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.