SI Canada dispute flares anew

Folio: The Magazine for Magazine Management, April 15, 1996 by Lorne Manly

When the Canadian Parliament last December passed into law an 80 percent excise tax on split-run editions from foreign publishers, the U.S. government was expected to live up to previous promises of retaliation. Now, that response has arrived.

U.S. Trade Representative Mickey Kantor announced in March that the government would challenge Canada's "discriminatory" policies at the World Trade Organization by seeking to overturn the measure directed against Sports Illustrated Canada--and to turn back 30 years of policy protecting Canadian publishers against their much larger neighbors to the south.

U.S. publishers, some of whom are considering Canadian advertising editions if regulations were to allow it, are following the dispute with great interest.

The battle first began with Time Inc.'s introduction of Sports Illustrated Canada nearly three years ago. Alarmed that such split-run editions (whose costs are all but covered in their domestic markets) would undercut Canadian publications, publishers north of the border beseeched their government to act. The result was an 80 percent excise tax on foreign publishers whose Canadian editions did not contain 80 percent original content.

This latest trade skirmish between the United States and Canada centers on differing views about the importance of cultural industries to each country's identity. Americans claim that the Canadian measures drape themselves in the rhetoric of cultural sovereignty as a means to protect commercial interests.

"The laws do not talk about promoting opportunity for Canadian writers," notes a senior U.S. trade official. "They talk about protecting the advertising revenue flowing to Canadian publishers."

Identity issues

Canadian publishers, however, see their identity as being at stake. The Canadian Magazine Publishers Association and the government have warned that about 50 U.S. consumer magazines with circulations above 50,000 in Canada--as well as a wide range of trade titles--could enter the market and siphon a significant portion of advertising away from Canadian publishers.

U.S. publishers are still free to sell their regular versions in Canada; in fact, American magazines already dominate newsstand sales. And a senior Canadian government official argues that the new legislation "does not discriminate on the basis of ownership." If, for example, a Canadian company publishes a split-run edition in the States and does not include sufficient original content, the government will slap the 80 percent tax on the Canadian edition.