Finance Committee on May 4th, 2010

[The Chair, Conservative, James Rajotte]

I call to order the 15th meeting of the Standing Committee on Finance.

Colleagues, we are continuing with our study of Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010, and other measures.

We are continuing our discussions with officials from various departments as we go through the various parts of this bill. We want to thank the officials for being with us here today. We hope to finish it this week sometime, but we'll see how things go today, as Mr. Pacetti says.

Colleagues, we'll go back to the five-minute rounds, and if you do have any questions, please indicate to the clerk.

We are on part 15, Canada Post Corporation, the amendment to the Canada Post Corporation Act.

Are there any questions?

Mr. McKay and then Monsieur Paillé.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Obviously this is a fairly controversial measure among some. Do you have any studies that indicate there will be jobs lost by virtue of this?

[Katherine Moynihan, Director, Portfolio Management, Crown Corporation Governance - ADC, Department of Transport]

No, we don't. These companies have been active in Canada for some 20 years. Canada Post has been competing with them during that time. If the bill passes, it will protect the jobs of employees in the industry.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The first argument is job loss. The second argument is that it will affect post offices negatively in rural Canada. What is your response to that?

[Katherine Moynihan]

The government recently established the Canadian postal service charter, which sets its expectations for Canada Post. The service charter clearly says that rural postal service is an integral part of Canada Post's universal service obligation.

As part of the service charter, the government also continued the moratorium on the closure of rural post offices. That moratorium has continued without any change since it was established and confirmed in 1994, so I wouldn't expect any impact.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I would have thought that most of the business done by remailers has nothing to do with rural Canada.

[Katherine Moynihan]

I would expect there may be some companies in the remail business that are operating in rural Canada, but I don't have details.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes; they may operate in rural Canada, and that's not been a business that the post office has enjoyed for 20 years, so the impact on rural Canada would have to be pretty modest.

The third argument I've heard is that this is really the thin edge of the wedge, that this is going to erode exclusive privilege, and that the rights of Canada Post will be negatively affected by this particular provision. What are your comments to that?

[Katherine Moynihan]

We don't expect a large impact on Canada Post. As I said, the government has made its expectations clear in the Canadian postal service charter. Canada Post has already started annual reporting on those service commitments. Canada Post recently said that the revenue risk was in the neighbourhood of $40 million to $80 million, on a revenue base of $7.3 billion, so 0.5% to 1% of its revenues, and that's the risk. However, these companies have been operating for 20 years. Canada Post has been competing with them and will continue to compete with them if Bill C-9 is passed with this provision.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I understood at one point that Canada Post was in the remailing business.

[Katherine Moynihan]

I have heard that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes.

You mentioned $40 million on gross revenues of $7 billion. Would that be $40 million new dollars that would be realized if in fact the remailers all went away today?

[Katherine Moynihan]

Canada Post expressed it as a revenue risk.

I can't answer your question exactly. I don't have that information.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I don't know what a “revenue risk” means.

[Katherine Moynihan]

It could be interpreted as there could be a further reduction in Canada Post revenues of $40 million to $80 million.

[John McKay, Liberal, Scarborough—Guildwood, ON]

A further reduction beyond what it is currently? The remailing business constitutes, what, $200 million to $300 million?

[Katherine Moynihan]

I don't have solid estimates on the size of the industry. Given the legal questions about the business they're in, we don't know as much as we would like to about them. The Canadian International Mail Association has indicated there are hundreds of companies, thousands of jobs in the sector, but I don't have a total revenue in the industry right now.

It is somewhat difficult to get because many of the companies are involved in a number of other industries. There's a small and medium-sized business component of the remail industry. These are people who are producing catalogues, producing envelopes, doing graphic design and other printing services. Part of their service package is remail, so it would be difficult to carve out exactly how much is the outbound international mail.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm still a little confused as to whether Canada Post will be up $40 million or down $40 million. If it's an opportunity lost to Canada Post, that means they couldn't increase their revenues $40 million. If, however, they're not doing the business and the business is actually in the order of $200 million or $300 million, it might actually be more money than that.

[Katherine Moynihan]

My interpretation of Canada Post's estimation is that this is a revenue risk. If the legislative change is made, they could lose—could lose—between $40 million and $80 million, but they will be continuing to compete with the remail industry in Canada.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Paillé, s'il vous plaît.

[Daniel Paillé, Bloc, Hochelaga, QC]

We're going to get back to the figures, if I may. When we talk about millions of dollars, you can say there is a big difference between $40 million and $80 million, the difference between the minimum and the maximum is fairly big. I know it's just one paragraph, but given that we are talking about lost revenue, is that revenue, which is currently the Canada Post Society's exclusively, profitable? Does it make a profit from it?

[Katherine Moynihan]

Canada Post does make a profit.

[Daniel Paillé, Bloc, Hochelaga, QC]

How much?

[Katherine Moynihan]

Excuse me?