Madam Speaker, I am pleased to take part in the debate on Bill C-55, an act respecting advertising services supplied by foreign periodical publishers.
In giving an historic overview of the issue before us today, we should point out that, since 1965, the Canadian magazine industry has always enjoyed the support of the federal government.
Indeed, the Royal Commission on Publications, set up in 1961 under the Right Hon. John Diefenbaker, recommended that measures be taken to protect the Canadian magazine industry against dumping. To that end, measures prohibiting the import of split run magazines were finally implemented in 1965.
Measures were also taken to provide reduced postal rates for Canadian magazines, thus helping them lower their shipping costs.
I should point out that the Progressive Conservative government promoted strong growth for the Canadian owned magazine industry. Indeed, during the negotiations on the Free Trade Agreement, we made sure that an exemption provision would be included for the cultural industry as a whole. A similar provision was also included in the North American Free Trade Agreement.
However, in 1993, the magazine Sports Illustrated managed to circumvent the ban on imports by electronically transmitting a split run edition to a Canadian printer. The Progressive Conservative government took speedy action, forming a task force to bring policy into line with the electronic era.
In response to the recommendations contained in the task force's interim report, the Hon. Jean Charest, then the minister responsible for Investment Canada, issued ministerial directives under the Investment Canada Act that eliminated the loophole by which Time Warner had introduced a split run of Sports Illustrated into Canada.
The final report of the task force led, in 1995, to Bill C-3, the purpose of which was to strengthen the position of the Canadian periodical industry by means of measures to discourage split run editions of periodicals, particularly American ones, in Canada.
These measures included an excise tax of 80% on the total value of advertising space in split run editions, and a customs tariff making it illegal to import split run periodicals.
Unfortunately, in October 1997, the World Trade Organization ruled that levying customs and excise taxes on split run periodicals went against international free trade agreements. Canada was given until the end of October 1998 to bring its policy into line with the provisions of the General Agreement on Trade in Services, failing which the United States would take retaliatory measures.
Publishers of Canadian periodicals maintain that American publishers, who cover their costs in the United States, can offer lower advertising rates to Canadian business. Canadian periodicals depend heavily on advertising revenue, which is estimated at $350 million.
The government has therefore introduced this bill as a response to this request, taking care to protect Canadians' ability to express themselves through Canadian cultural vehicles, such as those offered by this country's periodical industry.
Incidentally, the World Trade Organization's decision did not challenge the ability of member countries to take action to protect their cultural identify.
The proposed measures provide among other things that only Canadian periodical publishers will be able to sell advertising services aimed primarily at the Canadian market and that stiff fines as high as $250,000 will be imposed on foreign publishers who contravene this legislation.
The bill before us also specifies that both the customs tariff preventing split runs magazines from entering the country and the excise tax on the distribution of such magazines in Canada are removed. From now on, foreign publishers will have access to the postal subsidy program, and commercial postage rates for Canadian and foreign publications will be harmonized accordingly.
This concludes the historical overview. Now I would like to remind the hon. members that the party I have the honour to represent in this House has always been committed to ensuring future of the Canadian publishing industry, which is closely tied to advertizing income. It is indeed essential that this industry be promoted and protected.
That having been said, the government must give Canadian publishers the assurance that the new measures will not result in another trade crisis. Canada cannot afford another fiasco like the one caused recently by the flip-flop over MMT.
Bill C-55 is a very important piece of legislation. Aside from providing much needed support to our Canadian magazine publishers, it shows publicly that we are intent on protecting and maintaining our cultural sovereignty in the midst of ever-increasing pressures from global forces.
Protecting our cultural integrity in Canada has always been a major priority of any trade discussion Canada participated in. Just think that plans for the multilateral investment agreement are being wrecked in part by the fact that both Canada and France refuse to put cultural industries on the table.
The previous Progressive Conservative government was deeply committed to the protection of cultural industries. In negotiating the Free Trade Agreement, we ensured all cultural industries were excluded from the operation of the FTA, an exclusion that was carried over into NAFTA.
It is very important to note that the WTO in its decision was not questioning Canada's right to protect its cultural industries; it objected to a policy that directly targeted U.S. magazines. So, rather than specifically target U.S. magazines, Bill C-55 seeks to put restraints on advertising services.
Essentially, Bill C-55 will restrict the sale of advertising directed at the Canadian market to Canadian publications. It should be noted that U.S. magazines will still be able to sell advertising aimed at the Canadian market. However, these advertisements will have to appear in all North American publications. They cannot appear solely in magazines aimed at the Canadian market.
Some people may wonder why we should impose measures to protect our Canadian magazine industry. There are very important reasons for us to do that. The Canadian magazine industry employs thousands of Canadians and pumps millions of dollars into our economy. Many distinguished Canadian writers publish in our magazines insightful and interesting articles on people, places and things that reflect our unique culture.
The Canadian market is one of the most open markets in the world for imported magazines. According to the Canadian Magazine Publishers Association, imports account for 50% of magazine sales in Canada and over 80% of newsstand space. Despite this intense competition from foreign magazines, Canadian magazines continue to attract their share of readers, allowing them to hold their own in a very competitive industry.
The Canadian magazine industry plays an important cultural role in helping to define who we are as a people and where we stand as a nation. Culture defines our beliefs and our values. We are not automatically born with a culture. We may be born into a culture, but it is something we learn. We need Canada's magazine industry, so that future generations have the opportunity to learn and appreciate this culture that distinguishes us and that is the envy of the rest of the world.
As I mentioned earlier, for some thirty years now, government after government in Canada has passed laws designed to help Canadian publishers earn enough in advertising revenues to remain competitive on the Canadian market.
When Sports Illustrated managed to circumvent import restrictions by electronically sending its publication to a printer in Canada, it basically opened the door to unfair business practices by American publishers, who began to produce their magazines with split runs and to reap the benefits of bundling the editorial content of their American editions with Canadian advertising, which they could sell at a much better price than their Canadian competitors.
Canadian publishers count on advertising to generate 65% of their revenues. It is therefore urgent to act to protect them against the possibility of unfair business practices by their American competitors.
Advertising has not just recently become a powerful influence on the course of our society. Before printing was invented, criers were hired to announce upcoming events. I know of a member of government who would have made an excellent one had he been born a few centuries ago.
Prior to the advent of radio and television, magazines drew most of their revenues from advertising. Since then, they struggle to create their own niche and ensure their survival. Advertising has changed more in the past 10 years than in the past 60 years because of new technologies and market developments.
Advertising revenues amount to over $350 million annually. Canadian publishers depend on these revenues to survive. A stop must be put to any threat of unfair and grasping practices. Canadian publishers need our support in order to remain competitive in the new world economy.
This bill is far from perfect. Even after a full year to consult with international trade experts, countless legal advisers and representatives from Canada's publishing industry, a number of issues still need to be clarified.
First, as I mentioned earlier, the postal rate changes could have adverse effects on small community based publications. Legion branches, which previously enjoyed postal rate subsidies, could be in danger of losing this assistance.
The same could be said for church organizations that provide their congregations with regular updates of church activities. Because these organizations are not charging their members for their materials, they are no longer entitled to preferential postal rates as are other Canadian magazine publishers. This issue must be addressed by the minister either through amendments or regulations.
The last section of the bill, which relates to the grandfathering clause, must be more clearly defined. As it stands, the bill appears to restrict important contributors to our Canadian magazine industry, such as Reader's Digest and Time Warner, from expanding their present interests, including future investment possibilities. While I realize that was not the intent of the bill, the wording could lead to such an interpretation.
I am afraid the bill might not survive another WTO challenge. I also wonder about a possible challenge under the Canadian charter of rights by the advertising industry.
Even though I was told by Heritage Canada officials that all possible avenues had been properly explored, I simply cannot forget the government's incompetence in the MMT issue, the gasoline additive, which is now costing Canadian taxpayers $13 million U.S. Canadian taxpayers cannot afford another costly mistake by the government.
In conclusion, even though Bill C-55 is far from perfect, we should support it at second reading, so that it can be immediately referred to a committee for further review.