The Canadian government has given a green light for the US online bookstore Amazon to open a distribution centre north of the border – despite vehement opposition by local bookshops – in a case that became a key test of attitudes towards cultural protectionism and free trade.

Canada’s heritage minister, James Moore, granted permission on Monday for Amazon to establish a physical presence in the country, on condition that the Seattle-based company takes special steps to promote Canadian literature.

Amazon has agreed to invest $20m (£13m) in cultural events, awards and the promotion of Canadian authors internationally. The company will increase the visibility of local content on its Canadian-focused website. It will stock more French-language content and will make Canadian books available on its Kindle reader.

“Amazon has shown its willingness to promote Canadian cultural products, and we are pleased it is continuing to demonstrate this through this new investment,” said Moore.

Although Amazon has shipped books across the border to customers in Canada for eight years, the company has had no physical presence there until now.

The company’s application to enter Canada tapped anxiety about domination by the US and critics argued that it could lead to a “Walmart-isation” of the literary industry, with large, low-cost players hurting community bookshops.

The Canadian Booksellers’ Association fears that Amazon’s entry will lead to the arrival of other US high street chains. It wanted the government to block Amazon under laws allowing ministers to veto the entry of foreign businesses posing a threat to Canadian arts and culture.

Canada’s literary community includes Booker Prize-winning authors such as Alice Munro, Yann Martel and Margaret Atwood. During the 1990s, two leading US chains, Borders and Barnes & Noble, were thwarted in attempts to enter Canada.

The country restricts foreign ownership of newspapers and broadcasters but prime minister Stephen Harper has made it clear that he wants to steer a course towards free trade. © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds