Canada's Billion-Dollar Culture Deficit Requires New Policy Approach

Canadian artists have enjoyed unprecedented international critical and commercial success in recent years. From Avril Lavigne to Yann Martel to Denys Arcand, Canadians have won Grammys, Bookers and Os

Michael Geist is the Canada Research Chair in Internet and e-commerce Law at the University of Ottawa. He can be reached at
The opinions expressed herein are personal and do not necessarily reflect those of the University of Ottawa.

Canadian artists have enjoyed unprecedented international critical and commercial success in recent years. From Avril Lavigne to Yann Martel to Denys Arcand, Canadians have won Grammys, Bookers and Oscars, and have demonstrated that our best belong on the world stage.

Notwithstanding these headline-grabbing success stories, wider success for the Canadian cultural community has proved more challenging. In fact, Canada has long faced a cultural deficit, with imports exceeding exports. The full magnitude of the Canadian culture deficit became evident last month, when Statistics Canada released a major report on the status of Canadian cultural services.

Canada's culture deficit stood at Canadian $919 million ($729.3 million) in 2002, a figure that accounted for one-third of the total Canadian commercial services deficit. The trade figures involving the United States were particularly troubling, with the Canada-U.S. culture deficit ballooning by 42% between 1996 and 2002.

Three sources contributed to virtually the entire deficit -- copyright royalties, trademark royalties and broadcasting fees. Of these three sources, copyright royalties was by far the fastest growing, with the Canadian copyright-royalty deficit nearly doubling in six years from Canadian $125 million ($99.1 million) to Canadian $223 million ($176.9 million).

Following the Canadian governor general's Oct. 5 speech from the throne setting out governmental priorities, the time has come to reverse the alarming increase in Canadian cultural deficit by establishing supportive policies that promote the interests of all Canadians.

Those policies should focus on three strategies. First, fostering the creation of Canadian cultural products through governmental arts programs. Second, facilitating broad public access to Canadian works by using the U.K. as a model. Third, putting an end to legal reforms that invariably lead to an increasing flow of copyright fees out of the country.

Supporting the creation of new cultural products sits at the heart of the cultural policies of many countries. As Peter Grant and Chris Wood illustrate in "Blockbusters and Trade Wars," an excellent examination of global cultural policy, many countries utilize a "culture toolkit" to help support their local culture. Canada already employs a range of such tools, including Canadian content requirements, arts funding programs and tax policies that encourage film and television production in Canada. While these policies have been the subject of some criticism, there is little doubt that many artists depend on them to help pay the bills.

Building on Canada's current successes requires a continued commitment to cultural funding, along with a careful examination of additional alternatives found in other countries. For example, the French film industry is supported by a small levy added to the cost of movie tickets, an approach that has helped facilitate a thriving national industry.

Of course, industry must do its part as well. Major record labels such as Universal Music Canada trumpet their support for domestic artists, yet those same artists represent roughly 21% of the performers promoted on the Web site. That figure does not even come close to the 35% Canadian-content requirements imposed on Canadian radio stations and suggests that a greater commitment to Canadian culture rather than the corporate bottom line is needed.

The continued creation and increased promotion of Canadian cultural products alone will not address the cultural deficit. We must also ensure that access to our culture and heritage is publicly available to all Canadians.

The United Kingdom provides an excellent model for such policies. In recent months, the British Library has unveiled an ambitious plan to digitize and freely post on the Internet thousands of historical newspapers that are now in the public domain. Similarly, the BBC has established the BBC Creative Archive, which will allow users to download clips of BBC factual programming for non-commercial use, where they can be stored, manipulated and shared.

Although Canadian funding of the CBC is not identical to the television license fee approach used for the BBC, there are clear similarities between the two public broadcasters. CBC would take a significant step forward by returning its programming to the taxpayers who provide the majority of its funding. In doing so, Canadians would be free to use CBC programs for non-commercial use, much like residents in the United Kingdom.

Canada must also foster the growth of the public domain by resisting pressures to extend the term of copyright. Canadian copyright currently lasts for the life of the author plus 50 years. While some countries have extended that term to 70 years after the author's death, the extension would not generate further cultural products, yet it would result in diminished public access to Canadian works.

For example, in 2003 the Canadian government introduced a bill dubbed the "Lucy Maud Montgomery Copyright Term Extension Act," which would have extended the term of copyright for certain works. While the heirs of the famous Canadian author would have benefited from the extension, the Canadian public would have paid the price, losing access for years not only to Montgomery's unpublished works but also to unpublished works from dozens of other prominent Canadians, such as former Prime Ministers Borden and Bennett. That bill was ultimately amended, with the copyright term extension provisions excluded.

The third and most essential strategy is that Canada stop adopting copyright policies that, to no one's surprise, result in the transfer of millions of dollars out of the country. Over the past 50 years, Canada has regularly faced pressure from U.S. organizations and their Canadian proxies to adopt new reforms that are quite obviously designed to increase the payment of copyright royalties to U.S. interests.

For example, relentless U.S. pressure on broadcasting royalties was a prominent feature in the U.S.-Canada free-trade negotiations. The pressure eventually led to reforms that created new compensation schemes for broadcasting that has resulted in Canadians paying millions more to U.S. rights holders each year.

Canada is currently facing copyright policy choices that could lead to more of the same. Rights holders are lobbying for Canadian ratification of the World Intellectual Property Organization's Internet treaties, which cover issues such as anti-circumvention legislation popularized by the Digital Millennium Copyright Act. Many experts, reportedly including some Canadian government officials, believe that ratification would force Canada to amend its private copying regime to conform to the treaties' "national treatment" requirements. National treatment obliges countries to treat foreign and national artists on an equal footing, a requirement that could lead to an additional Canadian $100 million ($79.3 million) in Canadian private copying royalties flowing south of the border.

Moreover, the cost of ratification to Canadians would not be limited to increasing royalties. Ratification of the treaties would swing the copyright balance dramatically toward rights holders, as it shuts out individual Canadians from their fair dealing rights for research and private study -- an essential part of the balance affirmed by the Supreme Court of Canada.

Despite claims that Canadian artists would be harmed should Canada decide not to ratify the treaties, Canadian artists would in fact scarcely feel the effect of such a decision. Eighty percent of the world's population has not even signed the treaties, while many European countries have yet to formally ratify them. Furthermore, since Canada's most significant trading partners, notably the United States and Japan, provide Canada with national treatment status, Canadian artists would still enjoy benefits in those markets.

Policy makers should also recognize that even ratification of the WIPO Internet treaties will not satisfy many rights holders, who have continually sought new rights that might increase their earnings. The U.S. Congress has recently been considering legislation called the Induce Act, which could conceivably regulate a wide range of electronic equipment, including popular devices such as Apple's iPod.

Canadians can expect similar proposals to surface here, as rights holders have left little doubt that the WIPO Internet treaties represent only the tip of the copyright reform iceberg.

For example, Graham Henderson, the recently appointed president of the Canadian Recording Industry Assn., wasted little time in telling Billboard that even with ratification, Canada's Copyright Act "would still not be able to serve the needs of the business community."

The Statistics Canada data illustrate that the country's culture deficit, led by copyright royalties, is not a matter of fiction. In order to give this story a happy ending, several government ministers, including Canadian Heritage Minister Liza Frulla, her Parliamentary Secretary Sarmite Bulte, and Industry Minister David Emerson, must reverse the culture deficit by crafting policies that promote creativity while focusing on Canadian interests.