Madam Speaker, it is an honour to rise to debate this bill. The hon. minister alluded to the pride that Canadians have in the various minted coins we use and in those coins that are collected by investors and coin collectors. We are all proud of the Canadian coins.
I will address certain aspects of the bill. I will first look at the object of the Canadian mint. Then I will look at the present legislation and the provisions that currently exist for the operation of the mint. Then I will compare those provisions with what the bill is proposing to change.
I draw the attention of the House, for review purposes, to the object of the mint. According to the act that established the Royal Canadian Mint, the object of the mint is “to mint coins in anticipation of profit and other related activities”. The act goes on to detail rather specifically exactly what the mint is to do. Its legislative powers are as indicated in the object.
In order to carry out this mandate, the Mint may exercise any or all of the following powers:—
We need to look specifically at these powers because they are quite different when the proposed legislative changes are taken into consideration.
To produce and arrange for the production and the supply of coins of the currency of Canada; to produce coins of the currency of countries other than Canada; to melt, assay and refine gold, silver and other precious metals; to buy and sell gold, silver and other metals; to assay, refine, store and otherwise deal with gold, silver and other metals for the account of Her Majesty and others; to prepare and store shipments of coin, gold, silver and other metals and to move such shipments to or from the Mint; to make medals, plaques and other devices; to borrow or lease precious metals that it requires for the purpose of its operations; to acquire, hold and alienate real property or any interest therein; to make grants in lieu of taxes to any municipality in Canada in amounts not exceeding the taxes that might be levied by that municipality in respect of real property under the administration and control of the Mint if the Mint were not an agent of Her Majesty; and to do all other things that are incidental or conducive to the attainment of the objects and the exercise of the power of the Mint.
That is a pretty comprehensive list. The mint has in its corporate plan 1996-2000 indicated rather clearly how it has translated those particular powers into its operation. I would like to read into the record exactly what the mint has said in that report:
Canada's national mint, the Royal Canadian Mint, is one of the world's foremost producers of circulation, collector and bullion investment coinage. It is one of the largest gold refiners in the world. The mint is highly respected, in Canada and internationally, for the high quality and variety of its products and services. Its numismatic and precious metal investment coins, all promoting Canada, are sold in over 60,000 retail outlets worldwide.
Some might wonder what this numismatic business is. Numismatic has to do with coins and with people who collect coins or who invest in coins. It has to do with precious metals that are not in general circulation but that are there for a very special commemorative purpose or some other reason. They are made of special metals and have a value.
The report goes on:
The Royal Canadian Mint is designated a Schedule III-II crown corporation under the Financial Administration Act. The mint reports to parliament through the Minister of Public Works and Government Services.
The mint manufactures all of the circulation coinage used in Canada and manages the supporting distribution systems for the Minister of Finance. It also carries out research on coinage demand.
I draw attention to that sentence because what has happened here is going to come up a little later in my speech.
Furthermore, the mint develops proposals to introduce high quality, less costly metals or metal alloys in Canadian coinage in order to reduce costs and improve seigniorage for the Government.
This has to do with the circulation of coins that actually have an intrinsic value lower than their face value, the penny for example. We go on to the nickel, the dime and so on.
The mint is also concerned about the security of supply and price competitiveness of coinage metals used in Canadian coinage.
In recent years the mint's commercial activities have been impacted by intensive international competition, changing investment markets, economic slowdowns and recessions. After consistently producing profits annually from the time of its incorporation in 1969, the mint experienced an operating loss of $3.475 million in 1994
The minister told us that in the last year it had a profit. That is good.
In order to address this situation they produced this plan, the turnaround plan. That plan is now operating and, according to the minister's numbers, apparently is working all right.
That is a very interesting development. We now look into exactly what has happened in that turnaround plan and what the government is proposing to do in introducing this new legislation.
The minister told us the purpose of the legislation and as far as the statement went, it was accurate and complete. I think we need to commend the minister for some of the aspects of that statement.
I would now like to read the summary contained in the bill itself:
This enactment amends the Royal Canadian Mint Act to update the terminology for coins in order to reflect the markets served rather than the metals of which the coins are composed.
The amendments simplify the process for issuing coins by giving additional powers to the mint and to the Minister of Public Works and Government Services.
This is the core of this bill. The mint is given the capacity of a natural person and the power to incorporate subsidiaries and to acquire and dispose of interests in other entities. Other amendments of an administrative nature are also enacted.
It is that central part that we want to draw some attention to right now. As the mint has gone along and looked at the existing legislation, its current interpretation and application of that legislation, it has issued a mission statement.
That mission statement has three parts. First, to provide quality coinage at a reasonable cost to enable the Government of Canada to meet the needs of Canadians.
Second, to manufacture and market on a worldwide basis high quality collector circulation coinage and precious metal investment products and market refinery services.
It is pretty clear that in the coinage part of this operation we are not in a growth industry. It is a mature stable industry. That comment will become a little clearer as to its significance as we move along into examining this bill.
I would now like to look at the provisions of the new bill and read into the record the new powers that are being given to the mint under this act. We are dealing here with section 4(1). Remember what we said the powers of the mint were before. Here are the new powers:
In carrying out its objects, the mint has the rights, powers and privileges and the capacity of a natural person and may in particular
(a) procure the incorporation, dissolution or amalgamation of subsidiaries and acquire or dispose of any shares in them;
(b) acquire and dispose of any interest in any entity by any means; and
(c) generally do all the things that are incidental or conducive to the exercise of its powers with respect to
(i) coins of the currency of Canada,
(ii) coins of the currency of countries other than Canada,
(iii) gold, silver and other metals and,
(iv) medals, plaques, tokens and other objects made or partially made of metal.
I do not think it takes a rocket scientist to understand that the powers of the mint have now been expanded very dramatically. We need to ask ourselves questions such as what are these activities that are incidental t, or that are conducive to the mint's carrying out its activities.
One thing is very clear already. The mint is in the refining business. It is my understanding that the Canadian mint refines more gold than any other refinery in Canada. It is clearly in the business of refining gold.
We need to ask ourselves is it also in the business then of buying and selling metals. Clearly it is. The act is very clear that it may buy and sell metals. But very closely allied to this is the full commodities market. The futures market is a very volatile market. There are people in the business who tend to hedge their positions in order to protect certain prices.
But it also means that the mint has the power, according to this act, to get not only into the business of hedging itself against future price fluctuations but to actually get into the act of participation in that market. Can it now buy or sell futures contracts, for example, not necessarily only to look after its own interests but also to actually declare a profit in simply buying and selling contracts on the futures market?
I do not believe that is the intention but the point is the act allows this kind of activity on the part of the mint. I think that is far too much power because whose money is at risk here? Ultimately it is our money that is at risk.
Let me indicate how significant the hedging program can be. Canada's largest gold producer is Barrick, a Toronto based corporation. This is a report in the Globe and Mail October 22. There is a lot of information in here but I will read just one paragraph:
As a result of its gold hedging program, Barrick was able to sell its gold during the third quarter at an average of $400 an ounce, compared with the market price of $290 an ounce. During the third quarter of 1997, Barrick sold its gold for $420 an ounce, compared with the market price of $324 an ounce.
Barrick has sold forward 10.4 million ounces of gold at an average price of $400 an ounce.
There is a good example of what the mining corporations are doing in the marketplace and what the hedging program has to do with the futures commodities market. While there are some very positive things for the investors in a company like Barrick there are also advantages to the mint's buying gold on the futures market at a lower price and to guarantee a particular price in the future. There is a speculative element in here as well.
Will the mint be circumscribed in its activities so it does not get into this speculative market?
Why is this significant? It is significant because of the subsequent amendment that happens later in the act. The subsequent amendment is section 20(1):
The mint may, for the attainment of its objects, borrow money from the consolidated revenue fund or any other source, but the total amount outstanding at any time may not exceed 75 million dollars or such greater amount as may be specified in an appropriation act.
We have to be thankful I guess for small mercies. At least it is limited to $75 million. It was $50 million. It has now increased by $25 million which really means that the public treasury of Canada can be attached to the tune of $75 million. That is our money. That is taxpayer money.
When that is allowed to take place and if the mint can borrow money to get into the buying and selling of precious metals, and it clearly says it may, and if it gets into the futures market it can get into some serious trouble. I would hope the management will not ever do that but the point is the act does not protect the Canadian public from that activity and I think it should do so. It is our money at risk.
It can be argued that it has been able to do that in the past. There is some indication that the mint has borrowed money in the past. The most recent expansion of the stamping plant being added to the mint in Winnipeg is being done with financing to the tune of about $30 million outside of the Canadian consolidated treasury. While that may be true, and I think it is true because there is an indication that it is so, the fact remains the mint has an indebtedness of $30 million. If it will need more money it can go to the consolidated treasury fund for whatever money it needs up to $75 million given the new provisions of the act.
Could the mint get into the mining business itself, in other words buy mining stock? Somebody would say that is a stretch. It is in one sense with the operation of the mint but go back to the powers of the mint and it has all the powers of a natural person.
The interesting thing is that it may acquire and dispose of any interest in any entity by any means, any means as broad as the imagination. One has to be really careful about looking at that and asking what it can get involved in.
I hope that is not the intent. I am sure it is not but nevertheless I think we have to write the act in such a way that there are protections against that kind of thing.
I want to go to the heart of the issue which really has to do with the business of the powers there. I just read a few of them and I want to ask the people of Canada should the Government of Canada be in direct competition or get into an area that private enterprise has demonstrated it can do. There is no doubt that the Canadian mint has to have the exclusive authority to stamp the actual coin with the currency in circulation. It must have that because that is the government's control of the currency operating in Canada. But that has nothing to say with the production of the plating of coins or of stamping coins in the first place. We have at least one corporation in Canada that has been doing this for a lot longer than the mint.
Should the government own a corporation that can be in direct competition with private enterprise? I am unalterably opposed to anything that the government does that the people can do as well or better. There is clear evidence that they can do so. What is some of the evidence?
First, right now before the courts of Canada there is a suit charging the mint with infringing on the patents that are held by the corporation we mentioned, Westaim. That suit is currently alive and unfortunately I am unable to go into the details of the suit. The fact remains there is a patent that is being infringed upon, at least that is what the contest is, by the mint which is owned by private enterprise.
If we look at that sort of suit that is going on in the courts, we look at the balance of powers that exist in this court case now. All the power of the government and all the resources of the government are now pitted against one little corporation. It is not fair. It is an unbalanced situation. Why should government or a corporation of the government ever get into the position of stealing something from another company that is protected by a patent, by the legislation that the government itself has.
Canada can be proud of the number of innovative ideas that have come from scientists. The National Research Council for example has all kinds of patents which have developed and have advanced the technology and have advanced the science of the world. We can be proud of those kinds of things.
Now one of these companies has developed one of those patents and lo and behold one of the crown corporations says “That is mine now”. It is not fair. It should not happen. We will go no further on this but it is very important that we recognize these things.
The second issue is whether there is a need for more coin stamping capacity in Canada. As I stand here today there is reason to believe with considerable confidence that there is right now a 30% overcapacity in the generation of coins to be engraved officially by governments. That includes the current demand of the Eurocoin.
When the Eurocoin demand comes out, and we know what the problem is, that causes an upward spike in the demand. When that disappears that overcapacity will increase beyond the 30% that exists at the present time. Yet the mint is expanding in a market that is adequately served at the present time. Why? The argument is that it is a business decision.
It may be a business decision but it looks to me that it is a lousy business decision because something is going to happen. Either the mint is going to have trouble or this other company is going to be in trouble or they are both going to be in trouble.
We cannot expect a company to succeed and profit when in fact there is an overcapacity. Somewhere along the line there has to be a balance between the supply and the demand that is out there. In fact we get to the point where we ask ourselves, who is in charge here? Is the minister in charge? Is the government in charge? Or is it the mint that is in charge?
Who made the decision to build this plant and add to the capacity of the mint in Winnipeg? Was that done by the minister? Was it done by the government? Was it done by the finance minister? Or was it done by the bureaucrats at the mint? We do not know. It is not clear at this point. These are the kinds of questions that must be answered before we agree to this particular change in the legislation.
It is clear that as the powers of the mint are expanded, and I have just indicated how much they are being expanded, that the mint can indeed thumb its nose so to speak at the government or at the minister and say “This is what we are going to do because we have the powers of a natural person”.
We need to go beyond this. We need to ask ourselves how successful crown corporations have been.
We cannot help but look at Petrofina and now Petro-Canada and the cost that was to the taxpayer and how efficiently that was run. Canadian National Railways became a private corporation recently. It is now starting to make money. It did not before. It was a drain on the public treasury. Canada Post has had a lot of difficulty in its labour relations which still are not completely settled. I have to commend the minister on what is happening now with the dispute with the franchises and Canada Post. There is progress being made, but it is not complete.
We really have to ask ourselves what is the best relationship. We need to move ahead with positive aggression. We need to move ahead with balance and we need to move ahead with fairness.
There are specific concerns in this bill which I have illustrated.
In conclusion I would simply remind members that the powers granted to the mint are too broad. The exposure to risk by the expanded powers to the Canadian taxpayer and to the Canadian treasury should be circumscribed at least. It is to $75 million but it is too high. The government should never do things that individuals can do as well or better themselves. The people can do it and we should not be in that kind of business to provide competition for them.
The bill needs to be amended. There are some housekeeping elements in the bill that the minister has alluded to which I think we need to support. In fact they need to go ahead. However, there are other aspects of the bill that should be looked at very seriously and amended to come into focus so we can have strong private enterprise in the country and at the same time within a framework that is clearly guided by government principles and rules which make it possible for private enterprise to be strong, profitable and which reward innovation and entrepreneurship.