Evidence of meeting #83 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was e-commerce.
A video is available from Parliament.
4:25 p.m.
Chief Executive Officer, La Maison Simons Inc.
In general, no. I collect my taxes and I remit them to the—
4:25 p.m.
Managing Director, eBay Canada Limited
To speak to the earlier points, trust is critical both in domestic transactions and particularly in international trade transactions that happen through e-commerce. At eBay, as a platform, that is one of our absolute top priorities. It's not my area of expertise, but I know for a fact that we invest tremendous amounts. There are bad actors out there who are constantly banging away trying to find ways to exploit weaknesses.
To address Mr. Simons' point, the focus on security is something that has to be carried through the entire flow of the transaction, because the one weak point will be found and exploited. It's very unfortunate, but that is the way it is. This therefore needs to be something in which all of consumers, government, and business are holding hands and taking part. If any one of those groups drops the ball, that's exactly where the bad actors will go.
4:25 p.m.
Liberal
The Chair Liberal Mark Eyking
That wraps up your time. We're going to move over to the Conservatives.
Mr. Carrie, you have the floor.
October 25th, 2017 / 4:25 p.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Dr. Geist, you said, I think, that increased costs in the Canadian market are not the way to go. Remember, I come from Oshawa, and the traditional business was bricks and mortar. Government policy makes a big difference. If you're increasing electricity rates or putting in new taxes, as we've seen, many of our jobs ship out.
I see with e-commerce that many of the jobs are portable, and these businesses can be portable. They don't necessarily have to be in Canada. I see that there's a bit of an urgency here, if we want to be marketing Canada to the world so that Canadians get an advantage in this.
Maybe I'll start with you, Dr. Geist, but then go across the panel. You gave us five really good points, but what's the low-hanging fruit here? What advice can you give the government as to what, maybe over the next six months to a year, we could do policy-wise to improve our global competitiveness? Is e-commerce going to help Canadian businesses be more competitive internationally?
What can you tell us that we could do right now to help things out?
4:25 p.m.
Canada Research Chair in Internet and E-commerce Law, Faculty of Law, University of Ottawa, As an Individual
I'm glad you liked the five I started with. I think those are the kinds of issues, given that we are actively renegotiating NAFTA and negotiating TPP 11, that are very much current.
Taking the perspective that e-commerce is somehow a threat and that those jobs can leave isn't to view e-commerce with the fulsome kind of potential that it has. Of course, eBay provides a paradigm example of the way many people can succeed on a global basis, but there are many examples over the last number of years. In many ways, we should almost stop calling it e-commerce and just think of it as commerce, because it does reflect how people do business today.
I have every confidence that Canadians can compete. What we have to get out of is the mindset that what we need to do is erect barriers or have government come in with programs to help make it happen. This is not to suggest that there isn't a role for government to help educate, to help lay the foundation, as I talked about, with such things as access. But it's a global marketplace, and what we ought to recognize is that if we're not able to compete on the global level, other companies are going to come in and compete right here at home. Amazon we know, for example, is obviously a giant in the space, and not just with the traditional books, of course, but with just about anything, including now groceries.
When you start thinking about those kinds of paradigm shifts that are taking place from an e-commerce perspective, what we need isn't so much cheerleading. We need to, in a sense, embrace the commercial opportunities that the Internet has brought and recognize that we do have a lot to offer and we can compete.
4:30 p.m.
Chief Executive Officer, La Maison Simons Inc.
I agree completely that we have a lot to offer and that we can compete. I can just talk from my point of view. What's holding us back right now is really the question of our ability to handle the quantity of transactions in a productive way. It necessitates enormous investment.
I marked here, “close NAFTA with zero de minimis”, because also economies of scale.... The more you move to robotics, the more you move to a fixed-cost business. The key to a fixed-cost business is to a certain extent volume. Zero de minimis isn't about erecting barriers. It's a question of how we finance our society.
The second thing is technical education. We're moving in Quebec City into a situation in which this investment will require 25 full-time electrical engineers to manage and maintain the robotics necessary to continue shipping. Those people are not available in Quebec right now. I would probably point to technical training, to make sure we have the skill set to support the infrastructure that will allow us to grow our businesses rapidly, because that's holding us back right now—NAFTA and having technical skills available.
4:30 p.m.
Managing Director, eBay Canada Limited
Yes, I'd agree with Dr. Geist. I think that Canadians are ready, willing, and able to compete. I think you only have to look at the myriad of sellers on eBay to see that's possible. I think they're looking for regulation that is built for the 21st century, that isn't a holdover from the early eighties. They talked to me about two things. First was shipping costs, which is a different committee, and the second was the de minimis threshold and the need to essentially get out of their way and take some of the red tape costs off their plate.
4:30 p.m.
Liberal
The Chair Liberal Mark Eyking
You're time is up. You're right on time, Mr. Carrie. Good show.
Okay, we're going to move over to the NDP.
Ms. Ramsey, you have three minutes. Go ahead.
4:30 p.m.
NDP
Tracey Ramsey NDP Essex, ON
Okay. I know this will go quickly.
I was interested to hear about southwestern Ontario being an e-commerce hotspot. I'd like to chat about that more.
One-third of all trade travels through the Windsor-Detroit corridor, and customs is a huge piece of e-commerce. You're obviously shipping to other countries, so I really want to ask you about customs processes, and the complexity, and some cross-border e-commerce frictions that you have in that space.
This will likely go to Ms. Stairs. Go ahead, Ms. Stairs.
4:30 p.m.
Managing Director, eBay Canada Limited
The interesting thing about e-commerce trade is that it's going through consumer channels like you and I would send something to our aunt in Bethesda. It's not going through programs that have been set up for commercial use. That creates specific frictions. No one's going to be surprised when I say de minimis is one of those big frictions both in terms of increasing the cost of low-value inputs—the reality is these small micro-businesses are bringing inventory in to resell in the hundred of dollars—and then it also is a huge pinpoint in terms of processing returns.
Returns on e-commerce transactions are table stakes. It's something that you need to offer now in order to compete. When you're doing more than a half of your business outside Canada, as most commercial sellers on eBay are, you're bound to be receiving returns from international customers. They tend to get assessed for duties and taxes, which you can reclaim, but that process costs money and diverts time and attention away from what you really want to be doing, which is running your business.
For that reason, aligned with what Dr. Geist was saying, we need to have regulation that acknowledges this new kind of trade and removes some of that friction, while still focusing on the key things of preventing dangerous goods, preventing the kinds of things that CBSA really needs to focus on. It's clear that picking up a $21 package, assessing it for duties and taxes, costs way more than the revenues that this generates.
If we feel we need to protect Canadian retail, there must be a more efficient way of doing that and in a way that consumers can trust that this package is above the threshold so it will get assessed, but this is package below so it won't. We play duty roulette now. Half the time the stuff coming across the border is assessed; half the time it's not. That creates a lot of red tape. It doesn't permit Canadian consumers to participate in global e-commerce in the way that it appears other countries do, and to use global e-commerce to fill the gaps from what they're able to get domestically.
4:35 p.m.
Liberal
4:35 p.m.
Chief Executive Officer, La Maison Simons Inc.
For the returns, I agree. Returns are a big part of e-commerce. They're expensive. They have to be automated, and that is a lot of friction. I was in my store this morning and I sold a three-dollar hair accessory. To say the taxes I collected on it are friction, no, that's just the way it is. That's what we've chosen to do, collect the taxes.
To say that it's going to be auto-declaration, that doesn't work. The person who's selling, who's shipping to Canada should collect the taxes. Should it be efficient? Yes, but to say it's friction and it's protectionism.... As far as I'm concerned collect the same taxes from everyone, but lower the tax rate for everyone, then. Lower it by 5% on everything we purchase in Canada. You'd probably break even. But you can't have one person calling taxes a “friction” and the other one calling it a “legal responsibility”. That doesn't make sense to me.
4:35 p.m.
Liberal
The Chair Liberal Mark Eyking
Thank you.
We're going to go right to the Liberals again.
Mr. Peterson, you have the floor.
4:35 p.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Thank you, Mr. Chair.
Thank you, everyone, for being with us this afternoon. I find the presentations very informative, and obviously important as we do our study into e-commerce here in Canada.
I have a question. It seems to me that de minimis is obviously coming up. I think we lack consensus with stakeholders, and it's obviously going to take some more input.
Andrea, I'll start with you. I just wondered if you see a difference between the impact of raising the de minimis regionally. Is there a regional benefit to a change in de minimis at all?
4:35 p.m.
Managing Director, eBay Canada Limited
The key benefits are going to be for Canadians who don't live near the border, right? On a consumer basis, obviously Canadians who live near the border have had higher in-person duty thresholds for quite some time. The small businesses that are at the border have also had the benefit of being able to cross the border and receive goods and returns in the U.S. and then drive them back across, which we know happens. The real beneficiaries will be both consumers and small businesses away from the border.
We need to level set. E-commerce is still a tiny proportion, less than 10% of total retail. While it's growing well, the growth is coming through domestic e-commerce. Canadians would much prefer to buy in-store first, online second, and when they buy online, they prefer to buy domestically. What they're using international e-commerce for is to fill the gaps.
On the small business side, to Dr. Geist's point, in order to survive and create a robust business, you need to trade outside Canada. I don't think that's news to this committee. Being able to access those foreign markets in a way that is efficient no matter where you are in the country is critical.
4:35 p.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Mr. Simons, I don't know if you have any insight into that, whether there would be a regional impact, even if we take your suggestion to take the de minimis to zero.
4:35 p.m.
Chief Executive Officer, La Maison Simons Inc.
The logic for me would be that if you take the de minimis, let's say it is raised, then in a sense there's an issue of sacrificing your sovereignty, your national independence to make certain decisions. I'll go to minimum wage. To build a robotics facility in southern Ontario or in the upper Michigan peninsula, obviously you'd look at unemployment rates, accessibility of labour, and minimum wage.
If you raise the de minimis, effectively you're probably removing your freedom to make other choices of public policy, which as a nation we'd probably regret and we'd be dragged down to a lower level. The regional impact is more in regard to where people will localize their businesses.
4:35 p.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Thank you for that.
Something that we haven't really touched on, but it's an important part of the e-commerce infrastructure, is payment systems and the way money travels through the Internet when we make online purchases.
Of course, we have the Visas and the Mastercards. The big credit cards play an important role. There's some push-back against those now for fees that might not be commercially viable for some of the people who use those services. We have things such as PayPal, which is a hybrid, and we look at things such as Bitcoin, which obviously undercuts the traditional payment methods altogether.
Have you guys given any thought to that infrastructure and what role that's going to play in making sure that Canadians can leverage e-commerce to the benefit of Canada and Canadians?
Professor Geist, maybe I'll start with you.
