Industry Committee on April 30th, 2007

[The Chair, Conservative, James Rajotte]

Members and guests, I'll call to order the 57th meeting this session of the Standing Committee on Industry, Science and Technology. Pursuant to Standing Order 108(2), we are continuing our study of counterfeiting and piracy of intellectual property.

Members, before I introduce the guests, I want to point out that you have a briefing note for the three meetings we will have on the counterfeiting and piracy of intellectual property.

I also want to mention that there was a report, the 2007 Special 301 Report, issued this morning, I believe. We were able to get that translated for members, because it in some ways perhaps amends what's in the actual briefing note, if I can put it that way. So I think you should definitely read the briefing note in conjunction with the one-pager that we have from the 2007 Special 301 Report.

We have six witnesses with us here today, so it will be a very full session. I should just point out to members that I have to leave at about 4:45 or 4:50, at which time the second vice-chair, Madame Brunelle, will assume my position.

We'll get right to the witnesses. We have, first of all, from Polyform Foam Plastics Inc., Monsieur François Beauchesne, who is the vice-president of sales and business development. From Eaton Electrical Canadian Operations, we have Mr. Brian Savaria, who is the manager of codes and standards—and I see he's brought some goods with him today. From Caccia Fashion, Groupe Imperial, we have Mr. Michael Halickman, the president. From the Underwriters Laboratories Inc., we have Mr. Warren MacInnis, manager of criminal law enforcement. From the Entertainment Software Association of Canada, we have Ms. Danielle LaBossiere Parr, who is the executive director. And finally, from CSA International, we have Mr. Doug Geralde, who is the director of corporate audits and investigations and chair of the Canadian Anti-Counterfeiting Network.

I understand there has been agreement on who will speak first. For the witnesses' information, you'll be giving an opening statement of five minutes. Because there are six of you, it will take half an hour. Then we will go immediately to questions from members.

Monsieur Beauchesne, I believe, will start it off. Vous avez cinq minutes.

[François Beauchesne, Vice-President, Sales and Business Development, Polyform Foam Plastics Inc.]

Good afternoon, ladies and gentlemen, members of the committee. My name is François Beauchesne and I am co-owner of a private company operating in the plastics industry. Currently, we employ approximately 300 people at our Granby, Quebec, facility, in addition to maintaining a sales offices in Barry, Ontario, and two plastic processing plants in Michigan and Georgia.

We specialize in the manufacture of products such as moulds, high-performance insulation, protective equipment such as hockey helmets, bicycle helmets, hockey gloves and shin pads. We supply packaging for commodities such as electrical appliances, furniture and so on.

Industrial workers and entrepreneurs face numerous challenges, including today's main topic of discussion, piracy and the protection of intellectual property. With our flagship product, NUDURA, we certainly have a bright future and we are optimistic. But with counterfeit products from Asia, and more specifically, China, we are nonetheless worried about wide-scale counterfeiting.

As we speak we are victims of intellectual property theft. Four American companies are currently copying our patents in force, but with our limited means, we cannot invest the millions of dollars required for rapid and proactive protection. Every day, many contracts are lost, and instead of progressing and creating jobs, we are presently experiencing negative growth and have had to lay off employees. We are working on an action plan to counter the American companies, but if the Asian companies copy us, then who are we going to prosecute and, above all, how?

Our customers are victims of industrial counterfeiting by Asian companies too. In 1997, a 160,000 square foot building was built to produce bicycle helmets for Bell Helmets. For economic reasons, they changed their business plan and purchased from China instead. At that time, our annual production was 3 million units with peaks of 30,000 helmets per day, which created at least 50 jobs, in addition to creating jobs for our customers and our suppliers.

To this, we can add the purchase of components for the Canadian manufacturing operation, such as boxes, conveyors, finishing materials, etc. The objective was to manufacture up to 10 million units annually, with at least $50 million in economic spinoffs for component purchases, salaries and taxes. But then, the entire, fine project went to Asia.

We also have a customer located in Quebec, Louis Garneau Sports, the pride of Quebec. The same thing happened with this company. They tried to avoid sending production to China, but, unfortunately, the last made-in-Canada products will be produced this summer.

An administrative decision based on economic performance is acceptable. If someone can make a product as well as we do at a better price, then fine, that's the principle of competition. But if these companies do not have to contend with the same social and environmental constraints, if they have no respect for intellectual property, then you, our representatives, should take action and do something to limit their encroachment, or even prohibit the entry of certain products into the country.

Is this protectionism? Certainly. Given the extent of our unfavourable trade balance with China, it is inconceivable that our ideas, jobs and economy could be forfeited without any reaction whatsoever on our part. If you disagree with this, please explain. Enlighten me.

To conclude my little story, the Asian companies that have manufactured products for Bell and Louis Garneau have learned how to manufacture. They know the North American market demand, they have obtained customers' addresses, and they have started selling directly to Bell and Garneau customers products that are identical in every way, except for the logo, which is so similar that it fools most people. The result is a total loss, for our customers, for us, and for our suppliers, not to mention the governments that have lost the revenues being generated by such significant economic activity. These people have stolen the design and pirated the product. They have betrayed their professional and economic relationship with our companies and our country.

Thank you for allowing me to speak. I am now prepared to answer any questions you may have.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Beauchesne.

We'll go now to Mr. Halickman, please.

[Michael Halickman, President, Caccia Fashion, Groupe Imperial]

Thank you, Mr. Chair.

My name is Michael Halickman. I'm the president of Caccia Fashions. We've been in the garment business in Canada for close to 50 years. I personally have been involved for 30 years. We're located in Montreal and Toronto. We have over 130 employees across the country, and we service over 1,000 retail customers in Canada.

Our business involves sales of upwards of $50 million per year. We pay millions of dollars in taxes and customs duties and support hundreds of suppliers and service providers in Canada. We're involved in the sales, marketing, production, and distribution of clothing and related accessories for numerous famous brand names such as Ecko Unlimited, G-Unit, Avirex, and Gotcha, just to name a few. Some of you may not be familiar with these brands, but I can assure you that if you check with your children, they're very familiar with them.

To the young consumer, we represent a quality product with an iconic image that is well known and accepted by customers who purchase nearly two million items per year, from headwear to shoes and everything else worn in between.

My purpose in speaking to you today is to express my deep concern for the apparel industry in Canada as it is affected by the flood of counterfeit product in the market. Counterfeiting, if left unchecked, places our whole business in jeopardy.

It's been difficult enough to deal with non-counterfeiting issues in a worldwide market, but it is clear to me that the need to protect the intellectual property of Canadian brand owners, distributors, and licensees is more important than it has ever been. The counterfeiters are stealing our sales and destroying our brand, and if they are left unchecked, they will ultimately destroy our business.

In addition to having to face the normal cost of business, which obviously counterfeiters do not, we are obliged to fight back and pay tens of thousands of dollars to private investigators, lawyers, and destruction facilities to combat these illicit operations. Last year we found ourselves in litigation and prosecution of over 100 cases of counterfeit merchandise, the real cost of which is in lost sales and brand dilution.

How many consumers have purchased inferior shoddy merchandise thinking it was real? They've been dissatisfied and are no longer customers. How many of my retail customers have stopped carrying our brands because they cannot compete with unscrupulous sellers of fakes? No one knows the real number, but judging by the amount of fake product, we find it significant and extremely damaging.

In the past, our lawyers and investigators have been involved in cases in which we have identified goods bearing our trademarks being imported into Canada. We have subsequently found out that Customs or the RCMP were aware of the situation and were willing to take action, but unfortunately, due to the lack of resources, were unable to do so. This puts us in the position of having to pay lawyers and inspectors to have the goods seized and destroyed after they have already entered the marketplace. Even with this effort, we are losing the battle as the amount of counterfeit is increasing, not decreasing.

I'm speaking today not only on my own behalf, but also on behalf of all my competitors who face similar problems. We are happy to compete against each other on a level playing field, but we cannot compete with the criminal counterfeiters. Nobody can.

In addition to the problem described above, there is a growing phenomenon of even legitimate businesses mixing counterfeit product with legitimate product. This puts us in the position of having to prosecute our own customers, which, to say the least, isn't conducive to building strong business relationships.

We are not seeking subsidies or financial aid. We are asking only that criminals who copy our product not destroy our industry. The criminal counterfeiters do not have to comply with any regulations, laws, taxes, or other legitimate business expenses such as licensing fees, large royalty payments, and the millions of dollars we spend on marketing.

In short, we are asking for increased protection from these criminal counterfeiters in the form of increased political pressure on countries that do not sufficiently respect intellectual property rights; more resources for the police and border patrol to intercept goods as they enter the country; and stricter penalties for those involved in the manufacture, sale, and distribution of counterfeit product.

Thank you for giving me the opportunity to express my concerns today.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Halickman.

We'll now go to Ms. LaBossiere Parr.

[Danielle LaBossiere Parr, Executive Director, Entertainment Software Association of Canada]

Thank you, Mr. Chair.

I represent the Entertainment Software Association of Canada, which is the trade association for companies that publish and distribute video games in Canada. We represent companies like Ubisoft, Electronic Arts, Nintendo, Sony, and others. I know Ubisoft had been originally invited to attend today and very much wanted to, but were unable to at the last minute, so they have asked me to represent them and our other members.

Thank you very much for inviting me to speak to you today about the urgent need for Canada to increase its protection and enforcement of intellectual property rights.

To begin, I want to briefly outline the important contribution that the video game industry makes to Canada's economy because I think traditionally people just assume it's what their kids and their staff are doing when they should actually be doing work. But in fact the video game industry is a very important one for Canada. It's one of the fastest growing market segments in the global economy.

Our market is projected to grow at 16.5% annually, with worldwide consumer spending on video games soaring to $55 billion by 2009. Over the next few years this rapidly expanding segment of the entertainment market is predicted to overtake recorded music as the second most popular form of entertainment in the world, and Canada is establishing itself as a leader in the international video game industry. In fact, according to a study by New Media BC, there are over 300 companies from coast to coast. There are over 20 video game development studios and over 140 new and support services companies in B.C. alone.

In 2005, more than 40 of the top 200 games in North America were made or worked on in Canada. We're proud to tell you that two of the largest entertainment software development studios in the world are located here in Canada. Electronic Arts has studios in B.C. and Ubisoft has studios in Quebec.

Ubisoft employs over 1,600 creators in Canada, with plans to employ 3,000 by 2013. The average Ubisoft employee is 30 years old. Since 1997, Ubisoft has developed over 40 games in Quebec, including Tom Clancy's Splinter Cell, with 14 million units sold, Myst, with 11 million units old and Prince of Persia.

Ubisoft forecasts that its projected annual revenues for 2007-08 will be 750 million Euro.

Electronic Arts employs nearly 2,300 employees in Canada, almost half of their worldwide employee base. Over 1,800 of these employees are located in B.C., and 11 of EA's top franchises are developing in Canada, including FIFA Soccer, Need for Speed, NBA Live, and SSX. EA also works with over 500 vendors in Canada.

THQ has 186 employees in Canada; Activision employs 65 people in Quebec; Microsoft Canada has a team of 40 who are involved in sales, marketing, field merchandising, and the public relations aspect of their video game business; Nintendo of Canada, with 62 staff, provides similar sales and marketing functions from its head office in Vancouver; and Disney Interactive Propaganda Games Studio employs 140 employees today and 25 staff on contract, and plans to expand to 230 employees and additional contract staff by December 2008. Edmonton's BioWare Corporation was named one of the Deloitte Technology Fast 50, with a five-year growth of more than 650%. And there are numerous studios across the country that are really world-class, top-selling video game developers.

The entertainment software industry has created thousands of highly skilled, high-paying jobs in Canada. A study that was done for our association indicated that entertainment software workers earn twice as much as the average college graduate. In fact, the average starting salary for a video game developer is $67,000.

Canada is increasingly becoming an important market for the sale of entertainment software and hardware, generating a record-breaking $933 million in sales last year.

The video game industry is especially valuable to the Quebec economy, something which governments at both the provincial and federal levels have recognized through their own investment. For example, the Quebec tax credit for multimedia titles can be as high as 37.5% of labour costs.

Under a 2005 deal with the Université du Québec, Ubisoft will invest up to $16 million in the development of various educational programs to train the next generation of Canadian video game developers.

I've taken so much time to talk about these things because I want to underline for the committee the importance of intellectual property to Canada's prosperity and to innovation and competitiveness, particularly in this digital age.

Piracy in Canada negatively affects Canadian jobs and Canadian tax revenue. Why would we condone illegal business activities that reduce job opportunities for Canadians and cost the country substantially in lost taxes and wasted investment dollars? By failing to enforce the intellectual property rights of companies in Canada, we're allowing pirates and organized crime syndicates to unfairly compete against our own national interests.

To develop and market a bestselling video game title requires a massive investment by companies. Development costs range from $10 million to $30 million, and it takes a team of 100 to 200 people at least a year to complete. In developing and publishing a new game, our members take a considerable risk that they will be able to sell enough games to recoup their investment--

[The Chair, Conservative, James Rajotte]

I'm very sorry, Ms. LaBossiere Parr.

[Danielle LaBossiere Parr]

I'm sorry. I always end up talking for too long.

Thank you very much for inviting me.

We are very much encouraged by the committee's interest in this topic. We urge all members of Parliament to take urgent action to combat intellectual property crime in Canada.

[Scott Brison, Liberal, Kings—Hants, NS]

You're not alone at this table as being someone who always speaks longer than expected. You're in good company.

[The Chair, Conservative, James Rajotte]

I appreciate it that you spoke in turn, which I am still trying to teach members of this committee.

We'll go to Mr. Savaria.

[Brian Savaria, Manager, Codes and Standards, Eaton Electrical Canadian Operations]

Mr. Chairman and honourable members, thank you for this opportunity to appear before you today.

My name is Brian Savaria. I'm a professional engineer employed by Eaton Electrical in our Canadian operations in Burlington, Ontario. We manufacture electrical equipment and systems that range from 120 volts to 46 kV. My company employs about 1,000 Canadians in several manufacturing and sales facilities across the country.

The electrical industry in Canada and all across North America faces grave challenges from reconditioners who place counterfeit labels on used electrical products, and from product counterfeiters, both domestic and foreign. While this unlawful activity impacts our business, there is far more serious impact and danger to our citizens here in Canada. Unsafe and dangerous electrical products that can not only cause significant property damage but also have life-threatening effects are being installed in facilities. Electrical shocks and fire hazards can result when an electrical product does not perform as a consumer expects from reading the label on the product. This consumer can be a trained electrician relying on information on the product labels. Consequently, counterfeit labels and/or products with false labelling can lead innocent users to believe, albeit incorrectly, that they are dealing with safe products.

I'm here today to tell you about my experience and involvement in our attempts to keep these fakes and counterfeits out of the Canadian market. My involvement includes working with my American and British industry colleagues, as well as with the RCMP, Canadian and American customs officers, and the electrical regulating authorities here in Canada.

The worst problems in this area occur with the electrical safety device known as a circuit breaker. These products are designed to prevent electrical wires and wiring devices from overheating and short-circuiting. As you know, the electrical wires in your homes and businesses are located behind walls; you cannot see a wire that's burning due to an overheating condition.

Imagine a light support system in a hospital that suddenly shuts down because of a false trip, or a machine that should shut down because of a short circuit and does not. All of these conditions have the makings for a catastrophe, not only in property damage but potentially in human lives.

The CBC television program Marketplace had an excellent program in November of 2006 on counterfeit electrical products that I recommend all of you watch.

Our industry, represented by Electro-Federation Canada, EFC, recognizes the serious and grave issues with domestic relabelling, which is outright counterfeiting, and with international product counterfeits. Let me explain.

Ten years ago, we found an electrical product reconditioner selling unauthorized circuit breakers. Using private investigators, we purchased these breakers, and our subsequent laboratory analysis concluded that our investigators purchased used circuit breakers that were being passed off as new. These breakers were likely salvaged from demolition sites in questionable circumstances, tampered with, and relabelled to change the electrical ratings of the breaker, an extremely serious and dangerous situation. The new labels contained the trademarks of certification organizations such as CSA and UL, along with the original manufacturer's labels.

Subsequent litigation in the Federal Court of Canada with one such counterfeiter has had little impact on this activity in Canada. Over the past 10 years, we have found examples of these dangerous electrical devices in the intensive care unit of a hospital, a grocery store, and even in schools.

This problem, like cancer, is appearing to grow and spread, threatening the electrical safety and integrity of this country. I have been involved with our industry's attempt to stop this for seven years. It still continues, and we need your help.

Five years ago, the RCMP agreed to act on a formal complaint that I lodged. That complaint was based upon discovery of a counterfeit-labelled moulded-case circuit breaker in a Quebec City hospital. Other investigations and seizures found similar cases of counterfeit and tampered-with circuit breakers in hospitals. These investigations culminated in search and seizure operations against three suspected businesses, with charges laid in two instances. The charges brought were forgery and passing off under the Criminal Code. In the cases in which charges were laid, the perpetrators pleaded guilty. In the first case, the defendant was fined $76,000; in the second, $40,000 was assessed, with an unconditional discharge. The first fellow got a criminal record. The third case was not prosecuted because the Crown did not believe there was sufficient evidence to bring charges.

I was present during the third RCMP search warrant execution on that guy. What I saw there brought shivers to my spine. I saw thousands of used circuit breakers stored in an unheated barn. Many bore counterfeit labels, the basis of RCMP seizures. Loose product certification labels were in filing cabinet drawers. The evidence was the basis for my victim impact statement, in which I emphasized how the activities threatened the safety of Canadians. This problem continues.

Are you sure your electrical system will function as it was intended? As long as Canada has electrical retailers selling suspect reconditioned breakers from unauthorized sources, how do we know that they have not been tampered with? We cannot possibly check all of them. Obviously, we check the ones that look suspicious. But with better copying technology, there should be serious concerns about this issue.

The Canadian electrical safety community has been on guard and for several years has been alerted to the potential hazards these products can cause. The fact that we have not encountered the foreign counterfeits in Canada is not cause for complacency. One of the seizures from a reconditioner who was relabelling circuit breakers included a sheet of breaker toggle amperage markings--1,740 of them on that black sheet in your information package. What do you think that sheet was being used for?

Also in your information package is a photograph of what happens when an electrical circuit breaker fails. The result is catastrophic. In this case, it shows a U.S. customs-seized Chinese residential breaker failing the UL standard test. The spectre of substandard, defective counterfeit circuit breakers and domestically relabelled circuit breakers with false information and settings entering Canadian homes, stores, public buildings, schools, and hospitals poses a serious threat to a safe electrical infrastructure. It is truly frightening and it must be addressed.

May I have your questions?

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Savaria.

We'll go now to Mr. MacInnis.

[Warren MacInnis, Manager, Criminal Law Enforcement, Underwriters Laboratories Inc.]

Mr. Chair and honourable committee members, thank you for giving me the opportunity to speak with you today.

My name is Warren MacInnis, and I am the criminal enforcement manager for Underwriters Laboratories Inc., more commonly referred to as UL.

I'm testifying on behalf of UL, but I will also be sharing my views on and experiences with intellectual property crime prior to assuming my current position. I assumed my role with UL after retiring in February of this year from the Royal Canadian Mounted Police with over 21 years of service. Prior to my retirement, I spent nearly 10 years investigating intellectual property crimes in the greater Toronto area.

In Canada and around the world, intellectual property theft is a serious crime that has arguably reached epidemic proportions and continues to grow each successive year. This national scourge has grown into a criminal activity that is complex, sophisticated, and as hard to eradicate as illegal drug operations.

Not only does product counterfeiting rob billions from our economy, it also places the health and safety of the consumers at risk and it funds organized crime. Make no mistake, the trade in counterfeit products is a clear, persistent, and direct threat to our economy and to the health and welfare of all Canadians.

Examples of IP crime span the economic spectrum and go far beyond the familiar news stories of music downloading, counterfeit designer goods, and fake Swiss watches. Today virtually no product is too obscure or insignificant for the counterfeiter, and no industry is immune from this illegal activity.

It is impossible to accurately determine the magnitude of this problem due to the clandestine nature of the crime. I've seen a dramatic increase in the scope, nature, and quantity of counterfeit products that are being sold across Canada. Particularly alarming are the items bearing forged safety certification marks and counterfeit products that present serious health and safety risks, such as pharmaceuticals, consumables, and personal care products.

These potentially hazardous goods are increasingly finding their way into the national distribution system, onto the shelves of large retailers, and into the homes of Canadians across the country.

For over a century, UL's mission has been the protection of human life and property from product risks and hazards. UL is an independent, not-for-profit product safety testing and certification organization. Founded in 1894, UL has earned a reputation as a global leader in product safety standards, development testing, and certification.

UL evaluates tens of thousands of products, components, materials, and systems for compliance to specific requirements, and it enables manufacturers and the public to benefit from the products that meet standardized safety requirements. Approximately 21 billion UL safety certification marks appear on products entering the stream of commerce each and every year.

Certification bodies such as UL and our affiliate, Underwriters Laboratories of Canada, ULC, as well as CSA, have seen an increase in the amount and type of counterfeit products appearing in the marketplace with fake certification marks. Products such as extension cords, night lights, power bars, circuit breakers, and other types of electrical items bearing counterfeit certification marks are now being found across this country.

This is of particular concern since consumers throughout Canada rely upon these marks to help determine whether they are purchasing products that have been evaluated and found to comply with safety standards. Electrical products or fire suppression devices bearing counterfeit certification marks can pose a severe health and safety risk to the consumer.

Criminals who deal in these products care nothing about national pride, our property, or even our families' safety. They do not discriminate between brands or product types and will manufacture and distribute anything, regardless of the consequences to consumers, in order to selfishly create wealth for themselves at the expense of all others.

UL cannot and will not tolerate this type of criminal activity. UL has invested heavily in building one of the most intensive anti-counterfeiting programs in the world and will continue to do so. Since UL's anti-counterfeiting program was launched in 1995, we have deliberately focused on stemming the flow of these illegal goods. For more than a decade, UL has taken an aggressive stance against counterfeiting through a comprehensive program that involves partnerships with various police, customs, and regulatory agencies internationally and has supported the criminal prosecution of offenders who deal in counterfeit UL products.

Over the last decade, it has become abundantly clear that no company is immune from this illicit activity. Criminals in Canada have learned that dealing in these goods is essentially a risk-free venture with an opportunity for unsurpassed profitability. I have personally witnessed many criminals who have turned to product counterfeiting as their crime of choice. Profit margins are huge and the risk is low. They know the profit potential of dealing in counterfeit products and will exploit the potential until it is no longer viable or lucrative.

I have personally spoken with criminals over the last 10 years who believe they can flood the Canadian market with counterfeit products and do so with impunity. I have further witnessed these same individuals make hundreds of thousands of dollars per year without paying any type of taxes. I can also state that many of these same individuals have reoffended time and time again with the same types of counterfeit products. For nearly a decade, I have witnessed the vast majority of counterfeiters I've dealt with walk away without penalty. Of the small percentage who have been charged and convicted, most have received fines that are insignificant compared with their illegally derived profits.

It is interesting to note that if someone steals, defrauds, or embezzles $1 million from a bank, the government, or a private company, they will likely go to jail. If the same person sells $1 million worth of counterfeit products or distributes hazardous electrical goods, which may injure a person or destroy their property, the offender will generally receive only a small fine.

The current legal environment includes border regimes, laws, and a judicial framework that has been essentially impotent in dealing with intellectual property crimes. During my service with the RCMP, I watched a handful of dedicated police officers and crown prosecutors attempt to deal with counterfeiting through the use of a patchwork of ineffectual, antiquated trademark laws that were not designed to combat these types of offences.

I have dealt with individuals who have turned to selling counterfeit products because they felt that such activity is an acceptable crime in Canada.

[The Chair, Conservative, James Rajotte]

Mr. MacInnis, we'll have to get you to wrap up here.

[Warren MacInnis]

Okay. Yes, sir.

Thank you.

[The Chair, Conservative, James Rajotte]

That's it? Okay. Thank you, Mr. MacInnis.

We'll go now to Mr. Geralde, please.

[Doug Geralde, Director, Corporate Audits and Investigations and Chair of the Canadian Anti-Counterfeiting Network, CSA International]

Thank you very much, Mr. Chair and honourable members.

I appreciate the opportunity to address you today on this very serious problem. I'll try to be brief.

CSA is a standards-writing and certification agency, the largest and oldest in Canada. We do not manufacture products. We test and certify products to ensure they comply with Canadian safety requirements.

The key issue for us in this fight against counterfeiting is that if the products that my colleagues are talking about are counterfeit, so are the marks. As Brian Savaria said earlier, they counterfeit the marks. They make money by reducing in the product some of the safety requirements that are necessary.

While I'm talking I will pass around an extension cord, as an example. Copper is a major commodity in manufacturing, but we find as we travel throughout China and other developing countries where they're cutting corners and placing their products in the marketplace that they save money by not putting so much copper in. The result is that the wire will burn up, posing a potential fire hazard.

In the black insulated wire you'll see 16 gauge wire. That's the type of copper wire that should be in there. What we're finding is 26 gauge wire, comparable to telephone wire. Because there is so little copper inside, the cords tend to overheat and cause a fire hazard. In addition to that, the insulation can melt, and if people were to grab the cord, they could become electrocuted. So we have a potential health hazard, shock hazard, and fire hazard.

Another example of the types of things I'd like to highlight.... The counterfeiters are not as clever as they think they are and they will make mistakes. This is a power bar, and essentially there are three conductors. The third conductor is what we call a ground. It's for safety. What they put inside, again to save on the copper, is only a two-conductor cord.

What you're finding is that counterfeiters will cosmetically focus on making things look the same. Where they save money is on the safety for the public. Therein lies the concern that we have with those products.

The problem with counterfeiting is growing. It's an underground economy so it's hard to get numbers, but different agencies--Interpol--have talked about counterfeiting representing 5% to 7% of global trade. That equates to almost $500 billion a year.

Canada and developing countries are looking for a GDP growth rate of anywhere from 2% to 3% and are happy with that, just with inflation, but what we're finding in the counterfeiting area is that it's growing at 20% to 25%.

Our issues are safety related. There are commercial issues as well, but we have spent an inordinate amount of time and built up a great safety network in Canada that relies on manufacturers and distributors working within the requirements with bona fide equipment, meeting the certification and standard requirements that the public requires to ensure a safe system and enforcement.

This new area of counterfeiting is something that is really taxing our systems. We don't believe that the current system and structure we have in place is viable for capturing it or containing it.

I urge you to take the steps we have discussed with several groups on fixes for this problem.

I appreciate the time you've given me to display those examples. I will be glad, as I'm sure all my colleagues are, to take any questions you have.

Thank you very much for your time.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Geralde.

We'll begin with Mr. Byrne.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Mr. Chair, with your indulgence, I'll share my time with Mr. Cullen.

[Scott Brison, Liberal, Kings—Hants, NS]

Given the nature of the last topic, his name is spelled B-y-r-n-e.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I think you've reinforced to each member of this committee the economic and human health consequences of counterfeit products and intellectual property in the Canadian marketplace and the supply chain. I think what's most relevant for this committee is remedies.

Obviously each and every one of you, not only as individual manufacturers but as umbrella organizations representing manufacturers and safety certifications, has been contacted by the federal government and its working departments on this. Have you been asked to submit to the federal government your drafts or considerations on changes to statute, regulation, or enforcement policy? If so, would you be able to table to this committee those specific recommendations, particularly focusing on the statutory and regulatory revisions that you feel would be beneficial to your efforts?

[Doug Geralde]

I will start and then turn it over to my colleagues.

As part of the Canadian Anti-Counterfeiting Network that I chair, we have a road map that delineates our recommendations, and all that. It's available at www.cacn.ca, and I'll be sure to get copies for the committee that highlight that.

We've also worked with many members on recommendations for everything from proceeds of crime to reinforcement and allocation of additional resources for Canada Border Services to stiffer penalties.

[The Chair, Conservative, James Rajotte]

Mr. Savaria.

[Brian Savaria]

Our industry association, Electro-Federation Canada, wrote a letter to Health Canada two years ago in response to their request for input from Canadians on renewal of the acts. We learned about two weeks ago that the whole program had been shelved.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Which program was that?