Mr. Speaker, I have the privilege of beginning the debate on Bill C-102 at third reading.
I also have the privilege of being the first member of the government to speak to the House of Commons after the rather monumental day we had yesterday. I welcome back all members who participated in the referendum. We will continue to debate the affairs of the country, as we have in the past, with the good spirit and dignity all members bring to the House.
Although we have felt very passionately and very differently in the last while about things, I expect we will continue to work together both in committee and in the House in the spirit of improvement during the coming months.
Before I get into the details of Bill C-102 I will discuss the efforts of the government, particularly the Minister of the Finance and the Department of Finance. I will discuss the improvements we are making in the framework to deal with questions of tariff and trade.
In a general way governments have during the last 10 years endeavoured to change our relationship with our major trading partners. That resulted in the emergence of the free trade agreement, which was a bitterly contested piece of legislation, becoming law in 1988. In its original form it caused a great deal of dislocation in Canadian industry and trade. Since we have formed the government we have made some improvements to it and we now find it an effective framework for dealing in North American trade.
At the same time the less controversial agreement, NAFTA, which was as influential as the free trade agreement, came into effect and set out our trading relationship with Mexico.
More important, from a strategic point of view the underlying agreements around the world have changed in the last few years. I am referring to the World Trade Organization. Canada is now participating in a whole new regime which affects its trading relationships. It affects the way disputes are being adjudicated. It changes the specifics of tariff regimes on a whole number of commodities traded around the world. It is a giant step forward and Canada has played a leading role.
As Canada fights for its interest on the world trade stage, it continues to have a number of disputes with its trading partners and it must aggressively pursue its interests. I do not have to tell the House how frequently the minister of agriculture has had to defend and promote the interests of western Canadian grain farmers against, in the trade sense, parochial interests from the United States.
Similarly, the fur trade industry is threatened by new European regulations which will come into effect on January 1. The regulations will affect a large part of the fur export business. However, the Canadian government, under the leadership of the Minister for International Trade, has been very aggressive in pursuing changes to these regulations which will not only achieve the environmental and humane aspects of the fur trade business but also promote our access to markets.
We have suggested a number of worthwhile compromises. Leaders from Europe have visited Canada. They have visited our research stations. They have visited the north to speak with the aboriginal people involved in the fur trade.
In the end we are going to find ourselves with an agreement which is more acceptable to everyone. Failing that, we are willing to take the dispute to the World Trade Organization. Although not many cases have been made before it since its inception, this is a very strong case and we can promote it.
Returning to the ground level of the World Trade Organization, we are constantly going through our regulations and trade structure to make sure that our own rules and regulations conform to the international situation. For example, our tariffs have to be reviewed constantly.
There is a new trade structure in Canada for arbitrating among different industries. The CITT is an example of a trade tribunal
which allows different industries to present their case as to what the levels of tariffs should be. This too is a new dispute mechanism which we think in the overall picture is a very important change. It gives the different sectors of the economy a chance to make a plea in front of a regulatory body instead of simply making a plea to the political leaders, which at times because of the specific interest and regional needs can be a very difficult act for industries to get involved in. Everybody prefers the new tribunal to the old system. It is dealing with its first case and we will see how that proceeds.
Bill C-102 fits into the good government theme we have been pursuing since forming the government two years ago this month. The red book, the speech from the throne and the budget each year have promoted this good government theme. We believe we are bringing to Canadians changes that are necessary, essential and desired to make for a more effective and productive economy.
A number of the measures in Bill C-102 build on the government's review of Canada's tariff regime announced in the 1994 budget. They are designed to ensure that Canada remains a favourable location for producing goods for investment, and also that Canadian businesses, including small businesses, are placed in a better position to profit from Canada's free trade agreements.
Certain amendments we put into this piece of legislation, for example, the enhancements to duty deferral programs and tariff reductions on manufacturing inputs, are designed to lower input costs for businesses and to maintain and enhance the competitiveness of Canadian businesses in Canadian and world markets. In addition, Bill C-102 provides for a number of technical changes to simplify, clarify and modernize the customs tariff and its administration, and to make it easier and less costly for business to access tariff relief programs.
The amendments to facilitate the processing of travellers at the border will allow Revenue Canada to focus on other important border issues such as smuggling and the processing of growing commercial imports. I want to speak to that for a moment. One of the aggravations which has developed in Canada and U.S. trade is not among big corporations or even in our professional relationships, but is as individuals travelling back and forth.
It has been a long time since these regulations have been modernized. We are trying to achieve a threshold so that people returning from the United States, Europe, Asia, or from wherever they have travelled can bring back a reasonable amount of goods, taking into account what the prices really are around the world, without having to go through a lot of processing and trying to figure out how to cook the books and evade the law.
More important, for those people who conform to the law or who are regular travellers, new systems have been designed for them to cross the border without having the complication of constantly being checked and having to fill out forms. Those people are in the vast majority of Canadians who, when they travel back and forth between the United States and Canada, do so without complication and without any idea of trying to avoid the border crossings. Allowing them to go through quickly allows Revenue Canada without any increase in resources to concentrate on contraband and smuggling. The large movement of goods or services costs the Canadian economy money. They are illegal and we want to keep them out of the country.
These are productive changes which reinforce the message that good government is responsive to Canadians. Good government means providing an easy way for people to carry out their activities in accordance with the law at the same time creating a more effective police force to deal with those who are not conforming with the law.
These changes were first announced last June and have been well received at border crossings. Canadian businesses have not felt any undue hardship because of the increased limits for travellers. In the coming winter travel season Canadians will appreciate the ability to get across the border more quickly. We anticipate an increasing tourist industry for Canadians travelling abroad, but more important of people coming to Canada. It is incumbent upon us to make sure that people can come into this country easily.
Vancouver is emerging as a very important port in the cruise industry. We have done things to facilitate the movement of people into Vancouver and on to those ships without tying them up for hours at border crossings or causing unnecessary procedural delays.
I commend the Minister of National Revenue, who is from British Columbia, for many of these initiatives. He was very proud when the Prime Minister visited the Vancouver airport a couple of weeks ago. That visit by the Prime Minister showed that real progress has been made in the area of customs and customs administration.
I look forward to input from members of the House who have border crossings in their ridings on whether they now find the service more effective. As the service is extended from coast to coast over the next few years, more and more Canadians will appreciate the changes being made by the Minister of National Revenue. He has the full support of the government. I again commend him on his initiatives and activities.
As hon. members may recall, this bill provides for important customs changes that will give Canadian businesses and individuals significant benefits in the long term.
These changes include the improvement of Canada's duty referral programs and the reduction of tariffs on a broad range of inputs. They will allow us to improve the competitiveness of Canadian industry by lowering the cost of inputs.
The proposed amendments will also update travellers' exemptions. Together with other measures proposed in this bill, this provision will facilitate the processing of travellers' applications and allow customs officers to focus on the real priorities such as processing the ever increasing number of trade imports and the fight against smuggling.
The bill also contains technical amendments that will make the customs system more effective. The customs value of imported goods is one of the most important changes in this regard.
The finance committee had a very good hearing last week. Several witnesses met with us and talked about questions of evaluation and answered questions on how to proceed with the law. Tariff is an obscure part of what we do, yet for many businesses and many professionals who specialize in tariff regulations it is at the heart of the way they do business. Witnesses came forward and told us that we should be doing some things in a different way. The government was very interested and listened to them.
The Canadian Manufacturers' Association had a dispute over how we were dealing with tariff relief on certain types of items. After a couple of years it was found that if the government decided that a particular item, for example a table in the manufacturing process, was not tariff free, a tariff could be retroactively applied. The committee broke at that point and national revenue officials went up to my office with officials from the Canadian Manufacturers' Association. Consequently, they came down with an amendment and changes were made.
That is an example of being very productive in the way we approach legislation. It is very respectful of the finance committee.
Under the leadership of the member for Willowdale, the finance committee has to deal with many different subjects. It is probably one of the busiest committees in the House of Commons. The areas under consideration can be very complex. For example, in the last two weeks we have had to deal with the tax treaty with the United States in Bill S-9. We have had to deal with tax treaties with other countries in Bill C-105. We have had to deal with measures from the budget in Bill C-90. We have had to deal with Bill C-103, which is the change in the Income Tax Act to deal with split runs, and we have had to deal with Bill C-102.
All of this shows the wide range of interests members on the committee have and their ability to respond relatively quickly to the needs of a minister, whether it is the finance minister, the national revenue minister, the minister of citizenship, or the heritage minister. We have had to respond very quickly and find out what the subject issues are.
When witnesses come forward and say to be careful, that we may be making a mistake, it is not taken lightly. As I alluded to a moment ago in the case mentioned earlier, changes were made on the spot when we saw that the association had a very good point.
One of the issues I wish to address is to make sure that the witnesses understood why we did what we did and why some changes were not made. The major amendment we introduced in committee was to reduce tariffs on manufacturing imports which would remove the competitive disadvantage that currently burdens Canadian manufacturers, since the U.S. tariff rates on average are lower than ours.
Another amendment enhanced, streamlined and consolidated Canada's duty deferral programs resulting in lower import costs for Canadian exports, easier access to programs by small and medium size business and the greater ability of Canadian regions to compete with U.S. free trade zones.
The most controversial area is the free trade zones. I will take a minute to explain what our strategy is because members opposite probably have local businesses, chambers of commerce, or whatever coming forward and saying they want a free trade zone. They want to have an area where economic activity can take place in a zone free from any taxes or taxes shared by others.
Free trade zones have emerged around the world as a very important tool in reducing costs for businesses in dealing with their markets. The Europeans have one in Amsterdam around the airport. The Americans have several. There has been a longstanding demand for a free trade zone in Canada.
Going back to the early 1960s, at least for the last 35 years we have made a number of efforts to target slow growth areas in this country and create some regional development programs. It goes back to the days of DRIE and DREE. There was also the tax credit which was eliminated last year. There have been a number of them.
The premise behind this is the isolation of slow growth areas from faster growing ones, or in the vocabulary of economists, it is red pencilling certain areas. We can isolate by census track those areas in greatest need. We can take the lowest 5 per cent and say that arbitrarily we are going to help everybody who lives in the lowest 5 per cent of the census track as judged by unemployment rates, industrialization and population size. There are many factors you can take into account. What we have found over the years is that the schemes have not been particularly effective. Despite 35
years of pretty extensive programming and tax measures, there has been limited success in attracting industries that are of long term benefit to a region.
Since we have formed the government the three regional development agencies we have, Western Economic Development, FORD-Q, and ACOA, have all changed their strategy as a result of the recognition of what I have just said, which is that many of our programs have been ineffective. This applies not only to the federal government but also to the provincial governments, who are hesitant to get involved aggressively in regional development schemes because frequently they do not work and they cost the taxpayer a lot of money.
Having said that, we still have to find very effective ways to increase the capabilities of our industries for producing goods and transferring products from the Canadian market into our export markets, because that is our fastest growing area. Those who have been watching the economy very closely for the last 18 months know full well that the growth in our economy has come from exports and not from the domestic market. We still have a reluctant consumer. We have a very low demand on residential housing and commercial real estate is also slow. But we do have, to our credit, a very productive and fast growing export oriented industry, which crosses several different sectors: manufacturing, agriculture, professional services, and the automobile industry. We have been very effective in developing expertise that takes us around the world.
A number of cities have come to us, Calgary being one, as well as some suburbs just outside of Vancouver, Halifax, and my own town of Winnipeg. They have told us that if we help them form a free trade zone they will create an atmosphere to increase exports, particularly into the American market. Winnipeg, through a new group called Winnport, has been very aggressively profiling Winnipeg as a transfer point from the European markets to Southeast Asia and into the United States. I wish the leaders in this campaign every success in achieving its new ambitions.
They have come to us and asked why we do not help them form a free trade zone. They ask us why we do not take the area around the Calgary or Winnipeg airports and create a zone that eliminates tariff barriers and eliminates, in some cases in the United States, labour laws and eliminates a whole number of regulations to make it easier to export to the United States.
We are very much interested in exports to the United States. However, at the federal government level we are preoccupied with enhancing the activities related to the export and not to the geographical region. That goes back to what I said at the beginning. The regional development strategies where we delineate zones for special treatment tend to be counterproductive. If we take an area around an airport, what do we do with the exporter who is two blocks away? Do we want the exporter to take down his plant and move it, or do we want to move the zone over two blocks? If we move the zone two blocks, what about the architectural firm that happens to be three blocks away? Do we move the zone three blocks away?
We have said to the municipal governments, the local development authorities, the chambers of commerce, and the provincial governments that have come forward with different schemes that they should be organizing and stacking up the provincial and municipal programs they want. If they want as a municipal government to zone certain lands and create an industrial park to encourage exporters to move there and show them the benefit of being close to an airport or a truck route or whatever mode of transportation is important, they should go ahead.
What we are interested in is a tariff regime that makes it effective for exporters to get their goods out of Canada and into the United States. We will change the rules and regulations to make it as easy as possible for businesses to import the products, the goods and the services they are working with to make whatever it is they are exporting so they can get them to market with minimal intrusion by the federal government.
We think Bill C-102 goes a long way to accomplishing that goal. We believe that once this becomes law exporters will find themselves within a regime that makes it a much easier decision to get into export markets, a much easier decision to import certain inputs and to add value into export to the United States, Europe or Southeast Asia.
I must say we have deliberately decided not to get into free trade zones as traditionally defined at the local level but instead to tell people who come to us with proposals to do what they think has to be done in their local market and we will be there to support them through a national regime that will facilitate the activity, which will in turn create jobs and economic growth.
This returns us to one of the premises of our government, which is that good government means the production of jobs and the expansion of the economy. The heart and soul of this government rests on the jobs and economic growth strategy. We feel that Bill C-102 contributes directly to this.
The legislation also contains changes to improve the operation of the customs tariff and the Customs Act. One of the most important changes concerns the valuation provision of the Customs Act. This valuation provision was discussed by many witnesses before the finance committee last week.
It is essential that the rules for determining value for duty not be vulnerable to manipulation or abuse. Otherwise, both government revenues and fair competition would be put at risk. In this connection, Bill C-102 contains provisions that would clarify existing Canadian valuation policy. That policy is that the basis for duty and tax assessment on imported goods is the price payable by
the Canadian purchaser. This is consistent with the thrust of the GATT-WTO valuation code and with NAFTA. Furthermore, the provision corrects problems that have also been identified and corrected by some of our major trading partners. These measures will ensure that Canadian producers receive the full protection they are entitled to under Canadian legislation.
In going through the bill in more detail, I would like to begin with the enhancements to Canada's duty deferral program. Duty deferral programs defer or relieve custom duties on imported goods that are subsequently exported but are awaiting formal entry into Canada. Bill C-102 will enhance, streamline, and consolidate Canada's existing duty deferral programs: duty drawback, inward processing, and bonded warehousing. This is what I was speaking to a few minutes ago when I talked about our response to the free trade zone concept.
The results will be lower costs for Canada's exports, programs that are more easily accessible by small and medium sized business, and greater ability of Canadian regions to compete with U.S. free trade zones. This will help attract and keep investment in our country.
I would like to emphasize that the changes are a result of extensive consultation with business and they enjoy broad industry and regional support. I can attest that after consultations with us, people in Winnipeg see more clearly what we are trying to do and how their plan fits in with our own plans.
Related to the enhancement of duty deferral is a change to the Access to Information Act. This change would protect the confidentiality of taxpayer information provided by the importing community under the Customs Act, customs tariff, and the Special Import Measures Act.
This is very important for businesses dealing with us. Most export sectors are very competitive. If individual manufacturers feel that the information about their companies is being shared, they will not participate. At the same time, we desperately need their participation in order to have a better understanding of what is happening.
Another major amendment proposed in the legislation is a reduction of tariffs on a wide range of manufacturing inputs. The amendment is also directed toward the relief of customs duties on manufacturing inputs so that our producers can compete more effectively. This amendment will enhance the competitiveness of Canadian producers both at home and internationally.
In essence, we will be removing the competitive disadvantage that currently burdens Canadian manufacturers vis-à-vis their American counterparts by reducing tariffs on some 1,500 tariff items covering manufacturing inputs to more competitive levels, generally to the levels seen in the United States. Since the United States is our major trading partner, we feel it is very important that our levels be consistent with their levels to maximize the competitive advantage of our industries.
The competitive problem is mitigated by the fact that exporters are entitled to receive full reimbursement of their input duties through duty drawback. However, as of January 1, 1996, existing duty drawback entitlements on exports to the U.S. will become more restricted under the NAFTA commitment. Therefore, to ensure that Canadian manufacturers enjoy the full benefit of Canada's free trade agreements we must bring our tariffs on imported inputs to more competitive levels. The 1,500 input tariff reductions I have referred to account for over $2.5 billion in dutiable trade.
Another important amendment is the increase in duty exemptions for Canadians travelling abroad. This is a simple updating measure, which brings Canada's exemptions into line with those of its major trading partners. The bill will raise the levels of exemption as follows: to $50 from $20 after a 24-hour absence; to $200 from $100 after 48 hours; and to $500 from $300 after seven days, with the once a year limit being dropped. I would remind hon. members that the new travellers exemptions are already operating without disruption.
A further measure in the bill will also help to streamline Canada Customs clearance procedures for travellers under what is known as a basket tariff item basis. Under this measure the government is proposing to replace the thousands of existing categories of goods with as few as 12 categories. That will be of great benefit to Canadians travelling abroad.
In addition to the amendments I have discussed, the bill contains a number of other changes of a largely technical or housekeeping nature. Most will serve to clarify the intent of existing customs and tariff provisions. Perhaps the most important of these deals with the value for duty of imported goods, also known as the valuation provisions of the Customs Act. It is essential that the rules for determining value for duty not be subject to any manipulation or abuse. Otherwise, revenue and fair competition will be put at risk.
Bill C-102 contains provisions that clarify our existing practices in dealing with valuation. It is founded on the concept that the price paid or payable should form the basis for assessing duty and taxes on these imported goods. The valuation policies and practices that are used by Revenue Canada are in fact the same ones that have been in place since the introduction of the GATT valuation code in the mid-1980s. The amendment to the valuation provisions of the
Customs Act will provide protection to Canadian businesses as envisioned by the legislation.
Members of the House will recall that Bill C-102 contains one tariff rate increase, which I would like to explain. The British preferential tariff is being withdrawn from certain rubber footwear, thereby restoring the 20 per cent most favoured nation tariff rate. Former British preferential trade imports will now compete on the same basis as other foreign suppliers. At the same time the bill allows for future improvements to preferential tariff treatment for the world's poorest developing countries.
Finally, several motions were introduced in committee, as I mentioned before, and amendments were made. For the most part the changes introduced by the government were minor technical amendments, but I should like to make sure the House fully understands what these were.
Of note, one amendment responds to requests from Canadian importers by allowing rubber footwear in transit to Canada on June 13, 1995, when legislation was introduced eliminating the British preferential tariff free rate, to take advantage of the lower tariff free rate rather than being subjected to the 20 per cent most favoured nation tariff rate.
The other notable amendment responds to the concerns expressed by the Canadian Chamber of Commerce about the proposal to shorten the filing time limit for remissions under the machine program. The government has responded to this concern by allowing importers up to four years to claim remissions on goods eligible for duty free treatment under the program.
To sum up the specifics of the act, the legislation is about improved competitiveness, increased exports and enhanced employment prospects for Canadians. Bill C-102 will help to promote the continuing good health of Canada's large and vital export sector. It will help Canada maximize the benefits we enjoy under the free trade agreements and the changes proposed in the legislation will be welcomed by the great majority of Canadians affected by them.
As I alluded to when I began my speech, this is a piece of legislation which may not have high visibility to average Canadians. However, to those who are working in manufacturing plants, to those travelling abroad regularly and to those seeking the most competitive position because their own jobs are at stake, this is one of the most important steps the government is taking in its workaday fashion, its desire to make the economy work and its desire to get government right. This is one of the steps we are taking that we think will in the end provide for greater job security and the enhancement of our export sector.
It is with a great deal of pride I presented the bill to the House and have taken it through committee. It will make a major contribution to the Canadian economy. For that reason I call on members of the House to support the bill and to see to its speedy passage.