Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 22 - Evidence
OTTAWA, Tuesday, April 13, 1999
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-55, respecting advertising services supplied by foreign periodical publishers, met this day at 6:30 p.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the Chair.
[Translation]
The Chairman: This meeting shall come to order. Welcome, all. I was surprised to see an article in The Ottawa Citizen today saying that today we would be holding our last meeting. I would like to point out that two notices of future meetings have already been sent to the senators. In the Subcommittee on Agenda and Procedure -- Senators Forrestall and Poulin sit on it -- we plan hearings to examine Bill C-55. I simply wanted to reassure Senator Lynch-Staunton on the matter.
Senator Lynch-Staunton: I would point out, Madam Chair, that when that article was prepared, no other witnesses had been called to appear. I am happy The Ottawa Citizen article was quoted.
The Chairman: Not at all. That is not what got the ball rolling.
Senator Lynch-Staunton: We would have to have other interviews with other witnesses.
The Chairman: The witnesses were confirmed. Perhaps you should ask Senator Forrestall.
Pursuant to the reference by the Senate dated Wednesday, March 24, 1999, the committee today will be examining Bill C-55, respecting advertising services supplied by foreign periodical publishers.
I am confident these hearings will be an instructive experience for the members of the committee, the interested parties and those Canadians following our deliberations on television.
[English]
The first witness today is Minister Copps, who is accompanied by officials from the department. We will hear first from the minister.
Please proceed, Madam Minister.
The Honourable Sheila Copps, P.C., Minister of Heritage Canada: Madam Chairman, I am accompanied by Michael Wernick, who is the Assistant Deputy Minister responsible for cultural industries; Jeff Richstone, who is the lawyer from the Department of Justice responsible for the legal issues surrounding this legislation; and Allan Clarke, Director General for cultural industries, who did the longitudinal and latitudinal work on the legislation, and other options.
[Translation]
Madam Chair, it is a pleasure to appear before this committee which is a very important one as concerns the future of a bill which is very important for our identity.
[English]
As honourable senators, you understand better than anyone that Canada not only has a right to protect its cultural identity, but has a duty to do so. Honourable senators also know that Canada plays by the rules.
In August of last year, Canada complied completely with all aspects of the World Trade Organization ruling on Canadian periodicals. We acted to repeal Tariff Code 9958. We acted to amend the Excise Tax Act. We acted to alter the administration of the postal subsidy, and we lowered the postal rate for foreign magazines.
[Translation]
Bill C-55 respects the letter and the spirit of all our international obligations, our own Canadian legislation, our national and international commitments and, more important still, the commitment we have made to the future of our own country.
[English]
Having complied fully with the WTO ruling, we were left with the reality that over 80 per cent of the magazines on our newsstands are American. We needed to find an effective means to ensure that the Canadian magazine industry continued to exist, not in isolation but in complementarity. That is what this legislation is all about.
I will be crystal clear about this. The government spent an enormous amount of time examining options before we proceeded with Bill C-55. We considered the legal, cultural and trade aspects of the issue. We weighed a host of possibilities, ranging from subsidies to licensing to content restrictions. We thought long and hard about the costs of taking action, and the far greater costs of doing nothing.
What cabinet approved was the most viable solution to meet the concerns of the Canadian magazine industry; to meet the desire of our compatriots in Canada to shore up our culture; and to meet the desire of Canadians to be fair players in the international community and to fulfil our international trade obligations.
This legislation succeeds in emphasizing and re-emphasizing some key points on which we can all agree. Canadians should continue to read about themselves and their stories in their magazines. Canadian writers, photographers, editors, illustrators and designers should be able to work in Canada. Canadian magazines should enjoy level competition in Canada.
Finally, the Canadian markets should be open to the world's largest range of foreign periodicals. If we want to maintain that freedom of choice for Canadian readers, we need Bill C-55. If we want the Canadian magazine industry to maintain healthy competition with foreign periodicals, we need Bill C-55.
Last month, Senator Graham reminded us that the first Canadian magazine was published in 1790 in Nova Scotia. A few days later, Senator Lynch-Staunton informed us that the first bilingual magazine was published in Quebec in 1792.
[Translation]
After modest beginnings, Canadian publishers have managed to create a highly competitive industry distinguished by its vitality and publishing world class magazines. These publications are read by millions of Canadians from coast to coast. These days, over 1,500 periodicals are published in Canada in French, English, Chinese, Italian or Polish, periodicals having to do with various areas and catering to all tastes that offer different perspectives and are the reflection of all of our regions. Some 70 per cent of all Canadians believe that periodicals are an integral part of our culture and that they represent a fair reflection of our reality.
[English]
Our magazines tell us about our challenges, our cultural diversity, our achievements, our institutions, our families, our values, our fashions, our foibles, our fantasies, and our future.
[Translation]
A few facts concerning the industry speak for themselves. Canadians spend over $247 million annually in subscriptions to periodicals. Nineteen of 20 of the most popular periodicals in Canada are Canadian. Canadians buy periodicals for purposes of information, amusement and to feel closer to their fellow Canadians. We are the neighbours of a country that exports the most cultural products in the world and most of those exports cross our border into Canada.
[English]
We welcome those exports. We enjoy those magazines. Nothing -- I repeat, nothing -- in Bill C-55 prevents those American magazines from being enjoyed by Canadians. What Bill C-55 does prevent is unfair competition, discounted competition, for Canadian advertising service revenues. The bottom line is that foreign publishers, who already enjoy massive economies of scale, would be in a position to dump their products in the Canadian market without this legislation, and that is unfair. We do not allow this type of dumping in any other sector. Why should magazines be any different?
If Canadian magazines do not have access to advertising service dollars, we lose high-quality Canadian content. Without a level playing field, Canadian magazines would be crushed. Bill C-55 is about ensuring a healthy space for Canadian voices while welcoming the voices of the world.
As the Prime Minister told The Boston Globe in January, "It is very important to maintain a Canadian identity. We have a good case and we will win it."
During second reading of the bill in the Senate, four key issues were raised by honourable senators: First, compatibility with the Canadian Charter of Rights and Freedoms; second, compliance with international trade agreements; third, speculation on a better instrument for addressing cultural concerns; and, fourth, the current status of Canada-U.S. discussions on magazines.
Let me state in the strongest terms that cabinet gave very serious thought to this bill before introducing it. No challenge is risk-free, but we considered the options, the risks, the challenges, the opportunities and the legalities. The Minister of Justice has advised that Bill C-55 is fully compliant with the Charter. Canadian advertisers will continue to have the same opportunities they have always had, including the right to advertise in U.S. editions of magazines.
Let me say once again how proud I am that our country is the most open country in the world when it comes to reading materials from around the globe. Bill C-55 will not change that. The sale of American magazines in Canada represents the largest export of magazines to a single country in the free world. We welcome the free flow of ideas across national borders. We encourage it. It is enriching and important, and it will continue unabated.
[Translation]
Bill C-55 will allow all Canadians to continue to be able to express themselves freely while having access to a diversity of viewpoints. It dovetails with the spirit of the Charter. What kind of freedom of expression would we have without any Canadian content in our periodicals?
[English]
We respect international trade agreements, as the Minister for International Trade has repeatedly underscored. Bill C-55 regulates international trade in services, not goods. Canada has no obligations with respect to the advertising services provided by periodical publishers -- and "no obligations" means "no grounds for retaliation."
Senator Lynch-Staunton and Senator Kinsella both raised fair-minded concerns about whether the bill is a proper vehicle to address our cultural concerns. Content is the heart and soul of culture. Bill C-55 addresses this issue of content squarely. Unfair competition for Canadian advertising services by foreign publishers undermines access to Canadian content. Access to those revenues allows Canadian publishers to produce the stories that are meaningful to our lives as Canadians and that are central to our national identity.
Let me assure senators that Bill C-55 is not the end of the process. Canada will continue to play a leadership role in a global, rules-based system for culture. We will push hard to place culture at the centre of worldwide economic and social concerns. That is why we launched the International Network of Culture Ministers. That is why studies like the recent SAGIT report on culture are so important with respect to the directions we must take collectively on the globe.
Let me also note that, in considering whether to proceed with this bill, cabinet consulted widely to ensure the option we chose guaranteed freedom of expression. The bottom line is that the principles of Bill C-55 are not negotiable. Period. Canada is not looking for a trade war -- of course not! What Canada is doing is standing up for Canada's interests.
[Translation]
Without legislation ensuring the viability of our cultural industries through which our country expresses itself, we imperil a fragile balance that we have managed, together, to nurture no matter what the political party.
[English]
As Canadians, we are a people with our own identity, our own heritage, our own languages, and most definitely our own culture. Canadian magazines are an integral part of our culture. They contribute to our cultural identity at a time when global cultural diversity is so important.
Honourable senators, I wish to thank you for the time and energy that you have already devoted and will continue to devote to Bill C-55. I want to be very clear: Your contribution to this legislative process is of the utmost importance. My commitment, the Prime Minister's commitment and the government's commitment is solid. All my cards are on the table, face up. I have nothing to hide and I will play no games.
With that, Madam Chairman, I am at the disposal of honourable senators.
Senator Lynch-Staunton: Thank you, minister, for that strong statement. I do not think anyone here will disagree with the intent of your remarks and your feelings about Canadian identity, Canadian culture, and the threats to both that we have to live through day by day. However, to get back to the bill itself, I think what is bothering a lot of us -- as was discussed during the second reading debate in the Senate -- is whether what we have before us is the final bill or whether, as you seemed to suggest in one radio program I heard, the negotiations in Washington could lead to amendments -- amendments of such a nature that the bill would be quite different from what we have before us now.
The question is reduced to this: Are we studying the government's true and final intent as far as the protection of the Canadian magazine industry is concerned, or is it more than probable that in the next few weeks or days we will be proposed amendments by the government which could and will substantially change the nature of the bill?
Ms Copps: First, senator, we believe that this is the best workable solution to the dilemma we are confronted with as a result of the WTO decision. We have studied a range of about 18 options and, over the course of a year or so, we have winnowed those down to this one. This is not the only solution, but we think it is the best solution.
The Americans have suggested on numerous occasions that they might have some other ideas. They have gone so far as to suggest that they would be willing to put forth their ideas in written form. We advised the Americans that any ideas they presented that were improvements to the legislation would be referred back to the legislative process. However, at no time would we ask you to take a position on a bill that would be somehow circumvented by behind-the-scenes discussions and negotiations. That is not our intent.
Senator Lynch-Staunton: That was not my question, either.
As a result of negotiations, can we expect to see amendments to this bill being proposed by the government before we are through with it at the committee stage? It is highly unusual that the parliamentary process would be used in such a way that the House of Commons, the elected body, would pass a bill suspecting that, when the Senate was through with it, it could be drastically different from the bill originally approved. That would be doing things upside down. I want to know to what extent we can expect, if at all, that the Senate will be asked to look at amendments to this bill that might drastically change the purpose of the bill, its intent and its general thrust.
Ms Copps: We have a bill before us that we feel is the best solution.
We have said from the beginning of the process -- and I think I was clear in discussions in Question Period in the House of Commons and in other discussions -- that if the Americans were to introduce suggestions that they felt would be in keeping with the spirit of the bill, we would be prepared to entertain them. Any entertainment of such changes would have to be approved by both the Senate and the House of Commons, of course. We are not looking for a way to do an end run around parliamentary institutions.
Senator Lynch-Staunton: What I hear in your answer, which is not specific but specific enough, is that we can expect significant amendments.
Ms Copps: You can?
Senator Lynch-Staunton: We can expect significant amendments.
Ms Copps: No, that is not what I said.
Senator Lynch-Staunton: That is what I interpreted you to say, because you have not answered directly "yes" or "no" as to whether we will have amendments.
Ms Copps: At the moment, we are in discussions with the Americans. They have put nothing substantive on the table. We continue to discuss. We are not at the stage of having received anything that would substantively change our view that Bill C-55 is the best vehicle in its current form.
Senator Lynch-Staunton: If you are satisfied with this bill, and it is the opinion of Justice and other departments that it meets the WTO test, the Charter test, and may be challenged but not successfully, then what is it that we are negotiating with the Americans and why are we negotiating?
Ms Copps: We are not negotiating anything with the Americans at the moment. We have simply had discussions with the Americans.
Senator Lynch-Staunton: Let me reword my question.
What are we discussing with the Americans that could impact this bill?
Ms Copps: The view of the Americans, as widely expressed by the USTR office and others, was that at the beginning of the process they wanted to see no replacement legislation for the steps we took to strike down the offending portions of the previous legislation that was found in breach by the WTO. We do not share that view. We have had a number of discussions with the Americans to lay out the historic precedents for the cultural instruments that we have used in many areas -- most particularly in Bill C-55 -- and why we think they are important.
The Americans have continued to suggest that our cultural objectives might be achieved through other means, which they have not specified. We are waiting for their specifics. However, any suggestions that they would bring forward by way of proposed ideas would come back to this body and, ultimately, back to the House of Commons if there were any amendments.
Senator Lynch-Staunton: My final question is more of a comment. If you are satisfied with the bill and if the discussions are not getting anywhere, why not just break off the discussions, move this bill along, and tell the Americans that we are serious and we want this bill as it is? I can assure you that you would have our full cooperation in doing so.
Ms Copps: I am looking for a quick and speedy passage of this bill, senator. That is why we are sitting here tonight. I accommodated your changed agenda rather quickly, because I would love to see this bill passed as quickly as possible.
[Translation]
Senator Joyal: Let us put an end to this discussion and be as clear as possible. At the point where we are presented with this bill, there are no discussions in the works with the American representatives you have been in contact with. In other words, there is no timetable for discussions or exchange with the Americans on the bill, isn't that so?
Ms Copps: There are discussions. There were six meetings and the sixth was held last week. The goal of these meetings was to discuss with the Americans what had not been understood before. In Canada, we are giving ourselves several instruments to protect our culture. Bill C-55 is one of those possible instruments. We did an overview of our cultural policies in general and, more specifically, we provided an explanation of the objective Bill C-55 is seeking to attain.
To date, the Americans from the American Foreign Trade Office have insisted that there might be other instruments that would play the same role. We are ready to listen to their suggestions. If there are any good suggestions, we could always come back before the House of Commons and the Senate.
To date, there have been no specific proposals from the Americans nor have there been any negotiations.
Senator Joyal: During the meetings you have had with the American trade representatives, was the possibility ever raised of jointly going with them to the WTO to find out if this bill falls within the parameters of the agreements under which Americans could exercise their right to retaliation?
Ms Copps: At the beginning of the process, when we introduced Bill C-55, our ambassador in Washington pointed out to the Americans that if there were any problems in principle with the bill, we would always be ready to go before the WTO. To date, the Americans have resisted that.
Senator Joyal: They did not express their agreement for something that would have been a joint undertaking of the American and Canadian representatives before the WTO to get a kind of statement as to the admissibility of the bill within your legal position?
Ms Copps: No, not directly. The Americans did not accept. At the very beginning, we suggested that we all go together to the WTO to find out if they thought the policy we wanted to adopt went against the WTO. To date, the Americans have refused this suggestion.
Senator Joyal: In the discussions that took place on the merits of the bill, have the Americans recognized that the Canadian magazine industry is vulnerable and must be supported by government measures which are of such a nature as to ensure that Canadian magazines will have a responsible and respectable share on the Canadian market?
Ms Copps: The fact that they are discussing this is a recognition.
Senator Joyal: In your presentation, you referred to the network of culture ministers, a network where you yourself are active. During your exchanges with the other ministers of culture who are members of this network, has anyone ever raised the matter of the interest that some of the other participants have in what might happen to Bill C-55 in view of the precedent this might create for those ministers themselves?
Ms Copps: Yes.
Senator Joyal: In what way?
Ms Copps: This is the dawn of the 21st century and everyone has the same question, in other words, how will countries be able to reflect their cultural diversities as well as recognize this little village we call the world. The bill we are suggesting is an innovative way of obtaining this cultural recognition while respecting our international obligations. Mr. Jospin, the Prime Minister of France, for one, when he came to Canada, emphasized his own personal interest and that of his government concerning this new policy. The minister from Mexico expressed the same interest. They see this going on and they are interested in it because they are also looking for instruments to ensure the cultural specificity and diversity that will still respect the obligations under our international agreements.
Senator Joyal: In the discussions you have had with your European colleagues, for example, have the problems that some food products are having in Europe -- not to name them -- been used as references?
Ms Copps: The discussions you are mentioning have more to do with international discussions going on under Mr. Marchi. We are basically really talking about cultural instruments and we are not getting involved in trade differences.
Senator Joyal: In what you were saying, you mentioned that magazines were one of the instruments of cultural diversity that you want to support. Could you tell us what other elements would serve to complete the array of policies your department has considered and that are in the same vein?
Ms Copps: Our policy on copyright would be another. We are one of the countries that have decided to sign the Bern and Rome Convention. Another one would be the CRTC's audio recording policy. It is a regulatory policy requiring a quota on records being broadcast on radio.
Another one certainly has to do with the policy on publishing houses. Last week, I was at the Salon du livre de Québec; if publishing houses are flourishing in Canada, we owe it first and foremost to the very talented authors, and then to a specific policy on the guarantees offered by Canadian publishing houses in the matter of distribution. We invest $25 million a year in our publications and this investment is only available to Canadian publishing houses. These policies favour the development of literature in Canada, but they are not necessarily available to authors from the U.S.A.. Another would certainly be the broadcasting policy, both for television and radio. There are others.
Senator Joyal: In your exchanges with the Americans, are all our Canadian policy objectives explained to the Americans or do you have more of what we call in English a piecemeal approach, in order words, do you proceed bit by bit? Within the cultural industries network, isn't your more specific objective to establish very clearly what the Canadian policy's global objectives are, to arrive at a better understanding, on both sides, of what Canada wants to obtain?
Ms Copps: At the ministers' level, the aim of the discussion is global recognition for everything we do and not just in Canada. In Europe, for example, we learn about the instruments they use. Other countries also. These are global instruments.
When we were starting discussions on magazines, it was a more general explanation at the outset because the U.S.A. Foreign Trade Office does not really have all that much interest in copyright or audio recordings. Bill C-55 is an orphan. It is the extension of a policy adopted by many governments, whatever their political colour, and if four out of five parties in the House of Commons support it, it is the result of a rather broad consensus in Canada. It is not the orphan child of some giddy minister.
[English]
Senator Kelleher: Madam Minister, welcome to the Senate. I believe you will agree that it is important to ensure that the proposed legislation fully complies with Canada's international trade treaty obligations before it becomes law. This is particularly important given the fact that this proposed legislation stems from two adverse World Trade Organization rulings.
The minister will recall that in March of 1997 Canada lost three out of four issues before the WTO panel. The government then appealed and we did even better that time: we lost four out of the four issues before the appellate body. Given these results, has the Government of Canada obtained a legal opinion that establishes that Bill C-55 is in full compliance with Canada's international trade treaty obligations, including our obligations under the WTO and NAFTA?
Ms Copps: Yes.
Senator Kelleher: Would the minister please table that legal opinion with this committee, and make available to us lawyers from the Departments of Justice, Foreign Affairs and International Trade to ensure that this committee can subject this issue to full public scrutiny?
Senator Grafstein: On a point of order, this question has come up before a number of committees, including the Standing Senate Committee on Legal and Constitutional Affairs. This is a change in practice.
I am sure that I will be corrected if I am wrong. However, my understanding is that the Senate practice is that if we receive a response from the government that they have obtained an opinion, and we have a different view, it is up to this committee to search out that different view as opposed to asking the minister or officials to table that opinion.
We were instructed that this was the practice when we were in the opposition. This is the current practice. If the minister chooses to answer, that is her concern. However, I am just speaking about the practice that we have heretofore followed.
Senator Lynch-Staunton and Senator Kinsella are here. They are both nodding in agreement. If they disagree, they should say so. If we have a question about compliance, it is up to us to obtain that information from outside experts and come to a determination.
Senator Oliver: There must be someone who can be cross-examined on the opinions that are being put forward.
Senator Grafstein: My understanding is that the minister -- and I do not want to appear to be defending the minister.
Senator Tkachuk: Of course you are defending the minister. What are you talking about?
Senator Grafstein: I do not want to be taken as defending the minister. I am here to suggest to senators opposite that there is a longstanding practice in the Senate that, if in fact the minister comes to the conclusion that she has received an opinion, it is a private matter. It is a solicitor-client issue between her and her advisers. If we quarrel with that, there is nothing to prevent any senator, or this committee itself, from calling alternative evidence to contest that view and coming to a different conclusion.
If that practice is incorrect, that is fine, and we can change practices in other committees. However, that was the practice we always followed, and we followed it when we were in opposition.
Senator Lynch-Staunton: I will not defend the minister, but I will defend the practice of not divulging legal opinions that are given to cabinet or individual ministries. It belongs to them, and it is confidential. They can reveal what the opinion said and the conclusion of it, but what led up to it is privileged and should not be tabled. It would set a bad precedent.
The Chairman: If members of the committee feel they need an expert opinion, we can call those experts here.
Senator Grafstein: I was trying to sustain the practices of the Senate, not defend the minister, which I would be delighted to do on any occasion.
Senator Kelleher: I am concerned, because we have already had a string of legal opinions from the government dealing with the former bill. Those said that the bill was in strict compliance and there were no problems with it. Nevertheless, the WTO struck it down. Then our officials said, "This is terrible. We will appeal it. Obviously, what the WTO said was wrong." So they appealed, and we got knocked down again, this time four out of four.
Naturally, at this point, I am a little skeptical of the validity of the legal opinions which the minister may be getting. That is not the minister's fault, and I am not blaming her for that.
The Chairman: I think members of the committee can have this debate later. I would not want to lose the time that we have to question the minister. The minister is here now; we can debate later and ask for more experts to appear before us.
Senator Kelleher: Fine. Notwithstanding the legal practices or precedents that we seem to follow, could the minister answer my question?
Ms Copps: I did. You asked me if we had a legal opinion, and I said "yes."
Senator Kelleher: I asked you if you would table it.
Ms Copps: I would suggest, Senator Kelleher, that in my position, and if in fact there is ever a future reference at a future date, it would be pretty irresponsible of me to bring out my legal arguments in advance. I would suggest that you invite Peter Grant, who represents the Canadian magazine publishers, or anyone knowledgeable in that area to come and give an opinion.
From my perspective, if in fact this legislation at a future date ends up being reviewed by other bodies, which is possible, I should like to reserve my legal case.
Senator Kelleher: I just really want to know. You can answer it with a simple yes or no. Are you prepared to table the opinion you have received?
Ms Copps: No.
The Chairman: I think the minister has answered the question. Do you have other questions?
Senator Kelleher: I understand. It took a little while.
As you may recall, the Alliance of Manufacturers and Exporters sent you a copy of their letter to the Prime Minister, dated February 3 of this year. They noted in that letter that the Canadian industries targeted by the United States -- steel, plastics, textiles and apparels, pulp, paper, and wood products -- account altogether for more than $45 billion annually in exports to the United States.
Ms Copps: Those are very important to Sault Ste. Marie and Hamilton.
Senator Kelleher: They also noted that thousands of jobs are at stake. Does the minister believe that the so-called cultural exemption under NAFTA will shield Canadian employees and exporters from American retaliation?
Ms Copps: I would not suggest that the forum for solution in this matter is the NAFTA, partly because I think we have made it clear from the beginning of the process that we have complied with the WTO; we have followed the whole process of the WTO, and we would not want to be accused of forum shopping.
Senator Kelleher: I understand that. However, I think the Americans -- correct me if I am wrong, and I am sure you will -- intend to resort to the provisions of NAFTA with respect to retaliation.
Ms Copps: I am not sure of their intentions. I think it is fair to say, senator, that all of us are extremely cognizant of the fact that we do not want to put Canadian jobs at risk. We also aware that Bill C-55 does not cost a single American job. In the context of job losses, it would be fairly hard to seek compensation for jobs that you have not lost.
Senator Kelleher: If, in fact, that occurs, will the Government of Canada compensate Canadian exporters who are targeted by any international trade retaliation arising out of Bill C-55?
Ms Copps: I do not think, at this point, that it would be prudent to speculate on future eventualities of actions that have not been taken by the Americans.
Senator Kelleher: Has this been explored or examined?
Ms Copps: Obviously, in looking at the broad range of options before us, we looked at all of the options, including the best international advice that we had, which was that this legislation is compliant with both the WTO and the NAFTA.
As to actions that the U.S. might take, that is purely speculative.
[Translation]
Senator Poulin: Since the beginning of our meeting, you have shown the courage of your convictions. In our country, if we can pride ourselves today on having a diversified culture, it is because at certain times in history, governments and institutions had to make difficult decisions, key decisions, that allowed the different cultural sectors to continue to progress.
I would still like to recognize, as you did in your opening comments, how complex Bill C-55 is. It is not just a matter of culture, or international trade, but also a matter of jobs in Canada.
As a Franco-Ontarian, I represent the north of Ontario in the Senate and I was raised in an environment where we have always been in a minority situation, just as our country is in a minority situation in North America. We are really used to these kinds of questions, just as the anglophone community in Quebec is; as Senator Lynch-Staunton said before, we share the same experience. In your opening comments, you specifically said, and I quote:
It would be extremely dangerous not to pass C-55.
Could you tell us what the impact on the industry would be if Bill C-55 were not passed?
Ms Copps: Bill C-55 is breaking new ground in terms of key moments in history. Had we decided, following the WTO decision last year, to do nothing and to leave it up to consumers to make a choice based on a more Americanized market than we have, there is no doubt that the voices we developed over the last 30 years, that did not exist when I was young, would have been impacted. For example, the voices of the minority in North America would not be heard.
[English]
This is perhaps one of the things that the Americans do not understand. The history of our country started with two peoples and two languages coming together and saying that we would make a country.
At times that meant that there were accommodations to the minority that were not simply driven by the market-place. We said from the beginning --
[Translation]
We will respect the two official languages, we will have two founding peoples. It is quite easy for Canadians, even those from Alberta and British Columbia, to understand why we need tools to support and protect our culture and language. For Americans, it is really unknown territory.
[English]
When you engage them in a discussion of why we have this legislation, they start from the premise that there is no such thing as a need for cultural protection; there is no such thing as a need for a culture minister, because you are not creating culture. Of course we are not creating culture. At the same time, four out of five parties in the House -- a house that has not always been unanimous -- have supported this concept. That is amazing, in that there is a consensus. In Canada, the minority perspective needs to be protected. We are not building walls in this legislation. In this vast North America, which we share with the world's most powerful geopolitical player, we need a small space on the shelve for our own stories.
[Translation]
Our culture will not be drowned out overnight, but if we have only American products for the next 30 or 40 years, that will certainly be our fate in the long run.
[English]
Senator Poulin: This committee has set up a subcommittee to look at Canada's competitiveness internationally within the technological revolution. What do you think will be the impact of this technological revolution on Bill C-55?
Ms Copps: The instrument itself is a new approach, because it deals with services. At the moment, services do not require us to give national treatment to foreign companies. Interestingly, advertising companies themselves, from whom you will no doubt be hearing, would react very strongly if we offered national treatment to American advertising companies.
Insurance companies in Canada respect the fact that we have different rules for operations in Canada. Banks in Canada have national treatment for our own citizens -- and not for Americans. With services, we have chosen to have a regime for national treatment, which is exclusive to Canadians for very specific reasons. The legislation is innovative. It does capture a choice that we made in the GATT not to sign on national treatment clauses for services. Other countries are watching this legislation to see if it is a treatment they want to utilize in their own services in the future.
Senator Roberge: Madam Minister, you said a few moments ago that this bill would withstand scrutiny. A few elements concern me. Its intent is to deny the American magazine publisher access to the Canadian advertising market. That blockage is clearly disruptive to trade. The other indirect result is to prevent the sale into Canada of U.S. split-run magazines, which has the effect of disturbing the conditions of competition.
Do you agree that both of those items can surely have an effect on the GATT?
Ms Copps: I think the same people who will make the arguments to secure markets for advertising will argue very vehemently that advertising should be excluded from national treatment. We could look at the route that we took under the GATT. The advertisers, who argue that we are somehow limiting their access to express their views on their product market, are the same advertisers who do not want national treatment for the advertising companies to be given to the Americans. They defend vigorously the right of Canadian advertising companies to have exclusive access to Canadian government contracts. That practice is completely within the law and completely acceptable under the GATT.
The same exclusivity of treatment should be available in magazines. If you analyze the raison d'être for targeting services, you must start with an advertising service base in Canada with a maximum of 30 million readers. An American magazine, which has already received its returns from its catchment of 290 million readers, comes to Canada with a second run that is virtually cost-free. You can hardly call that fair competition, or competition on an equal footing.
You may want to analyze the competitive aspects of it. Bill C-55 is our attempt to guarantee an opportunity for Canadian magazines. If our magazines are to be uniquely Canadian, the market is a maximum of 30 million people. This bill tries to give them a chance to continue to have our stories told at the same time as competitors who have a catchment run of 250 to 280 million. We are faced with economies of scale, which are 10 to 1 in favour of the Americans. With this legislation, we are recognizing that we need unique instruments for services in advertising in this country that are completely consistent with our obligations under the GATT. The critical question to ask the advertisers claiming discrimination is whether they are truly seeking advertising openness in this country. They are not.
Senator Grafstein: The minister has got to the heart of this question: fair access to our own market-place. How do we enable Canadians, creative people in the print business, to get fair access to their own market-place?
Perhaps you could assist me with some numbers. You mentioned that American magazines take up 80 per cent of the rack space. That leaves 20 per cent for Canadian magazines -- French, English and a third language.
According to the advertising numbers contained in some of the material, there is approximately $600 million in advertising from all sources in Canada. How much of that is already extracted by the foreign-owned, grandfathered magazines -- Time and Readers Digest? How much of the advertising dollar is left for Canadians?
Ms Copps: Nineteen of the top twenty subscription magazines in Canada are Canadian. The other figure that you want to consider in the overall mix is that 60 per cent of subscriptions to the home are for Canadian magazines. The home subscription rates balance the 80 per cent for off-the-shelf markets. Tax instruments that are made available exclusively to Canadian publishers aid the 60 per cent, who are also aided through a postal subsidy, which again we have had to rework because of the WTO.
Mr. Wernick tells me that the advertising revenue for Time is about 10 per cent.
Mr. Michael Wernick, Asssistant Deputy Minister, Cultural Development, Heritage Canada: In terms of the total share of that $600 million, the only two substantial ones would be Time Canada and Readers Digest, each of which has 5 per cent of that revenue. Readers Digest is technically a Canadian magazine.
Senator Grafstein: So approximately $550 million is available for Canadian magazines of all varieties. What is the total economic revenue of the subscription market?
You can give me those answers later.
Ms Copps: If you give us a list of questions, we will get you the correct figures.
Mr. Wernick: It is $200 million, senator.
Senator Grafstein: Have you examined rates of return for Canadian magazines versus American magazines? Many of us here are business people. We look at the margins in order to see if we can compete fairly, based on margins.
Ms Copps: You will probably get a better answer from people in the magazine industry. They are doing the comparisons and looking at the dollar figures. My understanding from discussions, however, is that if we had wholesale publishing of American magazines with Canadian advertising only, and American content, they would be able to put out a product for about 35 per cent of what it would cost us to put out the same product. That is your price point.
Senator Grafstein: There is an unfair economic factor based on the numbers you gave us of $200 million or so versus $30 million, although it is probably less than that when you subtract the French-speaking aspect.
Ms Copps: They were talking about 35 per cent, because in order to get established you would need primarily to set up an advertising sales force, and there would be costs associated with that.
Senator Grafstein: Based on the numbers out of Canada, have you calculated the spillover benefits to American magazines? What benefit do they get from spillover advertising? For example, an American magazine advertises a General Motors product that is sold both in Canada and the United States and therefore General Motors does not need to invest in a Canadian magazine.
Mr. Allan Clarke, Director, Publishing Policy and Programs, Heritage Canada: About 3 to 5 per cent of circulation of U.S. magazines takes place in Canada. Based on that, we ran some figures ourselves and we think that the top 40 U.S. magazines generate about $148 million in spillover advertising in Canada.
Senator Grafstein: So that is essentially a form of synthetic dumping in Canada because it deprives Canadians of fair access to those national advertising revenues. Is that correct?
Ms Copps: You are entering political territory here.
Senator Grafstein: I do not think it is political. I think it is economic.
Ms Copps: It is political and economic, but in the course of your deliberations you may want to look at the issues around what constitutes fair competition. It is the clear view of cabinet that we need Bill C-55 to ensure fair competition. You are much more skilled in this than I, due to your long background in the advertising business. You may want to ask these questions of Time Canada and others when they appear before the committee.
Senator Grafstein: I was never in the advertising business, but I am knowledgeable in the area.
Minister, is it not fair to say that perhaps your measures do not go far enough? Having looked at the size of the market-place and the slender highway that is left for Canadian publishers and magazine people, has your bill gone far enough? There is spillover. Let me give you an example.
If $125 million or $150 million gets dumped into Canada via the political determination that we cannot get at it, have we been fair to Canadian producers? Americans believe in fair trade and level playing fields. We do not have a level playing field in this aspect of our life. Has your bill gone far enough? Should we look at some of the peripheral issues?
Another issue connected to this has to do with cyberspace. Time magazine hits our screens in Canada. Canadians take advantage of that. I am sure they have many hits. I know that the New York Times is standard fare for me. Going back to technology, do we end up being crowded out by cyberspace in our own market-place as well, if Time magazine amortizes its cost in the United States and throws it up in the air in terms of spillover for Canada for advertizing, and then puts it on cyberspace for minimal dollars, using the same digital line, to get hits of Canadian advertising viewing?
That is back to the technological question raised by Senator Poulin. Does the bill go far enough?
Ms Copps: I think the bill responds very specifically and directly to the WTO. Phase 3 of copyright is something for a white paper. I am happy to be accused of being too conservative, Senator Grafstein.
Senator Tkachuk: Minister, I am trying to determine whether this bill is about culture or money. My questions will be political. You have been quoted as saying that we must insist upon our own cultural space, where we can express our ideas, our values and identity, with that being the major reason for this bill.
How does it help Canadian culture to prevent Sports Illustrated from publishing in Canada?
Ms Copps: Senator, my motivation for this legislation is not to line the pockets of any wealthy business person, and my motivation is not to cater to one or two large industries in Canada. While I was growing up in this country, I could not read Canadian stories, and I do not want my daughter to be in that situation. When I was growing up in the 1960s, I read Tom Alderman in Weekend magazine, and that was about the extent of what we had to read about ourselves.
I believe that this legislation has very broad support precisely because this is not about simply one industry. This is it not only about the magazine industry. Fifty-five to sixty national cultural organizations have supported this legislation; many of those organizations do not stand to make a penny from magazine sales. They support this legislation because they see it as part of our affirmation, as a country, that we have the right to have our own cultural spaces and voices.
Senator Tkachuk: You said that you did not read any Canadian magazines as you grew up, but I think you are quite the Canadian. I do not think you have become an American or a European or that you have lost your Canadian culture.
I return to my question. How does this bill help? You insist that we are doing this so that we can read about our own culture. I repeat: How does it help Canadian culture, if we prevent Sports Illustrated from publishing in Canada?
Ms Copps: I grew up about 60 kilometres from the U.S. border, at the beginning of the Irv Weinstein era. Today, Marshall McLuhan's predictions are coming true. The world is very different for my daughter than it was for me. The first time I ever got on a plane I was 16 years old and I was going to attend my uncle's funeral. I was 20 the second time I got on a plane, and it was to visit another country. A big trip for my family was either to go to Toronto or to take a trip to Montreal by car.
Senator Tkachuk: For me, it is still a big trip to go to Toronto!
Ms Copps: We are living in a time now, in my daughter's generation, where our children are subjected to cultural references from around the world. The culture reference points are that much larger. The challenge for us, as a country, is to ensure that our cultural reference points remain, while at the same time being open to other cultures.
You can pick up the latest swimsuit edition of Sports Illustrated in Prince Albert. No one is stopping the swimsuit edition from being enjoyed by one and all. However, at the same time, I should like to be able to pick up the United Church Observer, and so on.
Senator Tkachuk: These magazines will not be hurt, though. If you go through the whole list of these issues, there may be a few that are worried about the competition. However, London Magazine, Nature Canada, Swedish Press, Toronto Life, -- all the magazines that belong to the association of scholarly, political and special interests -- make most of their money by subscription. How will Bill C-55 help them? I am asking that, because I think it is an important question.
Ms Copps: I was told by an eminent television reporter, from a station that we will not mention, that, if Canadian magazines are good, people will buy them. I told him he was absolutely right. I said, "You are a fantastic reporter. However, if no one is buying advertising tomorrow, who will pay your salary?"
Let us talk about Canadian Legion, a magazine that we all know and love, and in many cases subscribe to. The Canadian magazines' raison d'être, in terms of capacity to sell subscriptions, is based on the fact that they have a certain base of subscribers. If you belong to a Canadian Legion, you automatically get a Canadian Legion subscription. If tomorrow they lost a percentage of their 400,000 subscribers -- not because the quality of their publication was any lower, but because they had a different system for payment as a result of a movement by the WTO -- and their subscription level dropped to 200,000, then the people who buy the ads that keep the magazine going would not pay as high a price. That is not a reflection on the quality of the publication. Rather, it is a reflection on the fact that it is the advertising dollars that keep the magazine alive.
As any magazine publisher will tell you, this legislation is supported unanimously by the executives of every single magazine organization in Canada, from the smallest to the largest. If it is simply a means of assistance for two companies, which has been suggested in some media reports, then why is it that everybody in the magazine industry is lining up in support of this piece of legislation? It is because they understand that it is the advertising dollars that support the content, not simply the subscription.
Senator Tkachuk: Let us go to the Canadian Magazine Publishers Association, which has about 270 members. Perhaps either your officials or you would know the answer to the following question. If you take into account circulation and dollars, how much of that group does Telemedia and Maclean Hunter control? I do not want numbers, because there are a lot of small special-interest magazines, but I should like to know the answer in terms of circulation and dollars.
Ms Copps: They are the big players. You must also underscore the fact that the executive of the Canadian Magazine Publishers Association, representing the broad spectrum, unanimously endorse this position. It is not two players, it is the collective wisdom of magazine producers.
Senator Tkachuk: My guess would be that they are the big players, both in circulation and in dollars, in that association.
Ms Copps: Yes.
Senator Tkachuk: Magazines such as Canadian Living and Maclean's are all Eastern Canadian magazines. They represent a point of view that is probably quite foreign to me.
I still do not know how Canadian culture would be hurt -- because you have not answered the question -- if we had Sports Illustrated in Canada. We do not have a national computer magazine in Canada. How would Canadian culture be hurt by an American presence, either by a co-op or by a magazine? I do not believe that we will achieve the goal of preserving Canadian culture by this particular bill.
I want you to tell me how preventing these kinds of magazines will help Canadian culture. I do not think you have told me that yet.
Ms Copps: I have tried to tell you that the survival of Canadian magazines depends on advertising dollars.
Senator Tkachuk: I understand that.
Ms Copps: Sports Illustrated is in Canada now, and it is widely read in Canada now, no holds barred. At the moment, however, Sports Illustrated cannot come into Canada and skim off the advertising dollars that are strictly targeted to the Canadian market because those advertising dollars are the lifeblood of the content of Canadian magazines.
I think Senator Grafstein also pointed out that, even in the current situation, about $150 million of residual advertising dollars are spent now in Canadian magazine sales from magazines that are from the United States, when, for instance, Nike or GM, or someone else, buys an ad and they have a 3 to 5 per cent readership in Canada. The point is that if you do not have advertising dollars in the Canadian market, you will not have Canadian magazines.
Senator Tkachuk: Canadian businesses, then, are prevented from using a demographically acceptable sports magazine to advertise their products. They cannot advertise in an American magazine, because it is too expensive.
Ms Copps: They can advertise in Sports Illustrated today, and they can continue to advertise. There is nothing in this legislation that stops anyone from doing what they are doing today.
Senator Tkachuk: Yes, but they must pay for the circulation all over North America. Is that not what they must do?
Ms Copps: They can advertize in a North American edition.
Senator Tkachuk: Let us say that a small Canadian company manufacturing sports products in Canada -- for example, hockey equipment -- wants to advertise in a sports magazine.
Ms Copps: That may not be a good example, because there are more hockey teams in the United States than there are in Canada.
Senator Tkachuk: They are prevented from doing that, though, are they not?
Ms Copps: The legislation prevents the skimming of Canadian advertising dollars, yes.
Senator Perrault: Honourable senators, it may come as a surprise to some of you, but I am generally supportive of this bill. However, as I look at this proposal, it is a bit like the Dutch boy putting his finger in the little hole in the dike and saying that he has stopped the North Sea. There is an angry storm out there, an incredible storm.
About two weeks ago, they found a technique to put high quality CDs on-line. That will revolutionize the merchandising of recordings, whether it is Joe's on Main Street or some big company in downtown Toronto. Amazon.com is the largest electronic bookstore in the world now. Hundreds of Canadian orders go down every day to Amazon in the U.S. We are faced with a jurisdictional problem of massive dimensions. We are unable to regulate the content. Will it be possible to restrict advertising percentages on the net? No one has found a way to control this thing we have created.
I think the bill is good. However, when I see that we cannot even control undesirable pornographic material on the net, where are we headed in the future? This is a challenge of awesome proportions to Canadian magazines. I do not know what we can do about it.
Yesterday, in preparation for this meeting, I did some surfing. I found a shop in Ireland. If you were born in County Mayo, you can send for your clan ring. Then I went to a place in Scotland where they are selling kilts by the dozen to Canada. These people are not advertising in magazines. They are taking advantage of the most effective communication device ever evolved by mankind.
Senator Oliver: It is called e-commerce.
Senator Perrault: There are professional services. There are food services. You can bring in ham from the United States.
In terms of what is out there, what will we do about a challenge that is much tougher for the Canadian merchant than anything he has ever faced before?
Ms Copps: In the larger context, the struggle to find international solutions is shared by many countries. Canada is not alone. I think the voices for diversity are being heard, and they are being heard around the world. What we need to do is to bring together some of the best minds and come up with solutions, because they are there.
Senator Perrault: Are people in your department actively involved in evolving some approaches to this new challenge that exists?
Ms Copps: Yes.
Senator Perrault: Some Canadian merchants will not be able to stand up to the kind of publicity that you can get on the net for cheap dollars as well.
Ms Copps: We are looking into it. One of the things you may want to look at in the longer term is the report of the SAGIT on culture to the Minister for International Trade, which deals with how to meet these global challenges. They are not specifically related to the net but are more general in a global world. They are key questions, which is why people are watching this bill. The bill in and of itself is not a big economic concern.
The status of a country like Canada in trying to protect its cultural space in the 21st century interests a lot of countries. They are looking to see if we are capable of achieving it.
Senator Perrault: The Internet has to be the biggest challenge we have ever faced.
The Chairman: Senator Perrault, do you have questions about Bill C-55.
Senator Perrault: It all relates to Bill C-55, because this is a brave start at trying to remedy the challenges before us. Although it only goes a minuscule way, I intend to support it.
Senator Spivak: Madam Minister, regarding those discussions with the Americans, newspaper reports have said that the key issue is Canadian content. Can you reveal anything about those discussions? They also talked about a compromise. Is there some level we are looking at? Why is that acceptable?
My friend Senator Kelleher has pointed out to me that in the NAFTA the only retaliation the Americans can take is the equivalent commercial effect. Does their threat concerning billions of dollars, et cetera, mean that they can take illegal measures with impunity?
We met with the Canadian publishers. In your statement you say that not a single job would be lost in the American publishing industry. Perhaps this is a political question, but is it true that this is basically because of Time Warner, and the reason for Time Warner's lobbying on this is that it would set an example for other countries? Of course, it is not only that. The fact is that they do not want just 80 per cent of the market; they want 100 per cent -- and not just in the magazine publishing field.
Ms Copps: Will you be hearing from Time Warner or Time Inc., Madam Chairman?
The Chairman: We have Time Canada but not Time Warner.
Ms Copps: My understanding is that the original approach to fight the magazine issue came from the U.S. trade representative to the magazines, and not vice versa.
Senator Spivak: That confirms even more the fact that they want this to be an example to the rest of the world.
Ms Copps: I am not suggesting it was any particular company.
As to the measures, there are lawyers around this table who can reflect on those measures better than I can; I am not a lawyer; but the information we have certainly indicates that the cultural exemption under the FTA, if ever asserted, would be for equivalent commercial effect. Therefore, the alleged list that is being discussed in the papers is not within the legal framework of the international obligations of the Americans. We fully expect that they will respect their international obligations.
Senator Spivak: Do you think this is sabre rattling? Is it your view that they do not really mean it when they talk about billions of dollars, or whatever they are talking about?
Ms Copps: Obviously, they have made a decision at the trade level to highlight certain industries that are targeted for political effect. Look, for example, at the steel industry, which is a very integrated industry. There is no particular reason that the steel industry should be picked, except for the fact that I happen to have more steel mills in my riding than anywhere else in Canada.
In the discussions that I had with the U.S. ambassador some months ago, I said, "We in Canada are only attempting to ensure that we have some spaces for Canadian voices. It is the content in a sense, isn't it?" He expressed support for that perspective. He said that that would be something he would be willing to explore with his colleagues. To date, nothing has been put on the table in terms of a recognition by the U.S. regarding the need for specific strategies on content. At the moment, it has been primarily discussions.
Senator Kinsella: Minister, are there negotiations or discussions going on this week between our officials and the Americans?
Ms Copps: No.
Senator Kinsella: Are there any planned for the week after?
Ms Copps: Probably next week. They had a meeting last week.
Senator Kinsella: Is it correct that your deputy minister is part of our official team?
Ms Copps: No. It is at the director general level.
Senator Kinsella: Do you anticipate a meeting at your level, at the political level, with the Americans in the next little while?
Ms Copps: I do not have a political counterpart.
Senator Kinsella: Minister, my concern is that many of us would want to see our Canadian minister fully armed in negotiations with our friends to the south. Somewhat along the lines of Senator Lynch-Staunton's question at the beginning, in your judgment, would you, as our minister, have more armour in prosecuting this matter with our American friends, if this bill were to be not only passed and proclaimed, but implemented?
Ms Copps: I am not a lawyer. I do not want to prosecute anybody.
Senator Kinsella: Let me change the term.
Ms Copps: I understand what you are saying.
Senator Kinsella: I raised this point at second reading, as you mentioned in your opening remarks, but some of us feel that there may be some questions of a technical nature with the bill. Many of us are not of the view that we would want to undermine you as the minister and weaken your bargaining position. Therefore, any question, in terms of amending this bill on a technical level, personally gives me some hesitation. That is why I should like you to advise us on whether you feel that you would be in a stronger position, if you had the legislation through the Senate and with Royal Assent, rather than not.
Ms Copps: The best solution to achieve our objectives is Bill C-55. Until someone presents an option to show us otherwise, I believe that Bill C-55 should be passed as quickly as possible.
Senator Kinsella: If we had the bill out of the Senate by Thursday, April 22 --
The Chairman: We have to hear witnesses. This has been planned.
Senator Kinsella: The chair has thrown me off my line of questioning.
Minister, I know you also have responsibilities for human rights and I appreciate that you focused on that concern, because Senator Beaudoin and I do have a technical question about Charter compliance. We also recognize that the right of expression is, as all rights are, subject to limitations, and indeed, we passed a resolution in the Senate expressing our horror at the publication that we had found so offensive a little while back, which clearly makes the point that freedom of expression is subject to limitation.
The question that I raise with you focuses on clause 3(1). Because the Tobacco Products Control Act was found by the Supreme Court of Canada to be unconstitutional, some of us are wondering whether or not this bill might be found unconstitutional. Would you speak to that? How is this different, in your view, so that it will be a reasonable limitation?
Ms Copps: I can only refer to the legal opinions that we have received about this bill. I did not seek, nor was I involved with, any of the legal opinions on the overturning of the Tobacco Products Control Act; so I cannot really make a comparison. I can say that our lawyers feel confident that this is consistent with the Charter and consistent with our international obligations.
[Translation]
Senator Beaudoin: I must say at the outset that I am very much in favour of legislation about cultural diversity, that promote Canadian identity. There is no doubt that we can regulate freedom of expression and defend our culture -- the Supreme Court has always been clear on this.
I have a problem when we a create a prohibition, what you call in English an "absolute ban on publicity." Regulating publicity is absolutely valid, but banning publicity altogether through legislation is a debatable step.
We mentioned the absolute ban on publicity that was established in the case of cigarettes. The Supreme Court held that advertising could be regulated, but not banned altogether. We may have an opportunity to question some legal experts on this in the days ahead.
We do have the word of the Minister of Justice that your Bill C-55 is not in violation of Section 2 of the Charter of Rights and Freedoms. However, I would like to know a little bit more about this for my own peace of mind.
Ms Copps: The interesting thing about the whole process that resulted in Bill C-55 is that we considered a number of options. We cannot claim that any of the options would have given us an absolute guarantee. As a result of the WTO decision, we decided to find a new way of ensuring that there would be a follow-up in Canadian content and services not covered by GATT. The reason why we chose this vehicle is that advertising plays a very important role in content.
However, there could be other ways of achieving our objective than an absolute ban on advertising. Of all the options open to us, the ban was the most appropriate one for Canada, based on the Charter, the WTO and NAFTA.
Senator Beaudoin: Your legal experts think the ban was not absolute?
Ms Copps: Nothing in life is absolute!
Senator Beaudoin: Some legislation bans certain things absolutely.
Ms Copps: We could not say that we were going to try to deal with these issues through the Charter. It is true the Charter exists. The WTO and NAFTA also exist. If we do something to cover our concerns under the Charter, there may be other implications as regards NAFTA or the WTO. So we had to try to find a balanced approach.
[English]
Are there any other questions that you wish to address to the officials?
Senator Tkachuk: I want to clarify a couple of questions to which I did not receive answers.
The Chairman: We will say good-bye to the minister first.
Thank you very much, Madam Minister, for appearing today.
Ms Copps: Thank you.
Senator Tkachuk: The concern I stated earlier is, in a roundabout way, similar to Senator Perrault's concerns. I refer to the ability of Canadian business to advertise in a demographic way. That is why I kept referring to Sports Illustrated. It is a sports magazine.
I understand what you mean when you say you allow a Canadian company that may manufacture skates or hockey sticks, for example, to advertise in Sports Illustrated, but they must advertise in the North American edition, which is prohibitive, if all they are trying to reach is the Canadian market.
I will ask a question that I think is very important for small business people, bearing in mind that there is no national computer magazine in Canada, but there is one in the United States. If you were to develop a software package in Winnipeg, Saskatoon or Vancouver, for instance, the reality of business is that you would have to advertise in that computer American magazine. It is all very well to say that Canadians are allowed to advertise in that computer magazine, but the fact is that people from that area are generally not big enough to afford to advertise in the North American market. They want to advertise to the Canadian market. In other words, there are all these specialty magazines that we do not have in Canada but actually need in Canada.
If a fellow is manufacturing skates in Shawinigan, can he advertise in Sports Illustrated? Does he not have to pay the North American rate? Say "yes" or "no."
Mr. Wernick: Nothing in the bill tells a Canadian publisher or an American publisher what kind of magazine to publish and what the format, the title or the content should be. If a Canadian magazine publisher decides it can make a go of a hockey magazine, or any other magazine, the bill has absolutely no implications for them and has no implications whatsoever on what choices American publishers have about what kinds of magazines they will offer readers or advertisers.
The answer to your question is that a Canadian advertiser can choose among any one of the Canadian media buying-opportunities and can advertise in any U.S. or foreign edition of any magazine.
The bill prevents the creation of a new, special type of magazine that can exist only in this continent and that would be merely the recycling of U.S.-based or foreign-based content with ads targeted to the Canadian market.
Senator Tkachuk: Let us go back to the example of the computer magazine. What does that have to do with Canadian culture? Who cares if an American split-run magazine allows a Canadian businessman a cheap rate? They are not competing against anyone in Canada. Surely they must add some Canadian stories and some Canadian interest to attract Canadian buyers. People do not buy a magazine simply because it exists. Newsweek only sells 50,000 copies in Canada; Time sells a lot more; but Canadians buy Time because it is a better magazine, and they buy Maclean's because it is Canadian. It has nothing to do with anything. It has to do with people wanting to buy a particular magazine.
Mr. Wernick: Nothing in the legislation impinges on the rights of any Canadian to subscribe to any magazine in the world they choose or to buy a magazine at a newsstand down the street that they choose.
Senator Tkachuk: A computer businessman would have to buy advertising in the North American market. A person in the sports market who wished to advertise in a sports magazine would have to buy into Sports Illustrated in the North American market, because the two Canadian publishers that control the market in Canada, Telemedia and Maclean Hunter, do not have those two magazines -- the computer magazine or Sports Illustrated. Frankly, unless they want to start one from scratch, they could buy a little one to get started.
The point is that we have a concentration problem in this country. We do not have those magazines, because those companies are the only two big enough to start one; is that not correct?
Mr. Wernick: No. There are over 1,000 magazine publishing companies in this country. Most are small and medium-sized enterprises. You can draw the concentration number where you want -- four, eight or twelve, but they certainly do not control the market.
Senator Tkachuk: The small magazines will not be affected by this legislation, because, even if we allowed split runs, few would be hurt by it.
I will ask you about The Hockey News, as an example. Sixty-seven per cent of its subscriptions are in the United States. It is a major Canadian magazine, but it sells mostly in America, not in Canada. How will this hurt that magazine?
Mr. Wernick: There is an advertising market in this country for magazines. It competes with television, with billboards and with other forms of media placement. It also completes against the ability of Canadian buyers to place ads in those U.S. editions. You are making an assumption that it is prohibitive to advertise in those foreign editions, which may or may not be true. It depends on the magazines, how they are targeted and the rate structure.
Senator Tkachuk: It is not cost per reader, is it?
Mr. Wernick: Some of them are very small and very targeted. The rate structures vary.
I am glad you raised the issue of the economics of the bill. The problem addressed by this bill -- and the minister put it far better than I can -- is that most of the revenues that flow to magazines, and allow for the salaries of the writers, photographers and illustrators, are the advertising service revenues. That is what keeps magazines going. The entry of editions that recycle foreign content with ads targeted to the Canadian market would have a displacement effect on the Canadian advertising market.
No one has contested that analysis since the measure was announced last July. No one has seriously contested that there would be a displacement of the advertising services market in Canada. Some of it would be one-to-one displacement of ads of the kind you have described. An ad would move from a Canadian title to one of these new entrant split-run editions. However, the other effect would be the structural impact on the advertising market. The entire rate structure would be affected. The entire relationship of costs and rate structures would be displaced by these entries.
The economics, which can only exist on this continent, of taking content that is already paid for in the bigger market, hiring a few ad salespersons and targeting the ad purchasers in this country is extremely profitable. No one has contested that analysis either. The economics of a split-run edition are extremely attractive and favourable to those magazines, but are prejudicial to the long-term health of Canadian magazines.
That analysis has not been contested by anyone over the last little while. That is the basic problem that the bill attempts to address.
Some people in this country would say, "Tough. Let the chips fall where they may and let the market sort out the winners." That is one point of view. Others have a different view and a different way of addressing the problem. That is fine, too. As the minister said, many options were worked on before this one was chosen.
This legislation is the straightest line from A to B. There is a structural issue in this advertising services market, and this bill addresses it directly. That is the basic design of the legislation. It is a simple piece of legislation, but we would be happy to assist you in any way at the clause-by-clause stage. It is essentially a prohibition of a particular activity. There are many definitions in front of it and some enforcement language after it. That is the bill.
Senator Tkachuk: Oftentimes, to serve one end, a bill will hurt other ends, which will cause other problems. That is what I was getting at. I have one more question and then I will be done.
Small business and the competitive edge are of concern to me. I will use an example from an article I read. Let us say that there is a book publisher in Canada who wants to access the U.S. market and advertises in The New Yorker; The New Yorker is sold in Canada as well as in North America, but it is the Canadian advertiser who is seeking this access. Is there a problem with that?
Mr. Wernick: No, the prohibition is on advertising that is targeted primarily to the Canadian consumer market.
Senator Tkachuk: Therefore, if the hockey manufacturer used Sports Illustrated to attract the Canadian consumer, that would be bad?
Mr. Wernick: No, there is no restriction on advertising in the foreign edition of the magazine. The foreign editions of the magazines know that they have readers here and it is already factored into their rate card in many cases. That is to say that 3, 4, 5 per cent of their readership may be north of the 49th parallel.
Senator Tkachuk: There is a different opinion on that issue in some of the articles, so I will pursue that further.
Senator Lynch-Staunton: Mr. Richstone, I will address these questions to you because I wish to have some clarification on the aspects of the bills that touch on violations, sanctions, penalties and investigations.
First of all, am I right in saying that the one in violation of the bill is the foreign publisher? Or is the advertiser or the agent also in violation of the bill as presently written?
Mr. Jeff Richstone, Legal Adviser, Heritage Canada: The way the bill is constructed, clause 3 sets out the prohibition, and the there are a number of subclauses within clause 3 that deem certain people to be foreign publishers. Therefore, people acting on behalf of the foreign publisher or people acting at arm's length, or not at arm's length, with the foreign publisher are also covered by those clauses.
Senator Lynch-Staunton: I wish to get beyond the legalese and put it in layman's language. Who can be in violation of this bill -- foreign publishers and anybody else?
Mr. Richstone: No, senator, according to the bill, the proscription is on the foreign publisher, not the advertiser or the advertising agency. It is the foreign publisher and anyone related to the foreign publisher as the foreign publisher's agent.
Senator Lynch-Staunton: You said the foreign publisher's agent?
Mr. Richstone: Yes. If you look at clause 3(2), a foreign publisher is deemed to be someone within Canada who, under licence from the foreign publisher, publishes the periodical or a substantial part of the periodical. I should correct myself; it is not an agent, it is a licensee.
Senator Lynch-Staunton: The distributor?
Mr. Richstone: No, not the distributor; it is the publisher. The foreign publisher proscribed by the bill is not the distributor; it is not the advertiser.
Senator Lynch-Staunton: Let us say a split-run magazine is being published on premises other than those owned by it; is that deemed to be an agent?
Mr. Richstone: The bill deals with advertising services. You are suggesting that if the person acting on behalf of the advertiser is situated in Canada --
Senator Lynch-Staunton: I want to identify those who come under this law, in case it is violated, and can be prosecuted and accused of a criminal offence.
Mr. Richstone: Senator, it is the publisher and the one extension of the publisher.
Senator Lynch-Staunton: Time Warner publishes a magazine and they violate the law. Who else other than Time Warner, affiliated with Time Warner, can also be in contravention of this law?
Mr. Richstone: As I said, in the bill there are two subclauses that deem people who are related to the foreign publisher, who act in the place of the foreign publisher, to be the foreign publisher.
Senator Lynch-Staunton: Can you give me an example?
Mr. Richstone: It is a hypothetical example. You said Time Warner. You mentioned a foreign publisher.
If Time Warner should give a licence to someone in Canada, hire an agent, someone in Canada, to publish the periodical or a substantial part of the periodical, clause 3(2) deems the person in Canada who publishes that periodical to be the foreign publisher.
Therefore, anyone who acts in the place of the foreign publisher, acting as a foreign publisher, under clause 3, subclauses (2) and (3), will be deemed to be a foreign publisher. However, that only deals with the publishing aspect. Anything else dealing with the periodical or periodical service, such as the advertisers you mentioned, or the distributors, does not come under the prohibition.
Senator Lynch-Staunton: What about the printer?
Mr. Richstone: The printer does not come under the prohibition.
Senator Lynch-Staunton: What would a publisher's agent do in Canada? What is his role?
Senator Perrault: Is it being done now by anyone?
Mr. Clarke: As a layperson looking at the bill, there are three places where someone would be liable for the infringement: the publisher, someone who is controlled by the publisher, and someone who is licensed by the publisher.
Foreign publishers are liable if they sell advertising revenues. People licensed by the foreign publisher are liable if they sell advertising revenues, and people who operate under the control of a foreign publisher would be liable if they sell advertising revenues. Those are the three instances where there would be any liability for any infringement as part of the bill.
Senator Lynch-Staunton: Are you able to provide us with concrete examples of who those entities are today?
Mr. Clarke: As far as we know, there is no one operating illegally in Canada.
Senator Lynch-Staunton: Can you identify those who are acting legally who could be identified as those three entities? Can you name me a foreign publisher, his agent and licensee?
Mr. Clarke: It is all hypothetical, because no one is operating in Canada contrary to Canadian law at present.
Senator Lynch-Staunton: Have you invented these terms? If there is nobody who exists who can be identified, where did these terms come from?
Mr. Clarke: The issue is that we are concerned that this could exist.
Senator Lynch-Staunton: However, you have no experience, background or knowledge of this existing at the moment.
Mr. Clarke: They have existed in the past.
Mr. Wernick: There are foreign publishing companies; they exist, they are real, they presumably would like to have access to the Canadian advertising services market.
The short answer is that it is the publisher, the seller and the transaction that are liable -- the seller of the advertising services, the publisher. The publisher is selling the space or the placement.
Senator Lynch-Staunton: I did not know publishers sold advertising space. I thought advertisers and advertisers' agents sold advertising.
Mr. Wernick: No. If you operate those magazines, you are selling the advertising.
Senator Lynch-Staunton: I understand what you are saying. It is the one who makes the space available. I was thinking of the one on the other side, who fills up that space.
Mr. Wernick: The second and third examples, and this may be the confusion, are included in the proposed legislation as anti-avoidance measures. You would not want someone to be able to avoid the proposed legislation by hiring some Toronto lawyer to be the publisher. Therefore, someone who is operating as an agent of the foreign publisher or is under the control of that foreign publisher is deemed to be the publisher.
Senator Lynch-Staunton: However, at the moment, there are no concrete examples that you can point to; is that correct?
Mr. Wernick: Any publishing company in the world is a potential entrant into this market. We have historical examples of foreign publishers who have come into the Canadian market and some of them have been grandfathered through this legislation.
Senator Lynch-Staunton: I hope to get further on my next question.
I understand that a violation of this proposed legislation is considered a criminal offence.
Mr. Richstone: There are a number of provisions in the proposed legislation. I would not call them criminal offences; they are regulatory provisions using certain aspects of regulatory mechanisms set out in the Criminal Code as an enforcement mechanism. These are not pure criminal offences; they are regulatory.
We use the criminal process in order to make an effective enforcement mechanism on the criminal side. There are also civil provisions that deal with this in terms of a civil process, such as injunctive relief.
Senator Lynch-Staunton: The warrant clause is under the Criminal Code, but that is the only aspect under the Criminal Code that touches on this bill?
Mr. Richstone: There are other aspects of the criminal law process which touch on the bill, such as clause 10. You mentioned the warrant; that is clause 8.
Senator Lynch-Staunton: What are you saying about clause 10?
Mr. Richstone: The provisions in clauses 10 through 16 deal with offences and punishment, and thus aspects of the Criminal Code are incorporated in this bill as a regulatory offence. Many Acts of Parliament use criminal law or quasi-criminal law provisions in respect of their enforcement, and they are quite properly regulatory offences rather than criminal offences.
I can go through this part of the bill clause by clause, if you like.
Senator Lynch-Staunton: No, that is fine. If this bill ever becomes law, will someone found guilty of violating it have a criminal record?
Mr. Richstone: He would be convicted of a regulatory offence.
Senator Lynch-Staunton: Answer "yes" or "no." Would you have a record if you violated all or part of this bill?
Mr. Richstone: As far as I am concerned, and this is my opinion, I would have to check the Criminal Records Act.
Senator Lynch-Staunton: Surely you must have looked into that. It is not exactly a major criminal offence, but we are left with the idea that it might be considered a criminal offence and might ruin someone's reputation.
Mr. Richstone: It is a regulatory offence and, as far as I am aware, does not constitute a criminal offence or warrant a criminal record.
Senator Lynch-Staunton: Could you provide clarification of that?
Mr. Richstone: Yes, I can provide clarification.
Mr. Wernick: The bill provides for a ladder of escalation. We are not leaping immediately to criminal conviction for a first offence of a minor violation of the bill. There is an escalation of an initial investigation. There is an opportunity to get off with a warning. There are possibilities of injunctive relief before you get to criminal penalties. There is a first offence, a later offence, and that sort of thing.
If it would be helpful to senators, we could provide you with a flow chart to show you how the enforcement of the bill would be applied. We certainly do not leap to the most serious criminal penalties as first line of enforcement of the statute. However, they are criminal penalties in the sense that, if you violate any of the business framework laws in this country, then certainly you will have a record showing that you broke the law. That would apply to the Competition Act or the Bank Act and any number of market-place laws.
Senator Lynch-Staunton: Are those criminal offences?
Mr. Wernick: They use criminal procedures and criminal enforcement.
Senator Lynch-Staunton: There seems to be some doubt as to whether it is or not.
Mr. Wernick: We will take the question under advisement and try to clarify the point.
Senator Lynch-Staunton: The main culprit in this will be the foreign publisher, who, in most cases, will be residing outside this country. What is the procedure other than serving him with notice saying he has violated the law? What else can the government do either to prosecute or to impose the penalties?
Mr. Wernick: They are liable with respect to their activity in Canada, in the Canadian market-place, and it would depend on whether they had assets and activities in Canada as to what kind of enforcement would be open to us.
Senator Lynch-Staunton: Would this allow for the seizure of Canadian assets of a foreign company?
Mr. Wernick: That would happen only in extreme cases.
Senator Lynch-Staunton: That is not the point. the fact is that this would allow it, extreme case or not. That is what I was asking.
Mr. Wernick: It would be the ultimate outcome of a court process, several steps into the process, but we are only regulating activity in Canada, in the Canadian market-place. There is nothing extraterritorial about this legislation. It regulates the Canadian advertising services market.
Senator Lynch-Staunton: The minister has made the speech. We understand the purpose of the bill. I am trying to get into the penalties and sanctions and the results of all that. First, we will find out whether it is a criminal offence, and, second, whether a foreign company's Canadian assets can be seized. This is allowed. It is sort of a Helms-Burton in reverse.
Mr. Wernick: Helms-Burton is an attempt by the American Congress to regulate a buyer and seller, both of whom are outside the United States of America. This regulates market activity in Canada.
Senator Lynch-Staunton: The buyer and seller in this case can be in Canada, if the "foreign publisher" definition you are giving can be someone in Canada. It can be in the States too.
Mr. Wernick: It is not Helms-Burton.
Senator Lynch-Staunton: It may not be Helms-Burton, but it smacks of it.
Mr. Wernick: No, it does not smack of it. There must be a Canadian party to the commercial transaction. The reason Helms-Burton has people so upset is that it deals with market-place activity between a buyer who is not American and a seller who is not American.
Senator Lynch-Staunton: I hope you will come back. I know it is getting late. You can have a Canadian owner of periodicals in the States who wishes to engage in split-run magazines; it is not just Americans. You can have Canadian publishers in the States also. You can have other publishers of other nationalities. It is all very well to say this only zeroes in on Americans, but it can also zero in on Canadians.
Mr. Wernick: It zeroes in on foreign publishers. It does not talk about what nationality the foreign publisher would be.
Senator Lynch-Staunton: There is an ownership clause.
Mr. Wernick: Everything that is not Canadian is foreign, and the Canadian ownership is the one that is in the legislation.
Senator Lynch-Staunton: It may be the lateness of the day, Madam Chairman, and I apologize if I have been aggressive, but I wish we had more precise answers to the questions. Perhaps we can leave the questions with the witnesses and they can come back to us or write to us.
Senator Grafstein: Clause 10 says that any person who contravenes section 3 is a guilty of an offence liable on summary conviction. There are two levels of offences here. They are criminal, or one would call them quasi-criminal, because they are more of a civil nature than a criminal nature, but at the end of the day the offence is, on its face, a quasi-criminal offence. You can call it a regulatory offence, but it is quasi-criminal.
There is a summary conviction, and there is an indictable conviction. With the summary, I assume the prosecutors would evaluate the offence and determine whether or not it was a matter that required a summary conviction, as for a highway traffic offence, or was serious enough to warrant an indictable offence. The bill, in clause 10, seems to set that out. I hope that we do not take further time of the committee to answer something that, on the face of clause 10, is self-evident.
Senator Lynch-Staunton: That may be the case for you as a lawyer.
Senator Grafstein: A summary offence is a summary offence and an indictable offence is an indictable offence. In any event, it is found in clause 10.
Senator Lynch-Staunton: I know the words are there, but the definitions are not there.
The trouble with these bills is that, more and more, they are executed by regulation. We have not seen the regulations, and we probably will not see them. A great deal of power is given to the minister through regulations here, including the nature of the investigations, and so on and so forth. That is out of Parliament's hands.
Senator Roberge: Clause 15 seems a bit unusual in that it deems that an act committed outside Canada has been committed in Canada. Is that a usual clause in legislation? Does it exist in other legislation? Has it ever been enforced by the courts?
Mr. Richstone: This is a usual clause in legislation. If the defendant or the other party is situated outside Canada, it is a normal clause in terms of granting to our courts jurisdiction over the person and over the substance.
Senator Roberge: Is it found in other legislation?
Mr. Richstone: There are provisions like that in the Motor Vehicle Safety Act and in the Canadian Human Rights Act.
Senator Roberge: Do you have court cases on that?
Mr. Richstone: Yes. It is a clause that is found in other legislation at the federal level.
The Chairman: Thank you very much. We will expect to receive some further answers.
Mr. Wernick: If other questions occur to the committee, we will be pleased to return.
The Chairman: If we need to, we will indeed ask you to return.
Honourable senators, the next meeting will be Tuesday, April 20, when the Senate rises. Then we will meet on Thursday, April 22, to deal with international trade matters. The next meeting after that will be April 27. We will also be meeting on Thursday, April 29, although the time is not yet set. We will then meet on May 4.
The CBC has written us a letter asking to appear before the committee in order to brief the members on their strategic plan. If the committee agrees, we can meet with them in May once we are finished with Bill C-55. Is that agreed?
Hon. Senators: Agreed.
The Chairman: We need to approve the budget to be submitted to the Standing Committee on Internal Economy, Budgets and Administration for the new fiscal year.
We have a summary of expenditures. For professional and special services, it would be $38,000; transportation and communication is $6,700, and other expenditures are $700, for a total of $45,400. The second item is the special study on Canada's international competitive position on communications, and the amount is $10,000. This is a special study budget. Professional and other services would be $8,850; transportation and communication would be $400, and other expenditures would be $750.
Is it agreed that the budget application for the special study be approved for submission to Internal Economy?
Hon. Senators: Agreed.
The Chairman: We need the budget for the total committee too.
Senator Maheu: How much did we spend last year?
The Chairman: The legislative budget was $53,000 last year, and we spent $30,000.
Senator Adams: I so move.
The Chairman: Thank you. Is it agreed?
Hon. Senators: Agreed.
The Chairman: Thank you very much.
The committee adjourned.