Hugh L. Stephens
Distinguished Fellow Asia Pacific Foundation of Canada Vice Chair Canadian Committee on Pacific Economic Cooperation (PECC)
July 1, apart from marking the 154th Canada Day, was the first anniversary of the entry into force of the “new NAFTA”, now labelled the USMCA (the US-Mexico-Canada Agreement). Canadians, being a stubborn lot, have decided to call it the CUSMA, just because they can. Whatever you call it, reaching agreement with a Trump Administration determined to blow up the original agreement was no small task for Canada, or Mexico. Although Mexico is an equal partner, I am going to concentrate on the implications for Canada (and the US) in this blog with regard to what the Agreement does, and does not do, in the area of copyright, culture, and related fields such as digital services, and to take stock of what has happened in the past year.
Renegotiating NAFTA was no easy task. Trump campaigned on a commitment to renegotiate or tear up the Agreement while Canada’s objective was to preserve as much of it as possible. The essence of the dilemma was summed up by then Commerce Secretary Wilbur Ross who commented that the negotiation was difficult because the US position was all “demand” and no “give”. “We’re asking two countries to give up some privileges that they have enjoyed for 22 years. And we’re not in a position to offer anything in return…”. Nonetheless the three countries finally managed to reach agreement. The fact that much of the original NAFTA was preserved was seen as a victory by Canadian negotiators. The biggest changes were in auto production, with new requirements imposed to try to limit the amount of low-cost Mexican labour involved in the manufacture of vehicles. But not a lot changed. Right after the conclusion of the agreement, the US imposed aluminum and steel tariffs on its NORAD and NATO ally Canada (using national security as the pretext, no less), and to this day continues to apply punitive import tariffs on the import of Canadian softwood lumber (despite unprecedented demand for building materials in the US, shortage of supply and all time high prices for consumers), while Canada continues to find technical ways to frustrate US dairy farmers from gaining a greater share of Canada’s highly protected dairy market.
Renegotiating NAFTA wasn’t just a question of rollbacks. The US set out some negotiating objectives that touched on the area of copyright and digital trade and it achieved some of those objectives– but by no means all. In Canada, there was hope in some quarters that the renegotiation could be used to advance some domestic agendas or reforms. Canadian educational publishers were as unhappy with the new education fair dealing exception introduced into Canadian copyright law in 2012 as were US publishers, given the resulting refusal of post-secondary institutions to license content from the publishers’ copyright collective, Access Copyright. However, renegotiating copyright exceptions was not a priority for either country. If the educational exception is to be narrowed or removed, it will have to be done through domestic legislation. Currently the key litigation (Access Copyright v York University) over the issue of educational fair dealing and mandatory tariffs for use of published materials is before the Supreme Court of Canada, on appeal from the Federal Court.
Extending the Copyright Term in Canada
While the USMCA did not deal with copyright reform in Canada nor did it change Canada’s rather ineffectual “notice and notice” system for dealing with online infringers, it did deal with some copyright and content-related issues, both broad and narrowly targeted. On the broad front it dealt with the longstanding issue of the length (term) of copyright protection, extending it in Canada by an additional twenty years to bring the period of protection in Canada in line with that in the US, the EU and most of the developed world. When implemented (more on that below), this extension will not only benefit Canadian rights-holders in Canada but ironically, will bring them additional benefit in the EU because the EU extends the benefits of the longer period of protection to artists from non-EU countries only on a reciprocal basis. With respect to the US, extension in Canada provides greater equity with respect to US creators in Canada since the US offered the longer term of protection in the US market to Canadian rights-holders, even though Canada did not offer equivalent protection to Americans.
Implementation Still in Progress
The actual implementation of Canada’s term extension commitment is still pending as, under the terms of the USMCA/CUSMA, the Canadian government was accorded 30 months from the date of entry into force of the Agreement to deal with this issue. Thus, it must come into effect no later than December 31, 2022. Exactly how Canada will implement its obligation is still somewhat of an open question. The simplest, most straightforward and most sensible option is to simply extend the existing “life of the author plus 50 year” term by an additional twenty years. That is what all other countries that have extended the life of the copyright term beyond the Berne Convention minimum of “life plus 50” have done. But there are those in Canada who, having opposed the term extension in the first place, now want to make it as complicated and difficult to access as possible by instituting a “trip wire”, a requirement for registration in order to obtain benefit of the additional twenty years. No other country has done this, and it is arguably in violation of the Berne Convention (to which Canada is a signatory). Berne requires an author’s copyright to be awarded automatically upon creation of a qualified work, with no additional registration requirement. Berne also establishes a minimum period of protection but has no restrictions on adding extending the period of protection beyond the Convention minimum.
Earlier this year the Department of Innovation, Science and Economic Development (the arm of the federal government with statutory responsibility for the Copyright Act) issued a consultation paper on issues relating to term extension. As I wrote at the time (“Canada’s Copyright Term Extension Consultation: Why all the Tinkering Around the Edges?”), the focus was not so much on the registration issue as on other tangential questions mostly of interest to the library community, such as orphan and out of commerce works. This will not stop copyright minimalists from attacking term extension as being an economic drain on Canada through an outflow of royalties, a conclusion unsubstantiated by facts, nor those advocating for the additional registration requirement in order to frustrate as much as possible the implementation of the CUSMA commitment. The full list of respondents to the consultation paper is available here. It is widely supported by the creative community.
Then There was the Super Bowl
Term extension was perhaps the broadest copyright-related issue dealt with by USMCA/CUSMA. The most targeted and specific, however, was Annex 15-D of the Agreement, dealing with Super Bowl ads. Yes, you read that right. Super Bowl ads. Hardly the substance of an international trade agreement, but hey, if you can achieve your goals through the leverage of a trade agreement when you can’t get it by other means, go for it. The issue was pushed by the NFL and supported by Bell Media, which licenses the Super Bowl broadcast in Canada. It’s all a bit complicated and will be a mystery to US readers. Essentially Annex 15-D removes an exception that the Canadian broadcast regulator, the CRTC, had permitted whereby Bell Media could not require Canadian cable and satellite platforms to substitute Canadian ads (i.e. Bell’s ads) for the US ads when Canadians watched the game in Canada on the original NBC feed.
What is “Simsub” Anyway?
The situation arises because the major US networks are available on Canadian cable systems under a compulsory licence issued by the CRTC. In addition, the CRTC allows Canadian broadcasters who have acquired the rights to US programming also being shown on US television to require that the Canadian cable and satellite distribution systems substitute the ads carried by the Canadian station into the US feed shown in Canada, as long as the programming is being shown simultaneously in both Canada and the US. This is known as simultaneous substitution or “simsub”. In most case simsub is not a big deal for Canadian viewers because an ad is an ad and arguably local ads are more relevant. But when it comes to the Super Bowl where the ads are considered by many as an integral part of the programming, many Canadian viewers want to watch the game with the original ads.
More Business for Border Bars
In 2016 the CRTC issued a decision allowing this if Canadians chose to watch the game on the US feed. Bell appealed but wasn’t sure it would prevail. Given the length of the appeal, in both 2017 and 2018 the CRTC decision prevailed resulting in a reported $10 million dollar loss in ad revenues each year for Bell (and by extension threatening the value of the NFL’s contract with Bell), because Canadian advertisers could not be assured of reaching the full Canadian audience. Although in the end Bell’s appeal was upheld by the Supreme Court of Canada, by then both Bell and the NFL had lobbied the US government to make repeal of the simsubexception a key demand. Remarkably, they were successful and the USMCA now includes a requirement that Canada cannot remove simsubfor individual programs unless it ends the practice for all programming. As a result, if Canadians want to watch the Super Bowl with the US ads in 2022 they will have to hit the bars of Blaine WA, Buffalo NY or other border drinking establishments—assuming the border is open by then. At least the USMCA will improve cross-border services trade.
The Canadian Cultural Exception
If Super Bowl ads are an example of how “down in the weeds” trade negotiators can get, the Canadian cultural exception (Article 32.6) is one of the loftier goals. Canada insisted that it had to maintain the cultural exception, a provision that dated back to the original Canada-US FTA in 1988. Under this provision, Canada could take exceptional measures to override commitments in the Agreement to preserve and protect Canadian culture. Culture is defined in the USMCA/CUSMA by reference to a long list of content related industries (film, publishing, newspapers, music, broadcasting). The catch is that if Canada invokes this clause, the other parties to the Agreement are entitled to take retaliatory measures of equivalent commercial effect against any other sector. This is obviously designed to discourage Canadian policy makers from using discriminatory measures to support Canadian culture at the expense of US content producers. For example, if Canada were to decree that cinemas had to charge an extra fee to consumers to watch US as opposed to Canadian films, in a (misguided) effort to promote Canadian film production, this would be a discriminatory measure against which retaliation would be allowed within the terms of the Agreement. However, if Canada put a tax on all cinema goers, and used the tax revenues to subsidize Canadian film production, that would not be inconsistent with the Agreement and would not justify retaliation.
Does CUSMA Stop Canada from Passing Legislation affecting Internet Platforms?
Recently the cultural exception has been highlighted as one means that Canada could use to defend (proposed) legislation that would require major internet platforms like Google and Facebook (which of course happen to be US companies) to pay news content providers for use of news content on the platforms, similar to the requirements introduced in Australia. Critics of the proposal have argued that such an action would be contrary to the USMCA, but for the cultural exception clause, which they argue would not be used because of the threat of US financial retaliation against non-cultural sectors. This is a red herring. Canada does not need to invoke Article 32.6 to defend actions to require internet platforms to reach content compensations deals with dominant internet platforms, nor, for that matter, to subject the platforms to oversight requirements relating to distribution of harmful content online. There are plenty of provisions of general application in the Agreement that can be used. One also has to consider to what extent the US government would be prepared to champion Google and Facebook, digital giants that are already under close scrutiny in the US for anti-competitive practices.
….Or Holding Platforms Responsible for Harmful Content?
In the digital chapter, the CUSMA includes a particularly controversial provision, Article 19.17 that provides internet platforms with limited immunity from civil liability for content posted by users. This article is based on Section 230 of late 1990s US legislation, the Consumer Decency Act. The misuse of this provision to shield internet platforms from any civil liability or to hold them accountable for harmful or illegal user content distributed (and monetized) by them has led to widespread demands for reform in the US. It almost did not make it into the USMCA given push-back from Democrats, and should never have been includedin a trade agreement. It’s not as bad as it could have been, however. The USMCA commitments left sufficient room for the continued application of existing Canadian law without any requirement to enact legislation to create new civil liability immunities for the internet platforms. As I pointed out in an earlier blog on this topic (“Did Canada Get Section 230 Shoved Down its Throat in the USMCA?”), the Parties to the Agreement have the freedom to implement Article 19.17 in various ways including through ongoing application of common law. Existing secondary liability doctrine and precedents will continue to apply in Canada.
The USMCA One Year Later
The fact that the first anniversary of the USMCA/CUSMA passed without much brouhaha is a good sign that things are generally working well. The COVID pandemic has of course challenged global trade patterns, including those in North America but considering that the Canada-US border has been closed for almost a year and a half now except for essential traffic—hopefully it will reopen very soon—two way trade and services have continued to flow with few new trade disruptions, although volumes were down quite significantly (Canadian exports to the US declined by 15%; imports declined by 11%). Without the security of the established rules and practices enshrined in the USMCA/CUSMA, the situation could have been far worse.
The two countries are intertwined economically in many sectors, including copyright, cultural and content industries. The “new NAFTA” has helped to maintain a mutually beneficial relationship in these areas and laid the foundation for further work.