When it comes to Canadian culture in the U.S. trade war, history is repeating itself

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History has a nasty habit of repeating itself.

In the 1980s, when Canada was involved in trade negotiations with the United States, the communications minister of the day, Flora MacDonald, was trying to carve out some space for the Canadian film industry by onshoring the lucrative distribution business. Her modest proposal was that Hollywood could still treat North America as one market for its own films or for ones where it held world rights, but only Canadian companies would be allowed to distribute independent films in Canada.

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The American film industry, which profited from controlling all North American distribution and knew MacDonald was also considering a quota system for Canadian film, moved its lobbying into high gear and shifted the file all the way up to president Ronald Reagan, a former Hollywood star. Canadian prime minister Brian Mulroney was told he could choose between the film bill and free trade, and the bill was dropped. (Eventually, a watered-down version was adopted merely as federal policy and it grandfathered the big U.S. studios in the Canadian market.) When push came to shove, trade had trumped culture.

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Today, the U.S. is trying to tax trade rather than free it, but Canadian cultural policies will be on the table again. If softwood lumber or the dairy industry are considered “irritants” in trade talks with the U.S., so too are the Online Streaming Act and the Online News Act.

Meanwhile, Prime Minister Mark Carney rescinded the Digital Services Tax in an attempt to get U.S. President Donald Trump to back off tariffs. That bill would have taxed some of the U.S. tech giants’ Canadian revenues, because they shelter profits off shore. Several European countries have already instituted similar taxes.

If Trump is so obsessed with trade deficits, he might take a look at Canada’s deficit on services: We buy a whole lot more of their services than vice versa, while they buy more of our energy. Travel to the U.S. accounts for a lot of these services, but every time you use Uber or pay your Netflix subscription, you are also sending some money south.

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So, as trade talks get under way, the question is whether Canada can now preserve the two pieces of legislation it did enact. The Canadian Radio-Television and Telecommunications Commission ruled the Online Streaming Act requires streamers, such as Netflix, Disney and Apple+, to contribute 5 per cent of their Canadian revenues to Canadian content funds, a decision the streamers are now fighting in court. Meanwhile, the CRTC has held hearings on how to define Canadian content for both video and music services but has yet to rule on that thorny issue.

The other law is the news act, which requires digital platforms such as Google and Facebook to pay Canadian news media for the content the platforms link to. The justification is that the platforms directly profit from displaying that content, but a second reason is that Google Ads decimated the local ad market, another way money flows south. Newspaper and magazine regulations once covered this area, by not allowing Canadian companies to claim ads in foreign publications as a business expense. The rules were never updated to cover the digital realm.

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That was low-hanging fruit that was never picked. Canada was slow to recognize that the digital revolution had bypassed cultural protections and that the rules desperately needed updating. It would be convenient if the streaming and newspaper rules were now well integrated into industry practice. Instead they are at risk, partly because they are new.

Ideologically ambivalent and politically allergic to cultural regulation, the Stephen Harper government did nothing when these issues first emerged. Easier to send out fundraising letters to the base maligning the CBC than actually grapple with the need to update laws that were first enacted under the Liberals in the 1970s but greatly expanded by Mulroney’s Conservatives in the 1980s.

When Justin Trudeau came to power in 2015, his government made the right noises on the file but was very slow to act. It was only when Pablo Rodriguez took on the Heritage portfolio in 2021, that the government seemed willing to make it a priority with a powerful minister to defend it.

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Carney took some flak in Canada for dropping the digital services tax – there were accusations of drooping elbows – but one challenge in any trade negotiation is balancing the demands of domestic politics with what’s required to get a deal. The question in the continuing negotiations may be whether the government feels the two new laws are politically expendable.

Despite a vocal minority of technological libertarians, economic conservatives and the far reaches of the free speech movement, Canadians generally support cultural regulation and don’t believe the internet is above the law. For example, when polled, a strong majority supported the Online Harms Act (that died on the order paper last January) because they want to protect children and don’t share expert concerns about the censoring implications of the hate-speech provisions.

However, they don’t ever want to pay for anything and won’t like it if Canadian content levies showed up as surcharge on the Netflix bill. The threat of passing costs onto consumers is often an effective one.

How powerful is Canadian political support for the recent digital regs? Interestingly, if the buy-Canadian movement still seems to be going strong in the grocery store, Canadians seem less committed to cancelling their streaming subscriptions (or boycotting Uber or Amazon) despite some initial rumblings. In the coming months, it may not be elbows we require, but backbone.