Amendments to Bill C-55

An agreement-in-principle has been reached between Canada and the United States that will resolve the trade dispute with respect to access to the Canadian magazine advertising market -- the so-called "split run" magazine dispute.

This agreement secures the future of the Canadian magazine industry. It guarantees that full access to advertising revenues -- the lifeblood of our magazine industry -- is tied to producing Canadian content. It protects the cherished right of Canadians to have our stories heard and told.

We hung tough and secured important concessions from the Americans.

For the first time, the United States has accepted -- in writing -- that a government can use its laws to protect culture. They have accepted that:

• We can control our advertising services market for the purposes of cultural policy;
• We have the right to control new investment in this sector using a net benefit -- or what would benefit Canadians -- test;
• Canadian content -- or the right of Canadians to read their stories -- is a legitimate part of the net benefit criteria; and,
• The Income Tax Act can continue to use the concept of content as a legitimate means of determining advertising deductibility.

At the same time, by stressing dialogue and being creative, we have reached a balanced and mutually acceptable agreement that averts a damaging trade war with our largest trading partner. The shadow of trade retaliation has been lifted from a wide range of Canadian industries -- protecting thousands of jobs.

Under the terms of the agreement, Bill C-55 -- The Foreign Publishers Advertising Services Act -- which we introduced to prohibit foreign publishers from selling advertising services aimed primarily at the Canadian market -- will be enacted with amendments that will permit two controlled forms of access:

• An exemption that will allow foreign publishers to invest in Canada and create new business and jobs for the purpose of publishing magazines, provided the magazines contain majority Canadian content. 
• Acquisitions of Canadian magazines will not be permitted;
• And a so called de minimus exemption, will allow up to 18% of the advertising in any foreign periodical to be directed at the Canadian market. This exemption will be phased in over a three year period from the date of the enactment of Bill C-55: 12% immediately, 15% after 18 months and 18% after 36 months. The Americans had sought 100% access.

In order to allow Canadian magazine publishers to adjust to the de minimus exemption, the Minister of Canadian Heritage will announce a package of assistance, following consultations with industry on its design.

In addition, the rules governing tax deductibility available to advertisers will be changed to provide full deductibility in any periodical -- regardless of the nationality of ownership -- that produce at least 80% original content or Canadian content.

Canadian advertisers will receive half of the deduction for ads placed in foreign magazines under the de minimus exemption, and for ads placed in magazines created by foreign investors that contain less than 80% original or Canadian content.

There is no link between this agreement and any other policy or industry.