Public Safety Committee on May 14th, 2008

[Peter Goldring, Conservative, Edmonton East, AB]

With 31,000 stores, you haven't had to take that action yet over the past years?

[Michel Gadbois]

No, and I would say that in most cases they can't even compete with the illegal market, simply because they don't have the system and they don't run after their clients. At the same time, I would say that they are so susceptible or open to police or government intervention that they're less inclined to get involved in it, because the consequences are not the same as for the runner who goes around and has no business.

[Peter Goldring, Conservative, Edmonton East, AB]

In the other vein, looking at the product that's on the table there, I'm seeing there's not much attention paid to packaging, so you don't have formal manufacturing in the truest sense of big assembly-line manufacturing of multicoloured packaging, etc. You're just using plastic bags with cigarettes. I would suggest the supply of the materials for that is pretty readily available.

There is small-run assembly manufacturing. There are home rollers, but there are also machines that can pump out 10,000 units. Is this smaller assembly an equal problem? How do they compare to the big-production assembly units in the States, the smaller-capacity ones that can run out 10,000 units in a week?

[Michel Gadbois]

I wouldn't know, because they're on Indian reservations. I don't think they--

[Peter Goldring, Conservative, Edmonton East, AB]

Would it be in the overall community, not just on the Indian reservations?

[Michel Gadbois]

I don't know how big a plant you need to have a business, obviously. But you have to understand that when you're dealing with illegal cigarettes, the market is controlled by criminals. If you try to compete with them in your own way, try to take some markets or sales away from them, I don't think you'll survive.

[Peter Goldring, Conservative, Edmonton East, AB]

To turn back to the 31,000 owners of your small stores, I would think that with little monitoring of the situation, there'd be a tendency for a small entrepreneur who has a small franchise to augment his income by having his own manufactured cigarettes that he sells in two, three, four, or five franchise stores in a smaller capacity. Is there any way of determining this?

[Michel Gadbois]

The only problem with that logic is that you're talking about monitoring. There is little monitoring on the criminal side, but there is immense monitoring on our side. We have inspectors every day; we have to write reports every day. A small-business owner can tell you that if he were involved in that type of activity, it would be lot easier to catch him than to catch the real criminals.

To me, that focus is on the wrong place. I'd much rather talk about the real...than speculate on who.... There will always be some mavericks, some individuals who we wouldn't like to be associated with, but I'd say they are very much a minority. Because of our control system and the government's monitoring system--and god knows, we complain about being too controlled--it's not an issue as far as we're concerned.

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

Mr. Cullen, please.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you, Mr. Chair.

Looking at this issue, it seems to me there are a couple of principles that say don't have laws that aren't supported by the people generally, and don't have laws that you can't enforce. It seems to me these are the horns of this dilemma.

We now have laws that are being flouted. We had the list the other day of how many laws are broken to bring illicit cigarettes to the market.

In terms of the policy generally, I suspect that if you're a middle-income or a low-income Canadian and you're a smoker, you could say you're addicted. You're going to spend so much on smokes, period. So you're going to find a way to get them so it fits within your budget.

In 1994 I didn't support our government's decision to ramp down the taxes. I was elected in 1996, not that it would have made a row of beans difference, but I was proud when we brought in the measures in 2000, when we upped the taxes, when we dealt with the issue of taxing at the plant door so the cigarettes didn't just come around into Canada from the U.S.

We knew at that time, our government knew, that as you ramped up excise taxes you were risking the possibility of more contraband. I understand why there would be cynicism. I'm cynical myself, because the laws aren't being enforced. I think what we should be doing is recognizing that this is going to happen, that it is happening, and deal with it. I think it's retrograde to....

I was glad to hear you say, Mr. Gadbois, that if there were solutions you'd be happy to see cigarettes taxed properly, and you even said there'd be higher margins for you. I don't know your business, but I found that interesting.

I think it comes down to political will. Having said that, this is a very complicated and difficult problem. But to just drop our hands and say they beat us.... We ramped up the taxes, we knew that was going to create more contraband, and we sort of just said, “Well, sorry. We give up.”

That's just a comment of mine. I think we have to deal with this no matter how complicated it is.

I'll allow you to come back, Mr. Damphousse, in just a minute, but I want to ask a question with respect to the revocation of licences for manufacturers. I think that's a good idea as well.

Mr. Damphousse, you mentioned that there were a whole bunch of these manufacturers who were licensed. They probably got in with these bonds of $5,000 or something. They're operating illegally now, and no one is doing anything about it. That doesn't seem to me to be very appropriate.

[François Damphousse]

What is very important for Canada, why they need to deal with this issue.... I don't know if you're familiar with the WHO Framework Convention on Tobacco Control. It's the first international public health treaty from the World Health Organization. We were among the first countries to ratify that treaty.

I was in Geneva in February. They are developing a protocol on smuggled tobacco products, and one of the strongest delegations to that meeting was Canada. Some of the policies that Canada has brought forward have been copied internationally. One of these is the pictures and health warnings that you see on the packs. We're the first ones who did that, and many countries have followed suit.

I think if you could show it as an example.... There are many countries right now that are watching, because they know that Canada is dealing with a tobacco smuggling problem right now. Smuggling is not just specific to Canada; it is a problem internationally, which is why we're negotiating this protocol.

In fact, if you take the initiative of dealing seriously with this issue and protecting the taxation policy, because it's been effective in Canada to lower tobacco consumption, if you ask anyone who was a smoker what their biggest motivation to quit was, they will say either because smoking was banned in the workplace and public venues, or because prices are too high.

That needs to be protected, and Canada needs to lead the way to show the international community that this issue can be dealt with effectively.

[Rob Cunningham]

I believe we can solve this; we can win this. There's a responsibility for federal-provincial governments and the American government. We're able to maintain much higher taxes in western Canada with very small levels of contraband in comparison to central Canada.

I'll just note that we have tabled a binder of reference materials for the committee's consideration.

There is one other remedy that we've not talked about--illegal advertising. In tab 8 of the binder there are some examples of illegal advertising by Grand River Enterprises. So there is advertising at point of sale, in violation of Ontario laws and federal laws, and that brings it to the attention of consumers. That is a further remedy: all of the illegal signage could be dealt with.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you.

[The Chair, Conservative, Garry Breitkreuz]

We'll now go over to the government side. Mr. Norlock, please.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much for coming, gentlemen.

I have a quick question for Mr. Damphousse. What percentage of variety stores does your organization represent? I believe there's another organization.... Oh, I'm sorry. This is for Mr. Gadbois.

I'd like to think that you're all on the same page, because if not, we're in deep trouble.

What is it percentage-wise? I know there is a Korean store owners group. I don't know if they're associated with you or not.

[Michel Gadbois]

You have to understand that there are three different types of convenience store, if I were to talk about the structure. Obviously, you have the larger groups--Petro-Canada up to Canadian Tire. They are members--big members, thank god for us. You have the smaller chains that might have 10 to 15 stores. Then you have the individual stores, and that's where you'll see, for example, the Korean businessmen's association. There's a Chinese businessmen's association in old Montreal, which has 200 members. There are different groups that unite simply because it's easier for them to work together, especially as many of them are immigrants.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

What percentage of all the variety or convenience stores do you represent?

[Michel Gadbois]

Do you mean out of all the points of sale?

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Yes, a percentage of the Canadian market in that particular area.

[Michel Gadbois]

I'd say about 50% or 60%.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Is Couche-Tard part of your group?

[Michel Gadbois]

Yes.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

I know Mr. Cullen is very concerned. This is one of the issues on this committee that he and I are concerned about. We have an elephant in the room, and the elephant of course is contraband tobacco and its multiple negative causes: everything from organized crime, to the government not getting its fair share of the taxes, to health issues, etc.

It was mentioned that we need to work together on this. The government recently introduced the RCMP contraband tobacco enforcement strategy, the task force, recognizing the machinery and those types of issues. I think it was Mr. Cunningham who held up a carton of cigarettes and said that currently under the law if someone is caught driving around with that in their car they could be arrested and their vehicle seized.

I immediately got a picture in my head of a lower- to middle-income-family person addicted to tobacco. We recognize that it's an addiction. A surgeon general in the U.S.—I think he was a general in the armed forces—said it's actually more severe than an addiction to heroin, and I suspect very strongly that he's probably right. So we do have good, hardworking Canadians who smoke and sometimes can't afford.... But I got this awful picture of a police car, a person trying to eke out a living--the hardworking Canadian paying taxes and all that--and a tow truck towing away their vehicle. And that's not what I want to see.

I want to see us get to the root of the problem, and to do that we need to look at the socio-economic reasons why people are manufacturing tobacco, whether it be on the reserve or somewhere else. How do we as legislators work with people like you--all the witnesses we've heard--toward that? That's the exact reason why you're here today. It's not to shove the elephant that's in the room into a corner, because we don't have all the answers. God forbid politicians should ever claim to have all the answers, because then we'd be in deep trouble. That's why we have these committees, and that's why you're here.

I guess it's less of a question and more of a statement that I'm making. There's an honest, all-party desire to work together, come together, and listen to Canadians out there. But we had to sort of cram the focus in this committee onto contraband tobacco. We are purposely leaving out the health issues, although we know how strong they are, because it's cancerous. Whether the political elements are on the reserve or in the government here, in the long run this is bad. Our children will suffer. Their health will suffer. They'll become motorcycle gang members. Terrorists will come in because it's a good fast buck--a good way to finance the bad things they're doing. We want to make sure we begin on the road to curbing those bad things from getting worse than they already are now.

So even though Mr. Damphousse and Mr. Gadbois may have different ideas, damn it, you have to work together and help us solve this problem.

Thank you, Mr. Chairman.

[François Damphousse]

One comment I can make is that Rob and I, and many others in the health community, have been meeting with many people from many different ministries. We were being told, “It's not us, it's the other ministry”, or “It's the other department”. We've been thrown so many times, going all around, trying to find people who would take the lead on this issue.

One thing we've said to all of you is that it's not just one minister who is responsible here. It's the Ministry of Justice, it's Health, it's Public Security, and Agriculture. All of these ministries have to get involved.

Just recently we've learned that the RCMP's strategic plan is going to help to set up such a committee to look into this issue through different eyes. This is very important. It's a major achievement, and I think you need to be commended.

As for working together, our motivation in the health community is to protect public health and to reduce the health consequences of tobacco use. You were talking about the cash-strapped individual who is addicted to nicotine. About 80% of smokers don't want to be smokers. In surveys, 80% of them say they want to quit. It's because of the addiction that they keep smoking. In much of the testimony we're getting, especially when they're on their death bed, they will say, “Please do something to make sure that my kids do not smoke, because of what I'm going through”.

The interest of the tobacco industry is to maximize their profits. It's to increase their sales. So we don't have any common interests here. The common interest is getting rid of the smuggling, but we'll keep on working to make sure that tobacco consumption keeps going down, because of the public health impact. It's very important that everybody understands this. We sincerely appreciate that, even though your mandate is public security, you are considering the public health aspect of this issue.

[Michel Gadbois]

My closing remarks were in the direction that you pointed out. In the coalition that we're putting forward, we committed to accepting our responsibilities. We're going beyond the urgency of the hard-working Canadians who are my retailers, my members. This coalition is a serious movement. You'll see it start to grow in about two weeks.

We want to do it across Canada. We want to use our stores to have people participate. I hope Monsieur Damphousse and Mr. Cunningham will participate. We're open. I'm not hitting anybody in particular. I'm saying that we have to work together. I hope the government will help us move the coalition together. When it's off the ground, I hope that we won't have to carry it and that everybody will be part of it.

That's why I say I hear you, very much. We're already there. We know we need a major social commitment.