CHER Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 26, 1998

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[English]

The Chairman (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.): Order, please. I declare open the meeting of the Standing Committee on Canadian Heritage. Pursuant to the order of reference of the House dated Tuesday, November 3, 1998,

[Translation]

We continue our study of Bill C-55, An Act respecting advertising services supplied by foreign periodical publishers.

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[English]

Today we have with us the Canadian Magazine Publishers Association,

[Translation]

represented by François de Gaspé Beaubien, Chairperson of the Political Affairs Committee and President of Télémédia Publishing. Kindly introduce the people who are with you.

Mr. François de Gaspé Beaubien (Chairperson, Political Affairs Committee and President, Télémédia Publishing, Canadian Magazine Publishers Association): Would you care to start, Michael?

[English]

Mr. Michael Rae (Chair, Canadian Magazine Publishers Association): I'm Michael Rae, chair of the Canadian Magazine Publishers Association, and I work with key publishers in Toronto.

Mr. John Tory (President, Rogers Communications and Maclean Hunter Publishing Limited): I'm John Tory, and I'm president of Rogers Communications and Maclean Hunter Publishing Limited.

Mr. Rick Salutin (Freelance journalist—writer): I'm Rick Salutin. I'm a freelance writer. I've written for many magazines and I'm the media columnist for the Globe and Mail.

Ms. Anne McCaskill (Trade Consultant): My name is Anne McCaskill and I'm a trade consultant.

Mr. François de Gaspé Beaubien: My name is François de Gaspé Beaubien. I'm the chairman, political affairs committee, of the Canadian Magazine Publishers Association. I'm also the president of the publication division of Télémedia.

The Chairman: Mr. de Gaspé Beaubien, the floor is yours.

[Translation]

Mr. François de Gaspé Beaubien: Thank you, Mr. Chairman. First of all, I must apologize because in response to some of the comments that have been made over the course of the past two days, I've had to change my presentation somewhat. Because of time constraints, my submission isn't available in both languages. I will be making make my presentation in English. I apologize to committee members and assure them that the French version will be available to them very shortly.

[English]

The panel would like to thank the committee for the opportunity to present the views of the Canadian Magazine Publishers Association on Bill C-55.

The CMPA is a national organization that represents small, medium and large Canadian publishers. As confirmed by Statistics Canada data, the Canadian magazine industry produces over 1400 titles, generates total revenues of $1 billion of which $650 million come from the sales of advertising services, and has almost 7,000 full- and part-time employees.

Although Statistics Canada figures are not available for indirect employment, including freelance journalists, writers, illustrators and so on, a product study puts this number at around 20,000.

The membership of the CMPA believes strongly that Bill C-55 is vital legislation. It has been unanimously endorsed by the association. It's a key point that we represent small and large publishers, and both the business press and the consumer press have unanimously endorsed Bill C-55.

I'm aware of the testimony you heard last week from Mr. Terry Malden and the others on his panel. I think they did an excellent job of explaining the economics of magazine publishing, the realities of the insurmountable cost advantages enjoyed by U.S. publishers, and the impact those advantages would have if U.S. publishers could enter the Canadian advertising services market.

There is no need for me to repeat that analysis. Instead I would like to focus on setting the record straight on the points made to this committee by the Association of Canadian Advertisers, the Institute of Canadian Advertising and the Canadian Media Directors' Council, which I will refer to as the advertisers.

Publishers were puzzled and disappointed by the advertisers' testimony. We believe that they are sincere in their support for the objective of ensuring a viable Canadian publishing sector and the continued availability of stories about Canada for Canadians. We appreciate that support and value the good relations we have, and always have had, with them.

If advertisers support the objective but nevertheless oppose Bill C-55, we can only think that they have misunderstood or been misled about the purpose and effect of the legislation. I would therefore like to offer further clarification of the key issues raised, beginning with a few fundamental points.

Bill C-55 will make an important contribution to sustaining a cultural policy objective that has been an article of faith for Canadians for decades: to ensure we have channels of communications through which to see and hear each other and share our own stories. Magazines are one of the channels we rely on for that information, reporting stories and images about our own society. The Canadian policy that Bill C-55 maintains has been very successful in allowing the Canadian publishing industry to flourish.

In her presentation to this committee, Minister Copps gave you the numbers to show how impressive the growth in publishers and titles has been over the last 30 years. I'd like to take a pause here to give you an illustration. Points have been made about letting the market decide, or “Why can't you make a better magazine?” Let me give you a concrete example.

Women's Day, a U.S. title, in 1972 used to sell 500,000 copies in Canada. We launched a magazine called Canadian Living in 1972, which today sells 600,000 copies. Women's Day today sells 80,000. When you produce great Canadian content by Canadian for Canadians, you sell magazines.

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As we talk about this, you'll see that it has nothing to do with readership or access to the reader, since we compete with the Americans quite effectively there; it has to do with the advertising services market. It is if Bill C-55 is not passed that the Canadian publishing industry will be stifled. The only viable means to preserve this channel for Canadian communication is to prevent what would be insurmountable and unfair competition from U.S. publishers and the Canadian advertising services market.

Publishers serve two distinct markets. We provide magazines to consumers as well as advertising services to advertisers. Although we're best known for the magazines we produce, it's by far the advertising services market that's the key to our viability. Canadian publishers depend on advertising revenues for an average of 65% to as much as 100% of our income. If we could not survive in the advertising services market, we would be out of business. We would no longer produce Canadian stories for Canadian readers, notwithstanding a strong demand for those stories.

I'd like to take another pause here to share with you that the policies that the government has supported and put in place for the last 30 years have worked. You have over 5,000 titles coming in from the United States. What's amazing is that Canadian publishers have managed to retain a 50% market share.

In the case of the magazine sector, therefore, demand for Canadian content—this is key—does not ensure supply. If U.S. publishers could access our advertising services market, the supply of Canadian content would be seriously jeopardized. This is because the split-run advertising editions they would produce as a result of having sold advertising services here would not replace the Canadian content that would be lost with the demise of Canadian publishers.

The example of the Canadian edition of Time and plain common sense tell us that this is true. Despite the impression that representatives of Time attempted to convey to you last week with their anecdotes about occasionally having Canadians on their cover or in their stories, the reality is that, on an ongoing basis, less than 10% of Time editorial can be said to have anything to do with Canada. The average, my friends, is two pages per issue of the Canadian Time.

There's a simple reason for this. The U.S. edition of Time can be, and is, sold widely in Canada. The only reason Time Warner has for producing a split-run advertising edition is to take advantage of the incremental profits available through the use of Time as a vehicle for accessing the advertising services market in Canada. These incremental profits rely on the recycling of the editorial content of the U.S. edition and the fact that most of Time Warner's other costs of being in the Canadian market are already covered anyway. I speak of overhead, printing, and distribution.

One must ask why a U.S. publisher would forgo profits in the advertising services market in Canada by assuming the additional costs of creating new editorial material for Canadians. The fact is that foreign publishers are here to maximize profits, not to provide a public service.

Against this background, let me now turn to specific claims made by the advertisers. I would like to first clarify an overall point. The submission of the advertisers asserts on page 7 that over the last 30 years, Parliament has drawn an ever-tightening circle around the kinds of magazines that are available to Canadian advertisers. The submission in statements made by the advertisers also suggested that Canadian advertisers can now advertise today in four magazines, but would no longer be able to do so under Bill C-55.

This is simply wrong. In fact, Bill C-55 involves no change whatsoever for Canadian advertisers. The option of placing advertising directly primarily at the Canadian market with foreign publishers has not been available for more than 30 years. Bill C-55 simply maintains a long-standing policy in the exact same environment that Canadian advertisers have operated in for those 30 years; it places no new limitations on advertisers.

The only significant foreign publishers that have ever had access to the Canadian advertising services market are the Canadian editions of Time and Reader's Digest. They were grandfathered under the previous measures, and should be fully grandfathered under Bill C-55.

Let's turn now to other claims made by the advertisers before this committee. Their arguments essentially boil down to four points:

One, magazine publishers have enjoyed privileged access to government, while advertisers have not been consulted.

Two, Bill C-55 has nothing to do with ensuring the availability of Canadian content, but rests instead on arbitrary and irrelevant ownership criteria.

Three, the real problem is that the Canadian magazine sector is underdeveloped in terms of its share of the overall Canadian advertising pie.

Four, Bill C-55 is inconsistent with Canada's international trade allegations.

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Let's address those points.

The first one was that magazine publishers have privileged access to government, but advertisers were not consulted. Let me tell you about the process of consultation that Canadian magazine publishers have been involved with.

I assure you, there was nothing privileged or improper about it, as Mr. Lund implied. Since Canada lost the WTO case over 18 months ago, Canadian publishers have engaged in a process of providing information and analysis to government. Canadian publishers did not receive an exclusive invitation to do so. We took the initiative of developing and providing input to Canadian Heritage and other departments. At no time did we receive privileged information or have access to cabinet confidences. Mr. Lund has claimed that I told him I was not able to discuss the issue because I was sworn to secrecy. I regret that there was misrepresentation and misunderstanding on this point. The only information I had that was not in the public domain related to the analysis that the CMPA and CBP had provided.

Yes, I had undertaken not to discuss the issue publicly. This was because of a need for discretion in light of U.S. threats of a new trade case or retaliation. It's obvious that we wouldn't want to share some information we had. If the U.S. got its hands on this, it would be dysfunctional.

There was nothing that prevented advertisers from doing the same thing as publishers did. If they had an analysis to offer, they could have engaged the government at any time.

The second point they made was that Bill C-55 has nothing to do with ensuring the availability of Canadian content, but rests entirely on arbitrary and irrelevant ownership criteria. The advertisers made two points here.

First, they know there are no provisions in Bill C-55 that require publishers to create Canadian content or hire Canadian writers. They claim that Bill C-55 will, therefore, not deliver this result.

Second, they maintained that the ownership criteria are arbitrary, and that there's no relationship between ownership and the creation of Canadian stories.

It's certainly true that Bill C-55 does not contain any Canadian content requirements. This is because it's not necessary to require Canadian publishers to create Canadian content; we already do so.

There is a strong demand in Canada for Canadian stories, and Canadian publishers are the ones who respond to that demand. That is our strength in the market. That is our competitive advantage. Foreign publishers do not now, and will not in the future, play this role. Ownership, therefore, is essential to the policy objective.

The ownership criteria in Bill C-55 are not arbitrary; these criteria are taken from section 19 of the Income Tax Act and the Investment Canada Act, both of which the advertiser pointed out as valid and important measures in the magazine sector. They have been in use for many years, and have never produced the kind of perverse result that the advertisers claim could occur under Bill C-55.

The suggestion that a 100% Canadian-owned publisher producing 100% Canadian content and employing no one but Canadian writers could fall outside the definition of being a Canadian publisher if its chairperson were foreign is simply not a real-world scenario. Bill C-55 is based on reality, not on a hypothetical situation that will never occur.

The third point is that the magazine sector is underdeveloped as a medium for advertising. The advertisers in the Canadian edition of Time have argued that the Canadian magazine sector does not get as much of the advertising pie as do magazine sectors in other countries because of an absence of Canadian magazines in some market segments. They suggested that if split-run advertising additions of U.S. magazines were available, this situation would somehow miraculously be rectified.

Yes, it's true the Canadian magazine sector has a smaller share of the overall advertising pie than that of magazine sectors in other countries. But let's be clear on the reasons for this. The first reason has to do with the impact of the spillover of generic advertising into the Canadian market through the very large number of foreign—these are mostly from the U.S.—magazines sold here.

American publishers do, in fact, already carry advertising in Canada. This is a key point. When selling advertising services in the U.S. through their domestic editions, U.S. publishers include in their rates the reach that advertisers will achieve through the circulation of a publisher's magazine—this is the U.S. magazine—in Canada.

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If you are a major advertiser with a presence in Canada but are already paying for the Canadian market through advertising in U.S. magazines sold in Canada, you are not going to duplicate that effort through Canadian magazines. You might place some of your advertising budget in Canada, but less than would be otherwise the case. This is one of the key reasons that more of the advertising pie in Canada goes to other media like television, newspapers, and radio, and it is a direct result of the high level of import of U.S. magazines in the Canadian market.

The second main reason is the difficulty Canadian publishers face in entering the niche-market segments mentioned by the advertisers due to the fact that imported magazines already dominate those niches. The costs and risks of launching a new magazine are great under the best of circumstances. They become prohibitive in a small market segment where economies of scale are not available and imports dominate. Would these realities change if split-run advertising editions of U.S. magazines that are already available came into the under-represented market segments?

Some additional portion of the Canadian advertising pie would go to magazine publishers, yes. But it would go primarily to U.S. publishers with no net benefits to Canada. There is no reason to expect that there would be meaningful new opportunities for Canadian publishers and no change in the kind of editorial content available to Canadian readers in the niche market segments concerned. Let's be clear. They're not going to produce more editorial content; they're just going to sell Canadian ads to a U.S. magazine that's already sold in Canada.

Moreover, access to the advertising service market is an on-off switch. To allow U.S. publishers to come into underrepresented market segments would be to allow them into the entire market, including the market segments that are well served by Canadian publishers. As we have seen, as has been shown to this committee, this would push Canadian publishers out of business and result in an overall loss of Canadian content for Canadian readers.

The ACAI might say that there would at least be benefits in such a scenario for Canadian advertisers. We would suggest, however, that such benefits—and yes, they would occur—would be marginal and, which is the other key point, probably short-lived. They would be marginal since the share of the overall advertising pie could only be expected to increase a few percentage points at best. They would probably be short-lived, since the discounted rates that would be available to Canadian advertisers with U.S. publishers would begin to disappear as Canadian publishers disappeared.

If U.S. publishers no longer had to discount the rates in order to gain market share, of course the rates would increase. The advantages to Canadian advertisers would therefore moderate over time, but Canadian publishers would have been pushed out and Canadian content would have been lost.

It's clear. If they come into the market they're going to discount, they're going to fight, they're going to have an 80% margin while we have a small margin. Once we're removed from the table, they're going to raise their rates, and there'll be no Canadian choices left. That's why we're saying advertisers would have a short-term gain but, in the long term, would have price hikes and no Canadian choices.

Their fourth claim is that Bill C-55 is inconsistent with Canada's trade obligations. Officials of the Department of Foreign Affairs and International Trade have now appeared before the committee to explain why Bill C-55 is consistent with Canada's trade obligations. I would like to make just a few additional comments to help keep the trade issue in perspective.

First, contrary to what U.S. officials would have you believe, the Canadian magazine market is completely open and will remain open under Bill C-55. You've already seen the key statistics, but I'm sorry, I have to repeat them one more time. Imported magazines, mostly from the United States, capture 50% of total magazine sales in Canada in over 80% of our newsstand space—and by the way, just so we're clear about this, U.S. publishers buy newsstand space. So they dominate 80% newsstand space and they have 50% of the market share of this country.

Just to make this committee smile, I wonder what the debate would be if this were happening in Congress with a reverse scenario.

But we, the industry, welcome that diversity and we welcome the fact that Canadians get to choose. We want that. This has never been about access to our market, it's been about advertising.

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Second, the issue in the advertising services market has to do with the prospect of insurmountable and unfair competition, akin to dumping. Free trade does not mean that countries have to accept unfair trade, and taking steps to prevent unfair competition is not protectionism. Under international trade agreements on goods, there are remedies available to counter practices such as dumping. However, our agreements do not yet provide such remedies for trade in services.

Third, in the negotiation of the WTO agreement on services, the GATS, Canada did not offer and the United States did not obtain or pay for access to our advertising services market. Canada did not put our advertising services market on the table precisely in order to preserve important Canadian cultural policies in the magazine and broadcast sectors. This was made clear to the United States and our other trading partners during the negotiation, and Canada's schedule of commitments under the GATS makes it clear that we assumed no obligations in this area.

It would not be in Canada's interest to make a unilateral trade concession by now opening up our advertising services market. Canada has a right under the GATS and NAFTA to regulate access to our advertising services market. We need not be apologetic or defensive about exercising this right.

Fourth, all countries, including the United States, draw some lines in the course of trade liberalization in order to preserve domestic policies in areas of vital interest. Canada has reserved certain rights in our trade agreements, and we should be able to enjoy them.

No country, especially the U.S., sacrifices vital national interests on the altar of free trade. For Canada, preserving cultural policies that promote an independent identity has long been seen as one of our vital interests. No one has questioned this in the debate on Bill C-55.

Canada should not allow U.S. threats of retaliation to prevent the pursuit of valid cultural policies. If U.S. officials think Bill C-55 is inconsistent with Canada's WTO obligations, it is their prerogative to challenge it before a dispute settlement panel. We are confident that it can be defended. If the U.S. were to just retaliate, that retaliation would be illegal.

Conclusion: At the end of the day two simple questions must be answered. First, who would ultimately benefit if the Canadian advertising services market were opened? Would it be Canadian readers? No. They would lose access to an important channel of Canadian communication that allows us to see and hear each other and to share our own stories. Would it be Canadian publishers? No. We would be pushed out of the advertising services market upon which we depend for our viability. Would it be Canadian advertisers? We do not believe so. The short-term benefits, as I described, of discounted advertising rates would dissipate over time. Would it be U.S. publishers and the U.S. government? Yes. American publishers would reap incremental profits in Canada, and the U.S. government would have gained access to a Canadian market without having to negotiate for it. It also would have won an important victory in its more general campaign against Canada and Canadian cultural policies.

The second question is, is there any other way to achieve the goal that everyone supports? After over a year of analysis and work, none has been found. We cannot rely on the kinds of mechanisms we used in the past, such as excise taxes, because they've been found to contravene the GATT. Subsidies are not the answer, because they would be too costly and simply would not work. Advertisers were unable to suggest even one viable alternative.

The only approach that would meet the test and the trade rules and work is the measure contained in Bill C-55.

It comes down to a question of balance. Canadian publishers do not have a whole loaf because of the adverse impacts of the very high level of magazine imports, including the suppression of the magazine sector's share of the overall advertising services pie in Canada. We understand that Canadian advertisers also do not have a whole loaf, but the lack of access to one type of magazine vehicle for advertising represents only a few slices. That vehicle would only amount to a few additional percentage points for magazines, mostly U.S., in terms of the Canadian advertising pie. Many other vehicles are available to them.

We believe Canadian readers should at least be assured of having a whole loaf through the continuation of choice in the magazine sector, including the choice of magazines that tell our own stories.

In achieving this objective, Bill C-55 strikes the best possible balance between the interests of Canadian readers, other Canadian stakeholders, and Canada's international trade obligations.

Thank you. Merci.

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The Chairman: Merci, Monsieur de Gaspé Beaubien. I guess your colleagues will be ready for questions.

Mr. François de Gaspé Beaubien: Yes, Mr. Chairman.

The Chairman: Mr. Mark.

Mr. Inky Mark (Dauphin—Swan River, Ref.): Thank you, Mr. Chairman. I would like to thank Mr. Beaubien and his delegation for coming before us. I'd also like to thank Mr. Beaubien for having taken the time to meet with me previous to the recess of the House to discuss a lot of these same issues.

As I listened today and the previous several days, it seemed to me most unfortunate that two vital components of a Canadian industry are pitted against each other. I believe it is unfortunate because they both agree on many of the same points. They believe that Canadians should have the right to read Canadian, which Canadians do. They're nationalistic in their approach and they want to see the industry alive and healthy. At the same time, we sometimes almost disagree for the wrong reasons. Perhaps both sides were not consulted thoroughly enough in the process when this bill was put together. Perhaps this situation could have been avoided. We have a tough enough time competing on the world stage as it is. We don't need our own industries to be split and fighting each other instead of the world competition.

Those are my opening remarks.

There are a couple of points I'd like to establish. One is that I'm going to ask Mr. Beaubien whether he feels this bill is one of culture or one of—and I've asked you this before—business and trade.

Mr. Francois de Gaspé Beaubien: Sir, my answer is twofold. I'm here as a business person and I'm here to share with you how we run our business. The reason I'm in business creating Canadian magazines is because they sell; the readers want to buy them. As I was sharing with you, though, unfortunately the fact that a reader wants to buy our magazines doesn't mean I can survive. I depend highly on advertising revenue.

So I can talk from a business perspective and share with you the facts: that we are a unique country in the world because we live next to a superpower that we like very much, but unfortunately we have a reality that they have economies of scale we do not; and that we are the only place in the world where they freely dump their magazines onto our market.

Just so we're clear about this, 85% of the exports of magazines from the United States go to only one country, and this is the one. So if they were allowed to do split runs, as I shared with you, just ripping out their ads and selling some Canadian ads, they'd have an 80% margin. Our average margin is 4% to 5%. We would be out of business. That's a reality.

My second answer therefore is that you, representing the people of Canada, must make a decision knowing the facts, which is that there would be no Canadian stories.

Let's talk about the profit motive. My profit motive is to create Canadian stories, because that's how I compete against the American product. Canadians want to read Canadian stories. That's why we're here. If they have an 80% margin with unfair dumping of an advertising service market, then I'm out of business. You'll no longer have Canadian stories in magazines. That's a given fact.

Therefore, is it a cultural issue? I believe it is. I'm here as a business person obviously arguing my case, but here are the facts: they're going to strip out the ads, they'll have an 80% margin, they'll discount, and we're out of business. You'll have no more Canadian magazines. Is that important to you? That is for you to decide as the representatives of this country. We can share with you, as the magazine industry, that there will be no Canadian magazines.

There's my answer.

The Chairman: Mr. Salutin, I believe you want to add something.

Mr. Rick Salutin: I'll just say that I'm here as a culture person, so I'll say something about that. I don't think this is just a matter of Canadian culture broadly. I think magazines are the key way that a society discusses itself. Newspapers are too fast. You have to write too fast and you have to read too fast and they're gone. Books are too long and they take too long to come out. Magazines are the main way—and I'm not just talking about politics; it can be in any area—that writers have the time to reflect and lay something out, but get it there before the issue is dead. And they sit around the house for a week or a month and readers have a chance to linger over them.

I think Canadians understand that. I think Canadians are real magazine readers. You give them a chance and they do read it. It's a bit like poetry, I think. Canadians are real poetry readers, and I think it's partly because it's practical. It doesn't take that long to read a poem. I think there's the sense with a magazine that this is really useful in your life. And I'm here because I think this bill and this kind of policy is the way we will maintain that key element of our culture.

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Mr. Inky Mark: Mr. Beaubien's anecdote about Women's Day and Canadian Living make that very point, that all the Canadian magazines create markets for advertising. And the statistics show that 94% of what Canadians read is Canadian. So it doesn't matter how much of the American magazine industry comes in here; Canadians still prefer to read Canadian, except for those they can't get.

Mr. Francois de Gaspé Beaubien: Mr. Mark, if I may make a point here, I think you are hitting the bull's eye of this whole discussion.

I have no problem competing against magazines coming from the United States, no problem. We have some of the world's best writers and editors, and that's why we do so well. Sir, my point is this: because my editors and journalists do great content and readers respond enthusiastically does not mean I will survive.

On average, 65% of revenues come from advertising. In some cases, sir, it's 100%. If you permit split runs, which are already in this marketplace—with, by the way, just so we're clear about the facts, 50% market share, and in English Canada it's 65% market share, if you want to be technical—if you give them that right, sir, which is an unfair competitive advantage because it's a dumping of a service, they will have an 80% margin because they've paid for their cost of goods in their home market. We have to pay for Canadian writers, Canadian journalists, and Canadian distribution. And what you'll find is our margin is 4% to 5%. It doesn't take Darwinian economics to figure out that he who has an 80% margin and is dumping a product, whether it be a Japanese car or a service, is going to kill the person who has a 4% to 5% margin. That's the reality of our marketplace.

So thank you for raising that point, because you've just proven that reader demand doesn't mean I'll be able to survive.

The Chairman: The last question, Mr. Mark.

Mr. Inky Mark: Could you comment on the fact that the rate cards for non-Canadians must be grossed up by 45% to account for section 19 of the tax act?

Mr. Francois de Gaspé Beaubien: I'm glad you raised that point, sir. Time Canada has made the point that their rate card is higher than MacLean's, and this is the point that maybe John would like to address. But I'll make one little caveat. Sir, the reality of the marketplace is what you print and what goes on behind negotiations. As everybody knows, when you're buying a house, what you print that you want to sell your house for and what you actually sell it for are two very different things. We would agree on that. The same goes for the printed rate card of a car. What you print it for and what is sells for are two very different things.

You won't be surprised to find, sir, that is the same case in the magazine industry. That Time prints a rate card that happens to be higher than MacLean's is a very interesting promotional manoeuvre. It gives them an ability to discount even higher when they close the door. That is unfortunately the reality of our marketplace. So what you find is, once again, the individual who has a huge margin loves having that margin. Frankly, if I were a U.S. publisher, I'd say why not reap incremental profits in Canada?

So what you find is that they have that margin and they're very happy to be here. They're very happy to be grandfathered and very happy to be before this committee saying, please do not take away our grandfathering, which you've advocated should not be taken away.

The Chairman: Mr. Tory, I believe you're going to add to this.

Mr. John Tory: Just to say, Mr. Chairman, that in trying to put together a number of the questions Mr. Mark has asked, if you ask yourself two fundamental questions.... And I'm not passing any judgment on people having these desires and commenting on it. Why do the advertisers want to see the advertising services market without the kinds of restrictions that would be placed on it by this bill? The answer is because they believe it would result in a reduction in the price of advertising. I would admit that for them that's beneficial. But anything that happens, especially when these people are coming in and are able to offer these reduced rate cards because they do not bear the expense of producing Canadian editorial, puts pressure on the advertising rates we rely on to fund the production of the Canadian editorial.

The second point is, why do the U.S. publishers want to come here? I think François mentioned this in his remarks. They want to come here because they believe they can make incremental profits here. They are pretty strongly of that view, or pretty strongly able to project that they could if they're able to offer split-run editions. They know that if all they had to do was strip out the American ads, replace them with Canadian ads and spend nothing in some cases, and very little in other cases, on Canadian content, they would have a margin that supersedes anything we could even dream of in this country.

We like to offer examples from time to time. Here is the April 27, 1998, issue of Time Canada, and here is the April 27, 1998, issue of MacLean's. They both write stories about bank mergers.

In the Time Canada issue, the story about bank mergers makes not a mention of any Canadian bank that might be consolidating or merging or trying to merge. In listing the 10 or 15 biggest banks in North America, it was not even mentioned that if those mergers went ahead, there might actually be a Canadian bank created that would be on that list. There's not even a mention of Canada in the article, in five or six pages.

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In the Maclean's article, five reporters are listed in the byline at the bottom of the article as having written an article that goes on for four or five pages about the proposed Canadian bank mergers.

In Maclean's magazine, we are spending $9 million on editorial work to write Canadian stories about Canada. If we're put in a position where our rates are pushed down through an unfair and unlevel playing field on advertising services and we're forced to compete with people who are investing nothing, or next to nothing, in the production of Canadian content, we will not be able to stay in business.

People think Maclean's magazine, because it's well known and has a big circulation and readership, makes a huge amount of money. It has margins that are of the order of what François described, which means there isn't much room for error in terms of having the marketplace other than the way it is today. There just isn't room in the advertising services market to have anything other than a level playing field, which is what we believe this piece of legislation accomplishes.

The Chairman: Madame Tremblay.

[Translation]

Mrs. Suzanne Tremblay (Rimouski—Mitis, BQ): Good morning, Mr. de Gaspé Beaubien. Thank you for your presentation. When you're the last to speak on a particular issue, you inevitably raise the same arguments as witnesses who preceded you. We'll be the judge of who is right, but I have the feeling that if previous witnesses were sitting next to you, they would like an opportunity to respond and to vouch for the accuracy of their comments.

Regarding the trade rules in effect, they told us that a magazine or periodical consisted of two components: articles, that is editorial content, and advertising, or advertising content. Each of these components has a service aspect to it, but the two combine to result in an actual good, that is a magazine or periodical.

Of course, experts and officials who testified before the committee responded to questions to which they already knew the answers. They repeated the same responses. Their comments didn't really shed any light on this subject for me since I heard the very same comments when we examined the other bill, when witnesses argued that the provisions were foolproof. They maintained that we would not be defeated by the United States, either at the GATT or the WTO, once this bill was passed. It's completely foolproof, they claimed. The same individuals came here to tell us that this bill was foolproof as well, but someone is telling us that this is not a sure bet. What are your feelings about this?

Mr. François de Gaspé Beaubien: I'll answer that question in two parts. Since I am not in expert in international trade, I will let Anne McCaskill, who has long been involved in this field, has the expertise and has negotiated many agreements between Canada and other world countries, tackle that part of your question.

As I understand it, we submitted to the WTO that the issue here was the service aspect. Everyone agrees that advertising sales are a service. Unfortunately, the measures in place relate to magazines as a good, pursuant to the GATT. As such, we are subject to an excise tax, namely tariff 9958, which doesn't quite jibe with the notion we have of magazines as a service. In short, we have always maintained that every country has the right to promote its own culture and identity, but the mechanisms in place were not consistent with the agreement that we had signed. That is my understanding of the situation.

Today we have this mechanism and our advertising services are quite consistent with the agreements we have with the GATT. In the past, we didn't have an agreement like this, but now we do. That's why I think our position will hold up very well before the WTO. Maybe Anne would like to add something to that.

[English]

Ms. Anne McCaskill: I hope you'll be able to hear me. In my view, it's not appropriate to take out of context an element of a finding that was made by a WTO panel with respect to the previous Canadian measures and simply extend it to what is a fundamentally different measure, which is the one contained in Bill C-55.

That statement in the previous panel report related to measures that, although they were aimed—this is what we maintain—at practices in the advertising services market, nevertheless applied to magazines as goods. We had a tariff item that applied to the import magazines. We had an excise tax that was applied to magazines. So with our previous measures, the panel was looking at measures attached directly to magazines as goods. They were therefore commenting on the relationship between a service aspect and a goods aspect of the product, magazines.

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In this case the measure in no way attaches to magazines as goods. It doesn't affect trade in magazines as goods. It deals solely and directly with access to a services market, the advertising services market. In fact, if the United States wanted to pursue a similar line of argumentation with regard to the new measure, they would even be under a different section of the GATT.

So it's just not appropriate to apply a previous finding that related to a completely different measure to Bill C-55 and suggest that the conclusion would be the same.

I have just one final brief point. What was not mentioned was that in that very panel finding, it was made explicitly clear that the panel finding in no way called into question Canada's right to pursue the cultural policy objective. Instead, the panel's finding related to the specific question of whether or not the specific measures that had been challenged were consistent with the trade agreements.

[Translation]

Mrs. Suzanne Tremblay: I have two brief questions for you, using some examples. The previous witness had copies of the U.S. edition of ELLE, as well as copies of the French, British and Quebec editions. She claimed that the passage of Bill C-55 would spell the demise of ELLE-Québec. True or false?

Mr. François de Gaspé Beaubien: False. I'm the publisher of ELLE-Québec and as such, I know that my facts are correct. ELLE- Québec was created in Montreal for Quebeckers and by Quebeckers. The content is 88 per cent or 90 per cent Quebec and Canadian. It's a Canadian magazine which meets all legal and industry Canada requirements. It's a Canadian magazine.

I'm not a lawyer, but having carefully scrutinized Bill C- 55, I don't in any way see how it might spell the demise of a publication like ELLE-Québec.

Let's consider some of the aspects of ELLE-Québec. This brings us to Mr. Mark's question. The Americans are not interested in a magazine like this. They are interested in products already sold in Canada because clearly, they are motivated by profit. Consider, for example, Cosmopolitan with a circulation of 200,000. Their idea is to remove some of the advertising pages from magazines already sold and replace them with new Canadian advertising space. That's what produces healthy profit margins.

ELLE-Québec was created here in Canada. It is now in its seventh year of publication and the millions of dollars we spent developing this magazine haven't yet been recouped. However, I believe will get there eventually. We invested substantial sums of money, millions in fact, to launch this magazine. We haven't yet recouped that investment.

The United States aren't interested in spending millions of dollars to create Canadian content. All they are interested in is recycling their editorial content and getting Canadian advertising. Therefore, the short answer to your question is no. Bill C-55 will not prevent the development of another ELLE-Québec because the truth is, the United States isn't interested in this kind of magazine.

The Chairman: One final question, Mrs. Tremblay.

Mrs. Suzanne Tremblay: Is it possible today to place Canadian advertising in an American publication?

Mr. François de Gaspé Beaubien: Yes.

Mrs. Suzanne Tremblay: And will that still be possible once the new legislation is in place?

Mr. François de Gaspé Beaubien: No. Let me explain it to you.

Mrs. Suzanne Tremblay: I'll give you a concrete example.

Mr. François de Gaspé Beaubien: Fine.

Mrs. Suzanne Tremblay: Can a company like Zellers, for instance, advertise right now in U.S. magazines sold in Canada? Once the legislation is passed, will it still be able to advertise? A U.S. company like Wal-Mart which operates in Canada would still be able to advertise in a U.S. publication, but not Zellers. Is that correct?

Mr. François de Gaspé Beaubien: Here's how things stand.

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First of all, a Canadian business can take out advertising space in a U.S. magazine sold in both the United States and Canada. In other words, if a Canadian advertiser wants to take out an ad in Newsweek, for example, that ad would appear throughout the United States and throughout Canada. He can do that. However, if that Canadian advertiser wants to place an advertisement strictly in the Canadian edition of Newsweek, then the answer is no. In fact, for the past thirty years, advertisers have not been allowed to advertise only in the Canadian edition of Newsweek.

Does an advertiser have the right today to take out an advertisement in a U.S. magazine sold in Canada? He cannot place an advertisement solely in the Canadian edition, with the exception of those magazines that are covered by the grandfathering clause. Time is one such magazine.

They don't have this right today, nor will they tomorrow. As far as they're concerned, the status quo will prevail.

Mrs. Suzanne Tremblay: They can take out some advertising space in Newsweek, for example, but that would be very expensive.

Mr. François de Gaspé Beaubien: From now on, they can advertise throughout North America.

Mrs. Suzanne Tremblay: That would be very expensive.

Mr. François de Gaspé Beaubien: Unquestionably.

Mrs. Suzanne Tremblay: They want to keep costs down and advertise only in Canada.

Mr. François de Gaspé Beaubien: In the past, they couldn't advertise only in Canada and they won't be allowed to do that either in the future. Let's be clear on that.

They will be allowed to advertise across North America, that is throughout the U.S. publishing industry. They could do that before, and they still will be able to do that. However, they will not be allowed to advertise only in Canada.

Mrs. Suzanne Tremblay: I understand. Thank you.

[English]

The Chairman: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): It's very nice to have you here. I'm sorry I was late and missed the first part of the presentation.

I am also interested in the cultural issues, and I am wondering why there is no Canadian content component in Bill C-55. Is there some nefarious or tactical reason for that? I know you don't feel it's necessary just because of the way things roll out, but I think I would be more comfortable with some Canadian content.

Mr. François de Gaspé Beaubien: There are two issues. The first issue has to do with the fact that our competitive advantage when we sell against American magazines is that we produce Canadian content, and that's something we've shared with the committee.

I might turn it over to Anne as far as the structure of a service is concerned.

Bill C-55 has to pass muster, if I could use that terminology, at the World Trade Organization, and therefore it was created, in my understanding, so that it would pass muster at WTO and still achieve the objective it was set out to preserve, which is a policy that has been in place for 30 years. So from my perspective as a publisher, we will continue to create Canadian content because that's our competitive advantage.

But as for why there wasn't a requirement in the measure, maybe I could just turn it over to Anne.

Ms. Anne McCaskill: As we all read for some time in the press coverage of this whole question, the option of a Canadian content requirement was discussed in various quarters. I think at the end of the day the feeling was that it would be more problematic both in terms of ensuring that we're consistent with trade obligations, WTO, and in terms of the charter. The implications of requiring that a certain kind of content be produced did raise some concerns vis-à-vis the charter.

Ms. Wendy Lill: So we can't safeguard Canadian content, then, under trade regulations.

Ms. Anne McCaskill: I don't think anybody can say categorically that we can't or that we can, frankly. The issue that arises in terms of the trade laws is that if you apply a content requirement, then it does relate to the magazine as a product. You're establishing almost a condition that has to be met in the product itself. This raises the issue as to whether or not there might be a risk of challenge under the agreement on goods, the GATT.

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Now, I personally believe there's a very valid defence that would have been available with respect to a content requirement. I think we would have had a fair shot at defending the content requirement in the GATT. But it's uncertain. It's very unpredictable. These are entirely uncharted waters.

Ms. Wendy Lill: Could you just tell me what that kind of defence would be, in your estimation?

Ms. Anne McCaskill: Well, it kind of gets into the gory detail of the provisions of the GATT. I think the simplest way to explain it is to say that when it comes to the requirement in the GATT that there be no discrimination between domestic goods and imported goods, the issue is whether or not, in a case where there are potentially discriminatory requirements, they're applying to like goods, which is one of the requirements under the GATT. The case that would be basically argued is whether or not, based on editorial content, a Canadian magazine could be seen as being different from, or not like, an imported magazine. The issue is whether or not editorial content is the basis for saying that these are not two like goods.

Ms. Wendy Lill: Okay.

Ms. Anne McCaskill: I think there's an argument to be made there. Others are skeptical about that. It's probably fair to say that there would have been some risk of a successful challenge.

Mr. Rick Salutin: I just wanted to say this. As you know, when you work as a Canadian writer, you generally have to diversify. The one area where Canadian content has never been a problem is in the magazine area because of the nature of magazines.

Mr. John Tory: Mr. Chairman, could I just follow on with what Mr. Salutin just said?

The Chairman: Please be brief.

Mr. John Tory: I'll say to Ms. Lill that while this isn't a direct answer to her question about Canadian content, I think it's an indirect answer to say that it would certainly be our view—this is between all of us and many others who appeared before you from the business press and so on last week—that ensuring a level playing field for the advertising services marketplace in Canada is one of the best defences you could have to ensure the continued production of Canadian content. As we said over and over again—this is at the very root of the entire discussion—if there's unfair competition for advertising services, then we will be unable to produce Canadian content or distribute it.

In fact is that in many cases we don't produce it; it's the writers who produce it, of course. But we won't be able to employ them or hire them to produce it and distribute it.

So I think that in many respects, the health of the Canadian magazine industry depends on a level playing field for advertising services, which in turn will ensure that we can have the vehicles through which Canadian content can be distributed. Hopefully, there will be more and more of it as time goes on.

The Chairman: Mr. Muise.

Mr. Mark Muise (West Nova, PC): Thank you, Mr. Chairman.

First, I'd like to start by thanking our guests today. I think this is very useful.

Here's one of my concerns. I really am concerned with basically this stripping of American ads so as to put in Canadian ones. Yesterday, we asked this question of the trade people. They don't seem to see any concerns or problems.

I'm just thinking back to last year when the government had some problems with MMT. They made a decision. They said yes, that's not a problem, and it's going to be fine. But it came back to haunt us. It cost us some money.

I'm wondering whether there are other ways whereby the same thing could have been achieved using other methods that may not be seen as contravening any trade laws. I'm just wondering if there were other ways it could have been done to accomplish the same thing yet protect us even more.

Mr. François de Gaspé Beaubien: That's a very fair and valid question. We've been consulted for over a year and a half. Although we weren't privy to Bill C-55 before it was tabled, obviously on our own side of the fence we did everything we could to look at all the options.

I would turn to our trade expert, Anne McCaskill, because her previous full-time job was negotiating trade agreements between countries on behalf of Canada. Anne was instrumental in helping us look at all the various options.

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I can share with you from my perspective—I'm a layman who has learned a lot in the past 18 months—that we looked at a lot of things. When the government tabled Bill C-55, we recognized this as being the best option. But I would ask Anne to comment on what she thinks.

Ms. Anne McCaskill: The basic answer is no, there really aren't any alternatives that would be completely risk free in terms of the threat of a trade challenge. Our first experience with the previous WTO case established pretty clearly that measures applying to goods per se can be successfully challenged, whereas measures that relate to services have a very different status in terms of the trade rules. I believe that Canada would be fully within its rights to pursue this measure that regulates access to the advertising services market.

Mr. Mark Muise: Do you feel this piece of legislation is risk free in the general sense of the term?

Ms. Anne McCaskill: Nothing is risk free under our trade agreements. It's always difficult to predict what a particular panel would decide in a particular case. They tend to be rather unpredictable creatures.

But I do believe there's a perfectly valid and strong defence with respect to this measure. It's one that would not in any way, as has been suggested by some, tarnish Canada's image as an upstanding citizen of the international trading system. This is perfectly valid and justifiable in terms of our rights and obligations under international trade agreements.

Mr. Rick Salutin: Mr. Chairman, I just want to add on to this.

I've had a fascination with Canadian and American cultural relations, going back to the film industry in the 1930s. There's nothing that Canada can do in cultural policy, if it affects American companies, that will not be challenged by the United States. Under globalization it's just gotten worse. They'll fight everything. The Americans are tenacious. There's nothing risk free. You have to take your best shot, and then be really willing to back it up. The Americans go back again and again, Eventually, very often, they win. Tenacity and conviction are at least as much of the game as framing a bill that's as risk free as you can make it.

The Chairman: Could we get back to you in the second round? We're moving along.

[Translation]

Mr. Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Thank you, Mr. Chairman.

[English]

I also thank you the witnesses for being here.

We've had a number of questions raised about the bill. It comes down, at the end, to a choice. We addressed some of those concerns yesterday with the people who were here on the trade side.

Another concern was raised. I don't share it, but I thought we should perhaps try to explore it. I'll direct my question to Mr. Salutin.

The concern was the matter of freedom of expression, freedom of speech, and freedom of the press. Some people have essentially argued that this measure before us would essentially cause a restriction of these freedoms. I would like to have your opinion, sir, as to what you think as a journalist. Do you believe that Bill C-55, as it is before us, would interfere or limit any of these?

Mr. Rick Salutin: I think this is a really shabby and cynical use of the concern with free speech. I take it fairly seriously. I've lost a lot of work over the years because of that. I think this is a really bogus concern. You cannot have free speech without a diversity of opinions, or at least it's utterly meaningless.

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What I understand this bill to be about is maintaining the potential for diversity of views, and particularly Canadian views, that cover a widespread spectrum. If you cut those out, how can you cut out that kind of diversity in the name of free speech? No, on the contrary, I don't think under this bill and in the current situation we have anything near the diversity of expression that would be optimal for the realization of free speech in the society, but with the kinds of effects you would have by wiping out the Canadian magazine industry, there would be far less.

I think it's very cynical. The big companies and the advertising industry have been using this a lot recently. It was a couple of years ago that there was an attempted seduction of the number of writers by the tobacco industry, which asked us to write articles on the importance of free speech for tobacco advertisers, and they dangled a couple of thousand bucks in front of you for doing that. It was a hard choice for a lot of writers, who were strapped. So I consider this a cynical misuse along the same lines. I am in favour of free speech for lousy arguments like that, but I don't think we have to give them any respect at all.

Mr. Mauril Bélanger: Thank you.

The last one is an accusation that's been raised and directed towards the government that this measure is essentially intended to support, enrich and protect a few, perhaps as little as two, large Canadian publishers. Your reputation precedes you a bit here, and I'd like to hear your views on that.

Mr. Rick Salutin: Which reputation?

Mr. Mauril Bélanger: You know which one I'm talking about.

Mr. Rick Salutin: I don't give a damn if François and John get rich or lose their pants, personally. But I'm here because I'm concerned about the survival of Canadian culture and particularly the magazine industry, for the reasons I said. I think it plays a crucial role not just in culture but in a healthy political ambience. That's what I think this is about, and if a few people get rich or don't get rich by the by, I couldn't care less.

But I also think that in this respect there is actually.... I've worked for 30 years on a small magazine called This Magazine, out of which nobody got rich. A lot of us put time into it for nothing that we could have spent money on. But there is a thriving small magazine industry, and I would say there's a potentially very good symbiosis between the big slick magazines like François and John put out and the hundreds of small magazines.

I've written columns in the slick magazines for Canadian business for a matter of years, including Canadian Business, Toronto Life, Southam's TV Times and the Globe and Mail's Broadcast Week Magazine. And I'm in the Globe and Mail now once a week. In all that time I also wrote a little column called “The Culture Vulture” in this magazine; and believe me, it was the work in the small magazine that nourished, intellectually and as a writer, the ideas that went into the big magazines, and it was the money from the big magazines and also the feedback from the larger audience that nourished what went back into the small magazines. And I think you see that a lot.

The editor of This Magazine now is Andrea Curtis. She was at Toronto Life and they would have killed to keep her there, but she wanted to go where she could realize more of her personal vision in this small magazine. Then she may well go back. A lot of recent editors of This Magazine have gone into the big magazines, and from our point of view, you shouldn't underestimate the flow back and forth of the way each needs the other.

As my last comment on that, I would just say the one thought that comforts me is that neither of these guys will ever be nearly as rich as Ted Turner or Rupert Murdoch.

Mr. Michael Rae: May I make a comment?

The Chairman: Yes, Mr. Rae. You've been very silent. Time is marching on, so perhaps you could make it concise. Thank you.

Mr. Michael Rae: I will.

On the issue of whether this is a MacLean Hunter-Télémedia initiative, while they have a vested interest, it is certainly not true. The Canadian Magazine Publishers Association has unanimously endorsed Bill C-55. There are magazines such as Canadian Geographic, which is one of the most successful magazines in Canada with a circulation of about 220,000, yet it depends on about $2 million of advertising revenue to make a profit that is less than $500,000 a year. If that advertising revenue were to disappear or to be cut back even significantly, by say 25%, then the magazine's profitability would be severely eroded and its ability to educate Canadians about Canadian geography could be imperilled.

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I think it's important. There are a lot of magazines that are not part of the Maclean Hunter-Télémedia stable that do express views and educate Canadians about Canada, and I think the importance of this bill to them is extremely important.

The Chairman: Thank you very much.

Ms. Bulte.

[Translation]

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): My colleague Mrs. Tremblay has already asked two of the questions I planned to raise and others have covered my third question. However, I still would like to make a brief comment.

[English]

With respect to the charter challenge, one of the things that Mr. Sosnow from Lang Michener claimed was that there has been a recent decision in the Supreme Court of Canada that advertising is included in the protection of commercial expression. Maybe I can direct my question to Ms. McCaskill. Can you comment on how somehow by prohibiting advertising we're going to be prohibiting freedom of expression?

Ms. Anne McCaskill: I am by no means a constitutional expert, however we have had advice from constitutional lawyers on this proposed measure. I think the best answer to that question is that I don't think anybody ever questioned that the charter applies to commercial expression; it was never at issue. The advice we have had on the charter question, and our own view, is that the overriding freedom of expression issue in this case is the very one that Mr. Salutin talked about. We agree that there is an important freedom of expression question and it is to ensure that there is a continuing opportunity for freedom of Canadian expression in the magazine sector.

Ms. Sarmite Bulte: Thank you.

I have a comment on Mr. Muise's question with respect to the Ethyl Corporation trade dispute challenge on the MMT. It's my understanding that this trade dispute was launched through the NAFTA agreement, that NAFTA was the applicable way to go to settle this trade dispute; but in fact the minister concerned has said that NAFTA has no applicability whatsoever to this legislation and the only thing that does apply is the GATT. We have an obligation with respect to advertising the GATT. Is that correct?

Ms. Anne McCaskill: Yes. My view is that Bill C-55 is consistent with all of Canada's rights and obligations under both the WTO agreements and NAFTA. As a result of the cultural exemption in NAFTA, the obligations of that agreement simply don't apply to measures taken with respect to cultural industries, which are defined in NAFTA and which include the publishing industry and all activities of the publishing industry. So there is no question in my mind that this measure falls entirely under the cultural exemption. I would agree with a comment that I believe you heard from the Foreign Affairs trade expert yesterday, that in terms of the provision in the cultural exemptions for the U.S. to take retaliatory measures in some circumstances, that right to retaliate is only available if the measure in question were inconsistent with Canada's FTA obligations, if not for the cultural exemption, and there are no obligations in the FTA that relate to this measure.

Ms. Sarmite Bulte: Thank you very much, Ms. McCaskill.

The Chairman: Thank you.

Mr. Bonwick.

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Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair.

Thanks very much for coming in today. It gives us an opportunity to get your perspective.

I think first of all I'd like to provide some clarification on a statement that was made a couple of days ago. I made a note, and I don't have it word for word but I can certainly get it from the Hansard. There was a suggestion made by opponents of Bill C-55, more namely the U.S. publications or foreign publications, that perhaps you had had access to privileged information from either the heritage department or the heritage ministry. Like many of the statements that were made, they were unsubstantiated. I'm just wondering if you might very quickly clarify that for me.

Mr. François de Gaspé Beaubien: Thank you. As I said in my statement—

Mr. Paul Bonwick: You did touch on it, certainly.

Mr. François de Gaspe Beaubien: Yes, but I want to be very clear. There's no doubt that when the WTO ruling came down 18 months ago, the magazine industry, the Canadian Magazine Publishers Association and the Canadian business press, got into gear to take a look at what we should do. We were pleased the heritage department asked us for our point of view about how magazines work and their economics. We explained our point of view.

As we shared information that we were working on with them, it was clear we didn't want that information we were sharing with them about things we were looking at—and it's obviously their prerogative to decide how they want to go forward, but we were looking at it—to get into the hands of the Americans. At no time did I get any confidential documentation from the department that was not supposed to be vehicled to me.

To give you a concrete example, when Bill C-55 was tabled, I got it after the journalists and everybody else got it. I mean, I got it 12 hours after everybody else got it. So the point is that those allegations were just that, allegations.

Mr. Paul Bonwick: Thank you very much. That does help clear up that specific question. As a committee, I guess we put a lot of substance into how, when making an allegation, an individual is able to substantiate that. That's sort of our credibility measuring stick.

Mr. François de Gaspé Beaubien: I do want to make clear though, I did say it to Mr. Lund. I had been meeting with the advertisers, because they're our clients, to say that I was in discussions and I had information that I could not share with them. But obviously...I know what would have happened if I'd shared that information.

Mr. Paul Bonwick:

[Editor's Note: Inaudible]...strategy.

Mr. François de Gaspé Beaubien: Yes, thank you.

Mr. Paul Bonwick: We've heard from a multitude of different witnesses from a variety of different backgrounds, and from lawyers and agents on both sides. So what I'm trying to do as a lay person is just simplify it and develop an opinion on it. To me it has boiled down to the fact that this bill, and I'd like your opinions afterwards, is about accessibility, not lack of accessibility. This bill is about accessibility for Canadians not just to Canadian stories but to international stories, international topics based on the international mosaic background that Canada is made up of.

I looked through the Canadian edition of Time magazine, and it so amply demonstrates this accessibility. As I looked through.... I would encourage my Reform colleagues to actually take some time out and look through this magazine. Out of 74 pages, there are four pages that touch international topics. One of the topics identified in this is the peace agreement in Northern Ireland. They take very much an American perspective. There's not one mention in there of Canada, despite the fact that Mr. Adams was over, despite the fact that the Prime Minister was over, and despite the fact that we've received international recognition—from Northern Ireland as well—on our past and future commitment to that peace accord. There was not a word about Canada in it.

I question whether we do not have an obligation as a government to ensure young Canadians, in fact all Canadians, have access to that kind of information, to know what kind of role either their government or their society is playing in international circles. As I say, out of 74 pages, there are four pages of international content in there. There are 70 pages of either advertising or strictly American content. To me it's a sin if our government does not ensure Canadians have access to that Canadian and international mosaic, rather than just strictly an American perspective on international events, and an American perspective on culture, if in fact they perceive themselves to have a culture.

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Mr. John Tory: May I just comment on that statement you made by saying this. The one thing we don't question at all—and François mentioned this in his opening statement—is everybody's perfect right in this country, including, I'm sure, many of us sitting up here, to read the Canadian edition of Time magazine. We've never called that into question. We don't call into question the right of Canadians to buy it and to read it as often as they wish. What we do want to ensure is that we have the opportunity to produce magazines of all kinds, not just news magazines, that actually do have in them the Canadian perspective.

I think an article written by the Time magazine bureau in Washington and one written by the Maclean's bureau in Washington are quite different. The one written by the Maclean's bureau comes from a journalist who is a Canadian, who looks at issues that are going on, whether it's there or in Northern Ireland, from a Canadian perspective. Unfortunately, unlike Time magazine with its perspective, Canadian magazines don't sell a lot in Houston, Los Angeles, Chicago, Paris, or New York. They just don't.

Mr. Paul Bonwick: It has been stated by many witnesses that the Canadian magazine industry would be devastated and, in fact, would collapse if there were not some sort of protection, some sort of barrier, to stop the U.S. from doing so. I give this as an example of what would happen if in fact it was a U.S.-dominated Canadian publication industry.

Mr. John Tory: I think it comes back to this being, right now and going forward after this bill, the most open magazine market in the world. Advertising revenue is key to the viability of a strong Canadian magazine sector and thus to the production of Canadian content. This legislation will, we believe, produce a level playing field in terms of advertising services in Canada and thus allow us to keep attracting that revenue and producing Canadian content so that there are stories available. It doesn't mean that anybody has to buy them or has to read them or can't read other stories written by people from other countries, whoever they are. It just means that there will be Canadian stories available in that boutique of content that's available in magazines.

The Chairman: Thank you.

We have a lot of business items to discuss as a committee.

I would like to find out now which members want to have another round of questions. I know Mr. Mark has signalled. Is there anybody else? Then we will close.

Mr. Mark.

Mr. Inky Mark: Thank you, Mr. Chair.

My understanding is that this bill is not about Canadian content but about Canadian advertising. I would suggest to my colleague Mr. Bonwick that he pick up any MacLean's magazine and check out the advertising and find out what percentage is really Canadian.

My question to the witnesses is this: who's really the biggest competition for advertising in Canadian magazines? Is it Canadian or foreign?

Mr. François de Gaspé Beaubien: Sir, just to refresh our collective memory, split runs are not permitted in Canada except for a few, such as Time and Reader's Digest.

Right now U.S. magazines, outside of those that are grandfathered, are not allowed to sell advertising in Canada, so the Canadian magazine industry competes within itself. But let us be clear. There is the spillover effect where 50% of market share is U.S. books and magazines, and they get a good market share, which we mentioned in our discussion, and we compete against the other media.

I fail to fully understand the question, I'm sorry.

Mr. Inky Mark: My understanding is that basically Canadians are the ones who want to advertise in Canadian magazines. Is that right?

Mr. François de Gaspé Beaubien: Yes.

Mr. John Tory: May I just say, Mr. Mark, that we pay a significant price because of the spillover Mr. de Gaspé Beaubien referred to, because a company such as General Motors—and I could name 100 companies that are operating on both sides of the border—buys less advertising in Canadian magazines because of the number of Canadians who read the American magazines and thus see the General Motors' ad. That costs us an awful lot of money and contributes as well not so much to a non-level playing field but certainly to our starting behind the eight ball in terms of our ability to thrive and fund Canadian content.

So, yes, our principal competition is each other at the moment in terms of all the different Canadian magazines and, I might add, specialty television services and a host of other people who are out there competing for limited ad dollars. But we automatically start a little bit behind the eight ball because of the spillover of magazine advertising into this country by companies that are on both sides of the border.

• 1235

The Chairman: This will be your last question.

Mr. Inky Mark: Its not really a question, just a comment. You make a very good point, because that's precisely one of the issues that were discussed. Now, why would a good businessman advertise just because it's cheap? If you were a good businessman, you would target your market and advertise the way you need to.

Mr. François de Gaspé Beaubien: Mr. Mark, our advertisers are friends and clients, and as you said, it's unfortunate that sometimes we get.... But they call me up after they testify. Anyway, we won't go into that. The point is that it's a funny relationship, as you can well understand, especially at this stage of the game.

The answer to your question is as follows. You're asking, why don't they advertise? They told us that they're still going to advertise with us, and that's good news and we're very happy about that. But they did say quite clearly, “We're still going to give you a good bulk of our dollars, but guess what, you're going to lose now.” Even the advertisers who were here testifying before you in their own research came up with numbers that went up to 75%. But let's say that it's not 75%; let's say it's a 40% or a 20% decrease in advertising dollars. The reality, sir, is that with a 4% to 5% margin, even with a 10% decrease in ad dollars—pick your number—we're out of business.

You're saying they're still going to want me. Yes, but they're not going to want me as much as they wanted me before, because they're going to go with an 80% discount. And you're asking, “François, how can that be?” I'll tell you, sir, how it can be. Time Warner will take People magazine, Time magazine, Money Magazine, and Sports Illustrated and say, “How about a package buy?” The reality is that they're going to bundle up all their titles that are already sold in this market and say

[Translation]

"there you have it, my friends, an 80 per cent discount",

[English]

and we're not going to be able to compete on that basis, because it's a service dump. That's the reality.

Mr. John Tory: Mr. Chairman, if I may, as they take away 10% or 20% of our advertising revenue, we will be able to fund less Canadian content, which will make our magazines less attractive to Canadian readers. This will mean that we have a smaller audience and that other advertising revenue they're not competing with will go away as well. That is why it threatens the viability of our businesses.

The Chairman: Ms. Lill.

Ms. Wendy Lill: I have a question about the grandfathering clause. Why do we have that there? If you were going to create a new magazine publishing policy, would you include a grandfathering clause? Why are you accepting that we're allowing Time and Reader's Digest to maintain the status quo in this country? I'd like Rick's views on that. We hear that Canadian content is very minimal. Obviously Canadian writers would do much better if there were Canadian content regulations in the big split runs.

Mr. François de Gaspé Beaubien: We in the industry never debated that issue. In fact, we said that Time and Reader's Digest should stay in the country. That was our position.

The question you're asking me is, why do we take that stance? There are legal implications, too, as you well know. If the Canadian government chose to remove Time, there's the practice of removing a viable business, etc., and they've been in the country, as they said, for 55 years. I don't feel as comfortable commenting on the Time or Reader's Digest issue, except to say we always said it's up to the government to make that decision. We just want to make sure there are still Canadian magazines in existence.

Mr. Rick Salutin: If I were writing the bill, yes, Time and Reader's Digest wouldn't have their agreement. But that's neither here nor there, because I don't have to deal with the power realities.

Look at how the Americans behave. Time Warner has their Time, but it's never enough. Now they have to have Sports Illustrated, People and all of the rest of it.

It's kind of a Canadian way to do the best you can under the circumstances. But I think what's amazing is that given the way that in a sense Canadian policy has knuckled under to Time and Reader's Digest over the years and has taken maybe not even half a loaf but a quarter of a loaf, we still have a thriving magazine industry with what we've managed to do so far.

The Chairman: Thank you very much, Mr. de Gaspé Beaubien and colleagues. I appreciate your presence here.

[Translation]

Mr. François de Gaspé Beaubien: Thank you, Mr. Chairman.

The Chairman: Thank you for coming.

Mr. François de Gaspé Beaubien: The pleasure was ours.

I have one final comment, Mr. Chairman. If we have been an extremely viable industry, it's thanks to the policy that has been in place for the past thirty years. We thank you for creating a climate which is supportive of a Canadian magazine publishing industry.

The Chairman: Thank you very much.

[English]

Thank you.

Will members stay, please? We have to have a quorum for a business meeting. We need nine people.

• 1241

We're starting the clause-by-clause next week, on the 30th, until we finish. We're going to have Bill C-48—

An hon. member: On the 30th?

The Chairman: No, in the week of the 30th.

Bill C-48 will be referred to us probably on December 7. We don't have any say in that. If the House refers it to us, it refers it to us. Then we'll deal with it or we'll decide.... I'm just advising you.

I'd like to turn it over to Mr. Mills. If you look at the agenda before you, I'd like to move to item...because we need a quorum to discuss it.

Mr. Mills.

Mr. Dennis Mills: Mr. Chairman and members of the committee, we tabled this week to all of you our subcommittee's report. The subcommittee unanimously agreed that minority opinions would be entrusted to me by the end of the week, whether they were from the Reform, the Bloc, or the New Democratic Party, and I will undertake to work with our people to make sure they are appended to the report.

In light of that, I would like to put a motion forward that this committee accept the report we have tabled in front of you.

The Chairman: Okay.

[Translation]

Mrs. Suzanne Tremblay: Nevertheless, some corrections need to be made in the official document. I don't want to stir things up, but there are some errors. We can't let this version stand.

[English]

Recommendation 50 has been doubled with 49, but it's not the same as it is in the English version.

Mr. Dennis Mills: You mean the recommendation?

Ms. Suzanne Tremblay: Yes. In French we don't have the 50th recommendation.

Mr. Dennis Mills: We have our chief researcher here.

Ms. Suzanne Tremblay: Unless we have the power to give you a correction on Monday....

Mr. Dennis Mills: No, we need the weekend to work.

Ms. Suzanne Tremblay: Yes, but I can read it on the plane on Friday and fax it to you over the weekend. I don't mind.

There are a few things that are not elegant in French, especially the title. If you look at the English and French versions, they don't say exactly the same thing. “Accountability” does not translate to “transparence”. It doesn't say the same thing.

Mr. Dennis Mills: I'd like our researcher to deal with that.

Kevin, do you want to just repeat what you said to me?

Mr. Kevin Kerr (Committee Researcher): It's my understanding that at the final stage, Committee Reporting Service does a concordance between the French and the English. At that point, I think the concern you raised would be addressed, but I'll certainly bring it to their attention today.

[Translation]

Mrs. Suzanne Tremblay: I haven't read the final version.

[English]

The Chairman: The clerk advises me that the cover has to be changed.

Mr. Dennis Mills: That is not the cover, Mr. Chairman.

The Chairman: I understand, but what appears on the cover has to be changed. The clerk will tell you that the subcommittee is not listed there.

Mr. Dennis Mills: Excuse me, Mr. Chairman, but I mentioned to the clerk earlier in the meeting that all of those points you've raised will be dealt with in the final packaging of the report. It's just the words you're receiving here today.

The Chairman: Okay. The second thing is that we have to agree on what cost is involved in the printing of the final report, which this committee has to authorize, and also how many copies are going to be issued.

Madame Tremblay.

• 1245

[Translation]

Mrs. Suzanne Tremblay: I have a question. For the past few weeks now, the subcommittee has been rushed a little. If we adopt the report today, since this is a public meeting, it would mean that the report would be public. We had agreed that we would not release our report until after the Quebec elections.

Mr. Dennis Mills: No, we hadn't.

Mrs. Suzanne Tremblay: You told me that the report would be tabled and made public on December 3. If we adopt it today, in my opinion... we haven't yet finished our work. How can we adopt a report when the minority opinions have yet to be tabled? That's ridiculous.

[English]

The Chairman: The report is not public until it's produced to the House. I think we should continue this meeting in camera, if the members agree.

Some hon. members: Agreed.

(Editor's Note: Proceedings continue in camera)