National Post

Tech’s war with news outlets soon coming to America

Congress pushes Australia-style legislatio­n

- David Mclaughlin Sara Forden and

The battle between news publishers and Alphabet Inc.’s Google and Facebook Inc. that flared up in Australia recently is coming to the U.S.

Lawmakers reintroduc­ed legislatio­n Wednesday to allow news organizati­ons to band together to negotiate with the technology companies over payment for content and the data the companies have about readers.

The legislatio­n, which was proposed in the Senate and House with bipartisan support, shows the U.S. is becoming the next front in the news industry’s war against Facebook and Google. Publishers scored a major victory last month when Australia passed a law to force the companies to pay for news content. In Europe, publishers have been lobbying European Union lawmakers to copy parts of the Australian law.

“Local news is on life support in this country,” Democratic Representa­tive David Cicilline of Rhode Island said in an interview. Cicilline, who chairs the House antitrust subcommitt­ee, is one of the sponsors. “And so this approach creates an opportunit­y to protect a free press and make certain that they have the ability to negotiate the use content,” he said.

Publishers have long complained that Facebook and Google are profiting off their content by siphoning ad revenue and controllin­g valuable data about readers.

Media organizati­ons argue that to gain negotiatin­g leverage and level the playing field, they must be able to collective­ly bargain with the platforms, something that’s prohibited under U.S. antitrust laws.

The proposed legislatio­n would grant them a safe harbour from that restrictio­n, but it doesn’t include a proposal for forced arbitratio­n between the tech companies and the publishers, a provision that’s included in the Australian law and which the tech companies fought. Facebook even went so far as to blackout its news feed in the country before winning some concession­s.

Amy Klobuchar of Minnesota, who is leading the initiative in the Senate, said the legislatio­n is necessary to help publishers better negotiate by giving them tools to counteract the power of Google and Facebook.

“The reason that we’re brought to this moment is that they have an unfettered monopoly,” Klobuchar said in an interview. Google and Facebook “thought they had so much power they could literally exit a major country,” she added.

Klobuchar said the legislatio­n has a better shot at passage this time because of bipartisan interest in antitrust issues today. Senate Minority Leader Mitch Mcconnell will be a co-sponsor of the bill, she said. Ken Buck, a Colorado Republican and the ranking member of the House antitrust committee, is a co-sponsor of the legislatio­n in the House along with Cicilline.

“Local journalism plays such an important role in keeping the American people informed, but many of our community newspapers have been crushed by the threat of big tech,” Buck said in a statement. “This bipartisan bill will send a lifeline to local news organizati­ons struggling to survive because Google and Facebook have decimated the news industry.”

The House will wade into the issue Friday when the antitrust panel holds a hearing as part of its initiative to consider antitrust reforms following a 16-month investigat­ion that accused tech companies of squashing competitio­n.

In its report on the findings of the investigat­ion, the committee recommende­d providing publishers the antitrust safe harbour provision, saying the risk associated with antitrust exemptions are low, “while the benefits of preserving access to high-quality journalism are difficult to overstate.”

David Chavern, the president of the News Media Alliance, a trade associatio­n that represents about 2,000 news organizati­ons in the U.S., said the biggest beneficiar­ies would be small publishers, and it’s the “only way to get some capacity to negotiate.”

Australia’s initial proposal would have forced the companies to submit to arbitratio­n to determine how much to pay publishers if deals couldn’t be struck. In response, Google threatened to shut down its search engine, while Facebook imposed a news blackout on its platform in the county.

Google is moving to negotiate deals with publishers, while Facebook backed down after concession­s from the government allowing the companies to choose which commercial deals to pursue, and only subjecting them to arbitratio­n as a last resort. The Australian Parliament passed the legislatio­n last month.

Facebook’s standoff with Australia prompted Cicilline to lash out at the company.

“Threatenin­g to bring an entire country to its knees to agree to Facebook’s terms is the ultimate admission of monopoly power,” he tweeted.

The possibilit­y of forced arbitratio­n could emerge in the U.S. Chavern said the News Media Alliance is examining proposals that could force the platforms to pay for news when an agreement can’t be reached. Cicilline said an arbitratio­n measure is something he would consider adding.

At their virtual summit last month, Justin Trudeau and Joe Biden talked about how Canada and the U.S. could be partners on future projects. Trudeau’s jab at Donald Trump — “U.S. leadership has been sorely missed” — made all the headlines but there was another important policy discussion that likely will have more important implicatio­ns. Trudeau and Biden both hinted that Canadian-american climate co-operation could include “carbon adjustment­s” on goods imported from high-emitting countries.

Carbon adjustment­s, often referred to as carbon tariffs, are levies on goods from countries that do not maintain our level of environmen­tal protection. Their main purpose is to avoid “carbon leakage,” in which companies move to countries that don’t impose costs on carbon.

No one knows how high a carbon tariff would be but it seems likely it would be imposed at the rate of our own federal carbon tax. A backof-the-envelope approximat­ion using the example of imports of Chinese and Indian steel shows that the impact would be significan­t. In 2019, Canada imported 612,000 metric tons of steel from India and China. The emissions associated with those imports are around 1,132,200 tonnes of carbon dioxide, using Mckinsey’s estimate of 1.85 tons of carbon dioxide per metric ton of steel produced.

Chinese and Indian steel presumably wouldn’t have to pay the full weight of the carbon tax on every ton of CO2, because we exempt 80-90 per cent of emissions from our domestic industry, and, to be non-discrimina­tory, the adjustment rate would have to match how we treat domestic producers. That said, even with an exemption rate of 85 per cent a carbon tariff would be costly. At that rate, 169,830 tons of CO2 related to these imports would be subject to the tax, which is currently $40/ton. That gives a cost of more than $6.7 million. At the 2030 rate of $170/ton, it balloons to more than $28.8 million.

Apply this technique across a long list of other products from these and other high-emitters and the costs become substantia­l.

Beyond cost, however, there are also a number of logistical hurdles, which have been outlined in a report submitted to the European Round Table on Climate Change and Sustainabl­e Developmen­t. The report favours carbon adjustment­s but advises that they be approached with caution.

It highlights that the revenue from the adjustment can either be kept domestical­ly or sent abroad. Neither option is problem-free.

If the money is kept in Canada, one option would be to refund it to Canadian businesses — though giving Canadian firms revenue generated from taxing the sale of their competitor­s’ products seems unfair. In many cases it would also mean inflating the price of goods from developing countries like India to protect industry in the developed world.

If that’s a problem, the rebate could be returned to Canadians, preferably through a revenue-neutral rebate scheme like the one that in principle is used to recycle our domestic carbon tax — though problems with rollout mean it hasn’t been revenue-neutral yet. Moreover, the Parliament­ary Budget Officer estimates that 40 per cent of Canadian families are paying more in carbon taxes than they receive in rebates.

Sending the rebate back to high-emission countries or to global climate funds to help with decarboniz­ation, as suggested in the report to the European Roundtable, isn’t much more attractive. Sending tax revenue abroad won’t likely sit well with Canadians who have spent the last year worrying about the impact of the pandemic on their financial future. It would also run counter to the prime minister’s December pledge not to raise taxes to deal with the deficit.

Rather than taking a swipe at Trump’s leadership, Trudeau should instead have looked at Trump’s record on trade and how disastrous tariffs can be. Trump’s tariffs on imported washing machines, for example, caused a 12 per cent increase in prices, around $88/unit, which created $1.56 billion in extra costs for consumers. (Americans buy a lot of washing-machines!)

Supporters of tariffs would argue, as Trump did, that inflated prices are worth it to expand domestic industry and create jobs. Trump’s tariffs did create manufactur­ing jobs in the United States — approximat­ely 1,800 new positions. The problem is that those jobs came at an enormous cost to U.S. consumers: $811,000 per job created, which comes nowhere near passing a cost-benefit analysis. Carbon adjustment­s, no matter how well intended, are likely to involve similar numbers.

Carbon tariffs are hard to calculate and open to abuse by rent-seeking protection­ists. It’s hard to imagine a scenario in which they don’t make life more expensive for ordinary Canadians. There has to be a better path towards carbon neutrality, one that doesn’t involve drasticall­y raising the costs of importing.

HARD TO IMAGINE A SCENARIO IN WHICH THEY DON’T MAKE LIFE MORE EXPENSIVE.

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