Canadian Investment in US Publishing and Cable Television
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United States General Accounting Office Fact Sheet for the Honorable Pete Wils&? ‘U.S.Senate FOREIGN INVESTMENT Canadian Investment in US. Publishing iand Cable Television ~ Industries 1111111111111111 135674 I.inlted State8 General Accounting Office GAO Wabihington, D.C. 20548 -- National .Swurity and International AfTairs Division B-230540 April 14, 1988 The Honorable Pete Wilson United States Senate Dear Senator Wilson: The U.S.-Canada Free Trade Agreement, which was signed on January 2, 1988 by President Reagan and Prime Minister Mulroney, is generally regarded as an important milestone of progress in U.S. -Canadian trade relations. However, the exemption of "cultural industries" from the Agreement has prompted concern about the impact on future trade in these sectors. In your letter of March 10, 1988, you requested us to identify the extent of Canadian investment in two U.S. "cultural industries," publishing and cable television, to provide background information for discussion of this matter. We identified eight Canadian corporations with investments in the U.S. publishing sector. The largest U.S. holding is by UThomson Newspapers Ltd., which owns 109 newspapers, and International Thomson Organization Ltd., which owns 40 publishing subsidiaries. Their combined annual sales in the United States is over $1.2 billion. Other investments in newspapers or publishing have been made by Hollinqer Inc., Maclean Hunter Ltd., Torstar Corporation, Quebecor Inc., Bell Canada Enterprises Inc., and Arden Management Ltd. We could not place a value on Canadian holdings in the publishing sector. We also identified five Canadian corporations with investments in the U.S. cable television industry. They are Rogers Communications Inc., Maclean Hunter Ltd.', Moffat Communications Ltd., Selkirk Communications Ltd., abd Amzak Corporation. Together, they have a total of 918,379 subscribers. Based on the industry rule of thumb of $2,000 per subscriber, a rough estimate of the value of their holdings would total $1.8 billion. We compiled information on Canadian investments in the publishing and cable television industries from available public sources, including the Commerce Department's data base Foreiqn Direct Investment in the United States and CONTENTS Page ,LETTER . 1 ~APPENDIx I U.S.-CANADA FREE TRADE AGREEMENT 4 Provisions of the Agreement That Affect Cultural Industries 4 Identification of Canadian Investment in U.S. Cultural Industries 4 II CANADIAN INVESTMENT IN THE U.S. PRINTING AND PUBLISHING INDUSTRY 6 I ~ III CANADIAN INVESTMENT IN THE U.S. CABLE TELEVISION INDUSTRY 20 ~ APPENDIX I APPENDIX I 2721 - periodicals 2731 - book publishing 2732 - book printing 2741 - miscellaneous publishing 2. radio and television broadcasting (4832, 4833) 3. communications, including cable systems (4899) ) 4. music licensing and distribution (6794, 7399) ~ 5. movies, including home videos (781, 782, 783, 784) was requested, we focused our review on the first and third categories. The availability of information, limitations on the ~data, and actual data identified for each grouping are presented in iappendices II and III. ~APPENDIX II APPENDIX II 6. Eureka (CA) Times-Standard - 20,372 7. Oxnard (CA) Press-Courier - 18,951 8. West Covina (CA) San Gabriel Valley Daily Tribune - 60,816 9. Whittier (CA) Daily News - 18,127 10. Yreka (CA) Siskiyou Daily News - 5,651 11. Ansonia (CT) Evening Sentinel - 16,474 12. Englewood (FL) Herald (weekly) - 2,000 13. Key West (FL) Citizen - 7,083 14. Marianna (FL) Jackson County Floridan - 4,616 15. Orange Park (FL) Clay Today - 4,800 16. Punta Gorda (FL) Charlotte Herald-News - 6,970 17. Americus (GA) Times-Recorder - 7,175 18, Cordele (GA) Dispatch - 5,691 19. Dalton (GA) Daily Citizen-News - 11,775 20. Griffin (GA) Daily News - 12,257 21. Thomasville (GA) Times-Enterprise - 11,358 22. Tifton (GA) Gazette - 9,730 23. Valdosta (GA) Daily Times - 17,513 24. Jacksonville (IL) Journal Courier - 14,750 25. Mount Vernon (IL) Register-News - 11,465 26. McLeansboro (IL) Times-Leader (weekly) - 3,397 27. Kokomo (IN) Tribune - 27,346 28. New Albany (IN) Tribune, Ledger & Tribune - 10,478 29. Rensselaer (IN) Republican - 3,062 7 B-230540 various reference directories, such as Standard & Poorls Register of Corporations, Directors and Executives. We also consulted the Federal Communications Commission, industry experts, and pertinent trade associations. To verify the accuracy of this information, we contacted the individual firms and asked them for confirmation. When there was a discrepancy between the two sources, we accepted the information provided by the firms. This compilation is based on the best available public information; however, it should not be considered to be comprehensive. It may understate the extent of C'anadian investments in the United States in these two industries. All values are stated in U.S. dollars. Conversions from Canadian dollars are based on the exchange rate f'or the day for which the data were reported (i.e., for data reported as of December 31, 1987, the exchange rate was $1 U.S. equaled $1.3 Canadian). Appendix I provides a brief discussion of the provisions of the U.S.-Canada Free Trade Agreement which affect cultural industries. Appendices II and III provide more detail regarding individual Canadian firms' investments in the publishing and cable television sectors. Unless you publicly announce its contents earlier, no further distribution of this Fact Sheet will be made until 30 days from its issue date. At that time, we will provide copies to other interested parties. If you have questions on the information provided, please contact me on (202) 275-4812. Sincerely yours, Allan I. Mendelowitz Senior Associate Director 2 APPENDIX I APPENDIX I U.S.-CANADA FREE TRADE AGREEMENT ~ PROVISIbNS OF THE AGREEMENTTHAT AFFECT CULTURAL INDUSTRIES The U.S.-Canada Free Trade Agreement (FTA) was signed by President Reagan and Prime Minister Mulroney on January 2, 1988, and is currently pending approval by the U.S. Congress and Canadian Parliament. Article 2005 of the FTA generally exempts '*cultural industries." However, Article 2005 also provides that the United States and Canada may retaliate in response to actions that would have violated the FTA had it covered cultural industries. The retaliation may take the form of "measures of equivalent commercial effect." The Office of the Trade Representative advises that retaliation is not limited to cultural industries. ~ The Agreement defines cultural industries in Article 2012 as: "an enterprise engaged in any of the following activities: a) the publication, distribution, or sale of books, magazines, periodicals, or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing, b) the production, distribution, sale or exhibition of film or video recordings, c) the production, distribution, sale or exhibition of audio or video music recordings, d) the publication, distribution, or sale of music in print or machine readable form, or e) radio communication in which the transmissions are intended for direct reception by the general public, and all radio” television and cable television broadcasting undertakings and all satellite programming and broadcast network services.” IDENTIFICATION OF CANADIAN INVESTMENT ~ IN U.S. CULTURAL INDUSTRIES I There is no comprehensive tracking system which can identify all foreign direct investment in the United States. In order to identify Canadian investment in U.S. cultural industries, we obtained available information from the Commerce Department and the Federal Communications Commission. We also consulted trade associations, industry experts, and reference source documents. ~ The industry sectors specified by the FTA as cultural industries ~ are grouped below according to Standard Industrial Classification ~ (SIC) code. ~ 1. printing and publishing (271, 272, 273, ,274) 2711 - newspapers 4 : : . ,:‘,, ~ APPENDIX II APPENDIX II CANADIAN INVESTMENT IN THE U.S. PRINTING AND PUBLISHING INDUSTRIES We identified eight Canadian corporations as owning newspapers or publishing companies in the United States. The largest U.S. holding comprises 109 newspapers with a total daily circulation of 1,665,300 owned by Thomson Newspapers Ltd. and 40 publishing subsidiaries owned by International Thomson Organization Ltd. Annual U.S. sales figures for these two companies total more than $1.2 billion. Other U.S. holdings are 28 newspapers owned by Hollinger Inc., 5 publishing companies owned by Maclean Hunter, 2 publishing companies owned by Torstar, 7 by Quebecor, 1 by Bell Canada Enterprises Inc., and 1 by Arden Management Ltd. The Foreign Direct Investment in the United States data base maintained by the Department of Commerce showed 75 records of transactions involving Canadian investment in U.S. printing and publishing industries between 1974 and 1986. Values for 17 of the 75 investment transactions were reported, totaling $1.13 billion. All values are stated in U.S. dollars. Conversions from Canadian dollars are based on the exchange rate for the day for which the data were reported (i.e., for data reported as of December 31, 1987, the exchange rate was $1 U.S. equaled $1.3 Canadian). TEOl4SON NBWSPAPECR!3LTD. Address: 65 Queen St. W., Toronto, Ontario, M5H 2M8 Canada. Annual operating revenue: $843 million. Employees: 11,500. Chairman & CEO: Kenneth R. Thomson. All information is as of December 31, 1987. U.S. subsidiaries A. TEOMSON NEWSPAPERS INC., 3150 Des Plaines Ave., Des Plaines IL 60018. Newspaper publisher. Sales: $307.9 million, employees: 7,500. Owned 93 daily and 4 weekly U.S. newspapers, listed below together with daily circulation figures. 1. Dothan (AL) Eagle - circulation 22,445 2. Enterprise (AL) Ledger - 6,754 3. Opelika-Auburn (AL) News - 12,736 4. Fayetteville (AR) Northwest Arkansas Times - 10,948 5. Barstow (CA) Desert Dispatch - 8,100 6 APPENDIX II APPENDIX II 30. Valparaiso (IN) Vidette-Messenger - 13,953 31. Council Bluffs (IA) Daily Nonpareil, Sunday Nonpareil - 17,807 32. Oelwein (IA) Daily Register - 6,250 33. Atchison (KS) Daily Globe, Sunday Globe - 5,607 34. Leavenworth (KS) Times - 8,973 35.