely
poised to enter foreign markets. The openness of domestic markets now becomes
an important consideration to factor into the policy calculus, if foreign
markets are to remain open to Canadian cultural products. Indeed, Canada
is at a crossroads in the cultural-trade policies nexus. The cultural SAGIT
suggests that Canada should champion a new cultural trade instrument.
Canada [should] take the lead in developing a new international instrument
that would lay out the ground rules for cultural policy ... I've set out
the five essential elements of this new instrument. They would be the following:
recognize the importance of cultural diversity; acknowledge that cultural
goods and services are significantly different from other products; acknowledge
that domestic measures and policies intended to ensure access to a variety
of indigenous cultural products are significantly different from other
policies and measures; set out rules on the kinds of domestic regulatory
and other measures the countries can and cannot use to enhance cultural
and linguistic diversity; and establish how trade disciplines would apply
or not apply to cultural measures that meet the agreed-upon rules. [Ken
Stein, 32:1545]
What remains unclear to the Commitee in the conception of this new instrument
would be its legal status and institutional residence. Would this instrument
be a separate treaty outside the purview of the WTO or a sectoral agreement
like that for telecommunications and financial services within the WTO?
The Committee was given the preference of one witness (Ken Stein, 32:1645)
who favoured the former under the friendly confines of UNESCO. However,
the effectiveness of this option to segregate cultural products from international
trade commitments is questionable. A new treaty also means that we are
creating a new forum from which disputants might shop. As Canadians witnessed
in our recent split-run magazine dispute with the United States, this option
might only lead to more confusion and to costly management of the issues
at stake. In the alternative route, as a sectoral agreement, the WTO may
be able to better manage these conflicts. In any event, much work is still
needed to flesh out the effectiveness of alternative mechanisms.
While this new cultural instrument, with the above and other details
worked out, would likely be the ideal instrument in this new global trading
environment, it is by no means a certainty, given that countries like the
United States would have to be signatories for it to be effective - at
least from a Canadian perspective. One culture international trade expert
put it succinctly to the Committee:
In an international trade negotiation, Canada can forge alliances with
other like-minded countries that will improve the chances of developing
a framework of values and rules that trumps the jungle of bilateral interactions.
... [T]he mystery is not why countries like Canada should support a WTO
agreement, but why the lords of the jungle - the United States, Japan or
the EU - should. [Keith Acheson, 96:1025]
The Committee feels that a similar covenant should also be sought as
part of a regional undertaking such as the FTAA. However, notwithstanding
U.S. opposition, there are additional complexities to forging such a covenant
in the Americas region.
[W]e're working to organize a parallel conference in Mexico - parallel
to the ministers - for international cultural organizations. We're having
a very difficult time because the NGOs in Mexico are almost non-existent
in the cultural area. Any connection we have is tied in very closely with
government, and the Mexican government is not welcoming a conference of
NGOs. ... I think we'll experience the same problem as we widen the circle
and start working with other cultural organizations in Latin and South
America. The type of development we see here in Canada, with a very complex
cultural infrastructure, just doesn't exist in those countries. [Megan
Williams, 32:1535]
The Committee further acknowledges that none of the other economic integration
treaties - MERCOSUR, Andean Community, CARICOM, CACM - treat the cultural
sector different from other sectors, except in terms of foreign investment
and ownership requirements. Regulations on content are nowhere to be found.
Moreover, despite significant exports of Brazilian and Argentinian audiovisual
products to the smaller markets of Paraguay and Uruguay, with combined
market shares of the former as overwhelming as that of the United States
within Canada's market, there is not even a hint of cultural protectionism
emanating from either of the latter two South American countries. While
the Committee finds this lack of concern for retaining and defending one's
cultural sector disturbing to Canada's interests, as well as posing a threat
to hemispheric cultural diversity, one witness offered a conciliatory strategic
purpose for the cultural covenant approach in the FTAA:
[T]he FTAA will be a Mexican standoff, if I can use another metaphor.
So nothing will happen, but a lot can be learned. ... [R]elationships can
be forged with Caribbean nations, with Latin American nations ... preparing
us for the possibility of getting the Americans to the table at such a
new instrument, which is a rather bold leadership role for Canada. [Sandy
Crawley, 96:1135]
The Committee duly notes these views and recommends:
14. That the Government of Canada preserve Canada's cultural identity
through the continuation of its present cultural exemption policies while
working to establish a new international instrument on culture along the
lines contained in the Cultural SAGIT Report, if feasible within the World
Trade Organization framework, and to seek alliances amongst the nations
of the Americas for achieving this instrument.
1 Bill
C-55 was one of Canada's legislative responses to a negative WTO ruling
on Canada's periodicals or split-run magazines policies. Originally, the
bill would have modified these policies in a way to achieve the same objectives
while trying to exploit different obligations between the GATT and the
GATS.