Bill C-26 (Historical)

Tobacco Tax Amendment Act, 2001

An Act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco

Air Transport

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, regional air services are very important to this government and to this parliament. That is why we have included in Bill C-26 a guarantee to maintain service for three years.

I have discussed the Magdalen Islands situation with Air Canada's President, Mr. Milton, and he has assured me that the service could be maintained, for a time at least, while we re-examine our air policy.

The Budget

[André Harvey, Liberal, Parliamentary Secretary to the Minister of Transport]

Mr. Speaker, I am pleased to respond, on behalf of the Minister of Transport, to my colleague, the hon. member for South Surrey—White Rock—Langley, whom I must also thank for her work on the Standing Committee on Transport. It is, I can assure you, always a pleasure to work on that committee, because the relationships between members are good.

Over the past three months, there have been some major issues to deal with, and we have certainly not lacked work. A number of our meetings have addressed those major issues, particularly ones relating to the crisis resulting from the September 11 terrorist attacks.

My colleague is asking whether the government intends to legislate on anti-competitive acts in the delivery of domestic air services, in the interests of all Canadians. The minister's response at that time was yes, and I would like to elaborate on that.

Hon. members will recall that, in July 2000, new provisions in the Competition Act, along with new regulations, came into effect, creating a special regime for domestic air carriers. A specific offence was created for anti-competitive acts by a domestic carrier.

The regulations provide a more detailed definition of what is meant by anti-competitive acts, along with the criteria for determining them.

The amendments made to the Competition Act introduced in Bill C-26 in 2000 give the competition commissioner the power to issue temporary cease and desist orders that could put an end to actions that provoked a complaint in the time leading up to an investigation and a decision as to whether or not a case will be heard by the Competition Tribunal.

More recently, the Competition Act was examined by the House, and a number of motions to amend the act in Bill C-23, were presented to the committee last week. Two of them would make changes to the air carriers' regime.

One of the amendments would allow the competition commissioner to ask the tribunal to extend the temporary cease and desist order beyond the 80 day maximum, if the commissioner has not received all of the information necessary to allow him to determine whether or not grounds exist to make an application to the tribunal. This amendment corrects a shortcoming that was identified by the standing committee.

The second amendment allows the tribunal to impose administrative monetary penalties of up to $15 million, when ruling on a case.

These two changes are designed to demonstrate clearly that the government takes very seriously the actions that have led to complaints regarding anti-competitive acts in this country's airline industry.The changes should also prove that the government's measures will not give rise to the type of letter Air Canada sent, which led to my colleague's question.

[Val Meredith, Canadian Alliance, South Surrey—White Rock—Langley, BC]

Mr. Speaker, in December 1999 the transport committee tabled its report, Restructuring Canada's Airline Industry, which recommended a number of measures to ensure competition. The following spring when the government introduced its airline restructuring legislation, Bill C-26, it chose to ignore most of the committee's recommendations, especially those concerning competition in the industry.

Since Bill C-26 was introduced, four major airlines, Canadian Airlines International, Royal Aviation, CanJet and last month the number two airline, Canada 3000, have disappeared from the country's aviation scene.

There is even worse news. Our national carrier, Air Canada, which controls almost 80% of the market is in financial difficulty and there are fears that it may not survive without a government bailout.

The Minister of Transport on the other hand believes that Air Canada controls too much of this industry and is prepared to regulate the industry to reduce Air Canada's share of the market.

The government believes that Air Canada has participated in anti-competitive behaviour and has introduced amendments to the Competition Act that would severely punish predatory behaviour in the airline industry.

However this is not the end of the soap opera in Canada's aviation industry. On Monday the finance minister introduced a new tax on air travellers under the guise of user fees for aviation security. Under the government's plan, every domestic air traveller will have to pay a $24 security fee for a round trip. For international travellers the round trip cost will be $48.

For some travellers, for example passengers travelling on WestJet between Edmonton and Calgary or Vancouver and Kelowna, the $24 security fee will increase the cost of the ticket by 22%. When people fly from Vancouver to Seattle they can get a one-way ticket for as low as $110, but they will now have to pay an additional $24 for security; again a 22% increase in the total cost of the ticket. If those individuals fly from Seattle to Vancouver, they will have to pay an American security fee as well. That fee will be $2.50. That is correct. Under the American legislation, the aviation and transportation security act, the security fee is $5 for a round trip flight.

Why are Americans charged $5 for a round trip flight and Canadians charged $24 for a round trip flight? It is certainly not because Canada will receive a higher level of aviation security than the United States. No, it is because this government has never met a tax that it does not like and if it can be hidden as a stealth tax, so much the better.

What are these high security fees going to do to the struggling airline industry? The transport minister says that these fees will increase traffic flow because people will feel more secure.

I think it is clear that Canadians would have felt far more secure with a fee in the American range of $2.50 per flight; not $12. This fee is just another example of how the government and the minister have missed the boat on bringing real competition to the airline.

The minister quickly rejected Air Canada's suggestion of modified sixth freedom, instead claiming that he would regulate the industry. That should kill off the entire industry right away.

Therefore I ask the parliamentary secretary this. Why has the government ignored such committee recommendations as higher foreign ownership limits and Canada only carriers, and instead is planning to reregulate the industry?

Competition Act

[Brian Tobin, Liberal, Minister of Industry]

Madam Speaker, it gives me great pleasure to take the opportunity to participate in report stage consideration of Bill C-23. As colleagues have said, this is a bill that is a result of a great deal of very good work by members of the Standing Committee on Industry, Science and Technology. No doubt the bill has been very much improved as a result of the collaborative approach that members have taken and their commitment to working together to make this a much better bill.

The main elements of the bill comprise the prohibition of deceptive prize notices, enhanced mutual international assistance in civil competition matters, streamlining improvements to the Competition Tribunal process, broadening the scope under which the tribunal may issue an interim order, a limited right of access to the tribunal and specific measures to protect competition in the Canadian airline industry.

On the issue of private access there has been a great deal of debate. There have been a great many witnesses and those who spoke who were diametrically opposed to each other with respect to the right of private access. I will come back to that issue in just a moment and refer specifically to the amendment being proposed by the hon. member who spoke just a few moments ago on behalf of the Bloc Quebecois.

First , I want to talk about deceptive practices. The amendment to prohibit deceptive prize notices addresses unscrupulous promoters who mislead their victims into believing they have won a prize without disclosing the excessive costs associated with collecting the prize. The commissioner has testified that this is a growing problem in Canada and the bureau, quite literally, receives thousands of complaints each year.

We have all heard of Canadian seniors receiving scratch and win cards in the mail. People scratch the card and discover they have supposedly won a prize. They then follow instructions and place a telephone call in order to claim their prize. However, they are not forewarned and they cannot know or be aware that the cost of placing the call is generally greater than the value of the so-called prize.

In short, senior citizens across the country are being targeted by corrupt and unscrupulous individuals seeking to quite literally take advantage and to steal their saved, hard-earned monies.

The approach proposed in Bill C-23 sets out a balance between capturing improper conduct and the legitimate practices of the majority of the business community. No doubt there are legitimate prize contests that do in fact treat citizens appropriately.

With respect to foreign evidence gathering, Bill C-23 proposes amendments that will facilitate the gathering of evidence from foreign jurisdictions with respect to civil competition matters. This is similar to what already exists for criminal matters under the mutual legal assistance treaty to which Canada and several dozen other countries are signatories. I believe these amendments will help us do a better job in a wide variety of areas but notably with respect to these corrupt so-called competitions or prize scams.

On a more technical side, the bill proposes to streamline the tribunal process and broaden the powers available to the tribunal. First, the amendments will permit the commissioner and the person who is the subject of an inquiry to refer to the tribunal any question of law in relation to the application or interpretation of the act. This is also available to private parties that agree to refer a question to the tribunal related to part VII.1 through to part IX of the act.

Also, the tribunal will be able to assess costs. The initial position of the government was limited to the assessment of cost by the tribunal in the case of frivolous or vexatious litigation intended to hinder or delay procedures before the tribunal.

Many witnesses before the committee urged the adoption of the ordinary cost rules of commercial litigation in order to have a proper deterrence against strategic litigation. Therefore the government tabled a motion to reflect this concern. Other changes permit the tribunal through summary disposition to rapidly deal with unsubstantiated matters.

The last amendment proposed with respect to tribunal improvements addresses interim orders. We have heard that certain anti-competitive practices cause irreparable harm to the Canadian economy.

Up until now the commissioner could not apply to the tribunal during an inquiry to obtain a cease and desist order to stop anti-competitive conduct. First he had to obtain sufficient evidence to make a case before the tribunal. The problem is that these inquiries are time consuming and they are resource intensive.

The amendments proposed will now allow the tribunal, when certain conditions are met, to render an interim cease and desist order. The order will be issued for an 80 day period with the possibility of extension where the commissioner has not received the information necessary to complete his inquiry and to determine whether an application should be made before the tribunal.

I want to address the matter of private access. Under the current system, the commissioner is the only person who can submit an application before the tribunal. This monopoly has been the subject of several studies over the past three decades. Many proposals have been made to permit the right of private access to the tribunal without involving the commissioner. One of these proposals was contained in a private member's bill tabled here by our colleague, the member for Pickering--Ajax--Uxbridge, and was part of the public policy consultation.

A great deal has been said about private access, during the consultations and again during the committee hearings. There were strong views expressed and, I think it is fair to say, a division, primarily between those who belong to the small and medium sized business community and those who belong to Canada's largest corporations, those that are members of the chamber of commerce. On the one hand, there is a concern for a right to private access, and on the other, the concern that Canada not become a litigious society where strategic litigation occurs primarily for reasons of corporate warfare rather than genuine need or concern. The committee worked very hard to try to resolve both, on the one hand the request for private access, and on the other the concern about not creating an overly litigious corporate environment in Canada.

The amendments that we now see and the manner in which private access is described is very much the result of the good work of the committee and very much the result of the compromise which has been reached between the parties that had diametrically opposing views on the matter as they testified before committee. It is for that reason, because we now have, I think, a measure of harmony and a measure of agreement after a great deal of hard work, good work, by members on all sides of the House,. that I would submit that further amendments or further changes at this stage of the game may very well undo, although that would not be the intention, the consensus and the compromise that has now been reached.

There is one other matter I want to speak to during the time that is available to me and that is that the last set of amendments added to Bill C-23 are specific to the airline industry. This industry was severely affected by the tragic events of September 11. Canadian airline passenger volumes have dropped. Airlines have lost passengers to alternative tourist transportation methods. In the midst of this turbulent period, airlines in Canada and abroad are trying to continue normal operations while adjusting to the impact of the events of September 11.

All the airlines have been affected. At the time of the collapse of Canada 3000, the commissioner had sufficient evidence to issue a temporary cease and desist order against Air Canada for abusing its dominant position to the detriment of Canada 3000. Air Canada's competitors, starting with WestJet, identified shortcomings in the Competition Act that could and, they submitted, should be remedied.

The events, as we all know, attracted much media coverage and commentary across the country, especially after the news that additional amendments would be added to Bill C-23 to address the airline industry specifically. We need to remember that since the coming into force of Bill C-26 in 2000, the Competition Act has included a specific regime for domestic air transport. The amendments tabled today will close a potential gap that was created by Bill C-26 and will encourage compliance with the abuse of dominance provisions of this act.

The commissioner has indicated that based on his experience in the use of the temporary cease and desist power he obtained in Bill C-26 it was possible that the order would expire before an application could be made before the tribunal. The commissioner has an 80 day window in which to determine whether to make an application before the tribunal with respect to an abuse of dominant position by a dominant air carrier, but that determination is dependent upon having the necessary information in his hands.

The perverse effect of the rules as they currently work is that if information is not forthcoming and if in fact an investigation is not completed, the dominant carrier to whom an order is made can return to the abusive conduct the day after the commissioner's order expires. Hence, we have amendments designed to extend the cease and desist period, amendments designed to give real teeth to the powers available to the commissioner, amendments which are timely in the context of returning Canada's airline industry to a stable operation.

Air Transportation

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, in Bill C-26, the role of Air Canada is to serve small communities for three years. This is very important for all communities.

As to the matter of loans and guarantees for Canada 3000, as I have mentioned a number of times here in the House, it was simply for Canada 3000 and the major carriers, in order to give them temporary help in the crisis.

Airline Industry

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, it is not up to the transport minister to finance the destruction of airline competition either. Air Canada has announced plans to expand the Tango program thereby destroying competition even further in Canada's skies. We do not know who its next victim will be.

Will the transport minister amend the sections of Bill C-26 so that Air Canada can no longer launch regional discount carriers and destroy competition in the country?

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, I might remind the hon. member that Bill C-26 and the former parliament did extract conditions from Air Canada to serve small communities across the country that Canadian Airlines served and Air Canada served at the time for a period of three years. This government and parliament supported the notion that these communities had to be protected. This provided a transition period for other companies to provide the service.

Certainly the competition was developing very well before September 11 but the tragic events have had an incredible effect, not only in Canada but around the world. We now have to assess the situation and determine what policy changes are required to ensure further competition.

Air Canada Public Participation Act

[Val Meredith, Canadian Alliance, South Surrey—White Rock—Langley, BC]

Madam Speaker, I find it interesting that I would agree with my colleague from Churchill when she said that one of the things which is lacking is any kind of vision from the Liberal government as to where transportation and certainly airline restructuring should be going. I must say I do disagree heartily with where she would want the Liberal government to go.

The issue is why the Liberals did not implement this policy 18 months ago when we were looking at airline restructuring under Bill C-26. In early 2000 the transport committee looked at restructuring the airline industry. Bill C-26 put in a provision to raise domestic ownership from 10% to 15%. I introduced an amendment to the bill at committee in March 2000, suggesting that the government completely get rid of any kind of limitation to domestic ownership. It is interesting that the Liberals who sat around that table, most of whom are here today, voted against that amendment, yet they will support the government's removing that same issue which my amendment dealt with when the government puts it on the floor for a vote.

The big question is what is the difference of doing it now as opposed to having done it 18 months ago? The big difference is that the timing of the Liberals is really off the mark. Eighteen months ago someone may have been interested in picking up a greater degree of ownership in Air Canada. Unfortunately, today there are not too many people around who are that excited about owning airlines. The market is not in a position where there is the same kind of interest that there was 18 months ago. The Liberals really missed the boat in that 18 months ago this would have had a much more meaningful impact on the airline industry than it will have now.

When the Liberals brought in this restriction originally it was to allow for wider distribution of shares so that not any one organization or any one person could control what used to be a national airline. Although it sounded good at the time, when we were looking at Bill C-26, we heard that in essence the restriction allowed the board of managers who owned at that time, and I understand it is not much different now, around 3% of the company's shares to make decisions that were not necessarily the best decisions for the airline.

It allowed that board of management to get into predatory practices or to make decisions to run out the competition. At that time the competition was Canadian Airlines. Today it would seem to be Canada 3000 and WestJet. It allowed the board of directors to have that kind of control over the directions the airline was taking.

Rather than determining that there was a place for Air Canada and making that place in the Canadian airline industry strong and effective, it seemed that the decisions were to get rid of the competition. Well, they succeeded. Canada 3000 is the latest victim to go under. Canadian Airlines of course was bought up by Air Canada over a year ago. A week and a half ago Canada 3000 literally ceased operations.

It is a question of, is that all the bill is going to do is allow new management? I would suggest it is a very ineffective way of dealing with that. That in itself is not going to have any meaningful impact. Once again a combination of things must happen.

The Liberal government refuses to deal with an issue which it had an opportunity to address before and has an opportunity to do so now and that is foreign ownership limits. The foreign ownership limits remain at 25%. If we were to ask the minister why that is so, he would say it is because that is the American limit. Raising the foreign ownership limit to 49% and getting rid of the domestic ownership restrictions would allow a greater pool of capital to be put into Air Canada and to help it restructure. The minister, and I would assume the government behind him, is refusing to even address the issue of raising the foreign ownership limit.

When we talk about foreign ownership limits the reason we talk about 49% is because the bilateral agreements that Canada has with other countries require that part of that bilateral agreement is that a Canadian air carrier has this agreement with another country. If we were to raise the foreign ownership component to more than 49% we would have a harder time convincing people that it was actually a Canadian air carrier.

Therefore 49% still allows Canada to have an air carrier that is a Canadian air carrier but with a greater opportunity for foreign ownership component.

I suggest that now is the time to allow Air Canada the flexibility of not only domestic ownership requirements being removed but upping that foreign ownership component.

When the committee studied the bill we were told that over 75% of the debt that is held by Air Canada is foreign owned. By not upping the foreign ownership we are also removing the ability of Air Canada to restructure its debt by transferring or converting it into equity.

If we were to up the foreign ownership we would allow that foreign debt to be converted into an equity in the airline and allow Air Canada an opportunity to look at a different way of restructuring and give it more flexibility.

I would not argue to any great degree with the NDP's attitude that Air Canada is the national carrier and is the flagship of Canada. We all accept that. However for the impression to be left that Air Canada can only function if the government takes equity and more control in the airline is a fallacy. History will show that governments do not do business well. Governments have a history of messing up some very good industries that could have operated on a profitable basis and made sure that customers were served but it was through government interference and government ownership that things were messed up, in some instances to a very large degree.

I would even go so far as to say that part of Air Canada's problem is that it was a government airline and the culture it has tends to be a government type bureaucratic culture. It is at a disadvantage when it has to work in a competitive marketplace with other air carriers. It is only when Air Canada learns how to do that, that it will survive in the international community.

I would suggest that the worst thing that could possibly happen would be for the government to get back into the ownership of Air Canada. I would think that by giving Air Canada more flexibility, which would certainly be a first step but by no means the last step, the government is allowing Air Canada a bit more flexibility in how it can restructure itself and compete in the international community.

When we start talking about government subsidization and governments throwing money into companies, I can give a couple of examples from my province of British Columbia but I will only give one. The NDP government put $380 million of taxpayer money into Skeena Cellulose Inc. to keep it operating and keep people working. All that does is defers reality. It defers the time when the company realizes that it cannot stay afloat because of bad management, where it needs to restructure and it needs to become more competitive.

Skeena Cellulose closed the doors once again. There goes 380 million taxpayer dollars that the government has no ability to collect from Skeena Cellulose.

Government subsidization or government getting back into the ownership is certainly not the way to go.

Yes, there is a role for government and that is very clear in the Canada Transportation Act. Government is there to make sure the safety of air transportation is there for consumers. It is there to make sure Air Canada does not run out all the competition. The competition bureau and the competition commissioner is there but unfortunately under the act they need more teeth. They need to have a greater ability to enforce the restrictions that are put on companies such as Air Canada when it holds a monopoly.

The issue is not whether or not we support the bill. We do support removing the limit on domestic ownership. However the bill should also have provided for an increase in foreign ownership which could be done by order in council of cabinet. I would strongly urge the Liberal government to consider doing that sooner than later. It should have learned by this example that it has to be bold and step out in a strong manner when the time is right. If it does not, it does not help to step out in a timid and weak fashion years later.

The government should be bold and increase foreign ownership along with removing the domestic ownership in Air Canada. It also should look at other opportunities to allow competition in Canadian airspace.

When it studied Bill C-26, the committee looked at things like a Canada only air carrier which could be foreign owned by British Airways or another airline. However it would operate solely in Canada so it would not need any kind of bilateral agreement. It would use Canadian crews, Canadian fuel, pay Canadian taxes and produce Canadian jobs. That is something the government should be considering.

We talked about other things when we looked at air restructuring and Bill C-26. It is appropriate to bring some of those issues back on the table. The Government of Canada should be looking at other things that could provide more competition in the airline industry and give better service to air travelling consumers. There is no reason that we cannot get into that debate and look at creative new ways of providing air service to Canadians.

What we need to do is convince, cajole and push the government into seeing the big picture on how the Government of Canada can fulfill its obligations to ensure safety and environmental issues are considered and to ensure labour and competition matters are considered without getting back into really serious ownership issues or conditional type issues.

I encourage the government to look to a much broader perspective and to be a little more creative. Hopefully we will see something in the near future that shows it is going in a direction that is for the good of all Canadians.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, I am going to speak in favour of Bill C-38, an act to amend the Air Canada Public Participation Act, but I would like to reiterate the points I made when I last spoke to the bill on October 31.

This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian carriers with respect to the sale of its shares. For the first time in Canadian history a Canadian citizen can buy, sell or trade as many Air Canada shares as he or she wants, just as if they were shares of any other private sector Canadian company.

Bill C-38 represents a marked departure from traditional thinking of Liberal governments. Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. Ever since that time it has been the subject of much discussion in the House. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation. That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to no longer be an agent of the crown. Even so, it remained a crown corporation and cabinet retained the power to appoint its directors.

Then in 1987 the Progressive Conservative government passed the National Transportation Act. This fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry. Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Section 6(1)(a) of the Air Canada Public Participation Act limited to 10% the number of shares that could be owned by a single shareholder. This was presumably done in the interests of ensuring that Air Canada stocks would be held broadly by as many Canadians as possible. The clause also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International. Let us not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988, nearly six months after the January 1, 1988 birth of Canadian Airlines International from the fusion into a single entity of all of Air Canada's pre-1980 domestic competitors: Pacific Western Airlines, Transair, Nordair, Québecair, Eastern Provincial Airways and Canadian Pacific Airlines.

In 1988 Canadian Airlines' parent company was governed by Alberta's Pacific Western Airlines Act which set a 4% limit on the number of shares any one group could control. The 10% share limit set in the original Air Canada Public Participation Act was actually a more liberal limit than the 4% set in the act governing Canadian Airlines. Then with the takeover of Canadian Airlines by Air Canada in 2000, Bill C-26 raised to 15% the number of shares that could be held in Air Canada.

Now, some 64 years after parliament first created Air Canada, we are finally discussing whether to give it some of the same rights as any other private sector company. If we were to believe the government members, Bill C-38 would put Air Canada on a level playing field. By striking down section 6(1)(a) of the Air Canada Public Participation Act, Bill C-38 ostensibly does put Air Canada on that level playing field with other carriers with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone quite frankly, it should be supported. As a party that believes in free market and free choice we support that.

At the same time it must be said that Bill C-38 does little to address Air Canada's short term financial concerns that have led to thousands of layoffs at Air Canada. This is because: one, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller; two, no single shareholder is currently restricted by the present 15% limit, in that no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of the current restrictions; and three, if one were not inclined to buy Air Canada stock before this legislation, the fact that one can buy more of it does not work as an incentive.

In fact there are only two ways that Bill C-38 would financially benefit Air Canada. One would be if some of the debt which the Caisse de dépôt et placement holds were to be converted into shares. The caisse currently owns roughly 9% of Air Canada's stock. Converting its debt into shares would give the Caisse roughly 18%. This move, based on the $2.50 price per share at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada's voting shares.

The second way it could help Air Canada is if an individual or group were to take control of Air Canada with a clear plan to restructure the company.

It has been alleged that this legislation is legislation on behalf of the transport minister, urged by a whole bunch of interests as a “get Robert Milton” piece of legislation. It may very well be but time will tell. Frankly that is not any of the government's business but it puts it on a level playing field. If that leads to broader restructuring of Air Canada and new management, and looks after the broader interests of the company, the people who work there and Canadian consumers, that is a choice and decision for the board of directors of the company.

When we really look at it, the bill basically is political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's pleas for bigger and bolder policy moves such as the implementation of air marshals or putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberations.

Bill C-38 requires us to examine specifically the Air Canada Public Participation Act, and while I must report that I am in favour of striking down section 6(1)(a) of the act which this legislation does, we should not stop there. There is more to be done. We should ask ourselves a basic philosophical question. As we enter the third millennium, do we believe that the government should continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns? Why for example should sections 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada by law to maintain facilities and/or offices in certain cities? Surely these decisions are more properly the responsibility of the company's shareholders and board of directors.

Why for example should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable only to Air Canada while no other Canadian airline is similarly bound? If we really believe that the Official Languages Act should apply to Canada's airline industry, to place it only against Air Canada and not against other carriers, against in the sense that it is a regulation and a requirement that they meet its standards, then it hardly seems fair to hold Air Canada to a higher standard than the former Toronto based Canada 3000, Calgary based WestJet and Montreal based Air Transat.

Why should sections 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? I believe that sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. There already is a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

--a corporation or other entity that is incorporated or formed under the laws of laws of Canada or a province, that is controlled in fact by Canadians and of which at least seventy-five per cent, or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56.3 of the act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect the airline's status as Canadian under law. Section 6(1)(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic services. Section 69 only allows two types of carriers to operate international air services: Canadian air carriers under the definitions I have just outlined; and non-Canadian carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, formerly Canada 3000, or Air Transat were to allow foreigners to acquire more than 25% of their voting shares, they would no longer be Canadian. As such they would lose their ability to serve domestic routes within Canada and international routes between Canada and any other country, which is to say they would lose their value to any potential buyer.

Given that restrictions against foreign ownership are already present in the Canada Transportation Act, sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. As well, it is important to note that if we do have a debate finally in this place, as some government members have said should happen, that the foreign share restriction on carriers, specifically Air Canada, should be raised from 25% to 49%, then it makes total sense to scrap that provision in the Air Canada Public Participation Act and leave it in the Canada Transportation Act so that when we do have that debate, the new restriction which would be lifted would apply to all carriers evenly. We would not have to amend two pieces of legislation in order to get the same thing done which would require more time of the transport committee, more bureaucracy and politicians wasting more time standing around talking about things they already agree on.

This is just simple streamlining and making things easier to do.

Even if there were no prohibition in the Canada Transportation Act on the 25% foreign shareholder limit, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because the convention on international civil aviation, more commonly referred to as the Chicago convention, sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is then made possible only by bilateral agreements in which governments typically exchange air rights for the benefit of their respective carriers. Typically, on any international route, each country can designate a national carrier. Thus Air Canada and Air France fly between Montreal and Paris, Air Canada and Korean Air Lines fly between Vancouver and Seoul and Air Canada and Cubana Airlines fly between Canada and Cuba.

Only in the most exceptional cases do we find an airline flying between two cities when neither is in the airline's home country. In virtually every case where a foreign airline flies between two foreign destinations, it is only as an extension of a flight that started in the home base of the airline. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto-Sao Paulo-Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

Even without the safeguards in the Canadian Transportation Act, if Americans or anybody of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might well refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes to those countries. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Without the ability to serve international routes, Air Canada, as an airline, would cease to have value to its investors. For this reason alone, its board of directors would never allow foreigners to own a majority of stock of Air Canada.

Anyone doubting this needs only to look at the arrangement that American Airlines had with Canadian airlines in 1999. It flew passengers from the United States to Vancouver and then from Vancouver on jets of Canadian Airlines to Asia. The reason for this was that the American Airlines had only been granted routes to Japan from the United States and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian services of Canadian Airlines were based on bilateral agreements between Canada and the Asian countries concerned. Had American Airlines taken control of Canadian Airlines, it would quite literally have killed the goose that laid the golden egg.

As I said earlier, I am in agreement with repealing section 6(1)(a) of the Air Canada Public Participation Act. For this reason I and the official opposition will be supporting Bill C-38. At the same time, having carefully examined the Air Canada Public Participation Act, I see no reason why we cannot just eliminate the entire act itself. It has at least four irrelevant clauses.

Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me that these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the 12 years since the act was passed. Section 11 deals with the continued appointment of the Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This clause has also been spent.

The act also discriminates against Air Canada in four specific areas.

Subsection 6(1)(a) limits share ownership of an individual or group to 15%.

Subsections 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. They make them maintain offices in Montreal, Mississauga and Winnipeg. We talk in the House all the time about getting out of the face of business, letting people sink or swim on their own merit, and getting out of the business of corporate welfare, mandating useless bureaucracy that is none of the government's business. This is a clear example of that.

I raised an amendment at the committee stage to have this part of the act struck down and it was voted down without any logic. It would be unheard of for the United States to mandate that Southwest Airlines, or United Airlines or American Airlines maintain facilities in Chicago, or Dover or Portland, Maine. The idea of telling a private sector company that it has to have a maintenance facility in a certain city is absurd. It is none of the government's business.

Specifically, subsections 6(1)(b) and (c) of the act restrict foreign share ownership in Air Canada, as I mentioned. Section 10 makes the Official Languages Act applicable only to Air Canada. As a Canadian who happens to believe in the principle of official bilingualism, who was taught in a French immersion class, whose mother taught French in this country, whose sister is a teacher of French immersion, in British Columbia no less, it seems bizarre to me that if we believe in bilingualism, if we believe that all Canadians should be able to speak equally in both of Canada's official languages, all we would have to do is put the idea of mandating official bilingualism in the air service, say that it was in the national interest and then put it under the Official Languages Act.

Why would we put the Official Languages Act and mandate it into the Air Canada Public Participation Act? It is a level of bureaucracy. It is a restriction and a burden on Air Canada that is not placed on other Canadian carriers. If we believe that people should be speaking in both official languages, if we believe in reaching out and it is an important principle for the country, then apply it to all of Canada's air carriers evenly, not just to one of them.

If the government is really intent on putting Air Canada on a level playing field with its domestic competitors, it can do this by not just removing the share limitation of section 6(1)(a) of the Air Canada Act, but by repealing the entire act itself. The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers and not just Air Canada.

As written, the Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace.

Just because Air Canada is a corporation, does not mean that the thousands of employees of Air Canada should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles. It is time to let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act in toto and finally create the level playing field that people on both sides of the House say they want.

I will be supporting Bill C-38, as will the official opposition, but I have also introduced amendments and will continue to push for the full repeal of this legislation, so that Air Canada can be put on a level playing field with its domestic competitors for the first time in its 64 year history.

I also wish to mention something else. We are now at the third reading of Bill C-38. Many thing have gone on in Canada's air industry. Since we started debating Bill C-38, Canada 3000 has gone bankrupt and thousands of people have lost their jobs.

Since we started debating Bill C-38, 78% of Canadians have said that air marshals would make them feel safer. Since we started debating Bill C-38, 66% of Canadians have said that they worry that the airline they use will go belly up, leaving them stranded. Since we started debating Bill C-38 the U.S. congress has passed S-1447, the aviation security act, dramatically improving U.S. airline security. Since we started debating Bill C-38, a host of experts have come before the transport committee and called for the entire scrapping of the Air Canada Public Participation Act to put all air carriers on a level playing field. In all of these areas the government has turned a deaf ear.

I want to look specifically at the poll that was released by Ipsos-Reid, CTV and the Globe and Mail , six days ago. It is quite something. The press release reads:

As Air Canada begins flights to Washington, D.C. Reagan National Airport with an armed security officer known as an Air Marshal on board, an Ipsos-Reid/Globe and Mail/CTV poll released today indicates that most Canadians support the idea of Air Marshals on Canada's airlines. Eight-in-ten (78%) Canadians say that they would feel safer flying if they knew that there was an armed Air Marshal on board. In fact a majority (52%) strongly agrees with this view. The cost of providing security aboard flights should be covered by the Federal Government according to seven-in-ten (72%) of Canadians.

Two-thirds (67%) indicate that they would be more likely to fly if they knew that an armed Air Marshal was on board the flight.

When we break down the numbers, it is quite something. It went on to say:

Those in Atlantic Canada (87%) are most likely to agree that they would feel safer if they knew an Air Marshal was on board their plane. This compares to those in British Columbia (78%), Alberta (78%), Ontario (78%), Saskatchewan/Manitoba ( 77%), and Quebec (77%).

Canadians with a high school education (82%) or less than high school education (86%) are more likely than those with post-secondary education (76%) or those with a university degree ( 72%) to say they would feel safer if an Air Marshal were on a flight.

Older (81%) and middle aged (80%) Canadians are more likely than younger (74%) Canadians to say that they would feel safer on a flight with an Air Marshal.

Women (81% versus 75% of men) are more likely to agree that they would feel safer on a flight with air marshals.

According to seven-in-ten (72%) of Canadians the cost of providing security aboard flights should be covered by the Federal Government. In fact, four-in-ten (41%) strongly agree with this view.

It goes on and on. It is overwhelmingly evident that Canadians believe in this principle. When we came back to the House after the September 11 attack, I raised the issue of air marshals with the transport minister. He said it was a radical idea and he would not go in that direction because it was not a good idea. He has for years said that Canada should have a seamless security regime in our skies. Yet about a month ago he said that he would put armed air marshals on flights only to Reagan National Airport, by definition creating a seam in the security regime in this country by saying we would have air marshals on some flights but not on other flights.

Either we agree with the principle or we do not. The United States said that we could only fly into Washington's downtown Reagan National Airport, if we had air marshals on planes. The transport minister has said that because it is an important relationship he would do it. He either agrees with the principle that it is safer, he agrees with 78% of Canadians and with most parties and most members in the House that it would make air travel safer and does it, or he does not. If the transport minister does it for Reagan airport and if he is to hold to this principle of a seamless security regime in this country, I would think that he would extend the air marshal program and make everybody feel safer flying. That is what we need.

It should also be noted that since 1993, when this government came to power, seven Canadian air carriers have either declared bankruptcy, sought bankruptcy protection or have been taken over. Almost one carrier each year has been dropping like flies in the country.

Blame can be spread to a lot of places, but a lot of the blame does fall on the shoulders of the government because of legislation like the Air Canada Public Participation Act, which holds Canadian private sector companies to differing regulatory standards and therefore retards the marketplace. It does not allow carriers to compete on a pure level playing field so that the truly best will survive. It is time for the government to rethink where it is going, to end the political correctness and to stop mandating that Canadian air carriers and private sector companies have to have maintenance facilities in certain cities. Let Canadian carriers compete on their own.

We support Bill C-38, but if the government really had the chutzpah, it would show greater leadership, introduce real legislation on air marshals and airport security, scrap the Air Canada Public Participation Act and have renewed thinking with regard to Canada's air industry.

[André Harvey, Liberal, Parliamentary Secretary to the Minister of Transport]

Mr. Speaker, it gives me pleasure to rise and speak to Bill C-38, which is being given third reading today.

Initially, I very much want to thank the members of this House for their co-operation in ensuring passage of this short but important bill, which was debated in this chamber at the end of October and was referred to committee immediately. I want to express my gratitude to the committee members who agreed to deal with the bill so expeditiously.

Bill C-38 has but one purpose, which is to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership by any person of voting shares in Air Canada.The bill does not try to resolve all the longer term issues relating to Air Canada that were raised during debate on second reading.

The proposed legislative changes will provide our national air carrier with one of the key tools it needs as it attempts to regain its financial health, which has been severely strained by a number of events this year. Even before September 11, it had become quite apparent that Air Canada was going to have to make some significant moves to address its weakened financial situation.

The carrier’s efforts to integrate Canadian airlines; the high fuel prices; declining passenger demand; and the severe slowdown in the economy; have all had a significant impact on Air Canada.Air Canada has stated publicly that it needs new equity and it has taken, and continues to take, measures to acquire a considerable amount of non-voting equity.

However, for those investors who may have wanted to have some say in the direction of the company, there has been the legislated limit on voting shares along with the companion prohibition on association between the holders of those same voting shares. Taken together, these measures were designed to ensure that individual shareholders could not act in concert to take control of the airline and thereby nullify the concept of a widely held company.

A 10% restriction was in place until last year, when Bill C-26, the airline restructuring legislation, came into force on July 5, 2000. Bill C-26 had in it a section that amended the Air Canada Public Participation Act by raising the individual limit on the holding of voting shares to 15%. The prohibition on association was not changed.

In the lead up to Bill C-26, both the House of Commons and the Senate Standing Committees on Transport held extensive hearings to assess the views and concerns of the airline industry in Canada. In their separate reports, both committees recommended that the limit on individual voting share ownership in Air Canada be raised to 20%. The government agreed that the limit should be raised as a means of encouraging investment in Air Canada, while still preventing a single shareholder from gaining effective control.

The government’s view, at the time, was that 15% was the appropriate threshold, and it is this new limit that was ultimately accepted and entrenched in law. In coming to the decision to remove the limit, we have been told by a number of persons that any limit can act as a disincentive to an investor with serious intentions of having a say in the management of the company.

The events of September 11, 2001 have had devastating consequences for airlines around the world. Passenger traffic has fallen significantly and short and long term financial difficulties are forecast for our entire industry. Regrettably, we have already witnessed the bankruptcy of Canada 3000, our second largest air operator.

Air Canada has been forced by the effects of the terrorist attacks in the United States to re-examine its entire operation, even more profoundly than had been previously announced. It needed to adjust the services it offered to reflect demand.

It has had to reduce costs wherever possible. This has meant extremely difficult decisions had to be made by Air Canada’s management, including laying off close to 9,000 employees.

As we know, the government did not feel it could hold the carrier to its commitment of no involuntary layoffs or relocation, which had been negotiated in the context of the acquisition of Canadian Airlines. Clearly when all other major carriers were facing similar traffic and financial problems in the wake of September 11, Air Canada could not be forced to retain all its staff on the basis of that commitment.

To reduce the layoff impacts, the company has been working with Human Resources Development Canada to ensure its employees can benefit from any existing federal programs, including work sharing to reduce layoffs.

The carrier has also eliminated some routes from its network and has scaled back on the number and size of aircraft used on other routes.

Air Canada has benefited, along with every other Canadian air carrier, from the government initiatives that were instituted to help the industry cope with the severe economic fallout from September 11.

The government provided an indemnity for third party war and terrorism liabilities for essential aviation service operators in Canada. It took this action, as did other governments around the world, to ensure our carriers would be able to keep operating.

In recognition of the closure of Canada’s airspace, the government implemented a $160 million program to compensate the more than 1,300 businesses providing air transportation for passengers and cargo and offering specialty air services.

A great many Canadian carriers have already filed their claims under the compensation package and a number of carriers have already received their initial payments, including Air Canada.

Reagan National Airport’s unique geographical location has resulted in authorities in the United States imposing more stringent security requirements than at other American airports. The requirements include aircraft size specifications, dedicated crews, and trained, armed security personnel on board flights operating to and from the airport.

In order to re-establish Air Canada’s important flying rights into that airport from Toronto and Montreal, the government authorized the presence of armed RCMP officers on Air Canada flights to the U.S. capital. It also has made the necessary provisions to allow armed U.S. air marshals on U.S. flights to enter Canada without difficulty.

The decision to amend the Air Canada Public Participation Act, at this time, is designed to provide additional assistance to Air Canada in its attempts to return to financial stability.

Let me assure the House that the board of directors of Air Canada supports this change. The matter was discussed with the chair and Air Canada has stated publicly that it supports the government’s decision.

The government is confident that this measure offers the private sector greater opportunities for investing in Air Canada that could contribute to the successful restructuring of the company.

Moreover, in the committee hearings held during the first week of November, there was not one witness who voiced objection to the elimination of the 15%. It will provide new freedom to invest in Air Canada and should attract new capital for the airline.

With the enactment of this bill, Air Canada will find itself on the same footing as the rest of the air industry with respect to individual share ownership there will be no limit except for the 25% limit on non-residents which is a very different issue.

On this point, I must emphasize that Bill C-38 will not, in any way, result in a change in the government’s position on foreign ownership. This government remains committed to ensuring that Canada’s airline industry is run in Canada, for Canadians, by Canadians. Consequently, the government’s longstanding policy of a 25% limit on foreign ownership of voting shares, which applies to all carriers and not just Air Canada, remains unchanged.

This is a bill with only three sections. The first removes the 15% limit and the prohibition on association. The second renders null any other corporate documents that addressed the 15% limit. The third deals with when the changes will come into force.

The legislative changes which will be enacted as a result of this bill are in the interests of airline passengers and all of those who believe that our national air carrier, the world’s 11th largest airline, should continue to be the great carrier that it is.

I therefore encourage members to give it swift passage on third reading.

I want to thank all the members of the Standing Committee on Transport for their extremely constructive work. While this bill has its limits, it solves a major financial problem for Air Canada's future. I am convinced that all the suggestions made in committee, both by its members and by all the witnesses that appeared before it, will give us an even better perspective on the future of Canada's transport industry.

I am convinced that the huge amount of work that will have to be done in the coming year as part of the overall re-examination of everything that relates to our transportation industry will allow us to integrate several suggestions that were made before the committee during the review of this bill, which, while being very restrictive from a financial point of view, allows us to expand our perspective regarding many issues that exist within the department. It goes without saying that we are there to make corrections as problems surface.

Therefore, I am very pleased to take part in this exercise, along with all the committee members. Incidentally, in the next few days we will travel to Washington to continue to strengthen our co-operation with the Americans regarding extremely important measures to make our fellow citizens feel safer and to make changes that will be increasingly more substantial.

Again, I thank all the members of the committee and of this House for their interest in this bill, which is substantial even though it only has three clauses and which will allow Air Canada to be financially sound.

Airline Industry

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, it is nice to stand in the House and play these partisan games while people are hurting and while travellers are stuck in places they do not want to be.

I will remind the hon. member from the fifth party that, when he was with the Alliance or Reform or the opposition, he supported Bill C-26 and he supported the current policy, and I would hope that he would have the guts to stand up and continue to support it.

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, it is typical for the Leader of the Opposition. Once he is knocked off his game plan he goes to plan B, which in this case is security.

Let me come back to the earlier issue because he talked about the airline policy. I wish to remind him it was his party, his members, that supported the government on Bill C-26. We have all supported the policy that got us to a competitive state before September 11 and I think the hon. member should not stand in this place and say the contrary.

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, the hon. member should remember that Bill C-26 strengthened the hand of the competition commissioner and gave him the cease and desist powers which he sought to deal with these kinds of situations. The law is there and the law can be applied.

Air Canada Public Participation Act

[Bev Desjarlais, NDP, Churchill, MB]

Madam Speaker, it is a pleasure for me to rise on behalf of the New Democratic Party at second reading of Bill C-38, an act to amend the Air Canada Public Participation Act.

It was not that long ago, in fact just about 18 months, that we last debated a bill to amend the Air Canada Public Participation Act. That was the last parliament's Bill C-26 which, among other things, approved Air Canada's merger with Canadian Airlines. I think it is important that as we debate the bill before us today we remember this context. It has been about a year and a half since the government passed Bill C-26 to approve the merger of the two national airlines and I think it is now pretty safe to say it has been a disaster. The government completely dropped the ball with the merger.

One of the minister's stated objectives in Bill C-26 was to foster competition in the domestic market. He said so repeatedly in the House. What has happened? Eighteen months later we have even less competition than we had before. Royal Airlines and CanJet are no more. They have been swallowed up by Canada 3000. Two entire airlines are gone. So much for fostering competition.

The minister also said that Bill C-26 was supposed to prevent Air Canada from using predatory pricing to drive its competitors out of business. As we on the House of Commons transport committee have heard repeatedly over these months, this part of that bill has been a failure as well. The small airlines that are trying to compete with Air Canada and offer Canadian travellers some choice in the market have repeatedly been saying what we in the New Democratic Party were already saying while Bill C-26 was still before the House: that the anti-predatory pricing measures contained in that bill were toothless and completely ineffective.

This should not be surprising to the government. The commissioner of the competition bureau came before the transport committee while we were reviewing Bill C-26 and told us straight out that the bill did not give him the powers he needed to stop predatory pricing, but the Liberals ignored him. So did the Alliance and the Tories. I do not know why that happened. Maybe they just had their ideological blinders on and would not even think about the possibility that maybe a little regulation was necessary to prevent Air Canada from abusing its monopoly.

The competition commissioner said the bill would not give him the power to stop predatory pricing. My party's response was to try to do something about it. At report stage I introduced amendments to strengthen the competition bureau's ability to fight predatory pricing. The Liberals, the Alliance and the Tories opposed it and now we see the results.

The bill before us today, Bill C-38, would repeal paragraph 6(1)(a) of the Air Canada Public Participation Act. This would remove the 15% cap on ownership of shares by an individual or a group of individuals working in concert. This is a thoroughly underwhelming response to the current crisis in the airline industry. If the minister thinks that this is going to solve either the short term or the long term problems facing Air Canada and the overall airline industry, he is fooling himself.

The government argues that removing the shareholder cap will allow large investors to come in, buy the company, recapitalize it and restructure it. There are two problems with this reasoning.

First, industry and market analysts tell us that there is virtually no interest out there from investors in making any kind of major investment in failing airlines like Air Canada. This was the case before September 11 and it is even more so now given the world decline in travel and tourism since the terrorist attacks. Who does the government think is going to come along and invest all this money in Air Canada? Unless it knows something that it is not telling us, the bill would not do even a little bit of good.

The second problem with the government's reasoning is that even if removing the cap were to solve Air Canada's short term problems, which I do not believe it will, it opens up the airline to an even more long term problem down the road.

Why has the minister flip flopped from 18 months ago when arguing against the elimination of the cap? Is it simply because he sees no other way to address Air Canada's short term cash crunch? There are much better ways to address the short term necessity of keeping Air Canada in the air, which do not carry the long term costs that the bill carries. In the past few weeks, as the New Democratic transport critic I have suggested numerous alternative ways that the government could help Air Canada make it through the short term cash crunch, like tax deferrals, interest free loans, lower airport lease fees and initiating negotiations with Nav Canada to find a way to reduce the air navigation fees.

New Democrats do not want to see a direct government handout of taxpayer dollars to Air Canada, but if it is necessary we have said it should come with strings attached and should give the government a say in how the airline is restructured.

The bill addresses only the immediate short term problem facing Air Canada and it does not even do a credible job at that.

We have to look at the long term issues facing the industry. In the long term it is crucial that the government break the airline industry out of the destructive cycle it has been in for the last decade. The cycle repeats itself over and over again in every country that, like Canada, has an unregulated airline industry. First, capacity rises to unsustainable levels. This leads to massive financial losses. Then the weakest companies go under. They collapse and are downsized or the airline reduces capacity. Then the cycle repeats itself.

This is a ridiculous way for the government to let an industry as important as the airline industry operate. The uncertainty we get from going from crisis to crisis undermines the entire national economy. We can ill afford this with our economy on the verge of recession.

If the government ever wants to end this cycle it has to drop the passive, minimalistic approach the transport minister is suggesting. It has to stop responding on a crisis by crisis, patchwork and piecemeal basis and look at some modern regulation to limit the growth of capacity. I am not talking about the old fashioned regulation of every route and every fare. I am talking about limited, targeted regulation to control the growth of capacity: a modern regulatory regime.

For the good of our airline industry the minister needs to take off the ideological blinders telling him that all regulation is bad and realize that total deregulation is just as bad as total regulation. There is a middle way and that is what he should be aiming for.

Although I do not believe this extinction of the shareholder limit will be the saviour of Air Canada or do the job of stabilizing industry, my party will not delay the bill going to committee. The transport committee needs to review the situation and, quite frankly, I hope we will see investors come forward. However, more must be done to stabilize our entire airline industry. Had one or two shareholders owned Air Canada, where would they be today? Would they have survived the huge losses of the past six weeks? Will these present changes ensure service to all regions of Canada? I think not.

My colleague from the Bloc has rightfully criticized the government for its approach to offering loan assistance. The government has said that if the airline restructures and lays off workers it will get assistance. The government has abandoned smaller rural and northern communities by not holding Air Canada to the merger agreement.

I also want to join my colleague from the Bloc in the disappointment I feel that the Alliance Party refuses to accept our bilingual nation.

Much more needs to be done to stabilize the airline industry. It is time to realize that the strategy of the last decade has not worked. We need to look at alternative methods. I look forward to having witnesses appear before transport committee and to coming up with a resolution that I hope will truly, once and for all, give some stability to our airline industry.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Madam Speaker, it is my pleasure to stand in favour of Bill C-38, an act to amend the Air Canada Public Participation Act. This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian air carriers with respect to the sale of its shares.

For the first time in Canadian history Canadians can buy, sell and trade as many Air Canada shares as they want, just as if they were shares of any other Canadian company. Bill C-38 represents a marked departure from the traditional thinking of Liberal governments.

Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. It has been the subject of much discussion in the House since that time. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation.

That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to be no longer an agent of the crown. It remained a crown corporation and cabinet retained the power to appoint its directors.

In 1987 the Progressive Conservative government passed the National Transportation Act. It fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry.

Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Paragraph 6(1)(a) of the Air Canada Public Participation Act limited the number of shares that could be owned by a single shareholder to 10%. This was done to ensure that Air Canada stocks would be broadly held by as many Canadians as possible. The section also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International.

Members must not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988. This was nearly five months after the January 1, 1988, birth of Canadian Airlines International from the fusion of all Air Canada's pre-1980 domestic competitors, Pacific Western Airlines, Transair, Nordair, Quebec Air, Eastern Provincial Airways and Canadian Pacific Airlines, into a single entity.

In 1988 Canadian Airlines parent company was governed by Alberta's Pacific western airlines act which set a 4% limit on the number shares any one group could control. In fact the 10% share limit set in the original Air Canada Public Participation Act was actually more liberal than the 4% limit set in the act governing Canadian Airlines.

Bill C-26 raised to 15% the number of shares that could be held in Air Canada following the takeover by Air Canada of Canadian Airlines in 2000. We are finally discussing whether to give Air Canada some of the same rights as other companies some 64 years after parliament first created a national airline.

If we were to believe government members, Bill C-38 would put Air Canada on a level playing field by striking down paragraph 6(1)(a) of the Air Canada Public Participation Act. Bill C-38 ostensibly puts Air Canada on that level playing field with all other airlines with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone it should be supported, and the official opposition supports this legislation.

Bill C-38 does little to address the short term financial woes of Air Canada that led to thousands of layoffs at Air Canada, including the laying off today of 500 to 700 pilots. I will explain.

First, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller. Second, no single shareholder is currently restricted by the present 15% limit, that is no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of this section. Third, if people were not inclined to buy Air Canada stock before the legislation the fact that they can buy more of it is simply not an incentive.

There are only two ways that Bill C-38 would financially benefit Air Canada. First, some of the debt which the Caisse de dépôt et placement holds would have to be converted into shares. The caisse currently owns roughly 9% of Air Canada stock and converting its debt into shares would give the caisse roughly 18%.

First, this move, based on a $2.50 price for shares at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada voting shares. Second, an individual or group would have to take control of Air Canada with a clear plan to restructure the company. This would not be enough unless the restructuring plan were to meet the approval of the transport minister and be acceptable to Air Canada unions.

The bill is essentially political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's plea for bigger and bolder policy moves such as the implementation of permanent new security regimes on the ground that are not only better but faster and more streamlined, placing air marshals on planes, and putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberation.

Bill C-38 requires us to examine the Air Canada Public Participation Act. While I am in favour of striking down paragraph 6(1)(a) of the act we should not stop there. We should ask ourselves a basic philosophical question. As we enter the third millennium should the government continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns?

Why should paragraphs 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada to maintain facilities and/or offices in certain cities? Surely these decisions are the responsibility of the company's shareholders and board of directors.

Why should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable to Air Canada and no other Canadian airline? If the Official Languages Act applies to Canada's airline industry it should do so in the Official Languages Act and not in the Air Canada Public Participation Act.

It hardly seems fair to hold Air Canada to a higher standard than Toronto based Canada 3000, Calgary based WestJet or Montreal based Air Transat.

Why should paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? Paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. The transportation minister should know that there is already a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

A corporation or other entity that is incorporated or formed under the laws of Canada or a province, that is controlled in fact by Canadians and of which at least 75% , or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56(3) of that act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect an airline's status as being Canadian. Paragraph 61(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic air service.

Section 69 only allows two types of carriers to operate international air service: Canadian air carriers and non-Canadian air carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, Canada 3000 and Air Transat were to allow foreigners to acquire more than 25% of their voting shares they would no longer be Canadian. They would lose both their ability to serve domestic routes within Canada as well as international routes between Canada and another country. In essence, they would lose the value of any potential buyer. This restriction is utterly redundant.

Given the restrictions against foreign ownership already present in the Canada Transportation Act, paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. Even if there were no prohibitions in the Canada Transportation Act, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because of the convention on international civil aviation, more commonly referred to as the Chicago convention. It sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is made possible through bilateral agreements in which governments exchange air rights for the benefit of their respective carriers. Each country can designate a national carrier on any international route.

Air Canada and Air France fly between Montreal and Paris. Air Canada and Korean Air Lines fly between Vancouver and Seoul. Air Canada and Cubana Airlines fly between Canada and Cuba. Only in the most exceptional cases will we find an airline flying between two cities where neither is in the airline's home country.

In virtually every case where a foreign airline flies between two foreign destinations it is only as an extension of a flight that started in the airline's home base. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto, Sao Paulo, Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

If Americans or people of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes in those countries even without the safeguards of the Canada Transportation Act. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Air Canada as an airline would cease to hold value for the investors who just purchased it without the ability to serve international routes. For this reason alone its board of directors would never allow foreigners to own a majority of Air Canada's stock.

We only need to look at the arrangement that American Airlines had with Canadian Airlines in 1999. Passengers were flown from the U.S. to Vancouver and then from Vancouver to Asia on Canadian Airlines jets. The reason for this was that American Airlines had only been granted routes to Japan from the U.S. and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian service provided by Canadian Airlines was based on bilateral agreements between Canada and the Asian countries concerned. American Airlines would have literally killed the goose that laid the golden egg had it taken control of Canadian Airlines.

I agree with repealing paragraph 6(1)(a) of the Air Canada Public Participation Act. The official opposition will support Bill C-38. However, having carefully examined the Air Canada Public Participation Act, we see no reason not to repeal the entire act itself.

It has at least four irrelevant sections. Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the past 12 years since the act has been passed. Section 11 deals with the continued appointment of Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This section has also been spent.

The act also discriminates against Air Canada in four specific areas. Paragraph 6(1)(a) limits share ownership of an individual or group to 15%. Paragraphs 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. That is mandated by the government and is not a decision of the company. That is mandated against Air Canada and not levied against other businesses. This is a government regulation that retards the economy.

Paragraphs 6(1)(b) and (c) restrict foreign share ownership in Air Canada. Section 10 makes the Official Languages Act applicable only to Air Canada and not other carriers.

The transport minister says that because the head office is mandated to be in Montreal it somehow adds virtue to a discriminatory policy which handcuffs Air Canada but does not handcuff other carriers. He says that it is in the national interest. It is in the national interest if it is in Montreal but not if it is in Calgary or Vancouver. That is not in the national interest; Montreal is the national interest.

It is a rather perverted approach to public policy. Why does the government not just leave companies alone to compete on an equal and level playing field in the free market? It might try it once. It does wonders.

If the government is intent on putting Air Canada on a level playing field with its domestic competitors it can do this not only by removing the share limitation in paragraph 6(1)(a) of the act but by repealing the entire act itself. This is what the official opposition believes the government should do.

I intend to call witnesses before the standing committee to examine the practicalities of repealing the entire act and the best ways to put Air Canada on an equal footing with its domestic competitors while respecting the other priorities now contained in the act.

If the transport minister would like to come before the committee and tell us why Montreal is more a Canadian city than Calgary, Hamilton, Toronto or Edmonton, he is free to do so. I encourage him to do so. It would be the death of the government if he did that.

The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers. Aviation law should apply to all Canadian carriers equally, not just to Air Canada.

The Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace. Just because Air Canada is a corporation does not mean that the thousands of Air Canada employees should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles and let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act and finally create the level playing field that people on both sides of the House keep saying they want.

I will be supporting Bill C-38, but I will also be introducing at committee amendments aimed at doing what Bill C-38 should be doing, which is putting Air Canada on a level playing field with its domestic competitors for the first time in its 64 year history; transport minister be damned.

[David Collenette, Liberal, Minister of Transport]

moved that Bill C-38, an act to amend the Air Canada Public Participation Act, be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to rise to speak to Bill C-38 this afternoon to try to get the sense of the House on furthering the improvement of airlines in Canada. This is a very short bill and it has one purpose: to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership of voting shares in Air Canada by any one person. I hope there will be speedy passage of the bill.

As most people know because we have been engaged in the airline file for a number of years Air Canada took on Canadian Airlines a couple of years ago. Over the last couple of years it has done a remarkably good job of merging the two airlines together.

There have been problems, not all of them of Air Canada's making. Some had to do with bad weather in the summer of 2000. Others had to do with the increase in air traffic when the economy was doing well. There was also an inability to merge the workforces on time.

All these things came together to create a situation that combined with high fuel prices and a declining economy in the last year caused problems for Air Canada before the events of September 11. Air Canada had publicly stated its need to get its house in order to attain more equity before September 11. The events of September 11 have compounded the problem and there is no question that Air Canada, as other airlines, requires a new infusion of equity.

Because of the constraints parliament imposed when Air Canada was privatized, it was impossible for the normal kinds of investment to occur in Air Canada that occur in other public corporations in the country. Investors who wanted a say in the direction of the company were stymied because of the legislation and the restriction on voting shares.

If we are asking the House to eliminate the limit on individual ownership it would be useful to give a bit of the history as to why the limit was imposed in the first place.

Air Canada was privatized in 1988 and 1989 under the enabling legislation which is before us and which would be amended by this bill. At the time the act contained a section that limited individual ownership of voting shares to 10%. The justification for the 10% limit was to ensure that voting shares would be as widely held as possible by Canadians.

Most people do not realize that the 10% limit was accompanied by a prohibition on association between persons who hold voting shares. This was designed to ensure these persons could not act together and take control thereby nullifying the concept of a widely held company. At the time no one thought much about that and the bill was passed. The 10% restriction remained in place until the year 2000 when we raised it to 15% by way of Bill C-26.

Members may remember that leading up to that bill there was an initiative by the government in the fall of 1999 to find a private sector solution to the woes that were bedeviling Canadian airlines. As a result of actions we took we precipitated a private sector solution. Two offers were before Air Canada at the time. One was from Onex Corporation. The other was a proposal that originated with the management of Air Canada.

I will not go into all the details, but people know that Onex withdrew and subsequently Air Canada's management made good on its promise to take over Canadian Airlines subject to certain restrictions. At the time in December 1999 there were intense negotiations between the government and Air Canada because with the demise of Canadian Airlines there would be one large carrier with 82% of the capacity in the country.

As a result of those negotiations, Air Canada decided on certain guarantees with respect to no involuntary layoffs and service to small communities. It has made good on its promises. I emphasize that during those discussions at any time the Air Canada board of directors was free to walk away from that initiative. It made a conscientious business decision which it had to live with in good times and in bad.

Of course the times right now are not as good. That is why the original objection by Air Canada management to changing the 10% and having single shareholders potentially own the company has changed. It has publicly stated its willingness to agree to this kind of a change. It is in agreement with it. Therefore I cannot see any great controversy.

The decision to move to the 15% limit was one we felt was at least in keeping with other crown corporations such as Canadian National Railways. We cannot take that particular comparison too far because the ownership limits on former crown corporations have been tailored to the specific industry sector. CN and Petro-Canada for example have a 15% limit but no limits on non-residents. Nordion for example has no individual share ownership limits except for the 25% for non-residents. Major Canadian banks will allow 20% but there is a fitness test. What we are proposing for Air Canada is appropriate to the Canadian air services sector at this time in our history.

As I said there has been some degree of support for this from Air Canada. In coming to the decision to remove the limit, I have been told by a number of people that any limit in the past has been a disincentive to an investor with serious intentions when investing to have a say in the company. That is why we have decided to re-examine the entire operation and to ensure that there is an equity infusion into Air Canada.

We have been fully engaged with all of the airlines since September 11 to look at their finances and ascertain their financial health. Obviously they have been adversely affected, as have airlines around the world. What we see in Canada is not unique to us; it is something that is being played out elsewhere.

We know what the United States government has done in the aftermath of the terrorist attacks. It came forward with a $15 billion package for the airlines, $5 billion for immediate compensation, $10 billion for loan guarantees. There was another $3 billion included in the $40 billion appropriations bill for reconstruction specifically for security measures. As I have said publicly, we are examining the efficacy of the Government of Canada taking on more of those security costs.

We have watched with some concern as airlines have faced difficulty. They have all reduced capacity and made many adjustments.

Just last week I announced a loan guarantee package for Canada 3000. That airline met certain objectives such as equity infusion by investors, reduction in capacity, the paring of workforces and most important, a business plan that would restore Canada 3000 to profitability.

What I said publicly last Thursday night is that kind of program will be available for the five principal airlines in the country that cover 95% of the market. I realize from questions in question period there are other smaller carriers that would like to avail themselves of a similar loan guarantee program, but they were covered in the initial compensation program. They were covered, as were all the airlines and airports, by our agreement to pick up the war risk liability for 90 days, the third party liability that was terminated by insurance companies which affected not only Canada's air industry but air industries around the world. We did this for the air carriers, the airports and Nav Canada. Everyone has benefited.

One has to draw the line somewhere in how far one goes in terms of loan guarantees. That is why we have said the five largest carriers that cover 95% of the market that are national in scope, they being Air Canada, Air Transat, Canada 3000, WestJet and Sky Service, would be eligible for the loan guarantee initiative. I am not sure that all of them will require it.

There is no question that air traffic has come back to some degree in the last number of weeks. It is gradually coming back to approximate pre-September 11 levels. However, that is not the case certainly on transborder traffic where there is still a significant reduction as compared to the period prior to September 11.

In looking at Air Canada in particular, we have said that perhaps by eliminating the single ownership limit the company would become more attractive to investors. It would allow more of an infusion of equity. It certainly would facilitate with the overall restructuring of the company.

We come with the message that we are preoccupied with the health of the transportation sector in general, but in particular the airline industry. We have made a number of changes to security regulations and safety regulations on board aircraft with the locking of cockpit doors and the strengthening of cockpit doors. In fact last Friday after I boarded the plane and before it left the gate, I was asked by an Air Canada pilot to see the new measures that had been put in place. I was quite impressed with how quickly that had been done and it had been done with the co-operation of Transport Canada. This is being done not only here but in the U.S. and elsewhere around the world. We are facilitating extra security on planes with the new regulations.

I hear my friend from the Alliance who is preoccupied with Americana and wants the provision of armed security personnel to be blanketed on Canadian aircraft. We have said yes for those flights to Reagan national airport, specifically because the American government has said that is a condition for Air Canada to go back to that airport. I think everyone in the House understands that. Anyone who has flown into that airport knows its proximity to the downtown core. It is not just any downtown core; it has the seat of government of one of the largest nations, arguably the most powerful nation in the world. Obviously there have to be some extra security provisions. We have agreed to that because Air Canada is unique on the open skies treaty in being able to use that airport. We did not want to inhibit Air Canada in any way, so we have agreed that the RCMP, Canada's national police, will be on those flights. I have said that we would consider it elsewhere.

However, our preoccupation has been to ensure that airport security be made more stringent and that those rules be put in place quickly and be enforced. Yes, there is some inconsistency across the country, but we are getting to that. We are dealing with that through inspections.

I was on the CBC town hall meeting last night. The Leader of the Opposition was on the panel. I was very happy when he agreed that the security regime has improved and that lineups at airports are diminishing as people get through the new rules.

Of course the one disagreement, in terms of substance, was the question of whether the government should go along with armed security personnel. As I have said publicly, we have that under advisement.

We have done much to help the airline industry and the airports. There are new regulations, new security regulations. I have no doubt that the security regime at Canadian airports, in the skies generally, and in other parts of the world is much better than it was before. I thought it was good before September 11 but it is much more stringent now. Canadians should feel very comfortable in flying. Indeed gradually people are going back. Even business class passengers who stayed away in droves following September 11 are starting to travel again, even some of them to the United States.

Our decision to amend the Air Canada Public Participation Act at this time is to provide another kind of assistance to Canada's largest carrier in its attempts to return to financial stability.

Air Canada is the world's 11th largest airline. It is an airline of which we can be proud. It has not been easy for Air Canada in the last couple of years with some of the problems that it has undergone. However, the quality of the professionals that work at Air Canada both in the air and on the ground is unparalleled. The quality of service we get on Air Canada is among the best in the world. It has been adjudged as such by international bodies.

We have an airline of which we can be proud. It is an airline that is having some problems, but it is an airline which I think has the ability to get over those problems. It is incumbent upon us as politicians and upon the House in general to facilitate solutions, certainly private sector solutions, on the part of our airlines, particularly Air Canada.

I am confident that if we enact the bill it will provide the private sector greater opportunities for investing in Air Canada which will contribute to a successful restructuring of the company. With the enactment of the bill, Air Canada will find itself on the same footing as all of the other airlines. No one else has a single ownership limit. We are not at this time proposing to raise the 25% foreign ownership limit. We do not think that is necessary. We are being consistent with many other countries around the world, including the United States, which keep that 25% limit. They believe inherently that an industry so fundamental to the economy, the fibre and the being of the country should indeed not only be operated by Canadians but controlled in effect by Canadians. If we need to change that we would not need legislation because current legislation allows that change to occur, at least the raising of the limit from 25% to 49%, by order in council. However we do not think that would be necessary.

We believe that the passage of the bill would be timely. It would give Air Canada the investment. As I said before, it is a very simple bill. It has three sections. The first removes the 15% limit and the prohibition on association. The second renders as null and void any other corporate documents that address the 15% limit. The third deals with when the changes will come into force.

I would hope that my colleagues would agree that this is just another step in the government's response and parliament's response to the tragic events of September 11. But in particular, it is also a response to the ongoing restructuring and realignment of the Canadian air industry which predated September 11. I hope that my colleagues would ensure speedy passage of the bill. Certainly at committee if there are any detailed questions members would like to ask, I am fully prepared to be there with my officials.

This is a bill that is in the national interests. It is certainly in the interests of airline passengers and all of those who believe that our national air carrier, Air Canada, should continue to be the great carrier that it is.

Airline Industry

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, I am very surprised. The Alliance Party, Reform as it then was, actually supported the government's policy. There were no divisions. In Bill C-26 we enacted the recommendations of the commissioner of competition, so I would ask the hon. member to get his facts straight.

With respect to the announcement I made last night with Canada 3000, is he telling Canadians that the government is wrong to give short term cash support to the number two airline to provide competition? Is that where the Alliance Party is?

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, my hon. friend knows that Bill C-26, which was passed recently, provided for Competition Bureau powers to deal with predatory pricing.

Application was made to the tribunal after the findings of the commissioner. The tribunal has adjourned those proceedings, but that is a matter that is separate from the government. It is a quasi-judicial tribunal that will deal with the matter in its own time.

Canadian Airline Industry

[Shawn Murphy, Liberal, Hillsborough, PE]

Madam Chairman, I appreciate the opportunity to speak to this take note debate on the difficulties being experienced at present by the Canadian airline industry. Our airline industry has long and short term challenges.

These challenges should be dealt with separately. We should not be mixing apples and oranges. The short term challenges result from the dramatic decrease in the appetite of the consumer for flight travel, especially international flight travel resulting from the terrorist incidents that occurred in New York City, Washington, D.C. and Pennsylvania on September 11.

Before dealing with the financial assistance that a lot of us are speaking about tonight, the first issue that has to be addressed is providing consumers with total confidence in the security of our airline system. Our Canadian system is safe and has been safe. Canada has an enviable aviation safety and security record and is committed to improving that record. However the system is not perfect and improvements have to be made.

Canada and all other countries around the world are taking extraordinary steps to improve the system. Changes must be made in both airport and air flight security. There must be increased terrorism response training for flight crews; increased use of sophisticated technology; total separation of the cockpit from passenger areas; worldwide identification and tracking of known terrorists or people who in the past have associated with known terrorists; and increased penalties for both the travelling public and, more important, the companies that operate within our Canadian airports for any violation of airline security regulations.

It has been said tonight that many of these actions are being taken. I compliment our Minister of Transport for the actions that have been taken to date.

I support the privatization of our airports. I have read or heard nothing that convinces me the Government of Canada is better able to operate the country's airports than the companies that are presently operating them.

Improvements have to be made, especially with the financial plight of our smaller airports. The Government of Canada must make and enforce the rules. What the Canadian airline industry needs right now is a return to normal flight levels.

Airline traffic will return. We are seeing positive signs, especially on domestic flights, that the number of passengers is slowly returning. Immediately after the September 11 incident traffic was down by 60%. Today it is my understanding that traffic is down by approximately 20% and decreasing daily.

On the issue of financial assistance to Air Canada, I am compelled to recommend a go slow and cautious approach. Any decision has to bear in mind that Air Canada lost $108 million in the second quarter of this year. That is nearly a million dollars per day for every day that it was operating during that period.

Robert Milton, president and chief executive officer, announced that Air Canada had to adopt a new business plan and lay off approximately 4,000 employees. That announcement was made prior to the September 11 incident.

Many of the commitments made by Air Canada during the takeover of Canadian Airlines and incorporated in Bill C-26 were in serious jeopardy prior to the September 11 incident. Any compensation package should be based on losses directly incurred as a result of the September 11 incident, and any package should be available to all airlines operating in Canada. That is the short term solution.

Unlike some of my colleagues, I am against the Government of Canada taking over Air Canada. A government owned airline would be cumbersome, uneconomical and inefficient. It would not have the flexibility to operate in today's complex airline industry.

Unlike many of my colleagues, I am against the Government of Canada taking an equity position in Air Canada. This would be politically pleasing in the short term but would cause considerable grief to the Government of Canada. I see difficulty convincing the public as we go forward that the government is not operating Air Canada. As the saying goes, “if you are in for a penny, you are in for a pound”.

The industry's long term problems are caused to a large extent by the sheer size of our country.

Canada is a geographically large country, the second largest country in the world, with a relatively small population. Servicing cities like Montreal, Ottawa, Toronto, Calgary and Vancouver will not be the challenge. The challenge will be providing air service to other cities, towns and regions that require economical, stable and reliable air service.

If Canada is to remain a strong country, regular, stable and cost efficient service is needed in smaller centres. We need a competitive environment, the environment that existed prior to the September 11 attacks. We also need mechanisms that in the long term protect service to our smaller communities.

Looking at the long term and going forward, I invite the transportation committee and the Minister of Transport to look at the following positive recommendations.

First, all airlines should be required, depending on the number of flights they have, to offer service to outlying communities, to the smaller towns, to the smaller regions. This would be done on a comparative basis, based upon the size of the airline and the flights they operate.

Second, all airlines operating on major routes should be required to accept passengers of a competitive regional carrier at a reasonable cost. This code sharing is similar to the concept that has been already successfully adopted in the long distance telephone industry.

Finally, and most important, there are many routes because of their remoteness that will require government assistance. Air service is the lifeblood of many communities in the western part of Canada, right across the northern part of the country and in Atlantic Canada.

The Government of Canada provides assistance for roads and wharfs. It assists the rail industry. It is only normal to accept the proposition that some assistance would go directly to the airlines that provide service to these communities.

There is tremendous pressure today, tonight and tomorrow on the government to straighten all the problems of the airline industry. We are under some artificial deadline this week. There is suggestion the train is leaving town and that everyone should be on the train.

What I am saying tonight is that the trains are already gone from a lot of these smaller towns, cities and regions. They do not have trains and they need air service.

The public is returning and will continue to return to the air. The short term difficulties should be dealt with as such. At the same time the government should seize this opportunity, this crisis, to look at a made in Canada solution to the long term challenges facing our Canadian airline industry.

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

moved

That this Committee take note of the difficulties experienced in the Canadian airline industry.

With respect to the U.S. measure on funding of $500 million for cockpit modifications, we are now discussing similar modifications with the industry. With respect to the measure to restrict the opening of the cockpit doors, I announced that prior to the U.S. announcement. With respect to the fortifying of cockpit doors to deny access from the cabin to the pilots in the cockpit, together with funding for cockpit modifications, we are pursuing these issues with the FAA and European authorities because any new regulations really have to affect Boeing in the U.S., Airbus in Europe and Bombardier. Those funding issues are now being discussed with the industry.

Another measure the U.S. is bringing forward is that of alerting the cockpit crew to activity in the cabin and ensuring continuous operation of the aircraft transponder in the event the crew faces an emergency. Again, we are working with the FAA and others to make the best use of new technology to enhance aircraft security.

We are part of this effort. It is a transborder, it is an international effort.

The U.S. announced the establishment of new standards for security operations. We already play a strong role in the management and oversight of airport security services. Our current role includes setting standards for the training and performance of screening personnel. Transport Canada employs inspectors across the country at all major airports to oversee the test and performance of screening procedures. Our inspection and testing procedures have been increased since September 11. We have retained additional personnel, many of them with experience in security and other technical areas, former Transport Canada employees. We will be building on that as the weeks go ahead. In this case the new U.S. measures bring them more into line with Canadian practice.

With respect to the supervising of the passenger baggage security at 420 commercial passenger airports in the U.S., we already play a strong role in the management and oversight of airport security services. This includes setting the standards for training and performance of screening personnel. The U.S. is following Canada in becoming more involved in security oversight. The government's assuming direct management and operation, which of course was the practice a few years ago, is something that has been advocated by many in the House. We are not closing the door on anything, but I would like to have the views of hon. members on this.

Last, the president of the United States talked about extensive background checks and test screeners and security personnel. We are already doing this. We are working with the RCMP and CSIS conducting background and security checks of anyone requiring a permanent restricted area access pass, including screeners and airside workers. Steps are already under way to further improve the clearance program. In fact, again the U.S. is adopting practices which are already in place in Canada.

That is not to say that we have all the wisdom. We are learning from the FAA. We are working together. Canadians have to know that there will be a seamless security regime in North America. It does not mean to say that we cannot do things our own way, implement our own measures as we did on September 11. Of course the FAA was comfortable with the measures that we instituted on September 11, as we were comfortable with theirs.

In the remaining minutes I want to talk about the viability of the Canadian airline industry because there has been a lot of discussion on that in the last few days. Certainly the House provided leadership in the restructuring of the airlines because we ensured that the interest of the general public, travellers, employees and small communities were protected. Despite the difficult problems of merging operations of the two carriers in the last 18 months or so, and there have been many bumps as we know and we all have our own little tales to tell, frankly Air Canada has done a very good job on a macro level of merging the two carriers. In recent months it was turning its attention to improved customer service and plans for the future when the business environment began to change.

Bill C-26 was designed to protect and enhance competition and express confidence in the ability of the industry to meet the needs of the travelling public. That competition was there before September 11. The market share domestically of Air Canada declined from about 82% to 65%. Even before the events of September 11 the combination of an economic slowdown, a rise in fuel prices and a major drop in the level of business travel began to take a bite out of the airline industry worldwide. Canadian carriers, including Air Canada, announced plans to adjust its operations to the new realities.

The terrible events of September 11 and the major cost of the shutdown period have pushed the airline industry, already suffering from the beginnings of an economic downturn, into a tailspin. The losses threaten the financial viability of some carriers.

The situation has been made worse because many travellers choose not to fly or use alternative modes for travel. Forward bookings are down.

In response to the changed conditions, airlines all over the world have announced painful restructuring programs to deal with the crisis. Air carriers have announced layoffs, capacity cuts and aircraft withdrawals. Within two weeks, over 125,000 jobs worldwide have been lost, including in Canada.

Stock prices of major carriers around the world have declined dramatically in the aftermath of September 11. Carriers have experienced problems in raising loans as the perceived risk of investing or lending to air carriers has increased. The cost of the shutdown, the drop in revenues from declining air travel and the inability to borrow money has placed a great strain on the cashflow of most Canadian carriers.

The crisis in the airline industry has wider impacts beyond the industry itself. The drop in airline travel has affected a broad range of related industries, NavCanada, airport service providers, aerospace and tourism to name but a few.

I would like to reassure Canadians that the government will take firm action to maintain the viability of the Canadian airline industry throughout this crisis. I want to hear the views of members of the House tonight before the government moves forward. I must remind my colleagues that the government has already acted in some areas, such as in providing 90 day indemnity for third party war and terrorism liability for essential aviation service operators in Canada. I think that since September 11 we have shown that we want to act and we are prepared to act.

Everyone has a view on the future of the airline industry. However, I can say categorically that the government is committed to the continued viability of all of the air carriers in the industry and especially our nation's flag carrier, Air Canada, which is the world's 11th largest airline. We are committed to that.

The shape and the form of Air Canada as we go forward in the months ahead is something for debate in this House and is something to be determined. I believe that when this is all done, Air Canada and the other companies affected will come out of this crisis stronger and renewed to provide Canadians with the kind of air service that they want and deserve.

Airline Industry

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, the minister from Toronto is from a city where the largest number of Air Canada employees actually work and reside, so I do not need to be lectured by the NDP or anyone else.

This matter is extremely serious. Last week Air Canada approached us with respect to the interpretation of Bill C-26. We agreed, after discussions with our lawyers, that the interpretation of no involuntary layoffs in Bill C-26 dealt with the merger of Canadian Airlines and not with the extraordinary situation with which we are now faced.

Message From The Senate

[The Deputy Speaker]

I have the honour to inform the House that when the House went up to the Senate chamber the Governor General was pleased to give, in Her Majesty's name, the royal assent to the following bills:

Bill C-12, an act to amend the Judges Act and to amend another act in consequence—Chapter No. 7.

Bill S-24, an act to implement an agreement between the Mohawks of Kanesatake and Her Majesty in right of Canada respecting governance of certain lands by the Mohawks of Kanesatake and to amend an act in consequence—Chapter No. 8.

Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions—Chapter No. 9.

Bill S-17, an act to amend the Patent Act—Chapter No. 10.

Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act—Chapter No. 11.

Bill S-16, an act to amend the Proceeds of Crime (Money Laundering) Act—Chapter No. 12.

Bill S-3, an act to amend the Motor Vehicle Transport Act, 1987 and to make consequential amendments to other acts—Chapter No. 13.

Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts in consequence—Chapter No. 14.

Bill C-13, an act to amend the Excise Tax Act—Chapter No. 15.

Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco—Chapter No. 16.

Bill C-22, an act to amend the Income Tax Act, the Income Tax Application Rules, certain acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act—Chapter No. 17.

Bill C-3, an act to amend the Eldorado Nuclear Limited Reorganization and Divestiture Act and the Petro-Canada Public Participation Act—Chapter No. 18.

Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act—Chapter No. 19.

Bill C-28, an act to amend the Parliament of Canada Act, the Members of Parliament Retiring Allowances Act and the Salaries Act—Chapter No. 20.

Bill C-9, an act to amend the Canada Elections Act and the Electoral Boundaries Readjustment Act—Chapter No. 21.

Bill C-25, an act to amend the Farm Credit Corporation Act and to make consequential amendments to other acts—Chapter No. 22.

Bill C-4, an act to establish a foundation to fund sustainable development technology—Chapter No. 23.

Bill C-29, an act for granting to Her Majesty certain sums of money for the public service of Canada for the financial year ending March 31, 2002—Chapter No. 24.

Bill S-25, an act to amend the Act of Incorporation of the Conference of Mennonites in Canada.

Bill S-27, an act to authorize The Imperial Life Assurance Company of Canada to apply to be continued as a company under the laws of the Province of Quebec.

Bill S-28, an act to authorize Certas Direct Insurance Company to apply to be continued as a company under the laws of the Province of Quebec.

Pursuant to order made on Wednesday, June 13, the House stands adjourned until Monday, September 17, at 11 a.m. pursuant to Standing Orders 28 and 24.

(The House adjourned at 5.26 p.m.)

Points Of Order

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order. Moments ago a bill was introduced, Bill S-15. I take this occasion to indicate to the House that it is my belief that the bill cannot proceed to the next reading because it is out of order.

Bill S-15, which was just introduced in the House, creates an independent foundation to provide funding for programs to prevent the use of tobacco products by young people. It is obviously a very laudable initiative.

The funds would come from a tax on tobacco products. The senator who introduced the bill expects that such a tax will bring in $360 million each year to fund the foundation.

As members know, section 53 of the Constitution Act, 1867, states:

Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons.

Beauchesne's states:

A Ways and Means motion is a necessary preliminary to the imposition of a new tax, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of the incidence of a tax so as to include persons not already payers.

Whether we are talking about imposing a new tax, continuing an expiring tax, increasing a tax or extending the incidence of a tax, a ways and means motion is necessary. Beauchesne's also states:

Only a Minister of the Crown can move a motion to impose a new tax.

Bill S-15 is essentially the same as a bill tabled in the first session of the 36th parliament, Bill S-13. The principal differences between Bill S-13 and Bill S-15 are a detailed preamble and the addition of part III which sets out what are claimed to be the bill's benefits to the industry.

However the new bill is the same in purpose and operation as was Bill S-13. The main purpose of Bill S-15 remains: to prevent the use of tobacco products by young people. Its mechanics to implement that purpose are completely identical. I therefore suggest that the same treatment be reserved for this bill as for the prior one. The taxation powers of Bill S-15 of $360 million per year are increased fivefold over Bill S-13, which would have raised $70 million annually.

Mr. Speaker, your predecessor, Speaker Parent, concluded that Bill S-13 constituted a tax bill and as such constitutionally and procedurally could be initiated only in the House of Commons and only after the House had concurred in a ways and means motion tabled by a minister of the crown. The bill was therefore ruled not to be properly before the House.

I submit that the ruling on Bill S-13 applies to Bill S-15. As I have indicated, the two bills are in essence the same in purpose and operation. Like Bill S-13, Bill S-15 must be considered a taxation measure which should have been initiated and could only be initiated in the House and not the Senate after concurrence in a ways and means motion proposed by a minister of the crown.

The government and the House recently took action to address tobacco use, and in particular smoking by young Canadians, by passing Bill C-26, the tobacco tax amendment bill. I will quote a speech made in the other place by Senator John Bryden who noted that Bill C-26 and Bill S-15 both claim to reduce tobacco consumption to meet national health objectives. Senator Bryden said:

I have much difficulty making the difference between Bill S-15, which will charge $1.75 per carton, and the bill that was introduced from the other place today, which will charge $2 per carton. One is called an excise tax; the other one is called a levy.

Bill C-26 was introduced in the House after concurrence in a ways and means motion which was introduced by a minister of the crown.

I submit to you, Mr. Speaker, that although Bill S-15 has the laudable objective of reducing smoking by young Canadians, it is a taxation measure. As such it should have been initiated and can only be initiated in the House of Commons after concurrence in a ways and means motion which furthermore can only be proposed by a minister of the crown. The House did almost the same thing by introducing Bill C-26 which was preceded by a motion of ways and means that was concurred in prior to the bill's introduction.

I therefore submit that the bill cannot be introduced in the House. Now that the member has gone through the process of introducing it, it is not properly before the House, to use the language your predecessor used, Mr. Speaker. Therefore I ask the Chair to rule that the bill is out of order and not properly before the House.

Tobacco Tax Amendments Act, 2001

[The Acting Speaker (Mr. Bélair)]

It being 6.30 p.m. and pursuant to the order adopted earlier today, Bill C-26 is deemed to be read a third time and passed.

(Motion agreed to, bill read the third time and passed)

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, it is with pleasure that I rise today to speak on Bill C-26. I thank my colleague, the member for Richmond—Arthabaska, for his comments and personal reflections on this issue.

It is important to realize that smoking is on the rise in Canada, particularly among young people. That is the most troubling part of this whole trend relative to smoking. In 1990 in the age group between 15 and 19, 21% of that age group was smoking. That rose to 28% by 1999.

Let us look at our strategy to combat smoking. We have seen the banning of sponsorship of auto races and cultural events across the country. It is questionable whether or not that ban has helped reduce smoking. What it has done is reduce funding for cultural events across Canada. I question the government's strategy on whether or not banning sponsorships of cultural activities has made a big difference in reducing smoking. That has been part of the government's strategy.

Another one strategy has been these garish, egregious packages which have pictures of gangrenous feet and cancerous lungs. Now we have teenagers trading them like playing cards, with one teenager saying to another “I'll give you a gangrenous foot for a cancerous lung”. That sort of thing is going on, so I sometimes question whether or not that initiative is achieving its mark.

One jurisdiction that has made a difference in reducing the incidences of smoking with young people is California. We should take a serious look at how their best practices achieved that reduction in smoking. Certainly its advertising and promotion was very sophisticated. There was not a banning of sponsorship of events by the cigarette companies. Those have continued. The warnings on the cigarette packages are discreet but we have seen in recent years a 43% decline in smoking in California. The big difference is the funding of educational programs.

In Canada the government's latest initiative will result in what I think works out to about $2.33 per Canadian per year. In California the amount of funding devoted to smoking cessation or anti-smoking initiatives, from a marketing and educational perspective, is closer to $5 per person.

California focused on community groups, schools, the education system and on trying to avoid the behaviour from being developed in the first place. We really should take a hard look at California and other jurisdictions that have been successful in this light.

The government has the best of intentions with a lot of these initiatives. That is not to be questioned. What is more important than just having the best of intentions is having great results. We should take a serious look at a more significant investment on the education side and working with the provinces to ensure that we are doing everything we can to prevent young people from smoking.

As I said, I personally question the banning of the sponsorship of sports and cultural activities. I do not think that has had an impact. I stand to be corrected. I also question the garish packages with the pictures on them. I think that has perversely in its own way, through some type of reverse psychology, created an attraction to young people who, for some reason that is beyond me, are drawn to these sickening packages.

Whether or not the price will affect people's decisions, I can only speak in an anecdotal way from constituents who have told me that increases in cigarettes prices make a difference. They make a difference in their lives in terms of the affordability. It is intuitive to expect that raising prices will have an impact on reducing the actual incidence of smoking.

I do not smoke any more. When did I never bought them, I used to bum them off my colleague from Richmond—Arthabaska, so the price was never a factor for me. However smoking caused a few friendships. It was my efforts that slowly reduced the incidence of smoking in our caucus because none of the other members could afford to smoke and give me free ones. There are reasons why I am finance critic. Parsimony may be one of them.

I am very pleased that I have quit smoking. I feel very good about that. I am looking forward to the day when our caucus is completely smoke free. We are nearing that day very quickly. By that I mean I want the member for Richmond—Arthabaska to quit smoking, not that I want him to leave caucus. I see the hon. member for Compton—Stanstead opposite and I just wanted to make sure that I was being absolutely perfectly clear on this.

In any case, I commend the government's efforts in this regard. It is something of which we have to do more. I question some of the directions and initiatives, but I certainly do not question or dispute the positive intentions of the government. I just hope we are doing everything we can to fight this scourge on the health of Canadian citizens and to foster a healthier Canada, as we have now entered the 21st century. We have to work together to ensure that happens. As policy-makers and as leaders, we have to ensure that we do everything we can to ensure that. With health costs rising, the one way we can make a difference is to reduce the incidence of smoking, particularly with young people.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, that is it exactly. I thank the parliamentary secretary for his remarks. Indeed, in Canada, when there has been a marked, rapid and brutal increase in the taxes on tobacco products, the black market has moved in.

That said, the data are available and studies, which are, more or less conclusive, have been done. In the U.S., for example, increased taxes on cigarettes had limited effect on the number of smokers per age group. When one state is located in the central part of the States, and its partners from the other states have similar measures, data are available.

In Bill C-26, the most interesting measures, as I was saying earlier, concern a tax on tobacco products at the factory gate. This is about what we have. The old federal taxes we had prior to the arrival of the infamous, questionable and questioned GST, like the old federal manufacturing tax, resolved part of the problem.

It will be interesting to see the effectiveness and the impact of a tax on health. There is a study that has nothing to do with health. At one point a curve was developed, which was used frequently by Mr. Reagan in the States: the higher the taxes, the higher the revenues. At a certain point, however, revenues drop.

It will be interesting to see what tax on cigarettes will be the optimum in discouraging smoking among the young. I hope that the Department of Health will monitor this closely.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, I have a couple of technical points to make before I start. I advise the Chair that I will be splitting my time with my colleague from Kings—Hants who has not had a cigarette since the holiday season. He is setting a example for the House.

I would also like to thank the translation service and the interpreters. I find it very hard to stick to my prepared speech. I want to thank them for their understanding and for trying to follow me. I will try to speak more slowly. They do an absolutely remarkable job and I take this opportunity to congratulate and thank them for their understanding.

This being said, Bill C-26 is a tax bill, which hopefully will change things in the area of health. While I was looking at the bill I was thinking “Can a tax bill really save lives?” We certainly hope so, and this is the reason why we have been asking the government for a long time to put money back into health. The government should put more money into health.

If we are willing to levy an additional tax to put warnings on cigarette packages alerting young people to the dangers of tobacco, if it works, and we hope it will, we should take this opportunity to invest massively in transfer payments to the provinces so that they can deal with others issues.

Bill C-26 sets this amount at $4 per carton of cigarettes. I am a smoker, the only one in the Progressive Conservative caucus, and I am wondering why $4, why not $3, why not $10? Honestly, I do not know why. The government is proceeding cautiously, step by step. It claims smuggling is not an issue, yet it is still moving very timidly, according to anti-tobacco groups both in Quebec and the rest of Canada.

The parliamentary secretary said that $4 will give us this much money. It would have been interesting to know what the impact of a tax increase is on cigarettes sales. If people buy less, revenues will be lower. What are the mathematics? What is the government's objective in introducing Bill C-26 as it relates to the reduction of tobacco use, particularly among young people? We do not know.

Of course, it is not ethically correct to say that $4 are added to the price of a carton of cigarettes. However, we do not know what the government's plan in the fight against tobacco is. We know that a bill is coming from the other place.

People are applauding Bill S-15, except that there is a problem with parliamentary tradition. The problem is the fact that a tax is asked for by the other place. The House will examine that bill. I am not worried about that. If Bill S-15 is not acceptable to this House, in accordance with parliamentary tradition, the government, if it is serious, will introduce a bill the very next day, using the same arguments and the same information and will identify it with a C instead of an S. If the government is serious about its fight against tobacco, it must arrange to apply the principle behind the details in the bill.

This being said, $4 is one thing, but interestingly, the government is controlling something controllable in the fight against tobacco. We remember that, when there was a major increase in taxes, companies would sell their cigarettes to the United States and the cigarettes came back through somewhat illegal channels. We would buy Canadian tobacco, but it had made a short trip to the United States before coming back here. This bill corrects this situation.

We knew that one of the reasons why there was a black market was the fact that there was no tax on cigarettes coming out of the production plant. It took years to deal with that issue. We were aware of the problem and of the legislation, but it took six or seven years to make it into an efficient tool.

Now we are told that there is no problem anymore. We know that the black market is active again, albeit to a lesser degree than before, because it is harder now. However as we all know, if there is money to be made, criminals are usually quick to get involved.

As for the Canada—United States agreements, we do not know what measure was taken so that both sides would talk to each other. The case of duty free shops is interesting. People used to go to Old Orchard or elsewhere in the United States for a day or two, perhaps a week, and come back with cigarettes that cost a lot less. That situation is being corrected. This only makes sense.

Indeed, if tobacco products are taxed in Canada because they are deemed to be dangerous products, there is no reason to sell them for less to Canadians who buy them in duty free shops. We must be consistent. The Minister of Finance and his American counterpart deserve praise for having taken the necessary steps to deal with this issue.

We support Bill C-26, but the fact is that according to statistics, over 40,000 people die every year because of tobacco. If two people die from another cause, the government takes immediate action to ban that cause. However tobacco kills 40,000 people per year, and all it does is increase taxes and tell Canadians that it is a dangerous product. I find this a bit cynical.

I come from a town called Asbestos. What is being said around the world? “Asbestos kills. We are banning it”. If we apply the anti-tobacco logic, why not ban tobacco? Why not say that it is a dangerous product and that we are simply banning it. Why not? Because there is a certain degree of social acceptance.

We hope that the anti-tobacco program will be aimed not just at young people, but at all Canadians. Smoking must become unacceptable. I am a smoker and I must say that the bylaw recently passed by the new city of Ottawa, which will take effect August 1, promises to make life difficult.

They are talking about increasing the buffer zones, even outside. There will be buffer zones, as there are in hospitals, for instance. When one goes to the hospital, one may not smoke. There are even restricted areas at entrances. We do not have this situation in the parliamentary buildings; we have our famous smoking urns outside.

I recall being outside smoking a few years ago when the temperature was minus 35 Celsius. Neither cold, nor snow, nor sleet, nor rain will stop a smoker. We are like letter carriers, so we go outside to smoke, and the current Deputy Prime Minister went by and said: “My God”. It smelled terrible. Eventually the buffer zones will be enlarged.

That having been said, it is true that there are people who die because of tobacco. An additional $4 per carton will not solve everything. Bill S-15 will not solve everything. What is missing in this battle is a united front. The battle does not involve the federal, provincial and municipal levels. They do not talk to one another. This is nothing new on the part of the federal government, which acts on its own most of the time, but it ought to talk to its partners.

What other municipality would act like Ottawa? Does it have the support of the provincial and federal governments? We do not know. Within the information program, will the federal government spend money to encourage the provinces and municipalities to pass bylaws, as it has with the City of Ottawa? If there is a constitutional problem relating to a total ban on smoking, will the federal government be prepared to listen to the arguments?

There are logical measures being put forward and we applaud them, but taxation measures are not what is going to solve health problems.

I will close with the remark that, if it is a good thing to address youth smoking by adding more tax and to use those funds for awareness and education campaigns, it is surely also a good thing to reinvest in the entire health system the necessary funds to provide choices to people, not just Quebecers but all Canadians, so that they can live healthier lives.

We applaud Bill C-26 and await Bill S-15, these financial legislative measure introduced in this parliament, which make sense for the health of those we represent. The Conservative Party will be supporting them. Thank you, Mr. Speaker, and may I wish you good health.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, I cannot help but begin my portion of the debate on Bill C-26 by commenting on developments within the Canadian Alliance ranks.

I did not believe we would ever see the day when members of the Canadian Alliance would be supporting a tax hike. However, here they are today. I guess stranger things have been happening over the last little while. It is wonderful to see the transformation of Canadian Alliance members. I say good for them for recognizing that the tax system is an important part of shaping good public policy.

I hope they are able to use the logic they have applied to this debate in seeing tax increases as playing an important part in creating responsible social behaviour. It is something that needs to be extended and looked at in a whole number of areas, including conservation of our natural resources, the reduction of poverty in our midst and the pursuit of social justice. That is the bottom line in terms of the taxation system and what is important for Canadians.

I am also tempted at the start of the debate, following developments earlier in the House today, to say hello to my mom. It is a wonderful opportunity to pay tribute to mothers across the land and to make the connection between mother's day and the debate we are having today on tobacco control.

Many times in our history mothers have led the fight to create safer communities to protect the health of our young people. They have been involved in stopping drinking and driving. They ensure that pregnant women take all the necessary precautionary steps. They are also trying to prevent young people from getting addicted to the deadly product of tobacco. Women have been doing an incredible service for the country in the pursuit of health and well-being for all our citizens.

Today we have an opportunity to talk about tobacco control and to acknowledge the work of the federal Liberal government in pursuing one part of a comprehensive strategy to reduce the use of tobacco in society and to prevent addiction to cigarettes.

I acknowledge the importance of Bill C-26. It is a bill that would increase taxes on tobacco products. It would amend a number of acts which would result in an increase of $4 on a carton of cigarettes. That is an important development.

The members of the New Democratic Party certainly will support Bill C-26 at the final stage of approval by the House. However, I think it is incumbent upon us at this moment with this opportunity to look at what else the government could have done and to urge it to do more in this regard.

I was pleased to hear the Parliamentary Secretary to the Minister of Finance suggest that this is a beginning, that there are more tax increases on the way and that the government recognizes there is room to move when it comes to increasing the price of cigarettes and still not be worried or pressured because of the threat of smuggling.

I think it is fair to say that the government is actually making up for lost time. It has perhaps, I hope, seen the error of its ways in that devastating decision in 1994 when it caved in to the tobacco lobby, rolled back the tax increase on cigarettes and actually contributed to the very serious problem of smoking among our young people today.

It has to be acknowledged what that kind of taxation policy does and what that kind of caving in to tobacco companies can do in terms of our collective pursuit of preventing the use of tobacco and stopping addiction to cigarettes among our young people.

I hope the Liberals recognize what they have done and I hope today's measure in the form of Bill C-26 is an acknowledgement of their past wrongdoings and a determination to right a wrong and to move forward, doing everything we can.

In 1994 we had an opportunity to keep the taxes high on cigarettes, to keep products out of the hands of young kids and to stop a lot of folks from getting addicted. I think we really did a great disservice to this country. Because of the threat of smuggling, we dropped the tax increase and actually caused more young people to get addicted to cigarettes. It is fair to remind the House that under the Liberal government, addiction to cigarettes among young people has actually increased.

It is important to refer to the government's own document put out by Health Canada, entitled “Canadian Tobacco Use Monitoring Survey” for February to December, 1999, which points out that smoking by teens aged 15 to 19 years, though down significantly from 43% in 1981, has increased 21% since 1990 but appears to have reached a plateau at around 28% since 1994.

In the Liberal era, smoking among young people and addiction to cigarettes has actually increased significantly. That has to be the direct result of caving in to the tobacco industry in 1994 around the tax increases and a result of a failure of the government to actually implement a fully comprehensive smoking cessation program.

The question for us today is this: is a $4 increase on the price of cigarettes enough? Could we do more? The answer is clear. Many groups have said there is all kinds of room to move. We know from some of the mapping done by those involved in this field that there is still a considerable gap between the price of cigarettes in Canadian provinces and the price of cigarettes in U.S. border states. The statistics suggest that we could raise cigarettes prices quite a bit more in order to be even closer to the price of cigarettes in the United States, so there is no need to be leery about the whole issue of smuggling in that context.

The comments of groups that have pointed out that we have overreacted to the threat of smuggling are legitimate. It is very important to remind ourselves that perhaps the government got caught up in something that did not necessarily have a basis in fact.

I point specifically to much work done by the Canadian Cancer Society and the Non-Smokers' Rights Association, which over and over have reminded the government that it has room to move in terms of increasing the price of cigarettes. In fact, they suggest that even if the Canadian government raised tobacco taxes by $10 per carton the price gap between Ontario-Quebec tobacco and the now much more expensive American cigarettes would only close by about 50%. They said that in a letter and documentation put together by those two organizations in March of this year.

The executive directors of those two organizations, Ken Kyle for the Canadian Cancer Society and Garfield Mahood for the Non-Smokers' Rights Association, stated:

—we believe the fear of smuggling in some quarters has been greatly exaggerated. If the United States can maintain high tobacco taxes without significant smuggling, so can Canada.

I put that on the record because I take in all seriousness the parliamentary secretary's comments about potential future increases and indicate to him that there certainly would be no opposition from us. I believe that he would have the support of many Canadians if his government chose to do that on an expeditious basis.

There is another question around this announcement and this bill. Is there enough money for and is Canada doing its part in tobacco prevention and cessation? The announcement that was tied to the tax hikes under Bill C-26 indicated that there would be an additional $480 million over five years for the tobacco control program in Canada. That is clearly still far below the levels that most groups active in this field have called for. It is certainly not much of an increase when we break it down in terms of what the government is spending today.

The government's own press release indicates that about $210 million over five years would be assigned directly for prevention of tobacco addiction and for tobacco control programs. That is about $42 million a year. That is hardly in line with what Canada is obligated to spend if we are to deal with the serious problem in our society today. I do not need to repeat the figures.

We heard from the Alliance and other members today about the 6 million smokers in Canada today, the 45,000 deaths per year, the fact that 250,000 young people annually become addicted to cigarettes, the fact that 90% of all smokers are addicted before the age of 18 and the fact that we spend $3.5 billion annually in terms of the health costs associated with smoking. All of those facts should be obvious to the government and should point this government clearly in the direction of an increased expenditure for smoking prevention and cessation programs.

That is precisely the essence and the purpose of Senator Kenny's bill, which has been through this House a couple of times and is on its way for the third time. Bill S-15 is due to arrive in the House very shortly. It follows on the heels of Bill S-20 which died on the order paper when the election was called. That followed Bill S-13 which was killed here in this place as a result of the government rising on a point of order and suggesting that it was out of the bounds of this place to pursue a money bill, a tax bill, that came from the Senate.

There is a question for all of us today. Given everything we have learned, given the work by groups on this bill, given the clear changes to Bill S-15 to make it compatible with the rules of this place, what will this government do in the next couple of days when the bill makes its way from the Senate to the House of Commons?

I hope that under no circumstances would the government try to put the kibosh that bill and suggest that it is not within the purview of this place to proceed with a bill that would actually raise the price of cigarettes on a much more significant basis than the government has been prepared to do to date and would ensure that the money is targeted specifically for smoking prevention and cessation programs. We are looking under that bill at a fund of approximately $360 million a year to be dedicated to smoking cessation and prevention among young people and others in our society.

If we compare that $360 million a year to the $210 billion that the government promises to dispense over five years, we can see the huge gap in the proposals and the clear need for Senator Kenny's bill. I would hope that when the bill enters this place we would all be united in support of the bill to ensure it is allowed for debate so that we can have a meaningful discussion about the values of a tobacco control initiative that increases the cost of tobacco by another $10 per carton and ensures that the money goes into a special fund to be administered by non-profit organizations.

That would bring us much more in line with other countries that are taking the issue seriously. It is important, for the record and for the government today, to be mindful of the fact that under the government and the way we administer our programs dealing with tobacco prevention, we spend about 66 cents per capita on this important endeavour. Many others have pointed out how that compares to other jurisdictions. For example, $32 per capita is spent by the state of Ohio and $16 per capita by Massachusetts and so on. All academic overviews of the issue and all analyses by experts on this serious problem in our society show that Canada should be spending more like $270 million to $720 million a year on dealing with a problem that is growing as we speak.

The facts that more young people are turning to cigarettes, that smoking at an early age leads to a lifelong addiction and that it very likely leads to ill health and even death should be enough to tell us to get on with the job and do something now. The old expression that a penny of prevention is worth a pound of cure suggests that if we invest a little bit now we will save a heck of a lot later on if we are serious about this problem.

Finally, as part of a comprehensive strategy dealing with the high rate of tobacco and cigarette smoking in society today, we must have an increase in the cost of cigarettes, as the government is doing in part today. We must have a clear focus on education and prevention, a model of which is provided by Senator Kenny's bill coming from the Senate this week.

We also must do more in terms of advertising and restricting tobacco companies' attempts to get through to our young people. It was just over a month ago that we raised in the House a totally destructive ad by du Maurier which ran in dailies across the country. It was a huge colour advertisement that basically suggested there was a free trip to the city of New York to be won if one was a smoker and over the age of 18. The ad said “Live it up in the city that never sleeps. Win one of two amazing New York experiences”. It went on to set out the terms and conditions for applying for that prize.

The government has done nothing. We have appealed to the government to look at the Tobacco Act and to realize that this is contrary to the law. We have called upon the Minister of Health to take action. I wrote to the Minister of Health on March 23 and asked him to please take action against du Maurier and do something about that deplorable ad. I have yet to hear from him. I am hoping that this is still under advisement and that the Minister of Health and the government are prepared to apply the full force of the law in regard to this ad by du Maurier, because it is contrary to the law. We have heard clearly from many groups about how it violates the law.

I am referring to the Coalition québécoise pour le contrôle du tabac, which said, on March 27, “The tobacco industry is thumbing its nose at the government and its Tobacco Act”.

This was the reaction of the Coalition québécoise pour le contrôle du tabac to the new du Maurier ads announcing a contest to win a five-day trip to New York.

That organization gave the Minister of Health some very specific articles in the tobacco act to pursue in terms of contravention. Specifically that organization and others have referred to articles 21 and 29 of the tobacco act. We hope the government will take action. If it is serious, as it indicated today, about controlling access to cigarettes by raising the price then surely it is prepared to take on tobacco companies when they break the law. Surely the government is prepared to show leadership by example.

Leadership by example would do more than anything to deal with this tragic epidemic in society. I am thinking specifically of the government's decision to include tobacco industry representatives on the trade mission to China in February.

It struck us and many Canadians as odd that the government would show such hypocrisy. On the one hand it pretends to be interested in controlling tobacco use and on the other hand it promotes tobacco in a country where there is already an epidemic of smokers. Some 800,000 Chinese people die every year because of tobacco addictions.

The government is involved in global efforts to control tobacco and we commend it for that. Given the fast flow of goods and services around the world, dealing with cigarette addiction and coming up with meaningful tobacco control programs must be done internationally. That is precisely where we would like to see the government show leadership.

We commend the government for being involved in what is clearly an important initiative, one that requires more time and effort by all of us. However it is hard to take seriously the government's efforts regarding international tobacco control when it is neither showing such leadership domestically nor leading by example in terms of ensuring we practise what we preach wherever we go.

We support Bill C-26. Increasing the price of cigarettes is an important and necessary step. However it falls far short of a comprehensive strategy that involves education, prevention, advertising restrictions and ever increasing prices on tobacco so that it is priced out of reach of our young people.

I thank the House for its attention and urge the government to follow these suggestions.

[Bob Mills, Canadian Alliance, Red Deer, AB]

Mr. Speaker, it is my pleasure to speak to Bill C-26, the tobacco tax amendments act, 2001.

Last year as a member of the health committee I listened to a lot of testimony from various tobacco producers and sellers. I also listened to many health experts and it became fairly obvious after several months of hearings just how damaging tobacco is to society and how it impacts on our health care system.

Whether it is the heart association or the cancer association, all of them bring solid evidence that tobacco kills. They tell us that 45,000 Canadians are killed directly by the use of tobacco every year. They also show figures representing billions of dollars taken from our health care system as a result of this habit.

Like the last member who spoke I find the most discouraging, disappointing and despicable part of the whole tobacco industry is the targeting of young people and the various ways that it operates around the world.

While in Germany recently I went past a number of schools. Adjacent to a school, sometimes on all four corners, there would be cigarette machines and advertisements targeting young people. We do not have that in Canada because we have progressed a long way from that. However that is the kind of industry we are dealing with, one that targets young people even in an advanced country like Germany.

Over the many years that I have travelled to developing countries I have seen little 10 packs of cigarettes being given to children outside schools. These children are only 8 and 9 years old. Many reports indicate that these cigarettes contain many times the nicotine level contained in normal cigarettes. In this fashion, tobacco companies hook them young.

The tobacco industry does not want the bill to pass. It is hard for me to agree with the tax increase, but in this case if the money is put toward stopping people from using this very dangerous product then this tax is reasonable and legitimate, and my party will support it.

It is hoped, however, that the dollars collected would not be like the dollars collected on the gasoline tax. That money is collected but is not put into roads. I hope this extra money would go to the health system and toward stopping our kids from smoking. In supporting the bill I have to say that this provision must be included. The dedication by the government must also be there.

Our country's health system is deteriorating. Many experts would say that we are 23rd out of the 29 OECD members, the most industrialized countries. That is not something to be proud of. Obviously one of the problems, and there are many others, is the lack of funding. Hopefully this funding would help that.

It is also hoped that the tax increase would allow some other tax decreases to occur. The thing that is probably hurting us the most and the reason that many of us came to the House was the debt of $550 billion of which $43 billion is paid out in interest every year. I imagine what we could do with the $43 billion to help our health system, to help kids stop smoking and many other things.

It has to be remembered that today we are spending $15 billion on health. We spend $12 billion on advanced education and $22 billion on various other social programs. If we had $43 billion we could probably stamp out the problem that the bill is addressing.

I believe that the bill is good for Canada as long as the money from it is used in the right way. It is hoped that it would go a long way to stopping young people from wanting to smoke.

[Philip Mayfield, Canadian Alliance, Cariboo—Chilcotin, BC]

Mr. Speaker, we are here today to debate Bill C-26. The bill has some good qualities and our party agrees with some aspects of the bill.

However, I would like to suggest that the government look to the Senate to study a bill that addresses the real problems of tobacco use, particularly with children. Bill S-15 has gone before committee and may soon come before this House. Although Bill C-26 has some good qualities, I believe the bill from the other place really would be more appropriate. It targets youth and suggests a model for accountability of the delivery of government services. I believe, despite our support for Bill C-26, that Bill S-15 deserves more careful scrutiny.

Earlier in the day we debated Bill C-22 and Bill C-17. We talked about the complexity of the imposition of taxes and the tax act. Taxes in this instance are also extremely complex with some 40 pages of legislation and another 50 pages of explanations. My goodness, why does it always have to be so difficult for people to understand the government's intentions?

One of the main difficulties in increasing taxes, particularly for constituents who have service stations and corner stores, and those who are rural merchants, are that their businesses have been so caught up in the economic decline of the country, particularly where I come from, that the loss of this income in tobacco sales is a real difficulty.

Should the bill go forward, I would suggest that there be a commensurate reduction of tax on other economic activities that are sensitive to price changes. A reduction of taxes in other areas for people who are hit with these increases would be appropriate.

While it may seem equitable to some that the big, bad tobacco industry take this on, taxes are not necessarily borne by those who have the responsibility to pay those taxes.

I do not think I need to lecture adults about cigarettes and all the associated health risks but I do want to talk about why I am supporting the bill even though there is much about it with which I disagree.

We all know the facts. What needs to be addressed in the bill is the central reason for this bill coming into existence. We can argue over the wording of the bill. Some may call it a tobacco recovery levy and some may call it a tax. What we cannot argue about is the fact that the tobacco companies target children. These are the smokers of the future who the tobacco industry will depend on for their future income and profits.

Young people are the most important target for smoking prevention activities. Since most smokers in Canada begin to smoke in their adolescence, a major challenge for smoking prevention is to counteract the influences of the tobacco companies. Tobacco use among young Canadians must be reduced.

What does the data say? What are the numbers? There are close to 6.7 million smokers in Canada. Smoking among adolescents aged 15 to 19 has risen from 21% to 29% over the past 10 years, and females make up a large percentage of this group.

Smoking accounts for about 30% of cancers in Canada and 80% of those who suffer from lung cancer are smokers. Cigarette related deaths account for 40,000 deaths in Canada every year. These facts speak for themselves. We must do everything possible to stop children from getting involved with this killing habit. The bill is one step in the right direction.

Some may argue that tobacco farmers would suffer enormous economic hardship. However during the 1980s the number of tobacco farmers declined by about 50%. These farmers began to grow other crops and have benefited from assistance programs. There are others in the retail end of smoking who suffer as well. There must be compensation for those who suffer. There must be an ability for them to continue on but smoking is evil. It is wrong for us to poison our young people and have them sacrifice their lives. This has to be the bottom line.

In 1991 consumers spent over $10.1 billion on tobacco products. Of that amount about $6.6 billion went to the federal, provincial and territorial governments. There is no denying that this is a substantial amount of money but it amounts to less than 2% of federal and provincial revenues. Considering that tobacco taxes make up less than 2% of the federal revenue, there is even more incentive to reduce the number of children who want to smoke.

I want to compare the 2% of federal revenue to the health care costs in our public health care system. With over 40,000 deaths directly related to tobacco, the strain on our overburdened health care system is enormous. Those suffering from lung cancer as a result of years of tobacco use costs billions of dollars in health care costs. By reducing the number of children smoking, we not only save their lives but we can help save billions of dollars in health care at the same time.

These are very important reasons to help stop tobacco use among our children. When people stop smoking completely, the country saves money. In 1993 the societal costs attributed to smoking were estimated to be $11 billion, which is far higher than the income from tobacco.

The Canadian Cancer Society surveyed thousands of smokers and over 85% indicated that they wanted to quit and that they only smoked because they were addicted and could not get out of the habit. In 1994 almost 75% of Canadian smokers reported having tried to quit at least once.

What is needed from the government is leadership on the issue. The Minister of Health has taken some small steps to address the crisis of smoking among youth but small steps in the past have not been enough. The government needs to put the health of young children ahead of partisan politics and show some determination. We all must recognize the enormous health risks of tobacco and the true costs of allowing this habit to continue.

Children are one of the most vulnerable groups in our society and that is why aspects of the bill are so important. The bill would create an educational fund.

Bill C-26 would put a levy on tobacco and put the health of children ahead of everything else. By reducing tobacco caused illnesses and death through prevention, we are helping society as a whole.

Some argue that non-smokers should impose their views on smokers. Perhaps there is some merit in that. However I am arguing for the vulnerable children. Adults are responsible for the protection of children from this kind of harmful activity. The government is the watchdog and the guardian over that which would harm our children. The societal costs of smoking are tremendous.

We cannot forget that children need our protection from harm. They are vulnerable and impressionable. This is why elements of the bill are worth examining. Children are the future and the reason I am supporting the bill. Let us give them a fighting chance.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I appreciate the opportunity to address the House at third reading of Bill C-26, the tobacco tax amendments act, 2001. The bill would implement the tax elements of the comprehensive new tobacco strategy that was announced on April 5 by the Minister of Finance, the Minister of Health and the solicitor general.

The new strategy is designed to improve the health of Canadians by reducing tobacco consumption, especially among youth, which is one of the government's national health strategies. The new strategy represents the most comprehensive anti-tobacco program in Canadian history.

The strategy includes increased spending on tobacco control programs as well as tobacco tax increases to discourage smoking. Under this strategy, tax increases are linked to a new tobacco tax structure designed to reduce the incentive to smuggle.

The new tobacco tax structure builds on the 1994 national action plan to combat smuggling, which has proven to be very effective in reducing the level of contraband activity and restoring the legitimate market for tobacco sales. The main element of the new tax structure is a replacement of the current tax on exports of tobacco products, which was implemented under the 1994 action plan, with the new two tiered excise tax on exports of Canadian manufactured tobacco products effective April 6, 2001.

Under the new export tax, all exports of Canadians brands of tobacco products would be taxed, thereby reducing the incentive to smuggle exported products back into Canada.

The new tax would be two tiered. A tax of $10 per carton of cigarettes would be imposed on exports up to a threshold of 1.5% of a manufacturer's annual production. A refund of tax would be provided upon proof of payment of foreign taxes. This measure would help avoid double taxation of these products when they enter legitimate foreign markets.

Exports of Canadian tobacco products over the threshold would be subject to the current excise duty on tobacco products and a new excise tax which in total would amount to $22 per carton of cigarettes. There would be no refund on the second tier of export tax.

The new export tax structure would remove any incentive to bring Canadian tobacco products back into Canada illegally and would help set the stage for future tobacco tax increases.

Another element of the new tax structure affects people who travel. The government believes that all Canadian brands of tobacco products should be taxed regardless of where they are sold. Allowing Canadians who travel to continue to have access to low cost, tax free tobacco, either through duty free shops or the traveller's exemption, would be inconsistent with the government's strategy of raising tobacco taxes domestically to achieve the government's health objective of reducing smoking.

With the bill, Canadian tobacco products delivered to duty free shops and ships' stores, both at home and abroad, would be taxed at a rate for cigarettes of $10 per carton effective April 6, 2001. Furthermore, the traveller's allowance is being amended to ensure that returning residents can no longer bring back tax and duty free tobacco products. Effective October 1, 2001, a new duty of $10 per carton of cigarettes would be imposed on these products when they are imported by returning residents.

To ensure that Canadian residents are not subject to double taxation when they return with Canadian tobacco products on which tax has already paid, neither this duty nor regular excise duties and taxes would apply to tobacco products with a Canadian stamp, signifying that excise duties and taxes have already been paid. Non-residents would not be affected by the change to the traveller's exemption.

These measures would help meet the government's goal of reducing tobacco use.

Increasing tobacco taxes is another key component of the new strategy to combat the use of tobacco.

The federal government is increasing taxes, along with the five provinces that followed the federal government's lead when it reduced tobacco taxes in 1994. Effective April 6, 2001, combined federal and provincial taxes will increase by $4 a carton for cigarettes sold in Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island.

The increases would restore federal excise tax rates to a uniform level of $5.35 per carton on cigarettes sold in Nova Scotia, New Brunswick and P.E.I. The amount would be equal to the current federal excise tax rate in the provinces that did not reduce tobacco taxes jointly with the federal government in 1994.

This would be the fifth increase in tobacco taxes since 1994 and would raise federal revenues from tobacco products by $200 million annually.

Bill C-26 would also increase the surtax on the profits of tobacco manufacturers to 50% from 40% effective April 6, 2001. This surtax currently raises about $70 million annually. It would now raise an additional $15 million each year.

Before closing, I want to mention briefly that the government is providing additional resources in the amount of $15 million the first year and $10 million each year thereafter to help federal departments and agencies monitor and assess the effectiveness of these new tax measures in reducing smuggling.

The bill would implement fundamental changes in our tobacco tax system which would enable the government to use higher tobacco taxes to reduce smoking.

The new tobacco tax structure will reduce the incentive to smuggle Canadian-produced tobacco products back into Canada, and the resulting tax increases will help the government to meet its health objectives.

The new structure also sets the stage for future measures.

This new strategy demonstrates the depth of the government's commitment to reducing tobacco use. I encourage my hon. colleagues to give their full support to the bill.

Business Of The House

[Marlene Catterall, Liberal, Ottawa West—Nepean, ON]

Mr. Speaker, I rise on a point of order. I think you would find that the House is eager to give unanimous consent to the following motion. I move:

That, notwithstanding the decision taken by this House earlier today with respect to the third reading of Bill C-26, when debate on Bill C-10 is completed this day, the House shall revert to consideration of the third reading stage of Bill C-26, provided that, at 6.30 p.m. today, Bill C-26 shall be deemed to have been read a third time and passed.

Committees Of The House

[Maurizio Bevilacqua, Liberal, Vaughan—King—Aurora, ON]

Mr. Speaker, I have the honour to present the seventh report of the Standing Committee on Finance regarding its order of reference of Friday, April 27 in relation to Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco. The committee has considered Bill C-26 and reports the bill with amendment.

Business Of The House

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I believe it is the first opportunity I have had to respond to the hon. member in that capacity. Let me begin by congratulating her on the position she holds.

This afternoon we will continue consideration of Bill S-11, followed by Bill S-16 respecting money laundering. As a matter of fact the debate on Bill S-11 may have collapsed just before question period. That means we will start with Bill S-16 respecting money laundering, followed by Bill C-14, the shipping legislation. Afterward, if there is any time left, we will resume debate on Bill C-10 regarding marine parks.

On Friday we will begin consideration of Bill C-22 respecting income tax amendments at report stage and third reading. We will then return to the list I have just described should we not have completed Bill C-14, Bill C-10 or Bill S-16, for that matter.

On Monday next, if necessary, we will resume consideration of Bill C-22, followed by Bill C-17, the innovation foundation bill, at third reading. We will then return to the list that I described a while ago.

On Tuesday it is my hope that we will be able to commence and hopefully complete the third reading of Bill C-26, the tobacco taxation bill, as well as the second reading of Bill C-15, the criminal code.

Next Wednesday it is my intention to call Bill C-7, the youth justice bill at report stage. We also hope to deal next week with Bill S-3 respecting motor vehicles, Bill C-11, the immigration legislation, if reported, and Bill C-24, organized crime. As well there has been some discussion among political parties and hopefully we can deal with Bill S-24 respecting the aboriginal community of Kanesatake at all stages in the House of Commons, provided that it has been reported to the House from the other place.

Tobacco Tax Amendments Act, 2001

[Rob Merrifield, Canadian Alliance, Yellowhead, AB]

Madam Speaker, it is a great privilege to speak to Bill C-26 concerning the raising of taxes on cigarettes.

My position is not an easy one to take. When I consider raising taxes I swallow rather hard. Canadians are hurting desperately because of the taxes they pay, and imposing even more taxes cannot be healthy for the country. However the bill is less about raising taxes than about stopping the use of cigarettes. It is a health matter.

The use of cigarettes in our country has become a serious health issue and it must stop. I have been involved in the health care system for many years. When I talk with my counterparts I understand that one in six patients has a tobacco related problem. Canada has a critical problem with its health care system and cigarette smoking.

However to suggest that increasing cigarette taxes will solve the country's health care woes is misguided and dangerous. It is only one piece of the puzzle. We need to look at the whole puzzle and determine what must be done to change the paradigm and the way people think about tobacco use.

It would be better to ask where cigarette taxes are being spent. If they are not being spent to determine the health dangers of cigarettes then we have a serious problem. We need a game plan that does more than raise taxes because that is not the whole issue. The issue is about stopping cigarettes and the damage they do to the health of Canadians.

We should ask whether that can be accomplished. My father smoked all his life. I look at kids today and think of when I went to school and how difficult it was to discern whether or not to smoke. I was saved because of a basketball team and a coach who decided that if we smoked we would not be able to play. Those were the issues.

Teenagers are very vulnerable. The battle is about who will win the minds of our children with regard to cigarettes: the tobacco companies which are putting more and more nicotine into their cigarettes so they are more addictive, or the government which should address the issue in an educational sense so that teenagers know they are becoming victims rather than exercising free choice.

I believe a society should have free choice and that we should stop victimizing the weak. Someone who starts smoking at age 13 will have spent $15,000 on tobacco by age 30. That is a down payment on a good home or half the price of a good car. That does not even take into account the health effects of smoking.

Tobacco companies in Canada reap $260 million in profits every year from the sale of cigarettes to teenagers. Ninety per cent of those who start smoking do so between the ages of 13 and 20. That is where the battle must be fought. Approximately 28% of teenage girls in Canada smoke cigarettes.

The real question is whether we can win the war. Can we win the battle at that level? Let us look at the example of alcohol. Massive education campaigns have seen drinking and driving in Canada decline dramatically from what it was a couple of decades ago.

We have to be careful when we look at other countries and examine what they are doing. What California has done is worthy of note. It has put the pieces of the puzzle together a little more than we have here in Canada. As a result it has moved its percentage of teenage smokers from 30% down to 9% today. That is a success story that we need to perhaps model ourselves on and improve on, because it is an area that we have to look at.

The whole area of health care is something I would like to address because it is a bigger picture issue. We need to understand that if we are to address efficiencies in health care and sustain a health care system, we have to look at the bigger picture of preventative health. Since the seventies we have been talking about preventative health and yet I see very little effort directed to doing something about it.

The bill moves very slightly in that direction, but we have to recognize that as the baby boomer bubble hits our health care system we have to do more than just add funds to the system and stop the crisis management of health as Canadians end up in our emergency wards or clinics. To start with, we have to look at preventing them from becoming ill. That is something we have to look at in a bigger scheme. To do that we must recognize how smoking impacts our health care system. We have to realize that $3 billion is spent in direct costs for hospitalization and physician time in regard to smoking, and another $8 billion is spent in lost productivity in the workplace. Those are amazing figures.

Labour Canada estimates that it costs between $2,300 and $2,600 more to employ an individual who is a smoker. The rate of absenteeism in the workplace has increased because of it. Life insurance premiums have also gone up. Not only is there a productivity cost due to smoking, but there are other direct costs. These are the things we do not really recognize.

We have to get to the teenaged mind. Teenagers need to understand that not only is it costly to smoke and not only does it stink, and in more ways than one, but there is very little upside to smoking and to becoming addicted to something that will harness them to an addiction they cannot escape. I have talked to a lot of people who smoke. Very few of them want to smoke. Most of them want to quit, for many reasons.

Yesterday I had five individuals in my office. One of them was the president of the Canadian Dental Association. I have never thought about cigarettes and their effect on dentistry. These people came to my office to talk about cigarettes and what they see as they look into the mouths of Canadians. What they see is that baby boomers keep more of their teeth as a result of accomplishments in the dentistry field. However, they are suffering from far more cancers because of their cigarette smoking. Dentists are very concerned with the amount of gum disease and cancers of the mouth that they see brought on because of cigarettes.

I want to impress upon the House how important it is that we look at funding a plan to address teenage smoking. Just raising the cost of cigarettes is not the issue. If we took the money raised and put it into such a plan, Canadians would support it much more.

Here is what amazes me and why I ask the House to implement such a plan. The bill was introduced once before. Now it takes 40 pages to introduce the legislation and 50 pages to explain why. I am a little suspicious. It was introduced in 1998 by the Senate and supported at that time by the health minister. Unfortunately the Speaker of the House did not support it because he felt it was a taxation issue, not a health issue. Obviously this is a health issue and not a taxation issue.

It is a little suspicious to see the turnabout in the minds of the members next to me in the House, because they have to address this as a health issue. I am a little suspicious about how fast this is happening and about what kind of energy is behind it. If we do not address it as just one piece of a very large puzzle, then we will have missed our opportunity.

The House needs to examine it as not just a taxation issue but a health issue, one that has to be addressed in our country. We cannot fail in this one. We owe it to our teenagers and to the next generation. We owe it to them to sustain our health care system.

[Bev Desjarlais, NDP, Churchill, MB]

Madam Speaker, I am pleased to have the opportunity to speak on the bill today. There has been much work done on behalf of the Standing Committee on Health. I recognize that the government is making efforts to improve the situation to reduce smoking among Canadians. Also, our health critic, the member from Winnipeg North Centre, has been very active and keeps us abreast of everything that has been going on.

I am not going to dwell so much on Bill C-26 as to the specifics of it. We are going to support the bill. Any incentive or anything we can do to decrease the opportunity for young people to begin smoking and to discourage people from smoking, is definitely the route to go.

I have no shame in admitting now that I started smoking when I was 12 years old. By the time I quite I was smoking a pack and a half to two packs a day. I could barely breathe when I got up in the morning. I did not have the guts to go to my doctor and say that I had a problem with my lungs. My biggest incentive to quit was not being able to face my doctor and listen to him give me a good tongue lashing over the fact that I was smoking and complaining about not being able to breathe. It took a number of attempts but I have not smoked for close to 20 years. I have had my moments when it seemed like a not so bad idea. Maybe price is a deterrent but I am not sure.

I certainly think we must do everything to discourage people from smoking. I have to admit I am truly concerned that this increasing will just not cut it. I have seen young people buying one cigarette at a time from someone down the street. For 25 cents a cigarette, children as young as seven or eight years old can pick up a cigarette from certain people they know.

We all know that video games, trips to the arcades and little hand held Game Boys are a lot more expensive than a 25 cent cigarette. Those same young people, who have money for those things, are the ones who are out there buying the cigarettes. They may not have to pay the $6 or $7 a pack but they can buy them individually a little at a time. It is not hard to find a quarter lying around in the shopping carts or wherever. There will be money available for that.

What is of the utmost importance is that we have proper education in place and that we have proper pharmaceutical supplies available, whether it be Nicorette or the patch. It is important to have these available to assist people when they do want to quit.

I tried to quit a number of times and I know there are people out there, even teenagers, who by the time they are 16 or 17 are thinking about quitting but they cannot afford buy a box of Nicorette. I am sorry to use just Nicorette but it is the only name that comes to mind. I am not giving them advertising and I am not getting paid for using that product. A lot of people want to quit but they cannot afford to buy Nicorette or the patch. They do not have a prescription plan available where they can go out and get it. As a result it makes their job to quit that much harder.

What I personally would like to see is a more sincere effort to dedicate dollars to education and to help people quit smoking. Maybe what we need is dollars or legislation to say to those tobacco companies that they will have to pay for all of the products that people who smoke need to use to help them quit. They should be required to pay for the oxygen required when someone's lungs get so bad they cannot breathe because they are responsible for it.

Tobacco companies, after all these years, now admit, for the most part, that they deliberately encouraged people to take up smoking and made it habit forming by increasing the concentration of certain chemicals within the cigarette. I would much rather see an increase in education than an increase in the cost of cigarettes.

To those of us who do not smoke, no one complains more about a smoker than someone who has quit smoking. I know a number of smokers who want to quit but who have a hard time quitting. They do need help and we need to provide that help. Increasing the price of cigarettes will not make their lives any easier. Granted, we should not hand cigarettes to them at will. They do need to pay a reasonable price because of the additional health care costs, not just for smokers but for others around them, associated with secondhand smoke and numerous other factors.

Children in homes of people who smoke are jeopardized. I wonder if at some point we may need to seriously consider whether we are injuring our children by continuing to smoke or having them in smoke filled places. We need to decrease the opportunities where people are able to smoke or where they inhale smoke, but slamming an increase in the cost of cigarettes on smokers will not do it. We need to have the dedicated dollars.

One of the issues that I get the most mail on, to the credit of Senator Kenny, is his bill. I have received literally hundreds and hundreds of letters supporting Senator Kenny's bill to ensure that dedicated dollars go to education. Recognizing that there is that support, we need to push along in those areas and dedicate dollars. People do not have faith that the government will use tax dollars for the benefit of health care, to assist smokers and those around them, and perhaps look after the environment.

Instead of creating a bullheadedness between smokers and non-smokers, between tobacco industry workers and those opposed to smoking, we need an alternative plan for those workers and alternative uses for tobacco other than smoking, so that we are not creating these head on forces. We do not need these divisions with smokers literally cursing every non-smoker around. This might make smokers put more of an effort into trying to quit.

I wish it could be quicker but I think we are a long way from a generation of non-smokers unless we seriously commit to educating people and deceasing the number of places where people can smoke. One of the best routes that we have taken which has had the most impact is having fewer places where it is okay to smoke. It is wonderful, even for smokers, to enter a place that is not filled with a haze of smoke. Our eyes do not get as sore. Smokers have to go outside for a smoke but overall even smokers appreciate the curtains and the ceilings not being covered with smoke. Smokers appreciate areas where there is non-smoking as well.

Those are the things that we need to be doing, along with possibly increasing the cost of cigarettes.

[Wendy Lill, NDP, Dartmouth, NS]

Madam Speaker, we have room to further increase the cost of cigarettes without bringing about a massive smuggling effort. As I said, the cost of a carton of cigarettes in Maine is $60.31 Canadian. With the addition in Bill C-26, we would still not see our cigarettes go up that high. We would see a range anywhere from $54.38 to $37.00 in Ontario. Quite frankly, we need to put the prices a lot higher, then I think we would see a decrease in availability and a decrease of young people starting the habit.

[Wendy Lill, NDP, Dartmouth, NS]

Madam Speaker, it is my great pleasure to rise today and support the steps being taken in Bill C-26, an act to amend the various acts including the Customs Act and the Income Tax Act in respect to tobacco.

Everyone in this Chamber knows that smoking kills. Everyone knows that more needs to be done to help those Canadians addicted to nicotine to quit smoking. More needs to be done especially to stop our kids from starting to smoke. Our goal in this place should be a smoke free generation.

Ways in which this can be done are to make this dangerous substance cost more, take away the incentives of tobacco companies and often less savoury organizations from making huge profits through smuggling, increase the taxes on what profits tobacco companies make and hopefully to divert the funds allocated to fight tobacco use in our population.

Bill C-26 is a step in this direction and I commend the government for that but, and yes there is a but, there is much more to do.

The tax increase on tobacco could and should have been higher. I believe higher prices are a major deterrent to smoking, especially for young people. The tax increase has been far too timid. We need just look across the border at the United States.

The price for a carton of cigarettes in Maine is $60.31 in Canadian dollars. In New York state a carton in Canadian dollars costs $65.21. In Michigan a carton costs $59.00 in Canadian dollars and so on. What would the price of a carton of cigarettes be in Canada once this bill is in effect? Our prices would range from a high of $54.38 in Newfoundland and Labrador to a low of $37.00 in Ontario. There is more room to tax smokers without the terrible fear of smuggling, which dominated the headlines in the early 1990s.

The government's use of an export tax, once again a bit timidly, is a welcome step in allaying the fears of the development of new booming cigarette smuggling operations. The financial measures contained in Bill C-26, including the clauses on taxing duty free cigarettes and eliminating the traveller's exemptions, are only the first steps to protecting ourselves, our neighbours and especially our children.

I commend the excellent work which has been done by organizations, such as the Canadian Cancer Society, the Canadian Council for Tobacco Control, the Canadian Lung Association, the Heart and Stroke Foundation of Canada, the National Cancer Institute of Canada, the Non-Smokers' Rights Association and the Physicians for a Smoke-Free Canada, in developing an implementable plan of action which the government can use to further reduce tobacco consumption in our population.

I also feel compelled to congratulate Senator Kenny and my colleague from Winnipeg North Centre for their outstanding individual contributions in the fight against tobacco.

One of the most constant and recurring themes that these organizations and individuals have recognized as a priority is the need for adequate and sustained funding for tobacco control. The government currently takes in billions of dollars in taxes on cigarettes but does not spend anywhere near as much to directly discourage smoking. These organizations say that at least $360 million is needed to fight against smoking but the government has refused to commit those funds.

While I reluctantly support Bill C-26, I wholeheartedly support Bill S-15, a bill that has the seeds of a comprehensive anti-smoking plan and a funding mechanism through an arm's length agency. Bill S-15 would create a $360 million funding stream through a dedicated levy taken from tobacco manufacturers to an arm's length agency which would be committed to implementing real tobacco control programs aimed specifically at young people.

Frankly, I would love to stand in this place and say we do not need any arm's length agency to deliver unnecessary health policy, but the government has shown itself to be playing both sides of the tobacco fence in the past. Too many lives are at stake to trust this initiative to politicians. We need these things.

I do not wish to leave the impression however that nothing has been done up until now. I commend the government for the new bigger warning labels on cigarettes, and I look forward to them bringing in labels on alcohol bottles.

I commend the government for ending tobacco advertising even though I know the real pain that this initiative caused for many arts organizations across the country. I also know that most arts organizations never liked accepting tobacco money but they were given no alternatives after years of Liberal cuts to the arts.

The steps in Bill C-26 are not enough to move us toward a smoke-free generation. We need to support community initiatives aimed at making smoking uncool to young people. We need to work with all jurisdictions to make public places and all work places smoke-free. We need fund multitudes of community initiatives to help those addicted to tobacco quit. We need to eliminate the opportunities for our children to start smoking.

In short, we have to get a lot more radical on this front. I am not going to quote the horrific financial costs, both personal in health terms and as a country, that Canadians suffer due to tobacco. I am sure we all know them here, even the smokers. I will continue to urge the government to see Bill C-26 as only a small step towards this effort. Furthermore, New Democrats will continue to push for Bill S-15 hopefully with improvements.

It is going to take real sustained funding programs, creativity and tenacity through many anti-smoking initiatives to lead us to our first smoke-free generation. Let us get to work on it.

I will be splitting my time, Madam Speaker, with the hon. member for Churchill.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, if I understood correctly, the Liberals do not want to know the truth about the Auberge Grand-Mère. That is really what we heard. Nor do they want the lease to be tabled in the House. They do not want to see for themselves that the Prime Minister is talking through his hat when he says there was no financial connection between the auberge and the golf club after 1993. It is rather strange, but I will now get back to my remarks about Bill C-26.

I must say at the outset that Bill C-26 contains good measures to fight tobacco consumption. It provides various instruments, including a tax increase on tobacco products in general and on cigarettes in particular.

We support this bill. Why? Because tobacco kills. But before it kills, it creates considerable costs for our health system. These costs run into the billions of dollars every year. Tobacco kills through various smoking related diseases.

There is emphysema, heart disease and myocardial infarction in particular. There is lung cancer. There are strokes, many of which are linked to smoking.

In the end there are over 40,000 deaths a year in Canada caused by smoking.

There are still too many people smoking today. There are still too many people uninformed. There are still too many people today, especially young people, who are beginning to develop this bad habit of smoking.

And yet, tobacco kills. It is a real poison. According to the Canadian Cancer Society, there are a variety of components to cigarettes, chemicals, which should be made known to those who have the bad habit of smoking.

They are real poisons. To name but one, tar in cigarettes by itself contains 4,000 chemical compounds, 4,000 noxious compounds. Nicotine is the worst element in a cigarette causing dependency, because of its high level—between 5 and 7 milligrams per cigarette—of such magnitude that it is likened to cocaine and heroin dependency.

I know what it is like to break a habit like smoking because I myself smoked for many years. Given the withdrawal symptoms that one can experience over a long period of time, I know whereof I speak.

Cigarettes, and tobacco in general, contain acetone. This substance is normally used as a paint stripper. This is what one is inhaling along with cigarette smoke.

Cigarettes also contain methanol, something else one is inhaling. Methanol is wood alcohol, one of the most potent alcohols on the market. Tobacco also contains acetylene, another chemical, which is used to fuel flares. This is what one is inhaling in tobacco products.

One is inhaling hydrocyanic acid, which is used in gas chambers, benzene, a very strong solvent on the market, and ammonia as well. When one smokes a cigarette, one is breathing in ammonia. This is a colourless gas used for cleaning. I think that everyone is somewhat familiar with this chemical, which is extremely harmful if inhaled. It is very bad for the health.

Cigarettes also contain mercury, lead and cadmium. These are the substances one is inhaling when one smokes a cigarette: three highly toxic heavy metals. There is also carbon monoxide. Everyone has heard of carbon monoxide, a colourless, odourless and deadly gas. Nitrogen oxide, a toxic gas, is also present.

In short, if we could conduct an aggressive information campaign to provide this kind of fundamental data and make an analogy with a poison cocktail, we could not find anything more appropriate.

Imagine a large glass in which there is a certain amount of tar. This is the viscous, yellowish liquid which becomes black once it has been mixed with other products and which is used on roofs. Imagine a large glass with some tar in it.

Imagine another glass in which there is acetone and two or three spoonfuls of paint remover to enhance the flavour. To this, we would then add wood alcohol, a product used for torches, and hydrocyanic acid. We would also pour some acid into our explosive cocktail. And benzene, which is a solvent. We would also put a certain amount of heavy metals into the same glass. We would mix the whole thing with some ice and give it to someone to drink. This is the image that we should bear in mind whenever we light up a cigarette. This is what we are inhaling.

The fundamental question that I ask myself is: Would we give that cocktail to our children to drink? Would we be able give that explosive mixture, that poison which I just described, to our children to drink? This is what is happening.

Since the end of the eighties, the only age group that has significantly increased its tobacco consumption is the 15 to 19 year olds. Where are the parents? We must provide that information, but we must also have it. I could not give that to my child. I could not accept that my child would take such a quantity of poison. Yet, according to statistics, this is what is happening.

As a society, we have an obligation to act. In the case of young people aged 15 to 19, statistics on tobacco since the end of the 1980s are staggering. At the end of the 1980s, the percentage of habitual smokers among female teenagers 15, 16, 17 and 18 of age 24%. Today, it is 31%, an increase of almost a third since the end of the 1980s and early 1990s.

This is cause for concern, when one considers the devastating effects of tobacco. At the end of the 1980s, 21.6% of teenagers aged 15 and over smoked. Today, it is 27.2%.

This too is a cause for concern because we know that diseases that can be developed, like emphysema, myocardial infarction, lung cancer and even strokes are linked to a lifelong investment, from youth to maturity. It is a cause for concern when teenagers, who will become young adults and mature adults, are increasingly becoming smokers.

I believe we should take urgent action to put an end to the deplorable increase of smoking.

I was recently reading a report that showed that the situation with young people between the ages of 20 and 24 is stable but a stable catastrophe is still a catastrophe. When one looks at the data for young people between 20 and 24, and these are young adults we are talking about here, it is surprising to see that 39% of men and 32% of women in that age category are still smoking.

Again, when people hit 40 or 50 years of age, which is the time when tobacco illnesses surface, they end up with the health they built in their youth. If they neglected their health when they were young, it will not improve as the years go by.

What I am trying to say is that starting to smoke at a young age is a negative investment in one's health. It is a bad investment in one's health that can cause two major problems: first, it ensures a slow and painful death, and second, society has to pay for one's bad habit and one's choice not to quit.

Smoking kills and it costs billions of dollars in health care and other services. That is something those with government responsibilities have to bear in mind.

When the packaging of cigarettes and the horrible and repulsive pictures to be displayed on the cigarette packs were debated in the House, the Bloc Quebecois tabled a report containing a number of recommendations to better discourage smoking.

We, of course, recommended an increase in taxes, which has proven to be an effective tool. It has been proven in the past that tax increases have a deterrent effect on young people. Young people do not have a lot of money, particularly 15, 16 and 17 year olds.

We also said that putting photos on cigarette packs and increasing taxes was not enough. We need other solutions, such as requiring cigarette manufacturers to reduce the nicotine content of cigarettes.

As I was saying earlier, there are hundreds if not thousands of toxic products in a cigarette but nicotine is the one chemical that creates addiction. It is as addictive as cocaine or heroine. This should be our first priority so that young people who try that first or second cigarette do not become addicted.

There are means of reducing the nicotine level which, according to various scientific studies, should not exceed five milligrams a day for a person not to get addicted to cigarette smoking.

Members will certainly remember the scandal. If the tobacco industry was able to increase the nicotine level to get more people addicted to their product, an act which is totally reprehensible, irresponsible, appalling and despicable, it means that science is sufficiently advanced to enable the industry to lower the nicotine level. It could be a first step toward helping people to quit smoking or preventing them from becoming addicted to smoking.

Funding for anti-smoking campaign has to be increased as well. At the moment, some $40 million is spent on developing awareness. With new tax money available under C-26, $100 million could be set aside. There is an urgent national need to do so.

With slightly less than 30% of the population still smoking, still having the habit, and with the mortality rate of the various smokers' illnesses, and increased smoking by young people, it seems to me it would be worthwhile investing a little more money there. Instead of swelling surpluses or the government's consolidated fund, it seems to me that it would be a good idea to invest this tax surplus in information, training and public awareness, not only among children and adolescents, but among parents as well.

As parents, we have huge responsibilities and we cannot know everything. Despite all the information campaigns, I think there are still parents around, as there are adolescents, who are not completely in the picture about the problems of smoking and all its ins and outs. They are also unaware of the consequences of this bad habit smoking. We have to lay it all out in order to change these habits.

In the past 20 years, progress has been made. Fewer people smoke but there are target groups. Budgetary resources must be deployed such as information resources and educational resources, to ensure that there is reinvestment in health so that we do not end up 20 years from now with the same problems we have had for the last 20. I am thinking of such things as the increasing incidence rates of lung cancer, emphysema and stroke. Something must be done.

Our second recommendation at that time, and one I believe is still current today, was additional funding. There will be new funds connected with the new taxes imposed by the Minister of Finance on smokers and on the tobacco industry. Please, let us use this money to invest in the health of our young teens. It seems to me this would be a good thing to do.

Our third point was that smoking is not the only thing that creates victims, so do changes to the industry. If government continues its approach—and I choose this terminology because we are talking about smoking here—to burn an industry right off the map, even one as harmful as the tobacco industry, it must not penalize workers in the process.

There will be tens of millions of dollars at stake. Why could some of that not be earmarked for worker retraining and relocation? Why could some not be set aside for policies on conversion from tobacco?

Farmers in various regions of Quebec and of Canada are hurt by these measures. They will hurt even more because the government, like ourselves, seems determined to continue to battle against smoking. Why not earmark an amount to help them retrain?

Some farm families have invested a lot of money in machinery and land improvement to produce the best possible tobacco. Now that we are indirectly fighting this production, we must provide adjustment policies because there are none.

A few years ago the level of taxes on tobacco was so high that contraband was thriving. There is a direct link between the level of taxes and smuggling. If smugglers can sell cigarettes at a cheaper price than on the market, contraband will become more prevalent as the gap grows between these two markets.

This is my fourth point. We support an increase on tobacco taxes. We support any other measure that might be effective in the fight against smoking.

At the same time, we must realize that as taxes increase so will the urge to engage into contraband activities. This means that we must also step up law enforcement.

With these four measures—although there is no quick fix for such an issue—we would be on the way to helping those who are addicted to tobacco, an addiction that is often the result of the industry's greed. In the United States—I do not know if the same thing was done in Canada—it even increased the nicotine content of its products to get more people addicted. It seems to me that the victims of that industry could benefit from these four measures.

These four initiatives would also help the some 30% of Canadians who currently smoke kick this harmful habit so that some day there will not be any smokers left.

We will support the bill.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, it is always sad to be cut off after a few minutes, because the case to be made on tobacco taxes and smoking in general is a very serious one. The time at our disposal here is so important that cutting my speech in two might have a negative effect on the message. Nevertheless, in the five minutes remaining to me before oral question period. I will try to introduce my message.

As hon. members are aware, Bill C-26 consists essentially in raising the taxes on tobacco as an anti-smoking measure.

Right off, I will say that my party, the Bloc Quebecois, will support the bill because we care about people's health and about the fight that has gone on for many years against what I would call a plague, a major social problem, a problem creating considerable cost for the health care sector. It is a problem that also results every year in Canada in deaths that would not occur had people not taken up this bad habit.

Some 29% of people smoke. This is fewer people than in the past but it is still too many. It is still too many because tobacco kills and before it kills it makes people sick. These people impose considerable costs on the health care system.

People get emphysema, caused primarily by smoking. Smoking is also the cause of heart disease, and in particular, myocardial infarction, of lung cancer, and of strokes, some of which are linked to smoking.

Every year, there are over 40,000 deaths related to the use of tobacco. Why are there so many deaths? Why does tobacco kill? It kills because it is a really poisonous mix of highly toxic chemicals.

As for tar, do people know that the tar found in a cigarette includes over 4,000 chemicals? Tar alone, which is but one of hundreds of components found in tobacco and a product of the combustion of tobacco, contains 4,000 toxic products.

Nicotine is the worst of the poisons found in cigarettes. Why? Because, depending on a cigarette's nicotine content, it is the nicotine that creates a dependency, an addiction similar to cocaine and even heroin addiction. Some studies even suggest that nicotine makes it just as hard to stop smoking as to stop using hard drugs such as heroin and cocaine.

All sorts of junk is found in cigarettes. I could talk about it at length, because I smoked for many years. I stopped eight years ago. At the time, I did not have this information. It is thanks to awareness, information and advertising campaigns on the ills of tobacco that I became aware of the makeup of this poison.

Mr. Speaker, I can see that you are getting anxious. I will resume my speech after oral question period.

[Keith Martin, Canadian Alliance, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, we support Bill C-26. It is high time it came about. However I think a little history is warranted here.

Prior to 1994 tobacco consumption in Canada was plummeting as a direct result of high taxes. We also know that the average age young people begin to smoke is between 12 and 13. High tobacco prices do discourage smoking. The price elasticity of demand says that if the price is increased the demand will decrease dramatically, which is particularly important with regard to our youth.

In 1994, in response to cigarette smuggling, particularly in eastern Ontario, the government committed what was probably the most horrendous blunder in health care policy in the history of the country. Almost nothing this government could ever have done would have committed such a number of youth to smoke and have such a devastating impact upon the health of Canadians, not only in the short term but also in the long term.

What the government did in response to smuggling was drop the taxes on tobacco significantly. What did that do? It increased the consumption among youth and adults, as well as the number of people smoking and the amount that they smoked. Why do we say that? It is because something interesting happened. Tobacco taxes were reduced in five provinces in central and eastern Canada. The west and Newfoundland kept their prices relatively the same.

We had an interesting laboratory, looking at central Canada where the price was much lower, and the west and Newfoundland where the price was much higher.

If we looked at any graph we would see that tobacco consumption and tobacco profits after 1994 went up dramatically. Almost a quarter of a million young people started to smoke. Tobacco companies were popping champagne corks in their offices.

What the government should have done in order to deal with the tobacco issue, which was a legitimate problem, was what it did prior to 1993.

In 1992 the same problem arose. At that time the government put an excise tax on tobacco. That cut the legs out from under tobacco smugglers. It eliminated the differential between Canada and the United States. Within six weeks tobacco smuggling dropped 75% without changing the price of cigarettes. After six weeks the government of the day buckled under pressure from the tobacco companies that threatened to leave, and it removed the excise tax.

If the government had the backbone, it could have cut the legs out from underneath tobacco smugglers while not compromising the health of Canadians, particularly the youth. It could have done that by keeping the taxes where they were and by adding the excise tax.

It was the excise tax that would have prevented smuggling while enabling to keep the taxes where they were. It would not have committed a quarter of a million young people to smoking, 50% of whom will die of tobacco related deaths, with 21% of them dying of some form of cancer. It is a public tragedy and a public health problem that we will see in the long term.

The government also deprived the public coffers of nearly $5 billion worth of revenue. I can imagine what we could have done with that money. We could have put it into health care, into research and into prevention.

Our party supports the bill, but we want make sure that the money coming from taxes would not be put into some big vat to be used for special projects by the government. The money could be used for prevention models. It could be used for a head start program that focuses on strengthening the parent-child bond which has proven to be of dramatic importance and very effective at improving the health care of children and their families while preventing a lot of social problems that occur later on. That is what the government could and should be doing.

The government could also put money into increasing physical activities among kids. Physical activity is at an all time low. This would have a dramatic impact on the future health of Canadians because when children become adults, if they were not active as youth, there is less of a chance they will be active as adults.

The minister responsible for sport is very interested in physical activity and is working hard with our Olympic athletes. Why does he not take the Olympic athletes to the schools as part of a speaking program to teach children the importance of physical activity? The athletes could be paid to do this and the kids would be directly impacted by Canadian heroes, which would push and encourage them to be physically active. It is a win-win situation.

I hope the minister in charge of sport would consider this proposal. It is an informal proposal but doable. The Olympic athletes would get money. They would be getting paid to do a good job and the children of our country would benefit. It would have a long term and positive impact on the health of Canadians.

It is also important to look at what we could be doing in terms of improving the health of our children, our youth, as well as adults in the country. Looking at it from an international perspective, smoking consumption is not a domestic problem but an international problem. The World Health Organization has said clearly that in many countries such as China and other nations it will be a health care disaster with millions of people dying from tobacco related diseases.

The public would be very interested to know that tobacco companies actually sponsor dances in foreign countries and give out free cigarettes to children. They give out free cigarettes to children, not because they are good corporate citizens but because they are attempting to cause children to become addicted to cigarette smoking. Some of these tobacco companies are pretending to be the paragons of virtue and good corporate citizenry while going to other countries or nations, sponsoring dances, providing free admission to children and giving them free cigarettes. That is what is happening in the world today.

I encourage the government to pursue and fast track Bill C-26, to make sure that the bill goes through, and to increase the taxes to ensure that our children do not smoke. It should make the price so high that it becomes even more difficult for youth to smoke.

Libertarians would suggest that what happens to people is their business and that they should have freedom of choice. I agree. However let us take into consideration that we are talking not about people who are 25 or 30 years of age but about children who are 12 and 13 years of age. That is when children start to smoke. That is when they start to take up the weed.

On a slightly related issue, the issue of medicinal marijuana, I applaud the government in this regard. It is high time. However the government must make sure it is well regulated and not simply a tool to legalize marijuana consumption.

What the minister can do, and I am speaking personally and not on behalf of the party, is decriminalize the simple possession of marijuana. If we decriminalize marijuana consumption there would be a penalty or fine which could be used to fund youth prevention programs. It would also save expensive court costs. It would take people out of the courts and save legal fees and court time. The courts would then have more time to go after people who commit murder, rape and other heinous crimes. If we decriminalize marijuana use, and the Canadian Police Association supports this, we would have higher penalties, lower costs and a revenue source we could funnel into prevention programs for kids.

My last pitch, once again, is for the head start program. If the government is truly interested in preventing the social problems that result from youth crime, if it wants to ensure kids are more employable and less dependent on welfare or drugs, then a head start program is the fastest, best and most effective way of doing so. We could draw from the best of head start programs around the world which focus on strengthening the parent-child bond. This should start at the prenatal stage. If fewer parents took drugs and alcohol during pregnancy we could reduce the incidence of fetal alcohol syndrome, a tremendous problem in our country. The programs would also ensure parents had the skills to be good parents.

This can be done simply, effectively and for the most part with existing resources. It can be done if the federal government calls together its provincial counterparts for a conference on the issue. The government needs a specific plan of action that can enable the program to be a reality. The cost savings would be in the hundreds of millions of dollars. The lives saved would be in the thousands.

We support Bill C-26 and hope it goes through quickly. We only regret that the government in 1994 dropped the taxes to begin with.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I am very pleased to speak in the House today to present Bill C-26. In fact my heart soars with enthusiasm.

Bill C-26, the tobacco tax amendments act, 2001, implements the tax elements of the government's comprehensive new tobacco strategy which was announced on April 5 by the Ministers of Finance and Health and the Solicitor General.

The new strategy is designed to improve the health of Canadians by reducing tobacco consumption, particularly among young Canadians. Briefly, it consists of increasing spending on tobacco control programs, tobacco tax increases to discourage smoking, and a new tobacco tax structure to reduce the incentive to smuggle.

The package has received positive support from health groups, such as the Canadian Cancer Society, the Heart and Stroke Foundation of Canada and the Alberta Tobacco Reduction Alliance.

My remarks today will focus on the new tax structure and tax measures which are contained in amendments to the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act. Before I discuss the individual measures in the bill, I would like to take a moment to put the legislation in perspective.

All tobacco products manufactured and sold in Canada have federal and provincial taxes and duties levied on them. Prior to 1994, tobacco products for export were sold on a tax free and duty free basis.

In the early 1990s exports of Canadian cigarettes grew substantially. There was strong evidence to suggest that most Canadian tobacco products that were illegally exported on a tax free and duty free basis to the United States were being smuggled back into the country and sold illegally without the payment of federal and provincial taxes. Two serious problems developed. Organized criminal activities were increasing and the market in Canada for fully tax paid tobacco products was being undermined by the availability of illegal lower cost products. This undermined the government's health objective of using higher prices to reduce smoking.

This is why the government implemented the national action plan to combat smuggling in 1994. That plan included increased enforcement measures, a surtax on the profits of Canadian tobacco manufacturers, a tax on certain exports of tobacco products and reduced tobacco taxes.

It has proven to be very effective in reducing the level of contraband activity and restoring the legitimate market for tobacco sales. As a result, the government has been able to increase excise taxes on tobacco products five times since 1994.

The measures in the bill before us today include a new tobacco tax structure to further reduce the incentive to smuggle tobacco products back into Canada and tobacco tax increases to advance the government's health objectives.

As hon. members know, one of the government's national health objectives is to reduce smoking. Our new tobacco strategy is specifically designed to help reach this objective, particularly reducing smoking by youth.

Allow me to quote from the Minister of Finance when the new strategy was announced. He stated:

The Government's anti-tobacco strategy will help improve the health of Canadians by discouraging smoking. By increasing taxes sharply and introducing a new tax structure for tobacco, we are taking important steps now and positioning ourselves to take further steps as need be.

Canada needs this comprehensive strategy to deal with the broad range of factors that contribute to smoking. The measures in the bill are part of that strategy.

I will now discuss these measures in detail and begin with the new tax structure.

As I mentioned, the new tobacco tax structure is designed to reduce the incentive to smuggle Canadian-produced tobacco products back into Canada from export markets, the main source of contraband in the past.

The key element of this new structure is the replacement of the current tax on exports of tobacco products, effective April 6, 2001, with a new two tiered excise tax on exports of Canadian manufactured tobacco products. Before discussing the measure further, let me provide some background.

As we know, the Canadian smuggling problem of the early 1990s was primarily caused by Canadian exports to the U.S. that were illegally re-entered into Canada. In the 1994 national action plan to combat smuggling, which I discussed earlier, the government imposed an excise tax on Canadian tobacco products. To ensure that Canadian tobacco manufacturers were not denied access to legitimate export markets, several exemptions from the export tax were allowed, including one for exports up to 3% of a manufacturer's annual production. That was reduced to 2.5% of production in April 1999.

Bill C-26 implements the budget 2000 proposal to further reduce the exemption threshold under the tax on exports of tobacco products before April 6, 2001, to 1.5% of a manufacturer's production in the previous calendar year. This 1.5% threshold represents the approximate level of exports required to meet the legitimate demand for Canadian tobacco products abroad, principally in the United States.

Under the new export tax structure, all exports of Canadian tobacco products will be taxed, thereby reducing the incentive to smuggle exported products back into Canada. This new tax will be two tiered. For exports up to the 1.5% threshold, a tax will be imposed at the rate of $10 per carton of cigarettes. To avoid double taxation when these products enter legitimate foreign markets, the tax will be refunded upon proof of payment of foreign taxes.

Imposing a refundable tax on exports of tobacco products allows for a seamless transfer of tax-paid products from Canada to other countries. This reduces the threat of these products being diverted and used for contraband, while allowing Canadian exporters to meet legitimate demand for their products abroad.

Exports over the 1.5% threshold will be subject to both the current excise duty on tobacco products and a new excise tax that together amount to $22 per carton of cigarettes. Imposing a tax at this rate will remove any incentive to illegally bring these products back into Canada. Further, there will be no rebate on this tax. This measure will reduce the potential for smuggling and help set the stage for future tobacco tax increases.

Before moving on, I should mention that discussions are ongoing between Canada and the United States to help achieve the objectives of our tobacco products not being available tax free, while avoiding double taxation of exported products and helping reduce compliance burdens for U.S. importers.

The next element of the new tax structure concerns tobacco products sold at duty free shops and as ships' stores.

As hon. members know, duty-free shops are located at border crossings and international airports across the country. These shops are authorized to sell certain goods, including tobacco products, tax-free and duty-free, to people leaving Canada.

Tobacco products supplied as ships' stores have traditionally been provided for use by crew and passengers and are sold to passengers through on board duty free shops on ships and aircraft with international destinations. Under the new structure, Canadian tobacco products delivered to duty free shops and as ships' stores both at home and abroad will now be taxed at a rate of $10 per carton of cigarettes. In addition, imported tobacco products delivered to Canadian duty free shops will also be taxed. However, this tax will be refunded on the first carton sold to an individual who is not a resident of Canada. Both measures take effect as of April 6, 2001.

Imposing a tax on tobacco products for sale in duty free shops or as ships' stores is an integral part of the government's strategy to reduce tobacco consumption. It demonstrates just how serious the government is about this issue.

Allowing Canadians who travel to continue to have access to low cost, tax free tobacco through duty free shops would be inconsistent with our strategy of raising tobacco taxes domestically to achieve the government's health objective to reduce smoking.

This measure would also reduce the risk that smugglers might seek to access Canadian tobacco products in duty free markets as other sources of untaxed, low cost tobacco products are eliminated. We want all Canadian tobacco products to be taxed, no matter where they are sold, to ensure that they are not smuggled back into Canada.

Another measure in the bill would ensure that tax is paid on tobacco products imported by returning residents. Currently Canadian residents returning to Canada after an absence of more than 48 hours may bring back one carton of cigarettes tax free and duty free as part of a traveller's allowance. Effective October 1, 2001, a new duty of $10 per carton of cigarettes would be imposed on these products when they are imported by returning residents.

To ensure that Canadian residents are not subject to double taxation upon returning to Canada with Canadian tobacco products on which tax has already been paid, neither this duty nor regular excise duties and taxes would apply to tobacco products that bear a Canadian stamp signifying that excise duties and taxes have already been paid. Non-residents would not be affected by the change to the traveller's exemption.

Tobacco tax increases are another key element of the government's strategy to reduce tobacco consumption, particularly among youth. Since the implementation of the national action plan to combat smuggling in 1994, the federal government has worked with the five provinces that implemented matching tobacco tax reductions at that time, namely Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island, to assess the feasibility of regular joint increases in tobacco taxes.

As of April 6, 2001, the federal government has raised tobacco tax rates jointly with these five low tax provinces.

The combined federal-provincial tax increases are $4 per carton of cigarettes sold in New Brunswick, Prince Edward Island, Nova Scotia, Ontario and Quebec.

Bill C-26 would implement the increases in federal excise tax rates on tobacco products. These increases would restore federal excise tax rates to a uniform level of $5.35 per carton on cigarettes for sale in Nova Scotia, New Brunswick and P.E.I. This is equal to the federal tax rate that now applies in the provinces and territories that did not reduce taxes jointly with the federal government in 1994. After this tax increase only Ontario and Quebec would have cigarette excise tax rates below the national excise tax rate.

Taxes on fine cut tobacco and tobacco sticks would also be increased in all provinces and territories. In addition, Bill C-26 would eliminate the reduced rate of federal excise tax on fine cut tobacco for sale in Ontario.

As I indicated earlier, this is the fifth increase in tobacco taxes since 1994. In total, federal and provincial taxes on cigarettes will have increased from $7.40 to $9.80 per carton in these five provinces since 1994.

I am confident that a successful new tobacco tax structure would enable the government to hike tobacco taxes even further in the future. The bill would also increase the surtax on the profits of tobacco manufacturers to 50% from the current rate of 40% effective April 6, 2001.

To help ensure that these measures are effective, we are giving more resources to federal departments and agencies so that they could better monitor and assess the effectiveness of these measures in reducing smuggling.

These resources would be targeted specifically to the RCMP, the Canada Customs and Revenue Agency, the Department of Justice and the Solicitor General of Canada at a cost of $15 million in the first year and $10 million each year after that.

In conclusion, all the proposals in the bill reaffirm the government's commitment to reduce tobacco consumption in Canada while maintaining vigilance in combating the level of contraband.

A new tobacco tax structure will help reduce the incentive to smuggle Canadian produced tobacco products back into Canada and the tobacco tax increases will help advance the government's health objectives.

In addition, the tax measures would increase federal revenues from tobacco products by $215 million per year. I believe that this new strategy demonstrates the depth of the government's commitment to reducing tobacco use.

We know the stakes are high in the campaign against tobacco use. Through the tax measures contained in the bill, we now have the means to conduct the campaign effectively. Tobacco taxation is about health. Health is our priority, especially protecting the health of our young people. These new measures reflect our commitment to reduce smoking.

We have an endorsement from the Canadian Cancer Society. With an endorsement like that, I believe the government is definitely on the right track toward reducing smoking by Canadians, particularly young Canadians. I encourage all members in the House to give their full support to the bill.

[Pierre Pettigrew, Liberal, for the Minister of Finance]

moved that Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco, be read the second time and referred to a committee.

Business Of The House

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, let me begin by congratulating the opposition House leader on his appointment and to extend as well similar words of congratulation both to his seatmate, the new chief whip, and the other officials of his caucus.

This afternoon we will continue debate on the second reading of Bill C-6, the water export bill. I intend to seek adjournment of the debate after the speech from our colleague from the Bloc Quebecois on this matter.

If there is any time, we will commence the second reading of Bill C-25, the farm credit amendments bill. It would be my intention as well to adjourn the debate after the lead off speech from either the government minister or parliamentary secretary, as the case may be. We would then propose to move immediately to private members' business this afternoon.

Friday we will debate second reading of Bill C-26, the tobacco tax legislation.

On Monday we will return to Bill C-6, which will not be completed this afternoon. We will then continue with Bill C-25 for the same reason, and then, if necessary, to Bill C-26, the tobacco tax legislation, if we do not complete it tomorrow. If we have any time left, it will be spent on Bill C-10, the marine parks bill, as I previously indicated to my colleagues at the House leaders meeting earlier this week. In the afternoon we will debate Bill C-16, the charities bill. I wish to give notice pursuant to Standing Order 73(1) that the government will propose that this bill will be referred to committee before second reading. This should, in essence, take roughly the time between 3.00 p.m. and the adjournment later in the afternoon.

Tuesday shall be an allotted day. In the evening it is my intention to seek the usual co-operation to hold the second of the take note debates on the modernization of House rules. It would be pursuant to consultation with others. My intention is to see if we want to have this debate using the forum we used very successfully earlier this week, but, as I said, I intend to consult with other House leaders on that.

On Wednesday I would propose that we continue with any unfinished business from the previous days, adding thereto Bill S-16 which was introduced in the House earlier this day. Should we be ready to do so, and should time permit, I would then commence the report stage and third reading of Bill C-22, the income tax amendments bill.

Tobacco Tax Amendments Act, 2001

[David Kilgour, Liberal, for the Minister of Finance]

moved for leave to introduce Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco.

(Motions deemed adopted, bill read the first time and printed)

Transportation

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, I might remind the hon. member that his party joined with all parties in the House to support Bill C-26 in the last parliament to establish rules dealing with predatory behaviour and predatory pricing.

The Competition Act was amended. It is working. I am sure the commissioner of competition will be looking at each and every case very closely.

Air Transport

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, Air Canada is honouring its agreement with the government, that is Bill C-26. It is our intention to have air service throughout the country conform to the provisions of the Official Languages Act.