Evidence of meeting #11 for Industry, Science and Technology in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was designers.
A recording is available from Parliament.
9:05 a.m.
Conservative
The Chair Conservative James Rajotte
This is the 11th meeting of the Standing Committee on Industry, Science and Technology. The orders of the day are to continue our study of the review of Canada's service sector, and we have four witnesses with us here today.
First of all, from the Alliance of Canadian Cinema, Television and Radio Artists, we have the national president, Mr. Richard Hardacre.
Is that correct?
9:05 a.m.
Richard Hardacre National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
That's correct.
9:05 a.m.
Conservative
The Chair Conservative James Rajotte
Second, from the Canadian Booksellers Association, we have the executive director, Susan Dayus.
9:05 a.m.
Conservative
The Chair Conservative James Rajotte
Welcome, Ms. Dayus.
Third, from Campus Stores Canada, we have the board representative, Mr. Chris Tabor. Welcome.
Last, from Design Exchange, we have the president and CEO, Samantha Sannella.
We will go in that order in terms of presentations.
You do technically have up to 10 minutes, but if you can limit it, that would be helpful in terms of allowing more time for members to interact with you as a panel.
We'll start with Mr. Hardacre's presentation.
9:05 a.m.
National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
Thank you, Mr. Chair.
Good morning, members of the committee. I'm very pleased to be with you today.
My name is Richard Hardacre. As your chair said, I'm an actor--that's what I do professionally--so it's my job to make sure you hear me.
I'm a Canadian. I'm the elected president of ACTRA, which is the union representing the interests of performers in film, television, sound recordings, radio, and new media. We have 21,000 members who live and work in every corner of this country. We are English-speaking artists whose performances entertain, educate, and inform the Canadian public and global audiences through the most powerful and effective media that currently exist.
I'll give you a couple of background remarks, if I may, Mr. Chair.
Art in Canada is a serious business. According to Statistics Canada, in 2002 the cultural industries contributed $40 billion to Canada's GDP, employing more than half a million people. The contribution of the culture sector to the Canadian economy amounted to approximately 3.8% of the Canadian GDP in 2002.
The film industry is the third largest within the cultural sector in terms of the GDP; it's worth 9% of culture's contribution to the economy. According to Profile 2007, the film and television production sector was a $4.8 billion business in 2006 in this country, employing more than 125,000 people.
With average earnings of $23,500, artists are in the lowest quarter of average earnings of all occupation groups. This is from the 2001 federal census. Of the 500-plus occupations that are tracked by Stats Can, three-quarters have average earnings that are higher than artists.
Other things to note about artists are that many of us are highly educated; we're largely self-employed, which means we fall outside of government support such as employment insurance; and in the cultural sector, there is a predominance of women.
If I may, I'll talk about the film industry. Film and television production has three main centres in this country: Toronto, Vancouver, and Montreal. But film and television activity takes place across the country. In fact ACTRA has nine branches, from Newfoundland and Labrador all the way to British Columbia. More than half of ACTRA's membership is based in the Toronto area, which reflects that centre's level of activity, and more than 25% of our members are based in the Vancouver area. We are very mobile. All of us tend to work across the country, when we're fortunate to work. That gives you a sense of the clusters of our population, as far as membership goes.
The film and television business is supported by the federal government in a number of ways, and I'm sure you're aware of them. There are tax credits that encourage production, both domestic productions such as a series like Corner Gas, and the projects that are shot in Canada and mostly originate from Hollywood; we call them “service production” or “foreign production”. That's one of the ways the federal government supports our industry.
Funding of cultural institutions such as Telefilm and the CBC is very important as well. Finally, there is government contribution to the Canadian Television Fund, which is absolutely key to the seed money for production of Canadian television programming.
Government support for the film and television industry is crucial. We live right next to the most pervasive and insistent culture in the world, the United States, so government support is not just an investment in high-quality jobs or high-end industry, it is an investment in our cultural sovereignty, our identity as a nation.
There are four main challenges that face our industry: the crisis in Canadian television drama, the threat of increased foreign ownership of our broadcasters, the impact of the high value of the Canadian dollar, and we have some concerns with HRDC's immigration practices that affect the film and television industry.
I'll start with the crisis in Canadian drama. There's an urgent need to do more for Canadian-content production. Since 1999 we have lived through a precipitous drop in the number of Canadian productions. Being able to tell Canadian stories in the most powerful medium, television, is essential for cultural and economic reasons. We need the federal government to use its authority under the Broadcasting Act to direct the CRTC to impose content and spending requirements on Canadian broadcasters who, after all, are using public airwaves to make substantial private profits. In our opinion they need to pull up their socks and make more drama available on television in prime time when Canadians are watching.
The second point that is a challenge is foreign ownership. That phrase in our industry alone raises the hair on the back of the necks of many Canadians. ACTRA is aware that in the past this committee has come out in favour of relaxing rules around foreign ownership of our media companies. Mr. Chair and committee members, please have no doubt that ACTRA is a strong and vocal opponent to relaxing these foreign content and foreign ownership rules.
We were before the CRTC in November arguing vigorously that the commission must deny the takeover of Alliance Atlantis Communications by CanWest Global because the transaction is financed 64% by the U.S. investment bank, Goldman Sachs. ACTRA and others argued before the commission that this deal goes against the laws in this country, giving an American bank the control of a Canadian broadcaster.
ACTRA held an event in Calgary just last week with our colleagues, a couple of other unions, including the Communications, Energy and Paperworkers Union, and also the Friends of Canadian Broadcasting. We launched a campaign called “Our Media is OUR Message: Keep it CANADIAN”. We commissioned an Ipsos Reid poll that showed last week that 82% of respondents, 82% of Canadians, feel it's important for the government to work to maintain and build a culture and identity distinct from that of the United States.
In a few months we will be participating in the competition policy review that is being launched by Red Wilson. You can read more about our position when we file that submission next month.
The third challenge to our industry is the Canadian dollar. The current value of the dollar is a serious threat to this sector of film, television, new media, and commercial production. Making Canadian productions is about half of our industry's work, and the other half is service production, programs, movies, television, commercials, mainly originating from the United States. The effect of the dollar on our industry is quite obvious. In fact, a 2004 industry report pointed out seven factors that affect Canada's competitiveness as a filming location, and of these the most important factor is the value of the Canadian dollar relative to the U.S. greenback. The lower the dollar, obviously the more work is created; the higher the dollar, the less work there is.
Things are adjusting. We're aware that the dollar is getting out of the stratosphere that it was forced into by traders perhaps, but the full impact of the overvalued Canadian dollar will not be felt for us until the middle or the end of 2008. We know that major studios intend to let projects already on the books proceed; that's happening. But they're not planning any new productions due to the dollar value. I'm told that the 800 phone lines to our offices across the country have stopped ringing.
Finally, the other challenging area the government has influence in that affects our industry is immigration. When U.S. productions come to Canada to shoot, we obviously want them to make use of our home-grown talent, our professional performers, as much as they possibly can. Often U.S. producers insist on bringing in American actors even for the smallest roles in their productions. Human Resources Development Canada used to work very closely with our senior staff across the country, with ACTRA and with other unions, to make sure that productions had thoroughly investigated the availability of Canadian performers for these and larger roles. Unfortunately, today HRDC has stopped consulting ACTRA on immigration permits. In the recent past and now, this has had a direct and immediate impact, a loss of jobs for Canadians here at home.
Those are some of the challenges we face in our sector, the film and television industry. But it's not all doom and gloom. It's good to start a day in Ottawa looking at some positive things.
And yes, I'm wrapping up, sir.
We have had some significant successes in recent years. Sarah Polley's film Away from Her--you've perhaps heard of it--starring our own Gordon Pinsent, has been a very big hit at the box office here at home and in the U.S. Other Canadian successes in television are Bon Cop, Bad Cop and Trailer Park Boys, and we're proud of a hit show, Corner Gas. There are many success stories.
What can the government do, and what would we like to tell this committee? Well, there are five things--simple sentences.
First, help Canadian production and Canadian culture. Direct the CRTC to impose spending and exhibition requirements on broadcasters so that they start investing again in Canadian content and putting that content in prime time, when audiences are watching.
Second, introduce income averaging for artists. Artists are taxed unfairly compared with others in our economy because our income fluctuates. We're taxed at an inequitably high rate compared with our average earnings. Whenever we earn money that's greater than poverty wage, the taxes can be quite high. Allow artists to spread this income over a number of years so that they're taxed more fairly.
Third, extend film and television tax credits to cover post-production, and eliminate something that is called, in our industry, the “grind”, where the federal tax credit is assessed after provincial tax credits have been accounted for. It effectively reduces the overall tax credit.
Four, on foreign ownership, the government can do the very best by doing nothing. Please, keep the current limits to foreign ownership of our media companies.
9:15 a.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you, Mr. Hardacre.
We'll go now to Ms. Dayus, please.
9:15 a.m.
Executive Director, Canadian Booksellers Association
Thank you.
Good morning. My name is Susan Dayus and I'm the executive director of the Canadian Booksellers Association, CBA. Thank you very much for inviting CBA to attend your committee meeting this morning.
CBA is the national trade association of booksellers. We represent independents, chains, specialty stores, campus booksellers, and used and antiquarian booksellers across the provinces and territories, in communities large and small, from Victoria and Yellowknife to St. John's and Montreal.
Today I hope to offer you a snapshot of the current status of the bookselling industry. Specifically I will be discussing the major issues that our industry now faces, especially in light of the rising Canadian dollar. I will also take the opportunity to outline suggestions for the government that CBA believes this fragile and important cultural industry could greatly benefit from.
It is important to understand that the bookselling industry is mostly comprised of small businesses. According to a profitability survey conducted by CBA and published this year, over 70% of the respondents reported annual sales that were less than a million dollars. Furthermore, close to a quarter of the total respondents reported annual sales of less than $200,000. Small business bookstores are advantageous for the communities in which they operate, as they are able to carry more local and regional titles and more Canadian titles as a percentage of total offerings. The availability of such unique inventory, CBA believes, is key to promoting culture, heritage, and innovation in our country. However, small businesses are usually hit hardest when economic circumstances change, such as when big industry players merge or when our currency rises rapidly.
According to our 2007 financial profitability survey, the median net income of bookstores with less than $200,000 annual sales showed a net profit of just over 1%. So this group, which contributes to our heritage in an important way, is especially vulnerable. Sadly, from 1998 to 2006, more than 365 independent bookstores in our country closed, and recently, because of the rapid rise in the Canadian dollar, many members have reported a substantial reduction in sales at a time, the Christmas shopping season, when sales should be at their highest. In fact, many stores report that 30% of their sales come from the Christmas selling season of November and December.
Of course, booksellers are just one of the many retail sectors that have faced ongoing criticism from consumers, as they continue to be asked why book prices fail to be adjusted to reflect the rising Canadian dollar. However, unlike other sectors, the book industry must also deal with the fact that the prices are printed right on the books, directly in front of the consumer, making the disparity in pricing even more apparent.
CBA has been working hard over the past few months to get publishers to lower their prices, since it is they, not the booksellers, who determine the book cover price. Consumers should also understand that prices are often set six months or more in advance and therefore rarely reflect the current exchange rate. Because of our efforts, prices have come down and will continue to gradually come down. However, with many of the factors unique to the Canadian marketplace, Canadian cover prices will most likely never be at par with the U.S. cover prices.
As a result of the strong dollar, we are seeing that more and more Canadians are opting not to shop in Canada for their books, but rather, are crossing the border or ordering online to stock up. Not only is this a serious loss for Canadian booksellers and the economy in general, but it is also a loss for the government in terms of tax revenue.
Although Canadian booksellers are not afraid of healthy competition, we feel that it is not in the Canadian economy's interest for the enforcement of cross-border spending limits to be lax. In an effort to keep our dollars in Canada, CBA recommends that rules pertaining to taxes on purchases that went over the allowable cross-border spending limit should be more strictly enforced.
It is important to note that CBA has been working with the government to find a way to solve the issues created by the parity of the Canadian dollar. Last month CBA met with a number of MPs from all four parties, including a productive meeting with Minister Flaherty, to discuss the current status of the industry.
It is paramount that CBA continue to work with key decision-makers such as members of your committee in an effort to find a healthy solution to this issue, a solution that will satisfy Canadian customers while not making it difficult for Canada's small businesses to survive. In the meantime, some booksellers are having a hard time staying afloat, and some have even chosen to sell at the U.S. cover price, even though the merchandise was often purchased when the dollar wasn't as strong, and even though it means their margins will be very slim.
Another challenge facing our industry is the existence of non-licensed booksellers in Canada, such as Amazon.com. Amazon.com is a great concern for booksellers across the country. As committee members, you need to be aware that U.S. Internet retailer Amazon.com has been operating in Canada since the summer of 2002. The entry of this American retail giant into the Canadian market flies in the face of the Investment Canada Act and Canadian book policy that prohibits a non-Canadian from acquiring control of a Canadian book distribution business. Amazon is allowed to circumvent the intention of these rules because the rules were designed before the introduction of the Internet.
The basic rules define a bookseller under the act as meeting two key criteria: one, physical store location; and two, employees. Since Amazon operates with contract services and no physical Canadian presence, they dance around these rules. Indeed, the Department of Canadian Heritage concluded—wrongly, in our opinion—that Amazon's Canadian site is exempt from provisions of the Investment Canada Act that would have required Amazon to seek permission before selling books in the country.
The agency said it determined that the law does not apply to Amazon because the e-tailer is neither establishing a new Canada-based business nor buying an existing one. The act seeks to monitor foreign impact on businesses thought to influence cultural heritage, including the publishing industry.
Last, CBA, along with 16 other like-minded organizations, strongly believes that the government should remove the GST on books. Books all became a little bit more affordable with the one-point GST reduction announced in the 2006 budget, and we look forward to the second one-point reduction in January. CBA asks that the GST be removed from books entirely. GST adds to the cost of books, making them less accessible to Canadians. The fewer books purchased, the fewer people are exposed to the benefits of reading. This is important to fix, especially when more than 40% of Canadian adults don't posses the literacy skills needed for everyday life.
Reading is integral to our economy and our culture. That is why books should not be treated as objects of consumption. Eliminating the GST will bring attention, focus, and support for the independent bookstores in our communities.
On behalf of the Canadian booksellers that we represent, I thank you for your time today.
9:25 a.m.
Conservative
9:25 a.m.
Chris Tabor Board Representative, Campus Stores Canada
Good morning. My name is Chris Tabor. I'm here as a representative of Campus Stores Canada. I am also the manager of the Queen's University campus bookstore. I'd like to thank the industry committee for giving me the chance to speak today.
Campus Stores Canada is the national trade association dedicated to providing a unified voice for Canadian post-secondary institutionally owned and operated campus stores and, by doing so, enabling them to serve their institutions in the most effective manner.
Campus Stores Canada has more than 100 member stores nationwide, meaning that if you are one of Canada's million post-secondary students, you are likely served by one of our members.
Campus bookstores are an integral part of university life. They are as diverse in size as ordinary bookstores, yet they also serve as a cultural centrepoint to which all current and returning students and faculty gravitate.
Mr. Chairman, your committee has convened these hearings to conduct a review of the issues facing the Canadian service sector. No issue is more prominent than the effect of the high dollar on the cost of consumer goods. However, there are examples of where government regulations are adversely affecting the availability of lower-cost reading materials.
As you are no doubt aware, our industry has been assailed in the media for an inexplicable difference between the price of a book in America and the price of that same book in Canada. I'm sure many of you have had similar questions raised in your respective ridings. However, what most people don't know is that 10% to 15% of book prices is a regulated royalty paid to multinational publishers. A book that costs $50 could cost $5 to $7 less if the government were to eliminate a regulatory protection that does nothing for authors or consumers. We could see book prices drop by 10% or 15% overnight. Let me explain how.
The Copyright Act is a very broad statute that governs the protection and distribution of intellectual property. In the case of printed materials, the act allows for publishers to establish import monopolies on the works of artists from around the world. Minister Flaherty has recently used the example of the Harry Potter books authored by J.K. Rowling, noting that these books have different costs in America.
Let me explain a very significant element of that cost differential and how campus stores, other booksellers, students, and customers are beholden to foreign-owned publishers, also known as exclusive distributors.
Section 27.1 of the act makes it an offence to import new books from any source other than an exclusive distributor of those books, provided that those distributors adhere to the regulations promulgated under the act. These regulations stipulate that an importer can charge a bookseller the price of the book in the country of origin--in this case the U.S. or U.K.--and the difference in exchange rates between the two countries, and add either 10% or 15%, depending on the country of origin. That means that non-Canadian publishers can tack on an additional 10% or 15% of pure profit to their products before they risk losing the sale to parallel importers.
Mr. Chair, that pure profit comes directly out of the pockets of Canadian students, with no appreciable benefit going to them or accruing to the artists or the authors who created the work in question. This regulation was promulgated in 1999, and as you can imagine, the world of cross-border shipping and shopping has changed significantly since then.
Ironically, since the advent of the Internet, Canadian customers can get some books cheaper abroad than a Canadian reseller can. These booksellers and campus stores, the same ones that operate in your communities, have their hands tied by the act, while larger, non-Canadian entities use the act as a sword to carve out additional profits. With a wave of its wand, the Governor in Council can remedy this situation by removing the tariff. Removing the levy does not have an adverse impact to Canadians. In fact, it will provide Canadians with more options through which they can obtain their books.
The section 27.1 protections are outdated in a universe with the dollar at par or higher. The tariff protections actually compound the direct pocketbook impact the levy has on individual booksellers and purchasers. Eliminating the levy will not affect the primary function of the Copyright Act--to provide creators with the ability to protect their art and earn a royalty from producing it. Further, nothing in our proposal would impinge on a publisher's exclusive rights to distribute in Canada, provided they do not charge more for the work in question than they would at home.
Why should Canadian students have to pay more than their peers in the United Kingdom and the United States? It doesn't take a wizard to understand that it isn't fair.
The 1999 amendments to the Copyright Act and the related Book Importation Regulations were flawed public policy at the time. They make even less sense now. These changes were treated as cultural protection steps, when they actually constituted commercial regulation.
We respectfully request that this committee and others with influence move to amend item 5(1)(a)(iii)(A) of the Book Importation Regulations by deleting the “plus 10% after conversion”, and item 5(1)(a)(iii)(B) by deleting “plus 15% after the price conversion”.
With that, thank you for your time and your attention.
9:30 a.m.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Tabor.
We'll now go, finally, to Ms. Sannella, please.
9:30 a.m.
Samantha S. Sannella President and Chief Executive Officer, Design Exchange
Good morning. I am Samantha Sannella, the president and CEO of the Design Exchange.
The Design Exchange is Canada's national centre for the promotion and advancement of design across all design disciplines. We run over 50 programs each year--workshops, lectures, exhibitions, and other such programs--to teach people about the importance of design and its contribution to the economy, the environment, and our quality of life.
Most people think that design is a stylistic add-on, and design is not. Design is at its best when it's used strategically right at the moment of creation of a product, an environment, or an idea. Design is a creative problem-solving process, and it can influence the marketplace by creating new ideas.
Designers have a critical role to play in developing products and the environment, which includes minimizing environmental impact; increasing the quality of life of groups or individuals; and contributing to the economy by driving downstream industries, increasing the productivity of workers, attracting tourists, and retaining businesses and the workforce.
Design, of course, is both a noun and a verb. It can be a design object or it can be a design process.
Although specialized design services are growing in areas such as environmental design, aboriginal design, and green design, the DX formally recognizes eight design disciplines: architecture, which includes commercial and residential; fashion design, which includes clothing, jewellery, shoes, and accessories; graphic design and visual communications, which includes software interface, signage, 3D graphics, branding, video games and interactive media, and brochure, website, newspaper, and magazine design; industrial design, which includes furniture, fixtures, and equipment, both consumer and manufacturing; interior design, which includes residential and commercial building, exhibits, and set design; landscape design, which includes residential and commercial, including amusement parks; textile design, which includes fabrics, composition, and technology; and urban design, which includes towns, cities, transportation, and public use of space.
At present the design community is composed as follows: graphic designers comprise about 51% of all designers; interior designers are at about 14%; architects are at about 13%; industrial designers comprise 11%; and other designers, including fashion--and maybe also including environmental, set design, and theatre designers--are at about 9%.
Architects are the best paid, with an average salary of $61,000. Landscape architects earn about $47,000. Industrial designers earn about $48,000. A graphic designer's average salary is $35,000. Interior designers earn about $33,000, and other designers earn about $32,000.
Designers are also some of the best educated people in Canada. The average education is above the national average in Canada.
It's worth noting that due to the current tight labour market, salaries have risen in the overall design industry, and we expect to see higher salaries reflected in new studies from Statistics Canada.
The current marketplace for design has surged due to the popularity of design in the media--I'm sure you have all watched design shows in the last few years--and the growing sophistication of our diverse populations from around the world.
According to a 2004 Statistics Canada survey of specialized design firms, designers generated $2.4 billion in operating revenues in 2004, up 11% from 2003 and almost double what it was in 1998.
Ontario, of course, has the largest share of revenues as well as the largest population of designers, followed by Quebec, B.C., and Alberta. Of course, Alberta has hit a surge and is growing wildly. It is expected that the new studies that come out will show the significant increase in Alberta, as they're having a hard time finding enough architects and designers to build all the buildings there.
According to Statistics Canada, architecture has increased its operating revenues from $1.54 billion in 2001 to almost double that--$2.1 billion--in 2005. Additionally, growth in firms was significant, adding 344 new architecture firms from 2001 to 2005.
The workforce in the last 10 years has grown by 4.6% a year, more than four times the rate of the overall workforce. So you can see that design is a rapidly growing field.
Design is visible, persistent culture. And when I speak about design to our groups and audiences, I can easily say that design has visual presence, and long-term visual presence, which adds to the country's image. It's a key driver of the economy and a contributor to our quality of life, which I will talk about.
It's the ultimate source of differentiation for the 21st century, and those of you who read magazines such as Business Week and Newsweek can see that design now has its own issues about how design is so important to the economy.
At present, Canada does have a strong, growing design culture. We worked on a study a couple of years ago that shows that Toronto is third in North America for designers per capita, Montreal sixth, and Vancouver seventeenth. This is no small accomplishment, to have such a great mass of designers working in Canada, considering that our population is so much less than the United States.
Canadian designers have the benefit of working in a dynamic, multicultural community, which gives them an extra benefit in the outside world. And due to Canada's political climate, Canadian design services are exportable to almost anywhere in the world. Canadians are also viewed as experts in sustainable design, socially responsible design, aboriginal design, universal design, as well as for their “cool” factor, and they have seen increased demand for these services overseas.
The Canadian design timeline begins back in 1675 near Quebec. Today we count over 200 design association schools dedicated to design at local, provincial, and national levels. These organizations represent over 100,000 designers in Canada. Education programs are responding to market demands and growing. Several have added post-graduate degree programs and new programs, such as environmental design. We will see the number of students and practitioners rise in the population of Canada, and hopefully we can expect to raise wages and expectations, hence growing the quality of design services to meet market demand, as universities change their programs from diploma-granting programs to degree-granting programs and add their masters and PhD programs in design.
Design, I always say, affects three things, and I of course call it the triple bottom line: the environment, the economy, and our quality of life.
With regards to the economy, design of course plays an important role. Newly designed products and environments create demand in the marketplace. Designers are innovative and they create new ideas that create value. Those benefits include being the link between research and commercialization, which is overlooked in this country; creating changes that support innovation; speeding time to market; making products more marketable; demanding innovative materials and technologies; and feeding the downstream economy. Designers work in every sector of the economy, with the highest proportion of designers working in professional, science, and technical services--at 52%.
Design is the driver of the economy and affects virtually every sector. I've included a chart in your notes that shows examples of the sectors on which we have an impact. That includes machinery, mill work, glass, textiles, stone, wood, fixtures, furniture, equipment, paper, printing, drywall, flooring, energy, ceiling systems, wood products, mechanical, technology, engineering, etc. Design is in every single industry.
All design services attract international sales. Many of our most successful design firms first draw a large portion of their revenue from overseas clients. I always say that it's the Canadians who are building Dubai and it's the Canadians who are building Shanghai.
As an example, one our most award-winning design firms, Yabu Pushelberg, which is an interior design firm, is headquartered in Toronto and practises all over the world, including the U.S., Asia, and the U.A.E. This renowned firm is famous for its design of the W Hotels, the Four Seasons Hotels, and the affluent Park Lane department stores in Hong Kong, which, if any of you have been to, you cannot afford to shop in, I'm sure, as I was not.
Similarly, each design sector has its own success stories. One of our greatest challenges is to provide incentives to keep our design talent in Canada, as we're seeing a drain from our Canadian talent going to the U.S. to practise. It is important to attract buyers, manufacturers, developers, and entrepreneurs to design services. Countries with design strategies and strong design reputations are natural hot spots for economic and cultural development.
Recent studies indicate that the investment in design services is most desirable. The British Design Council has recently published the results of a 10-year study on design-led companies in the United Kingdom. It analyzed stock market performance for these companies relative to other publicly traded companies for a period of 10 years. The key finding of the research was that a group of 63 companies identified to be effective design users outperformed the FTSE 100 Index over the full period by 200% in both bear and bull markets.
Korea established a program with the Korean Institute for Design Promotion, which is the equivalent of the Design Exchange in Korea, to add a value of product development and improve competitiveness. The program was developed as a growth engine for Korean SMEs. It provides financial support for product design, product development, branding, packaging, and visual communications. The incentive program was structured to encourage an integration of design through the innovation process. From 1994 to 2002, 7,932 projects were completed with a commercialization rate of 70%, which is twice what the average commercialization rate is. The benefits included raising the standard of excellence for Korean design, new technology development, and enhancing the international reputation of Korea. We have LG and we have Hyundai, which of course are two success stories from that study.
The DX is currently engaged in a product design and development research study with Industry Canada. We're proud to be a part of that study, which builds upon ground-breaking research developed by the Design Council in the U.K. For the first time, Canadian companies will be able to compare their performance to local and international competitors.
We are using a definition of PD and D—product design and development—as the design of all goods and services that compose the process through which goods or services are created. It incorporates not only the use of the product itself, but also the design of new technologies used in the manufacturing processes. It includes the traditional design sectors that provide design services to firms, but also the activity of PD and D that is done by firms in-house. This research benchmarks Canada's PD and D activities across sectors against American businesses and compares the use of design between best-in-class enterprises and laggards. Included in the research, to be released in March 2008, are 86 subsectors, ranging from electronics to aerospace, transportation, plastics, apparel, and furniture.
9:45 a.m.
President and Chief Executive Officer, Design Exchange
Are we over time already?
9:45 a.m.
Conservative
The Chair Conservative James Rajotte
Yes, we are. I have to say, the only one who was on time was Mr. Tabor.
9:45 a.m.
President and Chief Executive Officer, Design Exchange
Oh, really? Okay.
Obviously design affects the economy, and you can see that from the information I have presented. Design also affects the environment and can impact the environment positively or negatively, because it's designers who choose the materials, finishes, and furnishings, and the manufacturers who make their products.
Design also affects the quality of life. Can you imagine the design of a school, a hospital...universal design and design for the disabled? That's a very important part of design that is often overlooked and that we need to embrace.
We have recommended 12 steps that are in your speaking notes, but in short, design is not embraced by the federal government at all. We receive no funding from the federal government. We are a self-sustaining organization. We receive some program funding to run the Design Exchange, but more importantly, across Canada design has to be included in the R and D process. It is the missing link between research and development and commercialization, which is why we're not seeing a great rate of commercialization across the country. Design is the key component in marketing, and until we embrace that, until our policies embrace that, we will not be the country we could be.
9:45 a.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you very much to all of you for your very interesting presentations this morning.
Before we go into questions, I want to highlight that members will have either five or six minutes, so it's a very short period of time, for questions and comments. They may direct a question to one or more of you. If it's not directed to you but you would like to add a comment, please just indicate to me and I will ensure that you have an opportunity to respond, but we will try to keep the questions and comments very brief.
We're going to start with someone who needs a fashion designer, Mr. McTeague, the vice-chair.
Mr. McTeague, you have six minutes.
9:45 a.m.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
How do you come back from that one?
Ms. Sannella, thank you very much for that. You'll be happy to know that the committee will be looking at the issue of R and D and science in the not-too-distant future. Perhaps there will be an opportunity to continue your comments, and perhaps throughout the exchange of questions with members of Parliament you might be able to get more in there. I read ahead some of what you had suggested, and it's very interesting.
Mr. Hardacre, you set out four priorities for ACTRA. This is the industry committee and we're dealing with the services sector, but one thing I expected to hear but didn't hear is the extent to which copyright infringement, the pirated movies and the unlawful use of camcorders, is having an impact on your association.
I've heard from several members of ACTRA individually. Some of the movies are being produced even in my riding, thankfully, although recently with the run-up in the Canadian dollar those numbers are certainly shrinking or dwindling in places like Toronto. Could you provide us with any comment or insight as to the extent to which you believe counterfeit and piracy in your industry is having an impact on employability and prospects for members of your association?
9:45 a.m.
National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
I certainly could comment. Thank you for the question.
As a preamble, you mentioned that a lot of the crisis in our industry was caused by the run-up in the Canadian dollar, and that's true; however, it would not be such a crisis if we had a Canadian industry, so let me put that as the foundation: the reason I come to Ottawa, for every single committee and every single appearance in front of the CRTC, is to build the Canadian industry. We would not be in such a jeopardized situation if we had a Canadian industry.
Yes, illegal recording is increasingly a problem. We were very encouraged last winter, I believe it was, when former Minister of Industry Bernier and Minister of Canadian Heritage Bev Oda announced new legislation in the Criminal Code for illegal copying, camcording, and distribution of motion pictures. There is a definite effect to distributors of these films, certainly, and a loss of earnings to distributors, but when recordings can be illegally made, there is obviously no remuneration downstream in the royalty structure for any of the creators, the writers, the directors, or the actors. That is a tremendous loss of revenue through the royalty structures we have in place as a union, so ACTRA has been very much in favour of that legislation.
We actually work very closely with the motion picture distributors in Canada, and the Honourable Doug Frith, a former minister, is a good colleague of ours on this battle. There's certainly an impact there in earnings, and it's tremendous. The writers are on strike in the United States right now over the earning of potentially billions of dollars for new media production, for which they currently receive nothing. That's just an example of how stopping the flow of earnings through any kind of royalty structure has a tremendous downstream effect, so performers are affected.
9:50 a.m.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
When you mention new media commercial production, bells went off in my head, but I didn't see any of that really covered in terms of protecting the Canadian content that you're looking at if there are no provisions. This committee has spent a considerable amount of time on this, as has the public safety committee.
I'm wondering if, in your deliberations with members on the heritage committee, you've also been able to stress this point. It's not in your top four, which is a bit surprising for us here on the industry side of things, but nevertheless I'm wondering if I could task you to talk to some of our colleagues in the House of Commons who sit on the heritage committee in particular, and who may not see this in quite the same way you or I might see it in terms of its threat to jobs here in Canada and to the survivability of your association.
9:50 a.m.
National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
Yes, I certainly am prepared to talk to members of Parliament on the heritage committee, but I'm sorry, Mr. McTeague, I didn't quite get.... Were you referring to commercial production, television commercial production--
9:50 a.m.
National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
--and the lack of protection for Canadian content of that?
9:50 a.m.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
Well, I mean content with respect to protection of camcording, protection with respect to new digital forms of technologies involved with creating this product. We don't have that. I have not spoken to people who make commercials, particularly.
I'm referring to some of the innovative technology used in this process of commercial production in sites established throughout Toronto, south and east of my riding. Some of these technologies are being unwittingly copied.
Is there a response? Is your association aware of this?
9:50 a.m.
National President, Alliance of Canadian Cinema, Television and Radio Artists (ACTRA)
We're aware of it, yes.
We're actually in negotiations with the Association of Canadian Advertisers for our new collective agreement. They're obviously very concerned about it. What you're talking about is pirate advertising, basically, and advertising that's done through new media or through the Internet. We're very aware of it, and at the next opportunity I have to speak with the heritage committee or with Minister Verner, I will be very happy to bring this up.