Proceedings of the Standing Senate Committee on
Legal and
Constitutional Affairs
Issue 53 - Evidence - Afternoon Sitting
OTTAWA, Wednesday, April 2, 1997
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill C-71, to regulate the manufacture, sale, labelling and promotion of tobacco products, to make consequential amendments to another Act and to repeal certain Acts, met this day at 1:20 p.m. to give consideration to the bill.
Senator Sharon Carstairs (Chair) in the Chair.
[English]
The Chair: Honourable senators, this afternoon we start with three witnesses. They are Mr. Charles Lapointe of the Office des congrès et du Tourisme du Grand Montreal; Mr. Kirk Shearer from Tourism Toronto; and from the Vancouver Fireworks Society, Mr. Raymond Greenwood.
We will begin with you, Mr. Lapointe. Please proceed.
[Translation]
Mr. Charles Lapointe, P.C., President and Director General, Office des congrès et du tourisme du Grand Montréal: Thank you for this opportunity to testify before the committee today and to share with you my grave concerns regarding this bill, particularly its impact on the sector in which I am involved, namely the tourism industry and tourism promotion in Montreal, the capital of Quebec.
From what I know and after reading this bill, I believe its passage will have an adverse effect on the economy. While I can prove to you that one plus one equals two, I cannot be absolutely certain that a major event will be cancelled the day after the bill is adopted. I can tell you, however, that our organization does have a number of concerns. You are in a position to make some amendments to the bill which would alleviate its potentially adverse effects and at the same time allow major events to go forward. These events encourage citizens, in particular young people, to get involved in cultural and sporting activities.
If the tobacco industry were to withdraw its sponsorship of major cultural events, whether it be the big festivals or certain sporting events such as tennis and automobile racing, this would mean an enormous financial loss for event organizers, one that would be difficult to overcome.
Municipal, regional, provincial or federal governments are certainly not about to open up their wallets and allocate more money for these events, given that in the last three years at least, governments have been cutting back on their grants.
Finding a new source of private sector capital to replace tobacco company sponsorship is easier said than done because a significant amount of money is involved. We do not have the exact figures, since this is market information, but we believe that tobacco companies inject in the neighbourhood of $20 million annually into the Montreal region for sports and others events. We cannot expect to find someone overnight willing to put up the same amount of capital. I will be suggesting several possible ways of resolving this dilemma.
The proposed legislation will adversely affect Montreal, perhaps more than any other region in Canada. For several years now, festivals and major sporting events have been the focal point of the city's image that we have been projecting to all tourist markets, whether in the United States, the rest of Canada, Europe or Asia. These events generate over $100 million in economic spin-offs for the Montreal economy. They are an outstanding promotional tool. Surely some of you have already visited Montreal. If you happen to be there when a major event such as the Grand Prix race is taking place, you will see for yourself that the entire city moves to the rhythm of the Grand Prix. Restaurants, bars and stores all display checkered flags bearing the Grand Prix logo. Some downtown streets such as Crescent and Peel are closed off. Ferraris and other race cars are on display around town. For five days, the city moves to this beat.
The same thing happens when the Jazz Festival is in town. Hotels, nightclubs and restaurants across the city are festooned with the festival's logo. The day-to-day life of every Montrealer is affected in some way. The same thing is true of the Just for Laughs Festival, the World Film Festival, the Benson & Hedges Fireworks spectacular and the du Maurier tennis championships. All of these events are an integral part of the image we project.
The promotional material that we will use this summer will say: "The world needs more Canada à la Montréal", and "Montreal the City of Festivals". All of the events that we promote in the United States, in Canada and elsewhere in the world are important to Montreal's image and all benefit from tobacco company sponsorship.
Major events generate significant economic spin-offs for Montreal and ensure an influx of tourists to the region. Montreal's tourism industry generates over $1 billion in spin-offs; many industries in Montreal are suffering, as we have read in the newspapers. However, the tourism industry is thriving. It has taken us 10 to 15 years to build up these events and to give them an international flavour. A month and a half ago, jazz critics in the United States decreed that Montreal's International Jazz Festival was the biggest jazz event in the world.
I think that it would be dangerous to tamper with this success. As I speak, Montréal international, which is headed by the Honourable Francis Fox and Jacques Girard, and the Montreal Chamber of Commerce are jointly holding a press conference in Montreal. They plan to present the respective positions of these two organizations and to recommend to members of the Legal and Constitutional Affairs committee two amendments that I fully endorse, as does the Hotel Association for Greater Montreal.
Firstly, we agree that a three-year extension of sponsorship promotion, coupled with decreasing amounts of money from a compensation fund, is essential in order to give event organizers time to adjust to the new reality brought about by the enforcement of the bill's provisions.
In year one, event organizers would receive from the compensation fund 100 per cent of the actual value of the sponsorship, in year two, 50 per cent; and in year three, 25 per cent. This would give them enough time to find the necessary funds to replace tobacco sponsorship. This national compensation fund would have to be set up by the Government of Canada.
Secondly, Montréal international, the Chamber of Commerce, the Hotel Association for Greater Montreal and the Office des congrès et du tourisme du grand Montréal believe that certain major international events should be exempted from the bill's provisions, provided they satisfy the following five criteria: firstly, the event must be sanctioned by a recognized international association or organization; secondly, the event must be a stop on an international circuit; thirdly, participants in the event must come from around the world; fourthly, the event must be broadcast to a significant number of countries, thus ensuring visibility and renown which would be very costly to achieve otherwise; and fifthly, the event must generate tangible economic and tourism spin-offs.
If such an amendment were adopted, the Montreal Formula I Grand Prix, the CART races in Toronto and Vancouver as well as the Canadian tennis championships held in Montreal and Toronto would meet these criteria and be exempted.
These are the recommendations that I respectfully wish to submit to you. I believe that they are in keeping with the spirit of Bill C-71. This action would ensure the survival of an important component of Montreal's economy and that of all major Canadian cities as well.
[English]
Mr. Kirk Shearer, President and Chief Executive Officer, Tourism Toronto: Madam Chair, I am pleased to be here today. First, I wish to point out that as the president of the Metropolitan Toronto Convention and Visitors Bureau, I have the support of my board and the Board of Trade; however, I am not here as a spokesperson for the tobacco industry. In fact, we do not receive one dime of funding from the tobacco industry.
I am here to talk about the economic impact of events on the hospitality business. First, I wish to mention the tourism industry in Ontario, which creates 400,000 jobs and has about a $10-billion impact on our economy. In Metro Toronto alone, we create 101,000 jobs. We have an impact of $4.8 billion. That sector pays about $1.8 billion in taxes.
The tourism business is the most competitive business in the world. As never before, people are fighting for visitors. Canada, Ontario and Toronto, for that matter, have spent a long time getting ready for this market to develop and mature to the point that it is now at. To put this kind of business in jeopardy for an economic perspective is a little bit frightening.
Events play a very key role. There are many reasons why people come to Canada, Ontario or Toronto. To be specific, I shall mention a few. They include the Symphony of Fire, which has a $61 million impact on Toronto alone and which generates some $30 million in tourism dollars. The Molson Indy is a $26.5 million business, with a $5.7 million impact on tourism alone. The jazz festival has a $17 million impact, with a $3 million impact on tourism alone. For Toronto and Montreal, tennis is a $10 million business, with a $1.5 million impact on tourism. Canadian Open Golf is a $7.7 million business, with a $1.3 million impact on tourism.
Frankly, these numbers are understated. They are understated because we think of events as samplers. They are samplers in the sense of bringing people to Toronto or Ontario or Canada for the first time. Our own exit research indicates that once someone has come to Toronto, they come back to Toronto an average of 17 times. Therefore, the economic impact, when you look at this as a "one off", is probably grossly understated.
It has taken Canada some time to be recognized as one of the great countries, if not the greatest country, in the world. It has taken Toronto 200 years to evolve to be perceived as being, perhaps, the greatest city in the world.
We all say that about our cities but Fortune magazine said that Toronto was as nice as someone else did and so did National Geographic. My point is that our business is very good as we speak right now. The tourism sector in Toronto and in Ontario right now is in good shape in spite of funding challenges that we face. A lot of the business that we are enjoying right now was generated years and years ago through what we called free media -- that is, journalism and advertising obviously -- but what we promote are the events, the attractions, the live theatre, the reasonable dollar, the wonderful hotels, our safety and cleanliness, a wonderful experience and our ethnicity. All of the things we are talking about tie in, to some extent, to the events that we think are genuinely in jeopardy as we speak.
As I mentioned earlier, tourism is the fastest growing business in the world. It is estimated that by the year 2005, one out of every 10 people working in Canada will be directly or indirectly employed in the hospitality business. This has made competition fierce. Again, events play a key role and we are here to talk about the economic impact of putting these events in jeopardy.
Ironically, the metropolitan Toronto budget for destination marketing has been falling for the last three years and our province's destination marketing budget has been falling dramatically for the past seven or eight years, but this enlightened federal government has created the Canadian Tourism Commission which Mr. Lapointe alluded to earlier. That is a $50 million injection into destination marketing for Canada with a $50 million match attempt on behalf of the CTC to create a $100 million budget to market Canada as a destination. The reason that this government has done so is that this government has identified that this is a very important and natural business for us to be in and has become the most competitive business in the world. Therefore, we must protect the quality of our product, namely, our markets that we bring people to, and that advertising budget to bring people here in the first place.
I would urge, therefore, that we find a balance between the government's health objectives while allowing tobacco sponsorships to remain viable for the people who support these events. We have to promote these events. We also should be focusing on the events, not on the tobacco companies. I ask that you strongly consider the amendments before you today.
The Chair: Thank you, Mr. Shearer. We will now hear from someone who I am sure thinks his city is the best in the world.
Mr. Raymond Greenwood, Chairman, Vancouver Fireworks Society: Thank you for allowing me to come from the fabulous West Coast -- spectacular by nature, as Vancouverites would say -- to speak to you today. I am the chairman of the Vancouver Fireworks Society, which is the host of the Benson & Hedges Symphony of Fire, which has now been going on for our eight year. As I will show you, 1.5 million people come down to the shores of English Bay, to West Vancouver, Cyprus Park, Burnaby Mountain, and all over the English Bay area to see this fireworks show. I am proud to say that we also had naval vessels there last year and two cruise ships on their way to Alaska which stopped to watch our event. As this gentleman from Toronto said, we are becoming a huge event. I should now like to take the opportunity to show you a short video.
(Video Presentation Follows)
Mr. Greenwood: The event that you just watched cost $1 million to put on in English Bay. As my colleague has said, thanks to the Honourable Judd Buchanan and to the Prime Minister for the extra funds he has given to tourism, we have seen a great flow of tourists coming into Vancouver. I should like to circulate an economic survey, put together by Tourism Vancouver, from which you will see our event is worth $9.7 million, just from the four nights of our fireworks competition. What it said is that 20 per cent of the event visitors came strictly to see the Symphony of Fire and then hopefully they stayed a lot later. As a point of interest, on the nights of our fireworks displays, our transit system actually makes a profit, which pleases me to hear. They have massive passenger loads coming into the English Bay area.
The survey was done independently in 1984 by Tourism Vancouver. I had nothing to do with this. It was produced and questions were asked regarding the nights of the events.
On the second page, there is a letter written to the Honourable David Dingwall from Tourism Vancouver expressing Tourism Vancouver's concerns about this event. Tourism Vancouver has 1,200 members. The letter describes what Bill C-71 would do to our events -- certainly my events -- and to a lot of other events in the community. For example, Women in View, which was given a donation from the tobacco industry, said very clearly that they could not hold their event if they did not get sponsorship.
On the next page, you will see a list of people who received sponsorship dollars from the tobacco industry. It is incredible. We come to the government to ask for money and there is none available. Yet, it is available here. We need the sponsorship support from the tobacco industry.
There is included a reservation from Gadabout Tours and a fax from Switzerland from a couple who spent their honeymoon in Vancouver. They want to come back to see the Symphony of Fire. There is also a request of the Vancouver tourism centre from Oklahoma.
There is a letter from the Burma Star Association, which is holding their convention in Vancouver because of the Symphony of Fire. They wrote to Mr. Dingwall when they heard of this problem. I had never heard of this gentleman and he sent me a letter.
I also included some thank-you notes. One was from the U.S. Consulate General. Last year, the Under-secretary of State came to see the fireworks while on vacation in Seattle. Prime Ministers have attended, as have many MPs.
I am asking today only that you be reasonable with Bill C-71, which is not reasonable. I understand that under this bill I could be arrested for wearing the Benson & Hegdes pin that I am now wearing.
I am supplying you also with our brochure. Apparently, sponsorship would be limited to 10 per cent. Why would a tobacco company want to sponsor an event like ours if they could not put their name on it? It is totally unreasonable.
I requested an interview with Mr. Dingwall and I was stonewalled. He was in Vancouver two weeks ago. We could have had a meeting with him there, but he did not have the courtesy to visit with us. I have written to him many times.
I do thank you for allowing me to appear here, but there are many groups in Vancouver who should like to talk to this committee. Why not come out to the coast? It is a beautiful place. It is as nice as Toronto or Montreal. You could have a great time and you could go to Whistler for skiing after. I am just asking you to be reasonable and hold further discussions before passing this bill.
The Chair: Thank you, Mr. Greenwood.
Senator Kenny: Mr. Shearer, if all the things you have talked about have a positive impact on the economy of Toronto, why do your members not subsidize them since they benefit from them?
Mr. Shearer: I do not think anyone can subsidize them the way the tobacco companies have. In fact, I do not think there is any major company, be it an automotive company or a bank, that is in a position to put up even one-twentieth of the money that the tobacco companies are putting up.
Senator Kenny: Why should the hospitality business ride on the back of the health of Canadians?Why should we put up with 40,000 Canadians dying a year so that you can have bread and circuses in Toronto?
Mr. Shearer: There are probably better people to respond to that in a medical sense. I am here to talk about the economic impact on the tourism business and jobs in Toronto.
Senator Kenny: I am here to talk about 40,000 Canadians dying a year, and you do not care about that.
Mr. Shearer: Yes, sir, I do. I also care about the tourism business and job creation.
Senator Kenny: How do you balance them?
Mr. Shearer: I am here to talk about tourism. I am not here to balance them in that sense.
Senator Kenny: It does not figure into your equation?
Mr. Shearer: It also figures into my equation personally, but in the context of tourism, it is very important that we understand that we are not reducing funding from tobacco companies potentially. Potentially, we are eliminating events, which is what I am here to talk about and which is what concerns me.
Senator Kenny: But do you not realize that you are being used here by the tobacco companies? They have you addicted to their money and you are here shilling for them.
Mr. Shearer: I do not receive a nickel from the tobacco companies.
Senator Kenny: No, but the folks who pay you obviously like the events they put on.
Mr. Shearer: It would be a drop in the bucket, as it relates to my funding. The moneys that we receive from the events we are talking about here is probably less than 1 per cent of my financing. I am here to talk about the value of those events as it relates to tourism.
Senator Kenny: If it is only 1 per cent, surely you can find a way to replace it.
Mr. Shearer: That is not the issue. The issue is that we cannot replace those events. That is what people are coming to Toronto for.
Senator Kenny: You can replace the 1 per cent, surely.
Mr. Shearer: Yes, sir, but I do not believe that is the issue.
Senator Kenny: You have come before us and are telling us about these terrific things that are happening because of funding from companies that are killing people. These folks are costing Canadians $3 billion a year in direct medical costs, $7 billion a year in indirect costs, and 40,000 lives a year. They have managed to get you to come from Vancouver, Toronto and Montreal to defend them.
Mr. Shearer: I paid my own way here. This was a day that I gladly volunteered. I believe in the importance of these events as they relate to attracting tourists. We do not receive a nickel from tobacco companies and I am certainly not here as their mouthpiece, but it would be irresponsible of me, in my job in the destination marketing arm for Metro Toronto, not to point out the importance of these events in a highly competitive business.
[Translation]
Mr. Lapointe: Let me point out that we are not here today to say that we do not regret that smoking is habit-forming or that it can cause certain illnesses. We are here to tell you that we believe the bill is ill-conceived, particularly the provisions respecting tobacco sponsorship.
We are recommending ways to get past this transitional phase so that we can maintain events which are fundamentally important to the economies of cities like Toronto, Montreal and Vancouver. We are not here to say that we are not concerned about the health issues that affect Canadians.
[English]
Mr. Greenwood: I am a commission salesman for Pitney Bowes of Canada and I am here on my own time. I was invited by this committee and you are actually paying my way here. I am not a mouthpiece for any one other than the Vancouver Fireworks Society.
Senator Kenny: That is terrific. My point to you folks is that it is terrific to have these events going on. Everyone likes them. I have been to your fireworks display. I did not need to see your show. However, none of you are focusing on the real cost. None of you are focusing on your friends and neighbours -- that is, the people who live in your cities who are dying from cancer now.
The tobacco companies have found a very effective way of capturing the hearts and minds of Canadians. They get an immense amount of free publicity from your promotion and they also get the benefit of a political lobby where, rather than coming to defend themselves, you folks speak on their behalf.
Think of it in balance. Is your four nights of magic worth one person having lung cancer?
Mr. Greenwood: I am not qualified to talk about what my event contributes to lung cancer. I am not a doctor. How would I know that?
Senator Kenny: The reason Benson & Hedges funds it because they will sell more cigarettes.
Mr. Greenwood: I would disagree. I should also tell you that it was myself that went to the Montreal competition and invited Benson & Hedges to come to Vancouver; they did not ask me to bring it to Vancouver.
Senator Kenny: Right. These are not foolish people; they are very skilled people. They will not spend a nickel that is not in their benefit. Do you think they are that altruistic that they want to see a fireworks show in Vancouver just because it is fun?
Mr. Greenwood: No, just to please me.
Senator Kenny: Thank you.
[Translation]
Senator Beaudoin: My question is for Mr. Lapointe. You have proposed two amendments and I understand clearly the gist of the second one. However, could you tell me again what the purpose of this amendment is? If I am not mistaken, the bill provides for a two-year extension of sponsorship.
Mr. Lapointe: Yes, a two-year extension.
Senator Nolin: Clause 66 provides for an 18-month extension.
Senator Beaudoin: Eighteen months? I see.
Senator Nolin: The date given is October 1 and/or earlier.
Senator Beaudoin: October 1, 1998.
Senator Nolin: Or earlier.
Senator Beaudoin: And you are proposing a three-year extension? You quoted some figures: 100, 50 and 25.
Mr. Lapointe: I was referring to percentages.
Senator Beaudoin: Therefore, sponsorship would continue for three years instead of 18 months. Is that correct?
Mr. Lapointe: That is correct. In year one, event organizers would receive the equivalent of 100 per cent of the amount that they would have received from tobacco companies, with the money to be paid from a compensation fund; in year two, they would receive 50 per cent, and in year three, 25 per cent.
Senator Nolin: They would be gradually weaned.
Mr. Lapointe: Correct.
Senator Beaudoin: They would gradually receive less compensation. You are talking about a 36-month extension, rather than 18 months.
Mr. Lapointe: Yes.
[English]
Senator Doyle: Mr. Shearer, we heard from another witness with whom I am sure you are familiar, namely, Mr. Beck, who represented Ontario Place, in Toronto, which was milked out of the remains of the Toronto Dominion Bank exposition.
He was talking, as you are, about a great interest in tourist attractions from events like fireworks, symphony concerts and sports events. He also talked about the fact that they unfortunately come during a time when government contributions to tourism is declining. Is that how you saw it or see it?
Mr. Shearer: Yes, it is. Our provincial spending as it relates to destination marketing is probably less than 25 per cent of what it was seven or eight years ago. My funding will be reduced by as much as 30 per cent by January 1, 1998, in just a 30-month period of time.
We are taking it from a side in a market that is spending more money than ever before. I am talking about the destination marketing in Canada, the United States, Europe and Asia.
Australia alone, for example, is now spending $103 million promoting itself as a destination. We do not just need the money, we need the reasons to bring people to Canada, Ontario and Toronto. These events and the attractions that we talk about are one of the key reasons why people come.
Senator Doyle: Do you ever feel that you have been slightly hornswoggled by the governments that have said, "We will cut you off. We will reduce the amount of money and you find it elsewhere."
You are building an industry; you are not using it for parties and happy occasions for the local servicery. You are using your knowledge to build an industry that will attract visitors from outside to spend money in your community and allow you to do all the other good things you want to do.
Where previously the government was a major contributor, the provincial government, at least, has been backing away. Why do you believe that the Ontario government is backing away from its responsibilities in tourism to the point where you must defend the likes of Benson & Hedges?
Mr. Shearer: We have been dependent on the likes of sponsorships for a long time.
For example, the Toronto Film Festival has been in existence for 22 years. It was an overnight success just five years ago and is now the number two film festival in the world next to Cannes. However, that did not just happen. The sponsorships that you are talking about have been in existence for some time and the funding reductions are relatively new for me. I am not sure that they necessarily go hand-in-hand.
I am concerned because, as other countries and destinations spend more money on destination marketing, if we were to spend less and did not have the same product to sell in the future as we do now, we would be putting these actual events in jeopardy.
Senator Doyle: Mr. Beck said that the falling away of support from the local government had set in relatively recently. He then recounted the time that the tobacco industry first became involved, which was approximately 10 years ago. That was long after the establishment of the film festival. I do not believe the film festival was supported by the tobacco industry then, was it?
Mr. Shearer: I am sorry. I was talking about the Metropolitan Toronto funding, not the provincial funding. Mr. Beck is quite correct. My funding has been a fraction of 1 per cent from the province and as much as 68 per cent two years ago from Metropolitan Toronto. I am talking about my funding, not the provincial contribution.
Senator Doyle: I do not mean to be offensive in this, I am only trying to find some figures and facts. However, I must admit that occasionally I wonder if there had not been a similar discussion when they closed off the main events in the Roman Forum.
Senator Jessiman: I should like to go further with Mr. Shearer. The Canadian Open is not sponsored by a tobacco company now, is it? I understood that Bell is the lead supporter.
Mr. Shearer: That is correct.
Senator Jessiman: Events such as the Symphony of Fire, which Montreal is asking for, are attractive and bring in much money. Surely that could be worth money to Metropolitan Toronto, the Province of Ontario, Vancouver and British Columbia. Should you not be able to get money elsewhere or through the government itself?
Mr. Shearer: You would think so and one would hope so. If I had not spent some years of my life in front of companies asking for sponsorship dollars, events dollars, advertising dollars and public promotional dollars, I would believe so.
One of the most telling issues would be, for example, that the number one sponsor for Symphony of Fire is a tobacco company. The number two sponsor, I believe, spends one-twentieth of the dollars. I wish that banks, automotive companies and other major companies in this country were stepping up to support events of this nature. Unfortunately, that is not the case because other companies can buy whatever media they want. It is better targeted, more focused, more cost efficient and more cost effective. The tobacco companies have no alternative but to sponsor events. They pay a premium of maybe ten-fold to do so. I wish that we could have a number of meetings with banks, automotive companies and other major players in corporate Canada and find replacement dollars. However, I do not believe they are there. I wish they were, and one would think they would be.
Senator Jessiman: The government has a majority not only in the House of Commons but also in the Senate. This bill will probably pass. You may find yourselves having to talk to these banks and other companies and maybe your own metropolitan and provincial governments.
Mr. Greenwood: In the capital of Victoria, they had sponsorship for the Canada Day fire show. They used to get the money from Heritage Canada. That has been completely cut out now. They are actually putting collection boxes in stores to ask the general public to help pay for a fireworks show.
This week there is a major event in Whistler, the Snowboard Festival. They have a fireworks show on the front of their brochure. They had to cancel it due to a lack of $3,500.
There was an advertisement in the Vancouver Sun for the APEC convention. Who is looking for money and sponsorship partners? Apparently, it is the federal government. Everyone is out there looking for dollars from sponsors for events. The pot is just not that big.
You saw that whole stack of letters today that came from the alliance members. The sponsorship money is just not there.
We hosted the APEC parliamentary convention earlier this year. I assisted by loaning them photocopiers for it. People were not coming up to the plate and saying, "Here is the money." There is no sponsorship tree out there that I know of where I can go to pull $10 or $1 million off it to help sponsor an event. It is not there. When a big event at a major resort in North America has to be cancelled, there is something wrong with the banks and all the major companies that will not put the money out today. We need the tobacco industry and people to be reasonable. We need Mr. Dingwall to be more reasonable.
Senator Jessiman: I guess we have to balance one against the other. That is the problem we are having.
Senator Lewis: In 1985, a bill was introduced in Parliament which eventually was enacted one year or so later as the Tobacco Products Control Act. That act -- which is still in effect except certain parts of it -- instituted a total ban on tobacco advertising. In the fall of 1995, some provisions on the ban on advertising of tobacco products were then struck down by the Supreme Court. However, from the time the act was enacted until the fall of 1995, there was a total ban.
I will start with Mr. Greenwood. We have this period when there was a total ban. When did Benson & Hedges commence to sponsor your event?
Mr. Greenwood: In 1990.
Senator Lewis: While the ban was on?
Mr. Greenwood: Correct.
Senator Jessiman: Sponsorship was allowed?
Mr. Greenwood: Sponsorship was allowed, yes.
Senator Lewis: As far as Toronto is concerned, how long is it since the advertising of tobacco products has been sponsoring events?
Mr. Shearer: I believe 10 years.
Senator Lewis: What about Montreal?
Mr. Lapointe: It varies depending on the events. Sponsorship of the symphony orchestra has been there for the last 40 years. However, with regard to Benson & Hedges, it has been 15 years.
The Chair: I want to get into the area concerning replacement money if money is no longer available from the tobacco companies.
We have banks out there with a profit of $6 billion a year. We have a tobacco industry with a profit of $220 million. They come up with $60 million a year in sponsorship. Banks do not come up with the same kind of sponsorship arrangements. I find it difficult to believe that a major festival such as yours, Mr. Greenwood -- and I have other concerns with smaller festivals -- would not be able to find a sponsor.
Mr. Greenwood: This year we have been out beating the bushes trying to find sponsors. We went to a very large telephone company and a very large bank and we were declined.
Banks get letters every day. They have a donations committee. I looked in that file. I had not seen it before. You see many letters asking the Bank of Nova Scotia and the Royal Bank to sponsor events. The Royal Bank does sponsor a lot of events. It is their decision. They are a corporate company and we cannot make them sponsor events.
We have been knocking on doors. We have a Crown corporation as a sponsor -- although I am not sure if it is a Crown corporation now -- namely, Air Canada. They sponsor a lot of our events and seem to get a lot of pleasure out of sponsorship.
It is difficult to go out and find $1 million. Earlier, you heard from a gentleman who said that the largest amount of money ever given out was $500,000. I am not sure where I could go for $1 million. Again, I cannot get $3,500 for a fireworks show this weekend.
The Chair: That is not a major event, though, is it?
Mr. Greenwood: The Snowboard Festival up at Whistler now is the largest winter sports event. Whistler was voted the number one resort in North America, so it is a major area. There is major TV viewing as well, but the money is just not there from the banks.
The Chair: In terms of the overall operation of your fireworks festival, how much of the overall fireworks budget is actually provided by Benson & Hedges?
Mr. Greenwood: Every dollar.
The Chair: You do not have any other sponsors other than Benson & Hedges?
Mr. Greenwood: No. As a matter of fact, I pay $240,000 to the City of Vancouver for policing costs and the closing off of streets. We pay that to the city or Benson & Hedges does.
No, we do not have a sponsor. You will notice that these are sub-sponsors. They are mainly all arrangements for airline tickets or for Cantel phones, et cetera.
We do not have other sponsorship dollars. It would be fair to say that our event would be finished and then the voters in the Lower Mainland, plus a lot of tourists, would be upset.
The Chair: What is your total budget?
Mr. Greenwood: It is well over $1 million.
The Chair: Benson & Hedges writes a cheque for $1 million?
Mr. Greenwood: They pay for everything.
The Chair: Thank you very much for your appearing before the committee this afternoon.
Honourable senators, we now have with us the mayor of the City of Montreal, Mr. Pierre Bourque.
[Translation]
Mr. Pierre Bourque, Mayor, City of Montreal: I am very pleased to be here. I would like to introduce my colleague, Robert Letendre. Madam Chair, thank you for agreeing to hear my testimony. I appreciate this opportunity to share with you the concerns of the City of Montreal and of many Montrealers regarding Bill C-71.
Let me make it clear right away that I share the government's objective, namely to reduce smoking in Canada, particularly among young people, and that I will work to achieve this end with the mayoral powers invested in me by the Government of Quebec. Yesterday, I signed an order banning smoking in all City of Montreal offices and vehicles. This order will take effect on May 1. For the past six months, we have been working to educate and inform all municipal employees. I would like to table a copy of this order with your committee. I can tell you that the vast majority of our 12,000 employees, even those who smoke, support this measure.
I have come here today to convey to you the concerns we have about the rather harsh provisions in Bill C-71 which restrict sponsorship. To my mind, these measures are unreasonable and will cause considerable harm to the economies of Montreal, Quebec and Canada.
I would like to talk to you about the new Montreal economy and the economic impact of the cultural and sporting events industry.
I know that a number of you are familiar with Montreal's history. In the past two decades, our city's economy has undergone profound changes. A number of industries which were responsible for creating our city's wealth vanished. The rail transportation, footwear and textile industries are just a few of the casualties. This has been a very trying period for our city and in many ways, we are still struggling. The most recent Statistics Canada report indicates that unemployment on the Island of Montreal stands at 15 per cent. This is an unacceptable level.
Despite these trying times, business people, entrepreneurs and government decision-makers have not been standing idly by. They have been working to build a new economy, focussing on our city's strengths, particularly its international renown, its outstanding quality of life and its cultural wealth. Montreal has gradually became a Mecca for major sporting and arts events.
The biggest event staged in our city, the Grand Prix of Canada, generates about $50 million each year in spin-offs, or $7 million a day, $5.6 million of which come from foreign tourists. This event is broadcast to 129 countries and enjoys an estimated worldwide audience of 310 million.
The du Maurier Tennis Open Championship generates $10 million in spin-offs and one quarter of those who attend the event come from outside the Montreal area. The substantial profits from the championships are reinvested in youth development in Montreal as well as in the rest of Canada.
I would just like to point out that the three levels of government and Tennis Canada recently allocated $24 million for the renovation of Jarry Park Tennis Stadium, the site of this event.
Montreal's four major festivals, the Jazz Festival, the Just for Laughs Festival, the World Film Festival and the Francofolies generate estimated spin-offs of $165 million in Quebec and create 3,600 jobs. Each year, these festivals attract in the neighbourhood of 2.9 million visitors, 16 per cent of whom are tourists from outside the region who spend $52 million in Montreal.
The Benson & Hedges International Fireworks Show attracts on average of 1.5 million spectators and pours $15 million annually into the economy.
In short, at stake here are over 4,000 jobs in Montreal as well as the city's and the country's international reputation and renown and ability to draw tourists.
Bill C-71 as it now stands compromises all of the patient efforts of people to build up these events. As mayor, I am here to ask you to treat Montreal kindly, not harm it with an ill-conceived policy.
We have forwarded to the clerk of your committee the resolution passed by Montreal municipal council on March 10 last concerning Bill C-71. I would like to table an official copy with you today.
First of all, we would like Bill C-71 to include a provision which would exempt major international events, as a number of countries have done, including Australia, Austria, Belgium and Hungary. We also propose that the federal Industry minister, who is also responsible for tourism, be able to decree that a cultural or sporting event is international in scope and thus exempt from the application of the law.
This action would be justified, in particular since television, which reaches hundreds of millions of people, would continue to broadcast images bearing the names of tobacco manufacturers. What will we have gained when the Grand Prix of Canada becomes the Grand Prix of China and images perhaps even more disturbing than those we now see will be beamed to us via our television screens? Absolutely nothing.
I hope that your committee will look closely at what other countries have done and take a lesson from them. Short of travelling abroad, which would be the ideal solution, I hope that you will listen to what experts from other countries have to say. Moreover, we feel, and this is a recommendation that we are making, that the Government of Canada, which has long been a champion of multilateral action, should, together with the World Health Organization, propose that the international community sign a treaty harmonizing restrictions on tobacco advertising.
Canada is recognized for its innovative action and this would be one way of harmonizing tobacco advertising in the world.
Our second recommendation concerns the transition period for the coming into force of this legislation. Clause 66 currently provides for a two-year transition period. We feel that this is not enough time for event organizers to adjust to the loss of sponsorship resulting from the legislation.
There are two possible courses of action: Either the government can extend this period from three to five years, or it can itself provide bridge financing for these events by dipping into the considerable revenues earned from tobacco taxes.
I would like to make one final comment. Montreal event organizers are very concerned about the vagueness of the definition of "lifestyle advertising" contained in clause 22. You are eminent lawmakers and I understand that there is a sacred principle in constitutional law whereby that which constitutes an offence must be clearly and comprehensively defined. I ask you to carefully consider this matter and to ensure that event organizers are dealt with fairly and honourably, not frightened by the vagueness of the law or the fear of committing a criminal offence.
Your committee faces a major challenge in the weeks ahead. It must wage an effective battle against smoking while preserving the major sports and cultural events that several large Canadian cities have come to claim as their own. I know that I can count on your wisdom to strike a balance where this issue is concerned.
Senator Beaudoin: Thank you, Mr. Bourque, for accepting our invitation to appear before the Senate Legal and Constitutional Affairs committee. You propose a transitional phase. Mr. Lapointe made a similar suggestion. He suggested a three-year period, instead of 18 months and 100 per cent compensation in year one, 50 per cent in year two and 25 per cent in year three. Are you advocating something similar?
Mr. Bourque: Yes we are, because we consulted with one another before coming here. We would like major event promoters to have the time to find new sponsors. The pool is fairly limited in Montreal and there are a number of major events held there. However, as far as international events are concerned, since decisions are made abroad, we ask that exceptions be made for the Grand Prix and for the du Maurier Open.
Senator Beaudoin: You are also suggesting that a number of events be exempted. However, this would have to be spelled out very clearly, because you are talking about exception to the law. Am I correct?
Mr. Bourque: Yes.
Senator Beaudoin: You are suggesting exemptions in the case of international events. You state with a great deal of assurance, and you are correct, that as lawmakers, we must uphold the principles of criminal law and that that which constitutes an offence must be very clearly defined. You are right. However, exceptions must also be clearly defined because other cities are involved, not only Montreal. Of course, there are a few of us here from Montreal, but Vancouver and Toronto may ask for the same exemptions. Do you have a generic definition of the events you have in mind? For instance, are you referring to international events? Could you be more specific?
Mr. Bourque: I am talking about events of an international nature where the decision on whether to stage them or not is taken abroad. While such events have a tremendous international impact because of the television coverage or the sponsorship they receive, decisions regarding their staging are made by a third party in another country and are beyond our control. For example, the decision on whether or not to stage the Grand Prix is not made by Molson, but rather by a committee in London or Paris responsible for selecting international race venues. For example, Australia granted an exemption to the Australian Grand Prix and to the round the world sailing race as well, because these events were taking place in Australia and in other countries and were internationally renown.
We are recommending that the Minister of Industry who is also responsible for tourism exempt these international events. Cabinet would have to decide, but internationally renown events are easy to identify.
Senator Beaudoin: In other words, to avoid all possible disagreements, objective criteria should be established?
Mr. Bourque: Absolutely.
Senator Beaudoin: When the event is international in stature.
Mr. Bourque: Absolutely.
Senator Beaudoin: Events that are outside the authority of a city, whether it be Montreal or some other venue?
Mr. Bourque: Exactly.
Senator Beaudoin: For instance, it has to be a decision taken outside the country, that is in Geneva, London or Paris.
Mr. Bourque: That is correct.
[English]
Senator Jessiman: You are talking about exceptions for international events. Are you speaking of those you already have so they would be grandfathered, or are you talking of others that might come in the future?
[Translation]
Mr. Bourque: I am talking strictly about the events that we already host, not future ones. That is a good point.
Senator Beaudoin: If I understood you correctly, you are referring to the Grand Prix and the du Maurier Open?
Mr. Bourque: Precisely.
Senator Beaudoin: And they are four or five events like this?
Mr. Bourque: These two events in particular are held in Montreal. As far as others are concerned, we are asking for a longer transition period, as Mr. Lapointe explained to you, for locally managed events. The Jazz Festival is one such event, as is the Just for Laughs Festival and the Francofolies. We are asking for more time to devise a new funding formula, whether it be taxes on tobacco or some other as yet to be defined formula --
Senator Prud'homme: We are very pleased to welcome you to our Senate committee, which always studies issues a little more in depth than the House of Commons. I hesitate to say that it takes a more serious approach, since I was an MP for 30 years. We put the same kind of effort into examining all other bills, even constitutional and language ones. I voted for you and I do not see any reason why I would vote any differently if elections were held in Montreal. I have made my position fairly clear.
Senator Nolin: You are very objective, Senator Prud'homme.
Senator Prud'homme: Yes, as usual. I have looked at both sides of the issue. Intense pressure is being put on us by the tobacco lobby as well as by health officials. Like Mr. Clinton, I smoke, but I do not inhale. I smoke for six months and I stop for six months. From a health standpoint, I know that smoking is a risk. I hope that this will not shock the tobacco lobby.
Senator Nolin: They admitted as much themselves yesterday.
Senator Prud'homme: They admitted it, but they nevertheless continue to spend a great deal of money in an effort to get people to smoke.
Given the complexity of this issue, I would submit that patience, time and education are the answer. When I was a young MP, I recall grappling with a major problem. namely whether people should start getting an old age pension at 65 years of age. Some argued that the Canadian economy could ill-afford this and that the age had to remain at 70. I was a young MP serving under Mr. Pearson and I watched the serious battle that ensued between supporters of the 70-year age limit, and the 65-year age limit. At some point, Mr. Pearson and several Liberals, who were more intelligent than the others, decided that the solution would be to gradually move toward paying an old age pension at 65 years of age. We even won two or three elections with this platform. How did we proceed? Since the economy could not take the sudden shift to 65 years of age, we opted to proceed gradually: lowering eligibility from 70 to 65 over a period of five years. This was in 1965. Some people believed that this would never come to pass, that this was merely an empty promise since elections were on the way. Yet, we did lower the age from 70 to 65. The Canadian economy survived and the public came on side. Those who believed that the Canadian economy could not withstand the change were ultimately converted. I see no point in getting all worked up, like Mr. Dingwall is, or in arguing that these provisions should be implemented immediately, when at the same time other people are saying that they should not be implemented at all.
Let me make a distinction and ask you a question. Mr. Chrétien, in his wisdom, has said that everyone is pushing for action to be taken immediately. I think then...
Senator Beaudoin: The transition phase is 18 months.
Senator Prud'homme: Eighteen months, or two more summers. Perhaps Mr. Chrétien remembers when he served with Mr. Pearson and opted for educating people about the ills of smoking and for giving them time to control their habit. I am not a member of this or of any other committee, because I sit as an independent. That is indeed quite unfortunate, but I do make my presence felt nonetheless.
Therefore, time is the issue here. Mr. Chrétien asked Mr. Dingwall to wait a little longer and he agreed to an 18-month extension. The year 2000 is approaching and since this is a symbolic date for many people, why not grant an extension until December 31, 1999 for the Jazz Festival, the Francofolies and the other two --
Mr. Bourque: The Jazz Festival and the World Film Festival.
Senator Prud'homme: Yes, the World Film Festival. I cannot move an amendment to request an extension to December 31, 1999. However, since elections are in the offing, I think we could convince the House of Commons to adopt an amendment to this effect. I am prepared to suggest this to my colleagues, that is an extension to December 31, 1999. Next week, I will be in South Korea where I will be making representations on behalf of Montreal and Canada. Is December 31, 1999 acceptable to you?
[English]
The Chair: Senator Prud'homme, you are quickly beginning to take more time than the witness.
Senator Prud'homme: That is because we know each other very well.
Senator Nolin: They voted for each other!
[Translation]
Is December 31, 1999 acceptable?
Mr. Bourque: Absolutely.
Senator Prud'homme: As far as the du Maurier Open and the Grand Prix are concerned, I personally do not think that people are so easily influenced that when they see the Marlboro logo, they are going to rush out and buy this particular brand. I am prepared to make a distinction. Is this consistent with the representations that you have made to us today?
Mr. Bourque: The senator has more or less echoed our recommendations, that is that an exception be made for foreign-controlled international events over which we have no influence, as countries like Australia, Hungary and others have done. We would like the du Maurier Open and the Grand Prix to be permanently exempted from this law's provisions.
In the case of the large Montreal festivals that have also achieved international renown, we would like the transition period to be extended. Senator Prud'homme is suggesting an extension until the year 2000, while we are suggesting a three- to five-year extension, with compensation, and talks with the Government of Canada. The compensation would come from the substantial tax revenues collected and would give event organizers time to find alternative funding. I think we are capable of showing some imagination.
We must save the Grand Prix at all costs. Let me quote some figures to you. The City of Montreal invests million of dollars each year to repair the track and get everything shipshape on Notre-Dame Island. This year marks our 30th year of hosting this event. Organizers may decide not to hold this event here any longer. Right now, we operate on the basis of a five-year, renewable agreement. For this reason, the Grand Prix race must be exempted, as is the case in Australia. You will tell me that France did not do this, but this country is the birthplace of this race. The automakers Renault and Citroën are based in France, whereas Mercedes is based in Germany. They are the major promoters of this race. We are not in a strong bargaining position, and that is why our situation compares more to that of Australia, Hungary and other countries where exceptions have been allowed. There will always be competition. I am thinking about Malaysia and China where because of the laws in place -- That is why I am recommending that the government harmonize its actions with the World Health Organization.
Last week, I discussed this matter with Neil Collishaw, a Canadian expert and lifelong anti-smoking advocate. I explained the situation to senators, and perhaps it would be interesting to let Senator Prud'homme know what it was that prompted the mayor to order a ban on smoking in all City of Montreal vehicles and offices as of May 1. However, that is not the issue here. The issue is how to keep major international events in Montreal and to safeguard Montreal's international reputation.
With respect to tennis, the tournament's rating is being reviewed. There is a possibility that the Canadian Open will lose out to Cincinnati, because the international federations will be deciding on the site of major world tournaments. If Montreal is no longer a stop on the tour, then Toronto will be penalized as much as Montreal will. The du Maurier Open is another international event which has an enormous influence on young people. I think that the legislation should provide for some exceptions.
Senator Nolin: You stated that you held consultations and obviously you discussed this matter with Mr. Lapointe. Have you discussed it with provincial authorities or with members of the federal government? What chances are there of this going further than today's meeting?
Mr. Bourque: We achieved a very broad consensus in Montreal. Municipal officials, Quebec government officials, regional government, the Chamber of Commerce, Montréal international, the Office du tourisme et des congrès and the Government of Canada are all on side. I think there is widespread agreement that these two major events should be exempted. Bidding on an international event is no easy feat. Countries battle fiercely for the privilege of hosting these events and spend millions of dollars in the process. In turn, governments must invest a substantial amount of money. The general consensus of opinion is that the Grand Prix of Canada should stay in Montreal. The spin-offs are enormous, not to mention that the Grand Prix of Canada is a promotional tool. If we lose this event, there will nothing to replace it. The same goes for the tennis championships which allow Canada to shine on the wold stage. Therefore, widespread consensus has been achieved at all levels.
Senator Nolin: More specifically, was the Government of Quebec consulted in this process?
Mr. Bourque: Absolutely.
Senator Beaudoin: It was?
Mr. Bourque: Yes.
Senator Pearson: Thank you very much for coming. I find this subject very interesting. I was struck by the idea of getting the World Health Organization involved. Could you tell us a little more about that? Have efforts already been initiated?
Mr. Bourque: Yes. I am closely acquainted with the Director General, Neil Collishaw, who happens to be a Canadian. He works a great deal in Eastern Europe. As you know, the tobacco industry is shifting the focus of its attention from America to Eastern Europe, China and Asia. Mr. Collishaw has been invited on behalf of the World Health Organization to work toward harmonizing laws to reduce smoking in these countries. He has a global vision. If we lose the Grand Prix to a country with more relaxed laws and greater freedom of action, we will not be any further ahead because the television images that will be beamed to us will be worse than the ones coming to us from Montreal. For this reason, the Government of Canada, which is well respected on the international scene, should try and work with the World Health Organization to harmonize smoking policies and laws.
If all countries could come to an agreement, we could apply one law everywhere. The issue of advertising has unnecessarily placed a remarkable event in jeopardy and I do not think that the interests of either Montreal or of Canada are being served in the process.
[English]
The Chair: Mr. Mayor, we heard earlier from the Honourable Charles Lapointe, who talked about the need to push this to three years. You seem to be saying that you want to push it to five years. Will this be a moving target?
[Translation]
Mr. Bourque: No. The municipal council resolution which I have given you copies of refers to an extension of three to five years.
Senator Prud'homme: Could you clarify one thing for me? Would the three- to five-year extension apply to both types of events?
Mr. Bourque: No, the extension would be for the major festivals, not for events such as the Grand Prix.
Senator Prud'homme: I see.
[English]
Senator Anderson: You talked about accepting the Grand Prix and the international tennis tournaments. Are there other international sporting events in other Canadian cities of which you are aware?
[Translation]
Mr. Bourque: The Indy races, although held in North America, have an international flavour to them. The Toronto Grand Prix is similar to the Montreal race. There may be other events, such as the world sailing race, but there are not many of them. We can count them on one hand.
Senator Nolin: However, this would at least give Montreal, Vancouver and Toronto a chance to bid for events like this. Mr. Lapointe spoke of setting very stringent criteria, but clear enough nonetheless so that people like you and others who promote their cities abroad can go out and bid on these types of events which are not strictly sports related.
Mr. Bourque: In closing, I would just like to say how much Montreal relies on its international flavour. In many areas, we serve as a form of UN agency. We are home to the secretariat on biodiversity. We are currently working very closely with the Government of Canada to obtain another secretariat, the secretariat on global desertification. The protocol on ozone layer protection was also signed in Montreal. We are also the home base of the International Civil Aviation Organization. In all, Montreal is home to 85 international organizations. This is one of our city's strengths. Its assets include its French, English and multicultural character, its history, its universities and its cultural vitality. This is how we have responded to municipal restructuring. We have turned the focus of our attention outward. Therefore, this legislation affects that which is truly precious to Montreal.
Senator Prud'homme: I have been in Parliament for 35 years and I am not accustomed to running around in circles and not calling things by their rightful name. Either we deem that tobacco is harmful and we ban it officially, or else we make adjustments because we do not have any choice. Otherwise, what we are doing is utterly hypocritical. Either we ban tobacco completely, which would perhaps be better for people's health, mine included, or we make adjustments and educate people. My feeling is that the more restrictions we place on this substance, the more attractive it will become. I cannot believe that people will rush out to buy Marlboros because they associate this brand with Jacques Villeneuve. As you stated, the interests of the City of Montreal do not override those of other regions of Canada and I agree with you on this point. We have a problem. We have to get people to smoke less. Education and time are the answers.
[English]
I am going back to what I said about Mr. Pearson. I am pleased to salute Senator Pearson, who is the daughter-in-law of Mr. Pearson. I learned patience from him.
[Translation]
With patience and time, we can achieve our objective. The emphasis should be not on smoking as such, but on time and patience. I hope that Bill C-71 will be amended along the lines that the mayor of Montreal spoke of, with some distinctions. Personally, I would support a five-year extension in one part of the bill, and no restrictions in the other part. I am not a member of the committee, but I am entitled to vote in the Senate. I hope that I have made my position clear.
[English]
The Chair: I think it is very clear, Senator Prud'homme, as it normally is.
Senators, we wish to thank the Mayor of Montreal for being with us this afternoon.
We now have Dr. John Luik with us. I had hoped that Dr. Luik would be part of a panel with Dr. Allan Best. Dr. Luik is an academic who has written on advertising in smoking. Dr. Allan Best takes an alternative point of view from Dr. Luik. He could not join us this afternoon, but he will be joining us on Monday. We are delighted to have with us Dr. John Luik this afternoon. I invite you to make your presentation at this time, please.
Dr. John Luik: Unlike many of your witnesses, I am here today to speak simply as a private citizen who has some expertise on a small part of the question which you are considering. I do not want to speak on behalf of anyone, except at one point I wish to introduce some evidence. In fact, I have arranged to have copies of a book written by myself and my co-author from the U.K, Mr. Mike Waterson, to be distributed to you. In some sense, the submission is a joint one, although Professor Waterson is unable to be here today.
In the course of any given year, I am typically engaged as a consultant by several dozen organizations on a variety of projects. I have worked, for example, for many health care organizations on a variety of health-related issues. To be fair, I have also undertaken work for a number of tobacco companies on the issue before you, namely, advertising and, in particular, the issue of tobacco advertising and young people.
I should like to say something briefly about the work that Mr. Waterson and I have done over the last 10 years on the issue of advertising in general and, more particularly, the issue of tobacco advertising. This work has been published in a number of academic journals. It is most conveniently brought together in a book which we published last year in the United Kingdom called Advertising and Markets, copies of which will be provided to you.
This afternoon I should like to make four points about the question of advertising and then allow you to move on quickly to ask specific questions.
I am afraid that the majority of the points that I wish to make will be negative or critical about some of the statements that are made -- that is, claims about advertising, about tobacco advertising, about tobacco advertising and young people, and about the effect of tobacco advertising bans. In fact, it is on these four areas that we have concentrated our research over the last 10 years. At the end of my comments, however, I should like to leave you with something positive, for it seems to me that many of the witnesses that appear before you are extraordinarily critical about what the government is attempting to do without answering the question: What are the most effective policies that you could implement to deal with the problem of youth smoking? In other words, I want to take it as a given that anyone who appears before you is concerned about the problem of youth smoking in Canada.
In particular, the means addressed in part in the legislation before you, based on research and evidence that we have looked at, seem to be guaranteed to do absolutely nothing about the problem of youth smoking. It is incumbent upon someone who makes this charge, then, to come with a better public policy agenda. I want to conclude by suggesting that.
In some sense, what I say is a re-rehearsal of comments made almost 10 years ago by your predecessors in this place and in the other place in which I presented a brief which suggested that the advertising ban brought in by Minister Epp would have no impact on tobacco consumption or smoking initiation amongst youth in Canada. The figures I want to suggest <#0107> and, indeed, the research that is contained in this book <#0107> do suggest that that is true. It should not be surprising for the following reasons.
First, advertising, as almost any advertising practitioner or academic will tell you, is about the selling of branded goods. In any given year in Canada, the United States, the U.K. or throughout Europe, advertisers put forth advertising campaigns for about 10,000 different branded products.
At the same time, consumers who are polled about their recognition of that advertising can cite at most 400 to 500 of those branded products for which the advertising has made any impact. This should not come as any surprise to you, as anyone who is in the advertising field would say that at most 20 per cent of any sort of brand of advertising makes an impact on any particular group of consumers.
Advertising, then, as conceived of by advertising practitioners, is a tool for obtaining market share or brand competitiveness and it is not seen by these practitioners as a tool for increasing the overall size of any particular market. What economists continually use in their aggravating jargon is called the "aggregate size of the market", which simply means the total size.
In fact, when you look at the evidence -- what evidence do you mean, Mr. Luik -- of academic practitioners and the evidence of people who run advertising campaigns, what do you find about the ability to increase the aggregate or the total market of any given product? You find quite surprisingly, and particularly in light of the Government of Canada's proposed legislation, that advertising appears over its inception to have no capacity to increase the size in mature markets of the actual market size.
You might say that is a convenient argument which only applies to tobacco or perhaps alcohol. I would reply and say that there is a wealth of evidence from around the world that that view of advertising is sustained across all markets sizes.
One of the witnesses who will appear will be derisive about the so-called use of mature markets saying, in fact, it is not an established term. There are hundreds of references in academic literature to mature markets.
Let me give you one example of an interesting study conducted by Jones over two 10-year periods in the United Kingdom when he looked at advertising and its impact in the food market. We are not talking about tobacco but about food.
He found that the advertising billions of dollars spent over those two 10-year periods had no effect in increasing the overall size of market. In fact, in many categories, there was a significant decline in the product that was most frequently sized.
What advertising did do, in a well-established market like foods, was to move brand share, precisely the sort of claims that are made about tobacco advertising.
First, people who come and claim to present to you a wealth of evidence about what advertising does -- what I would call the strong theory -- that is able to extraordinarily manipulate people into buying things or making purchase decisions that they would not make, have not read the academic literature about advertising.
Second, let us put academics aside. Academics are probably ivory tower people. Let us talk about real life people -- that is, the people who actually practice advertising. Do they, in fact, believe that advertising can increase consumption? Do they, in fact, believe that it can initiate consumption?
There are 25 years of practical advertising data contained in the Advertising Awards logbooks from the United Kingdom. This is a series of award winning advertising schemes going back almost 20 years. There are 500 case studies. These are awards for advertising campaigns submitted by advertisers.
It is interesting that you will not find a single practical advertising -- and remember that these are the ones that actually can prove they worked -- that was designed to increase the overall market of any product category, let alone tobacco. Therefore, the claim of what advertising is trying to do in terms of increasing aggregate market size is not true.
Let me say something specifically about tobacco advertising. You might say that is true, Mr. Luik, about advertising in general, but perhaps tobacco advertising is a peculiar exception. If it is, it would be the only exception that exists in the world.
Advertising in the tobacco industry is precisely the same in terms of its attempt to shift brand and the economic rationalization for it. However, you might say, "Consumers of tobacco are quite different: They die every year and you have to replenish them. "To that I would say," guess the consumers of deodorant, tooth paste and cars do not die every year and therefore there is no need to replenish those consumers either."
The point about the death of the consumer misses the point. The fact that tobacco is now part of the social landscape of Canada and other countries means that people will experiment or use it, particularly young people, simply by virtue of the fact that it exists as a legal product. Any advertiser who understands this will not waste a penny knowing full well that they will not increase the size of that market but they will direct their attempt to obtain their particular share for a brand.
The third issue involves young people and smoking, particularly young people, smoking and advertising, because this is the area that is perhaps most contentious. I find it curious that the minister who appeared before you, after years of scouring the world attempting to find conclusive evidence, have yet come up with no more evidence than they had and presented at the hearings and lawsuits involving the TPCA.
You might say that is because there is not any evidence about the consumption of tobacco advertising and smoking initiation. In fact, I wish to suggest that there is. Let me take one example which is not one produced by a tobacco company or by a researcher like myself but is one produced by a royal commission. The Smee report has been referred to on several occasions in this room.
Approximately three years ago, Mr. Waterson and I did a detailed analysis about the Smee report which has appeared in three reviewed articles and journals.
One of the interesting things about the Smee report is that no one who believes in the object of this legislation would introduce the Smee report as justifying tobacco advertising bans or a connection between smoking initiation and advertising. In fact, Mr. Smee came to two very interesting conclusions which I suspect you probably have not heard. One is that after rigorous and detailed studies, the Government of the United Kingdom represented by Smee, could find no evidence of a connection between aggregate tobacco consumption increases and advertising. Second, and this is even more relevant, regarding the question of young people and smoking, Mr. Smee did a detailed econometric study as well as a literature search in order to see whether he could establish that there was an effect on the part of advertising in the initiation of smokers of people aged 15 and above in the United Kingdom.
You will find, if you read his report carefully, because in fact he buried this politically incorrect conclusion in an appendix, the author said that his detailed work could find no effect of tobacco advertising on the consumption of tobacco amongst young people aged 15 and older in the United Kingdom during the 20 years in which the study was carried out.
If someone comes before you and wishes to claim that there is good evidence that would justify the minister or the government introducing restrictions on tobacco advertising because these restrictions will affect youth smoking in Canada, I would ask about the careful evidence of Mr. Smee and the Government of the United Kingdom. Mr. Smee is certainly not a partisan supporter of tobacco advertising, as he states up front.
This sort of evidence is backed up by dozens of other studies which looks carefully at the question of what are the most reliable predictors of smoking onset amongst young people?
Yesterday, Mr. Irving referred to the study by Conrad, Flay and Hill. I believe that study will be provided to you. It is also cited in the book by Mr. Waterson and myself. It is perhaps one of the most comprehensive reviews of cross-sectional studies that has been done in Canada or any other country.
It is extraordinary that two of those authors served on the advisory committee for the National Cancer Institute and yet their work as reported in two academic journal articles is nowhere referenced in that report which has been submitted to the Minister of Health.
I can only speculate why those articles in fact are not included in that report. My speculation might run along the lines that the findings were politically incorrect. If you read the report of Conrad, Flay and Hill and their analysis of these studies about why young people begin to smoke, you will find some interesting things.
The things that are most predictive about whether a young person becomes a smoker, are things like low self-esteem, low economic performance, social economic factors, rebelliousness, risk-taking and different risk perceptions.
In other words, the question of advertising was not seen as statistically significant. In fact, the three authors -- two who participated in the studies advanced by the minister and put before you -- indicated that only two articles existed in the review that they had looked at that discussed the question of advertising as a predictor of youth smoking and both were found to be statistically non-predictive as to whether, in fact, advertising prompted young people to begin smoking.
Even if we want to go nowhere outside Canada, if we want simply to say let us look at the ambit of research considered by Health Canada and put before you, the question, then, can be answered by looking at the very researchers who were introduced by the Government of Canada. Let us really find out what they said when they were not preparing a report that was laundered for the minister. Let us look at what they wrote in other academic journals. These very authors do not support the position that young people are led to smoke by tobacco advertising.
Finally, let me say something about tobacco advertising bans. This is my last negative point, for I want to say something positive and not seem like I am harping about advertising.
If you have followed the argument I have made so far, I have attempted to say something about what advertising attempts to do in the marketplace, with both what academics and ad practitioners believe advertising has done. I have tried to focus on the more specific question of whether advertising for tobacco products increases aggregate demand. I then focused even more specifically on the question, which I think is the main nub of the issue for you, as to what the evidence says about young people and smoking initiation in connection with advertising.
Let us assume that in fact this legislation will pass. Let us assume that we go back to the situation that we had in this country for almost eight years in which there was a more or less total ban on the advertising and promotional activities of tobacco products. The supporters at the end of the day, including the minister, have to put before you a reasonable assumption. I noticed they used the words "logic" and "commonsense" quite often. In my world, when someone uses the words "logic" and "commonsense", it means they do not have any good empirical evidence, and I have tried to suggest that they do not.
Let us assume for the moment that this bill will pass. What will be the effect of an advertising ban in Canada? Can we say, as we should, that it will make a significant difference in the number of young people who are initiated to smoking, that youth smoking will go down? If you look at the literature that is presented in the book by Professor Waterson and myself, you will find an interesting fact. Of the evidence that has been presented from around the world about advertising bans, one fact stands out significantly, that is, there is absolutely no correlation between the degree of severity of restrictions on advertising or of the success of bans and whether there is any impact on whether young people continue or start smoking or whether tobacco consumption is reduced.
One of the most startling indictments of Canadian tobacco control policies over the last 20 years, in particular during the period when there was a total ban in this country, is surely brought out by Health Canada's own evidence about youth smoking cycles, or Statistics Canada's evidence that during the period of the ban, depending on whom you are looking at and what particular period, youth smoking increased in Canada by anywhere from 3 per cent to 4 per cent.
One of the articles in this book is by a man by the name of Michael Stewart, who in 1988 wrote an article about the likely effect in Canada of introducing legislation to ban advertising. I think rather presciently Professor Stewart predicted that an ad ban in Canada would likely increase tobacco consumption among young people by 2 per cent to 3 per cent. His figures come uncannily close to what in fact happened.
In short, then, it seems to me there is no compelling evidence that instituting a ban or restrictions of the type envisioned in this legislation will do anything, based on the evidence from around the world. It is open to you to say that Canada is somehow unique, that the experience of 33 other countries, and of other jurisdictions, bears no relevance, but if you want to take that position I suggest you look more closely at home and look, for instance, at the evidence that arises out of the case in Saskatchewan. Saskatchewan had an ad ban, a total prohibition on alcohol advertising, for almost 58 years. It ended in 1981. It was an interesting laboratory experiment because here you had a whole population which, for 80 years -- within the living memory of anyone living in Saskatchewan -- there was no alcohol advertising.
According to the logic of Minister Dingwall, the return of advertising, in a situation in which it had not previously existed, should have done two things. It should have prompted a huge increase in youth consumption because that is what this argument suggests; and, second, there should have been a significant increase in overall consumption in Saskatchewan. However, when you look at the work of Makowsky and Whitehead who published two articles on the question of whether the ad ban had this effect in Saskatchewan, they conclude that, in our own country, they could find no evidence that the introduction of vigorous advertising had any impact on the alcohol market, in terms of either youth use of alcohol or aggregate consumption. Therefore, if the evidence about advertising bans from around the world is not convincing, then what about the evidence from our own country, in terms of a particularly controlled experience in the province of Saskatchewan?
That is enough about negative things. Let me conclude on something that I hope is positive.
It is often said that people like myself who study the issue of young people and smoking and advertising are continually harping on what the government should not do, continually saying that this particular policy will not work or this particular initiative is wrong, without providing any positive. I am not an employee of any of the principals in this issue. Therefore, I can put forward a suggestion which is my own and which is not derived from any sort of special interest. It really is not my own suggestion. I want to suggest that, perhaps, the direction for health care policy that deals with the question of youth smoking might profitably be focused on the report of the National Forum on Health -- a government-produced, commissioned and endorsed report released about six weeks ago.
In the work of the National Forum on Health, in a series of papers commissioned as part of this research, there are about 25 papers which deal with what are called the determinants of health. Of those papers, there is one which focuses on the question of youth substance abuse, in particular tobacco and alcohol, by Pamela Fralick, and I think that paper contains at least the beginnings of a different policy approach to the question of young people and smoking, one that strikes me the Government of Canada has not even considered let alone given serious thought to implementing.
When one looks at Ms Fralick's work, one is struck by two things. First, there is no mention of any of the provisions that are being envisioned in this bill as predictors of youth smoking onset. In reviewing the academic literature, you might think Luik simply comes in and tells you advertising does not have anything to do with this. However, if you look at what health care professionals say, that is not the case. If you look at a careful Canadian-produced piece about the things that lead young people to smoke, there is a striking overlap between the research by Conrad, Flay and Hill. The same sorts of predictors turn up over and over again.
Second, there is a surprising absence of any of the things that have been paraded before you as to what causes youth to smoke. Nowhere in that research report in the National Forum of Health is there any discussion of tobacco advertising as a predictor of youth smoking. The absence of this is even more striking when, third, you consider the following, and this is really the nub of the issue. What does someone within the health care community who produced a report, a commissioned piece of research for the National Forum on Health, suggest should be the Government of Canada's policies for dealing with the question of youth smoking?
Let me just suggest -- and I will quote in order to be exactly precise -- the priorities that are identified by Ms Fralick. These are the policy options that she says are important for dealing with the problem of youth smoking and youth initiation. They are fostering positive healthy home environments; decreasing socioeconomic disparities and inequities among youth; keeping youth in school; addressing literacy concerns; actively involving youth in healthy sport and recreational activities; providing role models and mentors; increasing coping mechanism; and enhancing competency and self-esteem.
In other words, for the first time in 25 years in Canada, someone in the health establishment has put forward a document about how to deal with the problem of youth smoking which is actually linked up with what the academic literature says is the problem. It says we have been pursuing a policy which actually misses because it goes for the superficial. It is extremely easy for a minister to introduce a bill which says we will deal with the problem of youth smoking initiation in Canada by hammering advertising, end of story.
It is extremely difficult to find creative and money-rich ways to deal with the problem of youth smoking which go to the rooted causes of youth smoking as outlined in this sort of research. From the perspective of someone who is simply a citizen observer in this debate, if the members of this committee are really interested in coming to a definitive answer to this problem -- which goes below the surface as opposed to the simple, superficial, cosmetic and, ultimately, by their own account, failures of tobacco control policy, particularly with regard to advertising -- then I suggest that you look at and give serious consideration to the work of the National Forum on Health rather than pursuing an agenda which looks at superficial and ultimately futile things. If the experience at the end of those eight years in Canada when we did have an advertising ban is anything to go by -- that is, by failing to pursue a positive agenda -- what will happen in the future is simply wasting 8 or 10 more years in which we could be getting at the problem in its depth and complexity rather than, as it were, tinkering at the edges.
I hope my negative message is offset to a large extent by something positive. The issue of youth smoking is not intractable. It takes a fair degree of creativity, a fair amount of money, attention and focus on the right issues, at the same time coupled with the realistic understanding of what the academic and practitioner language and evidence say about advertising.
If I could say anything, it would be: Please, do not misdirect the attention of the health care establishment in terms of what could only be called the chimera of advertising or the magic bullet while ignoring the things that practitioners within the health care community might say are more substantial avenues of dealing with this problem.
The Chair: Thank you, Dr. Luik.
Senator Pearson: Thank you very much for your presentation. It seemed to me that about the only thing advertising has been successful at doing is advertising advertisers. If it is as ineffective as you are suggesting it is, one wonders why companies spend so much time and money on it.
Senator Jessiman: It is to get their proper share of the market.
Senator Pearson: I know that. I am referring to creating the market in the first place. That brings me to a second point, which is not about tobacco. I am talking about looking at how all these things interact.
Mr. Luik: I think what you say is exactly correct. Someone once said, "I know that half the amount of money I spend on advertising works, I simply do not know which half it is." That is important to keep in mind when you are talking about a new product. For instance, I suggest that -- and advertising literature bears this out -- the introduction of microwave ovens or VCRs was aided enormously by advertising. In terms of new products in which advertising actually tells people they exist and what their advantages are, advertising can do an enormous numbers of things. However, in terms of what it actually is meant to do in terms of shifting market share, it is much more a sort of uncertain art than any sort of science which people portray it to be.
Senator Pearson: I am sure that is right, but I think it is an important component of our whole culture.
Mr. Luik: Yes.
Senator Pearson: It probably has impacts which were not intended by the advertisers or even by the industry, which I see, for example, in self-images among girls. Compared to the time in which I grew up, the time in which my daughters did and the time in which my granddaughters are, the girls have become thinner and thinner. The discomfort in the young population about their weight is directly due to the images that have been conveyed in the popular culture around advertising.
Mr. Luik: Certainly, with regard to the images that are conveyed in popular culture, I tend to think that advertising more reflects those images than creates them. I do not think an advertiser can create an image that will become pertinent in popular culture. I think that advertisers pick up on those images.
Senator Pearson: It must be a chicken and egg type of thing. I do not think anyone is quite so crude as to say, "I want to advertise for very thin girls," but the interaction between the image and what they then decide is the saleable image is very close. I am not sure where you assign blame in this case, but it is obviously a very powerful component of how attitudes are created within a young population. Probably those who were designing or conveying messages about tobacco had in mind that there was something about the overall impact of the messages that was making it an attractive thing to do. I quite agree. I do not think you could ever make a direct connection between seeing advertisement "A" and picking up a cigarette. I know that there are all these other components in it, but there is something in the overall culture that has made cigarettes a popular item.
Mr. Luik: I would agree in part with what you say; however, it needs to be qualified. There is an overall cultural fact about smoking in that it has become an artefact within our culture. If anything, tobacco advertising today has been spectacularly successful at producing a generation of kids who know a lot about the risk of smoking and who, overwhelmingly, consider it to be unacceptable. I will give you an example which often comes up, namely, a study by a man in Australia by the name of Richard Mizerski. He was particularly interested in this question about Joe Camel. You have heard a lot about Joe Camel; everyone has a view about it. Professor Mizerski's research is interesting and goes to your point. It really adds to this notion about the effect of advertising.
Mizerski was intrigued by the fact that, allegedly, Joe Camel is the most popular advertising figure among young children under 10 in the United States. That is not true. It is actually a serial icon or character, not a tobacco one.
He asked children in the United States about Joe Camel. He took a group of kids and asked them if they knew what Joe Camel stood for. He then asked another question, which is where his research became quite interesting. He said, "The kids know what Joe Camel is about." He then asked: "What is the impact of that icon out there?" He asked the kids with what they associated Joe Camel. Almost 87 per cent of the children, when asked with what they associated Joe Camel, stated that it was an unattractive, probably lethal activity that they did not want to take up. In fact, if Joe Camel and that sort of promotion has been successful, I think it has been spectacularly successful at inculcating a notion of disease, death and lack of health and vitality among little kids.
We need to be careful about what we say about whether these promotional activities allegedly go forward and make any sort of impact other than a negative one. There is a lot of evidence that the overwhelming impression of most of these kids about things like this is quite negative.
Senator Pearson: That brings me to my final question. You talked about commercial advertising. Another area that has been raised by a couple of speakers today is what we call social advertising, that is, advertising images that counteract the other kinds of images. Is it your impression that that is equally ineffective?
Mr. Luik: That is interesting because there have been some interesting studies about the effect, for instance, of government campaigns about a whole range of things, particularly about wearing seat-belts and that sort of thing, and whether what is often referred to as health or lifestyle advertising or counter-advertising can be helpful.
To be honest -- and I am sorry to tell you this because I should like to think that it would be different -- the answer is very mixed. Of the studies that have looked at this, a number have suggested that there is a very minimal impact in terms of changing people's behaviour on the basis of advertising. You might say that is regrettable. However, on the other hand, I say that it is consistent. If we argue, as the evidence suggests, that we cannot find good, solid evidence that advertising can persuade people to do things that they may not want to do, why would we believe that we could get them to change lifestyles, which are really deeply ingrained, on the basis of advertising? It does not mean, for instance, to refer to the seat-belt example, that after an advertising campaign and some of the evidence from Australia, that when you polled people they could not tell you the risks. The advertising campaign was very successful in getting people to understand the risks of not wearing a seat-belt, but it had virtually no impact in actually getting those people to buckle up. Again, I think that comes at the whole issue about health care promotion and the fact that we assume that advertising is a vast tool which, when you throw out a series of injunctions about how to live the good life, people immediately heed them.
Whether you are talking about smoking or seat-belts, that is not the case. It seems that advertising, even from those good advertising examples, works on a very small percentage of people and only when they are already inclined to a particular sort of behaviour or change.
Senator Pearson: Is the answer to impose a fine?
Mr. Luik: Yes.
Senator Pearson: I am talking about seat-belts.
Mr. Luik: I think you have to back it up with more coercive measures. However, if you are looking at this from a health care perspective, you would like to hope that carefully, well thought out advertising campaigns about risks could change the behaviour of a significant number of people.
In this regard, you need only look at the failure of campaigns concerning sexually transmitted diseases to change patterns of behaviour in regard to sexuality. People will say that those advertising campaigns have not been very successful. The use of advertising to engage in behavioural modification -- and I think most people within advertising would tell you this -- is a very dicey and tricky proposition. There is no good evidence to suggest that it works.
Senator Doyle: I wonder if our witness has ever dealt with a four-year-old Canadian child two weeks away from Christmas. If you doubt the value of advertising and modern television advertising, try it.
I might say that the chairman of this committee is wearing a very stylish colour. I was just told that by a lady friend of mine. I do not know whether that is a direct result of advertising.
Mr. Luik: It is a direct result of her good taste.
Senator Doyle: On the other hand, with ladies whom I have a more familiar acquaintance, I have found that they are quite willing to countenance the opinions of the so-called style centres, who are really advertisers. The house of Dior did not suddenly invent the "new" look. It was a well-calculated campaign to set an entirely new style in women's clothing, and it was enormously effective.
Look at the areas where we pay no attention to brands -- margarine, for example. We find that the margarine industry rarely advertises a trademark product in Canada. They are more inclined to advertise the generic product, as are the makers of butter, milk, maple syrup and eggs. I am reminded of these things constantly. Whether the advertising is in one form or another, it will kick my mind that I have not had maple syrup and pancakes for two weeks. That will prompt me to use the product without going out to buy Joe Blow's Syrup, but a generic product.
I discussed this subject with a group of students who are working in the Ottawa high school system to reduce smoking. They, like you, said that advertising was certainly not the major thing which prompted youngsters of nine and ten to start smoking because that is the furthest targeting age. It was not that. They did not read or watch the ads. What was a factor was that their older brother was smoking or, as Ms Fralick mentioned, it was because their parents, or the relatives they admired the most, or because so-and-so who was a big success on the tennis circuit or so-and-so who was a rock musician was smoking. Those things attracted the nine and ten year olds.
They also said that they were attracted by the odd advertisements that are seen on television and movies which do not appear as commercials. Let us say that you drive by and you see a big billboard advertising a lush young thing smoking. Thirty years ago, in a major city, they would have been depicted blowing smoke. There is nothing wrong with change.
I find it difficult to accept your confidence that all is well and that advertising will not get them and that you should go and find another target.
Mr. Luik: You made a number of points, senator. Let me say three things in reply. I will begin with the last, "all is not well".
Many problems must be dealt with in terms of youth smoking. I tried at the end of my presentation to suggest to you that academic research has suggested that the direction in terms of advertising is not particularly promising.
Second, I do not think you will find "lush young things" depicted on billboards in Canada. In fact, that sort of advertising does not exist here. Under the voluntary code, it is not permitted in Canada. That might have occurred 30 or 40 years ago.
Third, I want to come directly to your point about what advertisers try to do. Let me go to your points about butter, eggs, margarine and milk. Some 15 years ago the most heavy expenditures around the world in certain markets were precisely for those sorts of products on the assumption that you could increase the overall market with generic advertising campaigns. The evidence I cited earlier, particularly the study from the U.K. and similar campaigns that have been run in Europe by governments in an attempt to get rid of their vast surpluses of agricultural commodities, have shown that these are complete failures.
One of the interesting things about the evidence of advertising and foodstuffs is that the more money that is spent, the more the market appears to shrink for those particular sorts of goods. I simply do not see that that exists when you talk about those sorts of advertising.
It seems so easy, straightforward, intuitive and plausible to say that all this money is being spent on advertising, the purpose of which must be to get people who do not use the product to use it. Within the research we have done, we have cited several classic articles. Probably the most famous is by Brian Sturgess from the University of Nottingham in England. He said this is a myth. When you look at the actual campaigns carried out by advertisers, you will search in vain for advertising campaigns designed around those premises. I do not say there are none. I would say they fall in the 80 per cent of advertising campaigns that should not have been carried out. I think advertising practitioners learn very quickly that this will not work.
To come back to "all is not well", I think we have a huge disconnection in the amount of effort and attention this country is focusing on a single issue in terms of dealing with smoking predictors. All of the other smoking predictors seem to fall off the table. People say, "All those other sorts of things are dealt with in other parts of government policy. We do not need the Minister of Health to deal with socio-economic disparities or self-esteem, et cetera." I am sorry, but I do not see that commitment, from this government or many provincial governments, to deal with those issues. In fact, I think they generally fall off the table.
If you look at the increase of youth in poverty in this country since 1989, you will see that there is a 40-per-cent to 50-per-cent increase in youth poverty. There is no understanding of the tension in terms of the special needs of kids to deal with the questions of dropping out of school, literacy or self-esteem, the three highest predictors of youth smoking. Interesting interventions have been tried all over the world.
When you deal with the issue of keeping kids in school and you address the question of academic concerns, smoking rates amongst kids with those interventions plummet dramatically.
I find it extraordinary that we would waste our time talking about something that, in my mind, is a non-issue, even though I am interested in it from an academic point of view, instead of saying to the minister, "Perhaps you could bring in some initiatives that might creatively address some of these other things."
Senator Doyle: Mr. Luik, you mentioned surveys on margarine, butter and that kind of thing that have been done in England and in Europe. Are there similar studies done in the United States and Canada which are, perhaps, in a different market with different kinds of customers watching?
Mr. Luik: No. The studies about margarine and butter are U.K. and EU based. There may well be studies done in the United States or Canada, but they are not ones that have appeared in the mainstream research.
I have to say fairly that I do not know. That would be an interesting issue. I do not think consumption patterns are that different in terms of the U.K.
In the U.K. over the last years, and this is borne out in Canada as well, one of the highest per capita ad spends has been devoted to spirit advertising, followed closely by beer advertising. Yet, if you look at the market in the U.K., what has happened over 20 years is that the market for wines has increased by 1,500 per cent, while the market for spirits has collapsed. The market for beer has gone down by a couple of hundred per cent.
In direct contradiction to what you think would happen, the more you spend on advertising, the more promotional advertising you do, you seemingly ought to be increasing the size of the market. The exact opposite has happened. Why has that happened? I think that comes back to your colleague's point, senator. Without any impact on the marketplace, because wine producers advertise hardly at all in the United Kingdom, there has been a social change in the drinking habits of people throughout Europe, or more particularly in the U.K. People have moved away from spirits and beer toward wine. There has been no attempt on the part of the wine producers to do this. It has been a social factor that is connected with many other things. To answer the question what was the impact in term of advertising, the impact in terms of advertising was exactly the opposite of what anyone would have thought, but exactly what academics would tell you it would be.
Senator Doyle: Commenting on the decline and fall of liquor as a market share, when it happened in this country we knew why it happened. It was because we had started to arrest people who climbed into their automobiles under its influence. I do not think any advertiser could get out and counter that.
Senator Kenny: I have been listening to you, sir. I find what you have to say very interesting. I wonder if some of the answers with regard to wine and spirits were not a bit simplified. I can cast my mind back to a business case where tea was a declining product and an advertising agency put together a fairly successful program to retard the decline of tea sales. There was no question of reversing the sales of tea, but they felt they could perhaps reverse the decline.
Mr. Luik: Was it the sales of tea or the sales of a particular brand of tea?
Senator Kenny: It was the sales of tea, period. Canadians were drinking less tea.
Mr. Luik: So this was an advertising campaign on the part of an association?
Senator Kenny: Yes.
Mr. Luik: That is an important point.
Senator Kenny: It is hard to argue with your point that motivating people is a complicated thing and that there are lots of triggers and other factors that cause people to change their minds.
Having said that, that does not make the case that by focusing in on one of the things that might have an impact on making people change their minds, if you have the intention in the future at some point of doing some of the other things that might cause that change, then doing that one thing is appropriate just the same, if you agree that advertising might be a component in it. In other words, I am saying if you are prepared to say you will not write off advertising altogether, advertising together with some other things might have a change in behaviour. Perhaps it is appropriate, then, to move on advertising now, providing the other shoe falls at a later date. Would you agree with that?
Mr. Luik: No, I would have to take issue with that, for both a theoretical and a practical reason.
You have put the argument quite fairly in that you have used a hypothetical statement, something which is not often done. There is no good evidence to suggest that advertising has any connection with these things. If you, sir, or the Government of Canada, which has repeatedly said this, could find any evidence that would contradict 400 pages of fairly well documented best academic research in the world about this, I would be quite happy to entertain it and I would go through it study by study. Using good econometric models, proper specification and paying proper attention to causality, if this were true, then I would agree.
We have had 20 years of people saying, "Let us just do this advertising thing and leave all those difficult issues that we have to think about to another day." To that, I would ask: Why invest all this time in terms of arguing about something which is so non-predictive of smoking behaviour and, instead, let us begin to creatively address these other issues about which there is absolutely no dispute?
If you were, for instance, senator, to call for witnesses to come and talk about a bill which will deal systematically with those other eight or nine predictors, I do not think you would you get a single witness who would say, "These are things you should not do." You might have a quibble about timing and cost, however.
The practical point is that we invest so much enormous effort in this country over a silly, rhetorical, emotionally exhausting debate on advertising where the evidence is so clear that we never get on with any question about youth smoking.
Senator Kenny: You have used a lot of adjectives that did not sound entirely academic to me.
Mr. Luik: That is because I feel very passionately about this issue.
Senator Kenny: Are you familiar with Proposition 99 in California?
Mr. Luik: Yes, although not in detail.
Senator Kenny: My understanding is that the general effect of Proposition 99 was to impose a 25-cent-per-pack tax on cigarettes, take the revenue and use it for an educational program that was principally through the mass media. It had a significant impact on the usage of tobacco in California. According to a study done by the University of Berkeley, there was a reduction in cigarette sales of 819 million packs per year over a three-year period.
Here we have a situation with only two clear components. One was an educational program which I understand was pretty much an in-your-face sort of program. It was combined with a modest, by our standards at least, tax increase on a package of cigarettes. It appears to have had a significant impact on a population about the same size as Canada's.
Was the study flawed? Are my figures off? Do I have only part of the story? What is your response, sir?
Mr. Luik: Let me say something about the design and methodology of the study and then give you a counter example to show how difficult it is to draw these conclusions.
I would say that the study is not rigorous because you cannot simply take a two-variable analysis about anything as complicated as advertising and say that we had x-rated consumption at this point, we introduced measure A and at time sequence 1 we had an effect.
Anyone who does any study of this issue using two techniques, that is, the Box Jenkins technique and the Granger Causality Analysis, which is the basis of making assumptions like this, would have to say that that study, to all intents and purposes, is essentially useless. To put it in lay language, the reason it is useless is that there were probably 10 other factors going on, including a price increase and other sorts of things which had an impact in terms of that.
Senator Kenny: I accept all of that, sir.
Mr. Luik: You could not make that conclusion.
Senator Kenny: The problem is that the conclusion you are getting is my synopsis and I am not doing justice to the study.
Mr. Luik: You were fair in stating it and that is my criticism. I do not want to appear as if I am not in favour of looking at price as a lever to deal with this problem.
Senator Kenny: I am trying to agree with you by saying that it is not just one thing, it is a variety of things. The longest journey starts with a single step. You must start with one thing and then move on to another of the variables. You keep on going and you keep on moving. If you do that, eventually, you may change attitudes.
Mr. Luik: If you look at a similar sort of program carried out in the State of Massachusetts, which had an even more substantial tax increase, you will find, according to the Massachusetts department of health, that smoking rates among teenagers have increased during the same period. That is why it seems to me you cannot draw any reliable conclusions from that sort of thing.
Senator Kenny: That is tricky because when we saw an increase in price here, we also saw some increase in the number of smokers. However, that did not take into account the fact that smuggled cigarettes were being smoked.
Mr. Luik: When you disaggregate the data and allow for what was contraband during that period, you can make some fairly accurate assumptions.
Senator Kenny: It is hard to figure out what is contraband and what is not. None of your boxes will give you an answer to that.
Mr. Luik: If you use the figures of Statistics Canada, which has a pretty good reputation around the world, for sake of argument --
Senator Kenny: I got a feeling there were not many statisticians around Cornwall when the boats were coming across.
Mr. Luik: With respect, you can certainly take an estimate, for instance, as provided by the Prime Minister when, in 1994, he said that probably 40 per cent in the province of Ontario and upwards of two-thirds in the province of Quebec was smuggled product. That is a pretty genuine statistic.
When you use those statistics, you can get a fairly good idea of what was contraband and what was not and then make a conclusion about what happened to youth smoking. Surely, you will not disagree with the fact that youth smoking increased substantially during the period in which we had a total ad ban in this country.
Senator Kenny: If I am prepared to concede that one or two things will not solve the problem, are you prepared to concede that an education program which has an element of sophistication in it, one which does try to push several buttons as opposed to just one and which is communicated through the mass media, is easiest to do with advertising? If we combine that with a modest tax increase that does not precipitate smuggling, is that not our last best chance at modifying behaviour vis-à-vis smoking?
Mr. Luik: I am drawn in part to what you have said because price is a substantial lever in terms of youth smoking. I have a general reservation about the effectiveness of advertising and about the caveat you made about a "sophisticated" campaign. When you look at the evidence of what past campaigns in this country have effected, they have been disappointing. However, from the point of advertising, if that is the best we can come up with, then let us go ahead and do that.
Senator Kenny: Let us withdraw the word "advertising" and talk about education.
Mr. Luik: We could say health promotion.
Senator Kenny: Does a combination of a modest tax increase together with an education program make sense to you?
Mr. Luik: Yes, as two components among many. However, to be frank, they would not be my first choices because, as set out in the academic literature and, in particular, the report of the National Forum on Health, those are not the leading policy prescriptions put forward in terms of smoking initiation.
If you want to do those, all right, but why chose those two? Why not go to the root of the smoking problem in terms of educational attainment, socio-economic disparities, motivation and self-esteem?
Senator Kenny: First, self-esteem, motivation and education are all covered in the ambit of our educational program.
Mr. Luik: I am talking about education in terms of keeping kids in school.
Senator Kenny: Changing someone's socio-economic status is asking a lot of the government.
Mr. Luik: It is asking exactly what one should expect as a citizen of this country, with all respect, sir.
Senator Kenny: Then I will tell you who to vote for in the next election.
The Chair: You mentioned in passing that you also appeared when the previous bill was before us.
Mr. Luik: Yes.
The Chair: Can you tell me why you do not seem to have been listened to either then or now?
Mr. Luik: That is somewhat difficult, without casting aspersions on you and your colleagues.
If I were in the Minister of Health and had to deal with a sensitive emotional issue like youth smoking, it would be easy to get up in Parliament, or on a television spot, and say, "I am today introducing legislation to deal with the problem of youth smoking by banning sponsorship and banning advertising." Or, as Senator Kenny suggests, it would be easy to say, "We will have a youth education campaign and put up the price of cigarettes."
When you go to the point I just made about dealing with socio-economic disparities and keeping kids in school, the problems that underlie a whole range of social behaviours in this country, that is much more difficult. It is not a matter of not listening, it is that people find it difficult to deal with those issues.
My point is not one of anger. It is simply saying here we are, nine years later and we are still rehearsing the ridiculous question of advertising and we have not got down to some of these other things, whether they are questions of increasing taxes, promotional campaigns, et cetera. This is because we have not exerted the will and creativity necessary to do that. It is hard to market those sorts of initiatives. Think of yourself getting up and saying, "Today, I want to announce a brilliant new tobacco control policy for young people. We will eliminate socio-economic disparity in Canada. Thank you very much."
That is very hard. Those are big policy issues with which to deal. We need people who will take the first step, as you said, to break them down into measurable things.
The interesting thing in Ms Fralick's paper is a list of projects from around the country with respect to which she cites examples of people who have taken those coping skills, keeping kids in school and so forth.
Senator Jessiman: Do you make reference to that in your book?
Mr. Luik: No.
Senator Jessiman: Do you have her paper?
Mr. Luik: Yes. As you know, there are a number of papers. I can certainly provide you the one referring to health, which is just a summary of her paper.
The Chair: It is also available from the Department of Health.
Mr. Luik: Yes. So I guess it is a question about the difficulty of this. That is perhaps the reason.
The Chair: My final question has to do with mature product. I think it is true that you have a mature product in the sense of one that has been in the marketplace for a number of years. A VCR, for example, is not a new product. However, there is also a point where it is a new product for a certain group of people.
We were told yesterday that no one buys a car after looking at some advertising, which I think is incorrect. I think people do. I think they make their change not only for brand but for the kind of car, if they can be convinced that a van is more attractive to them, for example, than a two-seater.
What impact does that have on young people? I can put it in perspective. A woman is not very interested in hair colouring when she is very young. She may become considerably more interested in it as she gets older, although some of us just say, "To heck with that nonsense" and do not get interested at any time. However, surely there is a point when that product becomes a new product for a given consumer.
Mr. Luik: Yes. I certainly think that makes sense in terms of any product. The process of growing up in some sense is assessing a product source of a whole range of different products. That is certainly true.
The Chair: Is that not true for tobacco as well, then, so that at a certain point in the life of a young person tobacco is not a mature product; it is a new product?
Mr. Luik: I think that would be true of any consumer product with anyone who grows up, but the question you need then ask is, when that persons sees a branded advertisement are they making a decision about whether to use that product because of the advertisement or have they made the decision for other reasons?
I suggest that they made the decision on all those other reasons, not on the branded advertisements that they have seen, but it certainly is new to that particular group of consumers. I think that is certainly true.
The Chair: But you would not argue that a young boy watching the Grand Prix, seeing his hero Jacques Villeneuve with Rothmans written all over him, may not be attracted to smoking cigarettes and more particularly, perhaps, to buying the Rothmans brand because his hero, whom I understand does not smoke, is wearing a suit with Rothmans all over it.
Mr. Luik: No. I would suggest, with respect, and I think the evidence is quite clear, that that simply is not the case in terms of the young boy starting to smoke because he is attracted by his hero. It is a matter of debate. Even here I question whether there is much good evidence to suggest that he might be led to smoke Rothmans because of what he sees.
I think the sponsorship part of this piece is the weakest link in it. Therefore, I would have to say that I do not think there is evidence about that. While there might be weak evidence about the actual brand selection, I do not think there is any evidence about making the smoking decision on the basis of seeing the hero.
Senator Kenny: I have but two small points. Sponsorship gives an extra bang for the buck. Ads, by their nature, are easy to turn off. Sponsorship is life as it is happening. It is going on throughout the whole race and is very engaging. It reappears in the newspapers the next day. It changes from being an ad on TV to news all of a sudden when the winner appears not in an ad but in a sports column with the picture. It brings on a certain reality.
I am very much in agreement with you when you talk about the complexity of this issue. The point I wanted to bring up at the end is that the difficulty that we face as politicians in terms of communicating is that you have to narrow it down and focus on four or five points. You alluded to it yourself when you said, "I will change your socio-economic conditions."
Mr. Luik: Yes.
Senator Kenny: If we do not narrow it down and focus on it a step at a time and try to break the problem apart into its components, we will never get anywhere; we will stay on the dime forever.
Mr. Luik: Yes, I agree.
Senator Kenny: So then if we are going to try to break it down, I do not see why the only indicator you are against is advertising.
Mr. Luik: The reason goes to the nub of what I said. It is the one on which I think there is absolutely no compelling evidence that it is worth your time or has any results, and I think the evidence about that is incontrovertible.
Senator Kenny: However, the guys who run the tobacco companies are very smart and have been doing it so well for so long. They are not pouring their money down the drain. You and I know that.
Mr. Luik: I would like to think that in terms of a judgment about business people. Actually, I think many of them are not as smart as you might think because, as I said at the beginning, many of them might, from an advertising point of view, be incredibly stupid. As I said, at the very most only 20 per cent of any brand advertising or brand launch will work. That is true in tobacco just as it is in anything else. So you have, by definition, these guys being stupid 80 per cent of the time at the very best, senator.
Senator Kenny: What was Ted Williams' batting average? Twenty per cent is terrific.
Mr. Luik: I would not call them geniuses at 20 per cent.
The Chair: Our final witnesses this afternoon are Dr. Robert Allan and Professor Pierre Fortin.
Dr. Robert Allan, Professor of Economics, Department of Economics, University of British Columbia: Madam Chair, I will begin by saying that I endorse Bill C-71 and urge you to support it. I think the arguments in favour of the bill are health promotion arguments. I also believe that there are good economic reasons for believing that banning cigarette advertising would reduce smoking and promote health.
I do not think, however, that that is the only arrow in the quiver. The key features of any policy to control smoking would involve higher taxation on cigarettes to raise the price, which is an important influence on teenage smoking. However, price does not explain everything. It does not explain all the rises and declines that have taken place in cigarette consumption. I believe there is a role for restricting advertising in this regard as well.
For instance, as Dr. Luik said, it may indeed be the case that poor self-esteem is a good predictor of which teenager will start to smoke and which will not, but smoking the cigarette as a resolution for your problem of low self-esteem depends, I think, on advertising and the image that is created around cigarettes and smoking. So there is an avenue for intervention there.
In addition, it seems to me that, as a number of you have pointed out, the cigarette companies are not altogether irrational and that if cigarette advertising were solely a matter of market share and not market expansion, then Mr. Parker would have been here yesterday urging you to support Bill C-71 because, if it is only a question of market share, then all expenditures on cigarette advertising are a reduction in the total profits of the industry. So, if it is an unregulated industry, the collusion required to eliminate smoking might be illegal. Therefore, the simplest solution, of course, would be to have the government ban it.
If advertising were simply a matter of market share, the industry should be supporting this bill, and I take it their opposition indicates that they have some belief that it expands the market as well.
I have a couple of things to say with respect to educational policies. I do not believe that is a very effective avenue to restrict smoking. This is not 1955. People have quite a good deal of information about the health effects of smoking. If you survey eight year olds, you will find they all know smoking is a bad thing. They will all tell you they will not do it. Then, when they are 15, 30 per cent of them are doing it. Simply trying to work on their knowledge of health effects will not really have much leverage. What you have to do is change price, which affects their ability to buy cigarettes. As well, you have also to change the advertising, which affects the attractiveness of the product.
In any event, that is all on the demand side of the issue. The remarks I prepared really deal with the economic impact of banning sponsorship.
Tobacco companies sponsor major events such as Grand Prix auto races, fireworks displays, arts festivals and so forth. Increased commercial activity is associated with these events. The fear that this activity will disappear if this sponsorship is ended is the reason many people oppose Bill C-71. I put it to you, however, that events sponsored by tobacco companies in fact generate only tiny amounts of new, additional economic activity. The fear of economic loss is not a good reason to support tobacco sponsorship.
I wish to approach this issue in two ways. The first is by considering spending and spending patterns. The second is by considering more substantial events that we might expect to have a greater impact, such as world fairs. I will argue that if you examine these enormous promotional events, their impact in terms of generating economic activity is extremely small, and therefore much smaller events like car races have to be inconsequential.
The first approach to this problem is to look at spending and spending patterns. When you analyze a big event, like a car race or a big fireworks display that has a lot of associated commercial activity, you must distinguish between two kinds of spending. The first is the new spending or the new money brought in through tobacco advertising and promotion. That must be distinguished from the existing money that the patrons who come would have spent anyway.
What happens at these big events is that the tobacco companies spend new money. This draws a lot of people in who then spend money at restaurants, money that they would have spent elsewhere. The money they would have spent elsewhere is not a net gain in economic activity; it is simply a geographical displacement of spending.
For instance, if three guys from Trois-Rivières decide not to go bowling one afternoon and they drive to Montreal to watch the Grand Prix where they buy some beer and hot dogs, the money they spend in the restaurant in Montreal is the loss to the bowling alley in Trois-Rivières. When you are assessing sponsored events, you must take all these things into account and notice that the gain to the merchant in the vicinity of the sponsored event is also often matched by a loss to a merchant elsewhere. This means that the shift in the location of the existing spending does not count as a net gain when you are analyzing these events from the point of view of a province. The only possible source of net gain and economic activity is from the new advertising money of the tobacco companies.
It is possible in an economy with an unemployment rate like Canada's that this new spending could generate some jobs. I made some calculations, which are set out in my notes. Suppose the tobacco companies spend $100 million in promotion and sponsorship. This might translate into 2,000 full-time jobs across the whole of Canada. There might be more if you broke it up on a part-time basis, but that is the sort of number we are talking about. Frankly, that is not a big number. If that sponsorship was eliminated and those jobs disappeared, you would see no change in the measured unemployment rate. It is too small a number from that point of view.
This is likely an overstatement of any job losses at any rate because it is really a question of what would happen with $100 million if it were not spent on the promotions. If it were spent in some other way, then there would be job gains somewhere else.
For instance, if the tobacco industry is prevented from spending this money on promotions and instead spends it on litigation challenging the constitutionality of Bill C-71, that will create many new jobs for lawyers and be employment generating in another area. Alternatively, if the funds are paid out as dividends to Canadian shareholders and they spend the money, there will be spending someplace else. In the worst case scenario, not a lot of jobs are involved. There are many reasons to believe that these losses would never materialize anyway. I do not think this is a big item.
The second approach I want to take to the question of the economic impact of sponsorship is to look at giant events. The giant events I have in mind are world fairs, specifically Expo 67 in Montreal and Expo 86 in Vancouver. There was tremendous hype surrounding these activities and tremendous claims that they generated huge amounts of activity. However, if you look at the evidence, the amount of activity they generate is quite small.
I tracked what happened to various economic indicators in Quebec and the rest of Canada in the 1960s and in British Columbia and the rest of Canada in the 1980s to try to pick out the effects of these expositions on business activity. If you look at the tourist industries like restaurants and hotels, a little tiny blip is associated with a world's fair.
If you refer to the graph on the overhead, these are revenues in what StatsCan calls the restaurant, caterer and tavern industry. These figure apply to Quebec, which is the bottom line, and the rest of Canada, which is the top line. In 1967, the year of Expo 67, you can see a tiny upward blip there. This is the effect of Expo 67 on restaurant sales in Quebec. There was a peak the year before, but there is no comparable displacement in the rest of Canada. That is the Expo effect.
How big an effect is it? In Quebec, there was about a 6-per-cent jump that year in restaurant, caterer and tavern receipts. If you look at hotels, it is the same story and about the same amount. There is a little blip there.
If you look broadly at the economy, however, this all fades out and becomes inconsequential. Retail sales in general in Quebec are up 2 per cent in the year of the Expo, so it is a much smaller amount. With respect to total incomes in the province, there is hardly any change at all from the trend.
This next graph depicts the Vancouver Expo. In 1986, there is an upward blip there for the Expo. The B.C. Expo was about one-half the size of the 1967 Quebec Expo, and this is about a 3-per-cent displacement or a 3-per-cent increase above trend in sales.
If you look more broadly in the British Columbia economy at this time, you see the same thing with regard to hotels. If you look at retail trade, it actually falls off. It is below trend during the Expo. This is an example of the kind of displacement spending I talked about earlier. People in British Columbia, instead of buying toasters and clothes, spent their money going to Expo and buying food and concession stand items.
If you look at the total income of the province all told, it goes down. There is no overall gain.
The point of this comparison is that the sponsored events we are talking about are nothing remotely on the same order of magnitude as these world fairs. These things go on for six months. They are internationally sanctioned. They draw tremendous numbers of international visitors and are heavily promoted. If they have such small effects, if this Vancouver World Fair can only cause a 3-per-cent increase in restaurant sales with counterbalancing declines elsewhere in the economy so there is no get gain, how can anyone argue that eliminating sponsorship will have any serious economic ramifications at all? It will affect economic activity in the immediate vicinity of the race course, but once you go beyond that, there is nothing. Much of the gain in activity that takes place right around the race course is a displacement from the rest of the economy.
I do not think there is any basis for the arguments that we should oppose the prohibition of sponsorship because somehow it will cause us serious economic problems.
The Chair: Professor Fortin, please proceed.
[Translation]
Mr. Pierre Fortin, Professor of Economics, Department of Economic, University of Quebec at Montreal: I support the rationale behind bill C-71. There are always some aspects of a law with which one can disagree, but the principle behind this law is very sound. I supported the legislation when I testified before the House of Commons committee, and I continue to support it here today.
I did a study of the impact of Bill C-71 on employment. I started out with the rather reasonable hypothesis that over a span of 10 years, the law would reduce tobacco consumption in Canada by 20 per cent. I based my hypothesis on several impact studies conducted during the period prior to the drafting of the bill.
The bill would in fact reduce health care costs in Canada by over $400 million annually.
Furthermore, the number of jobs in the tobacco industry would drop by approximately 20 per cent. For example, in my own province of Quebec, approximately 2,300 jobs are related to tobacco manufacturing. The 20-per-cent drop in employment levels would mean a loss of approximately 430 jobs, or 20 per cent of 2,300, over a 10-year period. Consequently, this would mean a loss of 43 jobs per year, a loss which can easily be absorbed by the three plants in Quebec through retirements and voluntary departures. This would cause no serious hardship to the tobacco manufacturing industry.
Moreover, another extremely important fact that has been demonstrated on several occasions is that a reduction in smoking would redirect employment to other sectors of the economy because when tobacco consumption drops, the impact on employment is twofold: on the one hand, the tobacco industry, from the growers to the distributors, is adversely affected from an employment standpoint, but on the other hand, there is also a positive effect on job creation when the consumer takes the money formerly spent on tobacco and redirects it to other sectors of the economy.
Tobacco is a heavily taxed product with little value added for each consumer dollar spent, whereas the other products that the consumer would spend his money on are taxed at a lower rate and have a higher value added. Consequently, fewer smokers and job redistribution would create more jobs in sectors which would benefit from this increased purchasing power than would be lost in the tobacco industry itself.
Obviously, in the long term, the impact of the overall number of jobs created would be nil. A balance in terms of the level of employment would ultimately be restored, in keeping with the economy's resources. However, the initial economic impact would certainly not be negative. Obviously, the tax burden would be reduced significantly because tobacco in Canada is taxed at an average rate of over 60 per cent.
On the one hand, government revenues would drop by 20 per cent over 10 years, which would result in a loss of $750 million for all 10 provinces and the federal government. On the other hand, however, given the reduction in health care costs, the net loss for governments overall would be in the order of $320 million, according to my estimates. When shared by 11 governments over a 10-year period, this is not a very significant sum of money.
Moreover, given that public finances are recovering nicely, this would be one of the best ways for the government to spend the dividends earned from improving the debt and budgetary situation.
The problem, however, and this will be my final point, is that Bill C-71 may in some cases have an adverse effect on the sponsorship of cultural and sporting events which are currently funded in part by the tobacco industry. I am at a loss to understand why this would be a problem if we earnestly try to come up with some solutions. Of course, any time the government acts, generally for the welfare of all citizens, some disruption occurs, along with changes in legislation and in some cases, even changes in proprietary rights. When there are many winners, there is always as a rule a small number of losers.
In spite of what Mr. Robert Allan just said, namely that the macroeconomic impact of sponsorship is relatively minimal, we cannot deny that for local populations and individuals who experience the adverse affects of legislation which may be favourable to some, but very unfavourable to them, the sums of money involved are far from insignificant.
For example, the 6 per cent associated with Expo 67, which amounted to $25 million in 1967 dollars, may represent $100 million today. This may seem like an insignificant amount to Canada, but for the regional economy of Montreal and for those involved who would lose this $100 million, this is a substantial amount of money.
I am not saying that the legislation should be amended. However, I would like to propose today that the Senate introduce a mechanism for compensating those who would be adversely affected by the law, that is those who may agree with the spirit and intent of this bill which is aimed at controlling tobacco consumption, but whose activities would be seriously curtailed as a result of its passage.
For example, when businesses are affected by technological changes, the government offers people training and recycling courses to help them find work elsewhere. This is a similar situation. Technological advances benefit the public as a whole. They enable consumers to save money on the products they purchase.
People who lose their jobs because of technological change suffer, even if the impact is negligible on the country as a whole. That is why governments have instituted compensation mechanisms such as unemployment insurance and manpower training.
Another example is the harmonization of the GST, a desirable national objective, but one which was detrimental to the interests of the Atlantic provinces. The solution was quite simply to compensate the Atlantic provinces for any losses incurred.
When the government wants to build roads in rural areas for the general welfare of the population, it not only expropriates people's land, but it awards compensation for any damages incurred.
I fail to understand why in this instance, the people affected would not be compensated, given that this law is vital to the collective welfare of Canadians. For example, a grant fund could be established to replace sponsorship of cultural and sports events which would no longer be allowed. The fund could be financed through an additional tax on tobacco companies and through the economic and fiscal dividends that would flow from an upturn in the economy as a result of the drop in tobacco consumption. The fund could also be managed jointly by a public and private sector board which would act with impartiality when selecting events that would benefit from this special funding arrangement.
We have in Canada a cultural agency that operates very effectively, namely Telefilm Canada. Its existence is due to the fact that the private sector is unable to fully fund Canadian television and cinematographic productions. Its existence is fully justified according to the most basic economic principles.
I think we are facing the very same problem in the case of tobacco. We have a law that has been brought in for the welfare of the overall population. A compensation fund must be established to help finance cultural and sporting events. The money in the fund could be money no longer spent by tobacco companies on sponsorship activities. Some of the money in the fund could also come from taxes on tobacco companies and the remainder from the fiscal dividends that would flow from an improvement in the health of Canadians. That is the suggestion that I would like to make.
In certain cases, and I am not certain that everyone would agree with me on this, some thought should be given to extending the sponsorship period. Given the reputation and renown that Canada derives from events such as the International Jazz Festival, the Grand Prix, the Just for Laughs Festival and the du Maurier Open, consideration should be given to extending the deadline beyond October 19, 1998 and even to devising a more permanent rule whereby events that are international in stature and in which Canada takes part should be exempted. This will bring our culture international exposure and enhance Canada's international reputation. Therefore, there is not only the job creation impact that Robert Allan stressed, which from a macroeconomic standpoint is minimal, but also the fact that these events provide employment for a number of people who otherwise would not have jobs.
Therefore, we must consider exempting some events, as Australia has done for the Australian Grand Prix. I see no reason why an alternative fund could not be set up to subsidize cultural or sporting events and to compensate them for the loss of sponsorship in Canada. I am opposed to tobacco company sponsorship. We must find an alternative in order to keep these activities going and compensate those who are adversely affected.
In cases where the event is of great importance culturally or where Canada's international reputation is at stake, I think that we should follow Australia's lead and consider making some exceptions based on the international stature of the event.
[English]
Senator Kenny: These are two very interesting witnesses, Madam Chair. They received my undivided attention.
Professor Fortin, just so I understand the economics that you started off with before you made the pitch at the end, were you saying that the multiplication factor of cigarettes economically is less than other products?
Mr. Fortin: Yes. What I am saying is that $1 of spending on cigarettes generates much less value added and, therefore, fewer jobs than $1 spent elsewhere in the economy, simply because in the rest of the economy the average tax rate on consumption is 25 per cent compared with 60 per cent in the tobacco sector.
Senator Kenny: Is your assumption that the money going to the government will not be spent as effectively as it would be in the private sector?
Mr. Fortin: The assumption is that the $1 would be spent by the consumer elsewhere, and 25 cents on the dollar would go back to the government. However, that is subtracted from the net fiscal impact that I have reported as $750 million.
Senator Kenny: I think I understand the first part of your argument.
As to the second part of your argument, there is a great deal of justice in what you are suggesting. One option open to the government would have been, perhaps, to add a buck a carton to the price of cigarettes. That would not have been enough to precipitate smuggling. However, it would have generated $120 million, one-half of which could have gone to keep funding these events, the other one-half which could have gone to an education program.
Another possibility is for the companies themselves to be required to continue funding as they have for a period of time with, let us say, a transition period of three years or five years. I did not hear you mention transition in your comments. Do you envision a transition period? If so, in your view, how long is necessary to keep these third parties whole, if you will?
Mr. Fortin: I do not know. However, I would be quite empirical. It would be prudent on the part of the government to say, "It will last five years." That would leave some time for people to adjust to this and to find other sources.
However, after five years, there should be a reconsideration of whether we should put the sunset to it and terminate it. I am not at all opposed to the possibility that it be only transitional if you can demonstrate to me that, after five years, there would be no more need for it.
Senator Kenny: Would you settle for three?
Mr. Fortin: Instead of three, yes.
Senator Kenny: No, would you settle for three?
Mr. Fortin: No. I think those people would need five years. It is extremely difficult in many cases. I do not believe it is too difficult to replace the money for a very big international event like the Grand Prix, for example, which is the biggest sport event in the world. If the tobacco companies were required to leave tomorrow morning, then they would be replaced by others very quickly. The problem, though, is that in the case of Canada they would decide to take the show outside Canada.
Senator Kenny: You mentioned the big ones. You mentioned the Grand Prix, Just for Laughs and the Jazz Festival. Those are all big deals.
Mr. Fortin: Yes.
Senator Kenny: Dr. Allan, I was intrigued by your flat lines. I was curious about tourist dollars. Do they change your lines anywhere? Do they give you a bigger bump anywhere?
Mr. Allan: Non-resident tourist dollars go up and down quite a bit. They are not quite as flat. I have not looked at that for Expo 67. I did look at it for Expo 86, and there is a jump up there, but the whole thing is quite saw-toothed so you do not get a terribly stable pattern.
Senator Kenny: There might be a bit of a case for tourist dollars, but it is not a big deal.
Mr. Allan: The tourist dollars only matter as they get spent in restaurants and hotels. You are getting the tourist dollars there. The total receipts of restaurants includes the tourist dollars.
Senator Kenny: However, there is no suggestion that some people come up just for the event. People do not come to Canada just for the Grand Prix.
Mr. Fortin: Yes, absolutely.
Mr. Allan: Whatever they are doing, it is in the blip.
Senator Kenny: Following your argument along, all that is happening is that we are shifting the spending from Kamloops to Vernon or from Vernon to Burnaby or from Burnaby to downtown Vancouver.
Mr. Allan: That is mostly what happens.
Senator Kenny: We are taking the same dollars and simply moving them around in Canada. That is your argument. As a country, we are no better off.
Mr. Allan: Yes.
Senator Kenny: We heard from Professor Fortin that some communities are much better off and that it makes a big difference to those communities. I have not heard anyone say that the communities that do not have these events are hurting terribly.
Mr. Allan: I had the feeling as I listened to Professor Fortin that I was the only one speaking for the owner of the bowling alley in Trois-Rivières.
Senator Kenny: I have the feeling that the owner of the bowling alley has other customers, and it was only those three guys that went down for the Jazz Festival, but three guys also came from Shawinigan and three more from Sherbrooke.
The negative impact elsewhere in the country is not as pronounced as the positive impact in the areas where these spectaculars happen. Would you agree with that?
Mr. Allan: The logic of my position is that if everything is internal, then the plus in the area of the big event must equal the sum of the minuses everywhere else, but they may be more diffuse.
Senator Kenny: Would you agree that they are probably more diffuse?
Mr. Allan: I do not know.
Senator Kenny: It ties very neatly with the argument coming forward that these people have placed their festivals with political forethought and that they are buying political capital. If they are not selling any more cigarettes because they would have sold the same number of cigarettes in Vernon or in Burnaby, by concentrating their political capital in a few places like Montreal, Vancouver, and Toronto, they are getting a great deal of political clout to beat up people like us.
Mr. Allan: This is a very common argument in economics with respect to things like tariffs. You find a tariff is imposed on some commodity, some import, and it benefits a particular local industry. There is a clear set of people who gain a lot, and then many other consumers over the entire country are suffering because the price is up, but it is not a big loss. Economists are forever finding themselves in the position of representing the aggregate of all these small losses vis-à-vis the small number of gains, the people you are talking about.
Senator Kenny: You could make the same case for marketing boards.
Mr. Allan: Exactly.
Senator Kenny: We have here a political marketing board, if you will. Would you subscribe to that? Does that make any sense to you? If there is no economic rationale for doing these things, perhaps there is a political rationale for doing them.
Mr. Allan: I believe there is a political rationale. I agree with that.
Senator Kenny: Do you have any views on that?
Mr. Fortin: No.
Senator Pearson: Professor Fortin, I am very much taken by your concept of the compensatory fund. The practicalities immediately leap to mind in terms of not re-establishing something like an another Canada Council since this could not have a long life. It is a mechanism for enabling a transition.
Mr. Fortin: It could be under the responsibility of Heritage Canada at arm's length.
Senator Pearson: The arm's length is absolutely crucial. Naturally, I would like to see more support going to the arts, but that is another question.
Mr. Fortin: We share the same values.
Senator Pearson: I see it as more permanent, but I certainly see it as something that would take the wind out of the sails of the tobacco interests.
Mr. Fortin: My fear is that although instinctively people would adhere to this bill and to the law when it becomes law, the issue of sponsorship has become so hot and debated that it has clouded all other issues surrounding this bill. If we do not do this compensatory move, the law itself will be much less efficient in its consequences on large chunks of the Canadian population.
The Chair: I thank both of you for your presentation this afternoon.
The committee adjourned.