The US has a strong case against Canada’s Online Streaming Act 

On April 27, after years of political intrigue, Canada’s Online Streaming Act, better known as Bill C-11, became law. The legislation requires that streaming services like Netflix, Spotify and Disney+ invest in, and show, more Canadian content, known as “CanCon.” Proponents say it will prevent Canada from becoming a “cultural colony.” Critics warn that it will result in unprecedented government censorship of the web. 

There’s only one thing that both sides agree on: Namely, that the Biden administration may challenge Bill C-11 at the United States-Mexico-Canada Agreement (USMCA). That’s what should happen. A case would rein in abuses of Bill C-11, and deter other countries from getting carried away with their own cultural protectionism. 

The Government of Canada insists that Bill C-11 just amends its Broadcasting Act (1991) to include digital media. Canada has a long history of regulating television and radio broadcasters, including by taxing them to contribute to, and ultimately play, CanCon. Bill C-11 leaves it to the Canadian Radio-television and Telecommunications Commission (CRTC) to set criteria for defining CanCon, and the quotas that will be put aside for this content. 

Moving forward, there are two concerns: first, that the CRTC will get carried away implementing CanCon; and second, that the very premise of these guidelines is absurd in the digital age. 

Margaret Atwood’s “The Handmaid’s Tale” is a case in point. The streamed series, based on her novel, did not qualify as Canadian, according to the CRTC’s rules for traditional programming. As Atwood recounts it: “Book by a Canadian, filmed in Canada, but … the scriptwriters were elsewhere.”  

Atwood’s frustration will be shared by others working in Canada’s creative industries. Digital technologies make it easy to share ideas across borders and collaborate in real-time. Ironically, Bill C-11 is a tortuous read, precisely because digital sharing defies many of the outdated categories the legislation so desperately wants to retread from the heyday of legacy media. 

Many Canadians hope Bill C-11 will be short-lived. Pierre Poilievre, the leader of Canada’s Conservative Party, vows that, if he’s elected, he’ll repeal the legislation and replace it with a Free Speech Act.      

Bill C-11 could also come undone as a trade issue. CanCon is cultural protectionism, plain and simple. The U.S. can and should challenge Bill C-11 under the USMCA, likely under the digital trade chapter. Canada will then use the cultural industries exception it secured from the U.S. under the 1989 bilateral free trade agreement, which was later copied into the North American Free Trade Agreement (NAFTA) and the USMCA. But there’s a catch, and this is where things get interesting. 

Canada can use the cultural industries exception, but doing so would entitle the U.S. to “take measures of equivalent commercial effect in response,” which means it could exact compensation for Canada’s wrongdoings. 

This will be embarrassing for Canada. The cultural industries exception will be seen as not worth the paper it’s written on. This will cost Prime Minister Justin Trudeau politically, as he put a lot of emphasis on getting the exception copied into the USMCA, over the opposition of President Donald Trump. The only way Trudeau can get a reward from this “win” is to never use the exception. 

Some of this may sound familiar. In the mid-1990s, the U.S. and Canada fought over so-called “split-run” periodicals, so named because they were published on both sides of the border. These periodicals had very little Canadian content and took advertising dollars away from Canadian magazines. To give domestic periodicals a chance, Ottawa enacted measures it knew were illegal, save for the cultural industries exception. The U.S. didn’t file at NAFTA, however, choosing instead to go to the WTO. There’s no cultural industries exception at the WTO. The case was fairly mundane.  

Things will be different this time. The USMCA, unlike NAFTA, has exclusive jurisdiction to hear cases involving the cultural industries exception. Absent this provision, the U.S. would probably challenge Bill C-11 at the WTO, looking to get a ruling that might curtail local content quotas for streaming services in Australia and Europe, for example. 

At USMCA, the U.S. could maximize the signaling effect of its case by adding claims under more chapters, and pumping up the numbers behind its calculation of “equivalent commercial effect.” 

If Trudeau isn’t ousted in the next election, and if the U.S. doesn’t file a case, some companies will follow Netflix’s lead, setting up shop in Canada to comply with whatever the CRTC decides. The problem with this strategy is that, in the case of cultural protectionism, governments invariably have a right answer in mind when it comes to defining “us” versus “them.” 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, and a Global Fellow at the Wilson Center’s Wahba Institute for Strategic Competition. Follow him on Twitter @marclbusch