SUNS  4368 Friday 5 February 1999

Trade: Canadian-US fight over magazines



Ottawa, Feb 3 (IPS/Mark Bourrie )- Canadian politicians are scrambling to try and defuse the threat of a trade war with the United States over Canada's cultural protectionist policies.

Canada and its North American neighbour have been at odds for years over Ottawa's policy of fostering books, magazines, radio and TV productions and movies that promote a sense of Canadian identity. Politicians here always have argued that the cultural domination of Canada by the United States would spell the end of the Canadian nation.

Now the government is taking a tough line on the latest U.S. complaints which came last month over Canada's protectionist policies for the magazine industry.

Industry minister John Manley said Washington's opposition to Canada's support for cultural institutions is part of a "regular tactic of intimidation" on the part of the United States.

Canadian Prime Minister Jean Chretien, who prides himself on his government's good relations with Washington, said that he was "concerned" about the escalating war of words, but added he must
"protect the cultural interest of Canada." The current row is over a Canadian ban on "split-run" editions of magazines. Local tax laws have been invoked to bear down on U.S. publications attempting to sell "Canadian editions", with a few pages of local content, and many pages of Canadian advertising.

The Canadian government freezes out "split-runs" to protect the domestic magazine industry, which has only 50 per cent of the country's sales. So, while U.S. magazines may still be sold in Canada, Canadian businesses are effectively barred from advertising in them.

The government intends introducing legislation that would enshrine this policy into an even tougher which has drawn fierce protests from the U.S. administration.

A bill tabled in Canada's lower house of parliament followed a World Trade Organization ruling that threw out Canada's 80 per cent customs duty and excise tax on U.S. split-run magazines.  Washington had challenged the policy as a violation of international trade law.

A trade war between Canada and the United States would be painful for both countries who, along with Mexico, are signatories to the North American Free Trade Agreement (NAFTA). The two countries are each other's largest trading partner.

Prime Minister Jean Chretien originally scoffed at "hypothetical" retaliation but US Commerce Department officials threatened Canada late last month to endanger 4.5 billion dollars worth of trade because of Canada's 500 million dollar domestic magazine protection policy.

The Canadian argument is that the new law would exclude Canadians from using "advertising services" in US magazines under the WTO's agreement on services. This section of trade law is weaker than WTO rules on goods, which the US used to win its case in 1997.

Canada and the US have had long-simmering differences over cultural industries. Canadian negotiators, under strong pressure from Canada's monopoly-dominated media, fought to keep newspapers, periodicals, TV and movies out of NAFTA.

The Canadian government has the support of many of the country's most outspoken artists, writers and social activists, who say Canada would be completely swallowed up culturally if U.S.
corporations were given unfettered access to the Canadian market.

"The U.S. has no grounds for trying to force Canada to abandon an important cultural policy that has been in place for over three decades," said Francois de Gaspe Beaubien, head of one of the country's largest magazine publishing companies.

"Bill C-55 (the new legislation) maintains our policy but uses a completely different measure that is fully consistent with all our trade agreements. It is a measure that regulates access to the Canadian
advertising services market, a market that is governed by the WTO services agreement under which Canada has no obligations, and the U.S. has no rights with respect to access."

US ambassador Gordon Griffin has asked for a prompt high-level meeting of officials. The last session, held in Washington, between Raymond Chretien, Canada's ambassador in Washington, and Richard Fisher, deputy US trade representative, ended with US threats against imports of
Canadian lumber, steel, plastics and clothing.

These industries are major employers in the electoral constituencies of some of the Canadian government's most important ministers.
The government declared that any trade retaliation would be illegal under international law, violating the rules of the World Trade Organization (WTO) as well as NAFTA. Officials said the proposed
sanctions were out of proportion to the advertising revenue at stake under the new Canadian magazine rules.

Despite the U.S. pressure, Canadian Heritage Minister Sheila Copps has refused to withdraw the bill. She says it is expected to be passed by the Canadian parliament by the end of February.

"We think the bill on split-run magazines is defensible before all international tribunals. Our intention is to proceed as quickly as possible... We have no intention of turning back," she said.

Canada and the United States have other trade sore spots. The western states accuse Canadian grain growers of undercutting American farmers with low-priced wheat.

In 1998, several border states, led by North Dakota, launched special inspections of Canadian grain to try to slow imports. US farmers also erected roadblocks at several border crossings, and were allowed, by U.S. officials, to stop most truck traffic.

A temporary settlement was reached in that dispute, but in the Pacific Coast region, U.S. lumber companies have accused Canadian provincial governments of giving unfair tax breaks to Canadian wood cutters. And U.S. dairy farmers have complained to the WTO about Canada's new milk export pricing system.