IN 1960 THE NOVELIST, Hugh MacLennan, wrote a letter that found its way to the desk of Prime Minister John Diefenbaker. 'I have never been more depressed in my life about the future of Canada than I am at the moment,' lamented MacLennan. 'This magazine situation has brought our danger into sharp focus. It has made me see what even six months ago I could not see at all: that if the present trend continues, the Canadian dream will be dead inside fifteen years.' Canada's soul was expressed through its media, 'in its attitude toward itself,' but this identity was threatened if the only ideas expressed about Canada were those from American outlets. 'Do you think that I, or any of us, could have debated the variety of Canadian issues if this country had possessed no outlets of her own?' MacLennan resented 'the old Liberal habit of pussy-footing around these issues' and had hoped for a change when the Conservatives came to power. 'But this magazine affair has really shaken me, and I cannot avoid the conclusion that the gravest mistake the [Progressive Conservative] government ever made was the repudiation of the advertising tax.(f.1)
In the 1950s and 1960s, when Canadian magazines were experiencing serious financial difficulties, their American competitors held 80 per cent of the Canadian market.(f.2) The battle was on two fronts. Foreign magazines - mostly American - spilled across the border and competed with Canadian periodicals for readership. 'Split-run' editions of American magazines, issues with advertising directed at the Canadian market but foreign content derived from the American edition, also vied with Canadian publications for limited advertising dollars. Canadian magazines had trouble competing with the split-run editions which had lower editorial costs, could charge much lower advertising rates, and reached a broader audience than their Canadian counterparts.
In his March 1956 budget, the Liberal finance minister, Walter Harris, introduced a 20 per cent tax on the advertising revenues of split-run editions because he believed that domestic magazines could not compete with the Canadian editions of American periodicals and would disappear if the government did not act. 'Even this 20 per cent tax would be only a holding operation and more help would probably have to be provided in a few years time,' he told cabinet. One of his colleagues, unidentified in the official minutes, stressed the importance, 'from the point of view of Canadian culture and the development of a national public opinion, to preserve Canadian magazines. Protection, even of the most blatant kind, could be justified on these grounds.'(f.3)
Prime Minister Louis St Laurent and the American president, Dwight Eisenhower, discussed the magazine tax during a meeting at White Sulphur Springs, West Virginia, only days after Harris's budget. Eisenhower said that Time magazine had been putting pressure on the State Department and the White House to oppose the tax. St Laurent explained that American magazines dominated the Canadian market. The measure was not designed to kill foreign periodicals but to ensure that Canadian publications survived. The president admitted that he had not heard this side of the issue, but his government continued to oppose the tax.(f.4) In July, in a formal note to the Canadian embassy in Washington, the United States argued that the tax 'would have a discriminatory effect in practice and be injurious to established USA business interests.' The Americans worried that the tax 'would set an undesirable precedent for other countries which could create difficulties for USA periodicals.' They subtly warned Canada that the measure 'would be a significant reversal of the trend toward development of commercial relations' between the two countries and asked the Canadian government not to proceed with its enactment. In the face of this protest, Harris considered withdrawing the tax and replacing it later with a more lasting form of support for Canadian magazines, but decided not to back down from the original proposal. …