Public Safety Committee on May 14th, 2008

[Michel Gadbois]

For the rest of Canada, I would honestly say if you go west, the level of contraband is below 10%. If you go east, to the Maritimes, it's growing very fast now. There's easier access, I presume. There are other ways of getting the product in. We're talking about one type of product, but there are manufactured products coming in through containers, so they arrive in different ports.

One of the questions we should ask...and I'm not an expert on this, but I have my personal opinion. We have to make a distinction between the raw product itself, where it comes from, and the transformation of that product into cigarettes. It's evident that the transformation part is done in the U.S., and partly here. The big question is where do they get that raw product? I'm still not comfortable with the idea that it comes from the U.S. We don't have American-blend tobacco in the cigarettes we smoke. It's just so different.

[François Damphousse]

Actually, I'm told that some farmers in North Carolina are actually growing Virginia flue-cured tobacco that is used in Canadian cigarettes. They could be supplying the illegal manufacturers on St. Regis, and those cigarettes will be provided to the Canadian market.

[Penny Priddy, NDP, Surrey North, BC]

Okay, so it's still American; it's just that they're growing Canadian product.

[François Damphousse]

Well, you've heard the debate through other witnesses between GRE and Imperial Tobacco about where the raw materials were coming from. One was saying 80% is from Canadian farmers, the other was saying it's mostly coming from the U.S. farmers. Regardless of the source, what we're calling for is a control of these shipments of raw materials. That's what is important. You have to look into all possible sources of raw materials going to those illicit manufacturers, and blame them. Fine them. Make it an unwise financial decision for them to supply the raw materials to these manufacturers.

[Penny Priddy, NDP, Surrey North, BC]

I have a last question.

[The Chair, Conservative, Garry Breitkreuz]

You have 13 seconds.

[Penny Priddy, NDP, Surrey North, BC]

Okay...and now they're gone, so somebody else gets the next seconds. I'm sorry about that.

[The Chair, Conservative, Garry Breitkreuz]

There's a 13-second loop in your brain. I can give you....

[Penny Priddy, NDP, Surrey North, BC]

I thought it was way longer than that on some days.

[The Chair, Conservative, Garry Breitkreuz]

All right, if it's not coming to you we'll go over to the government side.

Mr. MacKenzie, please.

[Dave MacKenzie, Conservative, Oxford, ON]

Thank you, Chair, and thank you to the panel for being here.

I certainly have a sense that first off, there's no one body that's responsible for all of this. One of the bodies that seems to always be missed in all of the discussion is the guy who buys the cigarettes. I haven't seen much from folks who want to do anything about discouraging them. We point fingers at the aboriginal community, we point fingers at the tobacco industry, but we haven't pointed fingers yet at the people off the reserve who are buying these cigarettes--perhaps children or whoever--or the people who are transporting them.

Particularly CCAT has a mandate, and I understand that it's perhaps very aggressive towards the tobacco manufacturers. I think our friend here mentioned something about being in silos. Have you considered working with some of those groups, getting out of our silos, working together to discourage the Canadian public from buying cigarettes when, first off, we don't know what's in them? We're fairly satisfied that it's not necessarily in the best interests of either the people who manufacture them, the people who illegally import them, or the people who sell them, but for certain, I think we can say it's not good for the health of the people who smoke them.

There could be a concerted effort to work together with the legitimate industry to try to cut down that demand that's out there by people--for a bargain. That's why they're buying it, but they may not know what's in the bargain. Have you considered working together?

[François Damphousse]

Actually, in one survey that was conducted by Health Canada, I think, Phoenix Communications, it was mentioned that even part of the public doesn't believe it's illegal to buy these cigarettes. There's no police intervention preventing them from doing so.

I think your idea would be appropriate. For example, Health Canada has a strong budget for a national campaign. Why wouldn't Health Canada look into that issue, launching a national campaign about the illegal market? That would be part of a global strategy.

Actually, the impact we've had over the past ten years in tobacco control to reduce smoking in Canada has been through a global strategy. We've been restricting advertising, we've had health warnings, we have tobacco taxes, bans on smoking in public venues, and so on. Why can't we do the same thing?

[Dave MacKenzie, Conservative, Oxford, ON]

Have you done anything collectively to try to generate that?

I've talked to the aboriginal community, and they're willing to work. The tobacco industry is willing to work. I think we need at least another leg on this chair so that everybody's working towards the same end. It's counterproductive to the Canadian variety store owners when their regular customers for bread and milk buy their cigarettes in a contraband or counterfeit way just because they're cheap.

[Michel Gadbois]

I'll split my answer into two different parts.

Yes, we are doing something. At the end of my presentation I announced our campaign that we're going to launch in all the stores in Ontario and Quebec, to begin with. It will be a very visible campaign, with the best tools we have, because we have traffic—3.2 million Canadians go through our stores every day. So we do have some clout in trying to tell people what's happening. There are two types of clients, by the way, but I'll get back to that in a moment. But, yes, we are going to have a public campaign, and we're going to run it through Quebec and Ontario to begin with, but we won't stop. We've started the battle and we'll be out there. You'll see it. It will begin by early June.

Second, I mentioned the National Coalition Against Contraband Tobacco. We've invited every group, even the health group, if they wish, to be part of that. We just want to start that coalition. It's not something we want to control, it's something we want out there. There's a website ready. We want individuals, politicians, groups, so that there's some kind of forum where we can attack what I would call the second part of my answer.

There's an expression that seems very scientific in psychology. It's called cognitive dissonance. We know the problem; we don't want to hear about it. We don't like it. We know how bad it is, but we're pushing it away. What we want to do is put it out there so people have to face it.

Obviously, the smoker is saving a lot of money at the moment. That's tough to fight. They're not very happy to be smokers--I don't know of many smokers who are--but they are smoking. They say, “Listen, I can save maybe $3,000 to $5,000 a year. Hey, with the price of gas, it's worth it.” That's why we're talking of different ways to approach these people.

And I know that saying “You don't know what you're smoking” is not the best method for the tobacco issue. Let's say it's a non-regulated or non-supervised product. We could sell that a bit. But I think the smoker will move if we show that there is something, there is an alternative, because in a way, the smoker thinks they're getting even. It's a product that's taxed 75%. They're saying.... I'm not going to use the words in English; I know they're not proper. But that's what they say to government.

If we're talking about these people we want to get back, because they're basically the clients of that whole problem, we have to find a way not only to communicate, but also to show to them, by some of the measures we present—and they're not easy, and I know people don't like some of them—that we're ready to try to put all these measures away. We're going to fight that and have a reasonable discussion with them to say “Yes, we're all working together to make sure it's a level playing field and you're not getting...by the government.”

[Dave MacKenzie, Conservative, Oxford, ON]

That's my sense. When we talk to people everybody understands that government doesn't have all of the answers, the industry doesn't have all of the answers, you folks don't, and certainly the aboriginal community doesn't. But if we ever got to the point where we could all work together collectively, a little bit here and a little bit there, it would ultimately be good for everyone.

Your comment about the silos is so appropriate. If we can get ourselves away from pointing fingers at one another and say “We need to find that solution”.... And I know you folks have done a good job in dissuading people from smoking cigarettes of any type, but I'm concerned that we're not doing a very good job of telling the people who buy contraband what it is they're smoking and what they're supporting.

[Rob Cunningham]

On Monday, Mr. St. Amand asked the question about what the law says. It's a violation of provincial and federal laws for a consumer to purchase or possess this product. Where there's federal tax paid but no provincial tax, and it's supposed to be sold to a native on a reserve, it is illegal for a consumer to purchase or possess it. In theory, under the Excise Act their vehicles could be seized.

That's what the law is.

[Dave MacKenzie, Conservative, Oxford, ON]

My suggestion is that we need to all work together to make the public that buys this understand that. I think you folks and government and others can certainly work together and come to those kinds of solutions. It won't be the ultimate solution, but it's certainly a part of it.

[François Damphousse]

If I could add, just for information, you have to understand that for the health community, our interests are much different from the interests of the tobacco industry. They have their economic interests and we have public health interests. Based on the behaviour of the tobacco industry, we're very reluctant to work with the tobacco industry on issues like this.

[Dave MacKenzie, Conservative, Oxford, ON]

We won't get anywhere if we keep pointing fingers at one another.

[François Damphousse]

I understand that. I just wanted to tell you why sometimes it's very difficult to work with some of these interest groups.

[The Chair, Conservative, Garry Breitkreuz]

Let's go over to the Liberal side again. Mr. Cullen, please.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you very much, Mr. Chairman.

I would like to thank all the witnesses for their presentation today.

I have a few questions. I'm going to put them out, and maybe you can respond.

First of all, just coming back to the point that Mr. Gadbois mentioned about the direction of the flow of illicit tobacco, if I'm an illicit cigarette manufacturer in Akwesasne on the U.S. side, I can get tobacco that is pleasing to Americans or I can get tobacco that's pleasing to Canadians, and I can manufacture cigarettes that will sell in the United States or in Canada.

It seems to me they're saying it's easier if I ship them up north than if I ship them south. Is that not correct?

[Rob Cunningham]

That's absolutely correct.

[Roy Cullen, Liberal, Etobicoke North, ON]

Okay, thank you.

I'm intrigued with the idea of the bond, Mr. Cunningham. For the legal manufacturers it's a slam dunk, but for those that are illicit, first you have to send someone in to find them, and then they have to be told they're manufacturing illegally. That's a problem to start off with. Then they say they'll become legal, and you ask them for the bond. I'm just wondering how practical or useful it would be for illicit manufacturers.

[Rob Cunningham]

For somebody who is completely illicit, it's not going to help. We need different remedies for different aspects of the overall problem. There are some people who have a licence who have bad-faith intentions. We need something to discourage that type of situation, and a bond would help.

A $5,000 bond is exceptionally low. My understanding is that in Ontario it's $500,000 to start.