Debates of Oct. 31st, 1995

Customs Act

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I thank the member for Algoma for his speech. More important, the work done by the finance committee was very important in the development of this legislation.

Members of the finance committee over the last year and a half since I have been involved with it have had to deal with a number of different subjects. It requires a lot of work behind the scenes to make sure they understand each of these different bills.

A member such as the member for Algoma who is close to the border, an area which also has a lot of tourism, really depends on the operation of Canadian borders not only for industry but for tourism. A member such as the one for Algoma has to spend a lot of time making sure he or she understands this legislation and is able to contribute to the debate.

The witnesses who came in to talk about Bill C-102 were all very knowledgeable and very expert witnesses. They had very different opinions sometimes from what we wanted to do. It was up to the members of the committee to really strike a balance, to review these interventions and to come out with what I consider to be a first class piece of legislation.

Could the member comment on some of the things he heard in committee and whether he thinks the bill accurately reflects the best way of proceeding on these various issues?

[Brent St. Denis, Liberal, Algoma, ON]

Mr. Speaker, the parliamentary secretary in being succinct as usual has been accurate in his reflection of the facts as he was referring to me. I did not want to be self-effusive. His comments about me were what I was talking about.

There were a number of issues raised in committee. I spoke about valuation. I would like to spend another moment speaking on that because it was certainly the most contentious issue. In fairness, other matters were raised, of which the parliamentary secretary spoke, which were resolved during the meeting. As a member of the finance committee I was very impressed with the willingness of witnesses and officials to actually work out solutions to problems that needed to be addressed immediately.

On the issue of valuation, witnesses might have gone away from the meeting not feeling totally satisfied that we were able to accommodate them. The issue really boiled down to whether the proposals in Bill C-102 were in line with the actions and policies of our U.S. trading partner and the European communities. We were not persuaded that there was that much difference.

The WTO panel will look at Bill C-102, once enacted, and will let us know whether it is consistent with our obligations to our trading partners around the world.

[Dianne Brushett, Liberal, Cumberland—Colchester, NS]

Mr. Speaker, it is a pleasure to address Bill C-102, a government bill, and to have Her Majesty's loyal opposition stand before the House to support the bill and to have the Reform Party also stand before the House to support the bill. After four very difficult weeks it is a great day for Canada to bring in a piece of legislation which the major parties and the Government of Canada can support wholeheartedly.

Bill C-102 will amend the Customs Act and the Customs Tariff. It is a bill of language and a bill of clarity; it clearly defines, enhances and streamlines the duty deferral program.

The Canadian Chamber of Commerce made interventions in committee that perhaps if we did not bring the bill in on a time line acceptable to business more generally some companies would lose or forfeit the duty they may have paid to Revenue Canada because they could not reclaim on time. We have made adjustments so that this would not be a problem for business.

These changes are designed to help improve the competitive position of Canadian industry and Canadian business. The amendments will allow regions of the country to be more effective in marketing their programs and their products in a competitive manner which allows Canada to attract investment and to keep business at home.

The aim and the strength of the bill lie in its clarification of legislative provisions to make the tariff framework more clear and

to eliminate confusion and ambiguity for Canadian companies, importing companies and travellers.

The bill also prescribes the terms and conditions on which licences for the operation of sufferance warehouses or duty free shops may be issued to include the provision of security which may be required in the operation of these warehouses or shops. It includes the duration of licences and the fees or the manner of determining the fees, if any are to be paid, and for which licences. It is a very specific and clear bill.

The bill also clearly defines the circumstances by which licences for the operation of sufferance warehouses or duty free shops may be issued, in which way they may be amended or suspended, renewed, cancelled or reinstated; the process of accountability.

Bill C-102 also seeks to provide standards for the operation and maintenance of these facilities, sufferance warehouses or duty free shops, and in particular the manner in which the receipt of goods in these warehouses is acknowledged, the circumstances by which and the extent to which goods may be manipulated, altered, unpacked, changed or combined with other goods to make a new product while in the confinement of sufferance warehouses or duty free shops, in a clearly given constituency. The definition of these confinements is also clearly prescribed by these legislative enactments.

This bill and these amendments clearly spell out what are considered designated goods. This clarifies the language and establishes standards for the operation and maintenance of the sufferance warehouses or duty free shops.

Under this bill the framework is laid in which the importer operates his place of business and the respect and manner wherein he maintains his records of operation, his records of imported goods, so that he may be able to make them available to an inspection officer at any given time and answer truthfully to questions in respect of such importations.

The sufferance warehouses and duty free shops are places where imported goods arrive. The manner in which the receipt of these goods is acknowledged, the circumstances and the extent to which these goods may be changed or altered, as I have indicated, is clearly prescribed and defined in this legislation.

These changes should improve efficiency. These changes should reduce the costs of doing business in Canada. These changes allow business, in a very accountable way, to carry on in a very honest and accountable fashion and reduce the red tape for those people who are legitimate business and manufacturing companies here in Canada.

There is one point that was of great contention in the finance committee. That was a point my colleague talked about for a moment, an evaluation provision. Under proposed section 48 of clause 18, the value for duty is a transaction value of the goods if the goods are sold for export to Canada. The transaction value of goods shall be determined by ascertaining the price paid or payable for the goods when the goods are sold for export to Canada. We have changed that. The proposed amendment to subsections 45(1) and 48(1) are that we define the purchaser in Canada. The value for duty of goods is the transaction value of those goods if the goods are sold for export to Canada to a purchaser in Canada. Those are the key words, "a purchaser in Canada", and the price paid or payable for those goods can be determined. This is not a change in the process of doing business here. It is simply a clarification.

I will give an example so that members understand more clearly what our Canada customs officials have been practising for the last decade. If, for example, a foreign manufacturer makes a product valued at $80, that is the price leaving the foreign country. That product may go through several middlemen and maybe there are transaction values added through this process. When the product finally arrives to the Canadian purchaser, its value may be $100. Therefore, which is the value for tariff, the $80 at the foreign country doorstep where it left the foreign country, or the $100 when it arrives at the Canadian doorstep? This amendment clarifies very clearly that the value provision in this amendment is the $100 value, or the value to the purchaser in Canada.

I took a moment to make that clarification because this is not a new change. This is simply a clarification to the existing regulations and the current practices that govern importation of goods in Canada today. It is the practice that has been going on for 10 years. The clearly defined value for duty is the value that has been assigned. I repeat: this value has been used by Canada customs and tariff officials when assigning value for duty for the past decade. All we are doing today in this amendment within this bill is to allow every importer in Canada to know clearly the rules, to allow the value of goods as indicated on the invoice to the purchaser in Canada to be sure that he understands this value to which tariffs and duties will be assigned.

There will be arguments as there were arguments in the debates in committee that the value for duty should be in fact the $80 value that was assigned at the foreign country at the time of export, before the transactions of the middlemen intervened. However, we felt as a committee that the value when it arrives on the Canadian doorstep is the value when all transactions have been incurred.

Presentations were made to our committee by both the Canadian Importers Association and the Canadian Institute of Chartered Accountants in opposition to this bill, and more specifically to this very section, "purchaser in Canada". They said this is a residency requirement, this is new. We argued that it was not new, that it was simply clarification, identifying the purchaser in Canada, and that it had been the practice of Customs and Tariffs Canada for the past

decade; it was simply clarification and we were in compliance, not confrontation, with our world trading partners.

I elaborate on that point because it was very important and a great point of clarification. It sends a message to our businesses in Canada, our manufacturing businesses, where we have value added jobs, that here at home we will do our utmost to protect those jobs through good legislation that is acceptable to our global trading partners.

The bill introduces tariff reductions on a broad range of goods used as input into Canadian manufacturing operations, thereby bringing our input tariffs more in line with those of the United States. It does reduce tariffs on many finished goods that are required and requested by Canadian producers.

Part of our red book commitment was to reduce government red tape and streamline government operations so that business in Canada could be more efficient and we could provide manufacturing jobs in a more competitive global economy. That is what Bill C-102 does.

Bill C-102 allows Canadian travellers to bring back to Canada after their absences abroad goods of increased value. This will bring Canadian travellers' exemptions into line with those of our major trading partners and for administrative purposes ease border congestion. We know the majority of those travellers are honest, law-abiding citizens. This bill allows that to occur with more ease and allows us to spend greater time on those who are involved in criminal offences and criminal activities.

This is a positive step forward for Canadian legislation. It is a positive step forward for our Canada-U.S. agreements and our shared border commitments to ensure that activities between these two peaceful countries occur with ease and with the greatest efficiency for both countries.

Other amendments to the customs tariff or the Customs Act contained in this bill are aimed at clarifying the intent of certain legislation or involve changes to make the tariff framework clearer and more predictable for Canadian companies and the importing community. Those are very important words, "more predictable", when one is in business.

I had the experience of being in a manufacturing biological business for some 25 years. I was a co-founder in Nova Scotia of a scientific company, a tremendous challenge of a high tech biological company in a part of the country that is known for its hewers of wood and drawers of water. It was a challenge indeed, but we established that company and were able to provide scientific jobs for young Canadians in Atlantic Canada.

I know the value of predictability and stability in regulations on importation of goods into a manufacturing process. It is all part of maintaining jobs, maintaining accountability to employees, and maintaining a stable marketplace and economy for all Canadians.

These amendments will afford protection to our manufacturing jobs and enhance the capacity to which we can export, which is what Canada is so well known for. These amendments clean up the wording of the act so that importers in Canada, those who own businesses, and Canadians who are travellers will understand and appreciate the regulations more clearly. The clarification and wording are clearly conforming with our trading partners, not confronting them, as some might suggest.

These are progressive amendments. In an accountable and trustworthy business trading partnership they enhance Canada's credibility in competitive global trade. I am very pleased to hear this morning that all parties of this House will support this legislation.

I am eager. I am very pleased to be on the finance committee and to have heard the arguments on both sides to bring this into the House and let our business community in Canada know that we are progressive.

We are listening. We are reducing the red tape. We are trying to streamline so that business can be competitive, so that we can ensure those Canadian jobs in all regions and make Canada the number one place economically that we are forecast to be in the next couple of years.

[Brent St. Denis, Liberal, Algoma, ON]

Mr. Speaker, I greatly enjoyed the member's speech. Based on her experience in the private sector, she is extremely qualified to talk about matters that affect small and medium sized business in this country. This also eminently qualifies her to be a member of the finance committee of the House of Commons.

She made reference to the red book. I prefer to call it the well-read book, because so many Canadians have had a chance to be exposed to its contents, to be exposed to the commitments this government made during the 1993 campaign, which, when implemented, will do the kinds of things this country needs to take its proper place in the world as a trading nation that can, being strong economically, provide jobs for its citizens, especially our young people.

She mentioned her experiences in business with the biotechnology firm in the maritimes. No doubt she has many personal experiences with the red tape that faced her and her colleagues in that business. I wonder if she could share with us from her personal

experience the loss of productivity, the loss of human resources, the wasted time that attends the paperwork burden imposed on business in this country. She might say how it will be a liberating thing for business not to have this load weighing down on them.

[Dianne Brushett, Liberal, Cumberland—Colchester, NS]

Mr. Speaker, it was in 1972 that I was a co-founder of a company called Dominion Biologicals in Truro, Nova Scotia. We vowed to put our money where our mouth was. It was not a lot of money, but it was almost everything we had at the time. We wanted to build a scientific company because so many of our young people had to leave Atlantic Canada in order to find jobs, particularly in science or research.

We were noble in the cause, rather naive, and decided we would take everything we could after some experiences working for giant companies abroad to build this company in Atlantic Canada and to speed up the 25-year process. The company became very successful and went on to be publicly traded on the Toronto Stock Exchange.

We did a lot of research and Canada Customs played a key role in our manufacturing business. We used biological products. We would immunize animals and humans for an immune response reaction and then we would plasmapheres and bleed those humans and animals and this would be our source of raw material.

I do not want to go into every scientific detail of hybridoma production and monoclonal antibody production. This took a lot more research. Canada Customs was always a vital component of our business because we would purchase raw material, human plasma of high antibody content specificity, from countries abroad through the World Health Organization and the United States.

That raw material had to be tested as safe and processed on very tight timelines. As well, in the manufacturing process there are large numbers of people involved and the processing is very time consuming, filtration, refrigeration, sterilization; protocols of world health standards and the National Institute of Health Standards of Bethesda, Maryland. Everything is on a very tight schedule because cultures must be produced and searched for contamination.

A product must come through from Canada Customs in a time frame assigned by the manufacturer because we would have a time line by which to export the product to the Austrian or German Red Cross, to world health organizations or to sell the product to hospitals in Canada. Our products were all marketed to hospitals or Red Cross health centres for in vitro diagnostic testing.

In my previous life I spent a lot of time dealing with Canada customs and tariffs, a lot of time processing paperwork and knowing the tariff item number so that a product could come in. At the same time a relationship of trust is built. They know the products being imported and to what company they are going. A one on one relationship is established. This bill will do nothing but enhance those relationships. It will be a tremendous asset.

They know you are a bona fide manufacturer. They know your integrity, reliability and honesty in the workplace. They know you have a place of business where people work and that you pay your fair share of taxes and your books and records can be inspected at any time.

When they know their clientele and the transactions of goods and what they are and what they are being used for, the bill enhances that relationship. It speeds up the relationship and allows the manufacturer to get on with the process as quickly as possible so that the goods can go out the door for sale either domestically or in foreign countries.

That is part of the credibility, the stability of being a manufacturer in Canada. It is part of selling goods. Manufacturers need to be accountable and reliable and able to be competitive in the global marketplace with a quality product that meets the time line because it is no good if there has been a disaster and it is two days late.

It is critical to have these relationships with Canada Customs and with legitimate manufacturers in Canada. It is a vital component to have efficient regulations through which goods can move as quickly a possible, particularly the goods of which I speak because they are perishable. A small bottle of serum going to the Red Cross in Canada or to Europe might be worth $50,000. It is breakable and perishable if exposed to high temperatures or extreme cooling.

The whole process of efficiency in high technology is key to doing business in Canada. I can speak firsthand of this from the Atlantic where we are a little more remote from some of the high tech centres. It can do nothing but enhance business here at home and maintain jobs particularly in the manufacturing sector. That is where the value added jobs are.

It is very easy to call yourself an importer and have a fax machine in a small cubby hole in the wall somewhere. When you input something it goes through your fax machine and goes offshore somewhere or wherever, but it does not do much to add value to jobs here in Canada. That is an easy thing to do. We see more of this all the time as the global trading community becomes smaller. People are moving things but simply with a fax machine, a telephone and maybe a warehouse.

There are manufacturers, with hundreds of people coming to work in the morning, that know the value of using Canada customs and tariffs. I can speak strongly of another manufacturer in my hometown of Truro, Stanfield's woolen mills. It employs 800 people. It is a true manufacturer. It brings in sheep's wool. The wool is carded. It is then woven into yarn on spinning wheels. From the yarn it is then woven into fabric. The fabric is then cut and designed according to whether it is a t-shirt, a piece of underwear,

whatever piece of garment it might be. It then goes in for stitching and sewing, into piecework.

To watch the women work on the sewing machines at Stanfield's I believe they could compete with any women in the world in the garment sector. It does my heart good to watch our manufacturing people, to see the jobs created. These are value added jobs and the goods are sold in Canada and exported.

Everyone in the House knows how our exports have risen during this past year. It is a sign we are doing the right thing. This legislation is part of that progressive activity. It is progressive legislation for this government. To see Her Majesty's loyal opposition this morning announce it would support it after four very difficult weeks in the country and to hear the third party say it would support this legislation can do nothing but enhance jobs at home. I am proud to be part of the legislation.

[The Acting Speaker (Mr. Kilger)]

It sounds like Fruit of the Loom is doing well in the hon. member's riding.

[Eugène Bellemare, Liberal, Carleton—Gloucester, ON]

Mr. Speaker, there are close to 1 million small and medium sized businesses in Canada. Many of them are manufacturers; others are exporters or importers.

To stimulate the economy and promote job creation, the government has considered the demands and needs of small business and introduced Bill C-102, an act to amend the Customs Act and the Customs Tariff and to make related and consequential amendments to other acts.

I am pleased to support this bill. In summary, the bill before us would reduce tariffs on a broad range of goods used as inputs in Canadian manufacturing operations, which would bring our tariffs closer to those of the U.S. It would also reduce tariffs on certain finished goods, as requested by Canadian manufacturers. In addition, this bill would enact changes to streamline and consolidate Canada's duty deferral programs-duty drawback, bonded warehousing and inward processing-and to make them more accessible to all manufacturers. These changes are aimed at making Canadian industry more competitive by reducing input and administrative costs and easing the pressure on business cash flow.

The changes to duty deferral programs will allow the regions to market more effectively the programs competing with U.S. free trade zones in order to bring investors to Canada and keep them here.

This enactment also increases the value of goods travellers can bring back to Canada with them after an absence abroad. This will bring Canadian travellers' exemptions into line with those of our major trading partners and, for administrative purposes, ease border congestion so that customs is able to focus on smuggling and the growing number of commercial importations. It is also a positive step toward the recently signed Canada-U.S. accord on our shared border.

Other amendments to the customs tariff and the Customs Act contained in the bill are aimed at clarifying the intent of certain legislation or involve changes to make the tariff framework clearer and more predictable for Canadian companies and the importing community. These changes should improve efficiency and reduce the cost of doing business in Canada. One change will result in higher tariffs and the withdrawal of the duty free British preferential tariff rate on rubber footwear to protect Canadian production and jobs.

The bill would also amend the Access to Information Act in order to protect the confidentiality of information on taxpayers provided by importers pursuant to the Customs Act, the Customs Tariff, and the Special Import Measures Act.

Some of the provisions in Bill C-102 result from the government's review of Canada's tariff system, as announced in the 1994 budget. Their purpose is to ensure that Canada remains a good place for producing goods and that Canadian investors and businesses, including small businesses, are in a better position to benefit from the free trade agreements between Canada and other countries.

Some changes such as the improvement of duty deferral programs and the reduction of tariffs on manufacturing inputs are designed to lower the cost of inputs for business and to maintain and increase the competitiveness of Canadian business on domestic and international markets.

Bill C-102 contains some technical changes to simplify, clarify and update the Customs Tariff and its administration and to make tariff reduction programs more accessible to and cheaper for business.

The changes to facilitate the processing of travellers at border crossings will allow Revenue Canada, Customs to focus on other important border issues such as smuggling and the need to process an increasing volume of Canadian imports.

Several of the amendments in Bill C-102 were made following consultations with business and meet their demand for help in facing the competition.

The measures adopted in the bill will provide $60 million in import tariff relief to Canadian manufacturers to level the playing field with NAFTA trading partners in tariff reductions.

They will position Canadian businesses with the duty deferral program to more easily attract investment and compete in expanding world markets with a minimum of custom overhead. They will provide opportunities for provincial and municipal governments to enrich the duty deferral program with local incentives.

They will improve service to travellers through the simplification of customs procedures and allow customs to focus on smuggling and commercial importations.

In the current economic context and given the value of the Canadian dollar at this time, we have here a tremendous opportunity to encourage our industries, our small and medium sized businesses, and our people as workers and consumers. Everyone would benefit from this bill and I am pleased to see that on this day, the day after the referendum, all the parties sitting in this House support this bill.

This bill will benefit all Canadians, including small businesses and manufacturers in my riding of Carleton-Gloucester, and I commend all those who worked on it in committee. I will gladly vote in favour of this bill.

[The Acting Speaker (Mr. Kilger)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. Kilger)]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[The Acting Speaker (Mr. Kilger)]

I declare the motion carried.

(Bill read the third time and passed.)

The House proceeded to the consideration of Bill C-103, an act to amend the Excise Tax Act and the Income Tax Act, as reported (with amendment) from the committee.

Excise Tax Act

[The Acting Speaker (Mr. Kilger)]

Colleagues, I would like to make you aware of a ruling by Mr. Speaker on Bill C-103, an act to amend the Excise Tax Act and the Income Tax Act.

There are four motions in amendment standing on the Notice Paper for the report stage of Bill C-103, an act to amend the Excise Tax Act and the Income Tax Act.

Motions Nos. 1 and 2 will be grouped for debate. A vote on Motion No. 1 applies to Motion No. 2.

Motion No. 3 will be debated and voted on separately.

Motion No. 4 will be debated and voted on separately.

[Monte Solberg, Reform, Medicine Hat, AB]

moved:

Motion No. 1

That Bill C-103, in Clause 1, be amended by deleting lines 33 to 36, on page 2.

Motion No. 2

That Bill C-103, in Clause 1, be amended by deleting lines 30 to 42, on page 5.

Mr. Speaker, the reason I have moved these motions to amend the legislation is that I am concerned that our government is placing an impediment in the way of Canadian magazines. I am very concerned that by doing this it is jeopardizing the future of Canadian magazines.

Specifically, for people who are not familiar with what exactly this bill is about, I will provide some background. Bill C-103 is legislation that would retroactively apply most specifically to Sports Illustrated magazine. It would prevent the use of split run technology to publish their magazine in Canada and also pursue Canadian advertisers. I will address that whole issue in a moment.

This clause does not permit Canadian magazines which have circulations in the United States that are less than what they have in Canada to use split run technology to get back into their own market. By introducing this clause, the government is effectively blocking the way for the expansion of Canadian magazines which does not make any sense.

This weekend I was at the Canadian Association of Broadcasters meeting in Ottawa. As a former broadcaster I thought I had a pretty good handle of what was going on with broadcasters. However I was quite surprised to find out that some Canadian broadcasters have extended far out into the rest of the world. In doing so they have not only strengthened their balance sheet and profit picture, they have also provided tremendous opportunities for Canadian actors, writers and producers. As an example, I found out that Power Corp. out of Quebec is the largest broadcaster in Europe. I was surprised by that.

That tells us something about what we should be doing if we really want to give Canadian cultural industries a leg up on the competition. We should not be looking inward, becoming insular and engaging in navel gazing and putting up protectionist walls. We should be putting in place legislation that encourages free trade, that gives businesses the incentive to go out and compete in the world by getting into Europe, as Power Corp. has done. It has provided all kinds of jobs for Canadian actors, writers and produc-

ers and all kinds of other people involved in the Canadian cultural community. That is the right approach.

The same applies to CanWest Global which is involved in New Zealand and in Australia. The company I used to work for now has a MuchMusic type operation in Argentina which is doing very well.

The point is that what applies to broadcasting applies to the magazine industry. At the end of the day the cream rises to the top. Ultimately consumers get the best products. They get the most choice at the cheapest possible price.

I fail to understand why we are putting in legislation that impedes the ability of Canadian magazines to not only compete in the world market, but even in their domestic market against all the American and foreign magazines which are coming into Canada. It is ridiculous to have a situation where if you want to establish an operation in New York in addition to the one you have in Canada, you will not be allowed to use split run technology to get back into your own country. That is crazy. It makes absolutely no sense.

Our amendment is designed to get rid of that clause. Canadian magazines would then have an incentive and the government would not be standing in their way penalizing them for trying to expand and provide jobs for Canadians and to ensure that Canadian culture and the Canadian cultural industries, particularly the magazine industry, are strengthened in this country. Why in the world are we doing this? It makes absolutely no sense.

I am not going to belabour this. There are several motions before us and I will not talk for a long time on all of them. However, I really do feel that although the whole principle behind this legislation is flawed, this clause in particular needs to be addressed and this motion would be the ticket to do it.

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, we are here today to consider four amendments to Bill C-103. This bill contains major amendments to the Excise Tax and the Income Tax Act in areas that will benefit Canadian periodical publishers.

It has been a longstanding policy in Canada to channel Canadian advertising revenues into Canadian periodicals. The Canadian magazine industry actually depends on these revenues, as they represent 65 per cent of total revenues. More than 30 years ago, in 1961, the Royal Commission on Publications, commonly referred to as the O'Leary commission, looked into the situation of the Canadian magazine industry.

After a comprehensive review, the commission recommended that steps be taken to increase the flow of advertising revenues toward the Canadian magazine industry to give this industry a sound financial footing.

As a result, two legislative provisions were enacted in 1965: (i) section 19 of the Income Tax Act, limiting income tax deductions for advertisement directed at the Canadian market to advertisement bought in Canadian periodicals, and (ii) Code 9958 of the Customs Tariff, which prohibits the import into Canada of split-run editions or special editions of periodicals whose content is substantially the same as the content of the original edition, except for publicity specifically tailored to a Canadian market.

Over the past 30 years, section 19 of the Income Tax Act and tariff code 9958 have been successful in supporting the government's policy objective of encouraging Canadian advertising revenues to be directed to Canadian magazines. These two policy instruments have allowed the Canadian magazine industry to expand and to prosper.

However, a potential threat to the Canadian magazine industry arose in January 1993 when Time Warner announced its intention to publish Sports Illustrated Canada, a Canadian split run edition of the U.S. magazine Sports Illustrated . It would be printed in Canada using editorial content electronically transmitted from the U.S. Since Sports Illustrated Canada would not involve the physical importation of split run magazines in Canada, tariff code 9958 would not apply.

Time Warner's initiative demonstrated that there was a loophole in tariff code 9958 and a need to update Canada's magazine policy. As a result, in March 1993 the Government of Canada established a task force on the Canadian magazine industry. The task force was asked to examine existing policy instruments and to propose new measures which would ensure the continued effectiveness of federal policy in support of the Canadian magazine industry.

In its final report, the task force presented 11 recommendations to the government, two of which are addressed in Bill C-103: an excise tax on split run editions of periodicals distributed in Canada; and an anti-avoidance rule relating to the deductibility of advertising expenses in non-Canadian newspapers and periodicals.

The proposed excise tax will be levied on split run editions on a per issue basis at a rate of 80 per cent of the amount charged for all advertising appearing in the issue. Without this measure, the task force noted that new split run editions would likely enter the Canadian market and the Canadian periodical industry would risk

losing up to 40 per cent of its advertising revenues over a five-year period.

The proposed amendments to the Income Tax Act will add an anti-avoidance rule to section 19 of the act. This will ensure that newspapers and periodicals which claim to be Canadian are in fact Canadian controlled for the purposes of the act.

The proposed amendments to the Excise Tax Act and the Income Tax Act update our policy instruments in support of the Canadian magazine industry. They maintain the government's longstanding policy respecting Canadian magazines and underscore the federal commitment to support the continuing existence of a viable and original Canadian magazine industry. I wanted to put that before the House to give a context to the amendments which are being discussed.

I would like to take this opportunity to thank the hon. member for Medicine Hat for his participation in the finance committee deliberations. He is not normally a critic in the finance area, but rather in the heritage field. However, this bill went to the finance committee because it affects legislation which is under the jurisdiction of the Minister of Finance. His participation was greatly welcomed and contributed to the questioning of witnesses and our general deliberations.

I will now deal with the first two amendments presented by the member that are grouped together. Motion No. 1 would delete the definition of excluded edition. An excluded edition is defined as an edition primarily distributed outside Canada. This is a key concept that appears in several provisions of the bill. If the motion were adopted, a periodical edition distributed in Canada could be a split run edition if its editorial content is more than 20 per cent the same as that of another edition primarily distributed in Canada.

Thus the motion would result in regional editions of Canadian magazines being subject to the split run tax, even though at least 80 per cent of their editorial content is original to the Canadian market. This would be contrary to the government's stated policy objective for the Canadian magazine industry. It would also be inconsistent with the vote of the House to adopt a ways and means motion and the approval in principle given to the bill by the House at second reading.

The purpose of the bill is to encourage publishers to include at least 80 per cent original editorial content in magazines containing advertisements directed at Canadians. However, provided that a magazine satisfies this editorial content objective, there is no intention to discourage the publisher from publishing regional Canadian advertising editions of the magazine. For that reason the government will have to reject the motion.

The second motion would eliminate exceptions that would exempt certain types of publications from being subject to the tax on split run editions. The first exemption specifies the tax will not apply to an edition primarily distributed outside Canada even though it has some circulation in Canada. This exception would allow regional editions of foreign magazines to continue to be distributed in Canada, provided that the editions are primarily distributed outside Canada.

The second exception would allow a publisher of a foreign magazine to distribute in Canada an edition that contains some but not all the adds that appear in one of the editions distributed in a magazine's home country, provided that the edition distributed in Canada does not contain any new ads.

These two exceptions are intended to allow foreign magazine editions to continue to be distributed in Canada without being subject to the split run tax, provided that they do not contain ads primarily directed at Canadians. By deleting these exceptions the proposed motion would extend the scope of the split run tax to magazine editions not intended to be subject to the tax.

Thus the motion is inconsistent with the vote of the House to adopt the ways and means motion and the approval in principle given the bill by the House at second reading. For this reason the government will reject the motion.

[Hugh Hanrahan, Reform, Edmonton Strathcona, AB]

Mr. Speaker, it gives me great pleasure to rise today to discuss report stage of Bill C-103, an act to amend the Excise Act and Income Tax Act.

I will spend the majority of my time today discussing Reform amendments that have been put forward to alleviate some of the serious problems or flaws that have worked their way into the bill.

As I stated during second reading, Bill C-103 will impose an excise tax in respect to split run editions of periodicals. The tax will be implemented at the rate of 80 per cent of the value of all advertisements contained within the split run edition. The split run editions are essentially periodicals distributed in Canada. More than 20 per cent of their editorial material is the same or substantially the same as the editorial material that appears in one or more periodical edition distributed primarily outside Canada and they contain advertisements that differ from country to country. Reform's amendments lie at the heart of this issue.

It is all too clear the issue of a split run edition of foreign magazines is one of predatory pricing or dumping its product on the Canadian market at unreasonably low prices as it means a siphoning off of Canadian advertising. If this is happening then punitive measures should be applied against the violators.

The ultimate question is whether publications such as Sports Illustrated are in fact dumping and in so doing bleeding the Canadian periodical advertising market dry. To effectively determine if split run periodicals dump their product on the Canadian market, we should examine the fees charged for advertising and

compare them to a competitor or another publication with similar numbers or readership.

I will use readership as a quantitative measure in comparing Sports Illustrated with two other magazines simply because the same value was selected by the Canadian Magazine Publishers Association for comparing costs of advertising between publications. Sports Illustrated Canada has a readership of just over 650,000 compared with Equinox which has a readership of 783,000 and Outdoor Canada which has a readership of 621,000. The readership numbers are relatively close for those who read the three magazines and are relatively the same cross section of the populace.

Specifically Sports Illustrated charges $5,800 for a standard, full four-colour page advertisement, while Outdoor Canada and Equinox charge $4,300 and $5,500 respectively for the same standard, full four-page edition. Therefore it would seem logical, if Sports Illustrated is dumping the amount it charges, that advertisers should not only be lower but significantly lower. This, however, is not the case. It appears the opposite is true since Sports Illustrated charged more than the other two magazines for advertising space.

Even if we look at the unit costs per 1,000 copies for the same three publications after taxes, Sports Illustrated has a higher unit cost per thousand than the other two. Again, if Sports Illustrated were dumping, these costs would be significantly lower and not higher. This evidence has been seemingly overlooked or ignored by the Liberal government.

Further evidence is based on a 1983 study that the 10 most popular United States magazines in Canada commanded a collective circulation of approximately 2.8 million. Over the last 10 years the names of the magazines have changed yet the most popular U.S. magazines in Canada today have 25 per cent less circulation than their counterparts a decade ago.

Interesting enough at the same time the top 10 Canadian magazines have increased their collective circulation by almost 15 per cent. It appears that Canadian magazines are winning the battle for readers. This is happening not because of government intervention but because of the quality of articles in the magazines.

If we look at the amount of revenue generated for split run editions through advertisement, the lion's share is remaining in the hands of Canadian based magazines. Last year Sports Illustrated had six split runs that brought in ad revenues of slightly more than $1 million, which is minuscule compared to the $867 million in the Canadian magazine industry as a whole.

A final note on this issue is that Canadian magazine publishers admitted to the Standing Committee on Finance that advertising revenues in the Canadian magazine industry have increased 4 per cent over the last year despite the alleged dumping and predatory pricing of Sports Illustrated Canada that were supposed to have taken place during this time.

Moreover, the Canadian Magazine Publishers Association agreed there was no Canadian magazine in direct competition with Sports Illustrated Canada in its unique market niche for its readers. Even if there were, the Canadian competitor would survive not because of an end to split runs of a competitor but because Canadians wanted to read it and because it was quality material. In other words it would stand on its own merits. Advertisers would be attracted to certain publications for their readership and because they were Canadian or American.

The complaints of Canadian publishers are based on a much simpler concept than predatory pricing called economies of scale. To say therefore that economies of scale inevitably doom Canadian culture is to say that domestic and foreign cultural products compete strictly on price, that is Canadians do not distinguish between them on any other basis.

If there is one truth among nationalists it is that the two are not perfect substitutes. Canadian tastes are distinct and therefore indigenous production fills a need that foreign art cannot meet, in which case Canadians would be willing to pay a premium for the product. If we are not very different from the Americans, the advantage of economies of scale should be just as open to us as to them. A perfect example of this would be Hockey News , a Canadian publication running split run editions in the United States.

Should clauses 1 and 2 not be amended as we have put forward, future Canadian publications will be prevented from expanding into the United States. Not only does the bill impede the flow of imports, it also takes away any incentive for Canadian publications to grow, to expand and to take full advantage of the U.S. market. That is shameful. For this reason Motions Nos. 1 and 2 should be passed.

Bill C-103 implements a retroactive grandfathering clause as well. Clause 1 on page 6 dealing with section 39 clearly illustrates the meanspirited nature of the government in that it sets the exemption date for the legislation approximately one week before Sports Illustrated started running its northern edition. The bill therefore aims directly at disqualifying only them. This is grossly unfair and our amendment will remedy the situation by changing the enforcement date of the legislation to the day after the act is assented to.

We on this side of the House oppose the bill for the following reasons. First, Reformers do not support the notion that state sanctioned cultural protectionism is a good policy to implement. Second, Bill C-103 conjures up the view that Canadian magazines are not of sufficient quality or merit to compete with foreign

counterparts. We on this side of the House know that this is 100 per cent false. Canadians are among the best in the world. We compete through our talent and our products, not through government sanctioned protectionism.

It is clear therefore that the Reform Party cannot support the legislation without our amendments being passed. Bill C-103 represents the worst of giving special interest groups an advantage at the expense of all taxpayers who will now pay a higher price for many magazines they choose to buy.

On behalf of my constituents in Edmonton-Strathcona I thank the Liberal government for taking even more money out of their pockets.

[Jean Augustine, Liberal, Parliamentary Secretary to Prime Minister]

Mr. Speaker, I rise to join in the report stage debate of Bill C-103 and to stand in support of those members on this side of the House who were speaking to this bill.

I want to begin by giving a bit of my background as an educator and as someone who has enjoyed and is very concerned about the Canadian magazine industry. A task force on this industry was established in March 1993 with a mandate to recommend the update of existing policy instruments and to propose new measures in support of the Canadian magazine industry, which so many of us have enjoyed and are enjoying.

Since 1965 there have been two legislative measures in place to support the Canadian magazine industry: the Income Tax Act section 19 and the customs tariff code. The objective of both of those measures was to ensure an adequate flow of advertising revenues to support a vibrant Canadian periodical industry. These instruments of public policy have in large part been successful. However, technological developments in an increasingly global trading environment have meant that those two measures in place for almost 30 years are no longer completely adequate to meet the policy objective for which they were designed.

The first thing the task force had to do was learn about the industry. I would like to take this opportunity to give some background on the industry to put this bill in perspective to see whether the Reformers would appreciate some of the aspects of the bill that we are supporting on this side of the House.

The task force commissioned two reports. One prepared by Informetrica Ltd. examined the economic environment within which the Canadian magazine industry operates. A second, prepared by Lee Anderson of Carleton University, analysed the Canadian advertising market with particular reference to the Canadian magazine industry. The Informetrica study provided some basic information on the economics of periodical publishing, its products, markets, and cost structure.

In 1991-92 the Canadian industry produced 1,440 magazines, with revenues totalling more than $846 million. The Canadian magazine industry is one of the most important media pipelines between the generators of Canadian information, ideas, and views and the Canadian public.

In 1990 more families participated in buying magazines, both Canadian and foreign, than any other cultural activity except perhaps the buying of newspapers. Compared to 1978, the percentage of households buying magazines increased by 10 per cent, to an average of 69.8 per cent.

The domestic market is measured by Statistics Canada. Statistics Canada estimates that there are more than three million subscriptions to U.S. periodicals not included in the trade data. In 1991 Statistics Canada information presents one view of the size of the market and the Canadian magazine publishers' share of that market. Using these measures, Canadian publishers account for 54.8 per cent of the total domestic market.

One area of difficulty, of course, is that subscriptions ordered by Canadians directly from the U.S. and mailed from the U.S. to Canadians are not counted by any of the existing statistical systems. The value of magazines imported is the value at the border, with no real measure of the advertising contained therein. Therefore, with adjustments, an alternative measure based on circulation revenue suggests a Canadian publishers' share of about 25.5 per cent of the domestic market.

Although editorially rich and diverse, the Canadian industry is not on strong economic footing. We do not have to go very far from the House to recognize this. The 1991 statistics show that more than half of Canadian magazines had no operating profit. The average operating profit for the industry as a whole was only 2.4 per cent. In any business that is really not good.

Despite the strength of our mix of editorial content and diversity and the size and profitability of Canadian magazines, they are still very much limited in terms of their potential for revenue. The issue here is one of relative market size and economies of scale.

Magazines have two clients, the reader and the advertiser. The building blocks of a magazine are circulation, editorial content, and advertising. The larger a periodical circulation, the more advertising it can attract. The greater a magazine's advertising revenue, the more it can afford to spend on editorial content, which in turn makes the magazine more attractive to consumers and increases its

circulation. Circulation is crucial to advertisers and therefore crucial to a magazine's advertising revenue.

The Informetrica study reported that circulation revenue accounted for $245 million or 29 per cent of the total revenue of Canadian magazines in 1991 and 1992. Magazines can be circulated on news-stands or through subscriptions. For Canadian magazines, approximately 10 per cent of English-language and 27 per cent of French-language magazines are sold on news-stands. By contrast, 89.3 per cent of all imported consumer magazines are destined for news-stands. That is not to suggest that the government or the domestic magazine industry are interested in restricting the access of foreign magazines to our news-stands. These statistics are merely presented to demonstrate the competition Canadian magazines are up against on news-stands.

Subscriptions are the main source of circulation revenue for most Canadian magazines. A large subscription base provides a publisher with stability, helps in scheduling production units, and is particularly important for cash flow, since most subscriptions are paid in advance or early in the subscription period. I am sure that most of us who have subscribed to magazines know that we hear from the magazine far in advance of the expiry date of the subscription.

Advertising revenue is a lifeline of the Canadian magazine industry and crucial to the survival of Canadian magazines in an indigenous Canadian magazine industry. Sixty-five per cent of all revenue of Canadian magazines is derived from advertising. An adequate advertising revenue base is essential to the economic foundation of periodical publishing in Canada.

Without a healthy Canadian magazine industry Canada's policy objective of ensuring that Canadians have access to Canadian ideas and information through Canadian periodicals cannot be met. Policy instruments that have been in place since 1965 are designed to achieve that purpose. Encouraging magazine advertisers to reach Canadian consumers through Canadian magazines and periodicals is as important today as it was 30 years ago.

The advertising study commissioned by the task force showed that magazines have experienced more annual declines in advertising dollars than any other medium in Canada. Television's rise as an advertising medium over the 30-year period is perhaps the most significant trend behind the declining share of magazine advertising revenues.

Magazines tend to be disproportionately affected in economic downturns through drops in circulation. Whereas people will continue to watch TV, they would cancel their magazine subscriptions to save money and have cash flow. That affects the entire industry.

The bottom line is that the amount of money spent by advertisers to reach the Canadian consumer is not likely to grow. Therefore, within the Canadian advertising market it is extremely unlikely that the share held by periodicals will increase.

The two studies that were commissioned demonstrate very clearly the precarious situation the Canadian magazine industry finds itself in. This is a point I want to underscore, the precarious situation the Canadian magazine industry finds itself in. It must compete in a market that is dominated by imported magazines and it must compete for advertising revenues.

The consequence for the Canadian magazine industry and thus for Canadian cultural development will be very serious if we do not take the necessary steps to maintain the structural support necessary to continue to meet the government's longstanding policy objective for Canadian magazines of ensuring that they have adequate access to advertising revenues.

The measures in Bill C-103 are designed to support the Canadian magazine industry so that it can conduct business and be competitive. It is simply an extension of Canada's longstanding policy against split runs. The measures strive to plug a loophole in the tariff item so that the exploitation by Sports Illustrated Canada over the last two years can be dealt with. However, Sports Illustrated Canada got around the measures by electronically beaming the magazine to a Canadian printing plant.

I know that the members across the way are speaking in support of Sports Illustrated. I want to make clear that these measures in the present bill are in no way designed to limit Canadian access to foreign publications. Canadians will still be free to read whatever they want, including an imported edition of Sports Illustrated. Our borders remain open to the millions of copies of American magazines that are bought here each year. The best way to support the Canadian magazine industry is to adopt measures that will encourage original content, regardless of the country of origin.

We do not want a kind of recycled editorial material that is commonly dumped in split runs. We must continue to finds ways-

[The Acting Speaker (Mr. Kilger)]

I hesitate to interrupt the hon. member. I have been as generous as I could. Short of the member asking for unanimous consent to conclude her remarks, I would have to resume debate.

Perhaps the hon. member could mention to the House how much longer it would take to conclude her remarks.

[Jean Augustine, Liberal, Etobicoke—Lakeshore, ON]

Mr. Speaker, I was right at the very end.

We must continue to find ways to maintain a place for the rich tapestry of ideas and information we now have in Canadian periodicals. To that end, I urge the House to promptly pass this legislation.

[Charlie Penson, Reform, Peace River, AB]

Mr. Speaker, I am happy to rise today to support the motions of amendment put forward by my colleague for Medicine Hat. Before I do that, I would like to take a moment to speak about Bill C-103, which is the basis for these amendments in the first place.

What we have here is a form of cultural protectionism. It is protectionism for an industry that I do not think really wants it or needs it. This government seems to assume that this industry cannot stand on its own two feet, that it does not have a quality product that can be sold throughout the world on the basis of that quality. I really disagree.

I wonder what has happened to the Liberal government. At the same time those members have been talking about trade liberalization, bringing in NAFTA, the GATT agreement, they seem to be moving in the opposite direction in the area of culture.

In this area specifically we are talking about split runs for the magazine industry. What they do not realize is that Canadian magazines also use this technology very effectively. We have an industry in Canada out there competing in the international market and we can do it without government help. Those Canadian magazines will get sideswiped in this whole process.

This goes against the whole grain of free trade, of trade liberalization, and Canada does not want to set this example. We want to set an example that we are free traders, that we can compete on the basis of quality.

The question of whether this is actually a dumping issue was raised by my colleague earlier. If this is a dumping issue, that the Americans are dumping cultural property into Canada, it should be how it is addressed. We have a basis for discussing that with a NAFTA trade dispute panel. Why does it not go there instead of taking this round about way of hitting them with an excise tax?

We have to simply move away from this whole idea that we cannot compete unless we have government subsidies. Our cultural industries are actually being adversely affected by our assuming that and we have to get on with the process of competing on the basis of quality.

I want to talk to the first and second amendments proposed by my colleague. The first amendment deletes the term "excluded edition" from the bill. An excluded edition is an issue of a periodical that has less circulation in Canada than outside Canada. The second amendment deletes references to split end editions.

The purpose of these two amendments is to ensure the Canadian magazines we talked about earlier, which circulate in the United States and do split end runs, do not end up paying excise taxes in Canada in their attempt to penetrate the American market.

They are being penalized by an attempt to exercise cultural protectionism. The whole purpose of liberalizing trade between Canada and the United States is to allow goods and services which are superior and which are in demand to find a much larger market. We defeat that purpose of free trade by taxing Canadian periodicals which have a chance to stand, to make it at home and abroad.

Canadian periodicals should be free to export our good ideas and our great culture to the United States. They stand a better chance if they can do so by using the split end run technology on their editions abroad and not be penalized here at home. Presently there are two Canadian magazines, Harrowsmith and The Hockey News , which will be caught in the net of the bill.

Amendments Nos. 1 and 2 by my colleague ensure that these and other Canadian magazines are excluded from the bill's provisions. I would like to see our amendments passed this afternoon.

[John Godfrey, Liberal, Don Valley West, ON]

Mr. Speaker, I will address some of the arguments put to us this afternoon by members of the Reform Party.

I will limit my remarks essentially to four arguments. The first made by the member for Medicine Hat is an economic argument about market choice. It is an interesting theory about the ability of consumers to know their own needs best. It is a very alluring theory but there are flaws with that theory which I hope to point out.

The second argument is that of the member for Edmonton Strathcona on the apparently arbitrary nature of Bill C-103 with regard to its targeting Sports Illustrated and its split run and the timing of the proposal.

The third argument deals with the whole notion of state sanctioned cultural protection, alluded to by the members for Edmonton Strathcona and Peace River. The final argument deals with the whole notion of whether we can compete without this kind of government subsidy, an argument made by the member for Peace River. Let us review those arguments in order.

How does the world actually work? The world actually works in economic theory and in economic practice in two different ways. We have what could be described by any economist as imperfect market conditions in many of our relationships with the United States.

This is particularly true when, because of the market size and dominance in the cultural industries, there is a virtual monopoly condition which unless counterbalanced would essentially wipe out Canadian culture. It is true not only of magazine publishing but equally of broadcasting, movie distribution, popular music and many other cultural areas.

Our experience in this country is a sad one, going back to the days of radio in the 1920s and 1930s when we discovered there was simply no place for a Canadian voice unless we created it, unless we legislated some protection, some place for Canadian voices to be heard, which led to the creation of the Canadian Broadcasting Corporation.

We noted in a later era that in popular music Canadian voices could not be heard unless there was some place they would be protected initially so they could form a critical mass and then become competitive. We have noted in film distribution that there is still no place for Canadian voices because of the enormous market power of the American distribution systems. We have noted it in magazine distribution where we saw from 1961 a market share of 25 per cent of publications available in this country declining to 21 per cent. With the introduction of various measures designed to prevent this kind of dumping Canadian magazines started to increase in their number and in their proportion of the marketplace.

In other words, we are talking about public policy that actually has a track record of working; public policy that has worked in broadcasting with the Canadian Broadcasting Corporation, public policy that has created a vibrant successful popular music business which can now compete successfully in the United States, and public policy that has supported a vibrant Canadian magazine industry. Public policy works.

The argument has been put on the second point that this is grossly unfair to Sports Illustrated , a magazine that deliberately tried to violate the spirit of the law against this kind of dumping by trying a technological device not available at the time of Time magazine or Reader's Digest when we had to deal with this problem previously. It was a deliberately provocative act which demanded a deliberate, measured and firm response, which is what this is about. The spirit of the law is quite clear and it has been violated by Sports Illustrated .

The third argument has to do with the notion of state sponsored cultural protection. It is very interesting that we are not the only country to try to protect our cultural industries. It is also clear the United States does exactly the same thing. It is not possible for a foreigner to own a television station in the United States. The foreigner has to change nationality. We might argue that is a form of cultural protection. The Americans put it in a different way. They see that as a matter of national security so if ever they had to clear the air waves, a station would not be owned by some nefarious Canadian who would stop them. It is a form of cultural protection under the guise of national security.

The Americans do all sorts of things in this area. They do not allow foreigners to own significant amounts of the merchant marine because it might be required for national security. Surely if we chose to do so in this country we could simply redefine what we are on about here as our form of national security, our national cultural security. We also have something at stake here but we do not fight so much with arms as we do with our culture.

I think that, for all Canadians in whatever cultural or social group, our culture is nonetheless worth fighting for, since this culture, whether expressed in French or in English, represents us.

I think that we will also benefit from the European model, which reflects similar concerns with respect to culture. Our French counterparts have done the exact same thing, taking action for instance against the distribution of American movies and television programs. The problem is the same, it has to do with who they are.

That is what this is all about and why we are entering into a kind of alliance with the French and the Europeans on culture, in spite of American provocation if I may say so.

The Americans look upon us as a kind of Trojan horse. And if they cannot prevent us from taking such action, they will not be able to do so, even with the Europeans.

I suppose the argument, particularly by the member for Peace River, is whether we can compete without a government subsidy. The answer to that is quite clear. We cannot compete in an unfair market in which superior economic power is evidenced by dumping. The product coming across the border in the form of the split run by Sports Illustrated has been légèrement canadianisé. It is not a true Canadian product. It violates all of the agreements we put in place when we dealt with Reader's Digest and Time magazine. It was designed to do that deliberately. We have to take deliberate action against it.

As for being a subsidy, it is not a subsidy. It is simply a provision of the Income Tax Act which does not allow them to have favoured treatment because they have come up with a clever technological trick.

For all these reasons I reject the arguments of the members of the Reform Party and urge the House to support this measure.

[Bill Graham, Liberal, Rosedale, ON]

Mr. Speaker, I am pleased to address Bill C-103. Before discussing the content of this proposed legislation, I want to say a few words about culture and the importance of the Canadian culture.

Canadian culture includes a vast array of things. Ultimately, it is the essence and the reflection of who we are as individuals and as a nation. It reflects the way Canadians see each other, as well as the way they perceive the world. Our culture and our life as a people

are inextricably intertwined. Cultural events, which are a reflection of ourselves, show the result of our creative voices and energies.

Culture is a complex notion. It includes the knowledge, beliefs, arts, moral values, laws, customs, as well as all the other skills and customs developed by the members of a society. Culture does not only refer to art. It includes the periodicals and books that we read, the records and the programs that we listen to. Canadians are avid consumers of cultural products.

Unfortunately, the majority of these products are of foreign origin. I say unfortunately because I wonder, as a member of this Parliament and of our Canadian society, how we are going to pass on our values and principles to our children and to our fellow citizens, if we have no control over publications, at least over a large number of publications, including cultural ones, in our community.

In this era of mass communications, our industries, including the film, book, periodical, radio, television and recording industries, must face an enormous challenge. Not only must Canadian producers assume the very high costs and risks inherent to a small market, they must also compete with foreign products which are generally cheaper and which have free access to our markets. If our cultural industries are not relatively sound from a financial point of view, our cultural development will suffer and we will no longer be heard. This is precisely what this bill seeks to avoid.

These reasons explain why Canada's cultural development deserves the full attention of public authorities, and particularly that of the members of this Parliament. As the hon. member for Don Valley West pointed out, every state takes similar measures. He mentioned Europe and France. Europeans have what they call "cultural exceptions" to protect, through rules of European content, their cultural institutions.

And remarkably, as my colleague for Don Valley West pointed out, the Americans are precisely the ones who generally treat questions of culture and cultural exports as purely commercial products. They also have the necessary means to protect American culture, American communications, American films and so on.

It seems to me, therefore, that the member for Peace River has somewhat oversimplified the issue. Yes, we live in a world of free trade. That is true, but we must never forget that our American competitors are experts in transforming free trade principles into elements of protection when it suits them to.

I have a friend in the United States who uses a wonderful expression. He has often said that as far as his people are concerned, free trade ranks somewhere between Christianity and jogging on a list of things much talked about but little practised.

Another American colleague of mine recently said at a meeting I was at that, like some of us recognize, achieving free trade is like going to heaven; we all want to go to heaven but not just yet.

That is the problem. These are principles easily expressed but, regardless of the country, there are always impediments to prevent culture from being protected. The reason for this is a very significant one: culture is the very essence of a society.

We must be very pleased about what happened yesterday in the province of Quebec. We must all rejoice and I cannot miss this opportunity to state how thrilled I am with the wise decision the people of Quebec made in yesterday's referendum.

I venture to think that the cultural aspect played a strong role in that decision, because Quebec's contribution to Canadian culture and the Canadian identity is enormous. Quebec makes it possible for the French language to flourish in Ontario and other provinces, and therefore contributes to the preservation and protection of French in North America, thus serving the interests of Quebec and of Quebecers themselves.

Now we can work together in the interests of the French communities, the English speaking communities, the multicultural communities, to preserve this focal point of hope our country represents to the whole world, which is reflected in the culture this bill is attempting to protect for all Canadians within this somewhat limited context.

The Government of Canada has fully assumed its responsibilities in this area. Over the past 35 years, it has put into place a wide range of organizations and programs in support of Canadian culture, to bolster what has been accomplished within the country. The Canadian Broadcasting Corporation, the National Film Board and our national museums and archival institutions, through the Canada Council, distribute grants to artists and cultural organizations across the country.

The government promotes investment in cultural products by granting tax benefits to funding agencies such as Telefilm Canada. It helps Canadian periodicals attract the advertising revenue they need for their survival and facilitates their distribution to a very dispersed readership.

Nevertheless, the problem of very high production and marketing costs still exists. In other industries, sales revenues are usually such that companies are able to break even. Although it has always been difficult for Canadians to finance production of cultural goods from national sales because of the small size of the market, it becomes practically impossible as a result of the advantages enjoyed in Canada by foreign, especially American competitors.

This is certainly not to criticize foreign competitors, many of whom enrich our cultural life.

The purpose of this legislation is only to highlight the structural and financial obstacles to the distribution of Canadian cultural products. Among our Canadian cultural industries, the one that concerns us particularly today in the context of this bill is the periodical industry.

As was pointed out by the authors of the report of the Royal Commission on Publications in 1961, periodicals "can give us the critical analysis, the informed discourse and dialogue which are indispensable in a sovereign society".

In the past thirty years, the Canadian periodical industry, both francophone and anglophone, has become more creative and, to some extent, more profitable. Unlike most of our cultural industries, the periodical sector is generally under Canadian control.

In fact, our Canadian periodical industries include more than 1,300 magazines, each with their own characteristics. These periodicals target various groups, use a variety of distribution methods and are regional or national in scope. Their content may be very specialized or very wide-ranging.

The large number and diversity of periodicals published in this country-consumer magazines, business publications and specialized periodicals-reflect the concerns and tastes of Canadians.

All regions as well most large urban centres have their own magazine. There are magazines for almost every field of endeavour: economics, professions and trades, arts and letters, science, religion, recreation, and so forth.

The relative success of this industry is largely due to government measures aimed at giving Canadian periodicals access to advertising markets and the public. Although their editorial content is rich and varied, the state of Canadian periodicals is precarious. In 1991, more than half failed to make a profit.

The Canadian market is more limited and is also shared by two main language groups. Canadian magazines will never have more than a fraction of the circulation of what are mainly American magazines. Circulation revenues of Canadian magazines will tend to remain below those of imported magazines. American magazines, for instance, collect more subscription revenues in Canada than do Canadian magazines.

Advertising sales play a vital role in the magazine industry. Publishers of periodicals cannot break even unless they manage to attract advertising. This is true in all countries, but Canadian publishers are often faced with strong competition from imported magazines, especially from the United States.

That is why about 30 years ago, Canada took steps to make it attractive for advertisers targeting the Canadian market to use the Canadian media.

The Canadian government was able to ensure that our periodicals would have more equitable access to their own markets. A complex set of measures involving postage, taxation and customs, together with subsidies, has contributed to the growth and stability of the industry.

This particular measure and this legislation are an attempt to complete a system that protects not only our magazines but, more broadly, the culture, ideas and values these magazines communicate to Canadians and their children, by propagating and protecting Canadian culture. This government is to be commended for taking measures we feel are absolutely indispensable to preserve-

[Karen Kraft Sloan, Liberal, York—Simcoe, ON]

Mr. Speaker, in Montreal on Friday, October 27 Canadians from coast to coast shared their love for Canada and Quebec. My riding of York-Simcoe sent six buses and turned away 200 more. In other ways, in rallies and vigils and in presentations of song and drama, they celebrated Canada.

[Monte Solberg, Reform, Medicine Hat, AB]

On a point of order, Mr. Speaker, I am wondering if the member's intervention is relevant to Bill C-103 and the motions on it.