This article originally appeared in the Washington Examiner.
By Peter Menzies, November 20, 2023
Canada, which is overwhelmingly dependent on the United States for trade revenues and the defense of its sovereignty, seems determined to provoke a North American trade imbroglio.
The cause, should that happen, will be Prime Minister Justin Trudeau’s desire to retrieve cash from the American tech industry — primarily Meta, Alphabet, and streaming services such as Netflix and Disney+.
His legislative assault on Big Tech has opened on three fronts, all of which have raised eyebrows in Washington.
The first is Canada’s Online News Act, a piece of legislation created at the behest of failing legacy news publishers but expanded to include broadcasting-based entities that also produce news.
It was based on publishers’ allegations that Google and Meta (via Facebook and Instagram) were “stealing” their content. Dreams of hundreds of millions of dollars flowing north were dashed when Meta, seeing little commercial value in this content, simply stopped allowing news links to be posted on Facebook and Instagram. With Google threatening similar action and publishers reeling from lost traffic and revenue, news organizations are now suing for peace.
Trudeau, whose ministers had been promoting the need to get money from “web giants,” expressed dismay that Meta would defy a sovereign nation, accused it of bullying, and, at the height of the northern wildfires this summer, said the company had put profits before the Canadian public’s safety. Meta, though, was careful to ensure that access to emergency information through its platforms was unimpeded, and its departure from news carriage doesn’t appear to have affected its popularity.
Even more problematic is Canada’s Online Streaming Act. Passed in the spring, it gave the Canadian Radio-television and Telecommunications Commission authority over all audio and visual content on the internet. The CRTC differs significantly from its U.S. equivalent, the Federal Communications Commission, in that it strictly governs content, specifically to ensure funding for and airing of prescribed Canadian content percentages.
Exactly how it plans to draw U.S.-based streamers into that closed and tightly controlled world will become more clear following hearings this month. With Canadian broadcasters demanding companies such as Netflix, which runs a 13% profit margin, to pay 20% of its Canadian revenues into CRTC-approved funds, there are multiple opportunities for this to go sideways.
As University of Ottawa law professor and internet expert Michael Geist has pointed out, there’s every chance this ham-handed attempt to turn U.S. streamers into domestic broadcasters could trigger trade retaliation.
“The takeaway is that there are several provisions in the bill that — depending on CRTC implementation — could result in discriminatory treatment against U.S. companies,” Geist wrote in his blog. “Given the prospect of (Canadian content) rules that could result in greater benefits for Canadian firms … there is a risk of a trade challenge.”
How high that risk is remains open to debate. American officials have already raised concerns more than once with their Canadian counterparts, whose reassurances have so far failed to put them at ease. Suffice it to say, the outcome of the CRTC’s hearings will be monitored closely south of the border.
U.S. officials have been even more direct about Trudeau’s desire to break from protracted negotiations involving 138 other nations and push ahead on his own with a digital services tax next year.
David Cohen, the U.S. ambassador to Canada, told the National Post that “if Canada decides to proceed alone, you leave the United States with no choice but to take retaliatory measures in the trade context, potentially in the digital trade context, in order to respond to that.”
Why Trudeau is willing to risk this is unclear. While it’s true his government’s spendthrift habits are catching up with it in a hurry, the amount anticipated to be raised by a digital tax (just under $1.5 billion annually) is hardly going to balance Canada’s books by itself.
His country’s international reputation is in shambles. Canada has been humiliated by China, its sole contribution at the recent G-20 gathering was about “gender language,” and its diplomats have been booted from India. Faced with the prospect of a revolt within his own caucus, Trudeau is not in alignment with the U.S. or the United Kingdom on Israel, and a recent decision to trim already far-below-par military spending won’t be well received by NATO allies. Their patience with Canada’s freeloading has already been exhausted.
Trailing in the polls, Trudeau is a desperate man who seems to sense political purchase in painting Big Tech as ugly American interlopers. In doing so, he’s putting an important trade and security partnership at risk.
Peter Menzies is a senior fellow at the Macdonald-Laurier Institute, a former publisher of the Calgary Herald, and a former vice chairman of the Canadian Radio-television Commission.
