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UNCLAS SECTION 01 OF 02 OTTAWA 001797 
 
SIPDIS 
 
PASS USTR FOR MELLE, CHANDLER, BALASSA, BURCKY AND SCHNARE 
 
STATE FOR EB/TPP/BTA AND WHA/CAN 
 
DOC FOR ITA/MAC -- OFFICE OF NAFTA 
 
E.O. 12958: N/A 
TAGS: ETRD SCUL CA
SUBJECT:  WHAT IS CANADIAN?  GOC REVIEWS ITS DEFINITION OF 
       "CANADIAN CONTENT" IN FILM AND TV PRODUCTION 
 
REF:   02 OTTAWA 922 
 
¶1.   SUMMARY/INTRODUCTION:  Canada applies various tests to 
define "Canadian content" of entertainment products, in 
order to make funding decisions and to enforce broadcast 
content requirements.  On June 17, the GOC announced results 
of a year-long review (reftel) of the definition of 
"Canadian content" as it applies to film and television 
production.  While the resulting recommendations suggest 
numerous changes, they broadly support the GOC's overall 
approach to cultural policy.  They stress that "Canadian 
content can be created only by Canadians."  They also 
propose that the current "points/expenditure system" - under 
which Canadian content is determined by a formula based 
partly on the nationality of key creative personnel - be 
replaced by a co-called "creative expenditure model."  END 
SUMMARY/INTRODUCTION 
 
¶2.   THE CURRENT REGIME:  As a condition of license, 
Canadian radio and television broadcasters are required to 
fill certain percentages of their broadcast schedules with 
"Canadian" programming.  Key public sector film and TV 
funding bodies, Telefilm Canada and the Canadian Film and 
Television Production Fund (CFTPF), are mandated to support 
distinctively "Canadian" productions.  The GOC's Canadian 
Film or Video Production Tax Credit (CPTC) is also designed 
to support production of "Canadian" content. 
 
¶3. THE RULES:  Telefilm Canada and the Canadian Audio-Visual 
Certification Office (CAVCO) apply specific rules to 
determine whether a given production is Canadian for 
purposes of GOC funding and tax credits.  These rules are 
based on the nationality of key creative personnel 
(director, screenwriter, key actors, etc.) and on a minimum 
(75 percent) of production costs being paid to Canadian 
entities.  The Canadian Radio-Television and 
Telecommunications Commission (CRTC), the broadcast 
regulator, applies similar rules to determine whether a 
production is Canadian for purposes of meeting TV 
broadcasting quotas. 
 
¶4.   THE PROBLEM:  Critics have pointed out for years that 
these rules do not truly govern content; they implicitly 
assume that what Canadian personnel produce will be 
"Canadian content."  As one columnist recently wrote, "the 
requisite number of Canadians may be employed, but the film 
itself may be about American tourists eating Japanese food 
in Bangladesh. . . . And why should it be preferred to a 
film made by Americans of a Canadian story, as in `The 
Shipping News' [a film set in Newfoundland starring U.S. 
actors]?"  With Canada now the site of a large amount of 
U.S.-financed and/or internationally co-produced film and 
television, the rules have become somewhat harder to apply. 
Moreover, such questions about what is (or should be) 
considered Canadian are not only more culturally 
problematic, but also of growing economic/commercial 
importance. 
 
¶5.   POLICY CONTEXT:  Post predicted a year ago (reftel) 
that the GOC review, while potentially useful, would likely 
not tackle important larger issues about the relevance of 
Canadian cultural policy measures.  In many cases, Canada's 
media/entertainment industries today are vastly more 
prosperous, successful and dynamic than they were when these 
policies were first formulated.  As expected, the results of 
the GOC "Canadian content" review are framed within the 
broader status quo of Canadian cultural policy and are meant 
to reinforce it.  In fairness, it bears noting that some 
wider issues in cultural policy have been addressed recently 
by Parliamentary committees - such as the House Industry 
Committee's recent study of foreign ownership restrictions 
in telecommunications, and the House Heritage Committee's 
examination of the state of Canadian broadcasting (see 
website parl.gc.ca under "committee business").  However, we 
see little prospect of these studies leading to actual 
changes in policy. 
 
¶6.   RECOMMENDATIONS:  The results of the "Canadian content" 
review are available at website canadianheritage.gc.ca under 
"what's new."  Following are key features. 
 
-- The review reinforces a basic tenet of Canadian cultural 
policy:  "Canadian content can be created only by Canadians. 
. . . Foreigners cannot relate an event or tell a story from 
a Canadian point of view . . .  . The mere fact of being 
very largely created by Canadians is what gives an 
audiovisual work its unique Canadian identity."  (This 
effectively dismisses the criticism cited in para. 4 above). 
-- The review recommends replacing the various current 
systems for assessing Canadian content, including the 
current points/expenditure system described in para. 3, with 
a single "creative expenditure model" which would be applied 
nationwide.  This would focus on all the "creative costs" of 
a production, classed into four groups:  authors, creative 
collaborators, performers, and technicians.  To qualify as 
Canadian, a production would need to meet minimum 
expenditure requirements in each group.  These minimum 
expenditure requirements would be subject to a system of 
options.  Producers could exercise an option to use non- 
Canadian elements, and pay for this flexibility by incurring 
higher minimum expenditure requirements.  For details, see 
section 3.2 of the report at website canadianheritage.ca 
under "what's new". 
-- It recommends that the distribution of Canadian feature 
films in Canada continue to be reserved for Canadian-owned 
and -controlled companies (a long-standing protective 
measure). 
 
-- It recommends that the broadcast regulator consider 
exempting commercials that promote Canadian feature films 
from the twelve-minute-per-hour TV advertising limit.  This 
could reduce the perceived disadvantage faced by Canadian 
films in advertising and promotion vis--vis bigger-budget 
U.S. productions. 
 
¶7.   COMMENT:  Canada's cultural-policy-making establishment 
is making few concessions in the face of the profound 
economic, demographic and technological changes which have 
transformed North America's media landscape in recent 
decades.  At least under the leadership of outgoing Prime 
Minister Jean Chretien, all indications are that any policy 
changes will be designed to reinforce and improve the 
existing complex of protections and incentives, rather than 
re-evaluate its relevance.  However, it is clear that the 
challenges to the status quo - both technical (the Internet, 
satellite signal theft, etc.) and political (Chretien is 
scheduled to retire sometime in the coming eight months) - 
will not go away. 
 
CELLUCCI