CANADA'S HOUSE PASSES BILL, WITH ROOM FOR U.S. TALKS: EXPECT AMENDED LAW THAT ALLOWS SPLIT-RUNS WITH CONTENT QUOTAS

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[toronto] A controversial bill to protect the Canadian magazine industry passed the House of Commons last week. But it's expected to be amended to permit split-run magazines that publish an yet-unspecified amount of Canadian content.

"We have made it very clear that any future discussions must hinge on the concept of majority Canadian content, and we believe that reflects not only the letter, but also the spirit of the legislation," said Sheila Copps, the heritage minister responsible for the bill.

Canada's bill C-55, which still needs to pass the Senate before becoming law, would make it unlawful for foreign publishers to sell advertising to Canadian companies in split-run magazines in Canada. Split-runs reprint content for a secondary foreign market and resell local ads against that section.

The bill, a replacement for an earlier excise tax ruled illegal by the World Trade Organization in 1997, is aimed at preventing large U.S. publishers from flooding the market with Canadian versions of major titles.

TRYING TO AVOID TRADE WAR

In agreeing to weaken the legislation following a meeting in Washington, D.C., the Canadian government is seeking to avoid a costly trade war with the U.S.

"We're very encouraged that dialogue is taking place. We believe there are alternative options to bill C-55 that meet the goals of all stakeholders," said Ron Lund, president-CEO of the Association of Canadian Advertisers.

Half the magazines sold in Canada are U.S. in origin, and U.S. titles account for 80% of newsstand sales, according to the Canadian Magazine Publishers Association.

The ruling Liberal government fears that if it caves in to U.S. demands for the elimination of protectionism in magazines, that would lead to the inevitable dismantling of all policies protecting Canadian culture.

SPLIT-RUNS ARE CHEAPER

U.S. publishers can produce split-run magazines in Canada far cheaper than Canadian publishers can produce magazines for their own market, said Francoise de Gaspe Beaubien, president of the publishing division of Telemedia and chairman of the Canadian Magazine Publishers Association's political affairs committee.

He said that's because editorial and overhead costs of U.S. publishers have already been covered by U.S. sales.

Mr. De Gaspe Beaubien estimated these advantages would enable U.S. publishers to "realize profit margins of up to 80% in Canada, while Canadian competitors make

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