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Meta drops news content in Canada in response to law with U.S. trade implications

August 4, 2023

Meta announced this week that news content will no longer be visible to Canadian users across its platforms in the coming weeks, a response to a new Canadian law requiring that tech companies pay news organizations to share their content that has raised questions in the U.S. about whether Canada is fulfilling its trade obligations.

Meta, which operates Facebook and Instagram, has begun blocking news articles on its social network platforms in Canada, according to a company statement issued on Tuesday. The move brings the tech giant into compliance with Canada’s Online News Act, passed in June; beginning next year, Canada will mandate that platforms pay news companies to license their content or stop carrying Canadian news. Google indicated in June that it will take similar measures to exclude Canadian news sources from its search function when the law takes effect.

The law has caused consternation in Washington, DC, as some lawmakers argue it violates Canada’s trade agreement obligations by singling out U.S. tech companies. In a letter to U.S. Trade Representative Katherine Tai in January, Senate Finance Committee Chair Ron Wyden (D-OR) and ranking member Mike Crapo (R-ID) argued the Online News Act was discriminatory in the way it “targets U.S. companies for the benefit of Canadian news producers and raises national treatment concerns” under the U.S.-Mexico-Canada Agreement.

Tai raised the issue in meetings with Canadian Minister of International Trade, Export Promotion, Small Business, and Economic Development Mary Ng last November and last July, according to USTR readouts that offer little detail about the conversations.

Congressional Democrats, though, are divided over what many see as Canada’s attempt to rein in “Big Tech.” Some sympathize with the bill’s intent – to lift a struggling media sector hollowed out by the advent of social media advertising. Senate Commerce, Science and Transportation Committee member Amy Klobuchar (D-MN), who often notes she is the daughter of a newspaperman, has introduced similar legislation with bipartisan support – including from Sens. Lindsey Graham (R-SC), Joe Manchin (D-WV) and Dianne Feinstein (D-CA), who are among the “Journalism Competition and Preservation Act’s” 15 co-sponsors.

Tai to date has not taken a firm stance on the issue. In newly released answers to questions for the record submitted after her appearance at a House Ways & Means Committee hearing in March, Rep. Bill Pascrell (D-NJ) asked Tai what additional steps she was planning to press Canada on its Online News Act as it relates to its USMCA commitments.

Tai said only that USTR would “continue to closely monitor Canada’s digital policies and we will continue to monitor Canada’s compliance with our trade agreements.”

Similarly, when Wyden asked after a March Finance Committee hearing if Tai had made clear to Canadian officials that the law was discriminatory to U.S. businesses and violated its USMCA obligations, Tai, in a recently released response to questions for the record, said only that she had “raised questions about the Online Streaming Act and the Online News Act in order to learn more about the legislation and the motivations behind them.”

During the March Finance Committee hearing, though, Tai said she agreed with Sen. Elizabeth Warren’s (D-MA) statement that the U.S. “should support our allies when they step up to regulate big tech including supporting them in the way that we write and enforce digital trade deals.”

Asked this week for an update on the USTR position, a spokesperson referred Inside U.S. Trade to Tai’s March hearing and responses to Senate Finance and House Ways & Means committee questions from the record.

President Biden has signaled some willingness to curb Big Tech’s power and bolster antitrust regulation. In 2022, Biden urged congressional leaders to send bipartisan antitrust bills languishing in the Senate to his desk, and railed against what he called “Big Tech abuses” in a Wall Street Journal op-ed in January, claiming social media platforms have “elbowed mom-and-pop businesses out from their platforms, disadvantaged them, or charged them outlandish prices, making it harder for them to compete and grow.” He also assailed such companies’ for their data collection habits, promotion of polarizing content and allowing what he called abusive and criminal conduct from users on their platforms.

Even if the Online News Act does violate the USMCA’s Chapter 15 national treatment measures – which many contest – the administration might not want to be seen as going to bat for technology giants by initiating a dispute, according to Hugh Stephens, a former senior vice president for public policy at Time Warner and now an executive fellow at the School of Public Policy at the University of Calgary.

“It's highly unlikely that the U.S. government would take up the position of Google and Meta in this case, given the fact that there are a variety of U.S. interests involved, including the U.S. media industry, which is pushing for very similar legislation in the United States,” he said.

Lawrence Herman, an international trade lawyer at Herman & Associates in Toronto, says a U.S. challenge would not prevail.

“National treatment insures against favoring domestic providers of a service that are in like circumstances. If there's no domestic service provider in like circumstances, there's no infringement of the national treatment obligation,” Herman said.

The Online News Act, as Herman sees it, “applies to all digital news intermediaries across the board and it does not prevent entry of any digital news intermediary,” adding that it also “doesn't prevent them from providing services. It just says if you provide certain services, you’ve got to pay for it.”

Some trade analysts question whether the Online News Act would be protected by the cultural industries exemption in USMCA. It was originally negotiated into the U.S.-Canada bilateral free trade agreement signed in 1988, preserved in the North American Free Trade Agreement and carried over into USMCA.

Canada can take measures to support media sectors under the cultural industry carveout, which also allows the U.S. and Mexico to adopt retaliatory measures to offset harm to its businesses and restore the financial status quo.

“It would be a long process. You'd have to figure out how much the punitive values were,” Stephens said, but he maintained that Canada could conceivably argue its Online News Act protects a cultural industry.

Jonathan McHale, vice president for digital trade at the Computer and Communications Industry Association, is skeptical. “Essentially, it's a revenue transfer between U.S. companies and Canadian entities they want to provide preferences and monetary benefits to,” McHale said, but because the targets of the law – the digital platforms – aren’t a Canadian cultural industry, McHale says it is “questionable whether the cultural exception even fits in that space.”

Canada’s Online News Act is modeled on a near-identical Australian law passed in 2021. Google and Meta, however, ultimately negotiated licensing agreements with news outlets there and did not block news content across their platforms. Meta and Google also negotiated deals with French media outlets to reshare and highlight news content across their platforms in 2021.

McHale believes that dropping news content from Canadian platforms will hurt U.S. tech companies.

“It's not costless to exit the market,” McHale said. “The question is, will that cost be high enough for the U.S. government to consider that it really ought to intervene? And we just don't know the answer there yet.” -- Oliver Ward (oward@iwpnews.com)

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