CASE NUMBER:     353
          CASE MNEMONIC:   CMTVCAN
          CASE NAME:       COUNTRY MUSIC TELEVISION      


  
                      
I.   IDENTIFICATION
1.        The Issue
          On June 6,
1994 The Canadian Radio -television and Telecommunications
Commission (CRTC) revoked the  operating license of Country
MusicTelevision (CMT), a division  of the US owned Westinghouse's
Group W Satellite Communications. CMT suddenly lost an audience it
spent nine years targeting and Canada prepared to make way for its
own version of the station -- Canada's New Country Network (CNC).
CNC entered the market with its own 24-hour country music format in
1995. Canadian Representatives claimed that the license  revocation
was designed to protect Canada's heritage and that it was fully 
permissible under Canadian law. The United States Government
reacted immediately to what it considered discrimination against a
US industry. After a year-long running dispute, the issue was
resolved when a partnership  agreement was signed between CMT and
CNC. This was the only solution  that prevented the US from taking
retaliatory action in the case.

2. Description

     The United States and Canada enjoy the largest exchange of
goods and  services in the world. They also share a rather large
number of trade disputes --  Since 1989 there have been 80 minor
conflicts between the two neighboring  nations -- suggesting that
perhaps the old cliche "good fences make good  neighbors" holds
some validity(1) Canada's market of 26 million people has  become
saturated by American culture distributed by cultural industries in 
the US and in Canada. Between 60 and 95 percent of film,
television, music  and publishing markets in Canada are controlled
by Americans (2). Canadian  artists fear that US domination would
be even more dramatic had governments  not created subsidies, trade
barriers and tax policies to protect Canada's  cultural marketplace
-- and by extension, the identity of the nation itself (3).      
Canadians have historically  had difficulty separating their
economic  relationship with the US from their concern to defend
their autonomy and  cultural individuality. The dilemma is not
surprising when one recognizes  that Canadians share many basic
attributes with their American neighbors;  they speak (at least
partially) the same language, watch many of the same  films and
television programs and read the same best-selling novels.  These
similarities are compounded by the close proximity of the actual 
populations of two nations and the tendency for satellite and radio 
programming to cross borders between the two nations. Canada is the 
second largest nation in the world behind Russia. Despite its
enormous  geographic size, satellite and radio programming across
the borders from  the US reaches 90% of the Canadian population
because 90% of the population  is concentrated in the region of the
country that directly borders the US (4).
       The quagmire of programming crossing borders is seen as
threatening to  most Canadian artists and programmers because of
the huge popularity that  US books, magazines and film enjoy in
Canada. If given the choice, artists  fear Canadians will choose
American cultural merchandise. There is some  debate over whether
this phenomenon is a function of supply or demand side economic
factors. Regardless, the  need to preserve cultural homogeneity  in
Canada has been recognized and steps have been taken to insure that 
culture will not be further compromised. Trade policy and
regulation is  being used by Canada to protect its people from
being vulnerable to dominant  US cultural industries. These
precautionary steps have been taken to protect those elements
considered integral to Canadian culture. One of the integral 
elements of culture that Canada feels needs protection is the
Canadian  television industry. 

COUNTRY MUSIC TELEVISION

     CMT has been available in Canada since 1984. During its 10
years of  operation in Canada the station showcased US and Canadian
country artists  in both their home and foreign markets. Country
Music Television, a division  of the US owned Westinghouse's Group
W Satellite Communications, reaches  41 million viewers worldwide
with its country music video programming  and half of all homes in
the US with cable subscribe to the station. At the  time its
license was revoked, CMT was one of the fastest growing services 
in Canada, reaching almost 2 million Canadian homes via 450 cable
operators (4).  Canadian cable operators were no longer allowed to
provide CMT to their  subscribers as of Jan. 1, 1995 because of the
CRTC decision (5). Canada's  revocation of the station's license so
angered US trade representatives  that Mickey Kantor threatened to
retaliate under section 301 of the 1974 Trade Act.
        The only reason the US held back retaliatory efforts was
that discussions began  between Country Music Television and the
Canadian based cable network that  replaced CMT when its license
was revoked.  Despite negative reactions from US  officials,
Canadian government representatives maintained that the license
revocation  was in keeping with Canada's desire to protect national
heritage and with Canadian Law.  The CRTC's action was the result
of a decade old practice of denying market access  to foreign owned
television programming services which are determined to be directly
competitive with Canadian-owned services.

FINAL OUTCOME
     
     After 8 months of negotiations, Nashville-based Country Music
Television said it  will purchase up to one-third interest in
Canadian New Country Network, renaming it Country Music Television
(Canada).  Country Music Television and Canada's  New Country
Network signed the agreement March 7, 1996 to form a single 
Canadian country music network (7). Canadian law prohibits wholly
owned  foreign companies from competing with Canadian companies in
cultural industries (8). To circumvent this restriction, CMT will
initially get 20% of New  Country Network from Rogers
Communications Inc. It will then buy another 13.3 % from co-owner
Calgary based Rawlco Communications, Inc. When  Ottawa raises its
foreign ownership ceiling to 33% from 20% this month.(9).       
Part of the agreement calls for CMT to resume showing videos of
Canadian  performers on its US network, something CMT stopped doing
when its license  was revoked in Canada (10). Rawlco President
Gordon Rawlinson admitted  that threats by Kantor forced the two
sides to negotiate final details just three  hours before the
deadline.  The agreement resolves a dispute that dates back to 
June 1994 when the CRTC barred CMT from broadcasting in Canada
because it deemed unfair competition to the Canadian-owned New
Country Network. In  1994 CMT appealed the CRT decision to Canada's
Federal Court of Appeal,  as well as to Canada's Supreme Court
(11). Both appeals were denied.
       The merger was finalized hours before commercial sanctions
were to be  imposed by US Trade Representative Mickey Kantor. 
Kantor argued that any  discrimination against US industry will not
be tolerated and to prove his point  had already begun researching
possible retaliatory measures. The USTR initiated  a Section 301
investigation in February 1995 because Kantor determined that 
"certain broadcasting policies deny national treatment and market
access" to US  broadcasting companies (12).  Section 301 of
American trade law empowers  the President to place sanctions on
imports from countries that make unfair  trade actions against US
exports (13).
     In June 1995, the USTR announced that CMT and the New Country 
Network had reached a tentative agreement-in-principle and set a
Feb. 6, 1996  deadline for the agreement to be finalized.When the
deadline was not met, the  USTR determined that Canadian
broadcasting policies discriminated against  US-owned programming
services. The USTR then set the March 7 deadline.  Among other
threats Kantor said that he would hold up a Federal Communications
Commission license on Teleglobe, Canada's $50 Million underwater
cable off  the east coast of Canada. Teleglobe Canada applied to
the US Federal  Communications Commission for permission to connect
to US telephone  systems via underwater cable. The application from
Teleglobe and US partner Optel Communications Inc. Would allow
Teleglobe to connect with  the Cantat-3 Transatlantic Cable.
Washington was also primed to pull the US  license of Much Music,
the Toronto-based music video station. The station has  about 3
million US customers who subscribe through Rainbow Program holdings
(14).
      Wishing to avoid retaliatory actions against one another,
both countries  welcomed the solution to the long-running battle
over Country Music Television.   Even as this dispute becomes
resolved, other disputes still remain unresolved  and on the
horizon between the US and Canada. 

 PROTECTIONISM: PROBLEM OR PANACEA?
     
     The crux of the argument rests simply between a difference of
opinions  between Americans and Canadians. "The Americans regard
these things as  entertainment and service industries. Canadians
view them as integral elements  of our culture" (15).  By making an
international example out of Canada's  protection of cultural
industries the US also sends a message to nations imposing  similar
restrictions on US cultural industries in Europe, Asia and
Australia. The  US intends to complain that Canada is denying US
corporations "national  treatment"(16). The US states that it has
no problem with subsidies in Canada --  only with policies that
penalize US industries and make those industries pay  the cost. 
     Under international trading laws, governments must treat
foreign and domestic  products identically. Canadian officials
point out that the new legislation "does not  discriminate on the
basis of ownership."The US traditionally protects what it 
considers fragile industries such as lumber. Canada feels it has
the same right  to protect its fragile cultural industries. The US
is the largest cultural exporter  in the world with entertainment
as the second-largest US export industry, after aerospace.  Less
than 2 percent of time on US television is given to  foreign
programming.
     Under NAFTA, cultural industries are exempt from trade
requirements  preventing trade barriers. Canada does not violate
the accord by taking actions  against Country Music Television, on
the other hand, the United States did not  violate the agreement by
threatening to retaliate (17).

2.   DESCRIPTION
     3.        Related Cases

     (1)  FRENCHTV

     (2)  SPORTSILL

     (3)  QUICK CASE REFERENCE TABLE
  
 

4.        Karen Rinaman (24 June 1996)

II.       LEGAL Cluster

5.        Discourse and  Status:IN PROGRESS

6.        Forum and Scope:NAFTA and BI-LATERAL

7.        Decision Breadth:2

8.        Legal Standing:TRADE AGREEMENT

III.      GEOGRAPHIC Filters

9.        GEOGRAPHY

     a. Continental Domain: North America  

     b. Geographic Site: Northern North America  

     c. Geographic Impact: CANADA

10.       Sub-National Factors:NO

11.       Type of Habitat:Temperate

 

IV.       TRADE Cluster  

12.       Type of Measure:IMPORT BAN

13.       Direct vs. Indirect Impacts:DIRECT

     A number of Canadian writers, singers, film-makers and other
artists  have been enjoying acclaim recently beyond their Canadian
border.  They range from a Pulitzer prize winning novelist to
popular country  music singers--Neil Young, The Crash Test Dummies,
Joanie Mitchell, KD Lang and Michelle Wright. These artists feel
that their success  is due to Canadian subsidies, taxes and local
ownership rules.  In their view,  their talent might never have
been discovered without the protectionist  actions of the Canadian
government. 

14.       Relation of Trade Measure to Resource Impact

     a. Directly related: YES, ENTERTAINMENT

     b. Indirectly related:NO

     c. Not related:NO

     d. Process related:YES, CULTURAL LOSS

15.       Trade Product Identification: License Revocation of
Country Music Television Station           

16.       Economic Data

WHAT IS PROTECTION? 
     In international economic terms, "protection" refers to acts
of government  policy that protect industry from foreign
competition, enabling the industry  to earn more profit and to
create a stronger, more stable economic foundation.   Protection is
a tool used in government policies to assist local industries 
competing with foreign imports. It also serves to shield industries
that have the potential to export. Import tax and quantitative
import restrictions are  two devices frequently utilized by
government to protect local industry (18).
      In a trade relationship such as the one between the United
States and  Canada protection can be a particularly frustrating and
irresolute issue.   Washington is of the opinion that Canada's
unbridled access to the US  market under bi-lateral agreements and
the NAFTA should be reciprocated  and that Ottawa must offer
significant concessions too. Unfortunately, items  that US
negotiators are interested in, such as policies for cultural
industries,  are largely non-negotiable to Canadian officials.
These disagreements are  problematic because for the US, close
economic ties with its largest trading  partner are important; for
Canada, with three-quarters of its trade going to the US, they are
essential.
     Canada will export about $217 billion in goods to the United
States this  year (19). That represents 36% of the country's entire
economic output and  1.7 million jobs directly related to these
exports. 79% of automobiles made  in Canada are sent to the US
along with 65% of its lumber, 55% of its rubber  production, 50% of
its electronic equipment, 49% of its steel and machinery  and 47%
of its pulp paper (20). Canada also supplies more crude oil to the 
United States presently than Saudi Arabia or Venezuela. It enjoyed
trade  surpluses of $26.3 billion in 1994 and $32.3 billion last
year. The US  does not import a significant amount of cultural
products from Canada  but Canada certainly imports a great quantity
from the US. All four US  networks are available on Canadian cable.


17.       Impact of Trade Restriction:HIGH

     The results of the WTO hearing will impact how other nations
in Europe,  Australia and Asia choose to approach regulations
within the cultural industry as they relate to international trade.
The Sports Illustrated ruling is considered  to be  precedent
setting and could have a long-term effect on the trade relationship 
between the US and Canada as well as other nations worldwide.  

18.       Industry Sector:TELEVISION INDUSTRY 

19.       Exporters and Importers:US AND CANADA

 

V.        ENVIRONMENT Cluster:

20.       Environmental Problem Type:CULTURAL

     Culture is defined as that "complex whole which includes
knowledge,  belief, art, morals, law, custom and any other
capabilities and habits acquired  by man as a member of a
society"(21).  In many trade related policy decisions,  impacts on
culture should be taken into consideration. Increasingly when 
nations engage in a trading relationship with the United States the
issue of  culture must be considered. Culture is a highly
influential thread in the fabric of a society from which cultural
values and cultural identity is  established. The influence of
culture on society has sometimes regarded as  circular.  Moving in
a circular fashion, culture affects values, which affect 
attitudes, which affect behavior, which in turn affects culture
again (22). Following this  logic, unnatural outside interferences
in the process of cultural change can cause  alterations to a
culture which can be harmful to cultural identity. The import of 
certain goods and services from one country to another then,
conceivably  impacts the process which maintains cultural identity.
Cultural industries  such as books, magazines, music and film can
all be considered as influential  outside interferences when they
are imported and distributed in a nation like Canada. All are
tradable products capable of altering behavior, values  and
attitudes --therefore capable of altering culture.  
     Cultural products and services -- films, TV programs, books,
music -- in addition to offering entertainment, are ideological
items which embody social values and messages, and consequently
influence the organization of entire social systems. For this
reason,  borderless information and the entertainment  media are
increasingly being viewed not as positive forces for integration, 
but as divisive mechanisms which threaten national and cultural
sovereignty.
    The cultural environment, as a system of symbols, images,
words, concepts, stories  and values is considered a shared
resource held more or less in common by the  people of a particular
society or nation (23). As such, it is in the common interest  of
a community to maintain and protect the cultural environment with
the same  conviction that one may hold for his or her physical
environment. This rationale  has prompted Canada to protect its
cultural environment from cultural products  exported from other
nations -- particularly from the United States.
      The enormous amount of cultural programming imported from the
US to Canada  concerns the Canadian Government in terms of how
American programming  will effect the national culture of  Canada.
To counteract the imbalance it sees  in the cultural realm, Canada
has restricted US Magazine distribution, television  programming
and even bookstore ownership. Canada is joined by many other 
nations worldwide in its battle to preserve cultural identity.

21.       Number of Species:NA

22.       Resource Impact:NA

23.       Urgency and Lifetime:LOW and NA      

24.       Substitutes:LIKE PRODUCTS

 

VI.       OTHER Factors:      

25.       Culture:YES
It can be argued that music has the ability, through its lyrics and
message, to alter  behavior and beliefs.  Both contribute to
personal identity and therefore can be  related to national
identity and culture.  In a format like music television, culture 
is further transmitted by the images portrayed and the ideas
broadcast visually  and audibly in music videos. All aspects of
music television are therefore  capable of altering behavior and
culture. (For more information on Culture,  please see the
environmental problem section)

26.       Trans-Boundary Issues:NO

27.       Human Rights:NO

28.       Relevant Literature

Chet Flippo, "Canada Network and CMT Agree To Form Single Web"
BILLBOARD PUBLICATIONS (23 March 1996). 

Clyde Farnsworth, "Canada Plans tax on US Magazine" THE NEW YORK
TIMES (22 December 1994: Section D; Pg. 1; Column 6; Financial
Desk)

Frederick, Howard H.,Global Communication and International
Relations. (Belmont, CA: Wadsworth Publishing Company, 1992).

International News Writer, "US, Canada Find Something to Sing
About" AGENCE FRANCE PRESSE (Ottawa, 7 March 1996)

 Manly Lorne, "SI Canada Dispute Flares Anew" FOLIO (15 April
1996;Vol. 25;No. 6; Pg 1)

Peter Morton, "USA: A Favorable Balance - Canada-US Trade"
FINANCIAL POST (3 February 1996)

Peter Morton, "Kantor's Attack On Canada is Warning World"
FINANCIAL POST (12 March 1996)

Peter Morton, "Canada: Cultural Policies Get Canada On US Trade
Watch" FINANCIAL POST (1 May 1996)

Charles Trueheart, "Canada Puts Up Barriers To American Culture"
THE WASHINGTON POST (23 December 1994 ; Section 1; Page A17)

Bernard Simon, "Campbell Curbs Foreign Magazines" FINANCIAL TIMES
(20 July 1993; Pg. 4)

Bernard Simon, "US Accuses Canada of Unfair barriers" FINANCIAL
TIMES (26 January 1993; Pg.3)

Donna Smith, "US, Canada Country Music Dispute Settled" REUTERS BC
CYCLE (7 March, 1996)

Staff Writer, "International Trade, Country Music Dispute Resolved
as US and Cnadian Firms Finalize Deal" THE BUREAU OF NATIONAL
AFFAIRS DAILY REPORT FOR EXECUTIVES (8 March 1996) Section A;46

Carl Wilson, "Northern Exposure:Canada fights Cultural Dumping" THE
NATION (20 May 1996: Vol. 262:No. 20:Pg 15)

Lorraine Woellert, "Foreign Backlash Grows Vs. US Culture" THE
WASHINGTON TIMES (4 February 1996 :Part A;A1)

Gary Weaver, Culture Communication and Conflict (Ginn Press,
Weedham Heights, MA, 1994)

ENDNOTES

1. Carl Wilson, "Northern Exposure:Canada fights Cultural Dumping"
THE NATION (20 May, 1996: Vol. 262:No. 20:Pg 15)

2. Ibid., 

3. Ibid., 

4. Lorraine Woellert, "Foreign Backlash Grows Vs. US Culture" THE
WASHINGTON TIMES (4 February 1996; Part A; Pg A1)

5. Staff Writer, "International Trade, Country Music Dispute
Resolved as US and Cnadian Firms  Finalize Deal" THE BUREAU OF
NATIONAL AFFAIRS DAILY REPORT FOR EXECUTIVES (8 March 1996) Section
A;46

6. Ibid.

7. Chet Flippo, "Canada Network and CMT Agree To Form Single Web"
BILLBOARD PUBLICATIONS (23 March 1996).

8. Donna Smith, "US,  Canada Country Music Dispute Settled" REUTERS
BC CYCLE (7 March 1996).

9. Peter Morton, "USA: A Favorable Balance - Canada-US Trade"
FINANCIAL POST (3 February 1996

10. International News Writer, "US, Canada Find Something to Sing
About" AGENCE FRANCE PRESSE (Ottawa, 7 March 1996)

11. Flippo

12. Peter Morton, "USA: A Favorable Balance- Canada-US Trade"
FINANCIAL POST (3 February 1996)

13. Clyde Farnsworth, "Canada Plans tax on US Magazine" THE NEW
YORK TIMES (22 December 1994: Section D; Pg. 1; Column 6; Financial
Desk).

14.  Peter Morton, "Kantor's Attack On Canada is Warning World"
FINANCIAL POST (12 March 1996).

15.  Bernard Simon, "Campbell Curbs Foreign Magazines" FINANCIAL
TIMES (20 July 1993; Pg.  4).

16. Farnsworth

17.Frederick, Howard H.,Global Communication and International
Relations. (Belmont, CA: Wadsworth Publishing Company, 1992).

18.Morton 12 March 1996

19 Ibid.,

20. Ibid.,

21.Gary Weaver, Culture Communication and Conflict (Ginn Press,
Weedham Heights, MA, 1994):103      

22. Ibid., 103

23. Ibid., 104 







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