Arts and Culture in Trade: What NAFTA renegotiation might mean for the cultural exception

Kate Lynn Huffman
Jul 19, 2017 · 9 min read
Image credit Flikr Woody Wood

On Monday, the Trump administration released its objectives for the NAFTA renegotiation and was met with a mixed review by Congress and negatively by fair-trade organizations. Ways and Means Committee ranking member Richard Neal (D-Massachusetts) said that the objectives for renegotiation “raises more questions than it answers.” Democrats on Capitol Hill and anti-corporate/pro-citizen power organizations like Public Citizen have criticized the language of the document, saying that it is reminiscent of the language used in the Trans-Pacific Partnership (TPP), which President Trump criticized as a bad agreement and pulled the U.S. out of in January 2017.

Though some commentators in Canada and Mexico see the objectives as a softened stance by the Trump administration on scrapping the deal altogether, the introduction of the official document from the U.S. Executive Office touts then-candidate Donald Trump’s ‘promise’ of renegotiating NAFTA or taking the country out of the agreement. Even with the vague language and objectives from the U.S., it is certain that waves will be made during the renegotiation process, which, now that the Trump administration has submitted its objectives to Congress, will likely begin in the next 30 days.

Relating to the cultural industries, the renegotiation objectives include a heading and several points on intellectual property (IP), digital trade in goods and services, and trade in services including telecommunications, as well as an objective to reduce or eliminate barriers to U.S. investments “in all sectors” in the NAFTA countries. This objective is a particularly aggressive demand and suggests that the U.S. wants to end restrictions on American investments in numerous sectors, including in telecommunications and the cultural industries.

The stance of the U.S. in trade-relations has historically been paternalistic and hypocritical — in that the United States preaches about the benefits of open markets, deregulation, and free-trade, but is increasingly protectionist and limiting in its trade agreements. As relating to the arts and culture, these beliefs affect intellectual property, e-commerce, and audio-visual goods and services, including film, television, and print materials. The principles which guide trade policy in the U.S. similarly affect other areas of cultural policy and arts administration, for example in immigration policy and restrictive processes for obtaining visas for artists and musicians.

Though not a particularly sexy subject nor typically thought of as being critical to the arts and culture, trade agreements can, and do, have tremendous impact on individual artists, cultural economies, and cultural policies. In fact, the arts and creative industries are considered to be so important in some cultures, that they have historically been excluded from trade agreements all together.

Exempting cultural industries and policies from trade agreements is known as the cultural exception. The concept of cultural exception traditionally forms the basis of French cultural policy, or l’exception culturelle, but was codified in trade law with the passing of the Canada — U.S. Free Trade Agreement (CUSFTA) and was preserved in the North American Free Trade Agreement (NAFTA), which superseded CUSFTA. The cultural exception in NAFTA has set a precedent for trade negotiations and institutions overseeing global trade such as the World Trade Organization (WTO). However, the election of Donald Trump has thrown the future of NAFTA into question, as one of Trump’s campaign promises was to renegotiate the terms of the trilateral trade bloc.

Trump has called NAFTA “the worst trade deal” ever signed by the U.S. and, while on his presidential campaign trail, threatened to abandon the agreement altogether. In the months since the election, Trump seems to have softened this stance, though intends to renegotiate NAFTA to get the “best deal” for the U.S. However, it is unclear what that actually means or might entail. In early May, the Trump administration gave Congress official notice for renegotiation as required by a law that mandates the president give Congress at least 90 days’ notice before opening a trade negotiation. The page-long letter sent by the Trump administration differed markedly from an eight-page version circulated on Capitol Hill in March. The latter proposed potentially reinstating tariffs on certain goods and specifically addressed issues relating to culture under and digital trade headings, while the one-page letter merely stated the intent to enter into renegotiation and that the agreement is outdated. The recently-released U.S. objectives for NAFTA renegotiation shines some light on what the Trump administration’s intentions are for the trade deal relating to culture, including updating the chapters on trade in services including telecommunications and IP, but how these intentions might play out in renegotiation is unknown.

Stakeholders across the political spectrum and of all NAFTA countries have concerns about potential changes to the agreement. NAFTA was controversial when it was negotiated and ratified in the early 1990s and has remained contentious ever since. However, it is a vitally important influencer in all NAFTA countries’ economies and is critical to the discussion on how culture is treated within trade agreements. So, what might the renegotiation of NAFTA mean for the future of the cultural exception?

Debates over cultural industries and free trade in North America date back to the 1989 CUSFTA. Due to the cultural and geographical proximity of Canada to the U.S. (cultural proximity includes shared language and similar customs), the Canadian government insisted upon the cultural exception to protect their cultural industries from U.S. takeover. With this exception, Canada sent a message to the U.S. that it viewed culture as something deserving different treatment than ordinary goods and services in trade. The U.S. criticized the cultural exception as ‘protectionist’ and opposite to the values of free-trade, but ultimately accepted the terms of the cultural exception in CUSFTA. When NAFTA was originally being negotiated, the U.S. sought to remove the cultural exception, but Canada insisted that it remain.

What exactly does the cultural exception in NAFTA include and mean? NAFTA defined “culture” as a matter of property through the inclusion of copyrights, patents, registered trademarks, industrial designs, trade secrets, geographical indicators, and audiovisual production. Although there are many provisions in NAFTA that address culture-related issues, for Canada, the most important ones are Article 2107 and Annex 2106. Article 2107 defines cultural industries as being the publishing industry (books, magazines, periodicals, and newspapers), the film and video industry, the music recording industry, the music publishing industry, and the broadcasting industry (radio, television, cable, and satellite). Annex 2106 stipulates that the CUSFTA governs rights and obligations between Canada and any party with respect to cultural industries, except for Article 302 of NAFTA on tariff elimination.

Though not relating specifically to culture, another aspect of NAFTA that has proven to affect the cultural industries is the court system through which trade disputes are settled, called investor-state dispute settlement (ISDS). ISDS is a legal system run entirely by corporate lawyers, which allows corporations to sue governments if they think legislation will impede future profits. ISDS has been highly criticized for being too favorable to private interests. Since 1994, all three countries have had cases brought against them, though only the U.S. has not lost a case. ISDS in NAFTA has led to Canada being the most-sued country in the world. Those opposed to the corporate power ISDS provides are concerned by the language used in the U.S. renegotiation objectives. Many wished to see ISDS removed from future negotiations, but the U.S. objectives call for no such thing. The objectives include eliminating the Chapter 19 dispute mechanism system, which calls for disputes be to be brought before a bi-national panel of trade experts. This would not get rid of ISDS, but would rather reduce the small bit of accountability the mechanism currently has by including trade experts/corporate lawyers from the U.S. only.

As the Trump administration’s earlier circulated letter and the official renegotiation objectives allude, aspects of NAFTA relating to the cultural industries will be targeted subjects for change, as will ISDS. In a recent report, the Conference Board of Canada laid out what it believes Canada’s five key objectives in the renegotiation should be. One of these top priorities includes “encouraging innovation and digital trade through the creation of a chapter in the agreement dedicated to e-commerce, while maintaining the cultural exception from the existing NAFTA.” The report goes on to discuss why maintaining the cultural exception is important for Canada:

Culture can be viewed as a “public good,” one that if left to market forces alone would be underproduced. Culture’s benefits for society go well beyond the economic value attached to it… Culture is the backbone of a country’s social fabric. Creative expression — such as music, films, TV shows, books, magazines, and documentaries — contributes to building stronger communities, promoting the culture of minorities, and building a greater sense of national identity. What is more, the economic footprint of culture is significant, accounting for 3 per cent of Canada’s GDP and 3.5 per cent of employment. The country’s film and television production industry alone drives over 140,000 full-time equivalent jobs.

This highlights a fundamental belief of Canadian cultural policy, that culture is important to Canadians’ understanding of their country and fellow Canadians, as well as a force for connection and sense of identity. It is also an important industry to Canada’s economy, which furthers the case for their cultural industries to be protected from overwhelming U.S. cultural industries and influencers. A critique of NAFTA is its age — it was written in the 90s when technology, among other influential factors, was drastically less advanced. The Conference Board of Canada’s report recognizes that there is much to come in the way of digital and cultural progress and highlights a need to ensure the cultural exception as a way to mandate its own adapting policies as it relates to changing technologies:

One of the key areas transformed by our digital age is culture. Supporting Canadian content in the digital age will require us to keep our freedom to develop our own cultural policies. NAFTA 2.0 should maintain the broad cultural exception, rather than agreeing to weaker cultural reservations found in the TPP.

The comment about weaker cultural reservations in the Trans-Pacific Partnership (TPP) — a multinational trade agreement between Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the U.S., until January 2017 when Trump pulled the U.S. from negotiations — refers to the fact that a full cultural exception was not maintained as in NAFTA and other Canadian trade agreements. It will be years before the implications of this departure from the full cultural exception are known for the cultural policies and economies of TPP countries’ cultural industries, including that of Canada’s.

The potential changes that the renegotiation of NAFTA might bring may also have great impact on the economy of Mexico. However, when Mexico entered NAFTA, it did not insist on the cultural exception as necessary to its participation in the agreement due to beliefs of negotiators on cultural distance from Canada and the U.S. This does not mean that potential changes through the renegotiation of NAFTA will not affect the cultural industries of Mexico, as implicit impacts, like the use of ISDS, and changes in regulations of IP could still influence the country’s cultural policies.

Though Canada has clear objectives for the renegotiation of NAFTA regarding its cultural policies, the future of the cultural exception in NAFTA is unknown. The U.S. has historically been against the cultural exception stating that it undermines the values and practice of free trade. Canada has thus far been able to leverage other bargaining chips and has maintained the cultural exception in NAFTA. However, as the Conference Board of Canada’s report emphasizes, Canada and Mexico are about to enter into negotiations with the U.S. that will be very different than they have been in recent decades. The report states:

Since the 1980s, Canada has reached trade deals with the U.S., including the Canada–U.S. Free Trade Agreement, NAFTA, and the Trans-Pacific Partnership. In every case, the U.S. has consistently driven a hard bargain — with Canada and with all its other trading partners. However, there is a notable difference in the upcoming negotiations. While previous administrations arrived at the negotiating table with the goal of achieving agreement, it is unclear whether this is the preferred outcome for the current administration.

As the renegotiation process begins and conditions unfold, it will be important for the future of how culture is treated within international trade to see how and if the cultural exception will prevail in NAFTA.

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