by Steve Shrybman,
Executive Director, West Coast Environmental Law

The diversity of cultures within nations and around the world is a major treasure of humankind. The loss of a culture is a significant deprivation for human society. The goal of any cultural policy must be the liberation of the human spirit, and its two fundamental elements must be the twin goals of creativity and access/participation: the right of creators and artists to have opportunities to develop, create, produce, and disseminate their work, and the equal right of the public to the broadest possible opportunities to participate in, be enriched by, and enjoy the arts and cultures of their time and place, their cultural heritage and its living contemporary expressions, and the cultures of other nations.

In many ways, the struggle against free trade can be seen as resistance to the homogeneity and monopoly control of large corporations in the cause of preserving diversity of all kinds: biological, economic, and cultural. In fact, the need to preserve diversity in all of its forms is a unifying theme that not only informs a critique of globalization but that also describes an essential characteristic of the economic and trade policies that must replace the free trade/free market paradigm.

If we are to establish a truly holistic and sustainable model for human development, cultural diversity must play a fundamental role. Vandana Shiva, one of the most articulate critics of globalization, put it this way:

We will describe in subsequent chapters how trade and investment rules have been used to defeat efforts to preserve biodiversity or establish diversified resource-based economies. The same trade rules are also being used to bludgeon government programs intended to protect cultural diversity, in the form of domestic film, television, radio and publishing industries.

Canadian cultural programs have the dubious distinction of being the first to fall victim to WTO rules. Given Canada's long-standing efforts to deal with its particular vulnerability to the hegemony of U.S. culture, it is not surprising that Canada would be the first target of U.S. efforts to promote the interests of its media giants.

For decades, Canada has established policies and programs to foster the development of Canadian culture, and protect it from being overwhelmed by the U.S. film, television, music and print media that flood across our border every day. To this end, Canada has created such national cultural institutions as the Canadian Broadcasting Corporation, the National Film Board, and the National Arts Centre, and has established clear Canadian-cultural mandates for these institutions.

Canada has also created important licensing and regulatory regimes, such as the Canadian Radio-television and Telecommunications Commission (CRTC), which is mandated to regulate the broadcasting, cable, and telecommunications industries to ensure that these serve the interests of Canadians in all parts of the country. In addition, Canadian governments provide direct funding support to Canadian artists and art organizations through the Canada Council, provincial arts councils, Telefilm Canada, and the Department of Canadian Heritage.

Finally, Canada has used various tax and tariff measures to protect Canadian cultural expression. For example, for several decades, under the Income Tax Act, advertising in Canadian magazines was accorded preferential tax treatment. (We will consider this last example in some detail below, in the context of the recent WTO ruling against Canadian efforts to protect domestic magazines.)

However, before we assess how free trade policies undermine the policies, programs and laws that support our cultural infrastructure, it is important to note the global context within which the assault on cultural diversity is taking place; for Canada is not alone in confronting the tsunami of the U.S.-based corporate media culture that threatens to drown all other forms of cultural expression.

The statistics that follow will hardly come as a surprise to any Canadian, who will know that the "foreign content" referred to is overwhelmingly American. But many Canadians may not know that the pervasive dominance of U.S. culture is being experienced around the world.

For example, for most of this century U.S. films have enjoyed broad international distribution. But the emergence of sophisticated telecommunications technologies and the ascendancy of fully integrated media conglomerates have dramatically accelerated the global reach and penetration of all forms of U.S.-based corporate media.

In Europe, for example, U.S. films hold 80% of the market. Lost in the transition from domestic to U.S. cinema is the once-proud tradition of such film-makers as Fellini, Bergman, Godard, Bertolucci, Bunuel, Antonioni, Truffault, and Malle — to name but a few. So limited are opportunities for those who would take on the mantle of these brilliant film-makers that a number of contemporary European film producers and directors recently wrote an open letter to Martin Scorsese and Steven Spielberg, pleading for their support for the exemption of films from free trade. They explained their extraordinary letter by saying that they were "only desperately trying to protect European cinema against its complete annihilation."

The U.S. television industry has achieved an even more pervasive universal presence than has film. CNN, which in many countries provides the only available coverage of world affairs, is now broadcast to more than 130 nations. MTV (Much Music to Canadians) dominates television music culture, with an audience far larger than CNN's. As well, there is the appropriation of local television culture by U.S.-based themes. For example, The Price is Right, with its blatant preoccupation with acquisitive consumerism, is watched by hundreds of millions of viewers world-wide: sometimes in English, sometimes dubbed into the local language; and, sometimes as locally produced versions using the same format and themes.

Only in the print media has the influence of U.S.-based corporations been less than universal. Here the global turf has to be shared with consolidated publishing empires presided over by a handful of media tycoons: Rupert Murdoch (Australia and England), Bertelsmann (Germany), Hachette (France), and of course Conrad Black in Canada and Britain.

It is easy to understand these contemporary realities as a contest between U.S. and other cultures, and in many ways this is precisely what they are. But it is also true that these dynamics represent a struggle between increasingly monolithic media corporations and communities determined to maintain some modest opportunity for their own forms of cultural expression. In fact, concerns about the pernicious influence of large media corporations have also been raised in the U.S. itself. Even the New York Times has raised alarm bells about "growing threats to the nation's cultural heritage." But, when President Clinton received the recommendations of the special committee he had established to consider the problem, he evinced little interest in acting on its recommendations to revitalize public and private support for culture in the US.

Given the power of the large media corporations, it is not surprising that Clinton had little enthusiasm for trying to hold back the tide of increasingly concentrated corporate control of cultural expression. Not only did his administration do nothing to rein in the power of such media empires as Time-Warner, as the committee recommended, but it actually took up the cudgel on their behalf to assail Canadian programs very much like those advocated by the President's Committee. Foreign trade in telecommunications, film and other cultural services, where U.S.-based corporations dominate international markets to an extent that far exceeds the global presence of other corporate sectors, is simply far too lucrative to be impeded in any way.

The U.S. balance-of-trade surpluses in cultural products and services are even more important in the context of the enormous trade deficits that the U.S. runs. For example in 1996 U.S. trade deficits of $183 billion were offset by trade surpluses of $74 billion in the area of services.

There are also significant environmental implications that arise from the global influence of U.S.-based media corporations and the consumer-oriented cultural values they purvey. These have to do with the impact of these messages on the hundreds of millions of people in developing countries that are encouraged to strive for the same levels of material consumption they see depicted. When a country, such as the US, consumes an enormously disproportionate share of the world's resources, trade deficits would have to be considered an inevitable fact of life.

To compensate for these deficits, the U.S. has embarked upon a strategy of exporting U.S. films, television, music and print media. These cultural products invariably reflect America's unique and highly acquisitive perspective on the world. These messages, both explicit and subliminal, are intended to instill precisely the same unsustainable consumer habits and lifestyles that Americans so enthusiastically embrace. But the ecological imperatives of global warming and biodiversity loss require that we dramatically reduce our rapacious appetite for the world's resources. This is particularly true for developed countries which now collectively consume approximately 80% of global resources. No other country even approaches the rapacious rates of U.S. consumption.

If the planet cannot support 300 million Americans consuming at current rates, it certainly won't support the billions more who are being encouraged to strive for the same level of material consumption. The irony, of course, is that in seeking to offset trade deficits — one consequence of its extravagant appetites — the U.S. is promoting the same unsustainable habits that have created its predicament. The globalization of the media and the consumer boosterism embedded in them fundamentally undercuts our capacity to inspire the conservation ethic that is so critical to meeting current environmental challenges.

To ensure that its cultural trade surpluses continue to grow, the U.S. has seized on international trade rules to enforce the continued domination of global markets by U.S. corporations. In the first three years after the advent of the WTO, seven trade cases have been brought concerning cultural products, all but one by the U.S. on behalf of its media giants.

Cultural products and services — art, music, film, and television — are, with few exceptions, subject to the disciplines of international trade and investment agreements. In Chapter II we summarized several of the key structural elements of the WTO; most apply with full force to cultural products (see the periodicals case summarized below). However, there are several other WTO rules that have specific relevance for culture.

GATT Article IV, included at the insistence of the government of France, allows for the imposition of quotas on the import of cinematographic works (film and video). Over time, this definition has been expanded to include quotas on foreign programming in the broadcasting industry as well. In addition, Article XX includes an explicit exception for the protection of "national treasures." This term, however, has been narrowly interpreted to include only works of artistic, architectural, historic and natural-heritage value. Finally, and of particular relevance, is the General Agreement on Trade and Services (GATS) which covers a wide variety of cultural services, from advertising to telecommunications.

The GATS agreement embraces the basic principles of free trade that impose significant constraints on the policy, program and regulatory options that might otherwise apply to services. As is true for a growing number of issues that have become the subject of international trade and investment agreements, the services provisions of the GATS often have nothing to do with trade, and everything to do with domestic economic activity and regulatory policy. Commonly described as "bottom-up," the key provisions of the GATS — national treatment and market access — apply only to those sectors with respect to which a country has volunteered these commitments. While Canada has not made any such commitments for cultural services, it must now contend with both U.S. and European Community proposals to greatly strengthen and expand the GATS.

This brings us, finally, to the most noteworthy trade rule concerning matters of culture: the much-vaunted cultural exemption provision of the FTA/NAFTA. Both conservative and liberal federal governments have assured us that Canadian culture was safe from free trade rules because it was specifically exempted under these trade agreements.

However, a look at the text of the cultural "exception" clause of the Canada-U.S. Free Trade Agreement [Article 2005], subsequently incorporated within NAFTA [Annex 2106], tells a very different story.

1. Cultural industries are exempt from the provisions of this Agreement, except as specifically provided in Article 401 (Tariff elimination), paragraph 4 of Article 1607 (divestiture of indirect acquisition) and Articles 2006 and 2007 of this Chapter.
2. Notwithstanding any other provision of this Agreement, a party may take measures of equivalent commercial affect in response to actions that would have been inconstant with this Agreement but for Paragraph 1.

In other words, Canada can maintain and even establish new cultural programs, but the U.S. is free to impose trade sanctions if it does. But wait a minute: doesn't Canada maintain, at least in theory, the sovereign right to legislate? Isn't the whole complaint with free trade that it allows Canada to be punished by trade sanctions for exercising that sovereign prerogative? Finally, wouldn't the whole point of an exemption be to protect Canada from punishing sanctions in order to maintain its legislative and policy options? The answer to each of these questions is, of course, yes.

In fact, Article 2005 is merely an exercise in sophistry that offers no effective protection for Canadian culture. It would be a mistake, however, to dismiss this provision as merely ineffectual, since the Article actually may expose Canadian cultural support programs and other measures designed to protect culture to even harsher treatment than would be visited upon other Canadian measures that offend free trade constraints. The phrase "notwithstanding any other provision of the agreement," in Article 2005.2 arguably allows the U.S. to take measures of "equivalent commercial affect" without going through the consultation and negotiation provisions of NAFTA that apply in other circumstances.

The punitive rather than protective nature of Article 2005 is illuminated in the trade dispute concerning split-run magazines in Canada, which we describe more fully below; but the notion that culture is protected under NAFTA is clearly a deception of grand proportions. The only question left is precisely who was fooling whom. Were Canadian negotiators actually bamboozled by this relatively artless deception? Were their political masters? Or were Canadians deliberately misled by their political leaders in order to quell public protest against a trade regime that Canada was willing to commit to, whatever the cost to Canadian culture sovereignty?

The best way to demonstrate this point is to relate how the rules of trade were used to undermine Canada's ability to support its domestic magazine publishing industry.

In its recent decision on split-run magazines, the WTO's penultimate Appellate Body (the AB) dismissed Canadian magazine safeguards as being in breach of Canada's international trade commitments. In doing so, the AB thought it appropriate to equate Canadian cultural programs with measures Japan had adopted to protect Japanese beer manufacturers — after all a product is a product is a product, it reasoned. However, before we summarize the details of a trade dispute which has been described as "the most dramatic single blow ever leveled against Canadian cultural policy," let us set the stage.

The domination of Canadian magazine markets by U.S.-based publications is not a recent phenomenon; in fact, it has existed since the first decades of this century. (In 1925, for example, U.S. magazines sold in Canada outnumbered Canadian publications by a margin of 8:1). And, for just as long, Canadian governments have sought, with varying degrees of determination, to prevent Canadian publications from being entirely swamped in a sea of U.S. print media.

In the mid-1960s, the Liberal government of the day, firmly committed to strengthening Canadian cultural institutions, established import tariffs under the Customs Act to ensure the viability of at least a small number of Canadian magazines. The tariffs were specifically designed to address the problems created by "split-run" U.S.-based magazines.

In an attempt to level the playing field for Canadian publishers, then Minister of Finance Walter Gordon announced amendments to the Customs Act that effectively imposed an import ban on split-run magazines. To reinforce this prohibition, amendments to the Income Tax Act were also made, prohibiting Canadian companies from deducting the costs of advertising in non-Canadian publications. By all accounts, the measures worked: Canadian publications grew substantially in number and circulation, and the regulations created a truce between U.S. and Canadian publishers that endured for nearly three decades.

This is not to say that U.S. magazines were denied an ongoing and prominent presence in Canada. In 1992-93, for example, U.S. magazine exports to Canada were worth more than $600 million; Canada provided 80% of the foreign market for these publications. However, by the early 1990s, U.S. publications had been consolidated under the control of a handful of very large media corporations. As U.S. media markets had long been saturated, new growth opportunities had to come through global expansion.

This in part explains why one of the world's largest media conglomerates, Time Warner, announced in April 1993 that it would be publishing six "special editions" of Sports Illustrated in Canada, electronically transmitting the content from the U.S. to Canada, where it would be printed and distributed. Canadian advertisers in these editions could purchase a full-page ad for roughly half the cost of comparable space in editions prepared for regional U.S. markets.

Faced with a direct challenge to the ban on split-run magazines, the Liberal government scrambled for a response that would allow it to claim some credibility as a defender of Canadian culture. But it had a problem: how to protect Canadian cultural-support programs without straying from the free trade agenda that, suddenly after gaining office, it had become wedded to. The difficulty of reconciling these two agendas is probably the best explanation of why it was not until June 1996 that the government finally responded by tabling Bill C-103, which would impose an 80% excise tax on the gross advertising revenue of split-run magazines.

To counter charges that it was discriminating against U.S. publishers, the excise tax would be applied to magazines distributed outside Canada, including those published by Canadian publishers.

Not unexpectedly, Time Warner took a dim view of the bill, and warned the federal government off its proposed legislation. Indeed, it almost convinced the government to exempt it from the Bill. But, when Bill C-103 was passed unamended, the U.S. government galloped to the rescue of one of its most influential corporate citizens and filed a complaint under the WTO. Casting aside the putative support for Canadian cultural sovereignty that it had ostensibly endorsed in NAFTA, the U.S. now invoked the new and much more powerful dispute processes of the WTO to assail not only Bill C-103, but also the Tariff Act provisions covering split-run magazines, which had been on Canada's statute books for decades.

While the WTO would ultimately look like the villain, it should be kept in mind that, but for NAFTA, Canada would have been able to impose a border tax on split-run magazines, however imported or transmitted to Canada. It might also have imposed Canadian-content requirements without risking investor-state litigation that NAFTA alone authorizes. Without discounting the very serious constraints that WTO rules impose on the sovereignty of nation states wishing to preserve at least small islands of cultural diversity in an increasingly vast sea of corporate and largely U.S.-based culture, it must be pointed out that, at least with regard to culture, NAFTA is far more restrictive of government policy and regulatory options.

Canada, however, rather than adopt measures that would have tested the validity of NAFTA's cultural protection clause, chose a course of action that was likely to land it in difficulties with the WTO. Without access to the behind-the-scenes machinations, it is difficult to discern the government's true motives for choosing the particular approach it adopted. However, it is clear that the government's political exposure around NAFTA and culture is quite high, as is its enthusiasm for extending the NAFTA precedent throughout this hemisphere as part of the Free Trade of the Americas initiative.

As noted, the U.S. was the first to enlist the newly-minted dispute resolution processes of the WTO to assert the interests of its media giants. While technical issues were argued, the essential thrust of the U.S. complaint was that Bill C-103 discriminated against U.S. split-run magazines. Canada, it argued, was in breach of WTO obligations to provide "national treatment" to Time Warner products under GATT Article III.

To succeed with its claim, the U.S. would have to persuade the WTO that magazines should be treated like any other goods under WTO rules: a magazine was a magazine regardless of its origin, content or perspective. As the Office of the United States Trade Representative put it, the case had "nothing to do with culture. This is purely a matter of commercial interest."

Of course, Canada protested: surely a magazine's content should be considered a distinguishing feature. A magazine developed specifically for a Canadian readership, published by a Canadian company, and written from a Canadian point of view could not, it argued, be considered "like" one developed in and for another cultural, political, and social context.

To support its case, Canada stressed the importance of advertising revenues to Canadian periodical publishers, and described the direct correlation between circulation, advertising revenue, and editorial content: the larger a magazine's circulation, the more advertising it could attract. With greater advertising revenue, a publisher would be able to spend more on editorial content. The more the publisher spent, the more attractive the magazine would be to its readers, the greater its circulation, and so on. Conversely, the loss of advertising revenue would produce a virtual death spiral: declining editorial content, reduced readership, and a further reduction in the ability to attract advertising.

Not only was the WTO's Appellate Body (AB) unmoved by Canada's arguments, but it actually used them to buttress its conclusion that U.S. and Canadian magazines were in direct competition and therefore "like goods" within the meaning of Article III of the GATT. The AB made repeated reference to earlier trade decisions concerning alcoholic beverages and beer, in which trade panels had dismissed the notion that differential treatment of goods might be justified because of a beverage-particular characteristic. Adopting a purely market-oriented approach to the issues before it, the AB took pains to explain: "The GATT is a commercial agreement, and the WTO is concerned, after all, with markets." Thus, what was true for beer is true for cultural "goods": if they compete, they are alike.

In rejecting the argument that editorial content is a distinguishing feature of periodical publications, the WTO ignored the significance of the full play of diverse opinions in democratic societies. Ironically, coverage of the split-run magazine imbroglio makes that very case. Our Internet search for articles covering this long-drawn-out struggle revealed that, beginning in January of 1997, Maclean's published 10 substantial articles on the subject. During the same period, we found only one in Time-Warner's split-run edition of Time Canada: an editorial denouncing Bill C-55 as "draconian legislation [that] cannot fail to have a chilling effect on press freedom."

The irony that this defence of press freedom was being advanced by the corporation that had motivated a trade dispute to effectively deny Canadians the freedom to hear their own views (on controversies such as the split-run magazine debate) should not be lost.

Thus under WTO rules, a newsmagazine is a newsmagazine, regardless of its character, orientation, or national perspective. One can only assume that the same principles would apply to other forms of cultural expression: a newspaper is a newspaper, what difference could national orientation and subject matter make? As is true for the other AB decisions summarized here, this court of last appeal under the WTO has demonstrated a stunning ability to keep its focus on trade policy objectives, no matter how skewed its reasoning might appear in the larger view. Moreover, by so clearly treating magazines as tradable commodities rather than forms of cultural expression, the WTO also set the stage for further trade challenges to other forms of cultural protection.

It is not necessary to delve into the esoterica of trade dispute resolution to appreciate what this case was actually about. Or perhaps, more appropriately, what it wasn't about. Because the periodicals dispute was not about restricting the access of U.S. magazines to Canadian markets. Nor was it about restricting the circulation of U.S. publications in Canada. Rather, the Canadian measures that so offended Time Warner and the U.S. administration were the modest efforts of our federal government to ensure that Canadians had some opportunity to buy magazines that articulated a Canadian perspective, that reflected Canadian views, values and sensibilities.

Thus, 75 years after Canada first adopted measures to protect Canadian magazines, the federal government did not (or could not) prevent what it had repeatedly promised would never occur: sacrificing Canadian cultural programs on the altar of free trade.

But why? Was this really so that one of the world's most powerful media corporations could add a few points to the circulation figures of one of its dozens of publications? Or was it because the U.S. saw in this dispute with Canada an opportunity to send a message to other WTO members that resistance to the dominance of its cultural products was futile? Indeed, the price of doing so would represent more than the considerable costs of international trade dispute resolution; there would also be the political embarrassment of publicly abandoning programs that enjoy strong public support.

Facing the demise of the Canadian magazine publishing industry as a result of this trade ruling, it was back to he drawing board for Canada, but now with its options considerably narrowed by the WTO. The result — Bill C-55 — abandoned Canada's traditional approach of using tariff measures to protect Canadian magazines and instead resorted to criminal law to prohibit U.S. magazines from offering advertising space to Canadian advertisers on pain of reasonably significant sanctions.

Predictably, the U.S. responded quickly; but this time not by invoking the trade dispute resolution processes of the WTO. Rather, having lost its patience with Canadian foot-dragging, it resorted to the far more coercive options available under the very provisions of NAFTA that ostensibly had been negotiated to protect Canadian culture.

The U.S. announced that, should Canada proceed with its proposed legislation, it would immediately impose trade sanctions against a wide variety of Canadian exports, in the amount of $300 million. It chose its targets strategically and in a manner designed to maximize political pressure on the government. In no time, these bullying tactics produced the desired result. One of the first Liberals to break ranks and speak out against the bill represented a riding next to that of Sheila Copps, the Minister responsible for the Bill. Both ridings were dependent on Canada's steel industry and its capacity to export to the United States; steel products topped the list of Canadian exports that the U.S. would impose retaliatory tariffs on. Their constituents couldn't understand why industrial jobs were being sacrificed in order to protect Canadian magazines, and the Minister was hard pressed to explain.

Notwithstanding its insistence that U.S. threats were illegal under the WTO, Canada quickly capitulated to U.S. demands that it abandon the essence of Bill C-55. Not only would Canada allow U.S. magazines access to Canadian advertising markets, but the federal government actually also agreed to relax Canadian ownership requirements for Canadian magazines!

The only hint as to why Canadian negotiators thought it necessary to offer such a dramatic concession was offered by an unnamed federal official who explained, "They can always hurt us more than we can possibly dream of hurting them," neglecting to add that this is particularly true now that we have given them the weapons to do so under NAFTA and WTO rules.

One might be forgiven for taking from the sad fate of Canadian magazine protection measures a gloomy assessment of Canada's prospects for protecting its culture. But there is good reason to be hopeful that we may have just turned a corner that will enable Canada and other countries to regain some the ground that WTO rules have taken away. The critical moment that may have signaled this about-face came with the recent defeat of the Multilateral Agreement on Investment, discussed in detail in Chapter XI, when the Government of France formally withdrew from OECD negotiations. Prominent among its reasons for doing so were concerns about the potential impact of this investment treaty on its ability to protect French culture.

Canada and France have worked closely in seeking ways to preserve their prerogatives to protect their own forms of cultural expression. Although Canada was an ardent supporter of the MAI, it should feel emboldened by France's actions to more determinedly resist U.S. demands about Canadian cultural programs. The efforts of Canada's Minister of Culture, Sheila Copps, to build international support for exempting culture from free trade disciplines is an important step in this direction.

We began the chapter by quoting from the report of an important international forum of cultural non-governmental organizations that met in Ottawa in 1998. In addition to describing the importance of cultural diversity to our human community, the conference also mapped out a strategy for pushing back against the aggressive assault of U.S.-based corporate media culture.

Recognizing that human beings live not only in distinct, diverse national and cultural contexts, but also in a world in which nations and cultures are increasingly interdependent, this meeting had as its goal the development of opportunities for international cooperation among cultural NGOs:

• to preserve, enhance and nurture cultural pluralism and cultural diversity;
• to support efforts to ensure that international trade agreements recognize and respect distinctive national and local cultures; and
• to encourage the inclusion of cultural issues in development policies and to foster an increased role for culture in international relations.

The defeat of Canadian magazine protections should not be a cause for resignation, but for more determined efforts to insist that Canada honor its commitment to protect our culture by working with its allies to transform WTO rules to support, rather than undermine, the diversity that is fundamental to life itself.

As well known environmentalist, David Suzuki puts it: