Mr. Speaker, I certainly will comply. My apologies to the heritage minister. I will refer to her as the heritage minister, even though I am quoting from a magazine article.
An article in the May 27 Toronto Star , written by Rosemary Speirs, states:
In mitigation, (the heritage minister) is offering government subsidies. The publishers had argued fiercely for a chance to survive on their own—not on capricious government grants. Now they'll have little choice but to accept an unwanted federal largesse.
Yesterday, (the heritage minister) fought the perception that she'd lost in cabinet. But in the last couple of weeks, (the heritage minister) was sidelined while (the international trade minister) and (the Prime Minister's) principal secretary, Eddie Goldenberg, handled final negotiations.
It is quite obvious from the magazine articles that I have quoted from that it was the trade minister who came to the rescue to make sure that this country would not end up in a potential trade war with the United States.
An article in the May 27 Globe and Mail , written by Shawn McCarthy, states:
The American side not only objected to the magazine legislation but saw (the heritage minister) as the leader of an international effort to include cultural protections in trade deals and blunt the growing U.S. dominance of global media and entertainment industries.
Although (the heritage minister's) anti-American bravura might have political appeal and cultural nationalism remains a hot-bottom Liberal issue, neither was worth a trade war that would hit steel, apparel, wood and plastic producers—and sour a commercial relationship that often depends on the goodwill of Canadians' giant neighbour.
(The heritage minister), unhappy about the government's compromise, left the damage control to the Prime Minister's Office, International Trade Officials and the Canadian Embassy in Washington.
Relations between (the heritage minister) and (the international trade minister) deteriorated to the point that their respective staffs engaged in public slanging matches though not by name, (the international trade minister) would sign anything just to avoid a fight with the Americans, (the heritage minister's) staff suggested, while trade officials characterized (the heritage minister) as erratic and irrational.
I will continue on with what people have said over the last several weeks about the current Bill C-55.
An article written by Valerie Lawton in the May 27 Toronto Star states:
Trade officials were also frustrated with (the heritage minister), saying she didn't fully appreciate U.S. threats of a trade war.
“I don't know if there would have been anybody's hide to save had there not been some extreme positions put out there”, one trade official said. “Any sort of seemingly back-tracking on her issues is her own making. She was the one who said some very strong things at the beginning of the whole issue. It's just a fact that she now has to live with some of the things she said”.
A source close to (the heritage minister) said the minister would have preferred to give U.S. split runs less access to the Canadian advertising market. But he said she'll be satisfied with the deal as long as it follows up with an adequate subsidy package.
We can see that these amendments deal with trade over and over again.
The last article I will quote was an editorial written in the National Post on May 27.
Her posturing nationalism and xenophobic fear of English speaking culture Canada shares with the U.S., Britain, Australia and a quarter of the world are philistine absurdities and a national embarrassment. They also amount to unforced folly at a time when, as we have repeatedly warned here, the Americans are looking for a pretext to throws bones to their own native protectionism.
Is this the type of politician we want protecting Canadian culture? Would you even take her advice on what movie to see?
Many people do not agree with the amendments made to this bill because they really do change the intent of the bill.
The Canadian Magazine Publishers Association is led by François de Gaspé Beaubien. To be fair, I know Mr. Beaubien is a gentleman, and I would like to read into the record his opposition point of view. It is not that I agree with what Mr. Beaubien says regarding the amendments but I think his point of view is relevant. As the House knows, Mr. Beaubien and the Reform Party are on opposite sides of the fence, but in this case Reform is in opposition to the amendments as is Mr. Beaubien.
Mr. Beaubien wrote an open letter to the Prime Minister. I will quote the last page of his letter to make sure Mr. Beaubien is on the record in opposition to the amendments to the bill:
First, acceding to the U.S. demand for a so-called de minimis of 20%, give or take a few points, would gut Bill C-55. It would be a straight giveaway of a very significant portion of the Canadian advertising services market without any requirement that the U.S. publishers print one word about Canada. They would simply recycle editorial content from their U.S. editions, capturing incremental profits in Canada with virtually no costs. Giving away this slice of our advertising services market to unfair and insurmountable competition from U.S. publishers would mean the death of Canadian magazines that Canadians want to read.
Second, giving Canadian tax benefits to U.S. publishers who would enjoy this cost-free access to our advertising market is a straight transfer of Canadian taxpayer dollars to further pad the incremental profits of huge U.S. multinationals like Time Warner with absolutely no return to Canada.
The last point I will make on behalf of Mr. Beaubien, whom I disagree with, is he says:
Third, changing Canadian foreign investment rules to allow U.S. publishers to establish their magazines as Canadian publications with unlimited access to Canadian advertising revenues on the basis of a vaguely defined and unenforceable content requirement would be nothing more than the final sellout. Some have tried to claim that the U.S. has made a concession by agreeing to such a requirement. Nothing could be further from the truth. Far from accepting a Canadian content requirement, the U.S. has agreed to...legislation or regulation. This gives them free rein to object in future, which they surely would, if Canada tried to make such a requirement stick. This reality would represent the last nail in the coffin of the cultural policy in the magazine sector that has been pursued by successive governments for over three decades.
I read this as an example of objections to the amendments. As this House knows this government went to bat for the publishing industry. Here again we have the publishing industry objecting to the Senate amendments.
Right from the very beginning Bill C-55 had two combatants, the advertising industry and the magazine publishing industry. To be fair to the advertisers, I must for the record state their position in terms of the amendments and their impact on the bill.
The advertising industry has been kept out of the consultation process right from day one. It is certainly not unreasonable to expect problems when governments put together bills without consulting the whole industry. It should not be a surprise that the government has had all kinds of problems with this bill since it was tabled in the House. This alone should send the bill back to the drawing board as I have echoed many times during the debate on Bill C-55.
I will give the position and point of view of the Association of Canadian Advertisers which I believe is only fair at this time. The Association of Canadian Advertisers believes that market conditions should prevail. It is the association's considered view that the Canadian magazine industry would be best served through the disciplines of the market system.
The association does not subscribe to the doom and gloom scenarios of those who argue that the unfettered market is anathema to a vibrant and dynamic Canadian magazine industry. It indicates that one needs only to look at the great success story of the Ontario wine industry following the implementation of the Canada-U.S. Free Trade Agreement.
Remember the dire predictions for the survival of the Canadian wine industry in the face of a flood of cheaper priced wines from the United States. As history has shown to the contrary the wine industry in Ontario has flourished in an unfettered market. Moreover it has become a source of national pride as the industry garners one prestigious national award after another.
Another concern the advertising association has is that there needs to be a framework for acceptable intervention. It is the association's understanding that the government may deem it necessary to intervene in the market on behalf of the Canadian magazine industry on the grounds that the Canadian magazine industry as a public good merits assistance. Should this be the case, it is its view that such intervention is best accomplished through direct payments to publishers out of general government revenues, preferably based on Canadian content performance milestones.
Support for the Canadian magazine industry should not be borne either directly or indirectly by taxation or subsidy policies that ultimately target Canadian advertisers. We are still waiting to hear how much the subsidy will be on this magazine deal.
Punitive interventions are unacceptable according to the magazine advertisers. Any regulations that restrict advertising dollars to magazines meeting certain Canadian content requirements is also unacceptable to the Association of Canadian Advertisers. This is a dangerous road to go down. It would provide an indirect subsidy to the Canadian magazine industry which would effectively be borne by advertisers rather than the public. Initially it is fundamentally inconsistent with the very basic notion of commercial free speech.
Finally, any such regulations would be inconsistent with the World Trade Organization appellate body ruling and the GATT, 1994.
My belief is that the Association of Canadian Advertisers welcomes any new vehicles through which advertisers can convey their commercial messages. Advertisers need more mechanisms to inform consumers as they become more discerning and sophisticated in their reading and buying habits. This is clearly a void in the Canadian marketplace that is being filled by some U.S. publications. Consumers buy them. In order to effectively reach consumers Canadian advertisers require unrestricted access to those magazines that best deliver their messages. This set of amendments certainly restricts access to the marketplace.
As we are hopefully debating this bill for the last time, we need to review how we got into this mess in the first place. As I have indicated, we have been at this for at least 12 months and we still have not gotten out of it. How did we get here in the first place? For the record I need to talk about some of the background to this legislation.
In 1997 the United States successfully challenged Canada's protectionist magazine regime at the World Trade Organization. The WTO panel found three components of Canada's magazine policies to be illegal under the General Agreement on Tariffs and Trade, GATT, a key trade agreement administered by the WTO. The panel condemned a ban in place since 1965 on imports of magazines with advertising directed at Canadians; a 1995 special excise tax on so-called split-run magazines; and discriminatory postal rates for imported magazines. After Canada appealed the panel's report, the WTO appellate body found a fourth violation, Canada's discriminatory postal subsidy program for Canadian produced magazines.
Effective October 30, 1998 Canada terminated its longstanding ban on split-run imports, eliminated the 1995 special excise tax on split runs and modified its discriminatory postal rates and postal subsidies for magazines. However, Canada introduced Bill C-55 which simply accomplished the same results as the import ban and excise tax and would have kept U.S. and other foreign produced split-run magazines from competing in the Canadian market.
Bill C-55 would have prohibited U.S. and non-Canadian publishing companies and ethnic publications on pain of criminal fine from using the magazines they produce to advertise directly to Canadian readers. Among the four measures the WTO condemned was the compensatory 80% tax imposed by the Canadian government on imported magazines carrying this type of advertising. The tax put U.S. and other imported magazines at a significant commercial disadvantage in comparison to Canadian produced magazines.
Having finally agreed to eliminate the tax on these advertisements, the Canadian government proposed to ban them altogether. Canada will continue in a slightly modified form its postal subsidies for Canadian produced magazines and the United States will monitor closely the effect of that modification.
Beyond everything, Bill C-55, inclusive with the amendments, has shown over and over again a lack of consultation and planning. Even on the issue of subsidizing magazines, basic questions needed to be asked.
In terms of subsidization, should it have been short term? What are the needs of the readers in this country? Were the readers in this country even asked? We are dealing with amendments that have come back from the Senate which has indicated that the intent of the bill has changed substantially and I agree. It basically is a trade bill.
What determines success? The survivability of magazines that are not viable. As hon. members know, we spend considerable funds subsidizing magazines today. What will happen with this set of amendments? We already know that this deal will cost a substantial amount, perhaps up to $300 million will be given to the magazine publishing industry. I raise the question, why are we doing this? How long will this occur? Will the magazine publishing industry continue to receive upward of $300 million from here on in, year in and year out? Again, it will cost taxpayers a lot of money.
There are split-run editions in this country today. As we informed the House months ago, there were ethnic split runs in this country of which the government was not aware. I would like to inform the House that there are actually national magazines in this country that do split runs in the Canadian marketplace. Again, that is more information that the government probably did not come across.
I would read into the record a letter written by Ruth Kelly, the publisher and editor of the Alberta Venture Magazine . Her comments were published in the Marketing Magazine . Her letter concerns split runs within her own borders. We are trying to deal with split runs outside our borders, but at the same time we are not even aware that there are split runs in this country.
Her letter reads:
The pros and cons of Bill C-55 have been strenuously debated in the pages of your magazine, among others. As the publisher and editor of a business magazine that serves a regional audience, I thought long and hard about the ramifications of this legislative firewall. Ultimately, I decided that I could not support Bill C-55. The hypocrisy of a business magazine taking a stance that advocates protectionism for its industry, at the potential expense of others, was untenable for me.
Obviously, Paul Jones, publisher of Canadian Business and spokesperson for the Canadian Magazine Publishers Association, has experienced no such qualms. I am not sure how he has reconciled his stance with the free trade gospel so fervently espoused by Canadian Business editor Arthur Johnson. That, however, I am willing to leave up to his conscience—and the judgment of his readers.
I am somewhat more curious as to how Jones can speak so persuasively about the evils of split run editions even as he comes into my market and poaches my advertising dollars with nary a hint of guilt.
I emphasize this point:
For decades, regional magazines have faced the same kind of competitive practices about which Jones moans. Nationals like Maclean's , Canadian Business and Chatelaine create regional editions which are designated as such for the purpose of advertising sales only.
In other words, they are split runs.
They offer only a token, if at all, amount of editorial coverage to the regions, do not invest in the publishing infrastructure in that region, and do not participate in the cultural or business lives of the regional community. Feel free to correct me if I'm wrong, but I believe that adequately describes the bugaboo of American split run magazines.
She concludes by saying:
Regional magazines have learned to compete against Canadian split runs by developing strong relationships with our readers and ensuring that advertisers benefit from that relationship. If Jones and his national brethren fear the spectre of competition, I would suggest they give me a call. I would be happy to run a seminar on Competition 101—but it would have to be held in Alberta. Hopefully, most of them know where that is.
That was the letter written by Ruth Kelly, publisher and editor.
The government did not rush in to give regional magazines a subsidy to help fend off the national magazines when they were doing their split runs. Obviously, as this letter shows, our national magazines, which the government has gone to bat for, have done the same thing that they are complaining about, which is that they are being preyed upon by our neighbours to the south, the American split runs. Where is the justice?
The biggest question that has not been answered with all of these changes and amendments is how much this deal will cost the Canadian taxpayer. We have asked the minister in the House the same question, but we have received no answer.
Who will be the beneficiaries and for how long? As I have indicated, the government has gone to bat for the publishing industry, principally two large corporations. We have read in the press that a deal has been made and magazine publishers will receive subsidization. This amendment points to this very fact. How can we support these amendments unless we know the costs associated with them? The government refuses to divulge that information to let the people of the country know what this will cost.
What has been agreed to between the United States and Canada? That is another question we have received very little answer to in this House.
I would like to deal with some of the key points that the government has agreed to with our American counterparts. The key amendments to Bill C-55 include the following key provisions.
Canada agreed to amend Bill C-55 to narrow its scope by exempting foreign-owned magazines that are published in Canada or exported to Canada and carry advertisements directed primarily at the Canadian market within the permissible level.
Initially foreign magazines exported to Canada that carry less than 12% of Canadian ads will not be subject to Bill C-55 penalties. After 18 months the level grows to 15%. After 36 months it will grow to 18%, as we have read in the amendments to the bill.
The terms incorporated in the agreement will provide new opportunities for foreign investment. Very little of this information has been discussed in this House. Effective 90 days after the signing of this agreement Canada will permit up to 51% foreign ownership in the establishment and acquisition of businesses to publish, distribute and sell periodicals, except for the acquisition of Canadian-owned businesses. After one year Canada will permit up to and including 100% foreign ownership. Partnerships of foreign investors with majority Canadian ownership will be permitted.
Investments will continue to be subject to a net benefit review under section 38 of the Investment Canada Act. Under the review, among other things, Canadian investment officials will consider contributions to the Canadian economy, the effect of the investment on competition and compatibility with cultural policies. Publishers may be asked to undertake substantial levels of original editorial content in periodicals published in Canada.
The original editorial content means non-advertising content that is authored by Canadians, including, but not limited to, writers, journalists, illustrators and photographers; or created for the Canadian market and does not appear in any other edition of one or more periodicals published outside Canada.
The question I ask is, who won this contest? Did we win this contest or did our neighbours win the contest? Or was it a draw?
The key tax provisions of concern to U.S. publishers include the following terms, again as impacted by the amendments to this bill. Within one year of the signing of this agreement section 19 of the Income Tax Act will be amended so as to allow advertisers deductions for advertisements in periodicals regardless of the nationality of the publishers or the place of production.
Canada will further amend the Income Tax Act to modify the amount of the allowable deduction in the original editorial content requirement to permit half the deduction of advertising costs for advertisers in publications with zero to 79% original editorial content, and a full deduction of advertising costs for advertisers in publications with 80% or more original editorial content.
Current tax deductions were not available to advertisers if the foreign-owned magazines were published under a licensing agreement with a Canadian. As a result of the agreement, periodicals published under such licensing arrangements will not be excluded under the Income Tax Act.
Another term of reference is that a consultation clause is included in the agreement so that Canada and the United States can consult annually on any matter regarding the agreement.
It is unfortunate that we have not debated the terms of the agreement in the House.
The Reform Party will not support these amendments as they basically deal with trade and not culture. It is unfortunate that governments tend to wrap themselves around a flag and try to sell trade issues as culture. Even with the amendments, it would be interesting to see how this amended bill would stand up to a charter challenge.
With all the changes in technology that are currently occurring in the world, governments all have to realize that they need to thoroughly evaluate all of their grants and subsidies. We have heard that the Internet will have a huge impact in the future, not only in terms of culture, but also trade.
I believe that Canadian culture should be promoted, as many people have indicated, and promoted front and centre on all international fronts. Canadians do things well. We know that. We have a great track record. We need to seriously believe that promotion is the way to save our rich and diverse culture. We are not Americans. We are Canadians and we should not give in to protectionism which costs taxpayers dearly.
I move:
That the motion by amended by deleting all the words after the word “That” and substituting the following therefor:
“a message be sent to the Senate to acquaint their Honours that the House disagrees with the amendments made by the Senate to Bill C-55, an act respecting advertising services supplied by foreign periodical publishers, since the amendments allow the bill to continue placing unreasonable limits on fundamental freedoms such as freedom of contract, freedom of speech, freedom of the press and the infringement on property rights as guaranteed in the Charter of Rights and Freedoms and the Canadian Bill of Rights”.