Photo: flickr/ Cosmo Spacely

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Problems? Oh, the Trans-Pacific Partnership has a few! Read about them all in the new series The Trouble with the TPP.

This week’s lengthy Trouble with the TPP post focused on the likelihood that efforts to require online video providers to pay mandatory Cancon contributions would be challenged under the TPP. While I am not a supporter of extending contributions to companies like Netflix, including such a restriction within a trade agreement is bad policy.

Today’s post continues with the culture theme, by examining the risk that other new policy innovations might also be stymied by the TPP.

The Globe and Mail‘s Kate Taylor recently wrote a column arguing that Canadian cultural production is in crisis and calling for reforms to address the issue. For example, Taylor cited the possibility of tax credits for advertising on websites that meet a Canadian content threshold similar to the policy for television and radio broadcasters. ACTRA has long called for a similar policy, noting the benefits of tax deductions for advertising on Canadian-owned websites that give prominence to Canadian content.

But would such a policy pass muster on the TPP? It’s not totally clear that it would.

Article 14.4 provides for non-discriminatory treatment of digital products:

“No Party shall accord less favourable treatment to digital products created, produced, published, contracted for, commissioned or first made available on commercial terms in the territory of another Party, or to digital products of which the author, performer, producer, developer or owner is a person of another Party, than it accords to other like digital products”

Digital products are defined as “a computer program, text, video, image, sound recording or other product that is digitally encoded, produced for commercial sale or distribution, and that can be transmitted electronically.” That is a fairly broad definition given that it includes any digital product that is produced for distribution that can be transmitted electronically.

Digital goods and services may often seem similar with the TPP footnote acknowledging that “the definition of digital product should not be understood to reflect a Party’s view on whether trade in digital products through electronic transmission should be categorized as trade in services or trade in goods.”

In fact, if classified as a service, the national treatment provision discussed in the recent post could apply.

The Article 14.4 provision excludes government subsidies or grants, but there is no reference to tax credits or deductions. The provision is also subject to the “non-conforming measures”, which brings in the Canadian cultural exception. Cultural industries has a specific definition under the TPP exception:

“For the purpose of this reservation, “cultural industries” means persons engaged in any of the following activities:
(a) the publication, distribution, or sale of books, magazines, periodicals or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;
(b) the production, distribution, sale or exhibition of film or video recordings;
(c) the production, distribution, sale or exhibition of audio or video music recordings;
(d) the publication, distribution or sale of music in print or machine readable form; or
(e) radiocommunications in which the transmissions are intended for direct reception by the general public, and all radio, television and cable broadcasting undertakings and all satellite programming and broadcast network services.”

There is no reference to the Internet within the definition. It certainly seems likely that the websites of broadcasters or newspapers would be covered by this definition, but Internet-only may be a different story.

In fact, the North American Industry Classification System expressly excludes Internet-only products, treating the cultural industries as those covered by the TPP exception except when the product is exclusively on the Internet. Instead, Internet-only is treated as a separate industry group within the classification system.

The potential concern is therefore the possibility that Internet-only falls outside the cultural exception and is subject to the Article 14.4 requirements on non-discrimination of digital products.

I consulted with two of Canada’s leading communications professors and asked for their views. Both acknowledged that there was no clear answer. One took the view that this might exclude Internet-only services, while the other thought the provision could be stretched to include them.

Given this uncertainty, the problem is that if the Canadian government were to seek to extend tax credits to certain domestic sites, there is little doubt that it would run the risk of a TPP challenge from non-Canadian websites, thereby further limiting the government’s cultural policy options.

This piece originally appeared on Michael Geist’s blog and is reprinted with permission.

Photo: flickr/ Cosmo Spacely