FINA Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Thursday, April 18, 2002

Á

1155

The Chair (Mrs. Sue Barnes (London West, Lib.))

Mr. Jan Westcott (President and CEO, Spirits Canada, Association of Canadian Distillers)

Â

1200

The Chair

Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ)

Mr. Jan Westcott

Mr. Yvan Loubier

Mr. Jan Westcott

The Chair

Mr. Yvan Loubier

The Chair

Mr. Jan Westcott

Â

1205

The Chair

Mr. Nick Discepola (Vaudreuil--Soulanges, Lib.)

Mr. Jan Westcott

Mr. Nick Discepola

Mr. Jan Westcott

Mr. Nick Discepola

Mr. Jan Westcott

Mr. Nick Discepola

Mr. Jan Westcott

Mr. Nick Discepola

Mr. Jan Westcott

Mr. Nick Discepola

Mr. Nick Discepola

The Chair

Mr. Gary Pillitteri (Niagara Falls, Lib.)

Mr. Jan Westcott

Mr. Gary Pillitteri

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 090

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Thursday, April 18, 2002

[Recorded by Electronic Apparatus]

Á  (1155)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Good morning, ladies and gentlemen. This is the Standing Committee on Finance. The agenda for the order of the day is Bill C-47, an act respecting the taxation of spirits, wine, and tobacco, and the treatment of ships' stores.

    The witnesses today, from the Association of Canadian Distillers, are Kirsten Goodwin, counsel, and Jan Westcott. Please go ahead. Who would like to speak first?

    Mr. Westcott, please go ahead.

    Mr. Jan Westcott (President and CEO, Spirits Canada, Association of Canadian Distillers): Thank you, Madam Chair. Good morning. My name is Jan Westcott. I'm the president of Spirits Canada, the Association of Canadian Distillers, which is an industry trade association representing Canadian producers of distilled spirits products. I'm joined this morning, as the chair said, by Kirsten Goodwin, who is counsel to the Canadian industry. I asked her to come with me because she helps us a great deal in our trading relationships and on our export business around the world.

    I'd like to thank the committee for arranging this special meeting and making time to hear from the industry this morning regarding proposed changes to the Excise Act 2001. We appreciate that you've allowed us this opportunity to speak to an issue of great significance to the Canadian industry.

    I'm also joined this morning by some of Canada's most well-known international ambassadors. Although I'm sure many of you would have made their acquaintance before, let me take a moment to reintroduce them to you. I'm going to start with Canadian Club. I'm going to follow with Crown Royal. I see the nod, so you have met them before. And here are Wiser's Deluxe, Black Velvet, Seagrams VO, and Canadian Mist. I'll put the two Canadians up there.

    Indeed for many people around the world the first introduction they have to Canada is through Canadian goods and services exported into their home markets. The Canadian distilled spirits industry, through our signature product, Canadian whiskey, has a 200-year history of proudly carrying our flag on behalf of Canadians to over 150 different countries around the world. With brand names like Canadian Club and Canadian Mist, we have been very proud to do so.

    Many of you know this because you've supported the industry in its attempts to develop and grow its business. Whether it was helping us gain access to foreign markets, modernizing Canadian beverage alcohol laws and regulations, helping us educate the public about the dangers of drinking and driving, or simply as ordinary consumers of our products, we appreciate the many times that members have sought to assist the industry to help develop its business here in Canada and abroad.

    You know what the industry means to Canada. At home it means thousands of jobs, an important market for Canadian agricultural products, and an essential part of the critical mass that contributes to the economic viability of Canada's food processing industry. So when we buy our glass bottles in Canada, we support the glass industry in Canada, which is vital to the entire Canadian food processing business. You also know that the successful and growing export of our flagship, Canadian whiskey, accounts for over $600 million in export earnings for Canada every year. This is an amount that we've made a commitment and a stretch goal to raise to $1 billion by 2005.

    It's important to remember that we take Canadian raw materials, we turn them into finished goods, and we export them successfully all over the world. We have been doing so for a long time and have ambitious plans to grow that export business as the world trading environment becomes more and more open.

    Unfortunately, we find ourselves in a situation where two of the changes proposed to the Excise Act, if implemented, will seriously impair our ability to continue growing our Canadian whiskey business, particularly our international sales. Specifically, I'm referring to proposals to repeal regulations in the present act that provide the essential underpinnings for standards of quality and integrity surrounding the production of Canadian whiskey, features that are vital to Canadian whiskey's strong international reputation and stature and that we have painstakingly built over many years and with tremendous investment. Also, they've been a foundation that has been assuring consumers of the integrity and high standards of our products that they can rely upon when they buy a bottle of Canadian whiskey.

    I was in Europe last year and I was presented with a bottle of Canadian Club. I looked at this bottle of Canadian Club and I said, that doesn't look right, what's wrong with that? It was a fraudulent bottle of product made to look like Canadian Club that was being sold in Eastern Europe, essentially fraudulently, a counterfeit product. But it does happen.

    The legitimacy and the integrity of the products we produce, and the opportunity for consumers to know and understand exactly what it is they're buying, and that they're the true goods, are absolutely critical to the business.

    The absence of this national regulatory foundation, even briefly, will seriously undermine and damage the integrity of products that consumers both in Canada and in all those countries around the world where we sell them have come to rely upon. Once lost, this trust and confidence in our products would be extremely difficult, if not impossible, to regain. Obviously this would be a catastrophe for our industry, and without being presumptuous, I believe also for Canada.

    I don't think anyone set out to reach this juncture, but now that we have identified the risk, we would like your help in fixing it. We ask that the committee support our request to strike out of the draft regulations pursuant to the new act the repeal of two of the nine regulations that are being proposed to be repealed. These two are the Departmental Distillery Regulations and the Distillery Regulations that are found on page 201 of the explanatory notes in regulations of the Excise Act 2001.

    I'm pleased this morning to advise committee members that the industry has been working with officials in recent days to resolve this problem. We believe the government will recommend amending the draft regulations to again include the necessary certification in blending provisions. Nonetheless, we're anxious that the committee help us ensure that our industry in Canadian whiskey is not unnecessarily put at risk. Given a satisfactory resolution to this issue, which we think is at hand, the industry is pleased to support the balance of the bill, and in fact worked for many years with the government and officials to get legislation that is more modern and more effective for all parties.

    I'm just about done, Madam Chair.

    Madam Chair, the committee should also be aware, and through it the House, of the exemplary effort the parliamentary secretary, Mr. Wilfert, has made on behalf of the bill and on behalf of the Canadian distilled spirits industry. He has certainly worked very diligently with us and conducted himself with foresight in helping resolve this thing. Additionally, numerous members of this committee, on all sides, have worked quite diligently and effectively on our behalf. To them, we say thank you for the thousands of Canadians who are employed in the industry.

    That concludes my remarks. Thank you for giving us the opportunity to speak to you this morning.

  (1200)  

    The Chair: Thank you.

[Translation]

    Mr. Loubier, do you have any questions?

    Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ): Welcome to the finance committee. If I understood correctly, sir, your problem has apparently already been solved. You worked with the parliamentary secretary, and he assured you the government could amend Bill C-47 to retain the two regulations on spirits. So what are you asking of the finance committee? Are you asking us to reiterate the commitments that have already been made by the parliamentary secretary or the Department of Finance? What do you expect us to do based on what you have just told us?

[English]

    Mr. Jan Westcott: Clearly we appreciate all the efforts that have been going on with the department and with the parliamentary secretary. I think it is important, if we are able to gain the support of this committee, to protect the integrity and maintain these provisions. If we could ask for the support of this committee for those things, I think it is important. In principle, it is an extremely important thing to do.

    Our industry, like many Canadian industries that export, relies on standards that keep everybody producing products consumers in this country and elsewhere can rely upon. If there are gaps in that, if there are breakdowns in it, everyone gets hurt. All the dollars we've invested to create our brands, to build our reputations, are damaged, and when consumer products experience those kinds of difficulties, it's extremely difficult to rebuild trust among the consumers. So, yes, I would like to have, if that's possible, an endorsement from the committee. I believe specifics will be forthcoming, but that's what I'm asking for this morning.

[Translation]

    Mr. Yvan Loubier: Could you give me the numbers again, the numbers of the regulations in question in the bill, please?

[English]

    Mr. Jan Westcott: There are two. One is called the Distillery Departmental Regulations. The second is called Distillery Regulations. They are found on page 201 of the explanatory notes and regulations of the Excise Act 2001.

    The Chair: For the record, may I clarify that it is regulations you are talking about, not clauses of the bill? I think we mixed that up there. It was regulations that you mentioned earlier.

    Mr. Loubier.

[Translation]

    Mr. Yvan Loubier: That's fine.

[English]

    The Chair: Are there no more questions?

    Mr. Jan Westcott: May I speak on one more issue? It's on page 201, and I'm happy to leave this with people. There's a chart that shows the regulations. It's number 2 and 3 on this chart.

  (1205)  

    The Chair: Are there any other questions? Go ahead, Mr. Discepola.

    Mr. Nick Discepola (Vaudreuil--Soulanges, Lib.): Thank you, Madam Chair.

    I understand you've been working with the parliamentary secretary and you're on the way to resolving the issue, so technically this committee has nothing to do or recommend, do we?

    Mr. Jan Westcott: Theoretically. We believe that's the case.

    Mr. Nick Discepola: If we wait for Mr. Wilfert's proposed amendments, then, we can get that to the committee.

    Mr. Jan Westcott: I expect so.

    Mr. Nick Discepola: I have one point to ask about for my own edification. Could you explain to me what a 9.09% flavouring component is?

    Mr. Jan Westcott: In Canada, for as far back as we've been making whiskey, we've looked for ways to differentiate our product from other products. One of the ways we do that, and have done that, in Canada--some of the records I've looked at go back over 100 years--is to flavour our whiskey with other whiskies and wine. If you go back many, many years, the rule of thumb was about 10%. In converting that to codification, the actual conversion worked out to be 9.09%. That compares, for example, with what happens in the United States. When they make a blended whiskey in the United States, they can add 80%. Therefore, our provisions are quite modest and they're Canadian. Other countries do other things and we respect that. They all make their products.

    I have a background in the beer business as well as the wine business, and there are always discussions throughout all of these industries about the specific nature of the products that individual countries make. In Germany, many people practice a process called Reinheitsgebot, which means you only use four specific things. Brewers in Canada don't do that.

    We have distinct things in our wine industry, because of the nature and circumstances of Canada, that make our products unique. They are Canadian, and so it is with Canadian whiskey.

    Mr. Nick Discepola: Will this restrict you from the types of mixtures and concoctions you can use to differentiate your product?

    Mr. Jan Westcott: Yes, it does.

    Mr. Nick Discepola: Something that's blended to the extent of, say, 80%, is that supposed to be a superior or inferior product to something that's only blended 10%?

    Mr. Jan Westcott: I try to avoid saying anything unkind about someone else's product. Let's just say it's not--

    Mr. Nick Discepola: Let's say it's a debilitated wine.

    Mr. Jan Westcott: No. I was the president of the Canadian Wine Institute for many years, so I think we make exceptionally good products in Canada. As I used to say in the beer industry and in the wine industry, and certainly in the whiskey business, Canada doesn't have to take a back seat to anybody in terms of the quality of the products we make. The fact of the matter is our products are distinctive and they are Canadian. As well, we have a long history of making them.

    My preference happens to be for Canadian whiskey. Let's remember, in the United States this product--Canadian whiskey--is the largest selling whiskey in the United States. We outsell Scotch, Bourbon, Irish.

    Mr. Nick Discepola: I was just trying to ask why that would restrict you. If you made it 60%, you don't have to go up to 60%; you could stay at 10%, if that made your product better. But it would give latitude for other people, if they felt their product was better by going to 50%--

    Mr. Jan Westcott: No. We've worked for decades with these rules, and these are what the consumer knows and accepts and what represents Canadian whisky.

    Mr. Nick Discepola: Thank you.

    The Chair: Thank you.

    Mr. Pillitteri has a question.

    Mr. Gary Pillitteri (Niagara Falls, Lib.): I want to finish this off by asking the question, is the product you are using at 9% in line with the wine industry's appellation designation?

    Mr. Jan Westcott: Yes, it's comparable.

    Mr. Gary Pillitteri: It's 3% or 5% of a different product, in order to maintain that quality and standard. So it's similar to an appellation designation.

    Mr. Jan Westcott: I would say it's comparable.

    The Chair: I will just inform my colleagues that there is a vote called in the House. Are there other people who have more questions? Mr. Loubier? No.

    Is there anyone at the table who wishes to comment? Mr. Westcott, do you have anything further?

    Mr. Jan Westcott: No, I'm fine.

    The Chair: Ms. Goodwin?

    Do you feel you have made your case here today?

    Mr. Jan Westcott: Yes. Thank you.

    The Chair: Okay. I wanted to make sure that you and colleagues have had adequate time here.

    Thank you very much for joining us today.

    As you know, we're going to do clause-by-clause on this bill on Tuesday afternoon. The clerk has circulated amendments from the Canadian Alliance, the Bloc, and the government too. So if there are any other amendments, please get them in to the clerk so that he has them and we'll be ready.

    I thank you very much for your attendance. Colleagues, I'll see you in the House at the vote.

    The meeting is adjourned.