House of Commons Hansard #13 of the 36th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was transport.

Topics

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5:25 p.m.

The Speaker

My colleague, always address your statements to the Chair.

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5:25 p.m.

Liberal

Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, my apologies. The role of government is to set a policy framework against which proposals will be weighed.

As far as foreign ownership, as I said before the sole perspective of the Competition Bureau is competition in Canada. I wish the Competition Bureau would be as rigorous on this as it is about gasoline pricing. I have certainly been involved in that discussion. It does not have to look at the question of whether it is Canadian controlled. That is a serious issue for Canadians. I would have problems going above 25%. From a strictly economic point of view one could argue that it might be more efficient.

As policymakers we have to look at things other than economic efficiency. In fairness to the Competition Bureau that is its mandate, but as legislators we have to look at it more broadly.

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5:25 p.m.

Bloc

Maurice Dumas Bloc Argenteuil—Papineau, QC

Mr. Speaker, if I may, I would like to put a question to my friend from the Liberal Party.

Does he remember Bill S-31, which limited ownership in a Canadian company to 10%?

It was passed, of course, to prevent the Caisse de dépôt et de placement du Québec from buying shares in Canadian Pacific. I am surprised to see that today the government is willing to set aside the act to accommodate the Liberal Party's bagman, the Onex president, and increase the 10% limit to allow Onex to take over Air Canada.

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5:30 p.m.

Liberal

Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, as I said in my remarks, when Air Canada was privatized the decision was made to limit single shareholders to 10%. That was done so that the shares would be widely distributed across Canada. I was not there at the time, but it was probably a sensible policy decision. My colleague was there and he agrees with me. The irony is that there is no such requirement for Canadian Airlines.

Foreign ownership is another interesting twist. In the Onex proposal, American Airlines would actually own less of Canadian Airlines than it owns today. I think it owns about 34% or 35% today. That would come down to about 15%. How can we apply one standard for Air Canada and another for Canadian Airlines?

The policy objective of widely distributing participation in Air Canada has been met. Why do we perpetuate this? It is a good debating point, but to me it does not make any sense to close down the option until we have had a discussion about it. Frankly, I do not see the public policy objective.

The unfortunate thing is that when Canadian Airlines was in severe financial difficulty American Airlines came in, put a lot of money into Canadian and sewed up a lot of agreements which, in the final analysis, as a business proposition, was probably the thing that had to be done. However, at the end of the day, Canadian has been strapped with some agreements which have really hampered it.

I am not very happy with the extent of control American Airlines might have over Canadian the way it is structured now. However, I gather that Onex has come forward this afternoon with a new proposal and I will read it with interest.

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5:30 p.m.

Progressive Conservative

Gerald Keddy Progressive Conservative South Shore, NS

Mr. Speaker, I was listening to the member's speech and, for the life of me, I do not know in which direction he is headed. He started at one point in the circle and he chased himself all the way around the circle. I will ask him a direct question which has to do with foreign ownership.

On October 26 the minister said that he would address the 10% foreign ownership regulation. He said that he would take another look at it. That has not happened yet, but there is a lot of discussion on it. The minister is willing to look at it. We now have a new Onex bid, with direct Liberal connections, that is apparently proposing 14.5% foreign ownership.

If the minister wanted to open this up for direct competition, would it not have been better to open up the foreign ownership bid early on when the Competition Act was cancelled? When the foreign ownership part is opened up 78 days later there are fewer people willing to put a bid together in the timeframe that is left during the 90 days when the regulations of the Competition Act have been suspended.

We are stifling competition. We are allowing one person to bid because they have already done their homework, they have already spent millions of dollars, and they already know how much and what limit they can reach.

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5:30 p.m.

Liberal

Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, I will answer on two fronts. First of all, the member is in error. As many Canadians are doing, he is mixing up the 10% ownership rule with the foreign ownership rule.

The 10% rule means that for Air Canada, not Canadian Airlines, no single person or body can own more than 10% of Air Canada. That was implemented when Air Canada was privatized. The foreign ownership rule is the 25% rule.

When the Onex proposal came forward it was in the form of a proposition. Clearly, if the government at that point in time had a policy decision that it was not going to contemplate increasing the 10% rule, the government would have said so. Onex would not have proceeded up to this point if it did not feel the government was open to that discussion.

I find it amazing that Air Canada would be so dogmatic about the 10% rule. I think it is somewhat self-serving. If Air Canada came forward with a proposal which violated the 10% rule, my take on that would be that it would be saying that it does not meet the requirements of the law of the land now, but it would respectfully submit that there is a proposal on the floor which now exceeds the rule and it would like its proposal to be considered as well.

We are legislators. When people talk to us they ask us to legislate. Why is it so impossible for someone to say that we should reconsider the 10% rule?

At times, when it is convenient, people hide behind these rules. No one has actually increased the 10%. No one has done that. No one has violated the law of the land. Someone has come forward and said that perhaps we should reconsider. Frankly, if Air Canada had done the same I do not know how our government could possibly have said “You cannot do that”, because we did not say that to Onex.

I am fully confident that if Air Canada had come forward with that proposition we would have had the same kind of policy framework that has been articulated more recently by the minister.

Are we playing games or are we interested in solutions? Let us try to work on this.

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5:35 p.m.

Progressive Conservative

Peter MacKay Progressive Conservative Pictou—Antigonish—Guysborough, NS

Mr. Speaker, I would indicate at the outset that I will be splitting my time with the hon. member for Kings—Hants.

I am very pleased to rise to take part in the debate, a debate which I think has caused a great deal of uneasiness. There have obviously been even elements of consternation in the debate today.

As we have seen in a number of instances, it appears that the government is now lapsing into crisis management. We have seen it in the fisheries as a result of the Marshall decision. We have seen it in the debate over the pay equity settlement. Let us hope that this particular situation is not going wind up before the courts. The hon. member who just spoke has indicated, quite rightly, that we as legislators have to deal with situations such as this.

I want to congratulate the Bloc for bringing this motion forward. The timeliness of it is extremely important. It is an issue that is moving along at breakneck pace and one which has not been handled particularly well by the government.

We will be supporting the motion because the motives behind the proposal to increase the ownership limit of Air Canada, the 10% rule, and the 10% public participation rule, are very important and credible and should be considered free of all outside influences. The 10% rule is one of the issues that is at the very crux of this debate, as well as the confidence that Canadians have in the deals which are being proposed and the solutions to this crisis in our airline that are being brought forward and supported, for the most part, by the government.

The current proposal calls for a change to the 10% rule. This is one change that would be completely influenced by one proposal over another on the issue of merger. It shows and smacks of favouritism.

The process itself is one that has been fraught with a great deal of misinformation and a great deal of confusion. The government's timing of the announcement with respect to the suspension of the Competition Act was something else that caused a great deal of concern on the part of all Canadians and a great deal of concern in particular in the business community because it has broad, far-reaching implications for all business practitioners in the country.

The proposal to change the 10% rule at the beginning of the 90 day negotiation period might have been acceptable. It might have been acceptable. It would certainly have been more acceptable than what we have occurring in this instance, which is, 16 days before the end of the 90 day suspension of the Competition Act, we have the government basically moving the goal posts, changing the rules of engagement and allowing, without any doubt, a very undue and unfair advantage to one of the proponents, one of the proposed businesses that looked to engage and take over what is our national airline, or our two national airlines.

To put this in its proper context, with 16 days to go in the 90 day window for negotiation, the government suddenly, out of the blue, announced a plan to change the 10% ownership rule. That left absolutely no time for any serious offer or any serious business to come forward and develop, or at least put into the mix a bid with respect to this offer. The new proposal, if it were to come, would be at an unfair advantage. Even if a proposal could be made within the 16 day period, it would be completely unfair compared to a proposal made by, in this case, one of the proponents in the time period it has had. The timing itself is something that is extremely suspect and extremely tenuous when it comes down to the issue of fairness and competition, which is what is at the very root of this issue.

On the issue of the 10% rule, the proposal to change the 10% rule at this late date strongly demonstrates that the government is flying by the seat of its pants, improvising daily as to how to react or respond to the various businesses that are currently involved. As I said before, the crux of the issue is that there could have been more. In a competitive business world what we would surely want when it comes to our national airline is to have the best proposals and the best options to choose from. It is a very fundamental motherhood issue.

As the hon. member for Cumberland—Colchester put it, in terms that Canadians can understand, if we are going out to Canadian Tire to buy a toaster, we are not going to buy one brand of toaster without looking at the various options that are available. Compare that to having national airlines worth billions of dollars and the suggestion that we should simply buy this one because it has been proposed and it is the only option that is available because the government tells us so. Behind the scenes we know that is not the case. This is not a situation where there was fair competition, where the rules that applied to one business applied to all. It is at the very fundamental root of the Competition Act that this is the case.

The Competition Act was suspended. The rules were pulled away and, very curiously, the minister asked that the bureau look at a very narrow part of this deal. He has chosen to take out of the mix the normal scrutiny that would be applied by the bureau and he has, for all intents and purposes, emasculated the Competition Bureau and given it a very specific mandate as to what it should look at in the context of this deal. He has said: “The minister's option is the preferred option and therefore I am going to point you in that direction. I am not going to ask you to look at the entire situation as you normally would if the Competition Act were in full force and effect, but I am going to suggest that you take this particular aspect of your job and you follow it. In the meantime, I will continue to oversee the situation”. It was a very paternalistic and narrow view taken by the minister. The effect at the end of the day is that we may wind up with a dominant carrier approach which will not serve Canadians well.

One of the other fundamental motherhood issues is how this will affect jobs, how it will affect the employment situation in the country. The Canadian aviation industry includes thousands of employees in all regions of the country. Again I congratulate the Bloc for bringing the matter forward, but this is not limited to any one region of the country. It has drastic implications in the west, in the east, in the north and all over the country. More than anything else, this is something the government has to constantly have at the front of its mind and hopefully on its priority list, as to how it examines, manages or mismanages this issue.

What is the effect going to be on jobs in this country? There are dozens of smaller airlines that will obviously be affected as well, and there are hundreds of airports and hundreds of communities, in terms of being isolated in the service that will be provided to them, which will be affected in a profound way if this issue is not resolved in a fair and equitable manner.

This is not a new situation. It is something the government surely should have seen coming down the pike, but again, somehow, for some reason which is beyond me and beyond the understanding of many Canadians, the government is not reacting. It is simply improvising and reacting in a day to day way, as opposed to having some sort of concrete or deliberate path that it is following, giving Canadians the confidence they should have in their national government.

I again hearken back to the issue of employment. The government is proposing to completely restructure and revamp our national airline in 90 days. That is less than the gestation period of a mayfly. Somehow the government wants to completely change our national airline and asks Canadians to have faith in the process, all the while changing the rules of engagement as it goes along.

This is not something that should instil a great deal of confidence in Canadians. It is something we should slow down and something we should look at extremely carefully. We should ensure that those who are in the know are actually making the right decisions.

Part of the problem here is that we do not know who is in the know. We do not know what information is available. We do not know when the information was released that the Competition Act would be suspended. We do not what information was exchanged between the various airlines prior to the suspension of the Competition Act.

We must be extremely diligent in the way we proceed in the next number of days, months and years because the effect is going to be profound and potentially devastating on communities in the country.

I wish Godspeed to the minister and to the transportation committee as they proceed in their deliberations because this is a very serious issue. I am hoping and putting trust in those members of the committee that they are going to hold to account the government on this matter.

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5:45 p.m.

Don Valley East Ontario

Liberal

David Collenette LiberalMinister of Transport

Madam Speaker, I want to thank the hon. member for his last comments, in the best of parliamentary spirit, wishing all of us well. This is a very difficult file and it does have ramifications for travel throughout the country. How we handle this will define who we are as a country and a people as we go into the 21st century.

I was in and out of the chamber, for which I apologize because I missed some of the hon. member's remarks, but I was led to believe that he made a statement to the effect that I have said that the 10% limit is to be raised.

What I said at the committee the other day for the public record is that the government is prepared to consider raising the limit of 10% if, and only if, there is an interest that will be pursued in improving the airline industry. In other words, if it improves the viability or the stability of the airline industry then we would consider it.

I think what we are doing is in the best of parliamentary traditions. We are consulting MPs. We are having a debate today. I welcome the debate as well because I think it has been a very good debate.

I hope the hon. member did not unintentionally mislead the House with his statement a few minutes ago.

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5:45 p.m.

Progressive Conservative

Peter MacKay Progressive Conservative Pictou—Antigonish—Guysborough, NS

Madam Speaker, I appreciate the attendance of the minister and his participation in the debate. I think it is extremely important. As he said, the implications are grave. This is probably the biggest and most complicated file that this ministry has faced in decades.

I want to be very clear on this. I would never want to mislead the House or misrepresent the facts in the debate. My understanding is that the minister has floated the idea of changing the 10% rule. He has not said that he would or he would not.

However, the crux of the matter is that this causes confusion within the industry. This causes the participants in the debate to feel like they are on unstable ground as to what is going to happen next. The lack of policy, the lack of leadership and firm commitment as to what the rules of engagement are, is causing a great deal of misunderstanding, mistrust and confusion among the proponents and among Canadians.

I would encourage the minister to be perhaps more definitive and more diligent in making his position clear to Canadians and making his government's policy or plan clear to Canadians so that we do not have issues swirling out there in the public debate and this furore over what is going to happen and the confusion and consternation. That is not what is needed.

We need firm leadership from this minister and the minister of fisheries on other issues, and many issues that are out there right now. I am certainly glad that we have the ability to debate this in the House.

However, it would have been nice if we had been back here on the start-up date that was initially proposed in September. We would have had a better opportunity to look at all of these issues at an earlier instance.

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5:50 p.m.

Liberal

David Collenette Liberal Don Valley East, ON

Madam Speaker, I have two questions for the member. First, he talks about a lack of policy, has he read the policy framework that I deposited in front of the committee the other day?

Second, is he suggesting that we should have said that we would not consider raising the limit? I submit that if we had said that we would have been accused of bias by eliminating one of the proposals that will be considered by shareholders.

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5:50 p.m.

Progressive Conservative

Peter MacKay Progressive Conservative Pictou—Antigonish—Guysborough, NS

Madam Speaker, to a large extent, the minister has fallen on his own sword with that last comment. He deposited his government's policy the other day; 74 days into the situation he deposited his government's policy. In the middle of the game, he suddenly says “Oh, by the way, there has been a rule change and here is where we stand on it”.

That the minister himself has suddenly come up with a policy on this particular point is not the type of leadership nor the solid positioning that those involved in this particular debate should draw any sort of solace or comfort from.

As to whether I have read this particular policy that was deposited the other day, the fact of the matter is no. We have a very competent and able member of the committee, the member for Cumberland—Colchester who, I am quite positive—and he is nodding in agreement—has read it. He has certainly made his views very clear on this and will continue to do so, I might add.

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5:50 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Madam Speaker, it is a pleasure to speak today on this very important issue. The future of the Canadian airlines industry is at stake and it is very important that we take this issue very seriously in the debate tonight.

The debate is about the 10% rule and that being the maximum that any one group can own of Air Canada. I am not defending the 10% rule. The issue before us should not be debated in the last stages of a negotiation period or in the last stages of a period during which the Competition Bureau has been suspended for at least one of the proposed mergers.

The 10% rule has inherently some flaws. It can help protect mediocre or even bad management. It can reduce shareholders equity and the competitiveness of a company. Potentially, there are even issues whereby the 10% rule could be seen as in violation of NAFTA seeing as the 10% rule was utilized in 1988 and apparently, if one reads the fine print, because of the fact that the privatization occurred before 1994 when NAFTA came into effect, this 10% rule may not be actually tenable under NAFTA. There are some real issues about the 10% rule.

The question is why are we not discussing the 10% rule and some of these other issues, including the cabotage issue, as part of the discussion of a general restructuring of the Canadian airline structure when we are not in the middle of a crisis? The difficulty here is that we always seem to get to a crisis position before we actually deal with some of the structural issues facing Canadians and the Canadian economy.

It is inappropriate to be trial ballooning significant changes in the nature or the structure of the Canadian airlines at such a difficult and heated time. We should have done this long before. I would argue that the suspension of the Competition Bureau's activities on the Onyx proposal should be considered an admission of failure by the government to lead and to actually provide some visionary restructuring to the Canadian airlines industry a lot sooner.

The fact that the Canadian airlines industry is having difficulty is nothing new. We have known this for a long time. In fact this government, which has been in power since 1993, has been aware of the challenges facing the Canadian airlines industry.

The consumers should not be asked to pay the price for the government's dilly-dallying, dithering and failure to address the major issues in a holistic, forward-thinking and visionary manner.

The minister stated in one of the papers I read this morning that he may be amenable to allowing foreigners to set up shop in Canada to provide Canadian based airline units with foreign-owned routes and servicing within Canada. Again, that is another issue that should be discussed when we are not in the heat of an airline crisis and in the heart of negotiations on at least two fronts now with two proposals.

We should have been discussing the 10% rule, the notion of cabotage and all these types of issues during a period of time when we were less rushed and when we were in less of a crisis environment.

Instead of this crisis management, knee-jerk reaction that the government is taking now, we could have actually provided a framework to the airline industry to allow restructuring to occur as opposed to having the airline industry and entities within the airlines industry, in this case Canadian and Air Canada, actually having to come up with proposals. The government is effectively cutting the suit to fit the cloth on this one. It is not really providing the structural framework that one expects from governments for the private sector to respond in a more long term and meaningful way.

The government's approach to the airlines is very similar to the government's approach on the bank merger issue. Members will remember that about a year ago we were very heavily ensconced in the debate on the bank mergers issue? The government had ignored, from 1993 forward, some of the structural reforms necessary in the financial services sector until, at one point or another, there were private sector proposals that forced the government to make a decision on those specific proposals. In this case and currently, we are focused in Canada not on the holistic nature of reforming and restructuring the Canadian airlines, we are focused on two specific mergers.

In the bank merger situation, the whole focus of Canadians, which should have been on restructuring the Canadian financial services sector to provide an industry that was more capable of competing globally and at the same time meeting the needs of Canadians, was suddenly focused on two specific merger proposals. Unfortunately, this is not, in my opinion, the right approach to develop public policy in the long term interests of the competitiveness of Canadian industry and in the long term interests of protecting Canadian consumers.

Since the government's merger decision in the financial services sector, we have seen some of the ramifications or repercussions of that decision. We have heard the Bank of Montreal announce layoffs of 1,400 workers in direct response to the merger decision. We have heard the Bank of Montreal announce that 100 branches will close. Members should keep in mind that one of the conditions that the banks had agreed to if the mergers were allowed was to maintain branch operations, to service all the rural communities currently being serviced and to maintain current levels of employment.

The finance minister, dealing with a crisis within his own leadership aspirations and trying to shore up support among the backbenchers, allowed for a Liberal caucus revolt. The Liberal caucus witch hunt on banks occurred. What we saw was an uprising within the Liberal backbenchers that effectively prevented a focus on public policy that would have been in the long term interests of the Canadian industry or in the long term interests of Canadian customers.

It is also important to realize that there has been a $7.2 billion loss in bank shareholder capital in Canada since that decision. During the same period in the U.S. there has been a 7.4% increase in shareholder value with U.S. banks. This is very important given that 7.5 million Canadians are bank shareholders, directly or indirectly.

We have seen 1,400 jobs lost just with one of the banks involved since then because of the merger decision. The Dominion Bond Rating Service has downgraded Canadian banks, directly attributing its decision to do that to the Minister of Finance's decision. There has been a loss of market capital and a compromising of the ability of Canadians to save and invest for their future, in many cases for their retirement, all because of that decision.

My concern is here we are again focused on specific merger proposals and not dealing with the issues in a long term revisionary way. It is in stark contrast to the previous Conservative government's vision and courage to tackle the real issues not just facing Canadians today or tomorrow, but facing Canadians in the next century.

This government would not have had the courage to pursue a free trade agreement. This government would not have had the courage or vision to implement a significant tax reform and some tax policies that were not popular but proved to be the right policies in the long term. I do not believe this government would have had the foresight and vision and courage to implement some of the deregulation policies in financial services, transportation and energy.

Instead, here we are again in the heat of merger discussions coming up with policies to try to deal with specific mergers proposed by the private sector, having failed to provide a long term approach before a crisis situation. The government's approach to this issue and most issues it faces is one of crisis management. It is a knee-jerk reaction. It is analogous to someone installing a sprinkler system while the house is on fire. It is simply no way to run a railway as one saying goes. It is no way to run an airline either, but it is also no way to run a government.

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6 p.m.

Bloc

Maurice Dumas Bloc Argenteuil—Papineau, QC

Madam Speaker, I would like to ask a question of my colleague from Kings—Hants, for whom I have the utmost respect.

It is the same question I asked of the Liberal member opposite. He probably was a young student in 1982 and he may not remember why Bill S-31, limiting to 10% the ownership of any company by a buying company, was introduced at that time.

The Caisse de dépôt et placement intended to get substantial ownership of Canadian Pacific. The prime minister of the day—all the members will recall that it was a certain Pierre Trudeau who did not like Quebec very much and who feared Quebec's influence in everything—had Bill S-31 passed. It was to prevent the Caisse de dépôt et placement du Québec from buying Canadian Pacific. I must tell you that it was not the loftiest of initiatives.

Now we see that the government, to favour its friends, to allow the Liberal Party's bagman buy Air Canada, will use this legislation to let Onex become part owner of Air Canada and Canadian Airlines.

I hope my colleague from Kings—Hants will remember that. I wonder if he would like to comment on that.

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6 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Madam Speaker, in 1982 I was not old enough to have a driver's licence. I do not remember the specific legislation. However, I have a great deal of respect for my hon. colleague, and I can say that the types of policies that governments implemented in 1982 and in fact in the 1970s were very different. I believe that even the Liberals realize that part of the reason is that we are operating in a global environment. We are dealing with many global realities which are quite different from those which existed in the 1970s and early 1980s.

It is very difficult for me to compare those two issues because I believe we are dealing with profoundly different global competitiveness issues today. What may have been appropriate then would probably not be appropriate now in a policy sense. It is also important to realize that Caisse de dépôt now owns 10% of Air Canada.

I hope at least in some form that is an answer for the hon. member.

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6:05 p.m.

Don Valley East Ontario

Liberal

David Collenette LiberalMinister of Transport

Madam Speaker, do I take it from what the hon. member for Kings—Hants said that he is in favour of bank mergers and against airline mergers?

The best advice we have is that any change in the 10% rule will not abrogate any of our NAFTA commitments. The Alberta legislature did away with the 10% rule on Canadian Airlines last year because of course the parent was PWA, a creature of the Alberta legislature.

The Competition Bureau will indeed very much be at play in whatever happens. It will be looking at the merger in the normal way.

I remind the hon. member that the government was faced with three scenarios in July: a bailout of Canadian Airlines; a potential failure of Canadian Airlines; or finding some other way, imperfect as it may be, to find a proper solution.

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6:05 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Madam Speaker, on the first question relative to the bank merger issue, our party was not in favour of bank mergers. We were in favour at that time of the Minister of Finance negotiating the best deal on behalf of Canadians. He had the opportunity to do that because the banks were willing to commit to 10% reductions in services charges, services to rural communities and branch openings and maintaining jobs with Canadian banks. Unfortunately the Minister of Finance blew that opportunity. He was so focused on the short term politics of the issue that he forgot about the long term interests of Canadians. That is the crux of that issue.

Relative to the crisis the government found itself in this summer on the airline industry and Canadian Airlines, I would suggest to the minister a more forward thinking and visionary approach over the past several years in restructuring the Canadian airlines industry in advance of this kind of crisis would have prevented this evolution of events.

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6:05 p.m.

Thunder Bay—Atikokan Ontario

Liberal

Stan Dromisky LiberalParliamentary Secretary to Minister of Transport

Madam Speaker, the discussion has been exciting and debate during the day has been very interesting.

I will continue to deal with some of the issues that have been presented. I realize that some of the concepts I will present will be repetitive but we all know that if we repeat things often enough it leads to an effective learning experience.

I commend the Minister of Transport for his presentation on this subject before the House and the Senate standing committees on Tuesday and the policy framework document he tabled. He has shed a great deal of light on a topic that has been of consuming interest to members of the House and to Canadians for several months.

The government position is now known. Private sector parties will now be able to act with full knowledge of the government's policy framework and the process announced by the minister that will be used to approve and condition any proposal to restructure the airline industry.

I would particularly like to address two important issues raised last Tuesday by the minister. Those have been the central theme for much of today's debate. The first was the limit on ownership of Air Canada's voting shares established in the Air Canada Public Participation Act at 10%. The second was the limitation on foreign ownership of any Canadian air carrier and the requirement for Canadian control that are established in the Canada Transportation Act.

Those two issues are often confused. They sound so similar but they address different concepts. Both issues are very relevant to airline restructuring and both were addressed by the Minister of Transport in his policy framework and his statements.

I hope that by addressing them together I will not only be able to illuminate two quite technical issues, but also to clear up any confusion that may exist between them in the minds of some members of the House. Some members are quite confused.

The 25% limit on voting shares held by foreign investors applies to all Canadian carriers, including Air Canada. It is an aggregate figure such that it places an upper limit on the ability of non-Canadians acting separately or in concert with others to influence the result of any shareholder vote. This quantitative limit is accompanied in the Canada Transportation Act by a qualitative test of control in fact by Canadians.

Responsibility for applying the ownership limit and the control test lies with the Canadian Transportation Agency, a quasi-judicial body that operates at arm's length from the government and the Minister of Transport. Those are very important points.

The other feature to note is that both the 25% test and the requirement for control in fact are ongoing obligations that are assessed before the airline is originally licensed to operate as a Canadian air carrier. That can be reassessed at any time based on developments with the airline that affect its ownership and governance, or on any other new information that may come to the agency's attention at any future time, or on the basis of complaint.

The purpose of these two tests, which together I will refer to as the Canadian ownership and control rules, is straightforward. The purpose is to ensure that all Canadian air carriers are owned and controlled by Canadians, that is, that this industry which is so key to all Canadians remains Canadian in the full sense of the term.

Moving now to a consideration of the 10% rule, this rule applies to Air Canada only as it appears in the Air Canada Public Participation Act, not the Canada Transportation Act or any other federal act of general application. No other airline in Canada is subject to such a rule, although this has not always been the case. Until 18 months ago, Canadian Airlines was subject to a similar restriction left over from the time it was owned by the province of Alberta. The provision was rescinded by the Alberta government in 1997.

The 10% rule is not aimed at non-Canadians per se. It applies to all shareholders, both Canadian and non-Canadian. This rule applies to any individuals as well as to individuals acting together, such that shareholders are expressly forbidden from entering into any agreement that would allow any person, together with the associates of that person, to own or control directly or indirectly voting shares which represent more than 10% of the votes that may be cast to elect members of the board of directors of Air Canada.

The 10% rule was included in the Air Canada Public Participation Act when it was passed in 1988 in order to ensure that Air Canada remained widely held. As I understand it, the idea was that Air Canada was already widely held in that it was a crown corporation owned in equal measure by all Canadians. So when the airline was privatized, parliament was loath to contemplate that this national carrier might some day be owned and controlled by any individual or group, even recognizing that they would be Canadians as provided for by the Canadian ownership and control rules. It appears that this idea was sufficiently persuasive on its face that it received little debate among Canadians in the media or in parliament at that time and became part of the legislation that governs Air Canada to this very day.

The point to be clear on is that the 10% limit is not, and I repeat not—

SupplyGovernment Orders

6:10 p.m.

The Acting Speaker (Ms. Thibeault)

Order, please. It being 6.15 p.m., it is my duty to interrupt the proceedings. Pursuant to order made earlier today, all questions on the motion are deemed put and a recorded division deemed demanded and deferred until Tuesday, November 2, 1999 at the expiry of the time provided for government orders.

It being six 6.15 p.m., the House stands adjourned until 10 a.m. tomorrow, pursuant to Standing Order 24(1).

(The House adjourned at 6.15 p.m.)