HEAL Committee Meeting

STANDING COMMITTEE ON HEALTH

COMITÉ PERMANENT DE LA SANTÉ

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 30, 1999

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[English]

The Chair (Mr. Lynn Myers (Waterloo—Wellington, Lib.)): Ladies and gentlemen, we'll call this meeting of the health committee to order. The business at hand is, as you know, very important; it is the tobacco regulations and the kinds of things that are required.

Before we begin, though, I want to say—and Mr. Mills, Mr. Elley, and Monsieur Ménard, you'll want to listen to this—I gave some careful consideration to what we talked about yesterday, and I thought you gave some very good advice and constructive criticism. As a result, we'll redouble our efforts to make sure we can work effectively as a committee. That's important, especially on something as important as this, the tobacco regulations.

So in the spirit of cooperation, I would like to proceed accordingly, if that's okay. We'll listen to the witnesses.

I do have to note that pursuant to Standing Order 32(5), the following documents were referred to the Standing Committee on Health on Friday, May 12, 2000: the proposed tobacco products information regulations and the proposed tobacco reporting regulations, pursuant to the Tobacco Act, Statutes of Canada, 1997, chapter 13, section 42(1).

Today, as you know, is our first meeting on these proposed tobacco regulations, and our first witnesses are from Health Canada: Ian Potter and Jane Meyboom, and I think there's an additional person who will be introduced.

Welcome. May I remind the committee that we are on a tight timeline today because of the vote. I believe the bells begin at 5:15 and the vote is at 5:30. So we need to keep that mind. However, we do not want to limit anything you're going to say, nor do we want to limit necessarily questions. In fact it's important that we get everything out. But in the spirit of that kind of process, perhaps we could begin, please.

Who's leading off? Mr. Potter, are you?

Mr. Ian Potter (Assistant Deputy Minister, Health Promotion and Programs Branch, Health Canada): Yes, I am, Mr. Chairman. Thank you very much for providing this opportunity for us to discuss these important regulations with the committee.

I'm joined, as you noted, by Jane Meyboom, who's the associate director general of the bureau of tobacco control; and Dr. Greg Taylor, who is the director of the bureau of cardio-respiratory diseases and diabetes.

If I could, Mr. Chairman, I would like to put forward a proposal and run through a presentation to you and the committee. It should take about fifteen to twenty minutes.

The Chair: Proceed, Mr. Potter.

Mr. Ian Potter: Thank you very much.

As noted, we're here to deal with two regulatory proposals. The first regulatory proposal has to do with tobacco products information. This is the issue of labelling on tobacco product packages. Labels are a powerful communication tool, and we want to ensure a balanced message is delivered to the Canadian public in making the package an effective vehicle to provide tobacco-related health information.

The proposal in the regulation calls for graphic pictures along with health warning messages to be placed on tobacco product packages. Smoking cessation messages and disease information would be included on other parts of the packaging. Information on toxic chemicals contained in the tobacco product and its emissions would be printed on the package as well.

The second proposal relates to information reporting. It would require the tobacco industry to provide Health Canada with greater detail on its products and practices. Manufacturers would be required to report on a greater number of toxic chemicals than at present. These proposed regulations are the result of approximately ten years of research and have undergone rigorous scientific scrutiny and public consultation throughout their development. They are groundbreaking measures that would advance Canada's status as a world leader in the fight against tobacco use.

[Translation]

Over 6 million Canadians presently use tobacco products, which is over 25% of our population over 15 years of age. Although the smoking habit is decreasing in the ranks of middle-aged Canadians, it is increasing in the ranks of our youth. Every year, about 90,000 young people start smoking. In the 15 to 19-year old category, 28% now smoke as compared to 23% in 1991.

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As you know, the use of tobacco is one of our greatest health concerns. It is one of the main causes of death and avoidable disease in Canada. Tobacco kills over 45,000 Canadians a year. The use of tobacco also has serious consequences on the health of non- smokers and especially children. Every year, about 300 non-smoking Canadians die from lung cancer resulting from the exposure to second hand cigarette smoke.

[English]

The Chair: Mr. Potter, could you hold for a minute? We're not getting translation on this side.

Mr. Jackson, are you getting translation?

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Yes. It's quiet, but it's there.

The Chair: Okay.

Is there a technician who can help us in the meantime?

Mr. Potter, can you carry on en anglais, s'il vous plaît?

Mr. Ian Potter: Okay. I'll just see if I can find my English text.

From an economic point of view, according to the facts in 1991, the direct costs of health care caused by the use of tobacco were approximately $2.5 billion per year.

The proposed tobacco information and reporting regulations are made pursuant to the Tobacco Act. The Tobacco Act came into force in 1997, replacing the Tobacco Sales to Young Persons Act and the Tobacco Products Control Act.

The Tobacco Act regulates the manufacture, sale, and promotion of tobacco products in Canada, and the Tobacco Act is a key element in the federal government's tobacco control strategy to reduce smoking, particularly amongst young people. The act aims to protect the health of Canadians in light of the conclusive evidence linking tobacco use and fatal diseases. The Tobacco Act gives the Government of Canada the authority to implement these proposed regulations.

The proposed product information regulations require that health warning messages containing both text and colour graphics be placed on most tobacco packages such that they would occupy 50% of the surface. Packages of cigarettes, kreteks, tobacco sticks, cigarette tobacco, and leaf tobacco would have to feature sixteen different graphic health warning messages equally distributed amongst the brands. Packages of pipe tobacco and cigars would each display one of four graphic health messages. In the case of chewing tobacco, snuff, and bidis, which come in small packages, manufacturers and importers would be required to display one of four text-only messages on each of their packages.

Manufacturers and importers of tobacco products would also be required to place on their packages one of sixteen information messages on tobacco-related disease and on quitting smoking. In most cases this would be located on the inside slide of a cigarette package or on a leaflet or on the exterior packaging.

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There would be new requirements for displaying on packages the amount of three toxic constituents found in smokeless tobacco, such as chewing tobacco and snuff. The number of toxic emissions displayed on other tobacco products would increase from three to six.

Health warning messages are a vital part of any tobacco control regime. They fulfil one of the key goals of the Tobacco Act, and that is to enhance public awareness of the health hazards of tobacco use. Research indicates that the impact of the current health warning messages now seen on the packages of products is wearing out. The current messages also do not address the knowledge gap.

Our research shows that Canadians are generally aware that tobacco is bad for health, but they are not aware of the range and the seriousness of the diseases caused by smoking. In particular, smokers are less likely than non-smokers to think tobacco use is a major health problem. This is one of the fundamental reasons we are pursuing these regulations.

For example, young people who smoke are notably less likely, at 68%, than non-smoking youth, at 89%, to see tobacco as a major health problem. That is, of young people who are non-smokers, 89% see tobacco use a major health problem, but of young smokers, only 68% see it as a major health problem. This is the knowledge gap that these regulations are intended to address.

Not all tobacco products in Canada are labelled, and currently no labelling regulations are in place since the Supreme Court decision. These will fill that gap.

With the proposed products information regulations, there would be specific requirements in place to ensure effective health warning messages are placed on all tobacco products sold in Canada. The labels would call renewed attention to the health warning messages and fill in knowledge gaps among smokers and non-smokers.

We are also placing before you proposed reporting regulations. These would substantially expand the requirements on industry to supply detailed information regarding its products and practices. The proposals would expand current requirements to include all classes of tobacco products sold in Canada. The tobacco industry would provide monthly and quarterly sales reports on its tobacco products by brand. It would deliver information on how products are researched, including how new tobacco products are developed, the analysis of consumer attitudes and behaviour, and marketing approaches. Information on how tobacco companies promote their products, particularly at the retail level, would be required. In terms of manufacturing, information on product processing would be submitted to Health Canada.

The proposal requires reporting on more toxic chemicals found in tobacco. The list of chemical compounds to be reported on would grow from currently three to more than forty.

The proposed reporting regulations would increase our understanding of how the tobacco industry gains market share. Industry sales data would give us more information on the amount and type of tobacco products sold in various areas of the country. By matching this data with our statistics on tobacco use, we'd be able to draw a much more full picture of smoking trends and how we might address them.

What the additional data reveals about consumer behaviour will help us more effectively reach the Canadian public on issues of tobacco use. With information on product ingredients and research on product modification, Health Canada would be better able to monitor the dangerous and addictive aspects of tobacco products. Better information on tobacco product ingredients and the chemicals in tobacco smoke and unburned tobacco would ensure consumers' right to know of the ingredients and the hazards of the products they are using.

The process of consulting with the stakeholders on the proposed regulations was initiated as early as possible. An information letter on reporting regulations was released in June 1998, which indicated the intentions of Health Canada. A consulting document on labelling was released in January 1999. Minister Allan Rock announced a proposal for these regulatory measures in January of this year.

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Since then, Health Canada has had two additional 30-day public comment periods. These public comment periods generated over 2,000 responses, with more than 400 specific recommendations for modification of the regulations. That feedback was used to strengthen our proposal, to improve it in both its feasibility and its effectiveness.

Approximately 97% of the responses showed strong support for the proposal. Based on the responses, we have made over 120 specific changes to the regulations from those that were originally proposed. For instance, the range of products covered by the warning messages was increased, the wording of health warning messages was adjusted for greater impact, the requirement for emission testing on small cigars has been dropped, and we have clarified product-testing requirements to make it easier for the industry to comply.

We've also met with members of the industry in a formal setting 40 times to discuss manufacturing, packaging, and printing processes and to learn how the new regulations could more easily fit with current operations and practices.

In accordance with the regulatory procedures, all industry stakeholders were invited to participate in a business impact test to look at how what is being proposed might affect Canadians from a business point of view. Results of the business impact test have been incorporated into a detailed and thorough economic cost-benefit analysis that looks at the overall impact of these regulations on the Canadian economy.

Health Canada has made every effort to ensure that the decisions regarding the content of the proposal have been as informed as possible. A joint Health Canada-tobacco industry technical group was formed in August 1998 and has since been providing advice related to the product-testing section of the proposed reporting regulations. Industry scientists have worked with Health Canada to develop the product-testing methods and to identify ways to reduce testing costs to industry.

In carrying out scientific and legal research surrounding this project, Health Canada went to the experts in the field for advice, consultation, and support. A nine-member scientific panel was formed, of which Dr. Taylor was a member, which included experts from various health-related fields to review the health warning messages. The panel has agreed that each health warning message is scientifically accurate.

Advice was also sought from the Graphic Arts Technical Foundation regarding the issue of printing. The Graphic Arts Technical Foundation is one of 35 research institutes worldwide specializing in graphic arts and printing technology.

Some Canadian printers have indicated difficulty in complying with the regulations in printing the required information health warnings on their packages. We have taken this issue very seriously. We have researched the printing issue in depth, seeking advice from top professionals in the field. What we have been told is that the labels can indeed be printed in Canada.

Through research conducted on Health Canada's behalf by the Graphic Arts Technical Foundation, their advice to us is that the current printing processes used in Canada have sufficient flexibility to use a combination of process coloured inks, specialty coloured inks, and varnishes to produce the type of packaging being proposed. Their advice is that printers would need to make some modest incremental investments of around $200,000 to upgrade their pre-press colour management systems in order to achieve this result.

The product information regulations have been studied to determine their likely effectiveness. Over 100 focus tests have shown that these proposed labels would be effective.

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Our studies have shown that pictures with warning messages were 60 times more likely to encourage a person to not start smoking than messages without pictures. Increasing the size of the warning to 50% of the package increased the perception amongst the study participants that the messages would discourage young people from starting to smoke. Warnings with bigger, coloured pictures were more effective than warnings with black and white pictures.

The proposed new designs were two times as legible and three and a half times as effective as those in present use. Two-thirds of adults and eight in ten youths felt that cigarette packaging with a picture and text was more effective than text only.

We estimate that there will be a number of substantial long-term benefits from a health and economic perspective. The cost-benefit analysis I referred to was conducted by Consulting and Audit Canada. Results of the analysis have taken a very conservative approach to estimating the impact. The analysis indicated that the product information regulations alone would likely prevent more than 30,000 deaths over the next 26 years. This estimate is based on a potential of a 1% drop in smoking by 2001, rising to 3.5% in 2010.

Based on a 3.5% reduction in smoking, the saving to employers because of improved employee productivity is projected to be $86 million in the first year, increasing to $311 million annually by 2026. Deferred health care costs were to be expected to grow from a saving of $1 million annually in 2001 to $62 million annually in 2026.

The projected reduction in smoking will inevitably reduce the demand for tobacco products. However, according to the cost-benefit analysis, the economy overall and the retail and wholesale industry in particular are actually expected to gain jobs out of a decline in tobacco purchases, as the redirection of consumer spending would offset the decline in tobacco sales.

When consumers stop purchasing tobacco products, the $276 million not spent on these products would be spent on other goods and services, many more labour-intensive. The combined impact of reduced tobacco spending and the consequent redirection of consumer spending was estimated to result in a net gain of $85.8 million and 2,000 additional jobs.

There is certainly a cost to some industries and some particular groups, but it's not significant when compared to the overall cost to the economy. Based on industry estimates, the initial capital investment to implement these regulations is estimated to be $52 million spread over two years, plus an additional $28 million annually. Laboratory testing is estimated to be an initial start-up cost of $51.7 million, followed by ongoing annual costs of between $25.8 million and $54.7 million.

As I have said, these proposed regulations are a vital part of the Government of Canada's comprehensive anti-smoking initiative. It is the federal government's responsibility under the Tobacco Act to ensure that the Canadian public is well informed of tobacco-related health hazards. We are fulfilling this responsibility through the tobacco control initiative, which is a comprehensive strategy that includes legislation, enforcement and implementation of that legislation, research, and public education.

These regulations are a vital and powerful component of that initiative. It is important to keep in mind this serious health issue: smoking kills Canadians every day and is completely preventable. We've gone to some extent to try to introduce these regulations in a scientific manner and in a manner that balances the need to minimize the impact of excessive costs to the industry with the health gains to Canadians.

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Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Potter.

Mr. Mills.

Mr. Bob Mills (Red Deer, Canadian Alliance): Thank you, Mr. Potter. I have several questions that arose from what you've said.

First of all, I would like to see us stop young people particularly from smoking. Nothing is more unsettling than to see a bunch of young kids outside of a junior high school all lighting up. It seems more predominant with females than with males in today's society. I'm not totally sure that those pictures are going to make the difference. Does your research really show that this is going to make it cool not to smoke?

I've heard some say that having good pictures, having cool people who don't smoke, might be as effective as having a cancerous lung on a cigarette package. I wondered if you did look at or explore the other options as to what would work. I wondered how you're going to measure the effectiveness of this as time goes on. Are you going to really know?

I'll just ask the three questions and you can answer all three of them.

The second thing is that you have the industry doing a lot more reporting. Once those reports come in on a quarterly basis and so on, that's going to be a lot of data. I wonder what kind of a budget, what kind of a plan, what kind of a result we can expect from all that data.

Thirdly, when I look at the deferred health cost of $62 million from 2001 to 2026, roughly $2 million a year in a health budget for this year of $86 billion, that $86 billion versus $2 million isn't very impressive in terms of a saving. Obviously I'd like to see the saving be much greater. I'd like to see no one smoke, but I don't think that's what your end goal really is.

Those would be three things that jump out at me from your presentation.

Mr. Ian Potter: Thank you very much, Mr. Mills.

I have a quick response to your question. Do they work? Yes. We've tested these out. We've gone to experts in communications and psychology to see if they worked. The feedback we have is that this kind of messaging does make a difference. It is impressive. It should be situated in a broader context of a number of things: regulations, which we have to enforce, to prevent the availability of cigarettes to underage smokers; a reduction in the promotional activity of tobacco advertising; this kind of information on the package, which would remind people of the difficulties I indicated to you. At the moment, young people who smoke underestimate the impact of that.

We also need to change the basic attitudes of the public. The Minister of Finance has indicated an interest in raising the price of tobacco products because we know that young people in particular are price sensitive.

We believe these will work. As I indicated in my presentation, we have shown that there is a substantial gain, even with very conservative assumptions.

Mr. Bob Mills: Are they being used in other places, other countries?

Mr. Ian Potter: Other countries have used mostly word messages. Canada would be the first country to use images. When we asked people who are experts in communication, as I indicated in our research, “Which is the more effective message, straight print or print combined with pictures?”, they all say it's print combined with pictures. We need only look in the newspapers to find out why that is, or look at a box of corn flakes. That is how to make more effective communications.

You asked about the industry reporting and what we will do with this. We've indicated that the impact is that regulations will result in increased expenditures of about $1.5 million a year in order to analyse the material. We want to use the information to more precisely affect our communications programs and our work with respect to provinces and voluntary organizations to target our programs, our campaigns to inform Canadians and to encourage them not to smoke. We'll also be using that information to monitor industry compliance with the law and the regulations. We will also be using that to consider other initiatives that could be undertaken that might result in some other controls or modifications that are provided for in the Tobacco Act but that we haven't acted on yet.

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The impact on health costs sounds like a small number. We tried to be very conservative, not to elevate the impact. Part of the small number is that it takes a while for some of the costs to materialize. If you stop people smoking today.... Unfortunately, we have 6 million Canadians who are smoking. Many of them have smoked for years. The consequences of that ill health will fall into the system over the next 20 years. While it's always better to stop, you can't just turn off the morbidity and mortality impact of smoking.

The Chair: Thank you very much, Mr. Potter.

[Translation]

Mr. Ménard.

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Could you give us details on the economic impact studies on business that you did? I've read the briefing book you gave us a few days ago and saw the study on printing. I'll come back to that later. I'd like you to be more explicit and I'd like the members of this committee to have access to that study. In the same vein, did you say that it would cost about $52 million for business to adapt? Is that the figure you provided?

[English]

Ms. Jane Meyboom (Associate Director General, Bureau of Tobacco Control, Health Canada): There are two sets of costs. The first set of costs for the product labelling regulations is estimated to be around $200 million. The reporting regulations cost is between $200 million and $400 million. So it's between $600 million and $700 million, as estimated by the industry. The $52 million is estimated by the printers to be the cost of adding print stations to their presses. However, the Graphic Arts Technical Foundation, who you will be hearing from tomorrow, has indicated to us that what is really needed is additional computer hardware and software. Well, it may be needed; they may have it now.

[Translation]

Mr. Réal Ménard: One moment, please. I'd like you to answer only one question at a time so that I can be sure I've understood. We think that measures have to be implemented to fight against tobacco. We're not questioning that. You stated it would cost some $600 million for the industry to adapt. I'd like to know over how long a period these costs are spread. You talked about the economic impact test on business that you did. What does that mean? Will the members of this committee be able to get a copy of the results of that study? I didn't see them in the briefing book I got.

[English]

Ms. Jane Meyboom: You're asking whether you can have a copy of the cost-benefit analysis. Yes, we can provide it to you and we can provide you all the information related to the costs.

[Translation]

Mr. Réal Ménard: Fine. What is this impact test? You told us in your presentation that you organized 40 meetings with business and that impact studies had been done. What does that mean in concrete terms? Throw me a bone to satisfy my curiosity.

Ms. Jane Meyboom: I didn't quite grasp your question. I'm sorry.

Mr. Réal Ménard: Halfway through your document, it says that you ran an impact test on business.

Ms. Jane Meyboom: Yes.

Mr. Réal Ménard: The document you gave us doesn't have enough in it to help us understand what this impact test you ran actually is.

Ms. Jane Meyboom: I understand.

Mr. Réal Ménard: Tell me what this impact test means.

Ms. Jane Meyboom: Yes, certainly. I understand, Mr. Ménard.

[English]

I would like to ask Karen Walker from Consulting and Audit Canada, who has conducted the business impact test for us, to explain the details of the business impact test.

The Chair: Can you come to the table? We need to have a microphone working. State your name and position for the record, please.

Ms. Karen Walker (Consultant, Economic and Regulatory Services, Consulting and Audit Canada, Department of Public Works and Government Services): My name is Karen Walker. I'm with Consulting and Audit Canada.

The business impact test is a consultation methodology that was designed by Industry Canada and the Canadian Manufacturers' Association to be used with regulatory initiatives. It's a process for soliciting input from industry on impacts of the regulations, their suggestions on the way the regulations could be made more efficient and more effective. There were two business impact exercises that were performed on these regulations. One was with the tobacco manufacturers and the other one was with other affected sectors, including the retailers, the distributors, the growers, and the unions of tobacco workers.

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[Translation]

Mr. Réal Ménard: You do understand that all during our work, we'll be hearing two stories: one that is very pro health and which we support, of course, and the story coming from the industry that is afraid of the economic costs the implementation of these regulations will, of course, entail. As elected officials, it's clear that we must be concerned with both points of view.

Tomorrow, we'll be hearing the representatives of the Canadian Tobacco Manufacturers Association, and they were associated with the work concerning the impact evaluation and the regulatory framework that Health Canada is proposing today, at the very beginning of the whole affair. Does that demonstrate a clear understanding of the situation on my part?

The Chair: Sir.

Mr. Ian Potter: Mr. Ménard, you can consult the documents in section 2 of the briefing notes, more specifically on page 8 of the English version.

[English]

It gives the cost of the regulations.

Based on the estimated number, the industry estimates the initial capital investment is expected to be $52 million spread over two years and an additional $28 million annually. The net present value of this expenditure over 26 years is $304 million. That's for the product information regulations. The reporting regulations are estimated by the industry to impose an initial start-up cost of $51.7 million, followed by ongoing annual costs of between $25.8 million and $54.7 million, for a net present value that ranges between....

[Translation]

Mr. Réal Ménard: Do I have time for a brief question, Mr. Chairman?

[English]

The Chair: Yes, quickly, please.

[Translation]

Mr. Réal Ménard: As always, Mr. Chairman.

We want, above all, to understand the situation. I presume that Canada will have the most advanced anti-tobacco strategy in the world. We can be proud of that. Based on your studies, could you briefly tell us why you recommend using 50% and not 60 or 70% of the space on packages and how will images be helpful? How can we prove that scientifically? In five years, we succeeded in reducing tobacco buse in Canada by 5% and we are told that by 2026, we will have reduced it by 3.4%. This is hard to understand. Twenty-five percent of Canadians over 15 smoke, whereas five years ago, it was 30%. If I have read and understood your briefing notes properly, they project a decrease of about 3.4% by 2026. So, scientifically speaking, why is it so crucial to have an image and why do we need so much time to reduce the number of smokers by 3.4%, when we already succeeded in reducing it by 5% in five years? And I would like to stress that I have never smoked.

[English]

The Chair: Mr. Potter, please.

Mr. Ian Potter: On the first question you had, with respect to those numbers, the present value of those numbers was used in the cost-benefit analysis, which indicated that even with those estimates it's still a positive economic gain to introduce these regulations.

If I can move to your second question—that is, why do we think the images are important, and why 50%—we used a number of scientific tests to compare the effectiveness of the size of the warning measures. What we found from those tests was that when you increased the size—which is approximately 25% at the moment—you had better communications of the health warning message, and that increased up to 50%. After 50% the communications were marginally better, but we could not indicate that they were substantially better. Therefore, based on the advice that we have of minimum infringement, which is the advice we have from Justice Canada with respect to charter issues, the minister accepted 50% of the package.

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Why do we think the images are important? You make the point that if these images are so important, why does it only result in a 3% drop in the consumption?

We're dealing with a product that is very addictive. As you look over the period of time, you see that while a number of Canadians have reduced smoking, it's nothing like the numbers that many people would like. And among young people, it's actually gone up.

We think this is critically important to changing the attitude. We know from the studies that the graphic images.... Pictures communicate better. They emphasize the message. They attract your attention. They put a point d'emphase on the information you're trying to communicate. But we understand that this is not something that immediately is going to cure all of this and reduce tobacco usage. We have to work on a number of fronts on a coordinated strategy of information, product labelling, taxation, working on control to youth. So this is an important element, but it's only one element of a broader strategy.

The Chair: Thank you.

Ms. Wasylycia-Leis and then Mr. Proulx.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Mr. Chairperson.

Obviously the whole purpose of these proposed regulations is the cessation of smoking among young people and the prevention of smoking among young people. I think the question that Bob Mills asked earlier is an important one for us as we start to hear from witnesses over the next few days; that is, what research can you provide us with to make the case that this kind of packaging actually has an impact on young people?

It may be in the books, and if you could tell me where in the books, that would be helpful—any empirical evidence to suggest that this kind of packaging has an impact.

The Chair: Ms. Wasylycia-Leis, we'll get the reference and we'll also make sure we get the full study for you and all members.

Ms. Judy Wasylycia-Leis: Okay.

Mr. Ian Potter: We can provide that to you.

Ms. Judy Wasylycia-Leis: Okay.

On the question of prevention and cessation of smoking among young people, one thing that concerns me a great deal is that while we're working on regulations, and this is all important work, I don't see that the government is actually expending the money promised since 1997 on programs to prevent smoking among young people. As you will recall, the promise was made for $10 million a year specifically geared toward young people in smoking prevention programs.

As you know, as of September 1998, by your own figures, the government had only expended $200,000 of that year's $10 million. The latest figures we received would take us up to October 1999, and the government has spent just under $4 million for smoking prevention and cessation among young people. So there's a considerable shortfall yet.

Why is it taking so long to reach this commitment of $10 million a year on programs geared specifically to young people? Of the $9.8 million that was not expended in 1997-98, was there a carry-over of that money to this budget or the next budget? Where has it gone? And where are we at in terms of final reports for the 1998-99 fiscal year in terms of final expenditures?

The Chair: Thank you very much.

Mr. Potter.

Mr. Ian Potter: Thank you very much.

The tobacco control budget is approximately—and I can give the member the exact numbers—$20 million a year in total. And I can assure the member that we have spent the $20 million annually on tobacco control initiatives. That has involved a variety of things. It has involved the development of these regulations. It has involved research, surveys. It has involved the work we're doing internationally.

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As well, it involves the work of communication with young people. The minister has created a youth advisory committee to provide him with advice on how to specialize—

Ms. Judy Wasylycia-Leis: Look, do you mind if I interrupt you here?

The Chair: No, hang on.

Mr. Ian Potter: But I can give you all the detailed information on the expenditures. I can assure you, we are not under-spending the budget.

The Chair: Go ahead.

Ms. Judy Wasylycia-Leis: Perhaps I could get to this specific question. In fact, the department has provided the detailed information. Twice we put in the order for return and received the information back.

Ian Potter is quite right; $29 million is allocated each year. By the department's own statement, $10 million of that is allocated for public education, specifically for youth, and cessation programs. Of that $10 million, by your own records, you have not spent even half of that money, even if I'm generous in terms of combining 1997, 1998, and 1999. I'm using your own figures.

My question is, why aren't you spending the money that was promised for smoking cessation and prevention among young people? What are your plans to actually live up to that $10 million a year, on a cumulative basis, before the end of the five-year period for which this money has been promised?

Mr. Ian Potter: Mr. Chairman, I can provide the member of the committee with where we've spent the money. We believe we are spending the money on efforts to reduce the use of tobacco products by young people. We're spending it in a combination of ways.

It includes, as I said, the creation of a youth advisory committee. It includes direct advertising, such as the ads you have may have seen—the Debbie ads, media buys—and the development of regulations like these, which are targeted with youth in mind.

So it involves a variety of different aspects, and I can provide the details to the committee.

The Chair: That would helpful, Mr. Potter, if you would. You're coming back again at the end of these hearings, so if we could have that kind of analysis by then I think it would be useful. If you give it to the clerk, we'll make sure it gets distributed to everyone.

Mr. Ian Potter: Thank you, I will.

[Translation]

The Chair: Mr. Proulx, please.

[English]

Mr. Marcel Proulx (Hull—Aylmer, Lib.): Thank you, Mr. Chair.

Good afternoon, Mr. Potter, and good afternoon, Mrs. Meyboom. Thank you for appearing in front of the committee.

You touched on this very briefly a little while ago, Mr. Potter, and I'd like to know, what's been the international reaction to the proposed warning labels?

[Translation]

Mr. Réal Ménard: How did other countries react to your packaging project?

[English]

Have other countries shown any interest in this?

By the way, contrary to my colleague, I was a smoker.

The Chair: But you quit.

Mr. Marcel Proulx: I did.

An hon. member: So that's what happened to you.

Mr. Réal Ménard: Did you stop?

Mr. Marcel Proulx: Of course.

A voice: The youth programs work.

Voices: Oh, oh!

Mr. Marcel Proulx: Well, in my case it was almost old age.

The Chair: Okay, Mr. Potter, give us the international picture.

Mr. Ian Potter: Many countries are looking with quite a bit of interest to the experience in Canada, to, for example, the Canadian regulations. I think they've actually been proposed in the U.S. Senate—I can't remember the senator's name—where they're very interested. They've proposed regulations similar to what we've proposed.

I was in Britain recently, and they have shown very great interest in these regulations and the use of these kinds of labels. The World Health Organization has applauded the efforts of Canada. Their reaction to these proposed regulations has been extremely positive. All of the health departments of the countries we have dealt with have indicated some substantial support for these regulations and are hoping that Canada can continue the lead in this area.

• 1620

Ms. Meyboom has just indicated to me that the environmental committee of the European Parliament has indicated considerable interest in this as well and is looking at a similar type of initiative.

The Chair: Thank you very much.

I'm going to allow only two more questions because our time is short.

Mr. Elley and then Monsieur Ménard.

Mr. Reed Elley (Nanaimo—Cowichan, Canadian Alliance): Thank you, Mr. Chair.

I'd like to follow up, if I might, Mr. Potter, on the comments from my colleague, Ms. Wasylycia-Leis, on the federal government's commitment to indeed reducing the amount of smoking amongst our population.

Back on February 8, 1994, when the prime minister was announcing the tobacco tax rollback, he said revenues from the tobacco manufacturers surtax “will fund the largest anti-smoking campaign this country has ever seen”. Those were his words. I don't think this has happened.

Health Canada spends, I understand, as compared with jurisdictions in the United States, about 65¢ per Canadian on tobacco control. For instance, in California it's $4 Canadian per person and in Massachusetts it's $8 Canadian per person. My understanding is that both of them have very successful campaigns and programs there.

I guess what I want to say is that my sense is that we have to do far more. The Department of Health has to do far more in their commitment to educate particularly young Canadians. Having said that, I do applaud your efforts in terms of the legislation you've brought forward, and I support it.

I'm still a little concerned about the figures you have in your presentation today. It seems to me you're being very conservative in the amount of money you're suggesting in terms of deferred health care costs.

Can you tell me a little bit more about where these figures come from?

Ms. Jane Meyboom: I would like to ask Dan Hara of Hara Associates, who has conducted the cost-benefit analysis on our behalf, to join us at the table and explain the detailed methodology for arriving at the numbers you see before you.

The Chair: Can you repeat your name, if you would, for the record?

Dr. Daniel Hara (President, Hara Associates): I'm Dan Hara, conductor of the benefit-cost study.

First, to correct a slight misstatement, the savings in health that we estimated grow to $60 million annually by 2026 as the health benefits take hold, and that was a very conservative assumption in the sense that, if I can start with the gross numbers, in 2026 we expect the total health costs incurred by smoking to be close to $7 billion annually.

If we just look at the gross savings from that small 3.4% reduction, that would be some $155 million annually. But we call those gross numbers in the spirit of conservatism, because that includes the cost of death, and people ultimately die anyway. So we treated them as deferred costs. People would live longer, healthier lives, but ultimately there would be some cost to the health system of living, and, ultimately, dying.

So even in a very conservative approach, where instead of just attributing those costs we treated them as deferred costs, there still would be a savings to the health system in the sense that you save money by deferring costs and you have those resources to reinvest during that period. Even with that conservative approach, $63 million annually is what it grows to.

The Chair: Thank you very much.

I'm trying to be fair here. Mr. Ménard, very quickly, and then Ms. Wasylycia-Leis. Then we're going to wrap it up.

• 1625

[Translation]

Mr. Réal Ménard: I have two brief questions. I want to understand clearly whether, in our respective caucuses, we can tell our colleagues that the cost for enterprises to adapt to the regulatory framework, as you evaluate it on page 9 of your presentation, is $304 million over 26 years. I want a confirmation of that, in light of the trust that must exist among parliamentarians.

Secondly, has Health Canada already assessed the possibility of reducing the amount of nicotine during the manufacturing process? Would that not be a strategy in the fight against tobacco abuse? We could consider reducing that and passing a law or a regulation that would oblige tobacco manufacturers to reduce addiction to nicotine, by manufacturing cigarettes differently. These are both my questions.

[English]

Mr. Ian Potter: If I understand the question correctly, you want to know whether or not the information that might allow us to change the way in which cigarettes are made might actually affect the cost savings. Is that the question?

I'm sorry, Mr. Ménard, I....

[Translation]

Mr. Réal Ménard: We have received many letters over the last few days. Why do we not ask tobacco manufacturers to reduce the amount of nicotine and addictive substances in tobacco? Could that be done through regulations?

[English]

Mr. Ian Potter: This is a question for which we do not have consensus among scientists—that is, which would be the most effective health benefit. Some of the supposition is that smokers are addicted to nicotine, and they use cigarettes to maintain a certain level of nicotine intake. If you reduce the level of nicotine in a cigarette, it may induce greater smoking in order to reach the level of nicotine intake that a person is addicted to. Reducing just the addictive quality of a cigarette may actually result in greater health disability, or greater morbidity, because you get greater use. This is balanced off by minimalizing the impact of addiction on some people.

So the science, the analysis, the epidemiology, is very complicated. It's not clear. This is one of the issues we intend to study, and it's one of the areas in which the information we would receive through these regulations on reporting would help determine the most propitious public policy in this respect.

The Chair: The last question goes to Ms. Wasylycia-Leis.

[Translation]

Mr. Réal Ménard: He did not answer my second question. Is it $304 million over 26 years? Are these the official figures?

Mr. Ian Potter: Yes, $304 million.

Mr. Réal Ménard: It would cost $304 million over 26 years for the industry to adapt.

[English]

The Chair: Ms. Judy Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

Do you have a job impact analysis of these proposed regulations?

Mr. Ian Potter: Yes, we do. I can provide them to you with the....

Ms. Judy Wasylycia-Leis: Is it in one of the books?

Mr. Ian Potter: Yes, it's in one of the books.

The overall net impact is actually an increase in jobs. There was an estimated net increase of 1,954 jobs and an estimated loss of 129 jobs in the tobacco industry. There was a 3.4% reduction in the sale of products, resulting in the loss of 38 jobs in Ontario and 23 jobs in Quebec in the processing plant, with some reduction, 86 jobs, in agriculture, etc.

The cost-benefit analysis indicates, though, that if you reduce the expenditure, if these regulations have the impact we believe they have, the reduced expenditure on tobacco is not lost but transferred to other products. That expenditure actually induces a greater number of jobs.

So the job creation aspect of this is actually greater than the job loss aspect, and the net result is actually a gain of 2,000 jobs.

The Chair: Thank you very much.

That concludes this panel. I would now ask for everyone's cooperation.

Can Health Canada move out quickly? We'll make the adjustment and get the other panel up to the table.

Thanks very much.

• 1630

• 1633

The Chair: Ladies and gentlemen, again, I'm cognizant of the time. We want to hear our witnesses today and we want to have a full discussion. It's a very important debate and discussion.

As you know, we have a vote that will be coming quickly. Having said that, let's proceed right away to the National Association of Tobacco and Confectionary Distributors, Luc Dumulong.

Mr. Luc Dumulong (Executive Vice-President, National Association of Tobacco and Confectionary Distributors): Mr. Chairman, honourable members, I would like to begin by offering a genuine word of gratitude to the members of this committee for taking the time to consider the legitimate concerns of our members.

The three of us here today, along with others who will appear at a later date, represent tens of thousands of Canadian small businesses spread across virtually every community in Canada. Regrettably, this is the first honest forum for them in almost 18 months of so-called government consultation from Health Canada. I will come back later to that sorry state of affairs.

For the sake of both clarity and brevity, we would like to ask you to consider our remarks today as a single presentation with each of us covering different areas of concern. Naturally, we will be happy to respond to any questions following the three presentations.

I would like to begin by making some remarks on behalf of our organization, NATCD. Since 1955, the NATCD has represented independent wholesale distributors and more recently corporate wholesale distributors. The variety of products handled by our members includes groceries, health and beauty products, paper goods, food services, and fresh meat and produce.

The majority of our members are relatively small, family operated enterprises. As such, they are highly vulnerable to any change in the way they must conduct their business.

Today, the NATCD represents over 100 distribution outlets servicing more than 40,000 retailers across Canada. Collectively, our members distribute over 70% of all tobacco products sold in Canada. Retailers are our customers. If they suffer an economic setback, so do our members. For every retailer forced into bankruptcy, at least one of our distributors will be hit by financial loss.

• 1635

In short, our members have an obvious and profound interest in any proposed regulatory changes to the way tobacco products are sold in Canada. It is, therefore, common sense that government would consult with our members before making any major changes to the Tobacco Act.

Mr. Chairman, the one common complaint you're going to hear from all wholesalers and retailers today—the one source of frustration and anger—is the shameful way Health Canada has subverted a meaningful consultation with these tens of thousands of retailers and wholesalers across Canada. As a result, we have been left with only one logical conclusion: Health Canada has been railroading through new regulation with no regard for the legitimate concerns of our members.

Mr. Chairman, since the lack of consultation is a critical concern, I am going to walk the committee through some of the events of the past 18 months.

First, let's look at the government's own regulatory policy, reaffirmed by the federal cabinet as recently as November 1999. The policy is specifically designed to ensure that no Canadian stakeholders in any proposed regulatory change inadvertently suffer hardship as a result of an ill-informed process. The regulatory policy states:

Regulatory authorities proposing new regulatory requirements, or changes to existing regulatory requirements, must carry out timely and thorough consultations with interested parties.

In particular, regulatory authorities must ensure that special circumstances for small businesses are addressed. The same policy requires that a business impact test, or a BIT for short, is to be undertaken to assess the likely effect of proposed regulations on Canadian businesses.

Mr. Chairman, nothing could be clearer—or so we thought. Appended to our brief you'll find a chronology that details our 18-month fight just to be heard by the regulators, much less heeded. I would like to touch on just a few of the events in that chronology.

As you know, in January 1999 the Minister of Health released two discussion papers on tobacco regulation: one on reporting and labelling; the other on promotion and display. Publicly, the minister made it clear that the proposals in both papers were part of an overall blueprint of sweeping regulatory change. After retailers and wholesalers complained to MPs about the potential loss of display allowances, Health Canada temporarily shelved the promotion and display proposals by saying they would be considered at a later date.

Over the ensuing several months, wholesalers and retail organizations raised a number of serious concerns with the labelling and reporting proposal, some of which could have a potentially ruinous effect on the thousands of small businesses across the country.

Naturally, we requested that wholesalers and retailers be part of Health Canada's mandatory consultation process, including the business impact test. You can imagine our shock, Mr. Chairman, when we were subsequently advised by Health Canada officials that wholesalers and retailers were not to be included in the business impact test, because they—Health Canada officials—had decided that our members would not be affected by the present proposals.

As you will see from the chronology, our organization spent almost a full year fighting Health Canada officials for inclusion in this mandatory consultation process. During that time we were repeatedly promised consultation and then denied participation at key consultation meetings. During that time we implored Health Canada to abide by the strict requirements of the Government of Canada's regulatory policy on consultation.

Finally, during that time, out of fear and frustration, we had to retain the service of counsel just to fight for the right to be heard.

Mr. Chairman, our actions were based on the belief that a full understanding of our industry and its concerns by the Department of Health would produce responsible regulation. Instead, in January of this year—a full year after we began this exercise in frustration—Health Canada came up with the only thing worse, the only thing more insulting than no consultation at all. They conducted a business impact test guaranteed to produce absolutely nothing.

• 1640

The department knew that the retail and wholesale sectors included tens of thousands of small family businesses with a range of ethnic language barriers and scattered throughout the country. We warned the department that the Internet was not the option to survey our members and the retailers across Canada. A handful of retailers have fax machines in their stores. How many retailers in this country do you think have a connection to the Internet? We can count them probably on my ten fingers.

This is why we offered to work with the department to produce a clearly worded survey to provide sufficient time for translation. We were even willing to translate the questionnaire, because they weren't willing to do that for us. We asked for time for education. We also asked for time for our members to consider the proposal and time to reply with this questionnaire. These minimal measures were obviously essential in order to elicit a meaningful response of value for the regulator.

Instead, on February 7, 2000, the department initiated its mandatory business impact test with a vague and confusing questionnaire available on the Internet, with a two-week response deadline. We had asked that the BIT raise practical day-to-day business concerns. Instead, thousands of mom-and-pop convenience store operators, many facing ethnic language barriers, were supposed to answer questions about international competitiveness, export markets, and liabilities created by the regulation. They didn't even know about the regulation in the first place.

At an industry briefing session in Montreal, not one of the federal government's consultants responsible for the business impact test was fluent in French. As a result, our bilingual business representatives were forced to explain the government's proposal to the francophone business representatives at the meeting. I was one of the people translating for them.

At the same meeting, we offered to work with the consultants from Consulting and Audit Canada.

The Chair: Mr. Dumulong, I need to interrupt at this point. Sorry. There was a meeting in Montreal, are you saying, and there was no official translation?

Mr. Luc Dumulong: Of the ones responsible for carrying out the business impact test, no one was able to carry a conversation in French.

The Chair: Can you get a report of that? That's totally unacceptable.

Mr. Luc Dumulong: It is totally unacceptable.

The Chair: I want a full report, which I'll share with the committee.

Mr. Luc Dumulong: Thank you.

The Chair: Proceed.

Mr. Luc Dumulong: At that same meeting, we offered to work with a consultant of Consulting and Audit Canada to make the business impact test questionnaire more user friendly to the members. We were told that any change would have to be made there on the spot before the end of that meeting. Give me a break.

Mr. Chairman, when we hear stories like this, I'm sure the honourable members of this committee will understand why more than one industry representative walked out of those encounters with disgust.

While they were effectively shut out of the impact assessment survey, our organizations were sufficiently concerned to submit briefs instead. These submissions were also ignored by Health Canada. No mention was made of our concerns in the RIAS printed in the Canada Gazette.

Mr. Chairman, the final insult to the intelligence of our members arrived with the business impact test results dated March 2000. We have been asking for that report since April. Guess when we received it. We received it yesterday. That's an indication of the kind of process we've been subjected to. The report states that tobacco wholesale, retail, and union representatives expressed strong concern about the consultation methodology, and as a result, virtually no responses were received from those sectors—actually, one.

Mr. Chairman, I hope it is crystal clear to every member of this committee by now that the reason there were virtually no responses from the members of our respective organizations is because Health Canada and its consultants made it virtually impossible for our members to respond. To be blunt, the department's consultation process has been a complete sham. Health Canada has made a mockery of both the Government of Canada regulatory policy and this government's commitment to consult with small business.

Where do we go from here?

First, the past 18 months have left our members in a state of understandable fear, fear that the office of tobacco control is prepared to ram through its own agenda regardless of any potentially dire impact on small businesses across Canada.

• 1645

Second, Health Canada is wasting a great opportunity to work with wholesalers and retailers on positive, meaningful programs to prevent smoking amongst youth.

Finally, we know there's another shoe just about to be dropped. The minister has made clear his determination to proceed with changes on promotion and display practices, changes that could drive thousands of small businesses right out of business. Will our members be properly consulted before the next round of changes, or is Health Canada thinking it can get away with another round of contempt for our members?

On a positive note, however, Health Canada's deplorable behaviour is helping to mobilize wholesalers and retailers across Canada to ensure our concerns can no longer be ignored.

Mr. Chairman, if there's only one message we would implore this committee to send to Health Canada, it's this one: achieving meaningful objectives, particularly with respect to our youth, requires meaningful programs implemented with the full cooperation of all stakeholders working together. Health Canada would gain far more from our members by an open and honest consultation than by trying to muzzle possible criticism through the kind of systematic deceit we have seen over the past 18 months.

I would like to call on my colleague, Don Cha, of the Ontario Korean Businessmen's Association, to make a few remarks.

Don.

The Chair: Mr. Cha.

Mr. Don Cha (Business Development Manager, Ontario Korean Businessmen's Association): Thank you.

Mr. Chairman and honourable members, on behalf of the Ontario Korean Businessmen's Association, I would like to express our thanks to this committee for hearing our concerns.

The OKBA is a non-profit service organization that furthers Korean-Canadian business interests in the marketplace through the provision of business services and counselling. The OKBA represents approximately 1,800 independent convenience and grocery stores in communities across Ontario. The leadership is also involved in KBA of Canada, which represents almost 2,600 convenience and grocery stores across the country. The majority of our members are small retailers with stores owned and operated by fathers and mothers who work long hours to make a modest living to support their families. They are proud of their businesses.

At the best of times these small businesses operate on slim profit margins as low as 1% or 2%. Anything that hurts revenue, even by a few thousand dollars, can mean the end of the business. The loss of any business has a negative ripple effect throughout our Korean-Canadian community, a community in which people tend to support one another's businesses for all the normal reasons of culture and language.

Health Canada has made it clear that these regulations on tobacco labelling and reporting are the first step in a package of planned changes. The complete package could put the thousands of families who run convenience stores out of business, causing great financial hardship to the entire Korean-Canadian community.

Mr. Chairman, we wish to make it very clear that we support the meaningful measures aimed at keeping tobacco out of the hands of minors. Our members are at the front lines of these efforts every day and we are constantly trying to do even better, making sure we don't sell cigarettes to the kids. But our members are not prepared to put their livelihood at stake for what the minister admits is an experiment untested anywhere in the world, an experiment we do not believe will do anything to curb youth smoking.

Worst of all, we have been asked to put our businesses on the line, but we have been completely shut out of the consultation process. Our members are very worried about our future.

The OKBA is concerned about these regulations, and we are alarmed about Health Canada's real agenda, which it is trying to hide through its multi-stage approach to regulation. We are concerned about any regulation that drives up the price of cigarettes.

I have all my own stores. I've lived through six-dollar cigarettes, and I can tell you first-hand that increases in the price of cigarettes increase the risk of crime against the retailers. It hurts our health. We have to be very careful. Robbery and burglary are very real concerns to those who sell tobacco. Cigarettes are easy to steal and easy to sell on the black market.

• 1650

As for trying to keep cigarettes out of the hands of minors, often the criminal element distributing stolen or contraband cigarettes recruits kids to sell them. Who asks for proof of age? Who is going to care?

We are also very concerned that the labelling and reporting regulations will result in an end to display allowances to the retailers. With increased costs and unattractive packaging the government agenda is clear. Health Canada wants to end the display allowances either by making the package as ugly as possible or by banning tobacco displays outright.

Health Canada is not demanding detailed information on display allowances out of curiosity. It is gathering ammunition to try to kill our businesses. Without overstating this issue, Mr. Chairman, if these allowances end, either now or in a few months time when the next regulatory package is passed, it will likely end many of our members' businesses. And for what? What does Health Canada hope to achieve? Why are our members being asked to make a big sacrifice? We cannot imagine how the elimination of the display allowance will do anything to influence tobacco consumption. These fees are paid to try to get smokers to buy one brand over the others. Does Health Canada really believe that a person walks into a convenience store and suddenly decides to start smoking solely because one brand has a better position than the other?

The OKBA has repeatedly asked that promotion and display proposal be considered at the same time as labelling and reporting. Indeed, let us have an open and honest debate about all possible alternatives. As Luc pointed out, meeting and consultation is not optional for Health Canada; it is an obligation by law.

The department's refusal to consider all its regulatory proposals together, combined with its lack of an honest consultation process, makes it impossible to establish exactly what kind of financial hardship our members will suffer.

At the very least, Health Canada is proposing to make life more difficult and more dangerous for our members. I have already mentioned the direct connection between increased price and increased crime. The same applies to all of the proposals affecting display and packaging. These will make it more difficult for a clerk to locate a particular brand among the literally hundreds of different ones. The more difficult it is for the clerk to find a particular brand, the longer the clerk's attention will be diverted from the customers and the store, and the longer the clerk's attention is diverted, the higher the risk of shoplifting, robbery, and armed assault.

Mr. Chairman, we do know one thing for certain. Health Canada has insulted and upset the Korean-Canadian community and has undermined the trust and good faith of our members in the government. Our members are law-abiding Canadians selling a lawful product and as such no government has any right to try to put them out of business.

Mr. Chairman, we need the help of this committee to ensure that Health Canada does not get away with the abuse of the process on these regulations.

With this, I would like to turn over the floor to Diane, my colleague.

Thank you, sir.

The Chair: Thanks, Mr. Cha.

[Translation]

Ms. Hétu, please.

Ms. Diane Hétu (Director of Communications, Association des détaillants en alimentation du Québec): Mr. Chairman, ladies and gentlemen, honourable members, I thank the Standing Committee on Health for inviting us to appear today to present our arguments.

• 1655

The Association des détaillants en alimentation du Québec represents 10,000 retail grocers in the province: supermarkets, groceries and convenience stores. They provide jobs for 91,700 persons in all regions, which accounts for 23% of all the jobs in the food sector. They have 48% of the consumer products market share in Quebec as a whole and they generate about $1.5 billion in revenue for both levels of government.

Convenience stores will undoubtedly be most affected by the new regulations, because for most of them cigarette sales account for 30 to 35% of sales. They want to protect their market. That is a normal and legitimate desire, since it is a legal product that they are selling.

Today, I would like to review the options we have been suggesting for years to deal with smoking among young people. Unfortunately, we were unable to put those options forward during the consultation process, in which we were unable to take part for the reasons Luc cited a few moments ago. Yet the government's consultation policy requires that possible options be examined as part of the consultation process. The policy states that the proposed regulation must be shown to help solve the problem. It requires that other options be examined as well to ensure that the best one is applied.

Mr. Chairman, it has not been shown that printing these negative images on cigarette packs will solve the problem. As we have said many times, retailers fully agree with attempts to significantly reduce smoking among young people.

The first thing we must do on that score is make young people more responsible. We fail to understand why governments refuse to make it illegal for a minor to possess, purchase or consume tobacco products. Quebec has the Alcoholic Beverages Offence Act, which prohibits purchase and consumption of alcohol by anyone under 18. Why not adapt it to cover tobacco as well? Alberta had the courage to do that last year.

The point I'm raising is very important, and goes beyond Health Canada regulations. Here, we are talking about real problems. Convenience stores are the only ones responsible for controlling smoking by young people. Since it is legal for young people to smoke, many parents and friends provide them with cigarettes. Moreover, they feel quite free to smoke close to their schools. But at the same time, inspectors are fining convenience stores. That is a very hypocritical approach.

By passing legislation that makes young people responsible for their own actions, we would give all parties involved the power to prohibit smoking. It would also become much more difficult for older people and friends to give minors cigarettes, or to buy cigarettes for them. We believe that governments are simply washing their hands of the problem, and putting the burden on retailers.

But until we get legislation that is genuinely helpful, we need instruments that will help us, like an identity card. In Quebec, you cannot ask to see somebody's health card unless it is for some kind of medical care. You cannot ask to see a driver's licence, unless you are the police and you are checking some kind of highway safety code violations. Non-compliance with these restrictions can result in a fine of up to $2,000. So convenience stores run a lot of risks, and if they ask to see an identity card, they cannot state which one they want to see. They could ask to see student ID cards, but everyone knows how easy those are to fake. So retailers have to become specialists in detecting trickery, while other customers wait in line for them to complete their checks.

You have no idea how many customers complain about the process in stores. Often, you hear adults saying “Oh, just sell them the cigarettes, so we can get on with it.” That is true co-operation, isn't it! For years now, we have been waiting for the government to issue a valid identity card, with a photograph.

Now, I will say a few words about awareness-raising programs for retailers.

• 1700

Some years ago, the Canadian Coalition for Responsible Tobacco Retailing was formed. It is an initiative aimed at reducing and preventing the sale of cigarettes to young people. It is also known as Operation Identity Card. Thousands of kits were distributed to retailers across Canada. The kits included posters, signs, displays, an employee policy, an Internet website and a 1-800 number. The program is a very good one and things have improved, but much remains to be done to help retailers achieve better compliance with legislation.

The Canadian Tobacco Manufacturers Council has established pilot projects known as Operation I.D. It is a positive action program designed to help the entire community assist retailers in upholding the law and putting an end to the illegal sale of tobacco to minors. The operation includes schools, students, youth associations, business people and other groups.

To date, the operation has been launched in nine Canadian municipalities, with excellent results. For example, in Kelowna, British Columbia, Operation I.D. programs raised retailer compliance rates to 98.2%. But in order to succeed, the program requires generous funding. It must also be applied consistently in all regions of Canada. The federal government, which collects billions of dollars in cigarette taxes, must become involved in the program, which has demonstrated its effectiveness.

At present, we must depend on the willingness of all community members to participate. However, some groups still resist, making our task more difficult. Let me give you an example. I contacted a regional health board which refused to participate in the program, alleging that it could not become associated with tobacco manufacturers. However, board officials have been working with retailers for years, but their approach is to coerce and blame retailers. In our opinion, this is hardly a positive approach.

Organizations like health boards should be obliged to co- operate with us. What we do is work alongside them instead. Once again, we come up against hypocrisy. The government must make a commitment to move towards concrete results. In addition, I would say that anti-smoking groups should participate in the programs as well, rather than mount media events that lead absolutely nowhere.

Retailers are quite willing to do what they have to do, but we have to help them. The regulations we are opposing today will do nothing more than create additional problems, like those described by Don Cha: it will be difficult to identify cigarette brands, customer service will slow down, and retailers may lose revenue from manufacturers who rent promotional space in the store. Moreover, none of these measures will do anything to prevent smoking among young people. In fact, we are quite certain that these dreadful pictures on cigarette packs will represent a new challenge for many teenagers, who will cheerfully begin to collect them. Many sociological studies among young people have shown that they need to set themselves apart from authority and to defy authority figures. We cannot ignore that.

Now I will say a few words about smuggling, which may appear to be irrelevant in this context, but which may affect young people nonetheless. Paul Martin, the Minister of Finance, recently announced that he planned to raise taxes on tobacco products, in line with the provinces. That means throwing open the doors to smuggling. And when smuggling starts up again, as it certainly will when cigarette prices reach a critical threshold, what control will you have over cigarette sales to minors? Do you think that smugglers will ask young people for I.D. to prove they are not minors? They will do just the opposite: they will ask young people to run the stuff for them on the black market, as they did in the 1990s. Then, minors made a lot of money with illegal smuggling.

We believe the government should be extremely vigilant, and refrain from putting forward measures that encourage smuggling. We had a huge problem with smuggling less than 10 years ago, and today smuggling could seriously undermine all efforts made to reduce smoking among young people.

Mr. Chairman, we have tried to suggest genuine, well-targeted solutions so that the government can work with retailers instead of against them. There is of course no miracle solution, but we hope that the avenues we have suggested will be seriously considered by your committee, and implemented as quickly as possible. Thank you.

• 1705

The Chair: Thank you very much, Ms. Hétu.

[English]

We'll start our first round.

Mr. Mills, please.

Mr. Bob Mills: Thank you for appearing before us.

Certainly I think all of us would be disappointed to hear about the lack of consultation. Obviously the chairman has asked you to document that, and I think all of us would agree that we wouldn't like to find that to be as factual as you stated it.

Secondly, I guess the real problem for most of us comes down to the fact that costs for health problems associated with tobacco include such things as 45,000 Canadians per year dying and the huge costs for health care, and the fact that minors are a major consumer of this product. We look at how we can solve that problem. I'd like to know from you how you think we could deal with that, how you think we could stop young people from smoking. Do you think those pictures and those words just won't work? Is that just a total dream that Health Canada has?

I can understand your concern about the security, the loss of jobs.

When it comes to price, it seems to me.... I have these figures. I don't know if they're accurate or not. Prices in the U.S. right now are higher, particularly on the borders of Quebec and Ontario. In fact, a carton of cigarettes in Ontario is $32 and a carton of cigarettes in Michigan is $52, if you use the same currency. If that's true, I then wonder about the smuggling aspect of things. Could you explain to us how you think that's a factor?

I wonder as well about the fact that 30% of retailers will sell cigarettes to young people. Again, that's a figure we have. Is that not a true figure? If it is a true figure, how can we get that to zero?

Mr. Luc Dumulong: Where do we start?

If I may, on the pictures, we can't really say much on the pictures besides the fact that there's going to be an obvious shock effect at the beginning. But from my psychology background—that's all I can bring to the table here today—once this is done people will get used to the pictures and you're going to have a desensitization, a de-dramatization,

[Translation]

we are working to make these pictures less dramatic. People's tolerance towards them will increase and, at a certain point in time, they will be worthless.

That reminds me somewhat of the health warnings that were changed a few years back. We moved the health warning from the side of the package to put it on the front. If you ask smokers what is on their package of cigarettes, they don't even know. I think that that is going to happen again: we are going to desensitize people to the risks associated with tobacco use.

As to the price in Canada and in the United States...

[English]

you can jump in whenever you want, Don,

[Translation]

and you as well Diane, please—it's obvious that we have seen an increase in the prices in States bordering Quebec and Ontario, but it is possible that these products come from other States, or from other countries. We are well aware that today, with the global village, with Internet and all the rest of it, it is very easy to order products from just about anywhere and avoid taxes, not only on tobacco, but on just about anything.

If tobacco taxes are substantially increased, we will increase the profit margin for those people who would be tempted to make money at the expense of legitimate businesses who collect taxes and then give them to the government. The morning after the announcement of such an increase, people will get into business. It's obvious.

When that happened the first time, the network wasn't truly structured. Now, because governments did not act quickly enough to reduce taxes, a parallel network controlled by organized crime has been able to implant itself throughout the country. Certain Indian reservations are used, among others, which serve as major distribution points. But that's another issue. There are people who are not as concerned with respecting the laws of the land.

• 1710

And finally there is going to be a phenomenal increase in contraband overnight. The distribution network is still active and can be used for anything. It's like a pipeline. Once again it will be full of tobacco.

There is one other thing. The tolerance level of smokers, who have been ostracized for several years now, has increased with regard to certain activities which may be considered on the fringes of the law. A lot of smokers say that they have been overtaxed, that they are being perceived as cash cows, that they're being sent outside to smoke and that now they want to tax them again. They say that if that's how things are going to be, they're just going to resume contact with a former supplier.

I'm going to stop there because we could discuss this at great length. As for minors, some will be recruited to sell cigarettes. And I'll stop there.

The Chair: Thank you very much.

Mr. Ménard.

Mr. Réal Ménard: I would have three questions for the witnesses. I obviously deplore the cavalier treatment that Health Canada has afforded them and I would imagine that the committee—the chairman and ourselves—will take measures in order to shed some light on this issue, because it is unacceptable.

Furthermore, this committee must make decisions based on rigorous methodology and based on the studies. We cannot simply rely on our common sense as to empirical data. You say that you fear that the strategy proposed by Health Canada, namely to use 50% of the space on a package of cigarettes for health warnings, would have no other effect than to desensitize youths and would lead them to start collections of some of these images.

If I understand you correctly, your association has not carried out any studies which would allow it to state such a thing and is speaking based on instinct. You are here before us and presenting just an instinctive opinion. This is something that you cannot uphold, whether on a scientific or an experimental level, namely that the Health Canada strategy is doomed to failure.

Mr. Luc Dumulong: The Minister of Health himself admitted that the strategy was experimental, that it had never been tested anywhere in the world. So they will be sorcerer's apprentices on the backs of the distribution network in the hopes that it will work. I think that the government of Canada and all governments have the responsibility to ensure that a policy is effective before putting it into place.

In this whole matter, given that the consultation process regarding marketing was divided, and was set aside from the consultation process we cannot have... Health Canada, despite everything the Minister might submit to you, cannot tell you what the true impacts of this program will be, because the department doesn't have any idea, since it did not consult.

You have to understand that the direct impact of a package on marketing will depend on its appearance.

Mr. Réal Ménard: Let me understand you correctly. I can understand that you are disappointed by the marketing strategy being proposed by Health Canada. However, you cannot say that no studies were carried out. We know that 60% of people stated, during the course of a scientific test, that they would be more hesitant to begin smoking, or they might want to try to quit smoking because of this illustration. But you don't believe that, and I can respect that.

I'd like to come back to an aspect of your corporate mission. As far as I'm concerned, that's the most important point you touched upon. Your brief was quite eloquent on that point. You said that you represent 10,000 retailers in the province and that from 30 to 35% of your sales figures come from the sale of cigarettes. Now I would like to understand how Health Canada's strategy, namely to use 50% of the space on a package of cigarettes, will affect your bottom line in the short term. I hope that you will tell us what you feel in your heart and that you will not censor yourself. Please help us, the members of the committee, to understand.

• 1715

Ms. Diane Hétu: In fact, it's not simply a matter of the space on a package of cigarettes that will have an impact on the bottom line. What concerns us far more are the regulations that Mr. Rock would like to put forward concerning display. That is what worried us, regarding the consultation process.

Of course this 50% could make it more difficult to identify the brand name, but that is not the aspect that concerns us the most. It's rather that we will no longer be able to show these packages, whether in the short or medium term.

Mr. Réal Ménard: Therefore, you don't have an issue with the current regulatory framework. What you fear is the future. You're saying that the Minister will go further.

Ms. Diane Hétu: It's a great concern because, since the consultation process was not carried out as we would have hoped, we don't know whether we won't end up with something that is very worrisome for our stores, if the consultation process remains the same. We know that there will be closures and that it will be dramatic, as we saw last spring. That was separated, but...

Mr. Réal Ménard: May I ask one last question?

The Chair: No.

[English]

Madam Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

First off, we've all heard your concerns about the consultation process, and I think we've paid attention to your feelings about not being consulted adequately in this whole process. Certainly we wish we could have the officials back to the table now to actually raise some of these questions.

A voice: Yes.

Ms. Judy Wasylycia-Leis: We will pursue that when the officials are able to join us again.

I would like to, though, get into this whole area of the responsibility and role of retailers vis-à-vis the serious problem of smoking among young people. We've heard from others about the high number of young kids who are able to buy cigarettes at retail outlets. We've heard that the compliance rate is only about 70%. That poses a serious problem for kids finding a way to get their hands on illegal products. The other concern around the whole issue of retailers is what it does to kids when they see displays of cigarettes along with the candy and the comic books and whatnot.

Is there not an issue here that we have to come grips with as a society at the retail level? Whose job is it, then, to crack down in terms of illegal sales to kids, to try to push these displays behind the counter, to keep out of the picture some of these factors that clearly entice kids to smoke? I'm really anxious to hear your input on this public policy issue.

The Chair: We have only about five minutes. I'm sorry about that, but could we maybe do a quick wrap-up on Ms. Wasylycia-Leis' question, please?

Mr. Don Cha: I'll answer that question.

As for my experience of running stores—I've run stores for 18 years—if I understood it right, it was just implied that because there is a display allowed, kids tend to approve of the product. Is that what you were asking?

Ms. Judy Wasylycia-Leis: I think the display, the visibility of the tobacco product, is one factor in terms of kids thinking about smoking.

Mr. Luc Dumulong: I don't know that.

Mr. Don Cha: To that I cannot—

Ms. Judy Wasylycia-Leis: You don't believe that..?

Mr. Luc Dumulong: I don't know.

Mr. Don Cha: No, I don't—

Ms. Judy Wasylycia-Leis: You don't have any problem with tobacco products being displayed with the candy and the chocolate bars and—

Mr. Don Cha: Tobacco products have never been displayed with the candies. They're always way behind the counter because of security reasons and availability, and because we have to handle it. Especially so kids can't buy it nowadays, we cannot put the cigarettes in the open at the front of counters, so that issue is gone—

Mr. Luc Dumulong: I think some of the research—

Mr. Don Cha: Also, as you mentioned, how are we going to prevent stores from selling those tobacco products to minors? Our compliance rate is rated at 70%. I guess the best way to describe that is that before we started, about one year ago, it was a lot worse than that. Through communication with our members, we have been vastly improving. I want to make it 100% compliance. I want to make sure they understand everything.

The way they're catching the retail stores that are selling to minors, it's very deceiving, especially for us. They bring in kids who are 18 or 18 1/2 years old and look as if they're older. Sometimes it's really hard for us to judge, so people tend to sell them cigarettes because they think they're selling to someone who is over 19 years of age—in Ontario. As a matter of fact, the age is only 18.

• 1720

So what we are doing now is we even make the posters for the OKBA ourselves, posters that say we are proud not to sell cigarettes to minors. Not only that, but we tell them that if they are in doubt, ask, do not guess. This is education to our members. I have to translate it into the Korean language—it's a hard language—so that they can understand that this is the law and this is what we have to abide by.

The Chair: Mr. Cha, I'm going to stop you there, if you don't mind.

Mr. Proulx, very quickly, please.

Mr. Marcel Proulx: Thank you very much to the witnesses for appearing in front of the committee.

Mr. Dumulong, you seem to be very trigger happy against Health Canada. It so happens that I think Health Canada is doing an honest job, so I'm very anxious to see the report you've mentioned, because I think they're honest about it.

Are you same Luc Dumulong that used to be a staff member of the Smokers Freedom Society? If yes, what was that group doing and how was it related to the tobacco industry?

Mr. Luc Dumulong: Mr. Chairman, I don't know what this has to do with the business we're doing today.

The Chair: Well, Mr. Dumulong, a member of Parliament has the right to ask the question, and you should answer it.

Mr. Luc Dumulong: What's your question again?

Mr. Marcel Proulx: Are you the same Mr. Luc Dumulong who was a staff member of the Smokers Freedom Society, and if so, what did that group do, and was it related in any way to the tobacco industry?

[Translation]

Mr. Luc Dumulong: Yes. My name is Luc Dumulong and I worked for the Society for Smokers' Freedom. It is an organization which defended the rights of smokers. I don't see how that has any relation with the debate here today. It is a separate issue.

[English]

Mr. Marcel Proulx: Thank you, Mr. Chair.

The Chair: Thank you very much.

I do, however, want that information about Montreal—

Mr. Luc Dumulong: It will be my pleasure, sir.

The Chair: —and what happened. I want to know who, when, where, and any other details.

This meeting is adjourned. Thank you very much.