Canada Slaps 80% Tax on Some U.S. Magazines : Trade: Action applies to regional editions that Canadian publishers say threaten their survival.

The Canadian government stepped into the potentially incendiary area of cultural trade protectionism Thursday, announcing a steep new tax aimed at preventing American magazines from publishing regionalized editions in Canada.

U.S. trade officials called the action discriminatory and threatened retaliation. That could prompt an escalating dispute between the two countries over publishing and entertainment.

The heart of the plan, outlined by Heritage Minister Michel Dupuy at a news conference, is an 80% excise tax on advertising revenue realized by foreign magazines publishing “split-run” Canadian editions. These are remakes of domestic editions, substituting Canadian advertising for its American counterparts, while including a few editorial changes.

The government proposal has been under study since the April, 1993, appearance of a periodic Canadian edition of Sports Illustrated, which sparked protests by Canadian publishers who said it unfairly drains advertising from them and threatens their survival.

Thursday’s announcement was the second setback this week for an American company in the Canadian cultural market. On Tuesday, the Canadian courts turned down an appeal of U.S.-owned Country Music Television, which is being expelled from Canadian cable television systems Jan. 1 to be replaced by a new, Canadian-owned country music video channel.

U.S. Trade Representative Mickey Kantor’s office called the developments “concrete evidence of an increasing and disturbing trend in Canada toward the implementation of policies which are intended to protect Canadian industry by discriminating against legitimate U.S. broadcasting, publishing and copyright interests in Canada.”

Dupuy and Prime Minister Jean Chretien have been under mounting pressure from Canada’s cultural Establishment to be more assertive in protecting Canadian arts, entertainment and publishing from American competition.

At Canada’s insistence, cultural products were exempted from the North American Free Trade Agreement and from the earlier Canada-U.S. Free Trade Agreement, although the treaties do allow each country to retaliate, if it believes that the other has acted unfairly.

Dupuy said Canada does not regard the excise tax, which could take effect by mid-1995, as grounds for retaliation by the United States.

But, responding to a reporter’s question, Dupuy went out of his way to slam American advocates of a free-market approach to culture: “We don’t regard trading cultural products, if I may use the term, as trading chicken or beans. It is creating an identity and creating a culture. We have a fundamentally different view, and I stand for that view. We have a culture, (and) we are going to develop that culture with Canadian means, not American means.”

A web of laws, regulations and subsidies already shelter Canadian publishing and entertainment companies. But American products still pervade the Canadian market.

The most-watched television programs are American; more than 90% of the time on Canadian movie screens is devoted to foreign films, mainly American; the book with the longest tenure on the Toronto Globe & Mail’s bestseller list is “The Bridges of Madison County,” and 39.9% of English-language magazines sold in Canada are imported, 99% from the United States.

One law regulating cultural products is a 1965 Canada customs rule banning the import of “split-run” editions of American magazines. The only exemptions were for Canadian editions of Time and Readers Digest, which predated the law.

In 1993, Sports Illustrated circumvented the rule by beaming the magazine’s editorial content to Canada by satellite and printing it in a Toronto suburb. The magazine published 12 Canadian editions this year and plans 12 more in 1995. The rest of the year, Canadian readers receive the American edition, without Canadian ads.

Publishers here complain that Sports Illustrated’s editorial costs for its Canadian edition are negligible, and as a result it can sell ads at cut-rate prices.

“If this were steel, it would be called dumping,” said Catherine Keachie, executive director of the Canadian Magazine Publishers Assn.

In a statement released in Toronto, Nick Wattson, Sports Illustrated Canada’s sales manager, called the excise tax “a thinly disguised means of driving us out of business.”

On Thursday, the owners of Country Music Television said they will petition the U.S. trade representative, seeking retaliation for its ouster from Canadian cable systems.

The American service, with 25 million U.S. viewers who will be unaffected, has been available on Canadian cable since 1984 and has 1.9 million subscribers in Canada.