Country Music Television and Cultural Protectionism

By Karen Rinaman

          CASE NUMBER:     353

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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