House of Commons Hansard #230 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was magazines.


United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11 a.m.


Paul Zed Liberal Fundy Royal, NB

moved that Bill C-311, an act to require the Minister for International Trade to retaliate against import restrictions introduced by the United States of America on Canadian refined sugar and sugar containing products, be read the second time and referred to a committee.

Mr. Speaker, I rise today to talk about a private member's bill which the all-party caucus, the sugar caucus, has proposed, Bill C-311.

With six plants in six provinces sugar production is truly a national concern. An equally important statistic is that over the last 10 years four plants have closed and nearly 1,000 Canadian jobs have been lost. Plants are located across the country from Lantic Sugar in Saint John, New Brunswick, to Rogers Sugar in Vancouver. Approximately 90 per cent of Canada's sugar production is refined from sugar cane and sugar beet. The remainder comes from the domestically grown sugar beet market, produced mostly in our western Canadian farms. Whether derived from cane or beet, Canada has an annual sugar production of about 1.1 million tonnes.

The sugar industry is one of significant and historic importance to Atlantic Canada and to the country as a whole. Sugar refining has provided stable employment and regional economic benefits for about 150 years. Given the employment challenges, especially in Atlantic Canada, that we face today, it is of paramount importance that the sugar industry be protected at all costs or more jobs will be lost.

Protecting the jobs of Atlantic Canadian sugar workers and those of the rest of Canada's sugar industry is extremely important to me and to the many members of the House and the other place who are members of our sugar caucus.

The Liberal Party's red book stated more power and opportunity would be given to members of Parliament to create and participate in a process that would benefit Canadians as a whole. I believe the all-party sugar caucus formed to protect our sugar industry from coast to coast is good evidence of this commitment.

Last June sugar caucus members from the three official parties went to Washington to meet with our political counterparts, the House of Representatives ways and means committee, officials from the United States department of agriculture, and representatives from the United States sugar industry to discuss problems that currently plague our sugar industry.

A notably difficult and separate issue from access is the Helms-Burton anti-Cuba legislation.

While the anti-Cuba bills originally proposed to prohibit the importation of sugar, syrups and molasses from any country that does such trade with Cuba, I am very pleased that changes have recently occurred and that the pressure exerted on the United States by our Prime Minister during President Clinton's recent visit and our own sugar caucus has resulted in this deal being struck to remove the sugar provisions from the House version of the bill which was formerly voted on in the House of Representatives on Thursday.

The Senate version remains to be formerly introduced but the redrafted version retains a narrower requirement for certification of origin in respect of sugar, syrups and molasses. It is likely the Senate version will also follow the lead of the House of Representatives in deleting the references to sugar.

During our visit to Washington as a team of members of the House of Commons representing different regions of our country and representing all three major political parties we emphasized to our political counterparts that Canada was being unfairly targeted by the Helms-Burton legislation.

The combined efforts have resulted in significant changes to the legislation. This is viewed by our sugar caucus as a major victory in our fight to protect the jobs of Canada's sugar industry. The sugar caucus is extremely pleased to have contributed to the efforts made

by our ministers of agriculture and agri-food, foreign affairs, and international trade on the anti-Cuba legislation.

However we must continue to fight to protect these jobs. Today the sugar industry in Canada provides 1,400 direct full time jobs across Canada. In the west many more seasonal positions are provided during the annual beet harvest. Aside from the direct number of jobs created, many other regional benefits flow from having a Canadian based sugar industry. The direct employment figures do not account for those employed by sugar containing product industries which have located in Canada to take advantage of Canada's low sugar prices.

Canadian industrial sweetener users employ thousands of people, with annual sales in the billions of dollars. The benefits also extend upstream. By creating demand for inputs the industry supports employment in supplier industries, including packaging and other inputs such as transportation, fuel and electricity.

However the principal problem that still confronts our sugar industry is restricted access to the U.S. market while our American friends enjoy unrestricted access to our market. In Canada, in our open and unprotected sugar market, consumers and industrial sugar users enjoy prices roughly one-half of what they are in our protected markets of the major sugar trading partners.

Canada's traditionally low sugar prices have had some very attractive benefits. Because of that Canada has attracted its processing sector which has benefited refiners, food processors, consumers and generally the economy as a whole. Canadian sugar producers continue to support free trade as being in the best interest of all Canadians. However that trade must be fair. The sugar caucus has proposed a solution to the problem of unfettered access of U.S. sugar to our marketplace.

Bill C-311 is an act to require the Minister for International Trade to retaliate against import restrictions introduced by the United States on Canadian refined sugar and sugar containing products.

In other words, the all-party sugar caucus wants to continue to fight to protect the jobs of Atlantic Canadians, western Canadians, sugar workers and the workers across this great nation by imposing the same restrictions on American sugar exports as those which have been imposed on ours.

The arguments for the actions outlined in Bill C-311 are very strong. I invite my colleagues from all parties to speak on this extremely important issue. The workers of Lantic Sugar in Saint John and the workers from the rest of our sugar industry are anxiously watching the debate to see what we as elected representatives will do to address the most important problem they are facing, tackling the unrestricted access to our market which the U.S. sugar industry is basking in.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:10 a.m.


Stéphane Bergeron Bloc Verchères, QC

Mr. Speaker, I am extremely pleased to speak on Bill C-311, an act to require the Minister for International Trade to retaliate against import restrictions introduced by the United States of America on Canadian refined sugar and sugar-containing products.

I said that I was extremely pleased to speak on this bill, and I am pleased to do so of course, but also somewhat distressed at having to speak on such a bill. I feel it is an unfortunate bill not because the initiative of my colleague from Fundy-Royal is an unfortunate one, anything but, but because I think it is unfortunate we are placed in a situation at this time which requires us to discuss or pass such a bill.

It is unfortunate that the two largest trading partners in the world, Canada and the USA, have reached the stage of having to envision bills such as this one. It is unfortunate that these two countries, which share the longest undefended border in the world, are forced to assess, to envisage, to discuss bills such as this one. This bill from my colleague from Fundy-Royal, who also heads the sugar caucus, the all-party caucus to which he referred a few minutes ago, was introduced to this House in reaction, essentially, to two things.

First, to a decision by the United States to restrict unilaterally access to the American market by Canadian sugar products as of January 1 this year. On January 1, the United States decided to reduce Canadian sugar imports to the United States by 8,000 metric tonnes, and it will further reduce imports of Canadian sugar by 22,000 metric tonnes as of October 1. This is a considerable reduction, since in three months, from October 1 to December 31, 1994, we shipped more than 35,000 metric tonnes of sugar products to the United States. This is a considerable reduction.

As a result, sugar refineries in Canada and Quebec stand to lose $135 million, while in the process more than 2,400 jobs across Canada and Quebec may be lost. These unilateral reductions directly contradict the provisions of NAFTA and the provisions of the Uruguay Round agreements that led to the creation of the World Trade Organization.

The bill before the House today is also a reaction to legislation proposed in the United States, the Helms-Burton bill, which would prohibit any company importing sugar from Cuba from having access to the American market. The bill has already reached the floor of the House of Representatives and will soon be put to a vote in the U.S. Senate.

The consequences of the passage of such a bill may be quite serious for Canada and Quebec, since the bill may further restrict access to the U.S. market for Canadian and Quebec sugar refineries. As the hon. member for Fundy-Royal said earlier, we went to Washington to discuss the matter with our American colleagues,

and we found that they were influenced by two stubborn misconceptions, two misconceptions that will not budge.

The first misconception is that Canada is flooding the American market with sugar products. Let me say that this is totally false. It is totally false, because Canadian refined sugar represents only 1 per cent of the American market, and sugar containing products represent only 3 per cent of the American market, whereas the Americans occupy 13 per cent of our refined sugar market and 26 per cent of our market for sugar containing products. I say this to show how wrong this misconception is.

The second misconception that is very popular in the United States is the belief that Canada is dumping Cuban sugar on the American market-another belief that is totally wrong. It is totally wrong, because we differentiate in Canada between sugar produced in Cuba and anywhere else, and this differentiation is certified. The American authorities recognize this certification.

A few months ago, American inspectors came to Canada to check and were satisfied with the differentiation we make between sugar products from Cuba and other sugar products.

It is important to note as well that Canada imports more sugar from the United States than it does from Cuba.

While we were in Washington, people asked us if our mission was not a bit dangerous, if we did not think the Americans would take advantage of our being in Washington to try to obtain Canadian concessions on farm product quotas? Of course we did not, because the two matters are completely different.

Why are they completely different? The answer is very simple. In order to comply with the new provisions of the Uruguay Round, which gave rise to the World Trade Organization, Canada decided to transform its farm product quotas into tariff quotas, thus complying with the provisions of the Uruguay Round.

The U.S. in turn did not convert already existing quotas into tariff quotas but imposed new restrictions in flagrant violation of the provisions in the Uruguay Round agreements, in flagrant violation of the Marrakesh agreements.

This is a different situation because agricultural products were already subject to quotas. The Americans cannot claim that they were not aware of the situation since it already existed. All we did was modify it to comply with the provisions of the Uruguay Round agreement. As I pointed out earlier, the U.S. imposed new restrictions. So this is not a situation that existed before.

The two situations are totally different. One cannot put in the same basket a discussion about access to the U.S. market for Canadian sugar products and access to the Canadian market for U.S. agricultural products that are subject to quotas in this country.

We also saw when we were in Washington that even if the Americans do not try to link the sugar issue with the issue of supply-managed agricultural products, they will link it with anything else. In Washington, they talked to us about durum wheat, about softwood lumber, even about peanuts, believe it or not.

So the Americans are ready to link the issue of supply-managed agricultural products with anything. They will negotiate on anything to try to obtain concessions from Canada. They will negotiate on anything that relates to the sugar issue in order to extract concessions.

Finally, what must be understood is that they imposed new restrictions on sugar, simply to exert pressure on Canada, to force it to make concessions, whether on supply-managed agricultural products or on something else, which is totally unacceptable because the situations are completely different.

In this context, I think it should be pointed out that the government has been refusing for several months now to tie various trade issues to one another, considering them as completely separate issues, which are distinct from one another. I think that is desirable.

Bill C-311, finally, was put forward to show our American partners how concerned we were about the situation, how deplorable we found these additional restrictions imposed by the United States on Canadian sugar containing products. As I mentioned earlier, it is unfortunate that we have to debate a bill like the one before us today. That is probably why our colleagues have decided to make this bill a non votable item, because this kind of petty, eye for an eye, tooth for a tooth attitude of tying together discussions on completely different products does not fit in with our view of things, in Canada and Quebec.

We are for an open market and absolutely free trade, we abide by the terms of the North American Free Trade Agreement and the agreements concluded as a result of the Uruguay Round. In that sense, we are definitely not crazy about this kind of legislation, be it Canadian or American.

However, the purpose of this particular legislation is to clearly convey to our American partners that we will not tolerate such an attitude on their part and that, if need be, we are prepared to retaliate to make sure our rights as well as the partnership and trade relations between Canada and the U.S. are respected.

Of course this bill will not be voted on. We will not have to vote on this bill, and it will not be passed. But not passing this bill does not mean that the Minister of International Trade will not be authorized to retaliate or take other action against this kind of

action taken by the U.S. government. Of course, the Minister of International Trade and the Canadian government will remain perfectly free, if required, to retaliate against this kind of attitude displayed by our American partners.

Nevertheless, as I said, I greatly appreciated the opportunity to speak on this bill, although it will not be voted on. But, as I said, the government has complete latitude and can count on our fullest support in any action it may initiate to strengthen economic relations between the United States, Quebec and Canada.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:20 a.m.

Ottawa Centre Ontario


Mac Harb LiberalParliamentary Secretary to Minister for International Trade

Mr. Speaker, when Canada and the United States negotiated the free trade agreement that came into effect in 1989, both sides reserved their GATT rights. As such the United States retained its ability to take action under section 22 and Canada retained its quantitative restriction under article XI of the GATT.

The reservation of GATT rights was also incorporated in the North American free trade agreement five years later. In effect both sides, the Americans and the Canadians, agreed that a negotiated settlement on bilateral agricultural trade would be best achieved in the Uruguay round.

From 1982 to 1990, Canadian exports of refined sugar to the United States were subject to an absolute quota representing 1.1 per cent of the total U.S. imports. This roughly amounted to about 12,000 tonnes per year. Producers of raw and refined sugar from other countries were also limited to various shares of total U.S. imports.

In 1989 a GATT panel, at the request of Australia, concluded that the United States mechanism for imposing sugar import restrictions was in violation of the GATT. In 1990 the United States implemented the panel recommendation by converting its absolute quota on sugar into a tariff rate quota that essentially had the same effect as the quota it replaced.

For Canada, implementation of the GATT panel recommendation had an unexpected effect. The United States decided that due to the existence of the recently signed free trade agreement it would not apply the tariff restriction to Canada. That was a unilateral decision.

As a result, our exports of refined sugar, which had consisted exclusively of sugar made from Canadian grown sugar beets, have increased since 1987 from the previous annual level of 12,000 tonnes to an average of approximately 35,000 to 38,000 tonnes per year in the last three years. In fact we were able to triple the exports of refined sugar to the United States following the unilateral interpretation of the free trade agreement.

With respect to products containing sugar, the United States had an absolute quota in place as far back as 1983. Canada, like other countries, has always been subject to these quotas. During the last three to four years Canadian producers, for example, due to the high quality of their products and very competitive prices, have accounted for the vast majority of U.S. imports of sugar.

In 1989 the United States converted its old tariff schedule to the harmonized tariff schedule. In the process a U.S. custom service reclassified powdered drink bases, commonly known as crystal drink mixes, into a non-quota item. That has caused the Canadian exports of crystal drink mixes to the United States to increase rapidly.

In the case of refined sugar, the United States will apply a tariff quota of 22,000 metric tons, as of October 1, 1995. Canadian exports of refined sugar will be subject to that quota. As well, a tariff quota of about 64,000 metric tons has been in effect since January 1 of this year and includes crystal mixes for drinks and other products containing sugar.

The government has pressed the United States to allocate to Canada a specific share of both sugar and sugar containing product tariff rate quotas but the United States has decided not to do so. We regret this decision but it must be recognized that the United States is under no international trade obligation to allocate the tariff rate quota by country.

The imposition of unilateral retaliatory measures as requested by the bill would be a violation of Canada's international trade obligations as contained in the NAFTA and the agreement establishing the World Trade Organization.

International trade agreements define the circumstances which can justify the taking of retaliatory measures, as well as the specific procedures to be followed before a party can invoke the right to impose such measures. A party must first ask that consultations be held to find a solution to the problem. If such consultations do not bring mutually satisfactory results, the aggrieved party can ask that a dispute settlement panel be set up. If the panel concludes that the contentious action violates the contractual trade obligations of the other party, and if that party refuses to amend its action or to provide satisfactory trade concessions then, and only then, can retaliatory measures be taken. Moreover, the panel must be convinced that the proposed retaliatory measure is not disproportionate, given the prejudice suffered. By proposing unilateral retaliatory measures, Bill C-311 goes against the arbitration procedure.

Consequently, the United States might decide to challenge our action under NAFTA, or under the agreement establishing the WTO. Moreover, Canadian exports of sugar, and possibly some non-sugar products, might be adversely affected.

Bill C-311 does not take into account Revenue Canada's anti-dumping duty investigation into imports of refined sugar from a number of countries, including the United States. The investigation was initiated following a complaint by the Canadian Sugar Institute earlier this year and a preliminary finding of dumping was announced on July 7 of this year. As a result, Revenue Canada assessed provisional anti-dumping duties on imports of refined sugar from the United States.

The investigation is following its due course in accordance with Canadian trade remedies. The investigation has until October to make a final determination of dumping. This will be followed by the decision of the Canadian international trade tribunal on whether the Canadian industry is being injured by such imports. The decision of the Canadian international tribunal is also expected some time in November of this year.

I would also like to mention an important development currently taking place in the United States that could further complicate the U.S.-Canada trade in sugar and products containing sugar. I am referring to the proposed U.S. legislation to expand the U.S. embargo on Cuba, the Cuban Liberty and Democratic Solidarity Act, 1995, also known as the Helms-Burton bill.

There were serious concerns earlier this year that the proposed legislation would lead to a ban on imports of Canadian sugar and possibly products containing more than 35 per cent sugar on the grounds that Canada imports raw sugar from Cuba. This would have affected over $500 million in Canadian exports of sugar and products such as confectionery, chewing gum, jams, jellies, gelatin mixes, as well as products already subject to U.S. quotas.

Canada has been actively registering its opposition to the proposed legislation with the U.S administration in Congress. A strong diplomatic note was delivered to the United States administration and ministers have raised Canada's concerns with their U.S. counterparts on numerous occasions. Furthermore, the Canadian ambassador in Washington has written to many congressional representatives on the issue. The government has emphasized that if legislation is passed banning the import of sugar and products containing sugar, Canada would have no option but to respond firmly.

We are pleased to see that subsequent revisions to those proposed bills have been made by congressional committees in the weeks prior to the summer recess of Congress as a result of Canadian interventions. Changes to the legislation are now being proposed that could reduce the impact on Canadian exports in sugar and products containing sugar. Most of the sugar provisions in the House bill were removed before the bill proceeded to the floor.

Unilateral retaliation not sanctioned by either the World Trade Organization or NAFTA dispute settlement mechanism would therefore not be helpful at this time.

Finally, on behalf of the government I would like to recognize the enormous work and valuable effort of the sugar caucus led by my colleague, the MP for Fundy Royal. I assure the House as well as my colleague from Fundy Royal that the government is fully seized of the importance of resolving the issue.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:30 a.m.


Charlie Penson Reform Peace River, AB

Mr. Speaker, it is my pleasure to speak to the private member's bill introduced by the member for Fundy Royal, Bill C-311.

I must confess that I do have a bit of a sweet tooth, so I can assure the member that I support the thrust of his bill. I am certainly not interested in seeing the Canadian sugar industry damaged in any way, especially not through unfair trade restrictions on the part of Americans. I know of the concern of all parties in the House regarding the possible damage to our sugar producers and I commend the work of the sugar caucus in this regard.

I can imagine though that the bill comes at a rather awkward time for the government, since the Americans are taking us to task for tariffs we have put on that have precisely the same origin as the one the bill is attacking. I have to wonder if during the negotiations on the GATT we were outmanoeuvred and outnegotiated in this area when we allowed the Americans to expand the category for sugar into refined products as well.

I would like to give a bit of background. On January 1 of this year all countries that signed on to the Uruguay round of the GATT were required to replace existing import quotas with tariff rate quotas that would provide similar protection to vulnerable industries, with the proviso that these tariff rate quotas would eventually be reduced and dismantled.

For those members who do not know what tariff rate quotas are, if they do not know the difference between a TRQ and an O Henry bar, I would like to tell them. A tariff rate quota is a cutoff level. Up until that cutoff level has been reached no tariff is payable. After the TRQ is reached a tariff comes into play, which is usually so sizeable that it discourages imports altogether.

On January 1 the Americans put into place a TRQ of 64,000 tonnes on all products containing sugar, such as drink mixes and

gelatin desserts. At the same time, TRQs of 8,000 tonnes until the end of September and 22,000 tonnes from October to December were put in place for refined sugar. Since Canada is not the only country that sells sugar and products containing sugar into the United States, our share of the TRQ will be substantially below that level.

It is ironic that the GATT, which was intended to provide gradual expanded access, has actually led the Americans to restrict access in this regard. This is grossly unfair and totally contrary to the spirit of the Uruguay round. Furthermore, the Canadian Sugar Institute informs me that the Americans have taken advantage of the GATT tariffication by expanding this category to include items that were previously unrestricted. The Canadian Sugar Institute predicts that these restrictions could potentially lead to the loss of 2,400 direct and indirect jobs. It is a very serious matter.

I know that the hon. member who initiated the bill is concerned about the closure of one Canadian refinery, resulting in 700 immediate jobs. He predicts an additional 1,700 jobs will be lost through the reduced production of products containing sugar.

The hon. member proposes in his bill that consultation take place between Canadian and American governments to determine whether previous levels of access can be restored. If after 60 days no satisfactory resolution is reached, American access to Canadian sugar and the sugar products market will be restricted in direct retaliation. More precisely, the American share of the Canadian market will be reduced by an amount equivalent to the Canadian market share of the American market.

Research indicates that prior to these restrictions the Canadian share of the U.S. market was quite small. It was said earlier that it was about 3 per cent. At the same time the American percentage of our market share is 23 per cent. Presumably, American imports would be held to 3 per cent, a reduction of some 20 per cent, if we took this step. This would allow for some of the displaced Canadian sugar to find a domestic home. That is the kind of thing we have to do. We have to give protection to our Canadian producers.

The American sugar industry is highly protected. The U.S. government guarantees producers prices that are up to double the world market price and it maintains these high prices by restricting imports. The American government also provides loans to U.S. producers, loans which are guaranteed by their sugar crop. If prices fall too low and producers cannot repay the loans, the farmers simply forfeit a part of their crop or all of their crop, leaving Washington holding millions of tonnes of unwanted sugar. That is exactly what we were trying to stop through the Uruguay round of the GATT.

Not too long ago Washington assigned allotments or quotas to domestic producers, which could now force a lot of the excess sugar northward across our border. It is entirely possible, as the U.S. border closes to our Canadian sugar products, that our market could be flooded by the same American sugar products that are highly subsidized and trying to find a new home. In the past the Americans have sold Canada twice as much sugar as they buy from us, running up surpluses of some $230 million.

Another fact worth noting is that the industry in Canada is extremely efficient and only about 10 per cent of it receives deficiency payments when prices drop. I am referring to the refined beet sugar industry in Alberta.

Even though I support the bill I wonder whether another approach might not be just as good, if not better. Since the American industry is heavily subsidized, I wonder whether instituting a countervail action might not be a more honourable way to proceed. We do not need to let the Americans get away with this underhanded action, yet it would be preferable if we could take the high road and not stoop to the same level. It is just a thought. I guess we need to bring the Americans to the table and negotiate an end to the situation.

I support the bill. Should it become votable I will vote in favour. I certainly do not want anything to disrupt my supply of bonbons.

In conclusion, I would ask the House for unanimous consent that Bill C-311 be given votable status and that it be voted on, on Thursday, October 5, 1995.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:40 a.m.

The Deputy Speaker

Is there unanimous consent?

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:40 a.m.

Some hon. members


United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:40 a.m.

Some hon. members


United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:40 a.m.


Anna Terrana Liberal Vancouver East, BC

Mr. Speaker, I rise in support of the bill before us to protest the trade practices exhibited by the United States against the Canadian sugar industry and against Canadians.

The U.S. imposed severe new trade restrictions against Canadian sugar and products containing sugar on January 1, 1995, effectively closing its borders to imports of Canadian refined sugar and food products containing sugar. Its actions unfairly penalize the efficiencies of the Canadian sugar industry and unfairly penalize Canadians.

The United States extended the coverage of a tariff rate quota on products containing sugar by including crystal drink mixes, for which Canada is the main supplier. Also, on January 1, 1995, the United States limited Canadian exports of refined sugar to 8,000 tonnes until September 30, 1995, further eroding Canada's access to the U.S. markets.

The unwillingness of the United States government to act fairly in attempts to resolve the dispute and its disregard and violation of general fair trading principles has resulted in undue harm to Canadians, with potential consequences for the sugar beet growers, sugar beet processors and Canadian cane refiners in the long term.

There is a severe reduction in sales of Canadian sugar and products containing sugar in the United States and an increase in American sugar sales in Canada. Canadian producers are paying dearly for this and Canadian jobs are being cut.

Entire communities have suffered, and additional job losses are predicted. According to the Canadian industry, the Americans constitute about one quarter of the Canadian market, while Canadians represent only 3 per cent of the American market. That difference is remarkable. Far worse, while the American share of the Canadian market is on the upswing, the Canadian share of the American market is decreasing. American exports to Canada are four times greater than Canadian exports to the U.S.

Our market is open and barrier free. On the other hand, Canadians are faced with tariffs which discourage free trade between the two countries.

Signatories to the General Agreement on Tariffs and Trade, which include both Canada and the United States, agreed that they would reduce barriers to trade and increase market access over time, with the objective of creating a more open and stable trading environment.

I myself have seen the damage to communities and individuals. BC Sugar Refinery Ltd. is located in the Port of Vancouver in my constituency of Vancouver East.

On June first of this year, the company's western Canadian operations were consolidated under the name Rogers Sugar Ltd. Rogers Sugar is the main sugar outlet in the west but it has had to lay off 17 per cent of its employees in the last 16 months. Most of the lost jobs were in Vancouver, the others in Alberta and Manitoba.

Unless the restrictions against Canadian sugar are lifted, Rogers Sugar may be forced to lay off more of its employees. Across Canada the situation is equally as dire, if not more so.

Since 1980 we have seen the closure of four Canadian sugar refineries and job losses in excess of 40 per cent are a direct result of these practices. We risk the closure and the relocation of many Canadian companies to the United States lured by lower prices for sugar.

The U.S. trade restrictions also hurt Canadians as consumers as they result in higher sugar prices and may lead to the decline of high quality domestic sugar.

The sugar industry has enjoyed years of success and has provided meaningful employment for hundreds of Canadians across the country. It has demonstrated it is efficient and cost competitive, but the viability and very existence of our sugar industry is threatened by unfair trade practices. The Canadian government has acted in good faith throughout and has worked diligently to resolve this dispute and is left with this option, the measures contained in the bill.

I would like to conclude by stating how proud I am of the efforts of Canadian parliamentarians to resolve these differences. A parliamentary caucus has been set up by my colleague for Fundy-Royal and I am very proud to have also been a member.

The participating MPs and senators represent all parties in the House. They, along with representatives of the sugar industry, have worked very hard to resolve the matter. I am sure that this co-operation will help Canada persuade the Americans of the importance of reducing tariffs in this area.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:45 a.m.

Lethbridge Alberta


Ray Speaker ReformLethbridge

Mr. Speaker, thank you for the opportunity to speak to Bill C-311.

I support the remarks of the hon. member for Fundy-Royal which were very appropriate, very accurate, very non-partisan and certainly appreciated by this side of the House. The Bloc Quebecois member and member of the sugar caucus, the hon. member for Verchères, also made very appropriate remarks. I totally endorse his remarks as well since they were a very positive and constructive contribution to the debate and to the support of the principle of the bill before us.

I would also like to thank my colleague from Peace River as the Reform caucus trade critic for his support of the sugar industry whether in the area of production of sugar beet sugar or the import of sugar cane, which is refined in our country, and for supporting the industries that use Canadian sugar in a variety of products that are exported not only to the United States but to many other places in the world.

I give those compliments on the grounds that it shows this issue can be dealt with in a non-partisan way. It is a basic issue to the country. It is a basic area where Canadians can compete in the world market, can make a contribution not only economically but also in an indirect sense can provide many social benefits to the Canadian fabric.

I support the comments made with regard to the Helms-Burton bill. I am pleased like other members here that Congress and the

Senate are seeing fit to make some changes that will be of benefit to the sugar industry of Canada.

The point I wanted to make is one of the reasons beyond supporting the concepts already before the House. It is with regard to the attitude I gathered of the American Sugar Alliance. The alliance is an executive group which represents not only the producers but also the refiners, the sugar beet producers, the cane producers and the refiners of those two respective products. I want to talk about that group's attitude with regard to the situation and the advice they gave us as a committee when we visited Washington.

I would have to say very bluntly that we were stonewalled in our presentation. I raised a question with the alliance. I said to the alliance: "I believe we have set before you the current Canadian circumstances. We are going to have limited exports. The exports will be reduced in terms of refined sugar from some 43,000 tonnes down to 22,000 tonnes. Of that 22,000 tonnes we in Canada have no idea. We may get some. We may get half. We may get a little more than that, but we could end up not receiving any portion of that 22,000 tonnes of export opportunity into the U.S. market". We could be shut out completely if the Americans wanted to do that.

I also said: "Between our two countries we have the concept of free trade. My sugar beet producers back home support free trade. The refiners support free trade. We are open to that concept. We feel that could work very well between our two nations".

I asked how we could work together, how we could improve the circumstances we face in Canada and what they were prepared to do as an alliance. Their remarks were very clear and forthright: "Why do you not go home and do what we have done in the United States? Why not do the same thing?" What does that really mean?

It means we would put on import quotas with regard to some products. Maybe we would have to use other products as leverage, but we would put a quota on the import of sugar and products containing sugar into Canada. We would be reversing a trend that is the essence of free trade. That was the first thing they asked us to do, to go home and do the same thing they were doing with regard to imports.

I asked about pricing. They said to go home and establish a pricing system so there is a floor price for sugar in Canada, which there is not today, and our sugar producers are not asking for that. "Go home and do the same thing". They said to go home and put on import quotas, go home and put a floor price on sugar.

That is totally in contrast and is a negative interface into the way we want our North American economy and our economy relative even to Mexico to evolve. We want free trade and an open system by which we can work together, compete together, but also profit together. It is totally in contrast and I was very disappointed in that.

I raise that issue because underlying that attitude are political forces which exist in the United States. Congressmen who represent sugar beet areas, sugar producing areas or sugar cane areas, or refiners in their respective constituencies are faced with that dilemma. They are lobbied by the sugar alliance to work against opening the borders to Canadian exports so that we could again maybe export 43,000 tonnes of refined sugar.

A major portion of that sugar was sugar beet sugar from southern Alberta. We can clearly understand the effect that has on my constituency of Lethbridge and the constituency of Medicine Hat which is adjacent to mine where there is a major industry. The sugar beet industry has been one of the solid foundations of the economy of southern Alberta. Losing it would be a drastic disaster to the cities of Lethbridge and Medicine Hat, the rural areas and Alberta as a whole.

We are fighting against that kind of attitude and that kind of politics in these negotiations. I ask that when the government is in negotiations it understand that force is out there. Part of our strategy as Canadians and as a sugar caucus is that we must deal with it knowing there is this kind of anti-force when working toward free trade, a free exchange of ideas and free competition between our two nations.

I certainly support the concept of the bill. It may be a lever to try and open up the discussions and to relax some of those political attitudes which now exist in the mill and which we have to deal with to come to the conclusion we think should be arrived at.

I appreciate the work the chairman of the sugar caucus has done. I appreciate that the government has made representations on the issue but I urge it to work quickly. It was indicated to us that around September 15 the U.S. department of agriculture would be making a recommendation on what portion of the 22,000 tonnes we would get as Canadians. I hope the government and the ministers of agriculture and trade are making a strong recommendation.

We should have at least two-thirds of that 22,000 tonnes for Canadian exports. If that were there at least we would be able to have some assurance that our sugar beet industry and cane industry in terms of refining would be stabilized and we would be able to continue in the year or two ahead.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:55 a.m.


Paul Zed Liberal Fundy Royal, NB

Mr. Speaker, in closing the debate today I pay tribute to the new process which in many ways we as members of Parliament have brought about in a modest way in attempting to speak out for an issue that stands for all of us in Canada. That is the issue of our sugar workers, whether those workers are working in the fields of western Canada or producing and refining sugar in Montreal, Vancouver or Saint John. I am very

gratified to express to all members of the sugar caucus my appreciation for their co-operation, guidance and advice.

This is a complex issue which has affected all of our constituents. As I said in my opening remarks, we have lost almost four and possibly five plants over the last 10 years in Canada and 1,000 direct jobs. We are very worried about the industry.

Bill C-311 is a line in the sand, or a line in the sugar in this case. We as members of Parliament have said we are looking for levers. We are looking for ways to express our concern, our dissatisfaction and our outrage at the way Americans have access to our market. Yet we do not have unfettered access to theirs.

I urge the House leadership and the ministers of agriculture and international trade, as the hon. House leader for the Reform Party has said, to make a very strong case to our American cousins. Tell them we need some of the rate quota that is being allocated over the next couple of weeks. If we can get some of that quota back, our caucus will have gone a long way in making some important statements to the Americans. They will understand this is not a political issue for us in terms of Liberals, New Democrats, Reform or Bloc; this is a Canadian issue and an issue affecting all of us. It affects all workers in our country.

With that I want to thank the House. Perhaps because it is a very important issue and an issue of such strong national concern, I would like to make a last plea that we be given an opportunity to vote on the issue. I move for unanimous consent to have that voted on now.

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:55 a.m.

The Deputy Speaker

Is there unanimous consent?

United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:55 a.m.

Some hon. members


United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:55 a.m.

Some hon. members


United States Sugar Import Restrictions Retaliation ActPrivate Members' Business

11:55 a.m.

The Deputy Speaker

There is not unanimous consent.

Since no more members wish to speak and the motion was not selected as a votable item, the hour provided for consideration of Private Members' Business has now expired and the item is dropped from the Order Paper, pursuant to Standing Order 96(1).

Excise Tax ActGovernment Orders


Laval West Québec


Michel Dupuy Liberalfor the Minister of Finance

moved that Bill C-103, an act to amend the Excise Tax Act and the Income Tax Act, be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to introduce the second reading stage of Bill C-103, an act to amend the Excise Tax Act and the Income Tax Act. The purpose of this bill is to support Canada's cultural industries, and especially the periodicals industry.

Canadian periodicals are essential to cultural expression in Canada. They bring Canadians together from coast to coast. They provide a clearing house for the exchange of ideas and information. They disseminate information and points of view that are specific to this country and provide a voice for the country's artistic and cultural expression.

Issues that concern Canadian periodicals are important to the public. More than 1,400 periodicals are sold in Canada. They are an integral part of the media environment of Canadians and, from the economic point of view, constitute a substantial part of the cultural sector.

Today, more than 92 per cent of the content of Canadian periodicals is Canadian. Some of the more popular ones which have a long publishing history, like Saturday Night and L'Actualité , have become genuine institutions.

Strong and diverse editorial content notwithstanding, limited circulation figures will necessarily restrict the volume and viability of Canadian periodicals. The problem is the relative size of the market and economies of scale.

Over the years, Canadians have consistently shown that periodicals are important to them. For instance, in 1978 and in 1990, an increasing number of families preferred to spend their recreation budget on Canadian or foreign periodicals as opposed to any other cultural activity, with the exception of buying newspapers.

Bill C-103 provides for the implementation of two measures which I announced following recommendations by the task force on the Canadian periodicals industry. The first measure consists in imposing an excise tax in respect of split run editions of periodicals distributed in Canada. In these split run editions, publishers reuse content which was targeted at their own market and which made money there and insert new advertising intended for a foreign market.

These so-called Canadian split run editions are inexpensive to publish and attract lucrative advertising. It is therefore not surprising that they pose a serious threat to the long term viability of the entire periodical industry.

The second measure is an anti-avoidance rule with respect to the deductibility of advertising expenses. Let me explain. Advertising revenues are essential to the survival of the periodical industry; 65 per cent of the revenues of Canadian periodicals come from advertising. Since 1965, two measures taken by the Government of Canada have helped inject advertising revenues into the Canadian periodical industry. These revenues enable it to live alongside the

powerful American periodical industry, which has direct access to readers, to newsstands and to Canadian distributers.

These two measures are custom tariff 9958, which prohibits the importing of split run periodicals, and section 19 of the Income Tax Act, which permits the deduction of the costs of advertising directed primarily at the Canadian market, on the condition that this advertising is placed in Canadian editions of Canadian owned or controlled periodicals.

These measures paid off, because they led to the growth of the Canadian periodical industry. Thanks to them, the industry has expanded and prospered.

In April 1993, however, Sports Illustrated Canada was launched in Canada. It was a split run edition, printed in Canada and transmitted directly electronically from the United States. Canadian advertisements were substituted for American ones, and a little Canadian content was added. Sports Illustrated Canada managed to get around custom tariff 9958, because most of its content was sent electronically from the United States. It was simply a loophole in the tariff laws since electronic transmission made it possible to avoid tariff regulations.

In March 1993, the Government of Canada set up a task force on the Canadian magazine industry. The task force's mandate was to find ways to modernize the existing measures underpinning government policy on the magazine industry.

After researching the problem, the task force concluded that split run editions presented a real threat to the Canadian magazine industry, which stood to lose up to 40 per cent of its advertising revenue over a five year period. According to the task force, such losses would put many magazines out of business and marginalize even successful ones.

Task force members explored several avenues and finally concluded that the proposed excise tax was the best solution. It could be designed and implemented in order to avoid split run editions.

The task force's main recommendation is therefore the key element of this bill, whose purpose is to amend the Excise Tax Act and address the problem of split run editions printed in Canada. This new excise tax would apply to all periodicals distributed in Canada and containing more than 20 per cent of reused editorial material as well as one or more advertisements aimed at Canadians.

The proposed amendments to the Excise Tax Act will impose an 80 per cent tax on the value of all advertisements appearing in a Canadian split run edition. Depending on circumstances, the tax would be paid by Canadian publishers, distributors, printers or wholesalers and not by consumers.

Periodicals otherwise subject to the tax would be exempted from the tax based on the number of split run editions that were distributed in Canada during the 12 month period ending on March 26, 1993, the day the task force was set up.

This tax would not restrict access to the foreign periodicals Canadians enjoy reading. It will make it possible to modernize a government policy that is already several years old.

The proposed amendment to the Income Tax Act will add an anti-avoidance rule to section 19 of the act. The purpose of this provision is to ensure that newspapers and periodicals that claim to be Canadian are in fact Canadian owned and controlled for the purposes of the act.

The other recommendations of the task force deal with strengthening the industry through increasing the effectiveness of existing measures. Bill C-103, the legislation now before the House to amend the Excise Tax Act and the Income Tax Act, would not change or create new policy concerning Canada's magazine industry. It would simply provide a new tool to support a longstanding magazine policy. The tax would close the loophole in the existing policy framework.

The emergence of Sports Illustrated Canada as a new Canadian split run edition revealed to us that we should re-examine our policy instruments which support the Canadian magazine industry. This led to the formation of the task force, the resulting recommendations and the proposed new excise tax. In short, we are modernizing the policy tools that underpin this important sector of Canada's cultural industries.

I repeat that the excise tax would not result in a tax for Canadian consumers. The publisher, the distributor, the printer or the wholesaler of any magazine subject to the tax would be responsible for paying the tax.

Why is the tax necessary? In view of the challenge to federal magazine policy and in particular to custom tariff No. 9958, some means must be found to maintain an environment in which Canadian magazines can survive and flourish. Canadian magazine publishers would be at a grave disadvantage if they were forced to compete for advertising revenues with magazines that have recovered their editorial costs in markets which are much larger than the Canadian market. The average profit for a Canadian periodical is only 2.6 per cent. To compare, the average profit for U.S. consumer magazines is 12 per cent. Advertising is the most important source of revenue for magazines, accounting for 65 per cent of income. Ensuring adequate access to those revenues is essential in main-

taining a healthy Canadian magazine industry, benefiting all magazines in all regions of the country.

The Sports Illustrated Canada case has sent a signal that it is not possible for split run editions to enter the Canadian advertising market in spite of the policy measures in place. The threat to the health of the industry is real. The Canadian industry could lose up to 40 per cent of its advertising revenue over five years. The task force noted that such a loss would put many magazines out of business and marginalize even successful ones.

Clearly we do not have the resources to provide the magazine industry with a direct subsidy program that would offset the split run problem. The proposed tax, however, would bring the support framework up to date.

The Government of Canada is committed to the continued existence of a viable Canadian magazine industry. We recognize that advertising is key to the health of the magazine industry. The new tax is consistent with Canada's international trade agreements and obligations. Canada is the most open country in the world to imported magazines. The new excise tax will not limit the access of Canadians to foreign publications. Furthermore, the new tax will not be borne by the general consumer.

Finally, the new excise tax updates the legislative framework supporting Canada's longstanding magazine industry. The Government of Canada agrees with the findings of the task force on the magazine industry. The best way to support the Canadian magazine industry is to adopt measures which will encourage original content, regardless of the country of origin. We do not want the kind of recycled editorial material that is commonly dumped into split runs. We want a Canadian magazine industry that reflects Canadian voices.

The legislation now before the House for second reading promises to provide the kind of environment in which the Canadian magazine industry can survive and thrive.

I urge my colleagues in the House to promptly pass the legislation.

Excise Tax ActGovernment Orders

12:15 p.m.


Suzanne Tremblay Bloc Rimouski—Témiscouata, QC

Mr. Speaker, my remarks today will focus on Bill C-103, an act to amend the Excise Tax and the Income Tax Act. This bill's purpose is twofold: to put an end to the distribution of split run editions in Canada by imposing a tax at the rate of 80 percent of the value of all the advertisements contained in these editions and, second, strengthen section 19 of the Income Tax Act so that tax deductions for advertising in Canadian newspapers or periodicals really apply only where the advertisement is placed in newspapers and periodicals owned by Canadian interests or ones with Canadian content.

How is split run edition defined in the legislation? Split run edition of a periodical means an edition of an issue of the periodical that is distributed in Canada, in which more than 20 percent of the editorial material is the same as editorial material that appears in the original foreign issue, and which contains advertising sold in Canada.

Let us now ask ourselves what justifies the government in taking such action. Is it acting out of sudden concern for Canadian culture or is this a positive step taken by the heritage minister? No such thing. As usual, instead of acting on its own initiative, the government is merely reacting to legitimate pressure exerted by the Canadian periodical industry for many years.

In fact, after Time Warner announced its intention to print a split run edition of Sports Illustrated in Canada, the Canadian magazine publishing community reacted strongly to this announcement, especially since this would considerably reduce Time Warner's advertising expenditures, thereby draining the magazine advertising market.

The magazine industry began to exert this pressure, and sounded the alarm back in the spring of 1993. It would have been appropriate for the government to act then, since the Mulroney government had all the tools required to do so at the time. Instead, he shirked his responsibility and appointed a task force on the Canadian periodical industry. The Liberal Party, which then formed the opposition, denounced the Conservatives' failure to act regarding that issue, as well as their lack of energy in defending Canadian culture. Who would have thought that, once in office, the Liberals would do nothing in the first two years of their mandate for Canadian culture, except to sell it piece by piece on a silver platter to American interests.

In March 1994, the task force released its report. It was not until June 1995, over a year later, that the government replied to the recommendations contained in that report by tabling Bill C-103, which we are debating today. Now that we understand what brought on this legislation, let us ask this question: Why did the Canadian periodical industry object to a split-run edition of Sports Illustrated on our market? First, because the situation of the Canadian market for magazines is precarious and even fragile.

Indeed, in 1991, more than half of the 1,440 magazines sold in Canada had never generated any operating profit, while such profits for the industry as a whole stood at 2.36 per cent. To make things even worse, these operating profits were on a downward trend. From 1987 to 1991, operating profits for English language magazines went from 5.2 per cent to 2.6 per cent, while those for French language magazines went down from 8 per cent to 2.7 per

cent. In fact, the Canadian market for magazines must face the same pressures as our audio-visual industry.

The six main factors which make this industry fragile were well summarized by the task force in its report entitled A matter of Balance .

These factors are as follows: First, there is the massive penetration of imported magazines. According to the task force, foreign magazines account for 81.4 per cent of all magazines sold in newsstands, and for a little more than half of the total number of mass circulation English language magazines in Canada. As in the case of the audio-visual industry, that foreign penetration is mostly of American origin. For example, English language foreign magazines sold in Canada total close to 236 million copies, of which 233 million come from the United States. Therefore, Canada annually imports 25 times more magazines from the U.S. than it exports.

Second, because of Canada's relatively small population and the fact that it is split into two different linguistic groups, the potential number of readers here is only one tenth of that in the United States. This severely limits the potential circulation of our magazines, as well as the revenues which can be generated from advertising.

Third, Canadians are interested in foreign cultural products and are therefore avid readers of American magazines.

The fourth factor is the price of imported magazines compared to Canadian ones, which have to try to be competitive. However, it must be recognized that foreign magazines, which have a greater potential number of readers, generate more advertising revenues and, consequently, produce magazines which may be more appealing and which are certainly cheaper.

Fifth, competition by foreign magazines at the newsstand. Over 81 per cent of English magazines which can be found in newsstands are imported from the United States. I believe that magazine subscriptions depend, to a large extent, on the visibility of the magazine at the newsstand.

Sixth, the ban on tobacco advertising in Canada was very costly for Canadian magazines, depriving them of at least $10 million in revenues, based on statistics for the last year when advertising was allowed. Meanwhile, this type of advertising was still allowed in the United States earning American magazines $224 million in 1992. Obviously, such an injection of money makes it possible to sell the product much cheaper.

To protect the magazine industry, Canada took measures which, for years, satisfied the industry. The first one was the postal subsidy, which is 100 years old and which I will come back to later. The second one is section 19 of the Income Tax Act, which allows taxpayers to be granted a tax deduction if they advertise in a Canadian magazine defined as being 75 per cent Canadian owned with 80 per cent Canadian editorial content.

However, this measure is affected by the bill before us which is aimed at tightening this provision, following a recommendation to this effect by the task force. A number of witnesses reported that Taxation Canada was lax in controlling the application of this provision. Several taxpayers are said to have claimed advertisements in magazines which did not meet either of the above mentioned section 19 criteria.

The third measure is Canadian custom tariff 9958 preventing split run editions from entering Canada. Spilt run magazines printed outside Canada were not allowed in. For thirty years, this legislation kept them from entering Canada, but Sports Illustrated , using technology, outsmarted Canada in its efforts to protect its periodical industry, transmitting via satellite the American content of the magazine to be printed in Canada.

The bill before us today redresses this situation. If it passes, which remains to be seen, the distribution of split run editions will be banned or those involved will have to pay an 80 per cent excise tax on advertising revenues derived from this transaction.

Without the prospect of earning a lot of money at the expense of Canadian culture, Sports Illustrated should disappear soon.

The Bloc Quebecois agrees with the last two measures the government is proposing in the bill we are debating today, that is the tax and the limited application of section 19 of the Income Tax Act.

We will support the government in its efforts to abolish this loophole which allowed Sports Illustrated to squeeze out of Canadian magazines 250,000 dollars' worth of advertising for each issue published.

However, we feel that the government is stopping half way. The task force did recommend other measures to support the Canadian magazine industry. We would like the government to follow up on these recommendations as soon as possible.

Let us come back for a few minutes to the postal subsidies program. Created more than a hundred years ago, this assistance program is really useful for readers. It allows all Canadians to receive magazines, books and newspapers through the mail since it helps pay for the real cost of transporting such reading material. Not so long ago, that program's budget was $220 million a year.

At the beginning of the eighties, the government and the Magazine Association of Canada began negotiating the updating of that program. They even agreed on a replacement formula. But then the federal government decided to make some arbitrary cuts. The replacement program was never implemented. Nonetheless,

the resource envelope of postal subsidies will decrease from its 1990 level of $220 million to $50 million in 1996-1997.

In its report, the task force wrote this about postal subsidies, and I quote: "The viability of the Canadian magazine and periodical industry depends heavily on the postal subsidy. Canadian newsstands, particularly in the English language market, are dominated by foreign publications: only 18.6 per cent of the English language consumer magazines sold at newsstands are Canadian. The task force strongly urges the government to recognize the vital importance of this program to the industry and to preserve it for future years".

The Bloc Quebecois invites the government to follow up on the task force recommendation to freeze funds for the postal subsidy program at the level they were in 1995.

The task force on periodicals put forward another measure on which the government remains surprisingly silent: the abolition of the GST on all reading materials. The task force wrote in its report, and I quote: "The government should give serious consideration to eliminating any sales tax on reading materials in any new tax regime that includes exemptions".

This tax must be eliminated for several reasons. First, it was a Liberal promise. In March 1994, Carol Martin, a reporter, wrote in The Canadian Forum about the magazine situation. He was reminding us that the Liberal caucus had adopted the following resolution, and I quote:

"A Liberal government would reaffirm the historical principles embodied in tax free stages for the printed word and remove the goods and services tax, GST, on reading materials".

According to the Magazine Association of Canada, 50 million U.S. copies will not pay the GST and thus enjoy an undue advantage of 7 per cent over their Canadian counterparts.

The subscription loss due to the introduction of the GST is another reason for eliminating this tax. The Canadian magazine industry had predicted that it would lose one percentage point of subscribers for each tax point that was introduced. Unfortunately, the facts proved it was right. During the first year of the GST implementation, the subscriber rate fell 6 per cent.

Finally, among the G-7 partners, Canada holds, with Germany, the sad record of the highest tax on any reading material.

Another recommendation by the task force deserves consideration, and the Bloc Quebecois urges the government to implement it as soon as possible, given its financial situation. Here it is: "That the federal and provincial governments, their agencies and corporations, make every effort to support the Canadian magazine industry by placing magazine or periodical advertisements directed at the Canadian market in a way that is consistent with federal government policy regarding Canadian periodical publishing".

That recommendation is all the more meaningful when we realize that the Canadian government is one of the 30 biggest advertisement buyers in Time Magazine , a grandfathered split run periodical. Through its action, the government undermines its own directives concerning advertisements in foreign magazines.

Finally, the Bloc Quebecois would have liked the Minister of Canadian Heritage to draw a lesson from his last two years' experience and swiftly implement the following recommendation made by the task force: "That the Investment Canada Act be amended to provide that, when the Minister responsible for that Act issues an opinion or takes any step or makes any recommendation in connection with matters relating to Canada's heritage or national identity concerning magazines or periodicals and the applicability of the Investment Canada Act, he or she do so with the concurrence of the Minister of Canadian Heritage".

It is indeed surprising that the bill before us today remains silent on this crucial point for the heritage department, all the more so because that recommendation was not included in the report by accident. Here, in fact, is the underlying anecdote.

In March 1993, when Time Warner thought about launching a split run edition of Sports Illustrated in Canada, they went to see Investment Canada. Time Warner wanted to know if Investment Canada would consider the coming of the split run edition of Sports Illustrated magazine as a new business and, in that case, subject to an investigation, or if instead it would consider it simply as the continuance of Time Warner's activities in Canada. At the time, Investment Canada informed Time Warner that it considered the coming of Sports Illustrated as the continuance of Time Warner's activities in Canada.

When Canadian magazines owners heard that Investment Canada had given its approval to the coming of a split run edition of Sports Illustrated , they naturally went to the minister who was supposed to be their natural defender, the Minister of Communications. However, nobody in the communications department was aware of the authorization given to Time Warner by Investment Canada, neither the minister nor the deputy minister.

Now I would like to let the members of the task force speak, since they reflect my way of thinking and that of the Bloc Quebecois. I quote: "Indeed, the Task Force considers it essential that the Minister responsible for the Investment Canada Act obtain the concurrence of the Minister of Canadian Heritage before issuing an opinion on the applicability or non-applicability of the

Act or taking any other step related to a proposed investment in the magazine or periodical publishing and distribution sector".

By the way, I would like to take this first opportunity I get to remind the minister that we are still waiting for the government publishing policy he promised us following the Ginn Publishing incident. Now, our neighbours to the South, through their trade secretary, Mickey Kantor, have reacted to this bill now before the House. The Canadian government which has always been very impressed by this U.S. spokesperson until now, must not give in this time. We must see the process through and see to it that this bill is given assent.

If the government does not put an end right now to these split runs like Sports Illustrated , if it does not set Time Warner straight right now, the task force on the Canadian magazine industry believes that, first, 94 per cent of all profitable magazines would move to zero operating profit; second, the viability of the Canadian periodical publishing industry would be at risk; and third, as the task force put it, and I quote: ``The Canadian magazine industry would be seriously hurt by the entry of split-runs, and its important contribution to Canadian communication and cultural development would be diminished''.

I am worried. I am afraid that the government will backtrack and I even doubt whether it will go through with this bill.

In the last few years, in culture, the Canadian government has shown so many times that it was putty in the hands of the United States that I fear the worst.

On September 15, at the Canadian Conference of the Arts held in Toronto, the heritage minister gave a so-called major speech on culture before an attentive audience. However, during his speech, he barely mentioned this bill which is one of the most important cultural initiatives undertaken by his government since it came into office. I have carefully read and reread his speech, from beginning to end. I would like to say a few words about that speech to you and to those who are listening today because the truth has to be told about the Liberals who were very quick to criticize when they were in opposition, but who have become a very passive and wait-and-see government. There is a clear lack of leadership from this government, particularly in the area of culture.

Two aspects of the minister's speech captured my attention. First, the Minister of Canadian Heritage shared his feelings about our neighbours to the south. He reminded us, among other things, that, for many Americans, the word culture has no particular meaning, that it is only the forces of the products and of the entertainment industry that count.

Concerning the information highway, the minister said, and I quote: "We certainly have to keep in mind that the United States have already indicated, in international negotiations or through retaliation measures, their intention to limit the development of our Canadian cultural policy." Continuing his overview of our cultural policy, he then talked about the film and video sector. On that subject, he accused previous governments of not having done enough in this area. He said, and I quote: "Today, a large part of this sector is owned by foreign interests and most of the revenues from this sector leave the country."

He added: "As for our relationship with the American film industry, it is a different story. You are all aware of the American presence in our movie theatres and in our video market and you are also aware of the unsolved problem with regard to film distribution-We want a film industry that is truly Canadian- This requires fundamental changes in the American mentality and in the way Americans do business. They should stop considering Canada as being part of the American market. They know better than anyone how to finance new productions through the marketing of commercial rights. They also know that our ability to do the same is limited by the lack of a level playing field."

To conclude his thoughts about the United States, the minister said that he hopes, one day, to share the opinion and the optimism of Robert Lantos, president of Alliance Communications, who said at the Montreal World Film Festival that he sees encouraging signs on the Hollywood hills.

In view of these signs, the Minister of Canadian Heritage is considering including in our film policy measures that will improve our position vis-à-vis the Americans. He will contemplate the opportunity. With such an hypothetical political will, you will understand that the minister did not succeed in alleviating my concerns regarding the American invasion of the Canadian cultural field.

Finally, there is a last element of the minister's statement to which I would like to draw your attention. The minister quoted the red book where culture is defined in these words: "Culture embraces our shared perceptions and beliefs, common experiences and values, and diverse linguistic and cultural identities: everything that makes us uniquely Canadian. Culture is the very essence of national identity, the bedrock of national sovereignty and national pride. At a time when globalization and the information and communications revolution are erasing national borders, Canada needs more than ever to commit itself to cultural development.

Those are the fundamentals of the debate that is presently going on in Canada. In Canada, the minister speaks of Canadian culture, and that is only natural. In Quebec, there is a Quebecois culture which is just as normal and legitimate. If I take the definition of culture provided by the minister and apply it to Quebec, here is what I end up with: The Quebec culture is the sum of various artistic, linguistic and religious expressions and of the intellectual and moral values of the country which we will create on October 30, culture being what makes us different from other countries. Culture is the very essence of Quebec's national identity. Culture is

the very basis of sovereignty and pride in the country that is Quebec.

For me, there is not even the shadow of a doubt. The land north of the 45th parallel which extends from the Atlantic to the Pacific to the Arctic is composed of two countries. One has ties to the English culture and the other to the French.

In 1982, the Canadian portion outside Quebec became separatist. The constitution was unilaterally patriated and signed without the consent of Quebec. Since then, the people of Quebec have come to realize and understand fully that there is now only one founding people in this country-anglophones-and consequently, only one culture-the Canadian culture-enriched, of course, by the positive and remarkable contributions of all ethnic groups in Canada. In its very essence and uniqueness, the Canadian culture denies the Quebec culture.

The people of Quebec do not see themselves reflected in Canada's artistic, linguistic, religious, intellectual and moral expressions. The people of Quebec form a distinct society. The people of Quebec know they are different. The people of Quebec know that they must express this difference on October 30.

Excise Tax ActGovernment Orders

12:40 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, it is important to be very clear about the nature of the bill. In essence it is designed to kill international competition between magazines, more specifically magazines which come into Canada. The killing of that competition kills a lot of good things which flow from competition.

The legislation is really an anachronism. It is a throwback to an earlier time when we did not have trans-global communications, when people did not always have a great interest in seeing what was happening in countries around the world. Clearly that does not fit the reality of Canada and the world today.

With the bill the minister is walking up to our largest trading partner, the United States, poking it in the eye with a stick and asking: "Now what would you like to buy from us?" This is a step backward. Cultural protectionism is no more appropriate today than any other kind of protectionism.

While the minister is putting forward this measure of cultural protectionism the international trade minister, the finance minister and others are very anxious about the bill because they are trying to endeavour to liberalize trade in other sectors. We see other countries trying to liberalize trade, but for some reason we are taking a step back. That betrays an attitude about what the minister and people of this mind think about the Canadian periodical industry, the people who write for it and the people who read those magazines.

Canadian magazines do well because they are good. As the hon. member from the Bloc pointed out, something like 67 per cent of magazines on news stands are Canadian. That is not because there is a dictate somewhere which says we must read Canadian magazines. It is because people are interested in knowing what is happening in their country. They are interested in knowing the Canadian perspective.

According to the Canadian magazine industry task force referred to earlier, American magazines are already losing circulation while Canadian magazines are gaining circulation. There are good reasons for that. People want quality and they are getting it from their magazines.

The minister pointed to one of the things that has really helped Canadian magazines. In that is the seed of the solution not only for Canadian magazines but also for anything to do with Canadian culture. He pointed to the fact that with the growth in disposable income more people are spending more money on Canadian periodicals. To me that is a very good indication of where we should be going with Canadian cultural policy.

In 1988 members of the present government in the House and across the country argued against the concept of free trade. Since then it is no exaggeration to say that the idea of protectionism has been thoroughly vanquished. Not a country in the world that is at all prosperous does not believe to a large extent in the idea of free trade any more. Even the government since 1988 has turned around and decided it can support ideas like NAFTA, the GATT and the World Trade Organization because there are some laws of economics that are indisputable. Free trade does increase prosperity.

In a sense Bill C-103 is an extension of an argument against one particular law of economics, the economy of scale. All Sports Illustrated and some of these other split run publications are guilty of is utilizing the economy of scale. We do that in Canada and we see it all the time. We see it in other sectors. We even see it in the magazine sector where for instance Maclean's magazine, which has a much larger circulation because it aims at a national audience, is able to have a smaller overhead and can produce its product for a lot less than a regional magazine like Ottawa Magazine or Alberta Report . I do not see anybody railing against them for utilizing the economy of scale. It is good economics; it is good business to do that kind of thing.

It is very misleading when the minister says in his speech that if split run publications are allowed to continue in Canada it would kill the magazine industry here. It will not be split run publications that will contribute to the downfall of any magazine. It will be consumers deciding for themselves what magazines they want to purchase. That is the key.

Cultural policy has to be about what consumers want. They certainly have in my judgment more than enough knowledge to make those types of decisions.

A moment ago I pointed out that we should be concerned about poking the United States in the eye with a stick, which is what I feel we are doing here because we rely on them to consume a lot of our exports. Thirty per cent of our national income comes from exports, the great majority of which goes to the United States. I wonder even for people of a protectionist sentiment if it really is worth it to go around doing these types of things.

A moment ago a member of the Bloc Quebecois was talking about the need to get Canadian cultural products into the United States. Will we really be able to do that when we are on one hand closing down our borders to culture and then on the other hand saying that we need to get into the United States?

We have some real inconsistencies between what is being proposed in the magazine industry by the government and what is currently happening on the Internet. I do not see this as just competition between magazines, American or foreign and Canadian. I see it as a competition between different technologies. The Internet does not have any kind of regulation that prevents people from getting whatever they want. If people are not able to subscribe to the magazines they want and get Canadian advertising through the periodicals industry, they certainly can get just about anything they want off the Internet.

The legislation indicates that the government is not in line with what is happening in the world of technology today. On direct to home satellite, where the minister's department also has some jurisdiction, there is what is called the grey market where all kinds of American signals are coming in, completely uninhibited, and people have complete access to them.

The Canadian periodical industry has to be the same way. We must have that kind of direct competition and people can ultimately make their own judgments.

One thing that is disturbing about the excise tax that is going to be put on revenues gained from Canadian advertisers in split run editions is that it is a punitive tax. A tax level of 80 per cent will be levied against the printers and distributors of these magazines. It is a punitive tax. I would argue there have been recent court decisions which point out that the purpose of an excise tax is not to be punitive, that it is to gather revenue. I would also argue that this measure will not stand up in the courts. The government will have a lot of explaining to do when it brings this measure before the courts.

I want to talk for a moment about what the minister is implying when he brings forward this kind of legislation. He implies several things. He implies that people do not appreciate Canadian magazines, which is why there needs to be protection for them. He implies that Canadian magazines somehow cannot meet the standards of quality of magazines from outside the country. He implies that Canadian magazine publishers are not as capable in the field of business as are American publishers.

Quite frankly, I really do not think the minister believes those things, but he is implying them. With this legislation he is saying that for some reason Canadians do not want to buy Canadian magazines. There is a much more positive way to approach a cultural policy for Canadian magazines. We should ask what things can be done to ensure that Canadian magazines can compete in a free economy against magazines from around the world.

Probably the best way to approach it is by a method the minister hinted at earlier but really did not expand on, which is that if there is more money available to Canadian consumers they will buy the types of products they want. I believe those will be Canadian products because Canadian products can compete with any in the world.

If the government wants to come up with a cultural policy that really benefits Canadians and leaves them complete choice and free to pursue value and quality as they define it, it should ensure that taxes go down. The best way to do that is to battle the debt and the deficit which today is $564 billion. By the end of the government's mandate Canadians will be paying something in the order of $51 billion a year in interest payments on the debt.

I do not have to tell members or the people who are watching today that it is a very heavy tax load. With that very heavy tax load people have less disposable income. It is not only Canadian magazines that suffer because of that; it is all of Canadian culture. Leisure activities are the first to go when there is a crunch.

If the Canadian cultural industry is to be expanded in all its permutations, the best way is to ensure that Canadians have more disposable income. If members think I am kidding, let us look at the United States. The population of the United States, relative to ours, has a lot of disposable income. It has a very healthy entertainment industry. The correlation between the two is absolutely direct. The solution for Canadian culture is not in the past or in Bulgaria. We do not have cultural protectionism here. The solution is in what has worked in other places in the world. It is in what works in other sectors in our own country.

Therefore, if we want to find a way to enhance the ability of Canadian periodicals, television, the film industry and the book publishing industry to succeed, the best way is to knock down the barriers, get rid of all the impediments to trade and start levelling the playing field by ensuring that we have a tax regime that is somewhat comparable to that of our closest trading partner. When that day comes I can guarantee that Canadian cultural industries will prosper like they have never prospered before.

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12:55 p.m.

Mississauga East Ontario


Albina Guarnieri LiberalParliamentary Secretary to Minister of Canadian Heritage

Mr. Speaker, the United States has an advantage. It does not need paid lobbyists. It has 52 members of the Reform Party lobbying on its behalf.

Bill C-103 is an act to defend the Canadian magazine industry and to support the government's longstanding policy on periodical publishing.

The threat is split runs, a tariff dodge aimed directly at the lifeblood of the Canadian magazine industry: its Canadian advertising base. Reports commissioned by the task force inform us that this tactic, if left unchecked, could consume as much as 40 per cent of total Canadian magazine advertising revenues, devastating the Canadian industry.

Successive Canadian governments have had a longstanding history of implementing structural measures which provide support to the Canadian magazine industry. These measures have helped the Canadian periodical industry to survive in a challenging and difficult environment.

The importance of Canadian periodicals has long been recognized. Thirty years ago the O'Leary Royal Commission on Publications observed that Canadian magazines provide the critical analysis, informed discourse and dialogue which are an indispensable part of Canadian society.

The O'Leary report on the role of publications had a mandate of finding ways of furthering the development of the Canadian identity through a genuinely Canadian periodical press. The recommendations of this report have formed the basis of federal periodical publishing policy.

As this commission pointed out in its 1961 report, the larger a periodical's circulation, the more advertising it can attract and the greater its advertising revenue. The more it can afford to spend on editorial content, the better are its chances of obtaining more circulation. In other words, advertising dollars are the key element which determines the business success of a periodical.

The O'Leary Report recommended that the Canadian periodical industry be supported by measures which would channel Canadian advertising revenues to Canadian magazines.

Two policy measures were introduced in 1965 which were designed to channel Canadian advertising revenues to Canadian magazines: section 19 of the Income Tax Act and customs tariff 9958. Section 19 of the Income Tax Act limits tax deductions of advertising expenditures to advertisements placed in Canadian magazines for advertisements directed at the Canadian market. Customs tariff 9958 prohibits the fiscal importation into Canada of split runs or special editions of periodicals with editorial content substantially the same as the original edition except for the advertising which has been purchased especially to reach a Canadian audience. These two measures created a positive environment for Canadian magazines.

Customs tariff 9958 proved to be an effective way to prevent the distribution of split run editions. However, technological progress has forced the government to review the effectiveness of code 9958 which had well served the industry for more than 30 years.

In particular, technology now permits to evade the spirit of custom tariff 9958 and the objective of the federal policy regarding periodicals.

In January 1993 Sports Illustrated announced plans for a Canadian edition to be printed in Canada which would contain advertisements directed at Canadians. Sports Illustrated Canada is printed in Canada from texts electronically transmitted from the United States. Canadian ads are then substituted for American ads and some Canadian editorial content is added, thereby bypassing the border controls provided for with the customs tariff code.

As a result it became apparent the policy measures the government currently has in place could no longer fulfil their role.

On March 26 1993, the government announced the creation of the task force on the Canadian periodicals industry. The act to amend the Excise Tax Act and the Income Tax Act implements the main recommendation contained in the report of the task force. The excise tax on split run editions of periodicals distributed in Canada will eliminate the loophole used by Sports Illustrated Canada .

Amendments proposed to the Excise Tax Act would impose a tax equal to 80 per cent of the value of all the advertisements contained in the Canadian split run edition.

Bill C-103 gives the following definition of a split run edition: An edition distributed in Canada in which 20 per cent or more of the editorial material does not originate in Canada and that contains one or more advertisement destined to Canadians.

This tax will maintain the long standing governmental policy regarding periodicals. It shows the will of the government to support the preservation in Canada of an industry that is original, viable and dynamic.

Each member of the House can choose to support the bill, supporting the livelihoods of over 6,000 Canadians employed in the domestic magazine industry while at the same time keeping news stands well stocked with a broad choice of periodicals for the Canadian reader.

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1 p.m.


Hugh Hanrahan Reform Edmonton Strathcona, AB

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

Bill C-103 will impose an excise tax with respect to split run editions of periodicals. The tax will be implemented at a rate of 80 per cent of the value of all the advertising contained within a split run.

What type of publication are we talking about? A split run edition of a periodical is one that is distributed in Canada, one in which more than 20 per cent of editorial material is the same or substantially the same as the editorial material that appears in one or more periodical editions distributed primarily outside Canada. It is one that contains an advertisement that does not appear in identical forms in those other periodicals.

Ultimately the issue is split run editions of foreign magazines which are accused of dumping foreign editorial material into Canada to attract local ads through low cost rates. It is important to look specifically at the Canadian magazine market.

Based on a 1993 study the 10 most popular U.S. magazines in Canada commanded the 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. Interestingly enough, at the same time the top 10 Canadian magazines have increased their collective circulation by almost 15 per cent. It appears Canadian magazines are winning the battle for readers. This is happening not because of government intervention but because of the quality of the articles.

Even if we look at the amount of revenue generated for these split run editions through advertising, the lion's share is still remaining in the hands of Canadian based magazines. Last year Sports Illustrated had six split runs in Canada which brought in ad revenues of slightly more than $2 million. That is peanuts compared with the $869 million in the Canadian magazine industry as a whole.

Therefore as parliamentarians we need to fight the perception that Canadians read the same magazines as Americans. According to the past president of the Canadian Magazines Publishers Association a multinational ad buyer looking at news stands here would think the way to reach Canadians was through the same magazines as those on the racks in the United States. However high profile does not equal high circulation. Canadian publishers have found ways to reach readers other than through the news stand.

For instance, magazines such as Saturday Night and Modern Woman are distributed through newspapers. Magazines such as Chatelaine and Maclean's have large subscription bases. Because many Canadian magazines are subscription based it would seem logical that they are by far more vulnerable to increased postal rates than to split run editions.

I will take a moment to discuss the Sports Illustrated split run editions since it is this periodical which has caused the most controversy. Let us look at the example of the two issues of Sports Illustrated from October 11, 1993. The contents show pages of Ron Grant watching a home run disappear. In the Canadian edition it is Doug Gilmour stretching after a puck. The college football department was dropped to make way for a story on Calgary Stampeder Doug Flutie. The Inside the NFL'' feature was replaced by theInside the CFL'' feature. The section ``Faces in the Crowd'' is an all-Canadian selection rather than an all-American selection. The same type of changes were made for all Canadian editions.

Granted this is not everything which nationalists would have wanted. However, instead of forcing an alien sport and culture down our throats, Sports Illustrated would be reflecting Canada to Canadians. Nor is Sports Illustrated displacing a home grown alternative.

There is no Canadian general sports magazine. If there were it would survive not because of an end to split run editions of a competitor but because Canadians would want to read it and because it would be quality material. In other words it would stand on its own merits.

Since it is true that most but not all of the articles in Sports Illustrated Canada appear in Sports Illustrated United States, Canadian publishers argue the costs are already recovered from sales in the U.S. This means it can undercut the Canadian industry

on advertising rates. In other words it would be dumping, selling its product for less than one does at home.

However I feel the publisher's complaints are based on a much simpler concept referred to as economies of scale. To say that therefore economies of scale inevitably doom Canadian culture is to say domestic and foreign cultural products compete strictly on price, that is Canadians do not distinguish between them on any other basis. However, if there is one truth among nationalists, it is that the two are not perfect substitutes, that Canadian tastes are distinct and therefore indigenous production fills a need that foreign art cannot, in which case Canadians should be willing to pay a premium for the product.

On the other hand if we were not all that different from the Americans the advantage of economies of scale should be just as open to us as it is to them. A rash of recent Canadian television shows such as "Due South" or "The Boys of St. Vincent" have been hits south of the border. It is for this reason that we should be encouraging free trade, not a trade war.

A trade war with the Americans is precisely where Bill C-103 is headed. We as a government have the right under the NAFTA to discriminate against American cultural companies. However let us not forget the U.S. is also permitted to retaliate with roughly equivalent measures. According to many news reports the U.S. trade office is said to be drawing up a list of potential Canadian targets for retaliation largely in the cultural or media sector.

For these reasons we on this side of the House oppose the bill. 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 this is 100 per cent false. Canadians are among the best in the world. We compete through our talent and products and not through government dictated protectionism.

I cannot understand why the government has dragged the issue out, as it has been around for almost two years. Is this the best solution to the problem which could have been developed over the last two years?

A final note which I feel sums up my sentiments toward Bill C-103 can be found in an extract from an editorial written on January 3, 1995 in the Vancouver Sun :

The Americans have good reason to feel outrage at this piece of barefaced protectionism-and Canadians should not find any pleasure in it, because it only encourages continued mediocrity in the Canadian magazine industry. Worse, it now invites U.S. retaliation just when relations across the border had seemed to be moving into a friendlier phase.

The improved relationship is not worth jeopardizing for the dubious value of killing the Canadian edition of Sports Illustrated . Ottawa should reconsider this rash and ill conceived tax.

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1:10 p.m.


Alex Shepherd Liberal Durham, ON

Mr. Speaker, I will be sharing my time with the hon. member for Hamilton-Wentworth.

A country is more than an economic unit somehow linked together by rivers and lakes; it is much more than all of these things. A country is people working, living together and expressing themselves as a unity. Canada has a longstanding agreement with our publishing industry. That agreement is to support it within not only the North American context but also in the context of the world.

It seems to me that advertisers who earn their living by servicing the Canadian market should also be prepared to support the distribution and consumption of material within that country.

Is competition always invariably fair? The population of our southern neighbour is almost 250 million people and Canada is pushing barely 30 million. I do not have to give a lesson today on economics, but there is such a thing as economies of scale. As companies become bigger and their production lines become bigger, their costs go down. If we were simply a network of economic units, clearly all our cultural industries, indeed all our industries, should be in places where there is a higher density of population. This for us in North America would be our southern neighbour.

That is not what Canadians want. Asked that question time and time again over their history, Canadians have chosen to maintain a separate entity on the northern part of the North American continent.

I would like to put into context the broader context of the Canadian government having a place to support the Canadian magazine industry. It is relevant here to describe the importance of the Canadian magazine industry to Canadians.

Canadian periodicals are an essential medium of cultural expression for all Canadians. They serve as a channel for conveying Canadian ideas, information and values. They are an integral part of the process whereby Canadians define themselves as a nation. Magazines inform, educate and entertain. They play a vital role in the exchange of information. Canadians need Canadian magazines.

However, Canadian magazines face a unique challenge: the massive penetration of the Canadian market by imported magazines, the relatively small size of the Canadian population, the openness of Canadians to foreign cultural products, the effects of

the cover prices of imported magazines on the Canadian price structure, and the impact of overflow advertising on the potential advertising market in Canada.

The industry's total revenue in 1993-94 was approximately $800 million. Though it has flourished culturally with over 1,300 titles, its financial position is fragile, with overall pre-tax profits of less than 6 per cent. Gradual changes in the rapidity of competition with people with higher production runs could clearly wipe that 6 per cent profit margin into losses, basically wiping out the entire industry.

Because of the importance Canada places on having a means of expressing its unique identity and the difficulty and challenging environment the Canadian magazine industry faces, the need of structural measures of support for the Canadian magazine industry has long been recognized by successive Canadian governments. This policy is simply a reaffirmation of the policies government after government has taken before us in this country and it is in support of our cultural industries.

A number of policies and program instruments to help to ensure the development of the Canadian magazine industry have been put into place. I mention postal subsidies. Canadian magazines have limited access to Canadian news stands. Less than one-quarter of Canadian magazine circulation revenue is delivered from news stand sales. As a result, the industry relies on subscriptions to reach its audience.

The postal subsidy, which finances concessionary postal rates for Canadian magazines, has been an important instrument in helping the industry reach its market. By providing stability in the level of distribution cost the government has been able to assist publishers in developing and implementing viable business plans for the long term.

Two fiscal measures encourage Canadian advertisers to use Canadian magazines to reach Canadian readers. The first measure, section 19 of the Income Tax Act, has been in place since 1965. The legislation is merely an extension of that longstanding tradition of our government.

For advertisements directed at the Canadian market, section 19 limits tax deductions of advertising expenditures to advertisements placed in Canadian magazines. A Canadian magazine is defined as one that has 75 per cent Canadian ownership and control and has editorial content that is 80 per cent different from the editorial content of other periodicals. Here we basically disallow for tax deduction purposes certain advertisements placed in foreign magazines, which are basically to attract the Canadian market.

The second measure is tariff code 9958, which prohibits the physical importation into Canada of split runs or special editions of periodicals with editorial content that is substantially the same as the original edition except for the advertising, which has been purchased especially to reach the Canadian audience. This is basically why this law is before us today. Back then physical importation was considered to be the most important aspect of distribution but today it can be done electronically. We can communicate with Germany and other countries from our offices. This is simply updating that code to reflect modern times.

Until recently the tariff code dissuaded offshore magazines from soliciting advertising in Canadian markets. It has also succeeded in doing so through voluntary compliance.

Financial support is also provided to a number of cultural and scholarly publications through the Canada Council and the Social Sciences and Humanities Research Council. The Canadian industries development fund was established in 1990 with a budget allocation of $33 million. Its mandate is to provide Canadian owned and controlled firms within the cultural industries with a range of flexible financing services, which has an emphasis on investment loans.

This is another area where the Government of Canada is assisting our cultural industries and possibly resisting the importation. This does not mean that we are developing a narrow and small country. We still obviously have the ability to access foreign periodicals in Canada. However it underpins the importance of maintaining and strengthening Canada's periodical industry.

I see my time is gradually running out. I want to summarize by saying that I am happy to be part of a government that continues to support the concept of Canadian owned periodicals and the growth of the industry in Canada.

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1:20 p.m.


John Bryden Liberal Hamilton—Wentworth, ON

Mr. Speaker, it is a pleasure to rise in support of Bill C-103. I must say at the outset that I find it supremely ironic that in Parliament support for the bill should come from my colleagues in the Bloc Quebecois, who stand for promoting a separate culture, and that opposition to the bill comes from the Reform Party, which surely should stand to promote Canadian culture at any opportunity.

I begin by making some comments on the remarks delivered by the member for Medicine Hat, who says that the bill represents a kind of cultural protectionism, which is no longer appropriate. This is a bill that deals with cultural protectionism and is very appropriate. I feel that some of my colleagues in the House, particularly in the third party, do not seem to appreciate the central role the spoken and written word has in the viability of a nation, the viability of its institutions as well as the viability of its entertainment and cultural industries.

Certainly in English speaking Canada the publication industry, whether it is books, magazines or newspapers, has been under economic pressure for a long time. In Canada we believe in free

speech, which is tied with the independence of media agencies delivering the message from Canadians. Consequently, it is essential that these industries that deliver this cultural message in books, magazines or newspapers remain viable.

The sad reality is, as other members have mentioned, that we are a country one-tenth the size of the United States. What happens, for example, in books alone is that an author who is lucky enough to persuade a publisher that his book is worth while and it might sell on the open market will be very fortunate if he sells enough copies to earn perhaps $8,000 or $9,000 a year from that one book. However, because the United States is 10 times as big, a similar author with a similar book can make a living at it. He can make from $70,000 to $80,000 from that single book. This is the way it is with books and with newspapers. Newspapers these days have come under enormous advertising pressure: the shortage of advertising, the lack of circulation and competition from the United States.

When next in Toronto, Mr. Speaker, visit the Toronto Star at 1 Yonge Street, Canada's largest newspaper. You will find outside on the sidewalk various news boxes. Among those news boxes you will see U.S.A. Today . There is a very active market in this country for American publications and newspaper publications.

Mr. Speaker, I will take you back to your childhood for a little bit. I will bet at one time you sold magazines. It used to be very common to sell magazines as a child to make a bit of money. I did that when I was a kid. I remember vividly that most of the magazines I had to sell were American magazines. The reality is that we are a country dominated by the American cultural industries. There is no getting around it. To ignore this is to ignore a fundamental reality.

It is with irony that I listened to the member for Rimouski-Témiscouata. She spoke very finely on the issue of the need for Canadian cultural protection. The irony is that English speaking Canada is under the greatest pressure. Here we have a member of the Bloc Quebecois, a Quebecoise, defending English culture in this country. She is quite right that we have to subsidize, support and build a certain amount of protectionism around the magazine industry because of the phenomenon of split runs. That is a very real problem. It is true that the Canadian periodicals will suffer adversely from that.

Ironically French language periodicals do not have the same problem. Therefore I was very pleased to hear her defend the government's initiative in this regard with respect to split run publications. However, best of all, she took the debate one step further, which I really like, and she raised the question of the GST.

The one thing I could never understand as a former journalist and a some time author is any government that could put a tax on books. We actually have in this country a tax on reading. If ever there was a regressive tax that has set us back, particularly in English speaking Canada, it is this tax on reading.

I say to the Reform Party that it does not understand how difficult it is to get the word out as an author, a writer or as a journalist in this country, particularly when we are English speaking, because we are in overwhelming competition with the Americans to the south. The previous government put a tax on books which damages the periodical industry. It lost 6 per cent of its circulation. Authors of books suffered.

The member from the official opposition made a very good point when she suggested the GST be dropped from all publications and reading material. I support her 100 per cent on that. That recommendation from the task force on the magazine industry is not in Bill C-103, although I am confident the government will make that alteration when it addresses the problem of the GST. I hope we will see that change in the next budget.

Finally I would like to make a comment concerning the member's comments on postal subsidies. Again I believe she is right on the money there. In this case it is a question of distributing Canadian newspapers as well as magazines. We would do well to do anything in our power to make sure the Canadian point of view gets out to Canadians. If we do not back up our own authors, our own writers, our own journalists, our own publications, then at least English Canada is going to slide into the United States and the separatists will get their way by default.

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1:30 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, I have heard Liberal member after Liberal member and actually Bloc members talk about how we are such victims in Canada, that the U.S. is exploiting us. I suppose that is one world view of the situation, but to me it is a pretty morbid and pessimistic way of looking at things.

What I think is completely in alignment with how creative people think is that Canadians can overcome some of these things. They can overcome the fact that they have strong competition. The reason they can overcome it is that they are the same genetically as the Americans. Canadians can produce the same quality of books and music as anyone else. They have proven this time and time again.

Constantly complaining and whining about our lot in life is not helpful at all to the debate. I am amazed the hon. member was so distressed to see a U.S.A. Today box in front of the Toronto Star . He must be shocked when he walks into a library and sees Shakespeare, Tolstoy, Montesquieu and Jean-Jacques Rousseau. It must be a horrible experience for him. Imagine there not being enough John Brydens and David Suzukis. All kidding aside, I know the

member would not be shocked by that and really would not oppose that.

The point is not in the absurdity of the exaggeration. The point is in the premise, which is where there is real absurdity. Canadians are more than capable of making good choices. Every day we make thousands of decisions about all kinds of things, including very important things such as raising our children, et cetera. We are perfectly capable of deciding among the plethora of magazines and books available which ones we want to read and which television shows we want to view.

If the hon. member's argument is sound, does he recommend we take it to its full extent? Would we put up complete barriers thereby protecting all Canadian magazines, books, et cetera, and not allowing others in at all? That is the logical end of his argument.

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1:30 p.m.


John Bryden Liberal Hamilton—Wentworth, ON

Mr. Speaker, no, I would not do it to that extent at all. Bill C-103 addresses the problem perfectly and is entirely adequate as it stands.

The hon. member for Medicine Hat should look at the Canadian Football League or the various sports industries in Canada. He would see what happens when a cultural industry driven by profit is in direct competition with the United States. We are losing some of those cultural sporting industries. In the case of the printed word we cannot afford to lose it in a similar fashion. It is essential to our democracy, our freedom and our identity as Canadians.

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1:35 p.m.


Osvaldo Nunez Bloc Bourassa, QC

Mr. Speaker, my colleague the hon. member for Hamilton-Wentworth expresses surprise that the Bloc Quebecois supports this bill. We say that Canadian culture must be protected in the same way as Quebec culture must be protected.

How does the hon. member explain the Canadian government's spending so much money on advertising in foreign newspapers and not in Canadian newspapers, particularly in the ethnic press? There are some very important ethnic newspapers which do not have the necessary government support; they do not have their fair share of government advertising.

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1:35 p.m.


John Bryden Liberal Hamilton—Wentworth, ON

Mr. Speaker, I appreciate the comments of the hon. member from the Bloc Quebecois. We are very much on side on the issue. The Government of Canada and all governments should favour, where they can, placing advertisements in Canadian publications.