HEAL Committee Meeting

STANDING COMMITTEE ON HEALTH

COMITÉ PERMANENT DE LA SANTÉ

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 31, 2000

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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.

As you know, we're dealing with the tobacco regulations. Pursuant to Standing Order 32(5), consideration of the proposed regulations for tobacco will take place today. We had our first meeting yesterday, and now we're proceeding with additional witnesses.

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Leading off is the Graphic Arts Technical Foundation, with Richard Warner, the director of research. As well, Philip Shilton is here from Image Plus Graphics. He is vice-president of production.

Mr. Warner, do you want to lead off, please?

Mr. Richard Warner (Vice-President and Director of Research, Graphic Arts Technical Foundation): Yes. Thank you very much, Chairman.

It's indeed a pleasure to be here this afternoon, ladies and gentlemen, and to be invited to sit in on these hearings on the proposed tobacco regulations.

Just to give you a very quick lead-in, my position at GATF is that of vice-president and director of research. I've been with the Graphic Arts Foundation for over 24 years and I've been in this business for the past 35 years.

When I was asked by Health Canada to participate and to look at the proposal that included putting health warnings onto cigarette and tobacco packages, I was pleased to be asked to do it. It was a very interesting and challenging project for us.

I'd like to report to you today the results of our findings. At the foundation I worked on this project myself, along with several other colleagues and three or four other well-known industry experts in the area of colour reproduction and packaging and printing.

What I'd like to do this afternoon very quickly is to run through the process of colour reproduction and an understanding of what colour is. It may be a bit technical, but I'll try to keep it at a level where it's quite understandable.

I want to do this because things have changed in our industry. They've changed drastically. When asked about the possibility of combining these four-colour health labels with spot-colour packages, had this been ten years ago I probably would have come up with a different answer. But today, with the ability to make cylinders at very high speeds, using laser engraving techniques, diamond stylus techniques, and computer-driven information, one can engrave and produce cylinders in the neighbourhood of up to 96 inches in less than half an hour. This is done every day in the industry.

In addition to that, the ability to use new digital technology allows one to prepare the colour separations and pre-press work so that you can combine both images very successfully. Anyone in Canada, or anyone in the world, as a matter of fact, that's using an eight-station press, a modern press, Revere or litho, would have the capability of producing these packages—process colour and spot colour simultaneously.

First I want to tell you how it used to be. We used to eyeball everything. All colour was done by visual comparison. It was a very subjective process. It depended upon the rods and cones and their response to visible light and the signal sent to the brain of the person observing the colour whether there was a colour okay or a colour match.

As you can see in my next slide, it tells you about the frailties of the human eye. The human eye can be tricked very easily. If you look at the top row of green, it's identical to the bottom row of green in this contrast stripe illusion. It appears lighter in the bottom row, but it's actually the same green that's in the top row. One's eye can become fooled extremely quickly; it is not always the best answer for colour consistency and quality of run in process colour or in packaging reproduction.

We continued with this approach for many years, but at the same time we found a parallel track of starting to understand a little about the theory of colour and how colours are put together. This started with some very basic work, with looking at the visible spectrum and the wavelengths of energy that the human eye is sensitive to and at the psychophysical response of human beings to this energy emitted into the eye.

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We soon developed theories of colour. The first one was the additive colour process. This is where it's made up of three primary colours, red, blue, and green, and when you combine them you get white light again. There are many things in your everyday life that work on this theory of colour. The fluorescent tubes you look at are simply phosphors that emit red, green, and blue radiation, and you see it as white light again. Your colour television is another example of it.

In printing we use colour monitors to preview everything we do before we make proofs and before we go to press. We use the additive process for what we call soft-proofing, but in colour printing and in most photographic processes and printing processes, we use what's called a subtractive process, simply because we start with white to begin with. We start with a white paper or a board and print on it, and we subtract colour from that white selectively by using the process colours sienna, magenta, and yellow to make up the reds, greens, and blues that we see in all the pictures in the different packages we look at.

How many different colours are used out there in the printing industry? As you can see from this survey we took of some 400 different printers around North America, there is a wide variety of different colours used by printers out there, and they're used for specific applications, and indeed, to match trademark colours, special colours that clients want matched specifically. So when someone says they're using a red, a green, or a blue, they have to be a bit more specific about that and denote that colour in some other form rather than just saying that it's red, green, or blue.

As we progressed with colour science, we were able to start making measurements, which we called colorimetric measurements. They're made with a small instrument called a spectrophotometer. It is shown in the upper right-hand corner of this slide, being held by a hand. It's a very simple, easy-to-use instrument. It allows us to measure an object, to assign numbers to that object, and to tell what that object is in terms of its hue, its saturation of colour, and its greyness.

That can then be addressed and plotted on a diagram like you see over on the left-hand side of the slide. It looks like a horseshoe-shaped diagram. In that diagram, you see different colours of the spectrum. With this process of plotting colours, one can identify and give every colour that you see an address, a location, where to find it, and tell how red it is, how green it is, how blue it is, how yellow it is, and how reflective or transmitted it is.

This next slide shows a chromaticity diagram, which we just looked at. The triangle you're seeing in there is the colour gamut or the range of colours that one can produce on a colour monitor such as your colour television. The somewhat hexagonal-looking diagram labelled “CMYK Printing” shows typical printing inks used in everyday printing. You can see that the two colour gamuts don't necessarily lie one within the other. There are spaces that are common and there are spaces that are exclusive to each one of those different systems. We'll talk a bit about what that means in just a moment.

The industry got more sophisticated. As new technology has come on and has become more portable and affordable, we're able to take more measurements now than ever before. So we've sophisticated this a bit and now we have gone from the early days of chromaticity diagrams to what we call CIELAB diagrams, which allow us to plot colours very uniformly in a uniform colour space. The distance between those colours gives us an idea of how much colour difference we're looking at.

So if we're trying to match a colour, we can plot it. We can calculate its colour difference to the original object and therefore get a numerical handle on how well we're doing. We can totally eliminate the subjectivity of looking at colour.

How does all this apply to what we're trying to do here, that is, combine four-colour health warnings with the traditional trademarks that go with the package in question?

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I'm going to pass around now a form that I'd like you all to look at. What you're going to see on there is two rows of reproductions. One row has been separated for process colour printing. It's the same picture. The second row has been separated for a substitution of process colours with trademark colours.

This has been done by a unique technique where one goes in and takes what we call colour profiles of the colours you're going to print with. We have names for these profiles. These are called colour profiles, and there is software called colour management software, which is available off the shelf. You load it with these measurements you make, and you can correct for the fact that you're substituting a spot colour for a process colour. In other words, you can make separations that look very good and are very acceptable and compare them with those made by process colour separations, but you can do it with spot colours, or you can do it with a combination of process and spot colours.

So there are many solutions to this problem. You're looking at just one set of solutions in front of you right now.

Here, on the next slide, we've made separations for process colours on the left-hand side and we've printed them with process colours. On the right-hand side it's the same subject matter, but now we've made separations using our colour software. And we've done it for spot colours, but we've purposely printed it with process colours. That's the wrong way to do it, and it doesn't look right.

The options that are available to us are as follows. There are several different softwares in the marketplace today that will handle this colour management problem of substituting spot colours for process colours, or vice versa. The first method we're looking at here is called Photoshop custom colour. You simply take a test target like the one shown at the top right-hand corner, where you see a picture of a lady and some skeins of yarn of different colours, and some test targets, and you measure those with a portable spectrophotometer. You then enter that data into the computer and you apply the application program of custom colour from Photoshop, and it will automatically generate separations that give you the colours that are as close as possible to what you would get using either spot colours or commercially available process colours.

The next method, method two, is another approach to it. Here we're using international colour standards, and what I'm saying here is applicable worldwide. This is not anything that's part of the U.S. or North America or South America; it's used worldwide now. There are international standards for this, called the ICC standards in colour profiles. ICC stands for the International Color Consortium. It's made up of companies around the world that are wrestling with this exact same problem as we are here today, and they've found a solution to it. Again, it involves identifying the colour, measuring it, going into the software, and having it locate for you the best possible combination of process and spot colour that will match that colour.

There are several other solutions to this problem. Certainly there are other processes that can be used to produce packaging and trademark colours. The industry is full of it worldwide. There is a tremendous amount of packaging done gravure, granted. A lot of gravure packaging is also done by lithography and flexography. These are the three major processes, as you'll find, in producing packages around the world, and they're all very viable solutions. Using innovative packaging techniques, they provide excellent products.

What you're looking at here in this last slide.... We've measured several packages that were given to us that are being produced in the tobacco industry now. I have these packages with me. We have over thirty samples of different cigarette packages containing a variety of trademark colours being used in the industry right now.

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We measured those colours with the spectrophotometer and plotted them in one of these diagrams we've been talking about. We've put numbers to these colours. We then plotted them and we compared them with the colour gamut available in process colour printing.

The large hexagon that you see here is a plot of colours or the colour gamut available with process colour. The other marks that you see inside here, some of the greens and the blues and so on, are spot colours. As you can see, in this instance these colours fell inside the set of process colours. And we have a colour hanging out here, a red that's hanging outside the gamut.

Now, what does that really mean? That means that we can't reproduce that colour in its full saturation with process, but we can reproduce it in hue. We can get the right hue. If it's a red, it will be the right red with process colour. It may not be as saturated and as full as it would be with a spot colour, but it is attainable in hue certainly.

In the sampling we did of some 30 different cigarette packages representing some 80 different colours, we found four of them that fell outside the process colour printing gamut. The rest were all inside it, which means they would all be attainable using combinations of processing.

What I'd like to end with is to say that our studies show us there is certainly the ability to produce packages with any trademark colour. I mean, I don't think we're here to limit the number of colours that can be used on a package. That's up to the designers. They know what sells and what doesn't sell. The designers can make any kind of package they want with any trademark colour, and any printer in Canada using gravure or litho techniques with an eight-station press and colour management using new digital technology can certainly make their way to combine these four-colour warning messages with trademark colours. There are several options available for doing this. I didn't mention them all. There are several others besides the ones I mentioned.

This might have been an undue task to undertake a decade ago, but today, with new technologies that are out there in diamond-stylus engraving and laser cylinder, this is quite feasible. The times to make cylinders have been drastically reduced. The ability to register images, get them so there are no colours that are hanging out or where they shouldn't be—those problems have been solved with a computer. You just don't see those problems any more today.

I would like to leave you with that thought, that it is certainly technically conceivable to go ahead and produce packages that contain four-colour warnings. They can be either all process, or combinations of process and spot colour, and include the trademark colours, which can be either special colours or combinations of process colour and trademark colours.

With that I'd like to turn it over to my colleague, Phil Shilton, who has actually done this. He has done an admirable job in an extremely short period of time. His story is most interesting.

The Chair: Thank you, Mr. Warner.

Mr. Shilton, you understand we are under time constraints here. We have a lot of people and we have questions that are to be asked. So let's keep it moving—that is my point. Thanks very much.

Mr. Philip Shilton (Vice-President of Production, Image Plus Graphics): Thank you for inviting me here. It's a pleasure to be here.

I'm Philip Shilton with Image Plus Graphics, which is a commercial printing company in Toronto. We have about 70 employees. We do about $12 million in business. About 40% of our business is pre-press business and the rest is printing and bindery. We have up to eight colour presses available.

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I was contacted by Health Canada and asked if we could produce a test to prove whether some of these printing requirements that were coming up because of the new warnings could be done on an eight-colour press, and my answer was yes. We took that on, and we've gone ahead and done it.

What we did first was we took.... This is a real cigarette package, and this is one we printed to duplicate it. It's an almost perfect match. Most people could not tell the difference between these two packages. We did this just to show....

I should actually say that when we did all of these, we did not have original artwork. We're doing nothing much more elaborate than elaborate photocopying. We took these existing packages, we separated them on a machine that is not much more elaborate than that. You just put it on there and it can automatically colour-separate those pictures. We went in there in simple Photoshop software, manipulated those images to sharpen them up a bit, and tried to reproduce as closely as possible the originals.

I say that because you have to realize that everything we've done here is just a copy of a real package. If we were working with original artwork in conjunction with the designers, obviously we could produce a much better package than what we've done here.

What we've done here is just tried to prove that by using some of these basic elements and some of the colour technology Richard was talking about, it's easy to reproduce these packages. Using eight colours, to keep this simple, we used four colour process plus three special colours and one coating colour, like a varnish or a clear coat that is on the top. That would represent eight colours, which is a sort of industry average for gravure presses in Canada. The intent is to make sure this work is staying in Canada.

What we've done is taken main face panels, for instance on the du Maurier package, and said this red cannot vary, so we're going to use a special colour for that; we're going to use a special colour for the silver and the gold, and then the other colours that may be in these packages we'll make up out of process colours.

Actually, that's not a good example, because this one can be done using the eight colours without making any alterations. This is only a four-colour package, so adding the other four colours, just the standard package, can be done on a press without making any alterations at all.

Maybe the Players would be a better example. We felt that the primary blue they have here, which covers the majority of the face panel, was the most important colour on that package. So we did that in a PMS, which is a pantone matching system, so a special colour. So that's the Players blue that we're matching here.

The other blues that are less important, the blues in the ship and the blues along the bottom, the blues that fall within the colour gamut Richard was talking about, we chose to reproduce in process colours. So we mix screens of the standard available colours and we come up with something that looks the same as the other colour.

I think the important thing here is to remember that we're just trying to come up with something that is not necessarily the same, but looks the same. The minor differences that you do see on this package, again, are primarily caused only because we did not have original art.

Regarding the timing issue, we did these in the lithographic process. As far as the film and preparation part of this whole job is concerned, it makes no difference how it's being printed. That job is exactly the same. Making the plates and what not, the actual printing process, is much quicker on litho.

These were done on litho, which is not how most packages are produced. Some packages are produced that way, but most are gravure. There is a little bit longer time to do those cylinders, but as Richard mentioned, that could easily be done within a six-month period.

We in fact produced these in just a few days. All the pre-press to plate work was done in just a few days, and then about another two weeks were used for printing, making dies, die-cutting, gluing. The whole process only happened in a couple of weeks. This was also not done with an unlimited budget, so we had constraints there as well.

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The other issue that came up previously was with inking controls, that there would be a problem with litho or with gravure in using a process because of colour variation. As Richard has mentioned, actually with the new spectrophotometer and the inking controls, the chillers, the temperature controls that we have on the presses, the whole press is now so computerized that we can stay within virtually any tolerance that's thrown at us.

I think that's all I really needed to mention. The only other issue that had come up previously was about capacity, about timing, how quickly it could be done. I want to say that although this job probably should be produced gravure, all the big quantities, it is technically possible to do it litho, and the timeframe can be done much faster. There is certainly no problem whatsoever with the capacity of litho presses in this country to have it print, die-cut, and glued, just with all the existing printers that are available. There are also in that process up to 12 colours available. So the issue about colours really shouldn't be there anyway.

The Chair: Thank you very much.

Mr. Elley, do you want to lead off in questions?

Mr. Reed Elley (Nanaimo—Cowichan, Canadian Alliance): I'd like to ask questions after this group, not have the other group come in.

The Chair: No, I think we need some technical questions—if there are technical ones only at this point.

Mr. Reed Elley: I think there may be some wisdom in perhaps having the other side present it so that we might not be redundant in our questions.

The Chair: I hear that, and we'll do that. If there are technical questions now, you're passing—is that the point?

Mr. Reed Elley: Then is what you're saying to us, Mr. Shilton, that you have the necessary capacity in your business to produce the kinds of labels on the packages that Health Canada is requiring out of this legislation? You are telling us that?

Mr. Philip Shilton: Our company does not now have the capacity to print all the cigarette packages for Canada, no.

Mr. Reed Elley: No, but you did this—

Mr. Philip Shilton: Yes.

Mr. Reed Elley: Your equipment, the equipment you have in your facility, was able to do this without having to spend extra money to do it?

Mr. Philip Shilton: Yes, that's the very standard kind of work we do all day, every day.

Mr. Reed Elley: So you did not have to upgrade your equipment. You didn't have to bring in any expertise from outside the country; you used all Canadian technology and expertise to do this.

Mr. Philip Shilton: Yes. It's very standard technology used to produce these packages.

Mr. Reed Elley: And if for some reason you were given a contract to do this, would you then have to have an extra expenditure of upgrading your facility to do the bulk kind of work that would be done?

Mr. Philip Shilton: If we were given enough volume that would exceed the capacity I have on our current presses, then we would need just more of the same thing. So yes, we would need more presses if we were given more volume than our current presses could handle, which we would be happy to do.

Mr. Reed Elley: And as a business that exists to make a profit, you would expect that you would be prepared to make the extra outlay of expense to be able to do the job?

Mr. Philip Shilton: Yes, absolutely.

Mr. Reed Elley: Thank you very much.

[Translation]

The Chair: Mr. Ménard.

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Mr. Warner, you did a study for Health Canada which is included in our briefing book. As I understand it, you evaluated three possible printing processes with a view to meeting Health Canada's new regulatory requirements.

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You found that the gravure process offered the most interesting possibilities. In your opinion, it is possible, using these print technologies which you claim are available in Canada, to meet Health Canada's new regulatory requirements?

[English]

Mr. Philip Shilton: I'm sorry, I'm not getting any translation.

Mr. Réal Ménard: The question is not for you, but if you are interested—

The Chair: Mr. Shilton, are you not being translated?

Mr. Philip Shilton: I'm getting it in French.

The Chair: Okay, you flip the channel there, please.

[Translation]

Mr. Réal Ménard: Even with all of the new technologies available to us, we occasionally fail to understand one another.

Did you hear my question, Mr. Warner?

[English]

Mr. Richard Warner: I understood everything except for the name of the process the gentleman asked about.

[Translation]

Mr. Réal Ménard: I'd like you to discuss with us the findings of your study conducted on behalf of Health Canada. I understand that you analysed three possible printing processes and concluded that the most interesting one was the gravure process using a combination of colours. Basically, I'd like to know if our Canadian printing companies can satisfy Health Canada's new regulatory requirements, without there being any job losses in the United States. That's the only thing in which I'm interested.

A voice: Job losses in the United States?

Mr. Réal Ménard: Surely I meant to say job losses here in Canada, if printing contracts are ultimately awarded to US companies.

[English]

Mr. Richard Warner: The answer to that question is yes.

I know the document you're talking about, and in this study we did we looked at a lot of different possibilities for doing this. Some of them were not so attractive; they were very costly. But the possibility of keeping the gravure, the printers, the way they are, keeping the product where it is, and simply fixing the problem in pre-press—that's where it needs to be fixed—with new digital technology using colour management software, that is all certainly feasible in Canada, right here.

[Translation]

Mr. Réal Ménard: On page 9 of the French version of the documents from Health Canada, we read that three printing and packaging companies handle approximately 95 per cent of the requests from Canadian tobacco manufacturers. We could put some questions directly to these three companies because they are scheduled to testify before the committee this very day. They are: Algroup Lawson Mardon, which operates a plant in Lachine, FPC Flexible Packaging Corporation, which has a plant in Toronto, and Shorewood Packaging Corporation, which has facilities in Brockville and Smith Falls. Have you shared the results of your study with these three companies?

[English]

Mr. Richard Warner: The conclusions we came to were sent directly to Health Canada.

Ms. Jane Meyboom (Associate Director General, Bureau of Tobacco Control, Department of Health): We sent them too. We made them available.

[Translation]

Mr. Réal Ménard: You represent an American firm with extensive knowledge of print processes used in North America and you were called in as consultants. According to your findings, the Government of Canada can proceed and adopt a new regulatory framework that Canadian companies could abide by. Moreover, your findings could very well be supported by and shared with Canadian companies.

[English]

Mr. Richard Warner: That's the case. It's absolutely true that our studies would indicate that you could do everything here.

[Translation]

Mr. Réal Ménard: I see. I have one last question, because as you undoubtedly know, I would never go over the time allotted to me here in committee.

You do not anticipate that the three companies in question will need an adjustment period, in terms of absorbing higher costs. In your presentation, you talked about Canadian companies being able to meet Health Canada's new regulatory requirements within a period of six months, without any job losses.

[English]

Mr. Richard Warner: I think the process of doing this is a progressive one. You can't do everything overnight. It's going to take some time. But my experience with gravure printing and package printing is that once they get a set of cylinders on press and get the press inked up with special colours, they tend to do the whole press run, or a goodly portion of it. There's a lot of time in what we call make-ready on press, and if you're to switch jobs and go to a different job—clean out the ink pans, put in new cylinders, and start a new job—it takes a lot of time.

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So I suspect they would run here very much the same as they do in Europe or in the U.S. Along package runs, you tend to stick with one set until you get the job done or a good portion of it done.

This would give them plenty of time to start making new cylinders or re-chroming the old ones, as a matter of fact, and make new images and keep ahead of the press.

The Chair: Thank you.

Mr. Réal Ménard: Last one?

The Chair: No, you said “last one” before.

Ms. Wasylycia-Leis, Mr. Jordan, and Mr. Proulx.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Let me just follow up on this line of questioning, because this is really where we need some clear answers.

You've stated time and time again, and the officials yesterday did as well, that this work can be done in Canada. Obviously some upgrades are required to existing plants to do this kind of printing and packaging. Do you have any sense of exactly what that might cost and how we would handle those kinds of projected costs?

For example, we'll hear later from Shorewood, and I assume based on previous correspondence that they will tell us it's going to cost $20 million to upgrade their plant. Assuming it's up to the company to come up with this upgrade, what's to prevent a company from saying they just can't afford that outlay, and the only option is to ship it outside this country? Can you give us any sense of what the cost would be in real terms and how we would handle keeping jobs here and the work in Canada?

Mr. Richard Warner: If I may, I'd like to answer a little bit of that question, and I'd also like Phil to join in on that, if it would be permissible.

The major change that is obvious to me is this. The way these products are being produced right now, they're being produced in what we call flat colours, spot colours. There are no pictorials with it, no pictures. So one has to be able to learn how to do picture reproduction. This is done in gravure magazine printing all the time. It's nothing unusual.

The only costs I can speak to would be those costs associated with the pre-press area. This is the area where you're going to go in now and make up digital files that have all the right images and all the right spot colours in them, and then you're going to drive an exposing device—a laser or a diamond stylist—and you're going to make new cylinders.

Right up to the cylinder-making, the cost of the pre-press system, if they don't already have one.... I would assume they have one, but if they don't and they have to start from scratch, you can get into a desktop pre-press system using a desktop scanner, a Mac or PC computer, the software, the monitors you need, the proofing system you need—all that, everything—for under $100,000. You can get just about anything you need today for in that realm.

When you start making new cylinders, that's a different story, because you have to either buy new cylinders or re-chrome and re-image those cylinders. As for those costs, I'm sure the printers know a lot more about that than I do. I'll let Phil comment on that.

Mr. Philip Shilton: I believe the $20 million that came up was for adding additional colour units to the presses, which would take a long time and which would cost a lot of money. I guess that was the purpose of producing these packages.

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We're not adding another four colours to however many colours they're using now. We're just showing there's a process out there that uses the same roughly eight units they already have. So there's no actual equipment expense, just the cylinder cost. Like any new job, you need the equivalent of new plates to print it.

Ms. Judy Wasylycia-Leis: Do you believe that any costs associated with adapting plants to be able to do this printing could easily be absorbed by the companies involved, in that we wouldn't be faced with the possibility of companies taking the printing out of this country?

Mr. Philip Shilton: Absolutely. There is no additional expense, other than for the new cylinders or plates—the equivalent of that.

Ms. Judy Wasylycia-Leis: Are you saying Shorewood wouldn't need these new cylinders, or whatever it would take to add up to this $20 million additional cost?

Mr. Philip Shilton: They wouldn't need them at all if they adopted the technology we've used, which is very simple technology, to run it using processed colours.

Ms. Judy Wasylycia-Leis: Is there any reason why they would have a problem, in terms of using this technology? Is there a technological difficulty, in terms of adapting existing plants that do tobacco packaging to do this?

Mr. Philip Shilton: No. That type of technology is used for most of packaging that's out there now—for all kinds of other industries that produce packages. Combining special colours in pictures is the norm. It's very common.

The Chair: Mr. Warner, briefly please. We're running out of time. Go ahead.

Mr. Richard Warner: Maybe 10 to 15 years ago you needed very skilled people to do this. Today the dot etchers and retouchers have disappeared from the scene. We've seen the colour separators disappear from the scene. Today, designers and publishers themselves make their own separations.

If you know how to run a computer and you're computer savvy, and you know how to use digital technology, you're further ahead than somebody like me, who has been in the industry a long time and knows a lot about colour. All you need to know is how to run the computer and you're just fine. Everything is done for you.

The Chair: Thank you very much.

Mr. Jordan, please.

Mr. Joe Jordan (Leeds—Grenville, Lib.): Thank you, Mr. Chair. I just want to comment that I didn't get this much stuff for Christmas.

Mr. Shilton, I'll phrase my question so we can get short answers on a few technical points.

You say the litho industry in Canada has enough idle capacity to do the printing and cutting for the current demands of the packaging industry in Canada. Is that correct?

Mr. Philip Shilton: Yes, that's absolutely correct.

Mr. Joe Jordan: I have the same document Mr. Ménard has. It says that currently litho picks up about 5% of the current market's printing requirements. I estimate the packaging printing done by litho in Canada is approximately 1%. Are those accurate figures?

Mr. Philip Shilton: I don't know those figures.

Mr. Joe Jordan: So you could increase that by 99 times. What's the capacity of the printing you're doing now?

Mr. Philip Shilton: I took a rough look at how much equipment would be required to print the entire capacity of all of the cigarette packages in Canada.

Mr. Joe Jordan: Is it your opinion it's sitting idle now?

Mr. Philip Shilton: You're looking at five machines that could run everything in Canada.

Mr. Joe Jordan: Okay.

Mr. Warner, in your report, which is often quoted, “Investigation of Health Warning Labels in Packaging”, you compare litho and gravure and you make the claim that gravure also maintains colour consistency more effectively over long run-lengths. Is it your opinion that there's a reason why they use gravure? Is it a quality issue?

Mr. Richard Warner: The reason for using gravure is more of a run-length issue than anything else.

Mr. Joe Jordan: Given the technical nature of what they're doing, is it a more appropriate technology, if you want to maintain consistency?

Mr. Richard Warner: Yes.

Mr. Joe Jordan: So if we're turning graphics on these, we want them to be the best they can be.

Mr. Richard Warner: Yes.

Mr. Joe Jordan: In your opinion, is that gravure?

Mr. Richard Warner: When it comes down to it, both technologies today are equally capable of producing high-quality acceptable packages. It's the run length. That's why you'd go to gravure.

Mr. Joe Jordan: Okay. But apart from run length, you're saying one's better than the other. Anyone can print of either.

Mr. Richard Warner: Yes.

Mr. Joe Jordan: Okay.

• 1615

I want to talk about reproducing separation of spot colours. The results here are impressive, I'll say that. You say, and I'm going to quote again,

to reproduce a separation with spot colours, the spot colour ink combination would need to have a colour gamut capable of reproducing most of the colours in the original photograph. Also, spot colours would have to be transparent, rather than opaque....

Currently the spot colours are opaque. Is that correct? Is that why you made that distinction there?

Mr. Richard Warner: Some spot colours are opaque.

Mr. Joe Jordan: So the results you're showing us here assume you can go with transparent spot colours, because you're actually combining colours to fool the eye. Is that correct?

Mr. Richard Warner: Yes.

Mr. Joe Jordan: So if a tobacco company has a legal right to demand the opaque spot colour as part of its trademark, what do the printers do? You're assuming the tobacco company will accept what fools the eye. It's not exactly what they've been doing. But in everything you've said—the 200,000 versus the 20 million—you're assuming the tobacco company is not going to challenge, not the technical, but their legal right to dictate that on the du Maurier package they want red 1885, or whatever. Is that correct?

Mr. Richard Warner: The issue is whether colours are opaque or transparent, and when we say transparent we mean partially transparent. There is no such thing as real transparent colours.

Mr. Joe Jordan: But if a court finds that the tobacco companies are within their rights on their trademarks.... We went through this with plain packaging. If the court finds that the tobacco company, as the customer, can say to the printer, “I want this opaque red on my trademark”, and they have every right to do that.... Is the quality of the picture not compromised, where you show the spot colours without separation—where the image is influenced by what spot colours are used and the various trademark colours on the package?

Mr. Richard Warner: No. You have to remember that colour is made up of how the object absorbs, reflects, or scatters light. Light doesn't really care whether a colour is opaque or transparent. It is the aggregate amount of wave lengths that are scattered from the substrate—

Mr. Joe Jordan: Okay, but what if the law cares? What if the law says they're within their rights to do that?

Mr. Richard Warner: I don't know why we're trying to mix quality with opaqueness or partial transparency.

Mr. Joe Jordan: I'm quoting your report, but I'll tell you what I'm getting at. The packagers are suppliers to the customers, which are the tobacco companies. Correct?

Mr. Richard Warner: Right.

Mr. Joe Jordan: If the tobacco companies—and leave their motives out of this—say, as they did in the plain packaging debate, they need to be able to have their legal trademarks, and the courts decide it's within their rights and in their trademarks to be able to dictate opaque colours, spot colours, does that not influence the flexibility, in terms of the process colours that are left over? Will the graphics not vary then from package to package?

Mr. Richard Warner: Not necessarily. It all depends on the rotation of colour you put down. If you're going to run an opaque colour and combine it with other colours, then you'd better put it down first in the sequence. That's a necessity right there. Absolutely. You have to watch your colour sequence.

However, in all the years I've been around this business, I've never heard anyone specify whether it's opaque or transparent.

Mr. Joe Jordan: I'll finish with this. So if you're saying those things legally aren't part of the trademark, that gives us the flexibility to reproduce what I consider the high-quality things you've given us here today.

Mr. Richard Warner: The opaqueness or transparency of a colour depends on the fineness of the grind of the pigment that's put into it. All pigments are opaque, but if you grind them fine enough, once suspended in a vehicle they turn transparent. It's simply a matter of how the ink company makes the ink and what procedures they go through in milling it.

Mr. Joe Jordan: But if they have that flexibility we're okay; if they don't have that flexibility, we have some issues. Is that correct?

Mr. Richard Warner: It's very possible, in some instances.

Mr. Joe Jordan: Okay. Thank you.

The Chair: That's a key point. I assume you're offering us your opinion, as opposed to a legal opinion.

Mr. Richard Warner: Yes. It's just my opinion.

The Chair: Okay. Thank you.

Mr. Proulx.

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

I'm impressed but I'm confused. I thought printing was very easy. When I saw my face on a colour electoral poster, I thought they could do anything. I guess it isn't so.

• 1620

I'm amazed, and I apologize before asking the question, but why the heck do we need an expert like you from the United States to tell us what our printers in Canada can or cannot do? Are you one unit around the globe?

Mr. Richard Warner: By no means. I've had a lot of experience in graphics, and I've spent my entire career in colour science and colour reproduction. There are other people in the world who are equally if not more knowledgeable in the area of colour and colour reproduction than I am, for sure.

Mr. Marcel Proulx: It seems that your opinion is going to be, if it's not already, questioned—challenged, I should say exactly.

Does the weather make some difference between the States and Canada, or are you using standard ways of doing things? Are we going to hear from Canadian printers or Canadian associations of printers that what you're saying is impossible?

Mr. Richard Warner: I don't know what you'll hear from them.

The Chair: Let me interrupt at this point. We certainly are going to hear from printers, and we're going to do that in a few minutes.

Mr. Marcel Proulx: Okay.

The Chair: Mr. Warner, are you aware of anyone comparable to you in Canada?

Mr. Richard Warner: Yes. In fact, I used the individual up here to review the report and collect a bunch of the information.

The Chair: Who is that person?

Mr. Richard Warner: That person's name is K.K. Peri. He was a professor at George Brown College in Toronto and is actively engaged in gravure printing and consulting.

The Chair: Okay, thank you.

Sorry, Mr. Proulx.

Mr. Marcel Proulx: This is my last question. Depending on the testimony we get later on, will Mr. Warner or Mr. Shilton be available to either give courses or come back and tell us—

The Chair: That's a good point, Mr. Proulx. We will have them available to come back, to hear them again if we need to.

Mr. Marcel Proulx: It sounds very simple the way you're explaining it.

Mr. Richard Warner: Yes.

The Chair: My suspicion is this is a complex issue and we want to take our time.

[Translation]

Mr. Charbonneau.

Mr. Yvon Charbonneau (Anjou—Rivière-des-Prairies, Lib.): Mr. Chairman, at the risk of disappointing you, I will sacrifice the time allotted to me for comments and questions, because I'm eager to hear from the other witnesses and the clock is ticking. I think they've made their position quite clear and they all appear to be saying the same thing, namely that it's possible to satisfy the requirements and so forth. Therefore, I'm anxious to hear from the other witnesses. Thank you.

The Chair: Thank you very much.

[English]

Thank you, gentlemen.

Let's move quickly on to the Graphics Communications International Union and call Mr. Beattie, Mr. Novak, and Mr. Dale to the table.

Mr. Beattie, are you leading off?

Mr. Anthony Dale (Legal Counsel, Graphics Communications International Union): I'm Anthony Dale.

The Chair: Sorry, Mr. Dale.

Mr. Anthony Dale: I'm joined by Mr. Beattie, vice-president of Local 500-M in Toronto, and by George Novak, secretary treasurer and an international executive board member of the Graphics Communications International Union.

The Chair: Mr. Dale, why is it that lawyers always go first? Never mind an answer; carry on.

Mr. Anthony Dale: More importantly, why do I have to have this team with me? It's because they are the ones who will be able to answer the real questions, I suspect.

• 1625

Joining me is Mr. Barrie, from Shorewood Packaging in Smiths Falls, and in the audience, Mr. Paulus from FPC Packaging in Toronto.

The Graphic Communications International Union represents approximately 15,000 employees in this industry in Canada, approximately 1,000 or 1,200 of whom are directly involved in the production of materials for the packaging of tobacco products in Canada.

Of necessity, I suspect that some of what we have to say today is reliant on the representations that will be made to you by the representatives of the printing industry that you have yet to hear from. What we understand they will be saying is that there will be significant start-up costs and ongoing costs in meeting the requirements of the proposed regulations.

If I can give you an indication of what the GCIU's overall picture is, there is a potential that the goals of the regulatory process that the committee is considering may not be satisfied because of some of the challenges facing any regulatory process in terms of tobacco control. Combined with the likelihood that there will be job losses, it makes little sense to the GCIU for Health Canada to engage in a regulatory exercise that may not achieve the goal or may achieve only a short-term objective but results in permanent job losses that will affect the members of this union and others in the industry.

We should make it clear that the GCIU is not opposed to the aims of the regulatory process as a whole. In other words, the union is not opposed to the goals of improving the communication of information on the packaging itself.

The GCIU suspects, and I think Health Canada admits as much, that the effectiveness of the communications that will be contained on the packages if the regulations are approved as is will have a short-term effect. Health Canada has essentially admitted that graphic pictures and warnings on cigarette packaging is first of all unlikely to result in a decrease in youth smoking, and we understand that Health Canada anticipates that a different course of action is eventually going to be called for.

I believe their position is that the effectiveness of the proposed regulatory changes will wear off after the course of a couple of years. At that time, we would expect that Health Canada is going to have to revisit the issue, undertake a new program of regulatory changes, and implement new goals to achieve the goals of reducing tobacco consumption.

GCIU views, then, the regulatory changes as being something other than a permanent solution to the concerns the government has in this area. As I think you'll hear from the employers of GCIU members who are to appear before you shortly, the printing industry will have to undergo quite massive changes to comply with the regulations. As I've indicated, we anticipate that they won't result in satisfaction of the goals of the regulation in the long term.

We're concerned about the employers of GCIU members having to make extensive capital changes to achieve the packaging requirements, which we view essentially as a stop-gap measure that, as I've said, may not have a long-term effect.

Essentially, we consider that much is being put at risk in terms of jobs across the country, and particularly in the locations that have been identified by the previous speaker in terms of the three major companies that produce the packaging in this area.

We would urge the committee to consider alternatives to the packaging regulations in order to achieve the goals of the government's program.

• 1630

There ought to be consideration of sanctions similar to the laws and regulations that presently exist for the control of alcohol consumption by minors. If the federal government were to engage, in conjunction with the provinces, in a program to aggressively target those sorts of measures, that may be a more appropriate direction for the government to follow.

So we view then the proposed short-term strategy as one that's fraught with significant risks to employment in the industry as a whole. We believe Health Canada has seriously underestimated the impact of the proposed regulations in terms of job losses, particularly as regards the ongoing production requirements of the processes that will be required in order to produce the type of packaging called for by the regulations.

We are concerned that Canadian printers, and in particular obviously the ones that employ GCIU members, will avoid making the necessary capital improvements in Canada and may choose instead to make those investments elsewhere—in the U.S., in Mexico, in the Pacific Rim—which will cause job losses. We see a potential for the closure or partial closure of a number of the plants in which GCIU members work, one of which is not very far from here, in Smiths Falls, employing upwards of 200 people.

The other major concern in terms of the cost of the process is the proposal in the regulation that the health warnings appear on cigarette packaging on a rotating basis. That will necessitate—and this is something I'm sure the industry representatives will speak to more fully—constant changing of the cylinders, which is an expensive and time-consuming process, during which obviously the presses are non-productive.

The GCIU also expresses a concern about the psychological impact of its members reviewing this material in the course of the production process. Health Canada has considered the psychological impact of the materials as a whole on the population but hasn't considered the impact of the material on those who produce it. We would urge Health Canada then, and we would urge the committee, to refrain from implementing these regulations until those concerns have been fully addressed.

The printing industry in Canada, in which GCIU members are employed, has been able in recent years to maintain competitive edges by specializing. One of those areas of specialization obviously is in the production of materials for the tobacco industry. Again, Health Canada has seriously underestimated the costs of these changes, and this is an issue that ought to be studied very carefully.

We would urge then the government to reconsider the proposed regulations and consult fully with all of the stakeholders to evaluate the full impact of the new regulations. At all costs, what must be avoided is the adoption of stopgap measures that will result in permanent job losses for temporary satisfaction of the regulatory goals.

Thank you very much for your attention, Mr. Chairman and members of the committee. To the extent I'm able, I'm certainly happy to answer any questions, and of course the leaders and members of the union who are here today are willing to do likewise.

The Chair: Thank you very much, Mr. Dale, for that presentation, and thank you to all of you for attending.

We'll have some questions now. We'll lead off with Mr. Mills.

Mr. Bob Mills (Red Deer, Canadian Alliance): I listened to your presentation carefully, and it almost sounded like a lobby for the tobacco industry.

• 1635

I guess I don't quite understand how it's going to be a loss of jobs when the more complex the packaging gets, certainly in any experience I've had with printers, the more expensive it is, and that should be good for business. It should mean more jobs, and it should be that much better. I'd like you to explain why that isn't true with this more complex packaging.

You talked about the effectiveness of these ads. I think all of us wonder if they will be effective on a long-term basis. Will they save some of the 45,000 people who die every year from cancer related to cigarettes? I think we all have those concerns. Health Canada didn't indicate yesterday that these would not be effective on a longer-term basis. I wonder if you could address that as well, please.

The Chair: Mr. Dale.

Mr. Anthony Dale: All I can say is that there are two areas in which the potential for job losses exists. One is in the choice manufacturers may make if they choose to avoid making the initial capital investment and either to get out of the business or to make that investment in some other part of the world and thereafter import the packaging into Canada. The second area is that our understanding of the requirements that the manufacturers will have to adopt will result in a less efficient process, which also may cause them to avoid making that investment in Canada. If they can make the investment that's necessary to do that type of work, even though the material will eventually end up being used in Canada, they may choose to make their investment elsewhere.

The Chair: Thank you very much.

Do you have a supplementary, Mr. Mills? You have time.

Mr. Bob Mills: With regard to the effectiveness, as I say, I think all of us have some concern about that. I look at those pictures, and they certainly would influence me if I were a smoker, but I'm not sure how long. You said that this would be a stop-gap measure and that in two years Health Canada may have to look at another decision. The packaging isn't working any more, and we have to go to something else. What do you base that statement on?

Mr. Anthony Dale: We base that on statements that were made by Health Canada in meetings with GCIU and other unions that represent employees in this industry.

Mr. Bob Mills: It seems that a little research has been done. Is it correct that this packaging doesn't exist in other parts of the world?

Mr. Anthony Dale: I don't know the answer to that question.

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

[Translation]

Mr. Ménard.

Mr. Réal Ménard: I have three brief questions. You represent the Graphics Communications International Union, and therefore, obviously, unionized workers. Do you in fact represent the workers employed by the three big companies that are scheduled to testify after you?

[English]

Mr. Anthony Dale: GCIU represents employees of FPC in Toronto; Shorewood Packaging in Smiths Falls, where there are about 200 members; and approximately 250 of the Lawson Group in the Montreal area.

[Translation]

Mr. Réal Ménard: You understand that a government has a responsibility to draw up an anti-smoking strategy, but you're not convinced that printing messages on cigarette packages is the right approach to take. Obviously, that is your personal opinion and I can understand that, but I do wonder about manufacturing processes. You claim that it's impossible to satisfy these new requirements without incurring some job losses.

In you opinion, how many jobs could be lost as a result of this new regulatory framework? Talk to us about these cylinders. I was my understanding that Health Canada provided the microfilm and that basically, the whole question of the cylinders wasn't quite as you described it. Perhaps we were misinformed.

How many jobs are threatened, in your view? What concrete operational problems do you face? Just because someone is a lawyer doesn't mean that we need to keep up a constant patter.

Voices: Ah! Ah!

• 1640

[English]

Mr. Anthony Dale: I suspect that there are a number of people who have yet to speak to the committee who are going to be much more skilled at answering those questions than I.

In terms of the potential for job loss, I suspect that the union's answer would be that the potential is all of the jobs in the industry in Canada.

[Translation]

Mr. Réal Ménard: Yes, but it's difficult for us to find this response on the part of the union credible. You cannot argue that new regulatory requirements will result in general layoffs. You represent perhaps 300, 800 or 1,000 workers. What concrete operational problems are you facing? I can understand there being problems. As parliamentarians we are supposed to be sensitive to such issues. However, you can't tell me that every worker is about to lose his or her job.

[English]

Mr. Anthony Dale: I can give you the example of the Smiths Fall facility of Shorewood Packaging, where there are 206 employees. Mr. Barrie informs me that approximately 85% of their business is engaged in the production of this material. If that business were lost, it's hard to believe that the plant could continue with only 15% of its business. So in that area, for example, it could be all of those people.

At FPC, the union represents about 110 people in Toronto at two different facilities, I think, and there's a potential for those jobs to be lost as well.

[Translation]

Mr. Réal Ménard: The new regulatory framework should take effect in six months or a year. What kind of transitional assistance measures should we be considering in order to comply with the new Health Canada requirements?

[English]

Mr. Norman Beattie (Vice-President, Local 500, Graphics Communications International Union): One of the problems, I think, is the equipment that's coming in. I'm sure that the manufacturers and the producers will tell you that not all of these facilities have the up-to-date equipment that was talked about, this half-hour turnaround cylinder. I think the cost of that is far in excess of $100,000. That's maybe a Mac and a couple of employees. But when you're talking about large equipment such as we're talking about here that these employers have to purchase in order to keep competitive, not knowing whether it's going to be around for quite a while, would they make the investment? That's our concern. If they don't put the investment in and they take it somewhere else, that's where the jobs are lost.

[Translation]

The Chair: Merci, Mr. Ménard.

Mr. Réal Ménard: Is my time up?

The Chair: Yes. Thank you very much.

[English]

Ms. Wasylycia-Leis and then Monsieur Charbonneau.

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

I'd like to thank the presenters for this overview.

The first thing I'd like to do is just counter the suggestion by my colleague Bob Mills from the Canadian Alliance that concerns expressed about jobs and livelihoods and Canadian-based industry are really just a sign that you're lobbying for the tobacco industry. I think you have identified real concerns. We've heard from others about the impact this may have on industry in Canada and on jobs here. I think we have to sort out this matter. I don't think it's something that can be taken lightly. To date I don't think we've gotten a clear picture of the impact, and I think that's where you can help us.

We've just received a couple of studies. I haven't had a chance to read them in detail, and I hope you'll be able to do so. One is “Benefit Cost Analysis of Proposed Tobacco Products Information Regulations”, by Hara Associates, and another one is “Business Impact Assessment—Proposed Tobacco Products Information & Reporting Regulations”, by the Blair Consulting Group.

I can't make hide nor hair out of these two reports. One report suggests that the cost in terms of having industry adapt to these regulations would be $765 million, if I'm reading this correctly, and that the possible jobs at risk in the printing and packaging sector would be 1,200. I think that's in line with what you were saying.

• 1645

I'd like to hear your assessment of what number of jobs are at risk and what you think the cost will be to industry. What is the likelihood of those industries saying they're just not going to invest that money in our plants and the jobs going south?

Mr. George Novak (Secretary Treasurer, Local 100M, Graphics Communications International Union): I think that if you look back to four years ago and the plain packaging of cigarettes, there was a survey done back then. If I'm not mistaken, at that time it was stated in the survey that in the manufacturing, the printing, and everything involved in the tobacco industry, it would mean a loss of approximately 12,000 jobs.

In the printing industry, if the companies were to go south to Mexico or wherever the case may be, in Ontario and Quebec it would be a loss of approximately 1,200 jobs. If that stuff goes down south and the government decides in a couple of years that they want to change the method of trying to restrict people's smoking, will those jobs ever come back to Canada? I don't think so. I don't think the employers would be prepared to change their equipment again and bring it back up here.

The Chair: Mrs. Wasylycia-Leis, go ahead.

Ms. Judy Wasylycia-Leis: Thank you.

I assume we all share—and you stated this at the outset—the objective of trying to take whatever measures are necessary to restrict smoking in this country, especially among young people. Assuming that this is an important part of that strategy—and we've had some research to suggest that this might make a difference in terms of young people beginning to smoke—what steps should we, as a committee, take to make sure that jobs are protected, that industry stays in Canada, and that we are able to deal with any transition?

Mr. George Novak: I don't think what the government is proposing in the pictures on the cigarette packages is going to deter youth from smoking. I personally am a non-smoker and I believe that everybody should stop smoking, but I think the children must be educated to stop smoking. We need to have educators, through the parents and everything else, to stop the kids from smoking. I honestly believe that somewhere down the road, if these pictures come on, the kids are going to look at those pictures and they might use them as collection cards like they do for hockey players and everything else.

Kids start smoking. They don't start smoking by looking at a package and saying “I think I'm going to stop smoking” or “I think I'm going to start smoking”. They start smoking because their friends are smoking. They want to be part of the circle, so they start smoking. I really don't believe that the pictures on the packages are going to deter the children from smoking.

The Chair: Thank you very much.

We have a number of other speakers, starting with Mr. Charbonneau. Then it will be Mr. Jordan and Mr. Jackson. In the interests of time, we do have a number of people waiting here, so we'll try to keep the answers short and to the point, and the questions as well.

Before we do that, the presentation you gave us was in English only. Now, I know the timeline is short. We will get that translated, because, as you know, we always have the documents in both official languages. We will have those translated. Yesterday, as I recall, Madam Hétu presented, and hers was in French, so we'll get that translated as well. But what I will not allow again is for Health Canada to present this kind of document in English only. That is outrageous. It's unacceptable. Let's be clear as a committee that this will not happen again. I think Health Canada needs to take note accordingly. This will not be tolerated again.

Monsieur Charbonneau, please.

[Translation]

Mr. Yvon Charbonneau: I have a question for our witnesses, who represent a union and unionized workers. Gentlemen, you heard the testimony of the previous witnesses representing the Graphic Arts Technical Foundation and Image Plus Graphics. You heard them describe the printing processes. Could the workers you represent readily work with these technologies? Could they do the job they now do using the printing processes described to us earlier by the previous witnesses?

• 1650

[English]

Mr. Garry Barrie (President, Graphics Communications International Union): If they can produce the cylinders like they say they can, I believe we could probably do it, but I'd have to see the cylinders and I'd have to try to run them first. It's not just engraving a cylinder and sticking it in a press and running a cigarette pack. There's a lot more to it than has actually been said.

[Translation]

Mr. Yvon Charbonneau: The previous witnesses described how these processes were relatively simple and that there was nothing mysterious about them. Could the workers you represent adapt to these technologies? Since you're in the printing business, you're in a position to understand more easily the processes they described than the man on the street. If this new technology were made available by the employer, would you be able to use it to manufacture cigarette packages?

[English]

Mr. Garry Barrie: Yes, if we had the technology, but at what cost, I don't know.

[Translation]

Mr. Yvon Charbonneau: What's stopping you from pressuring your employers to provide you with the available technology to print packages that comply with the labeling standards? It was our understanding that current technology was inadequate and that it would be extremely difficult for you to comply with these standards. Ask your employers to supply you with this modern equipment and state-of-the-art technology. Then you'll be able to print cigarette packages and avoid job losses in the process.

[English]

Mr. Norman Beattie: The focus they put on was in the pre-press area. The pre-press area is not, as they said, somebody who can run a computer, set it down and have colour separations. I'd like to see that. We have all sorts of people who think they're desktop operators sending files to printing houses, pre-press houses in this country, and with the operators taking hours upon hours to fix them so that they're able to be put on the press and run as set.

I think in terms of the cost, if the employer has the pre-press capabilities or machinery then that's not a problem. If they don't—and I anticipate they do not—the cost to lay out, the capital lay-out, is a large amount of money, with no guarantee of this staying around. I think that's one of the problems that have to be addressed.

The Chair: Thank you very much.

Mr. Jordan, please.

Mr. Joe Jordan: I have a couple of quick questions.

I want to come back to the point I tried to make with the last witness. I think we need to be very clear, and if I have this wrong in your opinion, tell me.

What this comes down to is that if the tobacco companies will allow their trademarks to be developed through the blending of process colours pre-press, the problem goes away. Is that right? They can then print these using the separation of the colours within the eight colour limitations that your existing capacities have. Is that a fair statement?

Mr. Norman Beattie: If you can match.

Mr. Joe Jordan: Right. But what's critical here is that the tobacco companies have to give us some concessions on their trademark. If that's the case, then everything we heard with the last witness—the fact that for some desktop equipment and a minimal investment we can pre-press this stuff and then run it through what you have, and you don't have to buy any new equipment and we could reproduce these packages.... You're a lawyer, and I'll ask you now, because if I weren't in committee it would cost me. If the law says that the tobacco company is within their right to demand under trademark law, whatever it is, that it has to be done with the opaque spot colours, we lose our flexibility on the graphic in the process, we have to add presses, and that's where the real costs and potential job losses come. Is that correct?

Mr. Norman Beattie: Yes.

• 1655

Mr. Joe Jordan: So I am going to read from the Canada Gazette regulations here. It says:

All health warnings and health information shall be reproduced (a) in a colour that's as close as possible to the colour in which they are set out in the source document; and (b) as clearly as possible taking into consideration the method of printing used by the manufacturer.

If these regulations can be put in place and matched as closely as possible—this doesn't sound like legal terms to me—and as clearly as possible within the existing equipment that you have, then we're not talking job losses, are we? So it all comes down to can we get concessions from the tobacco company on the trademark. Is that correct?

Mr. George Novak: Yes.

Mr. Joe Jordan: Thank you.

The Chair: Thank you, Mr. Jordan.

Mr. Jackson.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Thank you very much, Mr. Chairman.

Yesterday we heard from Health Canada that in fact, let's be clear, we believe that smoking is not good for people and we intend to change people's behaviour, in particular, young people, who, once they start, become addicted. It's obvious then that fewer people are going to be smoking. In fact, we could make all kinds of arguments as to whether or not the kids will use it as collectors' models and so on. I don't know if we can predict it.

People expect governments not to do a good job now, but to be perfect, to not make any mistakes. We probably know government is going to make mistakes and it's probably going to cost more money than we said and all that, but the object of this exercise is we know smoking creates a lot of problems in society and in particular in our health care system.

We also know that in a democratic society you can't stop people from smoking, so some people are going to be smoking. We're not going to ban it completely. To me, the packaging is going to diminish it.

I think you have to understand, those of you who are in industry, they tell us there's going to be more disposable incomes and these people are going to be focusing on other areas. To me, that's where perhaps you have to make a paradigm shift and go to other things people are going to be wanting and not want to stick with manufacturing these packages, because obviously they're going to decline. It's what's happened all over the world. We've reduced these kinds of things, not as drastically as we all would like them to be, but hopefully this practice, this behaviour, over time will change.

Are you not looking, crystal-balling to see where you can go, where you can change? Because you have to do that or you'll be out of business. This is something you have to do, whether it's with cigarette packages, or whether people change what merchandise they're buying.

The Chair: Mr. Dale. I know it's a very complex question. It's a good one, but we are running out of time.

Mr. Anthony Dale: Very briefly, if I understand the member's question as being that the union has to be conscious of the fact that there may be job losses over time as smoking declines, I think the union realizes that as a fact. But if the result of the regulations is to cause significant job losses in the short term in response to a regulatory program that won't achieve the intended result, then that's a result that ought to be avoided.

The Chair: Thank you very much.

We're going to conclude this panel. We appreciate very much your time and the very good presentation you made. I would ask that you move as quickly as possible, because we're now going to move and proceed to the Flexible Packaging Corporation, Shorewood Packaging Corporation, Algroup Lawson Mardon, as well as Southern Graphic Systems. If we could take that position now, that would be great.

• 1659

• 1701

The Chair: Ladies and gentlemen, let's reconvene at this moment. We have Mr. Matte from Flexible Packaging, Mr. Shea and Mr. Devaney from Shorewood, Mr. Syrkos and Mr. Sinden from Algroup, and Mr. Seely.

Who's leading off?

Mr. Ron Syrkos (Vice-President and General Manger, Tobacco Sector North America, Algroup Lawson Mardon): Thank you very much.

Mr. Chairman, there were a lot of questions asked, certainly good ones, and a lot of good information. A lot of the questions that were asked I think should have been asked to the printers. We hope to have a chance to have those questions asked again so we can add some more details to what has been said.

In the interests of time, we have asked that our briefs be put in the written report so we don't have to sit here and read to you the same things over and over again that we've been saying for a long time.

The Chair: That's very good of you. Thank you very much.

Mr. Ron Syrkos: I'd like to say first of all, with all due respect, that I find it incredibly insulting to hear from Mr. Warner that we have to learn how to print in Canada. I think everything he says is generically correct and I think he is a very informed and very capable person in the world of printing and the world of colours. We use all of the equipment he talked about. We have spectrophotometers. We don't measure colours or approve colours with the eye any more. We use deltas and we use all the equipment that he mentioned and showed on his charts. There was nothing new for us there.

Everything he said and everything we've read in the reports, whether it was the GATF or the Blair report and everything else, always talks about approximates. It's going to be close. It's going to be nearly. It won't be quite that, but it will be good enough. The consumer won't tell the difference.

We are bound by our customers to meet their requirements and their standards. That's what they pay us for. Also, we're trying to give Health Canada the illustrations that they want. As we say in our statement from the beginning, with the equipment in Canada, if we are to give the tobacco industry what they want and what they are entitled to according to the law and if we are to give Health Canada the four colour separations, we do not have enough stations on our presses. We can't print twelve colours when our presses have eight colours.

It is true that we can play with some of the colours, and we have played with them. We have offered samples to Health Canada in the same area that Mr. Warner has touched, but they never seem to be close enough when we're concerned.

We have looked at litho and we have litho plans ourselves. Litho is good industry, but it's not widely used in tobacco because no matter what has been said, there is no consistency in litho. On our presses, we have all the electronic controls, but we just can't do the job consistently time after time. The litho gentleman talked about using litho gravure because of long runs. I'll tell you that we have 45 to 50 changeovers a week in our plants. There are no such things as long runs in the tobacco industry any more. So the litho is there, but it is not what the tobacco companies want. If that's what they want, we can do it.

We still dispute that there is not enough capacity in Canada to do two billion boxes as quickly and as well as what the tobacco industry is used to getting. It takes roughly six to eight months to approve a new supplier to meet their standards and what they need for their tobacco—mostly odour.

• 1705

We read in a report that odour is not a problem in litho. It still is, the way it's done in Canada. There are some litho processes in the States and other countries that will be as good as gravure on odour, but not what is used in Canada. It does do a good job, but not what they need.

The price almost doubles. That's where we talk about looking at the States. If the tobacco industry is faced with paying double what they're paying now, why wouldn't they ask us to print the designs in the United States at the same price they're paying currently rather than doubling their prices if close enough is what we want?

We have presses in the U.S. that have up to ten stations with the ability to add quickly two more. We do not have that in Canada. Our press rooms limit us in adding stations to those presses. In the U.S., the presses have been bought with the intent of adding to them in the future, so our press rooms are bigger and longer.

The capacity we talk about, as far as litho goes, is not only printing; it's especially the die cutters. Usually the people who have die cutters need two die cutters for every press they have because of speed limitations. There are die cutters that run very quickly. I saw one in Germany last week that does 12,000 sheets an hour. I don't know anybody in Canada who has one. There has been one sold worldwide so far.

Mr. Shilton says he could have come a lot closer with his pack if he had had the art work. That sort of contradicts what Mr. Warner said. The computer does it all today. With computers, you can adjust any colour you want. Why couldn't he adjust his colours with computers? They're so smart about it.

Opaque versus transparent means bad lay-downs. Opaque colours offer the smoothness and the lay-downs that the tobacco industry has grown used to. When you use transparent colours, it is motley. It is not smooth. It is not the quality they're used to.

Litho means no metallic colours. The metallics have gone a lot better in litho, but they are not what gravure offers. Gravure ink is carried in a cylinder, and it includes metallic particles. The plates that are used in litho cannot carry any metallic particles. The golds look more green than gold. Again, if it's legal for the tobacco industry to require metallics, they have to go gravure.

Looking at some of their litho illustrations, which they claim to have done in four process colours, we have done some in two that are very close to those. I offer samples if you want to see them, but they were turned down by Health Canada when we showed them. I don't see any difference from the one with the two boys on the Players pack.

The question we have, because we are the meat in the sandwich in this situation, is does Health Canada intend to force the tobacco industry to change their printing process or to change their trademarks? If they do, we don't have a problem. But if they can't, there's nothing we can do, and the jobs will leave.

Those questions about jobs should not be asked to unions; they should be asked to printers, because we're looking at spending the money. It's not plant-wise that it's looked at; it's corporation-wise. Our corporation sits in Zurich. They don't worry. They're not that nationalistic when it comes to Canada.

There was a gentleman who asked about the opportunity of printing difficult designs. We love difficult designs. We try to raise the bar all the time; we get more money for it. Ten years ago we were printing five colours. Today we're printing eight, nine, and ten, and we're looking at twelve because we'd make more money at it. If we can do it, yes, we want to do it. But if we can't do it, we can't do it.

In the U.S., there are also 24-colour presses, if that's what you want. There is equipment out there that can do some of these things, but not in Canada. Remember what we've said: In Canada, with the equipment that exists, if we are to please the tobacco industry and Health Canada, we don't have the equipment to do it.

Why don't we spend the money? To do it is prohibitive. The stated government intention is to go to plain packaging. Are we going to go to twelve colours on our presses and in two or three years go to two colours? What do we do with the other stations? Where do we get our return on investment?

To the people who ask if we are not worried about the decline of tobacco, yes, we are. We're bringing non-tobacco work into our factories, but it's something that is happening gradually, because we know that through education there's going to be less and less smoking. It's easily proven who smokes the most. It's the third world countries, where education is not very sound.

• 1710

As far as the investments are concerned, our corporation has told us that they will not spend $8 million on this project. It is easier to transfer the work to the U.S.

I would like Bernard Matte to talk about the flexible packaging side, because we take for granted that what is done on the cartons can be done on the overwraps. It's not at all the same. They're different animals. You can't do overwraps in litho. Mr. Matte will talk about that.

I would also ask that Mr. Shea talk to us about the certain Mr. K.K. Puri who was quoted as being the Canadian expert. If he's the Canadian expert, I'm not only going to get my green card; I'm going to change my citizenship.

Thank you.

The Chair: Mr. Syrkos, thank you very much. We appreciate that good introduction. Now we're going to ask Mr. Matte for some comments, followed by Mr. Shea.

Mr. Bernard Matte (Chair and Chief Executive Officer, Flexible Packaging Corporation): Thank you, Mr. Chairman and members of the committee. We appreciate this opportunity to appear before you.

I represent a company that has been in this business since 1922, and I too resent the implication by those who preceded us that the technology levels in Canadian industry are not up to the standards of worldwide industry.

The thing I want to point out to the members of the committee is the difference that exists between the two products that are actually involved in these proposed labelling changes. The differences between them are quite significant, and I don't think that comes out in the proposed regulations. So if I may be permitted a couple of minutes to try to educate the members of the panel....

There are two companies here, Lawson and Shorewood, that manufacture what is commonly known as a slide and shell, which is the box. There's a division of Lawson represented by Mr. Sinden, and our company, FPC, Flexible Packaging. We actually make two products for the tobacco companies. One, which is not a subject of these discussions, is this paper foil laminate that is used inside cigarette packages. It is embossed. It carries no warnings on it whatsoever.

The product we manufacture that is part of these discussions is what's commonly known as the overwrap. This is the material. It's an extruded lamination paper foil, printed on a rotogravure press, that basically covers the carton of cigarettes, the packages of cigarettes. Its purpose is to keep the product fresh. It's a barrier to keep the product fresh while the product is in distribution.

At the moment, 70% of cigarettes are sold in individual packages; only 30% are sold in cartons. In fact, if the government proceeds with its announced intention of increasing taxes, I suspect that the number sold in cartons will decrease even further.

The retailer receives the carton from the wholesaler, and what does he do with it? He rips open the overwrap and puts the packages up on his shelves. The consumer who buys the cigarettes in the carton does exactly the same thing when he or she gets home. So the point I want to make to you is, first, this product is seldom seen by a consumer, and secondly, those who do see it basically see it for a very limited time. It's destroyed. Health Canada recognized this in 1994 and regulated at that time that only one health warning appear on the overwrap, as opposed to the eight that have to appear on the package.

We're now being asked to print all 16 warnings on the overwrap in an equal distribution. That is going to involve some significant operational costs. You might say, fine, you can pass these on to the tobacco companies. My concern with respect to my business and our employees is that at some point the tobacco companies are going to say it's getting to be too expensive to wrap cartons like this. They could easily do it in just plain cellophane, and they'll simply do away with carton overwraps. If they do away with carton overwraps, we have a serious problem at FPC. It represents a significant portion of our business.

• 1715

In terms of the technology, we presently use ten-station presses to manufacture tobacco products. We manufacture products for a number of other industries as well: pharmaceutical, dairy, food processing.

What we have said consistently from the outset of these discussions is that we can produce the warnings. As Ron has indicated, we have shown to Health Canada on several occasions samples of warnings that can be produced using not process colours, but two-colour separations or duotones. We showed them examples with monotones as well. But if the law proscribes us to use a four-colour process, four process colours, and we are not allowed to tamper with the trademark colours, we must add stations to our presses. It's as simple as that, and that's based on a lot of years of experience in this business.

The Chair: Thank you, Mr. Matte. I appreciate that.

Mr. Shea, please.

Mr. Thomas G. Shea (Executive Vice-President and Managing Director, Canadian Operations, Shorewood Packaging Corporation): Just so Mr. Warner understands, Shorewood Packaging is a U.S.-based company and it's a wholly owned subsidiary of International Paper, so we do have access to all the technology in the world.

As has been stated by Mr. Matte and Mr. Syrkos, we have never denied that we would have trouble printing the packages. We can't have more stations that are capable of printing if we don't get support from Health Canada or if Health Canada doesn't cooperate with the tobacco companies to come up with a formation so that we can produce the packages.

There was a reference to Mr. Puri. I've known Mr. Puri for 25 years. I've been in this business for 51 years. Mr. Puri was a teacher and he was basically a knowledgeable person, but I'm not sure he had all the facts. When the report came out from the GATF, his report was attached, and it was fraught with errors. I personally phoned him up because of my long relationship or knowledge of him and I had him come and see me. He didn't truly understand that we couldn't use process colours. He even volunteered to go to work for us, to come here and discuss it with Health Canada. However, that's a secondary point.

I find Mr. Shilton's comments about litho.... I've been in the litho business longer than I've been in the gravure business, Mr. Shilton. The key is that it's as much cutting as it is printing. Sure, you can find presses anyplace, but you can't find cutters. If there are 2 billion packages being replaced, it would take quite a long time to get the cutters to accomplish such a situation.

The Chair: Thank you very much, Mr. Shea. I think that shed additional light in a very meaningful way.

We're going to ask Mr. Mills to lead off the questions.

Mr. Bob Mills: What I'm hearing is that because of the uncertainty, there wouldn't be investment in the technology. Is that correct?

Mr. Ron Syrkos: There can't be, sir. We don't have the room to include extra stations in our presses. People will say “Why don't you just add stations?” Look at it this way: if I had two eight-colour presses and I wanted to add four stations to each, it would mean I would add eight stations. It's like having another eight-station press. That tells me that my ink room is too small, my pre-made ready room is too small, my cylinder room is too small, I don't have enough room for the racking. It's all out of whack. You can't just add stations. You can't have half a press inside and half a press outside. So we're very limited in doing these things.

If they had to be done with a good return on investment, with a sound return on investment, of course we would do it. We are in business to be in business. But with the threat of going to plain packaging and with Health Canada changing their minds every two or three years, we don't know where we're going. So we are very reluctant to spend that money.

Mr. Bob Mills: The competition would be the U.S. Mexico wouldn't have this capability either. It would be the U.S.

Mr. Ron Syrkos: Lawson Mardon has plants in North America, the U.S. and Canada. We have two plants in Holland, we have plants in Bristol in the U.K., in Germany, in Turkey. Soon we will have some in Malaysia and in Kazakhstan, and there's anther one coming up in the United States.

• 1720

We are not averse to spending money in all of these plants for tobacco. We're not averse to spending money on tobacco, when there's a return on investment. So we could move some of that business anywhere in the world.

Mr. Bob Mills: Thank you.

Mr. Michael Seely (General Manager, Southern Graphic Systems): May I comment on the technology?

The Chair: Yes, very quickly please. Thank you. Go ahead.

Mr. Michael Seely: I'm with Southern Graphic Systems. We're the pre-press supplier here in Canada. Southern Graphic is the largest pre-press supplier in North America, one of the largest of pre-press materials as well as cylinder engraving. We do work for some of the largest consumer-product companies in the world: Procter & Gamble, Ralston Purina, Warner-Lambert, Coca-Cola, Pepsi-Cola. I can go on and on with the people we do business for. Our technology is as up to date as anyone's in the world.

Some of the systems that Mr. Warner mentioned—the colour management software systems, the Photoshop custom colour systems—we have available to us in our plant in Toronto. So there's no shortage of up-to-date software and technology within our organization.

The other thing I'd like to touch on, while I can, is with regard to the engraving end of it.

He mentioned half-hour cutting cylinders and laser engraving. There's only one company in North America at this moment providing laser-engraved cylinders. The rest of them, including ourselves, do electromechanical engraving. You can't cut cylinders through electromechanical engraving in the half-hour timeframe that you can with the laser engraving. And laser engraving is not producing cylinders on a regular production basis for the industry as a whole. They're still very new in their technology.

The Chair: Thank you very much for that clarification.

Mr. Syrkos.

Mr. Ron Syrkos: Thank you.

On laser engraving, we've been trying to qualify that one supplier for two years in our U.S. plant. They just don't cut it for the specialization that tobacco printing requires. They're not there yet.

The Chair: Very good. Thank you.

[Translation]

Go ahead, Mr. Ménard.

Mr. Réal Ménard: I can understand that there may well be adjustment costs, but you must also understand that a public health issue cannot take a back seat to adjustment costs. I think we've gotten a little off track. You began by saying that it would be exceedingly difficult, from a technology standpoint, to meet the new regulatory requirements. Now, technology seems to be less of a consideration. You say that you don't have the room for extra stations. The issue, however, isn't really the lack of available space, but rather the impact this will have on prices charged by tobacco manufacturers.

As parliamentarians, naturally we must take this into account, but what are we to do if our goal is to see to it that fewer people take up smoking in the first place and that those who do smoke as little as possible? You can't just say that we need to see to it that young people never start smoking in the first place. We must also find a way to discourage people from smoking.

You're convinced that these measures will be ineffective. If you believed that cigarette package labelling might discourage 1, 2 or 3 per cent of consumers from smoking, would you lobby your head offices to invest the necessary sums of money to comply with the new regulatory framework?

Mr. Ron Syrkos: You've asked several questions. We already have the technology to print in four colours. We brought a sample with us to show you. We do very nice work and we produce far more sophisticated images than the ones Health Canada would have us market. With the proper equipment, we can produce whatever they ask us to. However, we do not have the necessary equipment here in Canada.

Mr. Réal Ménard: You are capable of producing sophisticated packaging, but we would need to call on outside companies with the proper equipment.

Mr. Ron Syrkos: No. Four-colour labels can be manufactured at facilities in Montreal and Toronto. Take, for example, this illustration which contains some blue, another colour and some gray lines. If we add four additional colours to the mix, we end up with seven colours. It's not difficult to print material with seven or eight colours. However, if you were to ask me to add four additional colours, bringing the total to 12, then that would be difficult.

Mr. Réal Ménard: And that's what Health Canada is asking you to do?

Mr. Ron Syrkos: Yes, that's correct. The problem lies with the number of colours that are already trademarked and the restrictions on the gravure or litho process faced by Canadian printers.

• 1725

Mr. Réal Ménard: You claim that in order to adjust, you would need to invest to upgrade your procedures and that the lack of capital funds and space present problems for you.

Mr. Ron Syrkos: It's not a question of capital funds, because Swiss corporations have very deep pockets, but more a question of space and the return on our investments. By return on our investments, I don't mean on the health front.

Mr. Réal Ménard: But can you put a price tag on health?

Mr. Ron Syrkos: I understand what you're saying. I have two children and I hope they never smoke.

Mr. Réal Ménard: You're not a smoker yourself.

Mr. Ron Syrkos: I once smoked three packs of cigarettes a day, but I quit.

Voices: Bravo!

Mr. Ron Syrkos: Thank you.

A voice: [Editor's note: Inaudible]

Mr. Réal Ménard: Don't start in on me.

Mr. Bernard Matte: I simply want to clarify something you said, Mr. Ménard. I for one am not opposed to Health Canada's attempts and I think it's possible to comply with these labelling requirements. However, this would require a significant investment of capital. That's the problem. We are a small company, not a global one. The problem for me is the lack of liquid assets.

Mr. Réal Ménard: However, if, for example...

[English]

The Chair: Monsieur Ménard—

Mr. Réal Ménard: Last one?

The Chair: No, no. Thank you very much.

[Translation]

Mr. Réal Ménard: Time seems to pass quickly when I have the floor.

[English]

The Chair: If there's another round, we'll be happy to come back.

Ms. Wasylycia-Leis, Mr. Jordan, and Monsieur Proulx.

Ms. Judy Wasylycia-Leis: I think the bells are going off for 5:30.

The Chair: Yes, so let's keep going at this point.

Ms. Judy Wasylycia-Leis: I want to come back to the whole impact on the printing industry. I have just a quick question though. You talked about the requirements under the regulations for printing the sixteen additional messages on the overwrap. How do you intend to apply the regulations in terms of those sixteen additional messages going on the inside of the package?

Mr. Bernard Matte: On the inside of the overwrap?

Ms. Judy Wasylycia-Leis: No, on the inside of each package.

Mr. Bernard Matte: Oh, you're talking about the leaflets now that are being proposed?

Ms. Judy Wasylycia-Leis: Yes. I guess the regulations require you to put the sixteen messages either on the slide part or on the—

Mr. Ron Syrkos: Oh, you mean the carton?

Mr. Bernard Matte: That's his business.

Ms. Judy Wasylycia-Leis: Okay, sorry. How do you intend to apply that regulation?

Mr. Ron Syrkos: In a quick printing lesson, on a cylinder you can put a lot more of these boxes than you can these overwraps. They're limited on the number of units per cylinder, and the computation of getting all sixteen equally distributed means you have to keep buying cylinders, buying cylinders, and buying cylinders for the same job, and then it means you have to change them every ten or fifteen minutes so that you can distribute equally on that job.

As far as the cartons are concerned, we put up to 24—in some cases fourteen, in some cases sixteen, depending on the format—on the cylinders, so it's easier for us to ensure equal distribution of the sixteen health warnings. We can do that.

Ms. Judy Wasylycia-Leis: So what would you probably prefer, putting it on the carton itself, the inside slide part of the package, or on a separate...?

Mr. Ron Syrkos: It doesn't matter to us. If we can do it, we can put it anywhere you want.

Ms. Judy Wasylycia-Leis: On the job question and the impact on the printing industry, as I said earlier, we're getting mixed messages about what this is going to cost. This one consultant's report says the total present-value cost to printers and packagers rises from $63 million to $71 million, $52 million of which would be upfront capital expenditures, and it goes on to break it down. Is that a realistic cost that the printing industry should expect?

Mr. Ron Syrkos: That is a close estimate. If you read the Blair report, which is the report of Health Canada's consultant, he also says in there he doesn't feel Health Canada gave us enough time to give accurate and exact figures. He was against doing it that way, and he expressed his view in the report. But Health Canada proceeded anyway.

In the three or four weeks we had, we tried to put together as quickly as possible the economic impact of the capital expenditures required to do this. As an example, in my plant I would have to add those four stations we're talking about to three presses. Because now we're looking at more pull of the web through twelve stations than eight, we need to change the drives and we need to change the registrant system. There's one press in the world that is built for twelve colours, and I have it in Atlanta. Nobody else has it on the carton side. So it's a special registrant system.

So it's a million and a half for this, a million for that. You have to have incineration for the solvent emissions. You have to make sure your roof can support that weight. You have to brace it. That emission oxidizer costs $500,000 to $600,000 U.S. plus the installation. It is humongous.

Ms. Judy Wasylycia-Leis: If it is a real—

The Chair: Ms. Wasylycia-Leis, I'm sorry—

Ms. Judy Wasylycia-Leis: Quick question?

The Chair: I want to get to Mr. Jordan.

Ms. Judy Wasylycia-Leis: I just want to know if they would be able to absorb that cost.

The Chair: Okay, very quickly.

• 1730

Ms. Judy Wasylycia-Leis: If that's a realistic estimate of cost, would you absorb it?

Mr. Thomas Shea: That's where BIT didn't give us enough time to....

Mr. Bernard Matte: For my firm, there's no way we can do it. We can't absorb that.

The Chair: Thank you very much.

I want to get to Mr. Jordan and Mr. Proulx and back to Mr. Ménard.

Mr. Joe Jordan: Thank you, Mr. Chairman. I'll be very quick.

I want to pick up on what my colleague said about mixed messages. I keep coming back to this point. We've heard testimony that was based on the assumption that the tobacco companies would allow some flexibility and concessions on their trademark. If they will, then A, B, C, D, E, F, and G happens, and the disruption is no problem.

This is the critical piece we're missing. If the tobacco company says they won't.... I have the packages here, and I'm comparing them. They're close, but they're not the same. If I understand this correctly—every time I think I do I get it wrong—every little bit closer you get to the exact trademark is going to cost you on the graphic side. Is that the trade-off here? If you're not allowed to process colours pre-press, if you have to use the opaques, then that places restrictions on what you can do with the processed colours on the ground.

I sense your frustration, but I don't think they were saying that you didn't have the technology. I think they were making an assumption that they were going to get concessions on the trademark. If they are, as far as I'm concerned, the problem goes away. But if they don't, that's the crux of this, is it? Do I have that right?

Mr. Ron Syrkos: Yes, that's right.

Mr. Joe Jordan: Okay. When you provided feedback on the Blair report, did you know what you were dealing with, or did you take the worst-case scenario, meaning that the tobacco company is not going to be flexible at all? They have a legal right to sell cigarettes. They're going to use whatever strategy they can to kind of throw their body in front of this, and that's fine. But if they can force you to use four spot colours on their trademark, then you can't do that graphic with any amount of blending, can you?

Mr. Ron Syrkos: No.

Mr. Joe Jordan: Mr. Chair, when will the tobacco companies be here? Is it tomorrow?

The Chair: No—

Mr. Joe Jordan: I think that's why we're getting mixed messages. That's why we're getting 200,000 versus 20 million. That's the question I think we need to answer. If the tobacco company won't move, forget blending. Health Canada is going to have to accept some concessions on the graphic or the capitalization costs that they require to add additional presses are going to force this business out of the country. I think that's where we are right now with that question.

Mr. Michael Seely: Can I comment on that as well?

The Chair: Yes, go ahead.

Mr. Michael Seely: With all due respect to the original presentation that was made here, I think there's a gross lack of understanding of our industry with regard to the rotogravure printing industry and the pre-press industry and the tobacco companies as clients. The comment was made that the blue background on the Players pack is the most important colour. If it was the most important colour, that's the one that matches least to the sample pack that's provided. Then the comment was made that the other colours are not as important. Well, let me tell you, we did this pack originally, and we spent over two months testing this image. Every single element on this package is as important to the tobacco company as any other. There is not a hierarchy of priorities when we print this pack. It's 100% or nothing. You do it right or you don't do it. That's the bottom line.

Also, a comment was made that it would be no problem to print this pack with the health warnings because it's done in four colours. This pack is not done in four colours. This is done on an eight-colour printing press with seven stations. There's a red, a light burgundy, a silver, a gold, a black, a brown, and a varnish. In my math that adds up to seven, not four. That leaves one colour for the process images that the customer is requesting.

Mr. Joe Jordan: But at the end of the day, what we've heard in terms of what can be done starts with an assumption that the tobacco companies will accept less than they're getting now in terms of process and appearance.

Thanks.

The Chair: Thank you.

Mr. Proulx.

Mr. Marcel Proulx: Before you start the stopwatch, we're going to be running for votes, so can we count on Mr. Warner reappearing before us?

The Chair: We'll make him reappear.

Mr. Marcel Proulx: Okay, fine. Thank you.

I have two quick questions. In a nutshell, what you're telling us is that maybe we shouldn't be on coloured packaging; maybe we should be on plain packaging. However, five years, four years, three years ago some of you representatives came in front of the committee, I understand, and said that if you go to plain packaging you're going to lose your shirts.

• 1735

What can we do to complicate the plain packaging? Instead of two hinges, can we put four hinges on these packages, or can we put a lock or something?

If we weren't going to colours, following what my colleague is saying, if we were not going to go with the problem of the trademark and the colours and let's say Health Canada, the Government of Canada, said from now on it's plain packaging, what could be done to maintain your business and your jobs—not yours, I'm assured of yours, but your employees' jobs?

Mr. Thomas Shea: I'll give you the answer I gave at the previous health meeting on the plain packaging issue.

Mr. Marcel Proulx: Please, because I wasn't here back then.

Mr. Thomas Shea: It was in 1994, and it was that we don't need eight-colour presses to do black and white. It's the same story.

Mr. Marcel Proulx: Yes, except that if we go black and white, you're going to be losing a lot of employees. You're not going to have the same type of business. It's not as complicated; it's not as expensive.

I know what good work you can do. I said it with the previous witness. When I saw my coloured picture on an electoral poster I knew you could do anything. But it's not at the same price; it's not the same business.

Mr. Ron Syrkos: I want to add something. It's a lot easier and less costly to print two colours on an eight-colour press than to print 14 or 12 on an eight-colour press, because one of them requires investment. You might decide to stay in the business as long as you can until you can replace that business. The other way you can't do it. You just have to spend the big bucks and there's no return on investment. So you might take a hit for two years while you go into cosmetic, pharmaceutical, or other markets, but at least you have a fighting chance. This way we have no fighting chance.

I want to show two sets of samples. I want to show you one of the litho samples that is not bad, not bad at all. I want you to look at what the gravure does as far as the colours are concerned. I want you to look at what I mentioned about the lay-down. I want you to also look at the metallics, the gold colours. Then I want you to look at what they've shown us, “don't poison us”, about the kids. This is our third attempt we showed Health Canada, and I think I would call that close enough. It's up to you to judge.

Mr. Joe Jordan: That's what you can do without any job losses.

Mr. Ron Syrkos: That's right.

Mr. Joe Jordan: How many of these samples do you have?

Mr. Ron Syrkos: We have quite a few.

The Chair: While you're doing that, Mr. Proulx, I'm assuming that's the end of your questioning.

Mr. Ménard, very quickly, please.

[Translation]

Mr. Réal Ménard: On the one hand, you state that you can do what Health Canada is asking you to, while on the other hand, you claim that you're not in a position to meet the labelling requirements Which is it? What exactly are you saying?

Mr. Bernard Matte: We cannot do this kind of print job using four colours. The sample that I'm about to show you was produced using two colours. We can print this kind of label with our current equipment, but we simply do not have the proper equipment for four- colour print jobs. We're familiar with the technology, but we simply don't have the capital to acquire it.

Mr. Réal Ménard: Are you a multinational corporation?

Mr. Bernard Matte: No.

Mr. Réal Ménard: Does the person seated next to you represent a multinational corporation?

Mr. Bernard Matte: Yes.

Mr. Réal Ménard: Therefore, you're not convinced that the parent companies that operate printing plants using two-colour presses will make the investments required to save jobs.

Mr. Bernard Matte: No.

[English]

Mr. Ron Syrkos: Could I add something, Mr. Jordan, to your question?

Mr. Joe Jordan: Yes.

Mr. Ron Syrkos: If we're also permitted for a time to get organized, to offer the two-colour process, the illustrations on 30% or 35% of the pack, the way it exists now, rather than 50%, for a year or just to buy us some time, we could have that out in the marketplace in a couple of weeks, or maybe I should say a couple of months.

Mr. Thomas Shea: If Health Canada is looking for those messages to get out quickly, what you're seeing going around there right now can be out within a couple of months—

A voice: With no job loss.

Mr. Thomas Shea: —but it will take us something like 18 months to get into the 50% level that they originally requested. I think you will see it's not a bad issue.

The Chair: Thank you, Mr. Shea, for that. And thank you to all of you.

I have a suggestion. Mr. Parker, representing the tobacco companies, gets transcripts of all of this. I'm not trying to single him out, but the industry. I think we should ask Mr. Jordan's question about whether or not there is flexibility in advance of them coming in.

Why are you shaking your head? And who are you?

A voice: I work with a tobacco company.

The Chair: So you're giving us the answer in advance.

• 1740

A voice: [Inaudible—Editor].

The Chair: Okay. I want that in writing. That will answer Mr. Jordan's question. That's good information to hear and to know.

Mr. Joe Jordan: Well, it makes the first testimony obsolete.

The Chair: Yes, it does.

Mr. Joe Jordan: So we'll go back and take a look at what they're sending around. The only thing missing seems to be the blue.

The Chair: Okay, so we'll get that from the tobacco people. Thank you very much.

Thank you to all of you for appearing. It was very productive and very informative.

I'm sorry, Monsieur Ménard. We'll have your point of order tomorrow morning. Thank you.

This meeting is adjourned.