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Foreign ownership rules: The plot thickens

An employee grabs boxes off the conveyor belt to load in a truck at the company’s Fernley, Nev., warehouse.

Scott Sady/AP

Ottawa's review of U.S.-based online bookseller Inc.'s bid to set up shop in Canada is one of several steps that the Harper government is taking to loosen its restrictions on foreign ownership in an array of cultural industries.

As the Amazon case illustrates, it's becoming more difficult in a digital age for a government to stop companies from moving across borders because the online world is increasingly borderless, many industry insiders suggest.

Since 2002, Amazon has run an e-commerce business simply by ensuring it has no physical presence in Canada. Still, foreign ownership rules have barred U.S.-based bricks-and-mortar bookseller Borders Inc. from setting down roots here.

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"The question I keep getting is: 'If we keep people out, will other countries keep us out?' " said Jacqueline Hushion, executive director of the Canadian Publishers Council. "We have to make sure that our policies for domestic industries don't wind up boomeranging against our domestic industries when they export or establish themselves in foreign countries."

The Amazon review comes as Ottawa sends strong signals it will move to ease foreign ownership restrictions, even in areas where cultural protectionism is the norm.

A host of cultural industries may see a shift in foreign ownership rules. Books, telecommunications, television and radio broadcasting may well be the subject of changes, partly prompted by the rise of the Web and a host of Internet-based services that are already partially circumventing traditional rules.

The first industry up for review is telecommunications.

A Parliamentary committee agreed last week to review foreign ownership limits on Canadian broadcasting and telecom companies and "any other legislation deemed appropriate." The review stems from the government's decision to overturn the Canadian Radio-television and Telecommunications Commission and allow Globalive Wireless Management Corp. to compete here, despite its mostly foreign-based backing.

The review is bound to raise issues of protecting cultural content. Conservative MPs frame the issue as a way to lower telecom prices for consumers. But opposition parties will be watching closely to see whether loosening restrictions will have a negative effect on cultural content.

"This was kind of a curveball thrown, it surprised a lot of people," Liberal MP Marc Garneau, who sits on the committee, said of the Globalive decision. "We don't know whether the government has a secret agenda with respect to these things and we certainly want to understand what was behind the thinking ... and we also want to make sure that in no way are we going to jeopardize our cultural industries."

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Already the Canadian Booksellers Association has called on Ottawa to reject Amazon's application, saying it will hurt its businesses. However, Ms. Hushion said there may be more effective ways to protect cultural industries. Instead of barring foreign firms from entry, the government could provide "stimulation grants" and other support to bolster domestic publishers and other culture-sensitive businesses.

"It should be about what we can do to stimulate and enhance the cultural sector and what toolboxes we can give the cultural sector to be more successful, domestically and internationally," she said.

Traditional regulations for protecting Canadian cultural industries are showing glaring loopholes. For example, Ottawa will review Amazon's attempt to build a shipping centre in Canada, but Amazon's Canadian website has been operating for eight years without any review because it has no physical presence in the country. Similar issues are popping up in television, as users increasingly turn to the Web for their content.

"It's one thing to talk about greater competition, but we want to be absolutely sure that it's not going to impact the cultural side," said Mr. Garneau.

That's why Ottawa's decision on Amazon's warehouse is key. If the proposed business gets the green light, observers from all sides will want to see what undertakings the government manages to wring out of Amazon in terms of benefiting Canadians - anything from job creation to Cancon quotas.

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