The American Trojan Horse: U.S. Television Confronts Canadian Economic and Cultural Nationalism

Barry Berlin

The confrontation between the United States and Canada (the so-called "television border war" of the 1970s described by Barry Berlin in The American Trojan Horse) focused on the problem of Canadian advertising money escaping to U.S. border television stations. Canadian advertisers, knowing full well that Canadians, where geography permitted, were viewing programs on these U.S. stations rather than on Canadian channels, were receiving "more bang for their advertising buck" by placing their commercials on such stations. The 15-year "war" (involving 23 border television stations in the nine U.S. states) began in the Summer of 1973 when the Canadian Radio-Television Commission announced that, henceforth, newly-licensed CATV systems, and existent systems as they came before the CRTC for licence renewal, would be required to install devices which would delete commercials contained in television programs which originated with stations not licensed to serve Canada (i.e., U.S. border television stations which directed their signals into Canada). A few months later, while introducing some slight changes to the deletion requirement, the CRTC, clearly anticipating trouble, indicated that it was prepared to enter into a court examination of its authority to force Canadian cable systems to delete U.S. commercials. When Rogers Cable in Toronto began the deletion process in the Fall of 1973, the war was on! The three U.S. network stations in Buffalo, N.Y. shortly thereafter initiated court actions against both Rogers Cable and the CRTC.

As Berlin points out in his carefully researched The American Trojan Horse, the stakes were high! For example, six border stations, including three in Buffalo, indicated that gross Canadian revenues represented 39% of all their revenue in 1973; 40% in 1974; and 41% in 1975. In dollar terms in each of these years, the six stations shared $15 to $18 million in gross Canadian advertising revenues. The U.S. stations, with some legitimacy it was contended, charged the Canadian cable systems with piracy; they were taking U.S. programs off the air without making any payment to the program originators, and selling them to their subscribers. Complaints, however, were not resolved despite meetings between cabinet-level officials of both governments. The only conclusion reached at this time was the Canadian Supreme Court ruling in 1977 that the CRTC was within its jurisdiction in authorizing the practice of commercial deletion from signals beamed into Canada.

A second action by the Canadian Government had been developing concurrently during the early 1970s. Known as Bill C-58, legislation was being framed to amend the Canadian Income Tax Act which would disallow Canadian advertisers the right to claim their advertising as a business expense if that advertising were to be placed in U.S. media, effectively doubling their advertising costs. Initially presented in 1971, the amendment was intended to protect the Canadian magazine industry. The scope of the Bill, however, was subsequently increased, and when enacted in 1976, encompassed both the print and broadcast industries. Within a year after the amendment was effected, Berlin explains, advertising revenues from Canada dropped on U.S. border stations by about half--to about $9 million in 1977. The Bill was, obviously, proving to be a more effective measure than was commercial deletion in stemming the flow of advertising money out of Canada.

Strategies in the U.S. to have the income tax amendment repealed started in early 1977 and continued for over a decade to 1988. In instances where negotiations failed, retaliatory measures against Canada were implemented. For example, a form of U.S. mirror legislation to Bill C-58 led to the cancellation of 109 U.S. conventions that had been scheduled for Canada in 1977. As Berlin recites a series of actions taken by the U.S. against Canada (including claims that Bill C-58 represented an unreasonable barrier to trade and thus violated several sections of the General Agreement on Tariffs and Trade) he also points out that the grievance of the border stations found a sympathetic ear in the 1979 Report of the Consultative Committee on the Implications of Telecommunications for Canadian Sovereignty (the Clyne Report).

Despite continuing pressures by the border stations, findings in the courts did not support the U.S. claim that Canada had engaged in unfair trade practices. The details of these court cases have been well researched and effectively related in The American Trojan Horse. In particular, and to bring the matter to date, Berlin describes how the border station dispute became interspersed with negotiations for the 1988 Free Trade Agreement between the U.S. and Canada: "Whereas the border stations elevated the economic issue [of Bill C-58] to one of free trade and free flow of information, Canada elevated the economic issue to one of cultural protectionism" (p. 107).

Berlin concludes that the effects of Bill C-58 have been that a sizeable portion of the advertising money that had been flowing to U.S. border stations was recovered by Canada. However, if one of the goals of the Canadian actions was to re-direct these savings into a cultural benefit for Canada--either increased Canadian production or enhanced quality of Canadian production--such goals were not realized. On the contrary, claims Berlin, while a few Canadian television stations were helped by the re-direction of advertising dollars, "the bulk of the revenue remaining in Canada was used to purchase more U.S. programming. Ironically, the problem of the extensive amount of American fare on Canadian television worsened thereby" (p. 108)--hence the Trojan Horse analogy of the book's title. However, if the border is viewed in non-economic terms, Berlin points out that Canada may have been a long-term winner by asserting itself in terms of strengthening its sovereignty.

The American Trojan Horse is a thorough and thoughtful presentation of an issue that has importance for U.S.-Canadian relations beyond the issue of cross-border advertising. As it records an important chapter in U.S.-Canadian broadcasting history and in U.S.-Canadian relations generally, Berlin's book takes on some further values: it sheds light on the negotiations of the 1988 Free Trade Agreement wherein pressures were placed on Canada to place cultural industries on the negotiating table; it provides a valuable background study for negotiations currently underway for a North American Free Trade Agreement; and it presents a rationale for the Fall 1990 decision by the Canadian Copyright Board whereby the Canadian cable television industry was assessed an amount of $50 million annually in copyright fees. Of that amount, about 85% was assigned by the Board to U.S. movie and program producers and to U.S. networks and stations.