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.