Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 27 - Evidence
OTTAWA, Tuesday, May 4,1999
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-55, respecting advertising services supplied by foreign periodical publishers, met this day at 6:00 p.m. to give consideration to the bill.
Senator Marie-P. Poulin (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, this is the sixth meeting of the Standing Senate Committee on Transport and Communications on our review of Bill C-55. This evening we have an individual witness as well as two panels.
Our first witness is Mr. Peter Clark. Welcome, Mr. Clark, and please proceed.
Mr. Peter Clark, Grey, Clark, Shih and Associates Limited: Thank you, Madam Chair. I asked to appear this evening because, in following the debates on this draft legislation in the House, in the Senate and in the press, I have noted a number of inaccuracies or misunderstandings related to two very serious peripheral issues surrounding the legislation. Those are the status of the legislation under Canada's international obligations and the possibility of the United States provoking a trade war over our boldness in trying to protect our culture, as we are entitled to do.
I thought it might be useful to give you my perspective on those issues. I should state at the outset that I do not have any clients involved in this dispute. That is unusual for me, because I am involved in most of them. I have a perspective I bring from NAFTA and from the WTO, in terms of dispute settlement, both adjudicating and acting as an advocate for participants in those reviews.
I will not talk about the objectives of the legislation. My friend Gordon Ritchie did that last week and I tend to agree with Mr. Ritchie in terms of the objectives. We might have a somewhat different view in terms of rules and obligations, but probably not much.
What I would like to deal with for you are matters of detail that you might want to understand a bit better.
The United States view of the dispute settlement is that if they bring a dispute and they win, they have won and you must comply, and you cannot reintroduce another measure to have the same effect. That is not my view of dispute settlement. That is not the Canadian view of dispute settlement. The dispute-settlement panel hears both sides in a dispute and, if one side has gone over the line with regard to the rules, it is the panel's job to guide them back to the line. You can fix an error. You do not have to get rid of the entire system.
In the case at hand, Canada has, in fact, complied with the WTO panel findings by eliminating the measures that were found to be wrong. There is nothing in the WTO or in the NAFTA that says that Canada cannot protect its culture and cannot promote its magazine industry. The United States is asserting certain rights which, in my view, it does not have under the WTO with respect to Bill C-55. With respect to the NAFTA, there may be some arguments as to whether they have those rights. I will not get into the details of the pros and cons of the case under the NAFTA because I do not feel that it would be appropriate for me to give arguments to the United States, particularly if they are not paying for them.
Allow me to describe to you the risks to Canada. I will give you an illustration of how I tried to define American trade policy when I was representing Canada at GATT meetings many years ago. There was a request that we try to explain our concern about a U.S. measure in the context of Canada-U.S. relations, where we had such a great trading relationship, in fact the largest bilateral trading relationship in the world. I explained to people that, before I had gone to Geneva, I had traveled throughout the United States and I found myself one day just a little bit south and east of Tucson, Arizona, in a place called Tombstone. In Tombstone, there is a graveyard called Boot Hill, and if you go there you will find a grave marker that reads "Hung by Mistake." To me, that was characteristic of American trade policy. If you wish to understand how culture and history change in the United States, if you look in the same graveyard, you will find that it is claimed that the losers in the battle at the OK Corral were murdered by the Earps. This is not the story that most people have, but the fact is that, after he left Tombstone, Wyatt Earp went to Hollywood. That is how the story developed.
That is not directly on point, but it does show how American culture pervades everything and why we must be able to deal with it. The truth of the matter is that, when you are dealing with a threat from the United States, it really does not matter whether or not they are entitled to do it to you. They have a tendency to do it, ask questions later, and let you challenge them within the WTO or under the NAFTA. I speak to this with some experience. Back in the early 1990s, the United States was not happy with how the Government of Ontario was implementing a GATT finding on provincial regulation of the alcoholic beverages industry with particular respect to beer, and they closed the border to beer from Ontario going into the United States. We did the same thing coming back. It caused an incredible amount of disruption and cost to the Canadian industry at that time, so you cannot take the threats lightly.
Do they have the right to retaliate unilaterally under the WTO? No, they can only take retaliatory or compensatory measures if they are authorized to do so by the general council. Under the NAFTA, there is the same obligation to pursue dispute settlement. The cultural exemption, notwithstanding the claims of the United States, does not allow them to retaliate without authority. The problem is that there is a blurring between what the game is supposed to be, which is right and wrong based on the rules, which is the only way that Canada can survive, and big and little, which the Americans are capable of playing, and then forcing us to claim that they have acted in an excessive manner.
I am not trying to discourage you from passing legislation or taking measures that will preserve our ability to have a magazine industry that enhances our culture; far from it. My concern is that, in dealing with the United States, if there is some possibility, while preserving your objectives, to maintain the essential elements of the magazine policy and yet reach a negotiated settlement, that would probably be preferable to the dislocation that would occur if, in fact, the United States did pull the trigger. I understand that, notwithstanding the rather positive sounds that are emanating from Washington and even from Ottawa about the possibility of a settlement, the United States timetable for something to be done before they actually publish a retaliation list against Canada is sometime early next week. They apparently, after the last set of meetings, put a 10-day deadline on us. I do not feel that that is justified, I do not feel that it is a proper way to play the game, but that is the way they do play.
The United States is pursuing this approach for a number of reasons. They are having a very difficult time selling Congress, their labour movement and a number of their non-governmental organizations on the need for further trade liberalization in the WTO, so they must demonstrate that the WTO works. In order to do that, they must try to ensure that each and every victory that they have in dispute settlement is implemented as promptly and, in their view, as faithfully as possible. That is really what you are up against. It is not really a game of right and wrong; it is a game of big and little. If we are going to risk retaliation, I do believe that we can make a case that what we are doing is right. Unfortunately, we may be doing that with a number of our industries facing prohibitive tariffs into the United States. It is important that you have good advice on the defensibility of the legislation that is before you, both in the WTO and the NAFTA.
I would be pleased to answer any questions you might have.
Senator Forrestall: You are obviously very close to the situation. Do you have any reason to believe that there are talks going on between Canada and the United States with respect to a negotiated settlement as opposed to an imposed one?
Mr. Clark: In my experience, and notwithstanding the fact that the negotiators left the table in Washington last Wednesday, there would be continuing informal contacts between them. As I understood the situation, the U.S. position was put back to ministers. Ministers were supposed to discuss it this week and get back to the United States.
In the normal process, the people charged with negotiating on the Canadian side would be in touch with their American counterparts for clarifications, testing the waters to see if there could be other movement before they put a final position to ministers. Yes, I would characterize that as "negotiation."
Senator Forrestall: Looking back over the last two months, can you tell us, if you can, whether or not the position that appeared in the press just a few short days ago was an old negotiating position or, in fact, was there anything new about it?
Mr. Clark: There have been several stories in the press. Were you referring to Ms Scofield's?
Senator Forrestall: Yes.
Mr. Clark: There has been a fair amount of movement. I believe the option with the most likelihood of success is something that would guarantee content for people having access to the Canadian market. A number of permutations and combinations have been floated. Often, you are dealing with trial balloons where negative reactions are expected; and, when they are received, the trial balloon is pricked, if you understand the process.
In my view, there are the elements of an agreement being discussed. They may seem more attractive to trade negotiators than they might to the magazine industry.
Some of the options that I have heard discussed, and some of the options I have discussed with Canadian negotiators, would provide greater guarantees to Canadian content than we would have under the bill, which does not really guarantee Canadian content but guarantees Canadian ownership.
There does seem to be some scope there. The problem I foresee in that is that in order to sell it to the Canadian magazine industry and to Canadians we will have to have some pretty hard and fast commitments from the United States. They may not be prepared to go back to their magazine industry and say, "We have committed you to "x" or culture, and it has to be Canadian authors and themes," or whichever direction this will move in. I believe what the Americans would want to sell is something more loosey-goosey than we would be comfortable with.
I have been on the other side of the issue because I was doing work for Westinghouse. They had a communications division that got into a problem out of the blue. Instead of dealing with dumping on motors, I was dealing with something called Country Music Television. There was a section 301 complaint filed in the United States. Notwithstanding the press coverage up here about the U.S. retaliating against Canada and loading up the cannons because of what the CRTC had done, Mickey Kantor made it quite clear to my clients and to the other people with whom we were working that the United States was reluctant to retaliate against Canada on a cultural issue. He urged my principals to engage in negotiations with the people who had received the licence from the CRTC. That was the way it was eventually resolved.
That situation is not quite the same as the one we are in now. We have a U.S. trade representative who does not enjoy the same degree of access and the same degree of influence in Washington. It has been her agenda, as you might have seen from the press on the weekend, to announce targets and to shoot for the targets, notwithstanding the fact that she could not staff up the disputes to deal with all the targets if her life depended on it.
We are dealing in a bit of a circus atmosphere, where there is an awful lot of hype. Some things will come through and others will not. The problem we have is that the issue in the United States is not being run by their magazine publishers; it is being run by Jack Valenti and the movie industry.
We were involved in another issue in which we were trying to bring a deal together between Telesat, TCI, and other people to rent space on a Canadian satellite parking spot so that Canada could have digital television. It was not because we could not agree with the satellite people; it was because Jack Valenti was trying to hook others things relating to movie distribution into that deal. He is never far away from the scene. Anything to do with culture, you must read in the context of the movie industry.
Senator Forrestall: That is getting a little bit over my head.
Your concern is that we might, through Bill C-55, take a position that could directly affect other sectors in our relationships with the United States in trade. We will be hearing later from the softwood industry in Canada. Am I correct in drawing that assumption from your remarks?
Mr. Clark: There are two messages that I wish to get through that seem to have been mistaken. The first is that the United States is not required to go back to the WTO. The WTO issue was settled. Bill C-55 is a new measure. They can address it under the NAFTA or under the WTO. If we were under the WTO, I would be much more confident in our case because we have no obligations relating to advertising services under the WTO. Under the NAFTA, it is not as clear. I would not want to go much further than that. I will just say that I am more comfortable with the WTO case than the NAFTA case.
Second, I would like it to be understood that, notwithstanding the United States obligation to get the authority to retaliate against us, that will not necessarily be their practice.
Senator Roberge: In your discussion with trade representatives, have you heard anything about increased subsidies?
Mr. Clark: If you look at it from a purist trade negotiator, trade administrator's perspective, their attitude will be to say: "The policies relating to the magazine industry are designed to make them viable. If it is a question of giving them subsidies, give them direct subsidies." That is always an issue that is out there. Many people would like that to be the option because then the problem would go away.
If you are asking if there have been discussions about whether subsidization would be a better option, absolutely, and they have been going on since the matter was before the GATT.
Senator Callbeck: Mr. Clark, you mentioned in your opening comments that you are not trying to discourage us from passing legislation that will enhance our culture. I assume by that you feel Bill C-55 will enhance our culture. We have heard critics of this legislation who have said it has nothing to do with culture.
Mr. Clark: To the extent that having a unique Canadian magazine industry enhances our culture, and not having one would not, it would serve that purpose. Will it provide any more Canadian content? I believe I said it does not guarantee content. I do not see people who are trying to market a magazine based on Canadianness abandoning their Canadian content. The legislation does not guarantee it.
Senator Callbeck: Yes. It was just the point on culture that I wanted to make.
Mr. Clark: Perhaps I should not have used the word "enhance." I do not like using the word "protect."
Senator Callbeck: In your comments, you expressed concern about a trade war with the United States and the risks involved in that. You indicate that we should not be going ahead with this unless we feel we have a good case because we could be challenged.
Government experts have said that this is consistent with our international trade obligations. Are you saying that, in your opinion, the risks here are too great and that we should cave in and not pass Bill C-55? If we do that, then how will we defend other interests in the future?
Mr. Clark: Let me put it to you this way. I said I was comfortable with defending it under the WTO. I am less ebullient about the NAFTA. There are a number of technicalities in the NAFTA that make me less confident.
Under the WTO, yes, I believe we can prevail, but I am not talking about my concerns about a challenge going through the process. If we took the case to the WTO and asked for an opinion without American retaliation hanging over our heads or actually having been invoked, then there really is no problem.
My concern is that the Americans are not likely to wait for us to have it tested. There is really nothing in it for them. They have won under the WTO. We have had some people in Foreign Affairs and Justice take a look at this legislation. We have looked at it. We feel we have a strong case in the WTO.
If we could take it to the WTO and ask them for an opinion, then I would not be at all concerned about it. My concern is that we may get into a situation where the Americans pull the trigger without waiting for an analysis of the consistency or they may try to pursue it under the NAFTA. The government is trying to find other options that will preserve the objectives of the policy but, at the same time, will ensure that we do not have any disruption in our trading relationship.
Senator Callbeck: Your concern is not with WTO but with NAFTA?
Mr. Clark: My concern is with NAFTA. I wanted to discuss this with you because of an expressed view that the Americans had been stuck with the WTO because they had chosen that route on the first appeal. The fact of the matter is that that dispute was settled. We withdrew those measures; it is over. This is a new measure and they can deal with it under either agreement.
Senator Spivak: Mr. Clark, you are the first witness whom I have heard to directly speculate that the United States may take action which, technically speaking, is illegal. That is to say, it would just retaliate without going before any body. I have met Jack Valenti, and I totally agree with your comments about him.
If the Americans do take action, will the commercial equivalent still hold? Do you think the United States would retaliate according to the threats that they have made in the papers, or would they retaliate based on the commercial equivalent?
Mr. Clark: They would do an estimate. It might not be as high as what you have seen in the newspaper, so that they could then claim they are being reasonable.
Senator Spivak: I have read $250 million.
Mr. Clark: There are several estimates floating around. I would like to see the justification for that. I have not seen any justification for any of their numbers.
Senator Spivak: Your argument is undercut, though -- and I am strengthened in my feeling that this is the only way to go -- by the ability of the United States to illegally challenge what is supposed to be an exemption and a legitimate policy objective under NAFTA. So all bets are off if they can retaliate at any time.
What is our remedy? Where do we go to complain? Which world body could force the United States to answer for what they have done illegally? They must take all this into consideration before they retaliate illegally.
Mr. Clark: The United States could be required to withdraw the retaliation, either by the NAFTA or by the WTO. As I have indicated, it is Parliament's decision whether to pass this legislation for the purpose. There is a risk. If the risk can be resolved through negotiations without throwing out the baby with the bath water, that is one option.
Basically, that is my position. I gave a written submission to the committee and I believe that is where it comes out. I would be the last one to object because I am generally telling government officials and ministers the same thing that Ms McCaskill is telling you. If we are to back down every time we are threatened, then we might as well be the 51st state.
Senator Spivak: Let us go to the other scenario. We were told by witnesses, including no less a personage than the minister herself, that this is the best alternative and that the Canadian content approach is fraught with tremendous difficulty. Obviously, that is why they could not negotiate it quickly. They canvassed the options and they say this is the best option.
My question to you is very simple. There is risk in everything. You are saying that this is not a prudent risk, that a more prudent risk would be to go the Canadian content route. Would that be an accurate reflection of what you are saying to us?
Mr. Clark: I will confuse you even more and tell you that if you had a Canadian content rule applied to magazines, it would be inconsistent with articles 3.5 and 3.7 of the GATT under the WTO. You can do things that are inconsistent with your agreements as well, as long as no one challenges you.
Senator Spivak: Is that a better option because it is a more prudent risk?
Mr. Clark: It is a better option if you can reach a negotiated settlement that meets your objectives. You must bear in mind that the United States may walk away with half a loaf and say that they won because they got something. It is all about optics. It depends on what is negotiable and what is possible. The U.S. approach to these things is to draw up a big list, pick the most sensitive areas possible and put pressure on those areas.
Senator Spivak: When the free trade negotiations were under way and things got sticky, the Prime Minister sent in Derek Burney. Do we have a hot-shot trouble-shooter to send in at this point? Perhaps that is the answer.
Mr. Clark: It will not be Mr. Burney, because he wants to keep his head down.
Senator Spivak: Are there other people in this government who can go?
Mr. Clark: Our government still has people who can cope with that type of negotiation. Mr. Axworthy's deputy is one of the most competent Canada-U.S. negotiators with whom I have ever worked.
Senator Rompkey: If the machine is working, perhaps it is not wise to look for any other solution. Gordon Ritchie has said that, if we cave in, we are playing right into their hands. You said a moment ago that the U.S. may take half a loaf and walk away with that. Why should we give them half a loaf? If we do not stand up for rights on culture, what will we defend? It seems to me that this is the best measure that we have. The industry has survived up until now. One alternative that has been proposed is subsidization. I wanted to ask you about that.
The present measure has the virtue of being revenue-neutral. If we get into subsidization, we will ask the Canadian taxpayer to cough up more money. We have Kosovar refugees arriving, we have 18 CF-18s over there. Who knows what our defence budget will be this year.
There are other costs that will come up during the year. A U.S. magazine estimates that the value of subsidization is approximately $150 million. There has been discussion of what the value is. There are only two ways of finding money, cutting programs or increasing taxes.
When we have a measure that is apparently the best measure, one that can work and we are justified in putting forward, why should we ask the Canadian people to spend more tax dollars?
Mr. Clark: I have not promoted subsidies. I have discussed the matter with officials, and I said from a trade perspective that that is probably the best answer because it makes the problem go away. It would make the legislation go away and they would see the legislation as a pimple or a boil on the trading relationship.
I have not suggested that the magazine industry should be subsidized. That is one of the options. However, there are other options. The minister is trying to reach a negotiated settlement with the United States. That is exposing other options. My concern there is the same as Mr. Ritchie's, that any solution that you might reach does not throw the baby out with the bath water.
If there is a price to be paid for enhancing or preserving Canadian culture, then there is a price to be paid.
The Chairman: Thank you for your presentation.
Our next panel of witnesses is comprised of representatives of the Alliance of Manufacturers & Exporters of Canada, Mr. Matthew Wilson and Mr. Jason Myers. Representing the Free Trade Lumber Council, we have the president, Ms Roslyn Nugent, Mr. Frank Dottori, and Mr. Karl Neubert.
Please proceed, Mr. Myers.
Mr. Jason Myers, Senior Vice-President and Chief Economist, Alliance of Manufacturers & Exporters of Canada: Honourable senators, the Alliance of Manufacturers & Exporters of Canada represents 3,500 companies and 4,000 affiliates across Canada. Our membership is drawn from every sector of Canada's industrial and exporting base. Together, they account for approximately 75 per cent of the country's industrial production, 95 per cent of our exports, and 90 per cent of our research and development activity.
We are also appearing today to speak for the Coalition of Canadian Business, business associations that are seriously concerned over the retaliatory action threatened by the Government of the United States if Bill C-55 is enacted into law.
I wish to make clear that our coalition members are here to support our concerns about possible economic impacts on their sectors and on a number of issues that we will be covering in our presentation that are the views of the alliance alone.
In addition to the alliance, our coalition partners include the Canadian Apparel Manufacturers Association, the Canadian Chemical Producers Association, the Canadian Importers' Association, the Canadian Plastics Industry Association, the Canadian Pulp and Paper Association, and the Canadian Steel Producers Association. I am very happy to have a number of representatives of those associations joining us here today.
Our coalition does not only encompass those sectors targeted by threatened U.S. retaliatory sanctions, but also more generally the exporting and importing communities in Canada that are concerned about the impact of those retaliatory measures on the Canadian economy and on our future trade policy objectives.
To echo a great deal of what Mr. Clark has said, the threat of U.S. retaliation is unfortunate and objectionable, but it is very real. The United States government has threatened to impose retaliatory targets on Canadian apparel, plastic products, wood products and steel in the event that Bill C-55 is passed in its current form. The U.S. trade administration has demonstrated that it is prepared to retaliate in cases where governments seek to address negative WTO rulings by alternative measures.
While Canada could challenge such U.S. retaliation, I would point out that such an appeal would take time. It will not prevent serious interim losses to Canadian exporters or industry, and there is no guarantee that the dispute resolution system would in the end rule in Canada's favour.
I wish to tell you that the threat of retaliation is already having significant economic consequences. Those sectors targeted by retaliatory measures together account for approximately $45 billion annually in exports to the United States. Though one might think that the cost of retaliation or that the sanctions imposed would be in the range of hundreds of millions of dollars, I must say that there is no firm estimate here of what the direct cost would be.
It is important to understand that the North American economy is so integrated today and the competitive pressures are so great that these costs will not be passed on easily to customers or to consumers. The total direct cost would probably lead to a loss of between $3 billion to $4 billion annually in the sectors that have been targeted losses in export sales. There are also impacts to customers and suppliers of the goods and services dependent on the sectors being targeted.
We have asked for an independent econometric analysis of the impact. There are estimates between $10 billion to $12 billion in terms of total cost of the supply chain with the loss of 35,000 jobs. That is why we are concerned.
Although retaliatory action is only being threatened today, and none has been taken, the threat of border disruption has already led to the loss of contracts in targeted sectors that are selling into the U.S. This is an immediate problem. This is not something threatened in terms of economic consequences. The consequences are being felt right now in terms of the loss of supply contracts.
The alliance feels that both the enactment of Bill C-55 and subsequent retaliation by the United States would be serious setbacks for Canada's trade policy objectives. We spent a great deal of time arguing against the extension of the principle of extraterritoriality particularly under the Helms-Burton Act in the United States, and we are very concerned that Bill C-55 includes an extraterritorial application of this law.
The extension of retaliatory actions by the United States government to sectors unrelated to Canada's cultural or magazine industries is also extremely unfortunate. It is a precedent that we believe threatens to undermine the spirit and security of market access that Canadian industry has gained under the terms of Canada-U.S. Free Trade Agreement as well as the NAFTA. We believe that U.S. retaliation would seriously weaken Canada's position in forthcoming WTO and FTAA negotiations and probably erode a great deal of confidence on the part of Canadian exporters and Canadian business in general in the government's efforts to ensure freer market access for Canadian goods and services around the world.
We are not at all convinced that Bill C-55 can withstand legal challenges. We believe it would be challenged under the NAFTA and maybe the WTO, but we also have a concern about a challenge under the Canadian Charter of Rights and Freedoms. At best, legal opinion is divided on the issue about whether such legislation could withstand those legal challenges.
As far as we are concerned, a negotiated settlement of the split-run magazine issue is vastly preferable to the bill as it now stands. We believe that U.S. and Canadian trade officials are negotiating in good faith. We believe that those negotiations may be close to arriving at an agreement. We believe that a negotiated agreement should be finalized before the enactment of Bill C-55.
Finally, this issue is very much an issue about dumping. It is not strictly a cultural issue. Dumping issues, as they relate to advertising services in magazines, should be a part of the new General Agreement of Trade and Services to be negotiated under the WTO. We do not believe it is in Canada's interest to act unilaterally, turning an international trade problem into a criminal offence. It is in Canada's interest to champion free and fair trade in services to ensure that rules related to dumping and other unfair trading practices are clarified under the WTO. We believe that Canada should champion that as part of its negotiating position, as it is coming up in forthcoming negotiations in that body.
Mr. Frank Dottori, President and CEO, Tembec Inc., Free Trade Lumber Council: I am here as the Co-Chairman of the Free Trade Lumber Council, which was set up by Canadian primary softwood producers last year. Its objective is unencumbered free trade access to U.S. markets and other markets around the world. We currently represent about 65 per cent of the Canadian primary softwood producers, remanufacturers, and other people in the softwood industry. We are trying to take a pan-Canadian position on this trade issue.
As you know, this industry has probably borne the brunt of the U.S. counterattacks against so-called free trade. Obviously, the legislation presents some concern on whether we become victims again.
Our concern is to make sure that everyone is aware of the importance of this industry to Canada. One of every 15 Canadians works directly or indirectly for this industry. There are over 300 communities across Canada. Our exports are worth $50 billion. We are the largest exporter in Canada. We had a $40-billion trade surplus and, as such, are the guys who "bring home the bacon" for Canada. We are based on a renewable resource. We do indeed plant trees, contrary to what you may read in the papers from time to time. We build houses and provide lumber for houses and toilet paper and writing paper. We are a good part of the economy.
Specifically, we were delighted when we heard about the Free Trade Agreement some years back and then NAFTA. We thought that at last we could compete on a level playing field. Shortly thereafter, in 1996, of course, we got the Softwood Lumber Agreement, which limited our exports to $14.6 billion, while our capacity is over $20 billion, and shut us off from our natural markets. It has created a massive disruption in our industry. Many of us started going to value-added products to try to develop new markets.
The United States is now, through customs reclassifications and so on, attacking these areas. There is approximately $2 billion worth of trade represented in this attack which started several months ago. We do not know if there is any correlation or intimidation with regard to Bill C-55. If we can do the linkage, they can too. We think it may be part of intimidation, and it gives us concern.
We believe this is a trade matter. We certainly believe in a strong Canadian culture but we feel we are getting a trade matter mixed up in culture. Our concern is that, in solving this issue, we do not forget this industry.
Ms Roslyn Nugent, President, Baybridge Lumber, Free Trade Lumber Council: Honourable senators, Mr. Dottori provided you with very large numbers and showed how important our lumber industry is to Canada. That enables you to judge the enormity of the economic effects that the passage of Bill C-55 might have on our Canadian lumber industry and why we are here today.
We can assure you that the Free Trade Lumber Council understands the purpose and intent of the bill, and as Canadians we recognize that the preservation of the Canadian identity is an important cornerstone of public policy. We also recognize that, in limiting Canadian advertising in foreign split-run magazines, the likely effect of the bill will be to support the publishing of Canada's domestic magazines and, in so doing, maintain a domestic forum for the publication of Canadian viewpoints and interests. We have no quarrel with this underlying general public policy. Our concern is with respect to the implications of Bill C-55 for the Canadian economy if the threats of the United States administration of retaliation were to be carried out. The application of punitive sanctions against selected Canadian export commodities, including Canadian softwood lumber, is the announced target of the U.S. administration.
We think you likely have a good background in the workings of NAFTA and, in the case of the Canadian lumber resource industry, the U.S.-Canadian Softwood Lumber Agreement.
I will touch on the present difficulties our industry is having with the United States.
Since the signing of our Softwood Lumber Agreement back in 1996, which expires in 2001, the United States administration has been under constant prodding by a powerful U.S. lumber industry lobby to increase restrictions on export of Canadian softwood lumber products not included in the Softwood Lumber Agreement at this time. Following those extensive lobbying efforts by this sector of the United States lumber industry, which is called U.S. Coalition for Fair Lumber Imports, the U.S. administration has acted. U.S. Customs was ordered by the U.S. trade representative to redefine certain softwood lumber products that were not limited by the Softwood Lumber Agreement so as to include them as restricted Canadian exports as of now. They began with pre-drilled studs.
I am sure you have read in the papers over the last year and a half that there has been that ongoing case. Notwithstanding that the WTO had previously given the U.S. government a private option that these were not restricted by the agreement, an opinion that the United States government did not disclose throughout our whole court proceedings, throughout the whole revocation process, still pre-drilled studs became restricted imports by the U.S. Customs unilateral redefinition of that product.
The U.S. government is now reviewing other softwood lumber value-added products with a view to redefining them also to restrict their export by Canada into the United States. The loss of these exports is measured in the order of $2 billion, which will have a profound effect on the Canadian lumber resource and remanufacturing sectors, the jobs they create, and the income taxes they pay to Canada.
We have learned very well how the U.S. administration uses its power to serve special U.S. lobby groups. In particular, we have learned not to underestimate their willingness to act unilaterally and against Canadian interests. Currently, through an action in the United States courts by one of our members, American Baybridge Corporation, a Canadian company that happens to be my company, we are challenging and hoping to set aside these unilateral administrative actions of the U.S. government.
Would the U.S. government regard the enactment of Bill C-55 as sufficient cause to justify further administrative actions to restrict Canada's softwood lumber value-added products? The answer is "yes." Would the U.S. government then apply further restriction on Canada's softwood lumber value-added products exports? The answer is "yes." We have absolutely no doubt whatever about it. The answer is "yes."
We strongly believe that Canada is allowing itself to be painted into a corner where the economic cost to Canada is very great, both in absolute terms and in terms relevant to the magazine industry, from which any later escape or retreat would be an inglorious precedent-setting scenario for the future conduct of Canada-U.S. international trade negotiations and relations. If Canada should pass and implement Bill C-55, it will have allowed the U.S. administration to select the battlefield where the preponderant balance of power lies with the U.S. administrative government. Canada stands to lose exports, jobs and tax revenues from the curtailments we expect the U.S. administration to impose.
Is it too high a price to pay to stop the American split-run magazines that would be affected by Bill C-55? As you know, many significant exceptions are contained in the bill. Some may say that we cannot place a dollar value on the preservation of our Canadian identity and that Canada must take a stand now on the principle that is involved. We urge you not to do that.
Canadian government policy must, among other things, include the preservation of jobs for Canadians in Canada. The enabling of our citizens to earn a living and to be self-serving ought also to be an important cornerstone of Canadian public policy.
That is not to say that the intent of Bill C-55 should be abandoned. Our association is opposed to any unfair tactics that might be resorted to by the U.S. administration at the urging of the country's powerful U.S. lobby industry.
The Canadian lumber sector is pursuing various recourses that are available to it under Canada-U.S. agreements and before the bodies that have been established to oversee the conduct of the international trade of its members.
We strongly urge the government not to adopt a provocative or confrontational policy with the United States at this time. There are other avenues that may be followed, through which Canada might expect to have the support of other member countries to whom the preservation of their own cultural identity is a concern they might share with Canada's concern. This is a time for diplomacy, a time to resort to the rules and bodies established to govern international trade.
This alternative, of course, is time-consuming. Difficulties will no doubt be encountered. However, this is a way in which Canada should, in our respectful submission, proceed in this manner.
Senator Rompkey: Evidently, we are more vulnerable than I thought. I think it was Mr. Myers who said that the U.S. does not have to retaliate, it just has to threaten to retaliate. That is very scary, if we are that vulnerable. I had not realized that we are.
I wish to read to you two quotations, after which I would like your comments.
First, it was stated in Folio magazine, which describes itself as the magazine for magazine management:
Despite the hubbub, publishing analysis on this side of the border says the bill would have little effect on U.S. magazine interests. "There is not that much advertising up there," says Bob Crosland, managing director at AdMedia Partners, a New York City based media industry investment bank. Crosland values the Canadian market for magazine advertising at about $150 million in total.
In other words, he is saying, there are no real grounds for concern that the U.S. will retaliate against billions of dollars of lumber or other Canadian exports. Ron Atkey, counsel for Time Canada, who testified before us last week, agreed with that.
Gordon Ritchie, who negotiated the free trade agreement for Canada with the Americans, cautioned us when he testified here that if we cave in we would be playing into the hands of the Americans. He said:
I must also say that, based on their track record and their experience, they may well believe that Canada will cave under pressure if it is properly applied. That, in my view, is why they are playing this game of divide and conquer, and it has worked to a T. When the Canadian steelworkers producers come in to say, "Please, please, accommodate the Americans on this issue so we do not get hurt," their strategy is working much as they thought it would.
I would like your reaction to those comments.
Mr. Dottori: The last comment is absolutely correct. That is what they have done in the softwood lumber agreement. They have pitted provinces and companies against each other. Then, we got into a cat fight among ourselves, and they won the argument.
Our position on that aspect, and our concern in coming here, is to contribute to that point. We are saying there is a cultural issue and a trade issue here. You should treat them as two separate issues.
On both these issues, we feel that you should take a strong position. Our feeling is that if you mix the two we will lose. Our primary concern is that we do not get expensed for $150 million, which is what it amounts to. We are not suggesting that our position should be weak.
The comments are valid. Our concern is that in coming to an agreement on a cultural issue -- and we do not think it is a cultural issue but more of an economic trade issue -- perhaps the Canadian government should stand back and look at the whole Canadian-U.S. relationship. We have signed a free trade agreement, yet they are coming after us one section at a time. I am not sure we have free trade.
Ms Nugent: For the past three years, I have been very active in certain softwood lumber issues. I have had to network and work with many of our U.S. allies in the United States, such as U.S. home builders and lumber dealers who do not like the softwood lumber agreement or restrictions on trade. They would like a free market so that U.S. consumers could gain as a result of not having volatile markets and prices, et cetera. Throughout this whole process we have had to try to work with them to educate senators and congressmen to a different point of view. In the past year, we have worked hard to get a different viewpoint across in Washington on softwood lumber.
For example, a Republican senator has been bringing forward questions to the subtrade committee. Many senators and congressional representatives have started to ask why the U.S. government is harassing Canada, their best trading partner.
I wish to refer to you part of a letter that was presented to the subtrade committee chaired by Republican Phil Crane. This is a scenario in which we have convinced senators and congressmen to ask questions as to why we are being harassed. It is written by an association representing lumber and building material dealers, which is comprised of some 15,000 companies.
Yesterday, I went to the congressional hearing in our House of Representatives Trade Subcommittee of Ways and Means chaired by Rep. Phil Crane... Testifying for the Administration were Robert Fisher and U.S. Custom's Commissioner Kelly. After their formal testimony, they were asked questions by members of the committee.
As an example, Ramsay submitted questions to Customs asking why there was such a rush to reclassify wood products coming from Canada into classifications covered by the softwood lumber agreement. This is an area in which we feel Bill C-55 has interrupted.
Later, Chair Crane vigorously demanded that the USTR explain what their office was doing about C.55.
The chairman went on to explain his understanding that this legislation, if passed, would bound the import of American magazines into Canada to protect the cultural integrity of Canada.
Ambassador Fisher answered diplomatically that there were good-faith discussions going on with the Canadian government to hopefully resolve this problem.
His comment to me personally was: "Could you find out for me if Canada has collectively lost its mind? We are spending a huge amount of time and money in the United States to convince our government that Canada should not be restrained in the lumber products that it sends into the United States. Right now, billions of dollars in framing lumber products are restrained. Expansion efforts by American producers could add another $1 billion worth of products and destroy hundreds of businesses in Canada. We have enough contentions over the minuscule trade in cattle and wheat, et cetera, but Canada must have a sense of the bigger economic picture."
That is his personal viewpoint after attending some of these meetings where our U.S. allies are trying to work with their congressional representatives and senators to open up the border for our softwood lumber. As of the last year or so, we have had retaliation on products covered in the softwood lumber agreements. We believe that Bill C-55 has, in some form or shape, been involved in this area.
Mr. Myers: I do not think you will find many people from the businesses who might be affected by this. Ms Nugent is saying that the threat of retaliation is not objectionable but it is.
As long as Canada is negotiating with the United States over a possible settlement of this issue, then we should take the strongest possible negotiating position but wait before passing the legislation to see the outcome of those negotiations.
Mr. Ritchie is perfectly right. The United States is playing a great game of divide and conquer here. I hope the outcome does not lead to conquer in this situation. Nevertheless, there are real concerns and there are real businesses that are losing money right now as a result of the threats that I described.
The distribution system in North America is well integrated. It does not take much in the way of threat of loss to cause potential customers to back out of negotiations for new contracts because they say it is not worth the risk. That is happening in some sectors.
To your first quote that there is not much advertising up in Canada any way, one would ask: Why would they bother then with retaliation? One might also ask: What is the point of the bill?
Senator Rompkey: Mr. Dottori mentioned that we should not confuse culture and trade. On the other hand, Gordon Ritchie paraphrased Winston Churchill by saying that what we are doing now is a terrible measure, odious in every way, except for all the rest. Yet from his experience, investigation, and analysis, Mr. Ritchie does not know of measure that is better than the one that is on the table now.
Could you suggest a better measure than the legislation we have before us now?
Mr. Dottori: I do not know enough about it to make a comment on whether there is a better measure. Culture comes from within. Countries must always protect culture to some extent, as long as they do not take it too far, as we have seen in Europe. I do not know enough to offer alternatives.
Ms Nugent: In our softwood lumber issues, we have gone to various bodies. We have faced challenges in the U.S. international trade courts in New York. We faced proceedings in the courts of appeal in Washington. We are currently taking measures at the WTO to correct the illegality of the U.S. Customs reclassification of products. We are also working on the cattle subsidy case, which can influence lumber, too.
Our industry has had to look closely and carefully at which avenues we pursue. On the cultural issue, we ask why we should provoke a confrontational issue that will involve trade. The Americans will retaliate. They have already started in softwood lumbers. Let us pursue those other avenues and find another way that is not confrontational.
Mr. Myers: It is a little difficult to answer that question when you are taking ideas out of the blue and trying to come up with a rationale approach to this issue. This will be a political issue, a negotiated issue. The outcome of that process may give us something different than what we have right now and which may be preferable.
Senator Forrestall: I would ask Mr. Myers and Ms Nugent to go just a little beyond anecdotal information. Can you make a case? Can you cite examples that suggest that money has already been lost, that contracts have been lost, or that sources have dried up for whatever reason? Can you demonstrate that, or is it just anecdotal evidence?
Ms Nugent: In softwood lumber, our predrilled stud products that used to enter the United States free of any punitive damages now cannot go through the border without a penalty of U.S. $100 per 1,000. That equates to historical exports of about 750 million feet, in the year previous, being down by more than half.
The U.S. has targeted two more wood products. Their decisions will be announced in another month or so. Those products will go through the same process. USTR, in their dialogue with the Canadian embassy in Washington, has a list of 50 rulings that will potentially go through the same process. Those are actual finite numbers.
Senator Forrestall: Long before Bill C-55 and long before this very old issue of split-run advertising, indeed for as long as I can remember, we have been at war with the United States over Canadian softwood exports. A penalty of US $100 per 1,000 would affect competitive rates and trade would go down.
Ms Nugent: Absolutely. An exporter cannot afford that punitive damage.
Senator Forrestall: It is not because of anything stated, but your own experience has shown you that when the Americans start threatening, there is always a great impact.
Ms Nugent: We have fought the Americans for 15 years on softwood lumber. Through our Free Trade Lumber Council, we have some members who used to be members in the United States. They have encouraged us to start a U.S. grassroots campaign to get to all our U.S. customers. It is an education campaign to let them know how this adversely affects their businesses and their supply. We want our U.S. allies to start educating congressmen and senators involved in U.S. industry who did not like the softwood lumber agreement. That is where we will gain the changes, not through Canada's demands.
Senator Forrestall: If you find any good witnesses down there, send them along.
Mr. Myers: I wish I could list here some of the companies that have been in touch with us, but they would not appreciate having their names given in public. I would be pleased to ask them to write to you and your colleagues.
Senator Forrestall: We are hearing anecdotal evidence, and I have no reason to doubt it, but it is difficult to create a solid case.
However, if people were to write, we would appreciate it very much. They could write in confidence to the committee clerk or the chair of the committee. The matter would then be considered by the committee. That is a possible route.
Those of us who come from Atlantic Canada are very conscious of the role the forestry industry plays in our daily lives. However, on the other hand, I hate jumping on my own shadow. If we had something more, I would appreciate that.
Before Bill C-55 was drafted, were you consulted by the government or by trade officials of the government?
Mr. Myers: No, we were not consulted about the drafting of Bill C-55.
Ms Nugent: We have had periodic conference call meetings with the federal government and industry stakeholders. We were not consulted about this proposed legislation until it had reached second or third reading.
Senator Forrestall: You had no idea this was coming down the pike at all, then?
Ms Nugent: No.
Senator Forrestall: I find that less than helpful given the position we are in right now.
This afternoon we heard two of my distinguished colleagues who decided that there was not much point in being here tonight because a deal had been cut with our American friends.
You are certainly aware and are following as closely as you can the ongoing negotiations. Have you heard anything today or yesterday that might lead you to believe that we are, if not at that stage, very close to it?
Mr. Myers: It is our understanding that we are very close to an agreement. However, I do not know what the status of any negotiations would be.
Senator Fitzpatrick: I should like to go back to a comment that was made with respect to the point of the bill. I believe we are all discussing this issue because hopefully we feel that there is a need to protect our culture and our heritage; otherwise, this bill would not have been drafted.
The government has concluded, after a significant amount of thought and consideration, that this is the best measure to deal with it. You may argue otherwise, but that is the conclusion the government has come to.
Whenever you put something on the line, and our culture is on the line, you take some risk. We take risk simply by doing business in the United States. The Americans have a reputation of being hard and tough bargainers.
I have some difficulty, therefore, in believing that Bill C-55 is causing retaliation by the Americans in a whole series of trade issues over which they are at our throats all the time in any event. I do not believe that this is the catalyst for the Americans taking issue with some of our trade areas.
I come from British Columbia. I know how important the softwood lumber industry is in British Columbia. I know how important the fish industry is in British Columbia. However, do you really think that Bill C-55 has caused the tough negotiations that we are presently having with the United States on the softwood lumber agreement or with regard to the Pacific salmon treaty? It is a real stretch to blame all of that on Bill C-55.
I know the problems that we have had in the softwood lumber industry for the past 15 years. I anticipate that we will have the same problems for the next 15 years.
I also do not believe that it is fair to say that the problems we are having with predrilled studs are a result of Bill C-55. At present, we have those trade problems with the United States and we will continue to have them.
Do you really think that Bill C-55 is the reason we are having difficult negotiations with the United States on a whole series of trade items?
Ms Nugent: Over the last 15 years in softwood lumber negotiations with the United States what has always been targeted is commodity lumber. This is the first time that we have had a confrontation with them on value-added products.
I am not saying that it is the only reason that we have these difficulties with the United States, but it certainly continues to surface at all our U.S.-attended meetings in order to try to rectify some of these problems. It is a catalyst of some sort; to what degree, I could not tell you, but it is always there. I do not think it is a stretch in any regard to say that these realities are not linked to Bill C-55.
Senator Fitzpatrick: We had problems with predrilled studs prior to Bill C-55. I do not think that Bill C-55 brought about that problem.
We also understand that the predrilled stud problem was something that was expanded past just predrilled studs. To begin with, it was a pretty narrow issue. It has since expanded because some advantage has been taken with respect to value-added or alleged value-added products.
Do you agree that the predrilled stud or value-added problem predates Bill C-55?
Ms Nugent: I do not know when Bill C-55 was drafted, to tell you the truth. However, the difficulties with predrilled studs started a year and a quarter ago.
Mr. Myers: Madam Chairman, one of our concerns is certainly that there are many trade irritants and disputes that are outstanding. The U.S. trade authorities have been very good in selecting those areas where there are outstanding problems and targeting them.
There is a concern that certainly this will increase the costs for those sectors. There is also a concern that some areas of difficulty have expanded beyond some of the sectors where there were trade problems before. Some companies that are having difficulties are smaller customers.
Automotive customers depend on low-cost entry. Where contracts were negotiated three and four years in advance on the basis of declining price, they are the ones who cannot pass these results on.
The other point I wish to make is that there is confusion here between how much of this is a cultural issue and how much of this is a trade issue. If the issue is to try to deal with the problem of dumping of services and advertising services, then maybe we should be moving strongly in the direction of incorporating services and dumping provisions as they apply to those into a general agreement on trade in services.
I do not know if this problem would have arisen if magazines were treated simply as a manufactured product. If this is the key issue with which this bill is attempting to deal -- and I think it is an important issue with which we should be dealing -- then we should be looking at alternative negotiations, particularly in the context of the WTO, to deal with that matter.
Senator Callbeck: I wish to continue on in regard to what Senator Fitzpatrick was asking you about. I want to refer to the same article Senator Rompkey read from Folio magazine, which is called the magazine for magazine management. The article quotes Mr. Crosland, who is the managing director of AdMedia Partners, a New York City-based media industry investment bank. He says that the U.S. trade office cannot even get publishers to come to Washington to testify on this issue.
It seems to me that Bill C-55 is no big deal for the U.S. magazine industry. It seems that the U.S. trade office does not like it. However, it does not seem to have much to do with the magazine industry in the United States.
Mr. Myers: If that is the case, then that it is a pretty pitiful situation in the United States. Yet, it is a matter of concern. It is something that the trade officials in the United States are taking seriously. It is certainly something that our industries are taking seriously.
Mr. Dottori: They have some of the problems that we have in that sometimes the politicians and the government take positions not necessarily supported by industry, either for other reasons or for part of an overall negotiation picture.
The official position of the Free Trade Lumber Council is that we are not making a direct linkage between Bill C-55 and any of the reactions that the government is taking. However, in the letter to which Mrs. Nugent referred, you can see that there is a perception in the United States, at least in some areas, that we are banning U.S. magazines from entering Canada. That misinformation may be used to take other decisions.
Some of it is perception and sometimes the facts get confused by the vested interests that are involved. Obviously, the U.S. trade office, the politicians and some of the congressional representatives are using that to their advantage at our expense. Our concern here is that this is a cultural issue, and when you talk about culture it gets very emotional. We are all strong and nationalistic Canadians. We believe that we should preserve our culture. We are concerned that we are not mixing this with a trade issue and that we should sit back and take a look at it.
At the same time, if this is a trade issue, then let us keep it that way. Perhaps if they solve it this afternoon we are having a useless discussion. We believe we are mixing cultural and trade issues here. The perception is, perhaps, what is confusing the issue.
Senator Johnstone: I should like to ask the presenters if, in their opinion, there is any middle ground between negotiations and caving in.
Ms Nugent: We have not been part of this negotiation process, therefore, we cannot comment.
Our concern is that the Americans have indicated through their USTR that there will be some form of retaliation directed at our sector. We are concerned that that will be very real. If they do that, you will lose exports into the United States amounting to billions of dollars. Once that damage occurs, you cannot get those lost exports back. You lose your markets and your customers. There will be others who will come along and provide the lumber. If you can guarantee that we do not have to worry about that, then you can do whatever you want with Bill C-55.
Senator Fitzpatrick: No one can guarantee that the Americans will not be tough on softwood lumber now or in the future.
Senator Maheu: The negotiations on Bill C-55 started in either October or November of 1988. You have said that you have had 15 years of fighting with the U.S. What does that have to do with Bill C-55? How can Bill C-55 possibly have anything to do with the problems you have been experiencing for 15 years? That is pretty well what Senator Fitzpatrick said.
Ms Nugent: Our problems in softwood commodity lumber have been going on for over 15 years. We have not been attacked on valued-added products. When the softwood lumber agreement was signed in 1996, value-added products were excluded from the trade restrictive agreement. They were free to cross the border without paying damages or fees.
The problem that has occurred in the past year is that U.S. Customs has been reclassifying products through a harmonized position so that they would be covered under the softwood lumber agreement. That is in the form of predrilled studs and two other products that are up for a decision within the month. There are three more that will be attacked as well.
Senator Maheu: That did not start last November when the talks started on Bill C-55.
Mr. Dottori: The disposition of this discussion has been going on since before October.
Senator Forrestall: I would not want that last point to be left hanging. There are two separate issues here. I asked the question and I was surprised by the answer. It is a question that you will find you will want to ask yourself: Did the government discuss this with you beforehand? That is when you should have been raising your objections. Your response was that there had been no discussion until it was virtually in second reading.
The Chairman: I think we should ask that question of the minister, who will be returning to appear before us next Tuesday.
Senator Forrestall: How can the minister tell me what these witnesses know?
The Chairman: I am saying that we can ask the minister who was consulted on Bill C-55 before it received first reading in the House of Commons.
Senator Forrestall: I was trying to make it perfectly clear that it had nothing to do with the onerous problems of the softwood industry, something with which I have lived for 35 to 40 years. It has nothing to do with that. It has something to do with when governments had conversations, if in fact they ever did at all. Apparently, they did not.
The Chairman: I will now ask Ms Callwood to come to the table.
Ms June Callwood, Writer: I wish to thank you and the clerk, Mr. Patrice, for his indulgence in accommodating my schedule. I apologize for any inconvenience to the committee or other witnesses.
I get the impression that you have been hearing from very powerful, well connected and even wealthy people. André Cornellier and I represent a different voice. I am a writer. At one time, I was Chair of The Writers' Union of Canada; President of PEN Canada; chair of the Book and Periodical Council, vice-president of the Periodical Writers' Association of Canada, vice-president of the Writers' Development Trust -- and those are the major writing organizations. I should like to say I represent some of them though they do not know that.
I have also been in the business a very long time. I wrote my first magazine piece 54 years ago, and my most recent one last month. In that time, I have felt a part of the magazine industry in this country. My husband, Trent Frayne, who is also a magazine writer, and I have been freelancer writers most of our lives. We raised our children mostly on our income from freelancing for magazines, and we are not unique in that regard. Across the country, there is a host of people who developed as writers in the Canadian magazine industry.
Jack Stoddart can confirm what I have said. He has published a few of my books. Nearly all the writers of non-fiction books come up through magazines, almost without exception. I know of very few exceptions. That is the self-serving part of what I wish to tell you. There are a great number of people who rely on magazines for their livelihood. That is not as important, dear as it is to my heart, as to tell you about the contribution that Canadian magazines make in the culture industry.
Poets, I believe, are visionaries whose books can be read in any country. They are almost stateless. Many of our novelists do not set their stories in Canada. It is the peculiarity of non-fiction writers that Canada is our only homeland. We do not attempt to identify an American problem in an American magazine, with the exception of David Frum.
Our territory is to understand how Canada is evolving and changing, and document that. When my colleagues and I do research for a book, it is the magazines we research. There is a reason for that. Magazines are able to give writers the leisure of in-depth research that newspapers cannot give. Depending on how much the magazine can pay and their own tolerance, writers can spend weeks and months truly trying to understand something like prairie populism, which does not lend itself readily to any other format except a magazine. I feel that 2,500 to 5,000 words is the perfect length to examine a complicated Canadian subject that takes time to understand and explore.
If you wish to know what is happening in Canada by reading any other magazine in the world, you will not find out. You can only read about us in our magazines. As other people must have said to you, our magazine racks do not reflect that there is a lively Canadian magazine industry. Canadian magazines are very small in proportion to the other magazines on our racks, however, they are the only ones that will tell you how complex this country is, how interesting, how beautiful, where the troubled places are. They find our rascals and our heroes. They have become the fabric of our ordinary lives. We can look at a magazine and see ourselves, and see, through our history, how we have grown and changed. Without that voice of communication in this crazy geography we occupy, a country so illogically wide, we would lose an inestimable part of our self-awareness and our growth. I would say as well that the CBC is another such unifying voice.
We are still a young country. We do not have the abundance of self-esteem that the Americans have. We struggle to know who we are. When you take out the magazines, as will certainly happen if Bill C-55 is not successful, I do not believe you will find anything to replace it. It will not happen on the Internet. It will not happen on radio. It will not happen in the short attention span that television offers us. If we are to know who we are and to reach our potential, as this gloriously diverse country, you cannot jettison the magazines.
[Translation]
Mr. André Cornellier, President, Canadian Association of Photographers and Illustrators in Communications: I am a photographer and I represent the Canadian Association of Photographers and Illustrators. Most of the work we do is commissioned by magazines and advertising agencies. That is how we earn a living. Photography is not a medium for radio or television. Newspapers represent a totally different market. Magazines show all facets of Canada. Photography and books are the key to discovering Canada.
If someone living here in Canada or abroad has seen a part of Canada, it is because a Canadian photographer made the effort to travel to that location and take a photograph. There are over 12,000 photographers in Canada and their goal is to show Canada in every possible light.
It is critical for photographers to have a medium for displaying their work. Canadian magazines provide them with the best possible medium for showing Canada and its people to Canadians and to the world at large.
Americans view this as an economic issue. However, for Canadians, it is a much broader cultural issue, in addition to a financial concern. The photographers on whose behalf I am speaking rely on magazines for their livelihood. Each photographer runs a small business, so to speak.
For instance, I have three employees. Photographers work with makeup artists, hairdressers, stylists, models and so forth. They do not work alone. Theirs is a collaborative effort involving substantial sums of money. An ordinary photographer may do half a million in business each year, because of the people working with him. Many people are involved in this endeavour.
External pressure on the government to reject Bill C-55 is creating problems for us. Such pressure is not uncommon. We realize full well that Bill C-55 is perfectly legal and not in violation of NAFTA. There is no valid reason to listen or respond to this pressure. To do so would, in the long run, prove detrimental not only to photographers, but to many others as well.
Similar pressures are felt by sectors other than cultural industries. If magazines lose some of their clout and disappear from the market, when other NAFTA issues arise, either with the Americans or another country, who ultimately will be around to speak out? If magazines are no longer around and a problem arises, for example with softwood lumber, who will present the facts to Canadians? Who will raise the issue if journalists and others working in this field are not around to do it because they no longer have a medium through which to convey their message? In the long run, we stand to lose much more than a small trade war. People seem to think that this is a minor issue. However, there is an underlying principle here that we must bear in mind. Someone is exerting pressure, and if this action succeeds, then it will be repeated again and again. If magazines are not around any more, who will be left to report on the situation?
[English]
Senator Maheu: I was impressed when Mr. Stoddart wrote that it is unprecedented to have such widespread support for a bill and that each of your 50 organizations support this bill and its principles.
I have one question for Ms Callwood and one for Mr. Cornellier.
Ms Callwood, you spoke about the U.S. intervention. You were here for part of the previous presenters' presentation. You asked this question: If the U.S. succeeds in blocking Bill C-55, which of our activities will be targeted next? Do you feel that Bill C-55 is one of few measures that we could use to protect our cultural diversity?
Ms Callwood: We have had very bad luck in protecting our cultural diversity in other areas. I cannot imagine the psychological effects of us giving up our magazine industry as a kind of sacrificial lamb to the Americans. I cannot imagine where it would end.
This will not be the end of Canada, but it will be the end of Canada as I have known it for 75 years.
The Canadian Conference of the Arts did a superb job in organizing a splendid media event regarding this proposed legislation. The reason we received support for our position is that everyone sees the magazine industry as a domino. If this one falls, all of us will go down, one after another.
We do not have movie distribution. We have a difficult time protecting our book publishing industry because it is fragile. We do not have the critical mass of people to support these industries without there being some kind of structure, through laws and other means, to enable us to keep our uniqueness.
It would be heartbreaking if we gave up on Bill C-55. I really think our hearts would break.
[Translation]
Senator Maheu: We often hear it said that culture is exceedingly important to Quebecers and needs to be protected. On this issue, some argue that the United States will take retaliatory action. The threat of retaliation is very real, according to other industry stakeholders.
However, countervailing measures will target other sectors of the Canadian economy. Are we not being somewhat self-centred when we encourage the government to stand firm in the face of a giant like the United States, our neighbours to the south?
Mr. Cornellier: Yes, I believe we are, because we want to defend Canada. We love our country and want to preserve its culture. Everyone has a vested interest in this, not just photographers and journalists, but all Canadians. When we talk about Canada, we mean all Canadians. Magazines recount the exploits of all Canadians and report on the activities of all Canadian industries. When a problem arises, they are there to talk about it and to defend our interests. Magazines have always been there to provide in-depth reports on a range of issues. Our country has experienced its share of problems with the United States and each time, we have never hesitated to talk about them. We can thank creative artists and journalists for the work they do and will continue to do. Yes, we have to be a little self-centred if we want to preserve all that is great about this country.
[English]
Senator Spivak: I have a comment and a question. Joni Mitchell sang a song in which she said that "you don't know what you've got `til it's gone".
In Canada, it seems as though it was not always thus, however, we seem to be slowly dying from a thousand cuts. I support this bill very strongly because it is time to take a stand and say that enough is enough.
The issue of Canadian content has come up several times with our presenters. How do we define it? Is it something that is written about Canadians by Canadians, or is it anything written from a Canadian perspective?
Apart from that, we are hearing that any compromise would be based on Canadian content. It is my hope that no compromise comes about. Some presenters have said that such a compromise would not be good because it is so difficult to define Canadian content.
What is your comment?
Ms Callwood: I do not know how different my comment will be. The definition It is difficult to define "Canadian content." If you define it as a Canadian writer writing about Canadian material, you think you have it covered, but there is a sort of leeching activity that can take place. I am sure there is a more technical term than "leeching". An American piece of research is rewritten by a Canadian writer in the Canadian context. Of course, the rewriter is not paid very much for simply switching the statistics for Canadian statistics and writing a new lead, but it is then a Canadian story.
Unless the definition of Canadian content were to be rendered exquisitely fine, it would be very easy to get around it.
Senator Spivak: There are all kinds of writers, such as Vikram Seth and Rohinton Mistry, who do not write about Canada but they are Canadian writers.
Do you think this bill is our best option? We have been told that that it is the best alternative to meet a trade challenge and to protect Canadian culture through protecting the Canadian publishing industry.
Ms Callwood: I cannot speak to meeting the trade challenge. I know we lost one round on this one. I can speak to the feeling among writers that this is our only defence. If this fails, we fail to see how we will ever survive. Our major national magazines will lose a considerable amount of the support they now have. We cannot imagine surviving if Bill C-55 is weakened substantially, as the Americans would like.
Senator Spivak: And is it the same way in Quebec?
Mr. Cornellier: Yes. My feeling is that the Americans are trying to pull a fast one. They know this problem exists everywhere. They have this problem with Japan and with Europe. It is not a new problem. They are trying a different tact here because we have been so close to them for so many years. They are addressing this problem in all the other countries, and they know it.
The problem is not the big affair that they are trying to make of it. Their point is not so strong. The French people in Europe feel much more strongly than we do about such things. In Japan, it is difficult even for Americans to get their foot in the door. Here it seemed easier for them because our language and cultures are so much more similar, but they know the problem very well. I do not think this is a strong measure in the sense that we are doing anything to damage them.
Senator Spivak: That is correct, but I wondered about the perspective of Canadian content from the point of view of Quebec.
Mr. Cornellier: I would agree with Ms Callwood that it is quite impossible to define content. Is it a French-Canadian person talking about Toronto? There is no way to define that. I think we must stay as we are now.
Senator Fitzpatrick: For June Callwood to say that she is "just a writer" is the understatement of the evening. Indeed you are a great writer. Your work is the epitome of why we need a Canadian magazine industry -- so that other young writers can get their start just as you once started.
Where would young writers go today if there were no Canadian magazine industry? We hear a lot about the brain drain to the United States. Would they have to go to the United States to write? Would they submit articles to the United States? Would there be the same opportunities for young Canadian writers today as there were for you when you started?
Ms Callwood: Opportunities would be severely diminished. If Bill C-55 is not passed, the small magazines would probably not be affected. They may survive because of their specialized audiences. The big national magazines will be hurt, which is the area where writers are most affected. Small magazines do not pay much at all -- $50 is the usual amount for an article. You cannot go very far on $50. Most of the small magazines are paying between $50 to $150. The big magazines will pay $2,000 or $2,500.
I am now writing magazine articles because I am writing a book. In this country, you cannot afford to write a book unless you subsidize your earnings with magazine articles. We all do that. If that income were not there, it would put a lot more pressure on us. Going to the United States has never seemed to me to be an option. I wanted to stay here and write.
Senator Forrestall: Ms Callwood, I do not know you from your writing as well as I know you from television.
Ms Callwood: That is another way that I subsidize my writing.
Senator Forrestall: Which industry made it easier for you to write books, the television industry or the magazine industry?
Ms Callwood: We all must diversify. I take that very seriously. Writers will take academic jobs that they would rather not take because they cannot make a living only by writing. When I was president of The Writers' Union of Canada, we thought we would introduce a graduated membership fee so that low-income writers would pay a small fee and Pierre Berton would pay the most. That system failed because so many of our writers are teaching on campuses. Their cumulative income is healthy, but their writing income is very small. Writing is a precarious industry.
Senator Forrestall: To your knowledge, was there any consultation between any of your various writing groups and the Government of Canada prior to the drafting of Bill C-55?
Ms Callwood: I cannot speak personally about that. I have a feeling that sometimes the writers, photographers and illustrators are lumped together as "the creators," which to me seems a little presumptuous. There was not extensive consultation with "the creators" when the bill was drafted, but we got on board with enthusiasm once it was prepared.
Senator Callbeck: I take from what you have said that without Bill C-55 many of our Canadian magazines will suffer and we will likely lose some of them. You both have spoken very eloquently about what we as Canadians would lose without those magazines. I assume the reason you feel we would lose them is because of the advertising dollars.
Yet, last week, we heard from George Russell of Time Canada who said:
Third, neither Time Canada nor Sports Illustrated Canada provides unfair or discounted competition for Canadian advertising service revenues. Any allegations of dumping or discounting of advertising revenues are unfounded and not consistent with the facts.
What do you have to say about that?
Ms Callwood: My experience is that when some protection for Canadian magazines was first instituted, a number of my friends, writers known to you, were approached by American magazines to do quickie pieces so that they would look more Canadian. There was a great ethical issue because they were being paid more than Canadian magazines could pay. It was a case of us legitimizing what they were doing, which was a scam. Some people did it and some did not.
Mr. Jack Stoddart, President, Association of Canadian Publishers: Dumping is a part of this whole question. When you look at Time, you see that 80 per cent of it is foreign content while 20 per cent is Canadian. The 80 per cent is already paid for. Thus, all they have to do is cover the 20 per cent with advertising out of the Canadian market. Everything else is free. I consider that to be dumping, although it may not be dumping technically.
An independent analysis should be done of Time magazine, in particular, which initiated this whole program. I will deal with it in my comments. The analysis should look at the last year or two year to see what percentage of those magazines were Canadian-written material and how much of it related to Canada. If you look at that, you will see a model of what our magazine industry will look like. Maclean's will not exist. You can go through magazine after magazine. There will not be a competitive position in this country.
In one sense, dumping is the heart of the problem. The penalty will be paid by the writing community and the reading community.
The Chairman: I should like to thank our witnesses for their appearance here this evening.
I will ask the next panel to come to the table.
Ms Megan Williams, National Director, Canadian Conference of the Arts: Madam Chairman, I am pleased to be here this evening as the National Director of the Canadian Conference of the Arts, which is Canada's oldest and largest arts advocacy organization. We represent 200,000 artists and cultural workers. Our 24-member board representing regions and arts disciplines across the country share a strong interest in the passage of Bill C-55.
Since September, our CCA secretariat has sent out six fax bulletins on the subject. In March, we worked in partnership with the Association of Canadian Publishers and ADISQ. June Callwood is under the illusion that CCA organized this press conference on its own. It was a large coalition and the three of us worked very closely together on it.
We organized a rally of 50 arts organizations in support of the bill and in support of Minister Copps' efforts on behalf of Canadian cultural sovereignty.
The banner that was held up read, "Together for Cultural Diversity -- Together for Cultural Choice." June Callwood spoke very eloquently at that event.
Fate conspired with us that day in that the rally and the successful third reading of the bill took place at the same time.
The CCA has a long-standing interest in cultural policy which goes back in an unbroken line to our founding board in 1945. In recent years, we have been pushing hard for a unified policy housed within the Department of Canadian Heritage. Had this policy been in place prior to the negotiation of the NAFTA and the FTA, Canadian negotiators might have brought it to bear and thus avoided settling on the unusual terms that allow for the aggrieved parties to take measures of equivalent commercial effect whenever the cultural exemption is used.
Although there is no unified cultural policy, Canada does adhere to a set of fundamental principles developed and refined over years by government departments, standing committees and the cultural sector.
Individual senators with a long-term interest of Canadian culture at heart have contributed to the development of these policies going right back to the Massey commission in 1951.
The four principles to keep in mind in pondering the questions raised during the negotiation of Bill C-55 are these. First, Canadian ownership regulations are reasonable and necessary. The U.S. itself recognizes the importance of controlling its broadcasting industry through its ownership rules for broadcasting licences. Ownership is related directly to decisions that reflect cultural expression, voice and national identity.
The second principle is content. I believe Ms Callwood spoke to us very eloquently about the meaning and importance of Canadian content. I want to say that I do not share the view that it is difficult to define what Canadian content is. I believe if we look at Canadian writers or artists resident in this country, all their work is "Canadian content."
The third point is public-sector support, namely, the ability of government to promote growth in the sector either through direct subsidy or taxation and regulation according to the needs of the various cultural industries.
The last point is means of distribution. Canadian markets are completely open to foreign cultural products to an extent equal to or exceeding many other nations. One only has to leave this room and walk to the newsstand to see that foreign magazines occupy 80 per cent of the shelf space.
Canada's domestic cultural market allows plenty of space for foreign cultural products. It is therefore vital to protect some small space for the expression of Canadian artists and for their products.
As the months of debate over Bill C-55 draw to a close, we turn to the Senate to take a long view on this matter. Senators are more able to resist the crushing pressure that has been brought to bear on Canadian negotiators to achieve American aims. Every negotiation involves trade-offs. In the negotiations for NAFTA and the FTA, Canada emerged with a deal that is truly a double-edged sword. However, let us assess the nature of that threat.
Is the implementation of countervailing measures really so severe? Opinions differ as to the value of loss of advertising revenues. There is agreement that it is a relatively small amount in terms of the overall balance of trade. Certainly, Canada can take a hit every now and then in the interests of protecting Canadian culture.
The Canadian magazine industry has emerged as a strong voice of diversity and Canadian viewpoints under regulatory regimes that successive governments and senators have fostered successfully since 1965. We believe that Canadian cultural policies and the intent of Bill C-55 are in harmony. Most important, we believe that threats of countermeasures should not be exaggerated and should not deter us from our course. If worst came to worst, the procedures for countervailing measures under the FTA could be applied, but even this will require careful negotiation.
I urge honourable senators to vote on Bill C-55 in its present form and to continue to support the valiant efforts of the Minister of Heritage and the magazine industry in this very symbolic struggle.
Ms Sandra Graham, Vice-President, Public Affairs, Canadian Association of Broadcasters: The Canadian Association of Broadcasters represents the vast majority of Canadian programming services, including private television and radio stations, network and specialty television services in every region of the country. Canada's private broadcasting industry is a $2.8 billion a year sector that supports over 30,000 direct and indirect knowledge-based jobs in the Canadian economy.
While it is true this piece of legislation does not directly impact on the business of private broadcasting in Canada, in my brief time this evening I hope to share with you our concerns over the necessity of this bill in our current trade environment.
I submit to the members of the subcommittee that it is no coincidence that our association and others representing the cultural sector appeared last night at the House of Commons Standing Committee on Foreign Affairs and International Trade as part of the government's pre-consultation process for the upcoming World Trade Organization and Free Trade Area of the Americas negotiation set to begin in November of this year.
Our concern, of course, is the inconsistency between the cultural exemptions in NAFTA and the lack of a clear agreement on services under the WTO, which creates two distinct problems. As long as the U.S. continues to use the WTO as the principal forum for trade disputes, the cultural exemption in NAFTA is virtually ineffective. This ambiguity allows the U.S. to make up the rules when the WTO agreement does not serve their purpose.
Let us be very clear. The Canadian government moved quickly to comply with the WTO ruling on magazines. The result is Bill C-55, a magazine policy directed at services of advertising and accepted practice under WTO. That being the case, Washington is still unsatisfied. Unfortunately, the shell game can only go on for so long. The Minister of International Trade's own sectoral advisory group on international trade for cultural industries, the SAGIT, submitted a report in the spring calling on the government to work with other countries and negotiate a new cultural instrument for trade. The recommendation is based largely on the inconsistency between the provisions in NAFTA and the WTO.
Before the standing committee last week, a wide range of representatives from the broadcasting, publishing and fine arts sectors unanimously called on the government to adopt the recommendations of the SAGIT report. I can assure you that the unanimous support for anything in our sector is not a common occurrence.
Until we can build the necessary alliances and forge forward with a negotiating cultural instrument for trade, we will need mechanisms like Bill C-55 to maintain our domestic goals. Canada is the most open market in the world. We do not want to push out foreign publications or programming, we just want a bit of our own shelf space.
This makes the bill before you an extremely important precedent leading up to the WTO and FTAA negotiations. We believe that Bill C-55 speaks directly to the ability of a sovereign nation to exercise its own domestic cultural and industrial policy. However, I can tell you that this is not just about magazines. The broadcasting industry is watching, along with other cultural sectors, and I submit to you that the world is watching.
We believe that the current American assault on the Canadian government's efforts to sustain a Canadian magazine industry is the leading edge of a broader assault to come. The system of culture supports that we have built up to ensure our Canadian presence, on our own screens, in our own books, in our own music and, yes, in magazines, is at risk. Magazines are just the beginning. Television and feature film could well be next. We know that when it comes to Canada, the U.S. trade representative is intent on addressing major access implements to the U.S. magazine publishers and other media entertainment industries.
In conclusion, that is why support for Bill C-55 from the subcommittee and your colleagues in the Senate is critical. There has been talk in the media of current negotiations that may be settled in the current dispute. Perhaps our prime question should be: What is there to settle? Under current trade law, Canada, as a sovereign nation, should be allowed to use legislative tools to drive domestic policy. If Washington does not like the rules, then they should come to the table in the next round of the WTO and face other nations of the world. It is unfortunate that Bill C-55 is necessary at all. We must send Washington a clear message that Canada is committed to supporting our cultural industries.
Finally, I believe that we need to demonstrate to other nations who share common concerns with Canada that it is time to come to put trade issues on the agenda, not just with cultural ministers but with trade ministers.
[Translation]
Mr. Robert Pilon, President, Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ): L'ADISQ is an association that speaks on behalf of Quebec's independent record and concert producers.
We support the passage of Bill C-55. We have devoted a tremendous amount of effort to this initiative, working with our colleagues from the Association of Canadian Publishers in Toronto. On March 15, the Canadian Conference of the Arts staged a rally in Toronto which was attended by 50 organizations spanning the culture, arts and communications spectrum. Cultural industry players came together to express their support for this legislation.
We have forwarded to you the press release issued at the March 15 rally in Toronto. I would like to draw your attention to the list of organizations included in the handout.
The list is rather impressive. It reflects the support and interest expressed by all sectors of the culture and communications industry is Canada. As Ms Graham pointed out earlier, it is not often that we see associations representing songwriters and composers, record producers and broadcasters seated at the same table and expressing the same viewpoint. Yet, that is what happened and is happening again today, all because we believe there is an urgent need for action. We support the legislation because we believe something very important is at stake here. The aim of the bill is to protect the Canadian magazine industry and to give authors and writers like Ms Callwood and others the opportunity to express their views on Canadian and world events, giving Canadians access to a uniquely Canadian perspective in the process.
On further reflection, our cultural policies, whether in the field of broadcasting, music, film or television, have the same objectives. The means of achieving these objectives may differ from one sector to another, but the objectives remain the same. Basically, they are twofold: on the one hand, to give artists, creative artists and writers an opportunity, through magazine articles, books, songs, films or television programs, to reflect Canadian or world events; and on the other hand, to allow the Canadian public to glimpse these realities. These are fundamental objectives but not easily achieved in the Canadian context. Our situation is not unique and we will have to understand this one day. We share the same problem with Spain and Portugal, and most likely Korea. Canada is a small market, compared to the giant US market 270 million strong. Our large companies are modest players when compared to US giants or global multinationals based primarily in the United States. In light of this reality, enabling artists to express themselves and providing the Canadian public access to cultural industries is a difficult objective to attain.
I represent small record producers with annual sales of between $50,000 and $5 million. The largest record company in Quebec posts sales of about $5 million. It competes directly with large multinationals like Sony and Warner that have sales of $5 billion.
The people whom I represent are supporters of a market economy. However, under the circumstances, you have to understand that the rules of the market put Canadian companies and Canadian artists at a disadvantage. There is an imbalance in the way the free market economy works.
That is the reason why we need cultural policies, policies that impose some restrictions on foreign ownership, rules governing Canadian content on radio and television and financial support for films, like the kind provided by Telefilm, and for record production. They help to correct in some small way the fundamental imbalance within the cultural industries market. If not for this imbalance, such policies would be unnecessary.
Our market is already largely dominated by foreign content: 85 per cent of all records sold in the country are American, as are 80 per cent of magazines, 95 per cent of screen time in theatres and so forth. All we are trying to do is expand a small window, that is obtain a five, ten, fifteen or even twenty per cent market share for our artists and producers. That is all we want. These are relatively modest goals.
However, a mere five, ten, fifteen or twenty per cent market share is too much for the Americans, and therein lies the problem. Legislation like Bill C-55, policies that support the music or film industry and restrictions on foreign investment in broadcasting to ensure a relatively prosperous Canadian broadcasting industry -- all are designed to guarantee a small share of the market to companies primarily intent on bringing Canadian cultural products to the Canadian public.
Is there an alternative to Bill C-55? According to the newspapers, talks are under way in Washington. I will not deny that members of our industry are nervous about the outcome of these meetings. What are we to believe? We do not have the answer to that question. Some are confident that an alternative solution to Bill C-55 can be found, one based on content rules. That would be an extremely dangerous proposition. Consider the ramifications of the precedent that could be set.
For example, if Sports Illustrated were allowed to publish a Canadian edition with 30 per cent Canadian content, Viacom, which owns MTV -- by the way, MTV has already set up shop in 47 different locations around the world, but not in Canada because of the restrictions in our broadcasting legislation -- could request permission to launch a Canadian MTV with 30 per cent Canadian content, and so on. Subsequently, if a U.S. multinational wished to make a movie in Canada using Canadian actors, then what is to prevent it from seeking funding from Telefilm? We have to understand that our cultural policies entail maintaining an extremely delicate balance. Content rules, restrictions on foreign ownership and financial support are policy components that complement one another. We cannot operate strictly with content rules, particularly if the level is minimal, namely 20, 30 or 35 per cent. The day we allow that is the day we do away with competition. When American companies are the only ones left standing, it will be impossible to force them to comply with 30 per cent Canadian content rules.
I strongly urge you to use your full powers of persuasion to get through to the officials who are currently holding talks in Washington. Sometimes, compromise is no cause for pride. The consequences of doing so can be very serious.
We must not forget either that negotiations are slated to get under way in Seattle in November. On the table will be services, particularly audiovisual services. At stake is our broadcasting legislation, with all that this entails. As a result of Canadian content quotas for television and radio, a thriving domestic television and music industry has emerged. The future of these industries is at stake and everything could come down like a house of cards. Therefore, the situation must be carefully assessed. Compromising on Bill C-55 could set a precedent and have disastrous consequences.
[English]
I would invite Mr. Stoddart from the Association of Canadian Publishers to make his presentation.
Mr. Stoddart: Honourable senators, I should like to put a couple of things in context and provide some history, if I might. I will try to be as brief as I can.
In approximately August 1997, I had a call from the U.S. Consulate General in Toronto. Mr. Paul Davidson, the executive director of the Association of Canadian Publishers and myself were asked whether we would be prepared to meet David Edward Brown. He was the new officer of Canadian affairs at the U.S. State Department. He wanted to come to Canada to find out what all these issues on culture were about. It was during the MAI negotiations.
We had about an hour-long meeting and things kept going on and on. We tried to defend why Canada needed more than 2 per cent of our screen time or more than 30 per cent of our magazine space. Finally, I got frustrated with him and said, "You come to our country to ask us about what is important to us in the MAI and to get information in regard to the cultural issue. You keep saying that these are trade issues." I said, "Your government signed the FTA saying there was a cultural exemption."
He looked straight at me and said, "We did that as a courtesy to your Prime Minister." I said, "I beg your pardon?" He said, "There is no such thing in our country as a cultural industry, but your government wanted it, so we included it as a courtesy."
He said that everything was on the table. These are trade issues that will not go away. He rhymed off everything we have spoken about in the last two and-a-half years, including the radio-television and newspaper industry. He said that these were all matters that would be addressed because they are trade issues and have nothing to do with culture.
At that point, our conversation concluded. I was about to boil over and the other guy was not giving a cent.
I thought that discussion put Bill C-55 in perspective. This is not a subject on which logic abounds. What you have heard around the table tonight and over the past week or two does not relate to logic.
Time Warner, in particular, in conjunction with the U.S. State Department, has an agenda on this subject. There is an agenda with a very small group of people in Washington to achieve certain things in regard to what we call "cultural industries" and what they call "entertainment."
In late 1998, Mr. Davidson and I were again asked to attend a meeting. That was during the first stages of Bill C-55's route through Parliament. During that conversation, I made a statement that the issue of cultural protection would not be resolved. The Prime Minister would need to call the president because, at the end of the day, there was no common ground. I went on to say that this was not a matter for the trade department.
It was Time Warner that decided to walk around a 30-year-old Canadian law which had to do with bringing in the plates, et cetera. They found a technical way around our laws so that they could start doing split-run editions. That is why we have Time Canada today. Ron Atkey came over afterwards and said, "You got that a little wrong. We knew about this all along, and we chose when to use it." I think that is the name of the game.
Time Warner chose when to fight the battle on the magazine issue. They lost the MAI debate on culture because the MAI died. One of the major reasons it died is related to the culture portfolio. I understand that Mr. Atkey also said that the real damage in this war was not $1 billion dollars, which some people like to talk about, but $150 million. I believe he is straightforward and honest on this. He was honest when he said, "We chose when to create this fight." That is the battle we are fighting. This country must decide when enough is enough and when to say "No." It is clearly on the U.S. trade department's agenda that every cultural barrier or incentive program, or whatever you want to call it, is on the table as far they are concerned.
As far as ongoing negotiations -- and, I have certain amount of second-hand knowledge of what has been happening -- if ownership is to be traded away, that concerns me. In my industry, book publishing, 80 per cent of all the books are published by Canadian-owned companies. We publish only 30 or 40 per cent of the volume, but we cover 80 per cent of all the Canadian books and magazines. I will not go through the numbers again because you have heard them before. However, ownership does matter and depletion of ownership will change the whole structure of this industry.
I have sat on committees talking about this content issue in magazines for hour after hour. Once you get people in the industry talking about what is Canadian culture, what is Canadian writing, and what is content, it becomes a complex discussion.
This is a red herring, but I want to throw it in anyway. In 1960, the taxes paid in this country were about 50-50, personal to corporate. Today, they are about 80-20. That is documented. Those are not my numbers, those are from Statistics Canada. I believe that every time you move an industry from being Canadian owned and controlled to foreign owned and controlled, you lose a lot of your tax base.
I say that only in the context that, if we are to lose the culture portfolio, we will have more American companies operating in this country and more American magazines that have a 10 per cent or 15 per cent Canadian content and the tax base will continue to decrease. If you take away Maclean's or Télémedia or some of the small companies that all pay significant taxes in this country, again, we will lose a tax base. That is not the main issue here, but every time you welcome foreign companies into the country we do not seem to be able to get the tax revenue from those businesses. It is not only a matter of what we will do to culture but also what we will do to our business and to our country. I will stop there.
Senator Rompkey: Senator Spivak quoted something that Joni Mitchell sang, namely, "You don't know what you've got `til it's gone." I want to quote from an anonymous Newfoundland wit who said, "The worst thing you can have on your house is no porch." To paraphrase him, he would say with equal irony that the worst thing you can have in your country is no writers.
By the end of the evening, most of the questions have already been asked and answered. However, I do want to explore a little further the relationship between magazines and broadcast, and the broadcast industry.
June Callwood told us that magazines give writers the leisure for in-depth research and books; TV and radio do not do that. It seems to me there is a linkage, as far as writers are concerned, between magazines and the broadcast industry and other aspects of the publishing industry. I should like to hear a bit more about that because I think it is important. We are not just talking about magazines here as far as writers are concerned. We are talking about Canadian writers, however you define "Canadian content."
Someone said that, whenever a Canadian writer writes or an artist produces, that is Canadian content. Can you talk a bit about the relationship between magazines and the broadcast industry as far as training, producing and preserving writers are concerned?
Ms Graham: Most certainly, it is a chain. The broadcasting industry and the cultural industries all feed off each other. You need writers, producers and directors. You also need a cable industry and a number of different players in order to get our product across. Mr. Pilon said it most eloquently in that there are a number of policies in place that ensure each one of these pieces of the pie are able to do its job. Certainly, you cannot have a movie script or a television script without writers.
Everyone gets their start from different places. Unfortunately, some of our most talented television writers go south, but many of them start in the magazine industry in different writing capacities. There is very much an interconnection between the industries.
Ms Williams: Perhaps I could give you an example of the interconnectedness. There was a writer in Antigonish, Sheldon Currie, who wrote a novella called The Glace Bay Miner's Museum which became a radio play. Our politician from Dartmouth, Wendy Lill, made it into a stage play called The Glace Bay Miner's Museum. A Nova Scotia film producer then made it into a film called Margaret's Museum, which was a co-production with a Scottish company starring Helena Bonham Carter. All the creative people who worked on that particular story share an important connection.
Ms Graham: Eventually, it was aired on television.
Ms Williams: It was broadcast on the CBC.
Mr. Stoddart: My companies publish about 200 original Canadian books a year. I doubt if one of those authors is only a book writer. Rarely would that be the case. There is great cross-fertilization. That is the way it is, in particular, in Canada, because the market is so small. In the U.S. or in Britain or in France, you probably find more pure book writers or pure magazine writers. However, here a writer would put his income together by various sources. It is a great training ground. That is one of the reasons Canada has developed such a wonderful array of great writers. Almost invariably all the good fiction writers have been poets. It is not a lucrative business, but they learned a trade. They learned how to work with words. You can see how magazine writers develop an idea from a magazine and write a book based on that idea, and vice versa. It is totally integrated.
Senator Rompkey: Yes, or you publish excerpts from the book in the magazine.
Mr. Stoddart: Yes. Authors travel across the country to work in television and in radio all the time. It is a cross-fertilization. If you do not have that in a country this size with such a small population, it will not work. If you keep pulling bits out of this each year or each decade, you will just lose the whole fabric that we have woven so well in this country.
Senator Rompkey: We are not talking here about television, radio or books. We are talking about magazines. The point here is -- and, I had not thought about it enough until now -- the importance of magazines to publishing and creativity in Canada and to other national institutions, national occupations, or national endeavours or enterprises.
Mr. Stoddart: That is right.
Senator Rompkey: Magazines are important, not only in their own right but also as to how they affect other aspects of Canadian life.
Mr. Stoddart: I was struck by the presentation from the lumber people and how it was fine as long as it was business. I agreed with them when they said that this is a culture problem, not a trade issue. As has been said earlier, this should be a culture issue. Culture should be exempted from the trade agreements and have its own home within government. This government is working with a lot of international governments to try to do that. The real problem is between Canada and the United States.
Most of the rest of the world takes culture seriously. It is only the U.S. that conveniently says that these are trade issues. We need some time to build those bridges.
Senator Maheu: June Callwood made a comment about Canadian writers contributing little insertions in American magazines. In speaking about content, can we define "Canadian"? Are those little insertions, those little bits, which are printed in American magazines, really Canadian as claimed; or is Canadian content something far deeper than that, as far as you are concerned and as far as the magazine industry is concerned?
Ms Williams: Yes. Certainly the definition should go deeper. Ms Callwood expressed the importance of Canadian content. As the new director of the CCA, I am really not familiar with the story that she told about Canadian writers supplying ersatz Canadian content for split-run magazines.
There is a way to define Canadian content for the purposes of these trade agreements that would make sense. We must recognize that we are not talking about an entertainment product here but about something which runs much deeper into our national consciousness. The story that I told illustrated the way these ideas percolate through every creative layer of society.
I forgot to mention that Sheldon Currie's story was originally published in Cape Breton's magazine.
Senator Maheu: It is part of our basic culture. We go back to the word "culture."
Ms Williams: Yes. If you had to argue about it over a long period of time, the Canadian creative people who are living in Canada now are the producers of Canadian content.
Senator Callbeck: If Bill C-55 is passed, that will be the end of split-run magazines except for those that are grandfathered. Certainly the bill will help to keep our Canadian magazine industry alive and healthy.
Some people would argue that the fierce American opposition to Bill C-55 is part of a larger struggle to promote American culture world-wide. What are your comments on that?
Mr. Stoddart: I would not necessarily say that it is a grand scheme to Americanize the world, even though their culture is imprinted on ours by television, magazines and so on. There is a huge drive because entertainment is the first- or second-largest export of the United States. The industry has a very powerful lobby, and it always has had.
We have been a real nuisance to them by demanding that we have a little share of our own, just 10 or 15 per cent of our market. We set a precedent around the world that they do not like because we set barriers that they do not want to see anywhere else in the world.
I do not think there is a grand scheme from a culture disbursement point of view but, clearly, from an industrial point of view, they see this as one of the strong points of the industry. Unfortunately, the ramification is that countries become more like what they watch and read.
American culture is spreading as a result of these policies, but I do not think it is an intended invasion.
Mr. Pilon: The entertainment industry includes the film industry, the TV program production industry, the record production industry, the bookselling industry and so on. All those industries are dominated by huge multinationals, some U.S.-owned, some not. Sony and BMG are not U.S.-owned but they are still U.S. based. That is very important. The industry is based in a very large market in a dominant power, and it functions very logically.
It is very simple. A lot of money is invested in a film or in a record, and the owner tries to sell it in as many foreign markets as possible. Once you have covered the basic costs of production and promotion from your own domestic market, the remainder is mostly profit. That is a logical way to do business. Frankly, if I were the head of those major record or film companies, I would do the same thing. That is not part of a grand scheme to intellectually dominate the world. That is not the key. The key here is pure business.
Those people are pretty nervous now because, over the past three or four years in the film and record businesses, there has been some upset of American dominance. I am not commenting on the quality of the products. Personally, I like Madonna but there are people in Korea and Spain and Italy who are fed up that their own market is dominated only by a few U.S. stars and a few U.S. films each year.
There is a sort of renaissance in the local film industries of Spain, Italy and the U.K. You can observe the growing market share of the local music artists in Germany, in the northern countries, in Italy and Spain.
Obviously, the major record companies and film companies are worried about that. It is a sensible reaction on their part.
What do we do in Canada or in Spain or in Finland? Shall we allow our citizens, from time to time, to have access to a few products from their own country's artists; or shall we let the huge U.S. industry dominate the market everywhere in the world? That is a simple question. Is the answer easy? No, it is not. Will it be a long battle? Yes. The battle will last over and above Bill C-55.
The solution will likely come from the consumers of the different countries. I am very confident that they will express, more and more, their desire to see their own artists, to read the books of their countrymen, to see films about their own culture.
Minister Copps has initiated this effort and it is a great initiative. Perhaps different countries could work together so that we are not seen to be battling alone against the U.S. All those different countries, including Canada, should have a little shelf space for their own product; otherwise, 10 years from now, our children will be able to choose from only five films or three records per year, all of them coming from the United States.
Mr. Cornellier: When I took a course a few years ago in New York, I was surprised to find that, when the teacher addressed all the photographers, I was the only Canadian. Everyone else was American.
He told the photographers that they had three choices in a life of photography -- magazines, advertising or the gallery business. Of the gallery business he said, "Here we say it is culture; there they say it is business."
The way the Americans see it, it is a business and a business should be on the table to be negotiated. Canadians and the French and the Italians see this as a cultural issue. That spells out the difference. They see the world in their light; and we see the world in our light. We want to retain the difference. They are not after our culture; they are after our business, as they call it, but we want to keep it the way we see it, and that difference is important to us.
Senator Spivak: I want to go back to the essential question. From what I have heard from you, there is great danger in a different kind of compromise for Canadian content. Do you think that Bill C-55 ought to be the mechanism to achieve what you have called a very limited objective, which is just a little shelf space?
Mr. Stoddart: I would not say that Bill C-55 is perfect by any means. I think it is a compromise. It is a way of addressing a question. I think we had a much better solution in the first place. Time Warner decided to use new technology to get around our law. That cost the country nothing, it kept it very much open to foreign products, but it allowed our industries to develop.
The next phase was not successful because it was designed to go to the GATT rather than the WTO. We lost at the WTO so we have to find an answer. A question was asked about quotas in Canadian content. I have a major concern with Canadian content. Would you put it at 80 per cent, 70 per cent, 60 per cent or 50 per cent? If we put it at 80 per cent today, for the next 20 years we will be negotiating it from 80 per cent to 10 per cent.
Some of us have looked at this in many different ways. It is a cross-sectoral problem. It is not only related to magazines. This is a solution to a technical question, which is what the Americans made it by taking it to the WTO. I do not think it is the way a country should have to deal with its cultural identity, but I think that no better way has been put on the table. Hundreds of hours have been spent on finding solutions, and this is the end result. However, I wish it did not have to be so technical in nature.
Ms Williams: I agree with Mr. Stoddart. Bill C-55 is like a small child staggering with a huge load. It is unfortunate that we have had to deal with this important cultural issue in relation to this small bill.
It may reassure people to know that the cultural sector is working diligently to develop an instrument which would identify culture outside of the trade agreements and yet be hooked into them. The CCA is working with non-governmental organizations in many countries in a parallel process to Minister Copps' meetings of ministers of culture. We are talking world wide and throughout Canada about how we can develop this instrument. We are engaging talks with the World Trade Organization and so on. Although Bill C-55 stands alone at the moment, I hope it will be accompanied by other measures and instruments as time goes on.
Senator Spivak: I recently visited Finland, which is a tiny country relative to its huge neighbour. However, they have the will, they are very tough, and they have developed a distinctive culture and business based on quality. They have had to develop quality products. They have survived.
I hope your efforts and ours are successful in not caving in so that we do not have to go down a slippery slope to becoming a colony, as is happening in many other industries.
Senator Johnstone: I was once told that if your parents do not have any children, you are very unlikely to have any either. By the same token, if you do not have a magazine industry, you will not have writers. I sympathize with Ms Graham who said that the problem is part of a broader assault to come.
Is it possible that part of the problem, from the American standpoint, is the pressure on Washington because of their huge trade deficit which is approaching $300 billion this year?
Mr. Stoddart: I actually think it is more driven by two or three corporations working with the USTR than by a grander scheme.
It has been roughly 50 years since the Davey commission. I think the Senate might be the institution to do a major study of culture and the effect of it on our society. The Davey commission changed much in this country in the last 50 years. With the new millennium upon us, it is time again to take a serious look at this issue.
I am sure that the WTO will be in negotiations for three to five years. We have a little time, even a couple of years. If we do not, as a country, without partisan politics involved, study culture, communication and the needs of this country, it will be negotiated and dealt away. We need a firm understanding from a body of some kind that would look at the issues. This is just part of it.
We all appreciate the time that has been extended to us this evening to put our views forward.
Senator Rompkey: Would you be prepared to go a little further and put that suggestion in writing? We would have to get permission from Roger Gallaway to do it and he might not allow us to do it. If a group of you were to put that forward from your businesses, that might make all the difference.
Mr. Stoddart: A group came together to support Bill C-55 and we could easily go back to that group and see whether there is support for to do that. I think there might be.
Senator Forrestall: As a closing observation, I have heard so often this evening and recently that, if there were no Canadian magazine industry, there would be no Canadian writers. Canadian artists had no magazine industry and I think we have a fairly healthy, albeit very small, professional artists group in Canada.
I think you write off the magazine industry a little too quickly. I do not think you are that weak and I do not think our arts community in general is that weak. I did not realize that. I had forgotten those 50 years since Keith Davey did a splendid piece of work for Canada.
Ms Williams: You were talking about painters, graphic artists and so on. The means of distribution for those people is the system of Canadian art galleries, which are owned and operated in Canada. That is why they have enjoyed the success they have. They have not been challenged by foreign-owned galleries coming here and bringing foreign-owned work in for display.
Senator Forrestall: I know what you are saying.
Ms Williams: The means of distribution of Canadian art is in our hands in this country.
Senator Forrestall: There is some merit in taking a look again at the Canadian culture industry. One of the complaints we have heard is that this bill should not be in front of the Transport and Communications Committee of the Senate of Canada being force fed the dialogue that has been going on here for the last few weeks.
The rumour mill here is pretty hot. Two or three people are not here because they believe the rumours today that a deal has been cut in Washington. If it is not Bill C-55, what do we do next? This is not the committee to be discussing this issue. We are transport and communications oriented people, by and large.
I welcome the views and observations expressed here tonight. Not once since the softwood lumber and other manufacturing groups left has anyone bothered to relate to their problem. It is a fair comment that you come to the table with millions, and that the stakes are in the billions.
Mr. Stoddart: Any discussions going on in Washington or in Ottawa do not set policy. Those discussions may become policy somewhere down the road. If those two parties come to some agreement, I do not think that necessarily means the Canadian government is bound by those discussions. They are discussions and not negotiations of a formal nature. I stand to be corrected, but that is my understanding.
I am not aware that a "deal" was cut, but I do not think a deal is a binding deal. It is a vehicle for discussion as far as policy is concerned.
Senator Forrestall: You obviously know more than we do.
The Chairman: I wish to thank our five witnesses this evening. You have made some extremely important presentations and you were very candid with us.
The committee adjourned.