Justin Trudeau, Canada’s prime minister, speaks during an Economic Club of New York event in New York, U.S. (Photographer: Mark Kauzlarich/Bloomberg)

Fearing Flood Of U.S. TV, Trudeau Puts Culture On Nafta Front Burner

(Bloomberg) -- Justin Trudeau won’t sign a new Nafta deal if it means Canada’s airwaves will be swallowed up by American media giants.

The Canadian prime minister teed up the latest round of trade talks with the U.S. by digging in on a fight over an exemption for cultural industries. Negotiated a generation ago between the U.S. and Canada, it essentially means the pact doesn’t apply to sectors like television and music, which the prime ministers says are essential to maintaining the northern nation’s identity.

“We can’t imagine a situation in which an American TV company or network could come up and buy radio stations or buy CTV, for example,” Trudeau said Wednesday in a radio interview. “That would not be good for Canada, it wouldn’t be good for our identity, it wouldn’t be good for our sovereignty."

The U.S. has long grumbled about Canadian TV rules, but Trudeau’s statements thrust the issue to the forefront of talks to update North American Free Trade talks. The prime minister is shrugging off an era in which options for watching foreign programming have exploded amid streaming services such as Netflix to defend the exemption.

“It is a keystone of Canadian trade policy and has been for over 40 years,” said Lawrence Herman, a Toronto-based trade lawyer at Herman & Associates. “No Canadian government could abandon or weaken the exemption and hope to survive politically.”

Canadian Content

The U.S. proposals on culture are longstanding in Nafta talks but sat largely idle until last week when the U.S. raised the issue again, two Canadian officials said, speaking on condition of anonymity as private negotiations continue. The U.S. has proposed both eliminating the cultural exemption entirely as well as well as a group of other more specific changes, one of the officials said.

A spokesman for U.S. Trade Representative Robert Lighthizer declined to comment. Lighthizer and Canadian Foreign Minister Chrystia Freeland resumed talks Wednesday.

Canada’s rules defending domestic cultural industries are widespread. For instance, TV and radio stations must play a certain amount of Canadian content -- seen as a way to support a domestic sector against a mighty U.S. competitor, though U.S. shows remain popular. Changing the rules might include opening networks to takeover, ending incentives to produce Canada-specific content and blowing apart Canada’s leeway to fend off around-the-clock American TV shows.

Streaming Revolution

“It would have a devastating impact,” said Stephen Waddell, national executive director of the Alliance of Canadian Cinema, Television and Radio Artists, representing about 25,000 performers. “We commend this government on taking a strong position to resist the efforts by the U.S. to try and take over our Canadian broadcasting and production industry, and frankly our Canadian identity.”

The popularity of online streaming services has triggered something of an identity crisis within Canada’s system. Trudeau’s government hailed a deal with Los Gatos, California-based Netflix Inc. -- which committed to spend a certain amount on Canadian programming while remaining unbound by many of the rules that govern domestic TV networks. But it exploded into a political controversy.

French Language

One factor in the Netflix dust-up also looms large in the Nafta fight: Canada is a bilingual country, and a flood of English-language TV would undercut French-language programming, which is most important in the French-speaking province of Quebec, a region that’s key to Trudeau’s reelection hopes next year.

The two countries clashed most recently over rules for Super Bowl broadcasts. The U.S. balked at a Canadian decision to, finally, allow America Super Bowl ads to be aired live in the country, eroding the National Football League’s ability to sell them at a high price in Canada.

In a document written by Lighthizer this year, the U.S. complained about Canadian restrictions on foreign ownership of telecommunications firms; quotas on Canadian broadcasting content; requirements for Canadian channels; a minimum number of Canadian songs played on the radio; and rebroadcasting U.S. signals within Canada.

There would be virtually no Canadian production if the cultural exemption was killed, Waddell said. How determined the U.S. is, however, remains unclear. “We don’t know if it’s a bargaining chip to make Canada provide concessions in other areas,” he said.

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