Industry Committee on Dec. 11th, 2007

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

A point worth mentioning is that I think there is a misconception that there is a bit of foot-dragging with respect to new legislation to protect and enhance copyright and to combat counterfeit products and film piracy in Canada. There's a perception that the heritage committee or those on the heritage committee may not be quite familiar with all the ins and outs of the problems, and it's easy to see why they may have that misconception, given that your four top priorities enunciated here to this committee don't include anything along the lines of piracy.

That's just a note.

[Richard Hardacre]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

We'll go to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you.

Good morning everyone. Thank you for travelling to see us this morning.

I'm going to continue in the same vein as Mr. McTeague, who was asking what possible impact piracy may have. Since the advent of pirated goods, fewer people are going to the movies, which translates into a significant decline in box-office sales. This must surely have an impact on film producers and artists working in this area.

Have you recorded any loss in earnings because of the number of films being pirated in this country?

[Richard Hardacre]

Merci, Monsieur Vincent.

I will not attempt to speak for the distributors of feature films in Canada. I believe they have a very efficient lobby organization that will be talking to you.

We do not have statistics that show there was a drop in viewership. That's not something my union tracks. We listen to the motion picture distributors about that, and they have statistics that show there has been a loss of earnings for motion picture exhibitors. I don't have those statistics, monsieur. I wish I could help you with that.

But a concern to us is the lack of downstream earnings from viewership of films being distributed, and the very small percentage that performers share in that revenue--it's 3.6% of downstream revenue from those productions. There's also a disincentive for filmmakers who are our members, like Sarah Polley, to produce when their films can be pirated and they will earn nothing from them. But I encourage this committee to seek more information from the Canadian Motion Picture Distributors Association to answer specifically Monsieur Vincent's question.

[Robert Vincent, Bloc, Shefford, QC]

If producers are producing fewer films because more people are copying them, this must be having direct repercussions on the artists who make these films. They have less incentive to make films, because once released, they are copied and viewed elsewhere. You tell me the figure is 3.6%. Your association must have some power to attempt to put an end to piracy. Otherwise, you will also be forced to cut jobs within your own field.

Earlier you said that the relative value of the Canadian dollar has an impact on this phenomenon, but so does immigration. When an American production is being filmed in Canada, there is no requirement to have a certain percentage of Canadians hired on the film. People from all over, be it the United States or elsewhere, can be asked to come here and play minor roles. There is nothing that says that when any film is produced in our country, a percentage of Canadian workers must be hired.

[Richard Hardacre]

The member is absolutely correct on both points. First of all, attention is being paid to pirating. It's a very deep concern of our members, and we have been quite supportive since the announcement was made about legislation. I was in the Centre Block for that and answered media questions. I was invited to be there by Minister Oda, and I've already spoken with Ms. Verner about the piracy problem and the fact that we are encouraging law enforcement to crack down on this. As I said before, I don't have any statistics.

Thank you for raising the question of foreign workers. This has traditionally been something that we've been able to handle, because the HRDC did consult... I've been an actor for 30 years, and in my lengthy career I have been involved with ACTRA. I've been able to audition and get work in foreign productions that came to this country, and many of my colleagues did as well.

That is something that our union was able to enforce, because HRDC consulted with the union as far as work permits go for every role, not just the lead roles. For some strange reason that has not been explained to us, in 2007 HRDC stopped consulting with all unions on the issuing of work permits. It has become a serious challenge, because now we see non-Canadians being imported to play not only two- or three-day roles but single-day roles. This is a tremendous job loss to Canadians and the treasury of this country.

Thank you for that question, sir.

[The Chair, Conservative, James Rajotte]

Mr. Vincent, for 30 seconds.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, but I will forego my 30 seconds, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

Madam Sannella, I was really interested in what you had to say. I actually have a personal connection via a friend of mine, Douglas Cardinal, a fairly famous Canadian whom you may have heard about. I was speaking to him recently, and it seems that he is finding more opportunities in the United States and China than here at home.

I'm actually surprised at some of the things you said, because it does make sense to me that your industry, for environmental concerns, the economy, and quality of life, is key to innovation and improvements in productivity and efficiency. I was curious and wanted to hear you talk a little bit more about this, because the government has come up with an S and T strategy. From your recommendations here, is it correct that your industry is not able to work with the government in the S and T strategy? Can you comment on that?

[Samantha S. Sannella]

Well, they haven't asked us to. We would be happy to.

I find no reference to design in any of the government strategies regarding science and technology or innovation, which I think is a mistake and a huge oversight, considering that design is the key link between research and commercialization. So I'm surprised it's not in there. In every other country, with the exception of the U.S., they have design strategies. Even India is developing a design strategy; Singapore has a really good design strategy; and so do Taiwan, Hong Kong, Finland, and the U.K. I'm not sure why Canada has not embraced design.

[Colin Carrie, Conservative, Oshawa, ON]

I do think the intention is there. As far as the specifics are concerned, I am really pleased with your recommendations, because this is something we do need to look at.

You mentioned in recommendation 7 the need to increase investment in design services for export development. What are the opportunities for Canada as far as opportunities for export are concerned in your field?

[Samantha S. Sannella]

Currently, I think about 7% of all design revenue goes to export markets. A large portion goes to the U.S., but increasingly we've seen a shift as the dollar has risen, with design services being exported to China; Hong Kong; Asia; India, which is a huge market; South America; and the Arab countries. And this has been across all design disciplines. As I said, it's easy to say that Canadians are building Dubai with projects worth $40 million to $50 million in fees, which are significant for a Canadian company.

Currently we have very few government programs to help designers launch their careers in foreign countries. Right now we have trade groups, which I'm sure you're all familiar with. We've seen decreased spending in government programs over the last five years. Last year I think we were eligible for maybe $20,000 to help launch emerging designers overseas—which, as you know, will barely pay for a booth wall at a trade show, it seems.

We obviously know it's because of the political climate that funding has been decreased, but it's really hurting us in promoting emerging designers and in helping foreign offices understand that design is more than just the production of beautiful glass, but that it's about design services. So we have no funding to educate foreign offices that design services are an important marketable part of Canada; we don't. We try to do it on our own, but it's really hard. If we use airline points to go and meet with all of these people and try to tell them what design services are, most foreign trade offices don't even understand.

[Colin Carrie, Conservative, Oshawa, ON]

One of the things you mentioned was funding decreases, yet in the last budget we actually increased funding for science and technology and research and development by $1.3 billion, I think it was. So I think the perception is how to access that and how to become part of it.

Are there specific impediments to your industry from taxation or policy issues with the Canadian government?

[Samantha S. Sannella]

Well, there aren't really impediments, because there are no policies in place. There is no design policy, which we should have.

With taxation, of course, a tax credit or tax incentive for the industrial design community and the visual communications design community would, I believe, help boost commercialization for manufacturing companies. I think it's key that we look at manufacturing companies, and also at the commercialization rate of new products. The development of new products provides greater profitability. We show that in many different studies. New products are tied to design services, so if we can provide incentives to manufacturers to invest in design services, they will see more profitability. That's as easy as algebra 101—but we don't do it. Other countries do it, but we don't do it. We should do that.

Quebec actually has a design tax credit for industrial design services—not visual communications but industrial design services—and they've been better able than other provinces to maintain their manufacturing community. They are very small, and I think a lot of their funding has been cut over the years, but at least they have some idea about getting it right.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

To the booksellers group, I'm wondering if you could expand a little bit on the sites and the Internet commerce. You mentioned that Amazon.ca is actually unauthorized in Canada...? Perhaps you could elaborate a little more on that comment.

[Susan Dayus]

No, it's not that it isn't authorized. When Amazon came to Canada there were no policies in place--there still aren't--regarding Internet companies doing business in Canada.

Barnes and Noble, for example, can't just come into Canada and take over the company, or an American publisher can't just come in and take over a Canadian publishing company, because of the regulations in place. But Amazon was able to come into Canada, set up Amazon.ca, and employ no people, with no physical building here. They're doing it all from Seattle, in partnership with Canada Post through Assured Logistics. They distribute the books and handle all of the logistics of moving the books through Canada.

We're saying that this gave them an unfair advantage in Canada because they were able to go around the regulations that everyone else has to abide by.

It's already been done, so we're not saying that we think it should be drawn back now. You can't pull things back. But we think the government needs to look at a strategy to stop that from happening again.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Ms. Nash, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you very much.

Welcome to all the witnesses this morning.

I want to pick up on the Amazon issue, Ms. Dayus. With the rise of the Canadian dollar, I'm sure the issue of people purchasing books online with an American supplier has increased.

Do you have any sense of what proportion of book sales are now done online to an American company?

[Susan Dayus]

No, unfortunately I don't have any statistics on that. We also don't have statistics on how many people are actually getting in their car, crossing the border, and loading up on books because they're wanting to buy it at the U.S. price.

All I can say is that the booksellers I've been talking to from across the country--not all of them, but many of them--are showing a decrease in sales. Some of that could be because their prices have dropped. And that's a good thing; publishers have been working for over a year to bring the printed price on the book down. That is being passed on to the consumer.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I know it's been a public irritation for people--it's been in the media--that they see two prices on the book cover. In the bookselling industry probably more than in other sectors, that maybe has driven people to find alternate supplies.

[Susan Dayus]

That's right. As Mr. Tabor said, the climate has changed. Students and general consumers are now looking to the Internet to compare prices. When we have policies in place that help keep our prices high, that's not good for the government, that's not good for Canadians.

[Peggy Nash, NDP, Parkdale—High Park, ON]

What do you specifically recommend with respect to a company like Amazon, which is operating legally but seems to be flaunting the Canadian content rules here?

[Susan Dayus]

One thing we have to be sure about--and this just has to do with cross-border shopping, however that is happening--is that taxes are being collected on the goods that are coming into Canada. Not only are we faced with consumers looking at two prices, but in many cases they're also looking at not being charged that additional GST. It's not the reason for it, but it goes back to what we would like to see happen, that the GST be removed from all books.