CHER Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 18, 1988

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[English]

The Vice-Chairman (Mr. Ted McWhinney (Vancouver Quadra, Lib.)): I declare the session open.

We have witnesses from Time Canada and Reader's Digest Magazines. The witnesses have requested, as is quite proper, that they make their presentations and take the questions separately.

We'll begin with Time Canada. I believe that's agreeable to all the witnesses present.

Mr. Brown will lead—or Mr. Russell.

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Mr. Russell, maybe you could, in opening, introduce your colleagues.

Mr. George Russell (Editor, Time Canada Ltd.): Thank you, Mr. Chairman, and members of the committee.

Today I am appearing on behalf of Time Canada Ltd., which has its head office in Toronto. Appearing with me is Donald F. Brown, president of Time Canada for the past four years, and our long-time Canadian counsel, the Hon. Ron Atkey, a former member of this House, now a senior partner at Osler Hoskin and Harcourt, a Canadian law firm.

Our detailed brief of some 21 pages was submitted yesterday, in both official languages, to the clerk of the committee. I believe it has now been distributed to all committee members. I have with me copies of my oral remarks, which summarize the brief. Members may obtain copies from the clerk.

We're pleased to be appearing before you as the first private sector witnesses following presentation by the minister and her officials yesterday. Time Canada has been a major participant in the Canadian magazine industry for over 55 years, and we have seen a variety of governmental initiatives during this period, from royal commissions to special Senate committees to task forces to parliamentary committees.

In our view, none of the governmental initiatives studied or recommended by these bodies have so seriously and negatively affected our business as does Bill C-55, which is before you today, and no initiative considered before this is as destructive, in our view, of some important Canadian values.

Before outlining our grave concerns, let me give you some background by way of a summary of the detailed information that's in our written brief.

Time Canada has published a weekly Canadian edition of Time magazine since February 15, 1943. Currently we have 305,000 subscribers, virtually all of whom are in Canada, and we sell an additional 13,000 copies of the magazine each week on newsstands. We are Canada's sixth-largest magazine when measured by paid subscriptions and newsstand sales combined. Time Canada employs directly some 54 Canadians involved in various aspects of selling advertising services, soliciting subscriptions, supervising printing and coordinating circulation by mail, and distribution to newsstands.

Our president, Mr. Brown, is a U.S. citizen who currently resides in Toronto. He has had extensive experience with Time in similar posts in Hong Kong, Japan, and regional centres of the U.S.

I am a Canadian residing in New York. I co-ordinate the work on the Canadian edition with other members of the senior editorial staff of Time in New York. I was born and raised in Canada, and graduated from the University of Calgary. I began my professional journalism career in Ottawa as the national bureau chief of the Canadian University Press before joining the staff of The Globe and Mail. For a period in the early 1970s, I was a member of the Parliamentary Press Gallery in this building as a Globe and Mail reporter. I have worked for Time since 1974.

When it was established in February 1943, more than two years before the end of the Second World War, Time Canada was the second international edition to the magazine, after the Latin American edition, established in 1941. Soon after its inauguration, Time Canada contained a special section, “Canada at War”. The magazine enjoyed immediate success and acceptance.

Editorial copy for Time Canada has always been a hybrid of locally written Canadian stories, photographs, and features combined with material from Time's worldwide editorial pool produced in New York and elsewhere. The aim has been to produce “Time for Canadians”. Time has never presented itself to its readers as a Canadian magazine, but as the Canadian edition of a U.S.-based magazine with editorial perspectives and operations that range worldwide. In the same vein, various stories from the Canadian edition of Time have appeared in other editions of the magazine worldwide.

While Time Canada enjoyed great success in its early years, it became the subject of some adverse comments as early as 1961, when the royal commission on publications, known as the O'Leary commission, expressed concern regarding the non-Canadian ownership of Time Canada and Reader's Digest, given their market prominence at that time.

Significantly, the O'Leary commission rejected the thought of expelling the two publications, on the grounds that:

Singling out for expulsion two corporations that have done business in Canada for nearly three decades, and done it with flair and fairness and excellence, struck us as somehow inconsistent with the Canadian character.

The commission concluded that:

In an area as vital and sensitive as that of the press, whatever was done should be positive rather than negative with the goal of promotion of the Canadian periodical, not the suppression of the foreign.

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The O'Leary commission recommended, and Parliament enacted in 1965, section 19 of the Income Tax Act, restricting the deductibility by advertisers of expenses in respect of advertising in non-Canadian periodicals where the advertising is primarily directed at the Canadian market. Time Canada and Reader's Digest were grandfathered under this provision, given their longstanding presence in Canada and general approval by the commission.

The position of Time Canada and Reader's Digest came under parliamentary scrutiny again in the early 1970s, as a result of the Senate committee chaired by Senator Keith Davey. The Davey committee recommended that the grandfathered status of Time Canada and Reader's Digest be removed vis-à-vis section 19 of the Income Tax Act. This was done through legislative amendment in 1976.

Shortly thereafter, Time Canada closed its editorial offices in Montreal and reduced its network of news bureaus in the country from four to one, in Ottawa. The result was that virtually all the editorial material thereafter was produced in New York, with the aid of a single correspondent and local stringers.

In the early 1990s, the Ottawa bureau was closed down, but in 1996 a news bureau was added in Toronto, where bureau chief Andrew Purvis, a Canadian born in Montreal, and with extensive international experience for Time elsewhere, co-ordinates national news coverage.

Even after the closure of its Montreal offices, however, Time Canada did not become a copy of the U.S. edition of Time. It remained associated with and edited by staff members at Time's international editions, and differed significantly from the U.S. edition in a number of ways. Non-U.S. news and social science coverage was always more extensive than in the U.S. edition, in keeping with the editors' awareness that Canadians have a more internationalist perspective than many American readers.

The Canadian edition took part in special projects co-ordinated by the non-U.S. editions of Time around the world, including a comprehensive analysis of the United Nations at age 50, where Canada's External Affairs input helped shape the analysis for all of Time's international readers, worldwide.

Time Canada and Time Latin America cooperated on the coverage of the Summit of the Americas, which meant that news of Canada's new high profile in the hemisphere appeared not only in this country but all across Latin America. The same applied to Prime Minister Chrétien's trip to Cuba. Special cultural reporting, including some of the first international reports of such Canadian institutions as Cirque de soleil, was added on a global basis.

When overall unique Canadian editorial content remained relatively small in terms of total magazine pages, Time Canada could be as much as 40% different from the U.S. edition of Time, and was much of the time substantially different.

Time Canada also retained its franchise to do extensive editorial special reports on Canadian events for its readers where the magazine's editors felt its editorial perspectives could make a significant contribution, and to urge Canadian stories on other editions of the magazine. Canadian prime ministers Pierre Trudeau and Brian Mulroney both have appeared on the U.S. cover of Time. Time Canada has made a special point of cover-length coverage of Canadian Olympic participation, of Canadian national elections, and of political developments in Quebec.

On the cultural front, the Canadian and international editions of Time were the first major publications outside Canada to hail the arrival of Celine Dion as one of the world's “Divas of Pop”—Time Canada's phrase—and editions of Time worldwide have written about the achievements of Canadian paleontologist Phil Currie.

In 1997, both the Canadian and Asian editions of Time hailed the arrival of Vancouver as—and I quote—“the newest Asian capital on the Pacific Rim”. In May 1998, Time Canada published a special report on the brain drain to the U.S., which also helped spark an important national debate.

A number of distinguished contributors, including Canadian trade negotiator Simon Reisman, have recently written for Time Canada. In the current edition of the magazine, former Canadian Broadcasting Corporation chairman Patrick Watson comments on CBC autonomy.

In general, the thinking behind this editorial strategy has continued to be to produce “Time for Canadians”—that is, a magazine that does not attempt to mimic Canadian publications but instead brings Time's global and hemispheric perspectives and editorial standards to bear on Canadian issues where the editors consider it relevant and justified.

In January 1993, Time Canada sought to expand its business by announcing plans to publish Sports Illustrated Canada, after confirming with the Government of Canada that it would not contravene Canadian law.

This led to extensive lobbying by the Canadian Magazine Publishers Association—which is to appear before you next week—that in turn resulted in the government announcing, on March 26, 1993, the establishment of a task force on the Canadian magazine industry, just five days before the first issue of Sports Illustrated Canada appeared on the newsstands or was received in Canadian homes.

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On April 18, 1993, one week following the publication of the inaugural edition of Sports Illustrated Canada, the deputy minister of Revenue Canada wrote to us, stating that under tariff arrangements, the new publication was perfectly legal.

In July 1993, the government issued guidelines, under the Investment Canada Act, providing that an investment by a non-Canadian to publish a periodical in Canada was subject to notification, meaning the investment is reviewable and can be prohibited by the Minister of Industry. Sports Illustrated Canada had received written confirmation from Investment Canada that it would not be subject to the Investment Canada Act because it was an expansion of the existing business of Time Canada.

On March 24, 1994, the task force on the Canadian magazine industry delivered its final report, which called for an 80% excise tax on advertisements contained in split-run editions of periodicals, but which would permit Time Canada, and others operating prior to March 26, 1993, to be completely grandfathered, and would permit Sports Illustrated Canada to be grandfathered to the extent of seven issues per year, the number actually published in 1993.

The government over the next year and a half moved to implement the task force report, but without any grandfathering for Sports Illustrated Canada regarding the 80% excise tax.

Despite arguments raised before the House Standing Committee on Finance and the Senate Committee on Banking, Trade and Commerce as to the fairness to Sports Illustrated Canada and the possible illegality of the bill under international trade law, the bill was enacted into law and proclaimed in force on December 15, 1995.

Shortly thereafter, because of the punitive effect of the 80% excise tax, Time Canada suspended publication of Sports Illustrated Canada, which that year had published 12 issues and had announced plans for 18 issues in 1996 and a longer-term goal of weekly publication.

Since early 1996, Canadian subscribers and newsstand purchasers have received the U.S. edition of Sports Illustrated on a delayed basis, and Canadian content has diminished considerably.

The trade law debacle for Canada at the World Trade Organization has already been outlined to you by others. Suffice it to say that the World Trade Organization did not deal with the validity of section 19 of the Income Tax Act, which restricts the deductibility by advertisers of expenses in non-Canadian periodicals where the advertising is directed primarily at the Canadian market, since the matter was not challenged by the U.S. trade representative. Neither was challenged the July 1993 guideline under the Investment Canada Act restricting the establishment of new magazines in Canada by a non-Canadian. These two policy instruments of the Government of Canada remain in force today and provide significant commercial advantage to Canadian periodicals.

Moreover, the Canadian government, in its actions to comply with the WTO decisions by the October 30, 1998, deadline, appears to have found a way to continue the postal subsidy, of some $47 million a year, by reshaping this as direct subsidy paid by the Department of Canadian Heritage to the Canadian magazines' deposit accounts with Canada Post.

In summary, the government has three significant policy instruments to promote, assist and support Canadian periodicals: section 19 of the Income Tax Act; the Investment Canada guideline; and the postal subsidy.

Before proceeding to specific measures in Bill C-55, let me deal with the current business conditions faced by Time Canada. Time worldwide has a weekly circulation of nearly 6 million, in nearly 200 different countries around the world. Time Canada comprises 320,000, or 1%, of the Canadian population. Our ability to sell advertising—without restrictions—exists in nearly every one of the nearly 200 countries in which we circulate. Significant local advertising appears regularly in France, Germany, Hong Kong, Australia, Pakistan, India, South Africa, Brazil and Mexico.

In Canada, we have not been able to partake of the postal subsidy at any time since our inaugural edition in 1943. In today's terms, compare the net cost to mail a copy of Maclean's magazine, after they receive the postal subsidy, which is 8.2¢, when the cost to mail Time Canada is approximately 30¢.

Since the mid-1970s, we have operated under a discriminatory tax regime—under section 19 of the Income Tax Act—that adversely affects our advertisers, which in turn affects our advertising volume and profitability. Our advertising prices, based on circulation costs per thousand, are 9% higher than any other major magazine, such as Maclean's, and some 30% to 60% higher than most other Canadian magazines. This is the exact opposite of the charge raised by the Canadian Magazine Publishers Association.

Canadian readers must really want our magazine, because they pay a basic price of $77 for a one-year subscription. This is one-third higher than the nearest Canadian competitor, Maclean's, which charges $51.

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In fact, our subscription rate is 28% higher than Time's main U.S. edition. In no way can our pricing strategy be construed as an attempt to undercut any Canadian publication.

Minister Copps and others have made much of the presence of non-Canadian magazines on newsstands, but in measuring the relationship between Canadian and non-Canadian magazines in Canada, the primary focus should be on circulation to Canadian households, which represents 75% of all periodicals, since only 25% or less are sold at newsstands. Our best estimate of magazines distributed to Canadian households, including both paid subscriptions and controlled circulation, is that some 80% to 85% are Canadian-owned and -published.

In the Los Angeles Times, syndicated today, Minister Copps herself said that 75% of all magazines sold in Canada are Canadian.

There are only eleven Canadian magazines with circulations over 500,000. Five of the eleven are free to the consumer—controlled-circulation periodicals. This seems to be a phenomenon unique to Canada, and one that in our view receives insufficient attention as a contributor to any problems of the Canadian magazine industry. The dominance of controlled-circulation magazines in Canada means that Canadian publishers rely heavily on advertising revenue, artificially propped up by postal subsidies, and pay less attention to consumer commitment to buying their magazines.

This is a choice, but it's one that severely disadvantages magazines. Advertisers do not value controlled-circulation magazines to the same extent that they value consumer-purchased magazines. And when a publisher gives up or minimizes one of the two of its revenue sources, the consequences often translate into mediocre editorial products, a weak business plan, and an unattractive advertising option. That option in turn weakens the attractiveness of the entire magazine industry.

If Time Canada's pricing strategy poses no threat to the Canadian magazine industry, the same can be said, even more emphatically, about any threat it poses to the advertising market. Despite loud claims by CMPA lobbyists that Canadian editions of foreign magazines would engage in so-called predatory pricing that would destroy the Canadian share of the market, there is no evidence whatsoever to back up this claim.

In this regard, it is worth pointing out that a review of the advertising pages in English Canadian magazines, as reported by leading national advertisers, indicates Time Canada's share of market has declined from 6.9% in 1992 to 3.3% in the first nine months of 1998. Total Canadian media advertising for 1997, including TV, radio, outdoor, and newspapers, was $5 billion dollars. Time Canada's share of this pot was an infinitesimal 0.04%, or less than half of our total at the time of the Davey committee hearings in 1970.

We urge committee members to examine closely a confidential study commissioned by and submitted to the Department of Canadian Heritage on January 15, 1998, prepared by the Toronto advertising agency Harrison Young Pesonen Newell. That study contains some significant findings that argue against the sort of protectionist measures contained in Bill C-55. They also contradict the claims of the Canadian Magazine Publishers Association.

Consider these findings.

According to the study, current magazine advertising revenues are low in Canada but would grow significantly with the introduction of split-run competition. In fact, the study says magazine advertising revenue could achieve a 61% growth over three years.

The underdeveloped nature of the magazine medium in Canada, according to the study, is caused primarily by:

...lack of advertiser available titles and little or no Canadian title coverage for many editorial segments—specifically Men's, Sports, Fashion and Youth.

With a more open market in English Canada, the study says, the magazines most likely to survive would be those Canadian publications best able to respond on price; those offering unique editorial content; and those with targeted audiences.

If Canadian content is not unique content, what is?

We raise these points to defend ourselves against some of the assertions being made about split-run magazines, of which we are the major example currently in place in Canada. But our main point is to focus on clause 21 of the bill. This is not grandfathering of our magazine; it amounts to a freeze on our business.

The government, at the time of the introduction of Bill C-55 on October 8, 1998, published a backgrounder, which contained this statement:

The Act will not affect foreign publishers who now supply advertising services directed at the Canadian market. These foreign publishers will be able to maintain existing operations in Canada.

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Whether by accident or design, this statement is a misrepresentation of the actual words of clause 21. That clause would limit the business of foreign publishers such as ourselves to:

an extent no greater than that to which the foreign publisher lawfully supplied such advertising services during the year before the day on which this Act is introduced in the House of Commons.

Far from being a traditional grandfather clause, this should be characterized as a freeze on our business activities and those of the few other foreign publishers now supplying advertising services directed at the Canadian market. How such advertising services would be defined is left unspecified, to be determined later by regulation, but by setting such a ceiling, it raised the very real prospect that we could be engaged in a legitimate business activity one day and be declared in violation of the law the next day, for exactly the same activity.

Clause 21 is a graphic example of arbitrary and unfair legislation. For those familiar with the way advertising is placed in magazines, it could leave publishers open to violating the law three, four, or an infinite number of times in a given period as advertisers pull their ads and place them far in advance of publication. Time Canada is not often sure itself, until the very week of publication, what the cumulative total of its advertising has been.

Nor does the section make explicit what every foreign publisher is forced to consider as the freeze limit approaches. Should the publication be suspended, or should Time Canada publish ad-free magazines for the rest of the year?

In fact, once the language of clause 21 of the bill is enacted, it becomes clear that Time Canada could well be the first, and perhaps the only, publication against which the investigations contemplated by clauses 4 to 6, the ministerial demands and judicial proceedings in clauses 7 to 9, and the offences and punishment contemplated by clauses 10 to 16, will ever be applied.

The reason is simple. In general, the bill is intended as deterrent legislation, with draconian provisions intended to make foreign publishers think twice before creating a Canadian edition. But for non-Canadian publications that already exist, of which Time Canada is by far the largest, the arbitrary ceiling on business activity, represented by clause 21, acts as a trigger for the application of this harsh law. And as we have already pointed out, it is quite possible for us to be in violation of this ceiling before we are even aware of it.

The overreaching nature of the freeze effect of clause 21 has been acknowledged to us in private by the assistant deputy minister of Canadian Heritage responsible for developing the draft legislation, and by representatives of the Canadian Magazine Publishers Association.

We take some comfort from various concerns expressed by opposition members of Parliament during the debate in the House on October 22 and 29 concerning clause 21 and the potential for arbitrariness in the regulating power under paragraph 20(c). But by freezing Time Canada's business operation in this fashion, the framers of clause 21 have also taken no account of the dynamics of a real business operation, outside, perhaps, the framework of a regulated monopoly.

Time Canada did not lose money during the 12 months before this bill was tabled in the House, but it has done so recently. The strictures of the ceiling, in addition to triggering harsh penalties, make no allowance for investment of additional amounts of money in the product, improving its quality, accommodating future cost increases or even, God forbid, a resurgence of inflation. In effect, clause 21 puts Time Canada in a vice that over either the short term or the long term would effectively destroy a business, and a publication that has operated successfully in this country for over 55 years.

There was much discussion during the debates in the House last month concerning trade remedies that might be invoked by foreign governments, particularly that of the United States, if Bill C-55 becomes law. As we understand it, the discussion focuses on the options open to the U.S. trade representative as to whether to return to the World Trade Organization for relief or to proceed with retaliatory measures under articles 2106 of NAFTA.

However, if clause 21 remains in its present form, we are constrained to raise the prospect of another trade remedy that may be pursued under article 1110 of NAFTA, or its equivalent, article 1605 under the FTA. This will be based on the fact that clause 21 of Bill C-55, at least in the case of Time Canada, would amount to expropriation of a significant and substantial investment of a U.S. investor in Canada.

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Article 1110 provides that if Canada has directly or indirectly expropriated such an investment, the U.S. investment can require payment of compensation equivalent to the fair market value of the expropriated investment immediately before the expropriation took place. Such compensation must be paid without delay and be fully realizable.

It is not our desire to precipitate a trade dispute of this type with Canada. The better course, which we would recommend to this committee and to the government, is to amend clause 21, replacing it with a proper grandfathering clause that would simply provide that the act would not apply to specific foreign publishers listed in a schedule to the act. That schedule would include Time Canada and other foreign publishers supplying advertising services directed at the Canadian market who were established here prior to the introduction of Bill C-55.

Apart from our primary complaint concerning the inadequacy of the grandfathering clause, we believe Bill C-55 overall will create a chilling effect on press freedom in Canada, and should be carefully and cautiously considered by members before proceeding.

The government and the minister made much of the fact that Bill C-55 is designed to promote Canadian content and to support Canadian culture. Asserting that advertising revenues are the backbone of Canadian magazines, they claim Bill C-55 will give Canadians, “a chance to hear our own story, to see our own creators, to watch our own talent and to hear our own voices at home and abroad”. These are laudable aims, and we do not stand in the way of them, but we have already noted that in least one specific case, that of sports, no magazine publisher other than the publishers of Sports Illustrated Canada feel the need to tell those stories, even now, which hardly points to the need for escalated protection.

What is really under consideration here are the government's specific means to an end, not the end itself. In that regard, careful consideration should be paid to some of the side effects of this draconian way of approaching this issue. In its attempt to avoid subsidies or specific taxes in this bill in pursuit of cultural objectives, the government may have created an instrument that causes far more damage to the fabric of Canadian society and values. One of those values, we think, is press freedom.

I would urge members to consider the chilling effect on press freedom that may result from just this one provision of Bill C-55.

Under clause 11, even individuals who acquiesce in the supply by a foreign publisher of advertising services directed at the Canadian market can be found guilty and individually fined up to $100,000, even if, remarkably, the foreign publisher itself is not prosecuted. What constitutes “acquiescence”, and who can be convicted of it, has not been defined. But this loose wording could very well include editorial officials of the accused foreign publication operating in Canada or even elsewhere, since the legislation is explicitly extraterritorial. It is hard to see any purpose in this clause beyond intimidation.

The cumulative effect of these investigative, ministerial, judicial and evidentiary powers in this bill, supposedly in pursuit of Canadian content and culture, is inherently harmful to the notion of a free and open press in Canada, however that press may be defined.

No doubt a strong case will be made by Canadian Heritage and others that what is under attack here is not the press but a series of business practices, and that what the bill aims to do is to control business practices. But we would like to emphasize that in most regimes where control of the press is systematically practised, that control is precisely exercised through business practices, the better to avoid international opprobrium and violation of United Nations charter obligations.

We have observed that such pressures elsewhere can include, for example, selective taxes, control of newsprint supplies and import licences—and the list goes on.

The point is not that the Government of Canada is aiming to join a less-than-distinguished roster of countries where freedom of the press is merely an option. The point is more that with the adoption of a draconian and intrusive measure such as Bill C-55, press freedom suffers as a consequence. Today the object of such legislation is magazines. Tomorrow it could be newspapers. In general, the criminalization of publishing activity is a hazardous enterprise at best, and hardly in keeping with the Canadian traditions of press freedom.

Protection against this type of chilling effect finds expression in paragraph 2(b) of the Canadian Charter of Rights and Freedoms, wherein it is stated that:

Everyone has the following fundamental freedoms

the freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication.

Against that statement, Bill C-55 prohibits a whole class of persons, Canadian advertisers, from advertising in magazines that are under the authority of foreign publishers. This is an unambiguous limitation on their expressive ability. It is no answer to say that Canadian advertisers are free to advertise in Canadian magazines.

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In our view, Bill C-55 seriously violates the freedom of the press. It tells the magazine press what sorts of advertisements they can and cannot permit. Canadian advertisers are categorically prohibited from advertising in certain magazines read by Canadians. It is no answer to say that restrictions on advertising do not infringe protected freedoms because the content of editorial commentary is not affected. As a practical matter, advertising and editorial content are part of an inseparable whole, a point asserted by the WTO appellate body in its 1997 decision on Canadian magazines.

In summary, we believe Bill C-55 is unnecessary for the government to implement its policies on Canadian magazines, given other instruments now in place. We also believe it is unnecessary in terms of the dominance Canadian publishers already enjoy. To repeat, there are three significant policy instruments that already tilt the playing field in favour of Canadian publishers—section 19 of the Income Tax Act, the $47 million postal subsidy, and the magazine guideline under the Investment Canada Act.

Why does the Canadian magazine industry continue to lobby for more than the near total protection they already enjoy?

Thank you for your attention. We welcome your questions.

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Russell.

We will follow the usual procedure and commence with questions from the opposition, starting with Mr. Penson.

Because of the time constraints, I will have to limit each of the interveners to five minutes, unfortunately.

Mr. Charlie Penson (Peace River, Ref.): For questioning, Mr. Chair?

The Vice-Chairman (Mr. Ted McWhinney): Yes.

Mr. Charlie Penson: Well, that doesn't leave much time, does it.

The Vice-Chairman (Mr. Ted McWhinney): I know. The witnesses were advised that we prefer briefs to be limited to ten minutes, but it's a matter of their using their own time. We have to give time, though, to Reader's Digest. That was the undertaking we made.

Mr. Charlie Penson: Mr. Chairman, thank you for the opportunity to be here today, and I thank the panel for bringing this important issue before us.

I want to make a point, to start off with, that the official opposition believes this is regressive legislation. We believe the promotion of our culture is far more important than the protection of it. The opportunities to be able to promote that culture and our entertainers' ability to be able to promote their very livelihood in different countries around the world is very important to us.

In that respect, it's a concern to us that other countries may put up protectionist measures as well. I think it's important, indeed incumbent upon this committee, to ask about and assess the impact of potential retaliatory legislation by other countries.

I would ask the panel how they see that retaliation coming, if in fact it does. I want to say also that Canada has been one of the main proponents for trade rules around the world, coming out of the Second World War, setting up rules to operate by. Agriculture was just brought in around 1993, and so on. Canada has been pushing hard for that.

It's my understanding that under the NAFTA investment agreement, chapter 11, the possibility exists for an action by your company by way of looking at the expropriation factor as an opportunity to argue that you have lost business as a result of this legislation, and therefore could take action. There's also the opportunity at the World Trade Organization for the United States to take action.

Can you just expand, in the limited timeframe we have, on what form this retaliatory action might take, what it might cost Canada?

Mr. Ron Atkey (Osler Hoskin and Hancourt, Counsel to Time Canada Ltd.): Mr. Penson, this is a very complex subject that doesn't lend itself to a two-minute answer in a five-minute question period. I would recommend, however, that—

Mr. Charlie Penson: If we don't have time, I would ask the chair if we could have a written response from the group here today, because I think it's an area that we do need some detailed analysis on.

Mr. Ron Atkey: Let me make a suggestion that might be helpful.

The Vice-Chairman (Mr. Ted McWhinney): You could perhaps make a short response to Mr. Penson at this point, but if you would submit a written memorandum, we will undertake to read it into the record.

Mr. Ron Atkey: We will undertake to do a written memorandum regarding the position of a private investor under NAFTA—and it's only under NAFTA, chapter 11.

For the other part of the trade story, if you will, which is a much broader state, that is really the purview of a state—that is, of a government.

My own suggestion, frankly, is that there is expertise within the Government of Canada—the Department of Foreign Affairs and International Trade, in particular, that argued the earlier magazine case in Geneva—that considers these matters relating not only to magazines but also a whole host of issues.

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I think it would serve this committee well if representatives of that department were brought in and asked to share their views. I, quite frankly, would be willing to adopt their explanation, as a matter of law and practice, of how the system works both before the World Trade Organization and under binational panels established under NAFTA, or in some cases the FTA.

It's a complex area. I think this committee needs advice, and we have it here in Ottawa.

Mr. Charlie Penson: Thank you for that. I don't know just how we're going to work this, with the limited amount of time we have, but it seems to me that what we do need to know is what the costs might be for taking this type of action.

Under NAFTA, if you disregard the chapter 11 and go to the other sections, we supposedly have a cultural exemption, but it does say in there as well that other countries can take retaliatory action, so it might not even come back to hit Canada in the area of culture.

Would you agree with that?

Mr. Ron Atkey: That's correct. Under the provisions of NAFTA, the United States trade representative is entitled to recommend to the government measures of equivalent commercial effect. Those measures can relate to any area of commerce or activity in Canada, and deny benefits to Canadians trading with the United States in other services or in goods.

Mr. Charlie Penson: So in fact it might actually come back in a totally unrelated industry, where we are vulnerable. Canadian farmers, for example, could get hit as a result of this in a retaliatory action.

Mr. Ron Atkey: That is correct. Now, we do not have a precedent. This is still a fairly new area, and neither government has fully explored the extent of either the cultural exemption or the right of retaliation, but the words permit some extreme activity on both sides of the border.

Mr. Charlie Penson: Mr. Chairman, how long do I have?

The Vice-Chairman (Mr. Ted McWhinney): I can indulge you a moment or two more. I would be very grateful if you would be very brief, though.

Mr. Charlie Penson: I have a brief question that possibly they can supply us with a written response to.

With regard to page 6 of your written presentation, you talk about the trade law debacle that took place at the WTO and about a couple of areas that were not addressed there, that the WTO, “did not deal with the validity of section 19 in the Income Tax Act restricting the deductibility by advertisers of expenses of non-Canadian periodicals”. Is that because they were not asked to, or is there a possibility of that case being made at the WTO and the WTO panel ruling against us there as well?

Mr. Ron Atkey: I'm advised that the U.S. government has apparently decided, for its own reasons, not to pursue that as part of its challenge.

Mr. Charlie Penson: All right.

That's fine, Mr. Chairman.

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Penson.

We will take note, Mr. Atkey, of your suggestion, and particularly your confidence in the government services reporting on the technical aspects. Maybe we can take that up.

[Translation]

Mr. de Savoye from the Bloc Québécois.

Mr. Pierre de Savoye (Portneuf, BQ): I listened attentively to your presentation and I have two questions for you, Mr. Russell. On page 8 of your brief, you say:

[English]

Current magazine advertising revenues are low in Canada but could grow significantly with the introduction of split-run competition. In fact, magazine advertising revenues could achieve a 61% growth over three years by expansion.

[Translation]

Mr. Russell, unless there's some magic involved, the advertising base in Canada will not achieve such significant growth in two years merely because of the decision to allow split-run magazines in Canada. If the advertising pie, at the rate of 61%, is taken up by split-run magazines, who will be the loser?

[English]

Mr. George Russell: Is there a second part to the question? You mentioned two questions.

Mr. Pierre de Savoye: I have two questions. This is the first one.

Mr. George Russell: Do you want one answer at a time?

Mr. Pierre de Savoye: Please.

Mr. George Russell: I did not author the study by Harrison Young Pesonen Newell. This is a study sponsored by the Department of Canadian Heritage, and I would urge all of you to ask the heritage department to give you a copy.

• 1615

The study, as I have read it, says those funds will come from television and newspaper, or cable TV, I think, properly. I'm recalling this. I don't have a copy with me.

The study also makes the point that those are the sections that have most benefited, perhaps asymmetrically, from the weakness of the Canadian magazine market. In other words, this would be not a magical appearance of funds, as you suspect—although I have a magical trick I will perform in a minute on this point—but it does indicate that it will help redress the competitive balance between magazines and other sections of the Canadian media that have benefited extraordinarily from the weak magazine section.

From my own experience, and extrapolating from another part of the study, I would point out that the study points out that there are no magazines in important areas where there is usually a lot of advertising—in men's magazines, sports, fashion and youth. One would suspect that even though the new advertising funds would not magically appear, the introduction of new products would cause new advertisers to take a new look at this market, which is our experience, by the way, in launching other magazines in the United States.

[Translation]

Mr. Pierre de Savoye: What your suggestion amounts to, Mr. Russell, is robbing Peter to pay Paul. I'm not sure that's the best way.

My second question relates to another statement on page 8 of the same study:

[English]

With a more open market in English Canada, the magazines most likely to survive would be those...publications best able to respond on price;...

[Translation]

Split-run magazines do raise a problem here. For organizations such as yours, the production costs for the second edition, the Canadian edition, are lower than those involved in producing the magazine directly from scratch since some of the costs are already paid off by the American publication. In other words, your costs are of necessity lower than if you were producing an authentically and exclusively Canadian magazine. Therefore, the ability of a Canadian magazine to beat you on price would be very slight. It would be very difficult for a Canadian magazine to outdo a split-run magazine when it comes to price.

The study therefore concludes that in the short term, Canadian magazines would disappear. Do you agree on that point, Mr. Russell?

[English]

Mr. George Russell: Not exactly.

I might say a couple of words and then turn this over to my colleague, Mr. Brown.

First of all, we're not talking about robbing Peter to pay Paul. We're asking Peter to give back the money he took from Paul in the first place.

Mr. Pierre de Savoye: Wouldn't the effect be the same?

Mr. George Russell: No, not necessarily. If you have a weak magazine sector, and your intention is to preserve it, I don't understand why that effect would be the same.

Mr. Pierre de Savoye: Okay. You don't understand, and that's the answer.

Mr. George Russell: But on the other part of your question, the relation between the so-called price of the magazine and its allure to advertisers, they are, it seems to me, two completely different things. The price of our magazine—which, by the way, is high—is not the reason that advertisers, per se, rush in to buy it. And if we lowered the price of our magazine to 25¢, that wouldn't necessarily cause advertisers to go into it.

However, there is an instrument in place in Canada that already affects the equation you're talking about very dramatically, and to which the heritage department has not directed any attention whatsoever. It's called section 19 of the Income Tax Act.

Mr. Brown, I think, can explain to you how section 19 already works and has worked for us for 20 years to level the playing field that you are talking about.

Mr. Donald Brown (President, Time Canada Ltd.): If I may, I'd like to embellish a little bit the answer to your first question.

I apologize here for the smallness of this print, but what it states is that we went back and looked at the 12 issues of Sports Illustrated in 1995. In 1995, Sports Illustrated generated about $2.2 million Canadian in that year from Canadian advertisers. We went back and checked current issues, and there were some 80 advertisers in those 12 issues in 1995.

This lists some 15 to 18 advertisers that we can currently find not advertising in any magazine in Canada right now—Adidas; Champion Sports Wear; Cobra Golf Products; Champion Scalp Massager; Franklin Sports; John Hancock; Mizuno Sports Equipment; Nationsbank; Novel Teez Design; Royal Canadian Golf Association; Starter SW; Strength Footwear; Wheaties; and Strength Training Systems.

These are just some we were able to research, and to document that they no longer exist in the magazine pie.

• 1620

Secondly, if I may, to embellish again, the largest single category in the Canadian marketplace is automotive. Automotive generates a significant amount of advertising revenue for television, newspapers, magazines, out of home, and radio—in total, some $655 million Canadian in 1997.

The first bar graph shows that television is generating 45% of that revenue, some $295 million, followed closely by newspapers, with 44% of the pie, and finally magazines, at 6% of the pie.

In most other parts of the world, the reason this segment cannot grow against this very key magazine-sensitive segment is the lack of reach, the lack of products that provide significant reach against the people who would buy, more often, more automobiles.

So to answer your question about Peter to pay Paul, what's happening right now is that in the magazine pot they're competing amongst themselves. They're not moving across the street here to look at the television and the newspaper pot to increase their share. This is just one segment. This is well documented.

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Brown. Can that be made available?

Mr. Donald Brown: Yes.

Mr. Ron Atkey: Mr. Chairman, copies are available at the back of the formal submission, which all members have.

The Vice-Chairman (Mr. Ted McWhinney): Of this particular submission?

Mr. Ron Atkey: Yes. It's in black and white, not living colour, but the information is the same.

The Vice-Chairman (Mr. Ted McWhinney): It's clear. Thank you very much.

Mr. Muise from the Progressive Conservative Party.

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

I'd first like to thank our guests today. I guess a concern I have is the one that my colleague from the Bloc mentioned, about robbing Peter to pay Paul.

When you look at split-run magazines and the effect this can have, I'm truly concerned about that. But when you look a bit further into Bill C-55, one of the areas of concern I have is clause 21, or the grandfathering. I'm wondering if you could enlighten us a little bit, if you would, to tell us how you would see that clause changed or modified in such a way that it would take away some of the concerns you may have.

Mr. George Russell: I might just say that as the editor of the magazine, I've had to consider concretely what this law might mean to me, in perhaps a more pointed way than I ever thought I would until I'd read the section on acquiescence.

All we are asking for is what we understood both from the Department of Canadian Heritage in its initial observations and what we've heard privately from the Canadian Magazine Publishers Association, which is that they leave us as we were. As we've reported—and I must say, this is probably with some sadness on the part of my partner from the commercial side—our share of the Canadian magazine advertising pie has actually declined by 50% over the last five years. So it's hard for us to see ourselves as a voracious threat.

We don't see why, under these conditions, we can't simply have a grandfathering clause that does what it says and simply lets us continue to operate.

Mr. Ron Atkey: Mr. Muise, at page 15 of the brief, in the first full paragraph, second sentence, you will see the technique we suggest. It's a simple scheduling of those foreign publishers who would be exempt from this act. It would be a section about two lines long, and the schedule would include the list of foreign publishers already established here. That is the cleanest, neatest, and fairest way to do it.

The Vice-Chairman (Mr. Ted McWhinney): You have a couple of minutes left.

Mr. Mark Muise: Prior to this legislation being introduced, were you contacted in any way as to your opinion or your feelings about any parts of this legislation, or the grandfathering, or any section of it?

Mr. George Russell: No, we were not, not at all. In fact, I think the heritage ministry made several public declarations that they didn't want to tell anyone what they were doing because they were afraid the American government would find out.

• 1625

We were at one point informed that we would be advised, as a matter of courtesy, before the law was tabled in the House, as to what might be in the law, but whoever passed that message to us was in error. We've had exactly one meeting with Department of Canadian Heritage officials. Mr. Wernick was in New York, and talked to us the day after the bill was tabled in the House of Commons. That's the extent of our consultations on this bill.

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Muise.

We now switch to the government side.

Mr. Bonwick, are you ceding to Mr. Bélanger?

If you're both very brief, we can hear you both. Who would be first—Mr. Bélanger?

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Go ahead, Mauril.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Mr. Russell, you referred in your discussion to a study. This was nothing new. A column published in one of our dailies not long ago referred to the same study.

You mentioned that an open market would increase the advertising pie by whatever percentage. The study concludes that.

Mr. George Russell: No, that's not what I said. It would increase the amount of advertising that went to magazines out of the pot, but it mostly would come in the initial instances, according to the study, from other sectors.

Mr. Mauril Bélanger: Fair enough.

The same study concludes, from my understanding, according to the column I read, that the bulk of those revenues, plus existing revenues, a good percentage of that, maybe even up to 40%, would be going to the equivalent of the split-run magazines, essentially, to foreign publications selling advertising services.

Are you aware of the conclusion in that study?

Mr. George Russell: I'm aware of that part of the assertion of the study, and I'm also aware of the methodological way they got there, which was simply to take every U.S. magazine with a circulation in Canada of over 50,000 and assume that it would start a split-run edition.

Mr. Mauril Bélanger: You don't share that conclusion, sir.

Mr. George Russell: We don't, for the same reason that the study wouldn't if it had been asked to take into account section 19 of the Income Tax Act. That was not included, from what I can tell, in the parameters of the instructions.

We can show, I think with some clarity, that the ability to transmit magazines into Canada via satellite, which caused this legal eruption, was available for 10 years before anybody did it. In fact, in the 10 years in which both section 19 was operative and the ability to come into the country was also available, exactly one magazine tried to do it. They did it on an experimental basis, and they did it in a category where there was no existing Canadian magazine whatsoever.

Mr. Mauril Bélanger: I'd like the witness to reduce the length of his answers if we're going to be limited to just two minutes.

Mr. George Russell: I'd like to defer to Mr. Brown, if I could, to show you why few magazines would come in.

Mr. Mauril Bélanger: No, thank you. I'm just wondering; you pick and choose, from the same study, the things that suit and the things that don't. I have a problem with that, personally.

The other thing is, the minister was here yesterday, and she indicated a certain amount of flexibility with the section you're concerned with. I take it that's your concern, instead of the whole bill. Or am I mistaken there?

Mr. George Russell: Is that a question? Would you like an answer?

Mr. Mauril Bélanger: No. I want to know if your suggestion that there be a list of foreign publishers as an annex would hold if it were a list of foreign publications as opposed to publishers. That's the question.

Mr. George Russell: I'd have to defer to Mr. Atkey.

Mr. Ron Atkey: That would be much more acceptable than the current draft of clause 21. That is a true type of grandfathering clause.

Mr. Mauril Bélanger: Of publications, not publishers.

Mr. Ron Atkey: Yes, list of publications.

Mr. Mauril Bélanger: Okay.

Thank you, Mr. Chairman.

The Vice-Chairman (Mr. Ted McWhinney): Mr. Bonwick, very briefly, because I want to have one last second round.

Mr. Paul Bonwick: I'll have to submit some questions and have responses in writing.

Thank you very much for your time. With regard to the short time span you're able to present today, have you had an opportunity prior to the meeting to have discussions with or or brief any members of the committee, through any of your agents, or anything in that regard, to provide updates to committee members or members of the House?

Mr. George Russell: I don't know what an “agent” is, under those circumstances, but I personally haven't.

Mr. Paul Bonwick: An agent would be someone representing your company.

Mr. George Russell: Well, Mr. Atkey is the agent representing our company.

Mr. Ron Atkey: As legal counsel, I've had requests from a number of members of Parliament, some who are not members of this committee, for information concerning the activities of Time Canada. I have provided that information, when requested. A lot of it relates to the Sports Illustrated issue three years ago.

The Vice-Chairman (Mr. Ted McWhinney): There was no suggestion that this was improper as a communication, I take it.

Mr. Paul Bonwick: No. It was a yes or a no.

Mr. Ron Atkey: I haven't heard from you, Mr. Bonwick.

Mr. Paul Bonwick: No, it was a question of whether there was some concern over the tight timelines.

• 1630

I have many more questions, but I'll have to submit them in writing, obviously.

The Vice-Chairman (Mr. Ted McWhinney): I could give you one more minute, but I want to have a second round. Why don't you take one more minute?

Mr. Paul Bonwick: With regard to this Canadian message we've been talking about, or Canadian stories, do you believe the federal government has a responsibility to ensure Canadians have access to Canadian stories, and in turn—I guess this would be the supplementary—an obligation to ensure there are Canadian vehicles to deliver those Canadian stories?

Mr. George Russell: Sure.

Mr. Paul Bonwick: Do you consider yourself to have a cost advantage from a production standpoint because of the amount of production you have versus Canadian publications?

Mr. George Russell: No.

The Vice-Chairman (Mr. Ted McWhinney): My thanks to the questioner and the respondent for the succinctness of those answers.

We have time for a very short second round.

Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you very much, Mr. Chairman.

I need to address my question to Mr. Atkey, I suppose.

I'm curious—and you've probably had some discussion on this—as to what Time Canada thinks we as a committee should do to assess the constitutional validity of this particular bill.

Mr. Ron Atkey: Well, first of all, you're very fortunate to have a vice-chairman who's an acknowledged expert on matters constitutional. I'm pleased that Professor McWhinney is in this particular role. I think he has valuable experience from which the whole committee could benefit.

We also have a former editor of the Financial Post as a member of the committee, who's experienced in what a free press really means in practical terms.

However, there are others in the country who would be useful witnesses. Far be it from me to suggest, but there are professors of constitutional law who are experts on the Charter of Rights and Freedoms and the division of powers. Professor McWhinney knows who they are, and I would suggest they should be summonsed before this committee. You should get their views as to the validity of this bill.

Mr. Eric Lowther: Do you think it's something that might be challenged as this carries on? Is this a real possibility, Mr. Atkey?

Mr. Ron Atkey: As I think Time Canada has submitted, in our view, this bill is a violation of freedom of expression and freedom of the press under paragraph 2(b) of the charter, and will not withstand a court challenge.

Mr. Eric Lowther: Thank you very much.

The Vice-Chairman (Mr. Ted McWhinney): I'd like to thank the witnesses.

By the way, one should mention that Mr. Atkey, in his various careers, is one of our most brilliant younger constitutional scholars, and a minister of the crown in Joe Clark's government.

You were the member for Toronto—St. George...?

Mr. Ron Atkey: St. Paul's.

The Vice-Chairman (Mr. Ted McWhinney): St. Paul's, yes. You are now in private practice. We're particularly appreciative of the evidence. Thank you for your very succinct and very wise responses.

Thank you very much to all.

Ladies and gentlemen, we can proceed with our next witnesses, from Reader's Digest Magazines.

It would be helpful, when there are submitted written briefs, if the witnesses could opt to give résumés rather than literally to read them. It cuts into the time for questioning if a brief is simply read at length.

But that is a matter of your own judgment on the use of your time. Apart from making the suggestion, I certainly wouldn't dream of pressing it upon you.

• 1635

Who will be opening? I have Ms. Robins as the first on the list.

Will you be opening the presentation?

Ms. Barbara Robins (Vice-President and Senior Legal Counsel, Reader's Digest Magazines (Canada) Ltd.): Yes.

The Vice-Chairman (Mr. Ted McWhinney): Would you briefly introduce yourself and your colleagues when you're doing so, please?

Ms. Barbara Robins: Yes.

Good afternoon, Mr. Chairman, and committee members.

With me today are Mr. Paul Lalonde and Mr. Michael Flavell, both attorneys with the Ottawa law firm of Flavell Kubrick and Lalonde.

[Translation]

On behalf of the President of Reader's Digest Association Canada, Mr. Bernard Poirier, along with the over 300 employees working throughout Canada, but mainly in Montreal and Toronto, I would like to thank the committee for hearing us today.

[English]

Reader's Digest has been operating in Canada for well over fifty years now. As a result of that experience and history, we have come to comfortably support and truly understand the policy objectives that the heritage minister and the government are trying to promote.

Reader's Digest is dependent upon advertising revenues, as are many other publications. It is this source of funds that fits into the equation that allows us to publish a profitable, successful, and affordable-to-the-subscriber magazine.

In turn, it is the successful magazine product line that is the support of the substratum for all the other Reader's Digest activities—namely, its book business, its video business, and its music business. Understandably, the magazine, the way the company is structured both here and all over the world, is what they call in the parlance the “flagship product” of the company.

So the fate of the magazine is intricately linked to the fate of the company. A decline in the magazine will undoubtedly mean a decline in the success of the company as a whole.

We do have a few concerns, some specifics, with the language of the bill as currently drafted. We will get to those very shortly. I think, however, it would be instructive to give you a truly digest version of the brief. In fact, it's a digest in the sense that I simply would like to outline for you the nature of our corporate structure in Canada and to give you an understanding of how the magazine is put together each month.

With regard to the corporate structure, in 1976, when the government of the day brought forth its measure to promote the periodical industry—namely, section 19—the management of Reader's Digest took the very conscious and deliberate decision that the corporation was going to be considered as Canadian, and that the magazine would qualify as a Canadian periodical, thereby allowing any and all of its advertisers to benefit from a tax deduction.

Such was born Reader's Digest Magazines, Périodiques Reader's Digest, a Canadian company. That is, 75% of its shares are held by Reader's Digest Foundation, which itself is a Canadian foundation with no share capital, the objectives of which are devoted to essentially journalistic and editorial endeavours. To the extent of 25% are held by Reader's Digest Association Canada Ltd.

Since 1976, the boards of directors of both the magazine company and the foundation have been at least three-quarters Canadian, and so has been the chairman or the presiding officer. In our view, Reader's Digest Magazines Limited, the company which is the official and continuing publisher of Reader's Digest and Sélection, is a true Canadian company.

It is perhaps unfortunate, and you may have so read, that, because we do have a relationship with an American company, Reader's Digest, sometimes that tarnishes or colours the view as such, and that somehow we are not sufficiently Canadian. Reader's Digest Magazines, we believe, is a true Canadian company.

• 1640

As regards the editorial practises and matters in the production of this magazine, first let me say that we have two full-time editorial staffs, primarily located in Montreal, whose sole task, five or seven days a week, is to put out the magazine. They are aided on a daily, weekly, and yearly basis by literally hundreds of Canadian freelancers, researchers, photographers, illustrators—you name it. You'll find, in the material we've provided you, examples, and lists of these individuals.

The magazine, of course, is called Reader's Digest—Sélection in French—which is a very well known brand or trademark. The trademark itself is owned by the American company, Reader's Digest, as is Sélection and the Pegasus logo. We are allowed to use that name pursuant to a licensing agreement we have with the company.

Now, this agreement does not dictate to us what we have to put in each issue of the magazine, but I think you can readily appreciate that as the owner of any brand and the goodwill associated thereto, there is a need to ensure that the integrity of the brand is maintained. Therefore, for example, one may on a given day deal with a policy issue as to whether the magazine should carry tobacco ads, but that is simply by way of an example to ensure and illustrate the nature of preserving the integrity of the brand.

Getting back to these full-time editorial staffs, where do they get the contents from to put this magazine together? Well, a digest by definition is a product that does reproduce a material, or reprint it. Therefore, there certainly is a percentage in each issue of the magazine that is picked up from previously published sources. Very often these are Canadian sources, whether it be Elm Street or Maclean's or what have you.

But even in that picking up, or that digesting process, it's not a matter of taking the article and just putting it into the magazine. There is a whole process that goes on with that—the act of selection, the act of editing, the act of condensing, the act of researching, and at times the act of translating, depending on the original language of the article.

On the subject of researching, just to let you know—perhaps you're not aware of this—when we pick up an article, regardless of its source, whether it be the strongest or the best source, the article is researched, or reresearched, with two independent sources for every single fact. So there's a tremendous amount of reliability, we believe, in the articles we publish.

As I said, all of these processes are carried on with the support of numerous freelancers across the county.

We also generate an awful lot of original material. By that I mean material by which we will commission a Canadian author. Very often that will also be about some Canadian subject matter that we believe is of interest to Canadians.

We've been keeping very detailed records of that Canadian content, if you will, since 1976. We are very comfortably over the 50% mark, relatively on each issue, and certainly on an annual basis.

It's interesting to note that in terms of a pick-up, for example, if we do pick something up from Elm Street, recognize that this allows a Canadian writer, whoever the writer was, a considerable second chance, another kick at the can, at exposure. Being read in Reader's Digest magazine means you're being read by certainly well over 1 million Canadians. It enjoys a very wide circulation.

It is perhaps unfortunate, however, because of this digest quality of the magazine and the very nature of the magazine, that we have, in all of this Sports Illustrated debate that has gone on for the last several years, at times been labelled as “a split run”. This is patently untrue. It is not a true statement. It is only if you do not take the time to understand how the magazine is put together—the sources, the editorial staff, and activities—that you will come to that conclusion.

We have worked very hard to try to counter this misperception. In the binders you have, you will see a form letter that we have been sending out to whoever we can to try to make them understand. I would just like to emphasize that there isn't one author of any of the articles in the media that we have read that has ever called us, or has ever even taken the time to come and visit, before they've made up their mind.

That label has been put on us, but we believe this is truly a Canadian magazine. It wasn't a unilateral decision on our part. It's not just our whim to decide that we're going to process it this way. The activities and the corporate structure were agreed upon and understood and acknowledged by the government in 1976, as a result of a ruling we received, a copy of which you have inside your binder. Again, the ruling is not something that gives us a special status. What it does is provide a recipe for how a digest publication can remain a Canadian periodical.

From what we have said, I think you can readily appreciate that we want to continue to be considered as a Canadian periodical under the terms of Bill C-55. We have not heard from any associations or industry reps out there to date that they are against this, and we do not believe, and we sincerely do not hope, that is going to come from anyone who is going to appear before this committee in the upcoming days or weeks.

• 1645

We do not think, as a result of our long history and tradition in Canada and our contributions, both to the creative community and the periodical community in general, that it should be sufficient, or that one should think, okay, as long as they're grandfathered under clause 21, they should be happy.

We don't think that's fair. We think one should stand back and take a look at what we have done, recognize us as a model of compliance and a company that wants to continue to go down the Canadian road.

I'm now going to turn it over to two gentlemen who are going to spell out some of the specifics we have in terms of making the bill more comfortable to the nature of our activities and our digest nature.

Keep in mind that there is a precedent in the sense that in 1976, when the then Minister of Revenue, Bud Cullen, was before the senate committee on the very subject of section 19 and the digest, he very clearly said that it was not the intention of the government to unwittingly or unwillingly cast the digest or digest format aside, but that there was a need for clarifications because of the nature of the product.

The Vice-Chairman (Mr. Ted McWhinney): Mr. Lalonde.

[Translation]

Mr. Paul M. Lalonde (Attorney, Flavell Kubrick & Lalonde; Legal Counsel for Reader's Digest Association (Canada)): Good afternoon, Mr. Chairman and committee members.

[English]

In terms of the Canadianness of Reader's Digest, I'd like to add that you should know that Ms. Robins is herself a trilingual Canadian from Moose Jaw. I mean, how much more Canadian can you get?

The Vice-Chairman (Mr. Ted McWhinney): Did you say trilingual?

Mr. Paul Lalonde: Trilingual, yes. She speaks beautiful Italian if you're interested in a submission in that language as well.

In terms of the letter we've sent to editors of various newspapers that inappropriately called Reader's Digest a split run, we're gratified to see that we have ceased to be so labelled in recent media coverage. We're quite happy about that, and we hope that finally we're rid of that inappropriate label.

As Ms. Robins pointed out, Reader's Digest is supportive of what the government's trying to achieve with Bill C-55. Our concerns are with respect to some technical wording in the bill that creates some ambiguities that give us some cause for concern. My job is to point out those ambiguities to the committee.

Reader's Digest is clearly a very important player in the Canadian publishing industry. As Ms. Robins explained, it provides a fantastic array of opportunities for Canadian contributors from across he country. Reader's Digest deserves to be recognized as a Canadian publisher of a Canadian magazine.

Our submissions today are to make sure there's no ambiguity in that regard in the bill once it's adopted.

While we believe that, as it exists, Reader's Digest qualifies as a Canadian publisher under Bill C-55, there are a number of little glitches in the drafting that worry us. The first one is with respect to the definition, in clause 2, of “Canadian” and “Canadian corporation”.

The definition of “Canadian corporation” requires that “more than” 75% of the shares of the corporation be held by Canadians. The problem with that, as Ms. Robins explained, is that exactly 75% of Reader's Digest Periodical Limited, the editor of the magazine, are held by a Canadian corporation, and the other 25% by Reader's Digest Association Canada, a wholly owned subsidiary of an American company.

This 75-25 split, as Ms. Robins explained, is dictated by section 19 of the Income Tax Act, and it's in compliance with that provision that the company was set up that way in the first place. We're puzzled as to why there's a deviation between section 19 of the Income Tax Act, which provides that it's “at least” 75%, not “more than” 75%, of the shareholding that has to be Canadian.

As Ms. Copps explained yesterday, the model that was used, the 75-25 split, came initially from the Income Tax Act as a model. So we're puzzled as to why the language changed from “at least” to “more than”.

• 1650

It's causing us a problem, because either the bill has to change so that it's not “more than” any more, but “at least”, as it is in the Income Tax Act, or we're going to have to re-organize the shareholding. It becomes a bit difficult to explain to the company that's being robbed of a share or shares why it is that has to occur. We can't understand a policy objective that's being pursued, or a problem that would be caused, in terms of the policy objectives of the bill, by changing the “more than” expression to “at least” in clause 2 in the definition of Canadian corporation.

The Vice-Chairman (Mr. Ted McWhinney): As a lawyer, do you know of any jurisprudence bearing on this point? For example, do you know of any case where a court has said that it requires at least 75.1%, or is it totally terra incognito in jurisprudential terms?

Mr. Paul Lalonde: I'm not sure I follow your question. The language is quite explicit in clause 2. In order to qualify as a Canadian, one has to have more than 75% Canadian-share ownership.

The Vice-Chairman (Mr. Ted McWhinney): I'm asking you whether there is any jurisprudence on “more than” in this context that you are aware of.

Mr. Paul Lalonde: I didn't look at any jurisprudence on the interpretation of “more than”, but those words are pretty clear to me. More than is more than—not exactly or at least.

The Vice-Chairman (Mr. Ted McWhinney): There's nothing to prevent a court from giving a common sense interpretation, however. I wondered if there was any jurisprudence.

Thank you very much.

Mr. Paul Lalonde: The second problem we have with some of the wording in the bill relates to subclause 3(2). In fact, subclauses 3(2) and (3) are two deeming provisions, where, in case it's not clear, we deem that such and such is a foreign publisher. We have a problem with both of those.

First, subclause 3(2) provides that

a person who...produces...a periodical or a substantial part of a periodical under licence or other authority granted by a foreign publisher is deemed to be a foreign publisher.

Now, we understand what the government is trying to do here, and we don't have a problem with the aim. They want to avoid circumvention of the provisions of the bill. That's fine. But what the committee must understand is that, in turn, because of the very nature of our publication as a digest, we include in every issue, as Ms. Robins explained so well, material that we get elsewhere, that we compile and edit and modify in many, many ways. And under section 19 of the Income Tax Act and the mechanisms we have there and the ruling, which is attached to the material we've filed, there are detailed limits on how much foreign material we can use and what the recipe is, as Ms. Robins explained.

Our concern is that because of the vague wording of subclause 3(2), and notwithstanding our compliance, our very careful compliance, with section 19 and our ruling under it, the digesting of foreign materials that we do could expose us to some claims that somehow Reader's Digest is a foreign publisher. We're very concerned about that.

Mr. Flavell will speak to some suggestions we have to tighten the language so as to make sure that just because of the nature of what we do, we're not going to get caught by grabbing discrete pieces of material from foreign publishers.

The next concern we have is with subclause 3(3) of Bill C-55, which deems as foreign any publisher that:

is controlled in any manner by a person or entity that is not a Canadian that results in control in fact

Again, we understand the purpose of what the government is trying to do, and we don't have a problem with the objective, but we're a little bit concerned that because of the agreement we have with the American corporation with respect to the use and integrity of the trademarks, that agreement will be used against us in some unfounded claims that we are somehow controlled in fact by the American corporation, which we are not. We don't even want to leave the ambiguity that could expose us to such unfounded claims. So we also have suggestions on how that ambiguity, that vagueness, could be rectified.

Finally, with respect to the grandfathering clause, well, we just spent an hour on it. We have some suggestions as well that might resolve some of the ambiguity in that clause.

Ms. Copps opened the door to the possibility of fiddling with the wording. In the very unlikely and unfortunate event that somehow we were deemed to be a foreign publisher, which we don't think we are in any way, shape or form, the vagueness of the grandfathering clause could be a concern to us. In order to be helpful to the committee, we've provided some suggestions in that regard, or will in Mr. Flavell's presentation.

• 1655

And that's it. On that note, I'll hand it over to Mr. Flavell, who has some suggestions on the wording, and who'll clean up for us.

Thank you.

The Vice-Chairman (Mr. Ted McWhinney): Mr. Flavell.

Mr. C. J. Michael Flavell (Lawyer, Flavell Kubrick and Lalonde, Counsel to Reader's Digest Magazines (Canada) Ltd.): Thank you very much, Mr. Chairman, members.

They left me the boring part, which is to present to you a piece of paper you've already received and explain a little bit about it.

The essence of the changes we have suggested to subclauses 3(2) and (3) is aimed at trying to accommodate Parliament in catching what it wants to catch, but in not going so far as to catch someone like Reader's Digest, who it has no interest in catching.

Our reading of the situation, from dealing with our new-found friends at Heritage and others, is that nobody wants to throw Reader's Digest into the net, that everybody agrees it is a Canadian entity, a very valuable Canadian entity, and that the only problem is that because of this marginal relationship, mostly trademark, with an American company, if the net is cast too wide in order to avoid circumvention, it might catch Reader's Digest, almost by mistake.

I've given you some wording here, which I will provide to everyone who doesn't have it, on some suggestions as to how we might do this. Without dragging you line by line through the process—you have it in front of you—the purpose, again, is to focus on split runs, to focus on, as the press has said, “U.S. publications which contain little or no Canadian editorial, but are resold as Canadian editions”. That is, I think, a correct description of what you are after.

What I've tried to do in subclause 3(2) is to make sure that is what you catch, and that you don't, by the wide wording Mr. Lalonde just referred to, catch Reader's Digest simply by virtue of the fact it has this trademark relationship.

Again, in my suggestions to (3), the second sentence there is merely a repetition of what used to be in the Income Tax Act, and we think it would be useful. We have had, I think—and I don't want to put words in their mouth—not a cold reception from our friends at Heritage.

The last sentence of the redrafted paragraph (3) would be an attempt to make it very clear that Reader's Digest is not deemed to be a foreigner, or controlled by a foreigner, by virtue of referring to the tax statute under which Reader's Digest has qualified as Canadian and has operated for many years.

As Ms. Robins described, Reader's Digest fundamentally reorganized itself to meet the government's recipe of a Canadian publisher. Of course, having done that, we don't want to find ourselves in a situation where, by hazard, we are, if you will, sideswiped by over-assiduous drafting.

We appreciate the problems our friends have in drafting wording that won't let people that should be in the bag out of the bag. All we want to do is ensure that we aren't in the bag when we shouldn't be. This brings me to clause 21 and the grandfathering clause.

We, at first glance, having not of course heard their argument before today, see a certain clarity in the Time Canada suggestion that if you want to grandfather people, have a list of people who are grandfathered. It does seem to have a certain nice simplicity. Again, you wouldn't catch anybody you didn't mean to.

We, of course, would not be on that list, so it's in a sense odd for us to be making representations about it, but I think inasmuch as we are here, and trying to help as well as making our own arguments, our thought is that something along that line would be an appropriate way to grandfather.

• 1700

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Flavell.

We'll proceed to the first round of questioning. I hope to get in possibly a second round, so I'll ask each of the interveners if they could limit themselves to five minutes.

For the official opposition, Mr. Lowther.

Mr. Eric Lowther: Thank you, Mr. Chairman. I will be quick. I may catch some more in the second round.

I've read Reader's Digest, and I enjoy it. I got a little bit of an education here today, that it is so substantively different if I cross the border. How much different is it? Do I not see any stories the same in the American version? Do I see some of the same, or all different?

Ms. Barbara Robins: Section 19 of the Income Tax Act, which parallels the ruling, allows any publisher of a magazine or periodical or newspaper to go to the extent of 20% of material that is found in a foreign publication—i.e., published outside of Canada. So in theory, one could find up to 20% of Reader's Digest British edition, or Australian edition, or American edition in the magazine.

Mr. Eric Lowther: But 80%—

Ms. Barbara Robins: Of the material you read, certainly on a rolling 12-month cycle, but essentially on every issue, just in case there's a shortfall, 80% comes from essentially two sources. It comes from original material that we commission and/or from pick-ups from any magazine not associated with Reader's Digest. That can be, as I say, Elm Street, The Economist, or Time magazine. That is how we digest.

Mr. Eric Lowther: Isn't it also true, though, that in Bill C-55 that other 80%, as long as it's different, allows you to meet the criteria? It doesn't have to be Canadian, because the criteria are specifically around ownership. Content is not even mentioned.

So if you are 80% different, you still meet the criteria, don't you?

Ms. Barbara Robins: There are ownership criteria, but in clause 3, to which these two gentlemen just spoke, there are some references to the way a magazine, a periodical, is published. They do relate to content. They don't use the word “content”, but it is in there.

Mr. Eric Lowther: But they don't specifically require Canadian content, do they?

Ms. Barbara Robins: No, and nor, for that matter, does section 19. That, I believe, is the intent.

Mr. Eric Lowther: So really, in the whole driver here of Canadians getting more Canadian stories, we might be missing the whole point here. You could be giving us 80% different American stories or German stories or some-other-body's stories...but we're meeting some technical requirement that may never touch Canadian content to Canadians. Interesting.

Ms. Barbara Robins: Well, we don't. Are you talking generally about this bill?

Mr. Eric Lowther: I'm talking about the effectiveness of this bill to deliver to the minister the Canadian stories for her 11-year-old. I think we're missing the mark by a mile, myself, but I'll pass and go to the next questioner.

The Vice-Chairman (Mr. Ted McWhinney): Mr. Lalonde.

Mr. Paul Lalonde: Very briefly, I don't want to be putting words in the mouth of the government, and I wouldn't presume to, but I believe they might say, were they sitting here, that it's not unreasonable to think that Canadian owners of periodicals will write about Canadian things. That's one thing.

The second one is that as regards section 19 of the Income Tax Act, Reader's Digest will continue, and wishes to continue, to comply. So the Canadian content required there will continue to exist in terms of Reader's Digest.

Ms. Barbara Robins: Absolutely.

Mr. Eric Lowther: Thank you, Mr. Chairman. I was going to leave it, but since Mr. Lalonde saw fit to prolong this...and I appreciate his comment. But let's also consider that because the wording says “more than” 75%, you may be left out of this process. But if it said “less than” 75%, you'd be in it. That is strictly an ownership criterion. It has nothing to do with Canadian content.

We're assuming that as long as we meet the shareholder criteria, somehow that's going to equate to Canadian content. Maybe, maybe not, but it certainly is not automatic that this is going to flow, and yet that's how this bill is being packaged.

I just thought it important that we note that, really, it's an ownership issue.

Thank you.

• 1705

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Lowther. You reminded me of the ability and means thesis of 60 years ago, the distinction between ownership and control.

[Translation]

Mr. de Savoye from the Parti québécois.

Mr. Pierre de Savoye: From the Bloc Québécois, Mr. Chairman.

The Vice-Chair (Mr. Ted McWhinney): I'm sorry.

Mr. Paul Lalonde: Mr. Chairman, you must have watched last night's debate a bit too closely.

Mr. John Godfrey (Don Valley West, Lib.):

[Editor's Note: Inaudible]

Mr. Pierre de Savoye: Mr. Godfrey, you are no longer with the Globe and Mail.

Ms. Robins, Mr. Lalonde and Mr. Flavell, when I was young, my parents subscribed to Sélection and I would wait every month for it to arrive. I would gobble it up and then have to start waiting again for its next appearance.

I examined the two publications, the American one and the Canadian one. It is true that the contents are completely different but I do share the concern of my colleague from the Reform Party. When I was young, the articles I read dealt with subjects that most of the time had nothing to do with what was taking place in Canada. It could be a story about an expedition to the Antarctic or the latest developments in experimental cars. In other words, they were very enlightening and no doubt contributed to developing my interest in all sorts of things. But as far as Quebec or Canadian culture are concerned, it is not necessarily the best choice.

The purpose of the bill we have before us is to avoid an invasion of periodicals produced in the United States and dumped in Canada. How do you react to that? Are we hitting the nail on the head? You are in the publishing industry. Are we hitting the nail on the head with this bill or are we hitting the wrong nail? I'd like to hear your expert the opinion.

Ms. Barbara Robins: I'd like to say something about your childhood reading. I wonder whether you used to read Sélection before 1976 or after 1976.

Some Hon. Members: Oh, oh!

Ms. Barbara Robins: I'm not looking for confidential information. There was of course another bill dealing with that matter. It is merely to point out that section 19 is effective because, starting in 1976, the decision was made to publish Canadian and even Quebec content. That will continue to be our practice, whatever becomes of Bill C-55, because we want the people who advertise in our magazine to be able to receive a tax benefit. It's merely to inform you on that point.

Mr. Pierre de Savoye: In other words, this bill is indeed hitting the nail on the head.

Ms. Barbara Robins: I didn't really deal with that when I said...

Mr. Pierre de Savoye: That was my question.

Ms. Barbara Robins: Yes, but as I told you at the outset, we support the government's efforts and we can understand, because of the loss they incurred recently in April, the need to adopt another strategy, that is, to emphasize services rather than goods.

Mr. Pierre de Savoye: Let me reformulate my question. Let's assume that the bill does not pass. Let's assume that split-run magazines can be published without any difficulty and the study discussed with the previous witness does prove to be correct, that is that more revenue accrues to magazines. In those circumstances, what would the financial effect be on Reader's Digest or Sélection?

Ms. Barbara Robins: First of all, I should say that I haven't read the study. I'd like to read it but as far as we are concerned, it is far from a sure thing. According to certain studies, the revenue from other media will go to magazines and we will benefit. We are by no means certain of that. There is competition. We have to fight for every dollar of advertising revenue. It isn't easy. There's no certainty that when there are more fish in the sea, it will be easier for us.

• 1710

On the other hand, I acknowledge that there is a difficulty or weakness with respect to the perception that the other media may have of magazines. Perhaps the solution does not consist in saying that others should not be allowed in. It may simply be a matter of doing a better job of selling this medium within the periodicals industry.

Mr. Pierre de Savoye: Basically, what I want to know is how our Canadian industry, and you are one of the important players as you say yourselves, would react if there were no restrictions put on these split-run magazines in the Canadian market. Would it be to your benefit, to your disadvantage or would it have no effect? You must have an opinion.

Ms. Barbara Robins: Honestly, I think it would be difficult for us. It would cause us problems.

Mr. Pierre de Savoye: So we are hitting the nail on the head.

Ms. Barbara Robins: In that respect, yes.

Mr. Pierre de Savoye: Thank you.

[English]

The Vice-Chairman (Mr. Ted McWhinney): Thank you.

Mr. Muise, Progressive Conservative Party.

Mr. Mark Muise: Thank you, Mr. Chairman, and thank you to our guests.

Further to my colleague's question, if this bill was defeated, then, and assuming that split runs could continue, could we understand that even though Reader's Digest is a Canadian publication, Reader's Digest could effectively only produce one in the States and say it does for all, saving on costs?

Ms. Barbara Robins: No. No, because we have seen the benefits to us of complying with section 19. For over 22 years we've lived with a structure, and I do not see us undoing that, even though this bill may be defeated. No.

The Vice-Chairman (Mr. Ted McWhinney): Thank you, Mr. Muise.

[Translation]

Mr. Bélanger from the government party, please.

Mr. Mauril Bélanger: I intend to ask my question but first of all I'd like to thank Mr. Flavell, Ms. Robins and Mr. Lalonde for their positive and constructive approach and their very specific suggestions. I hope that we can take the necessary time to deal with them when we begin our clause-by-clause study of the bill.

Mr. Paul Lalonde: We're counting on you, Mr. Bélanger.

Mr. Mauril Bélanger: It's very useful. In any case, I'll make good use of it. I hope I'll be able to convince enough people around the table to take a favourable look at this, particularly my colleague opposite.

In 1976, if there hadn't been this initiative, this determination on the part of the Canadian government to preserve, protect and encourage the Canadian periodicals industry, would Reader's Digest have done what it did? If there hadn't been this government pressure at the time, this desire on the part of Canadians expressed through their government, would Reader's Digest have acted in the same way?

Ms. Barbara Robins: As the saying goes, hindsight is 20-20. All I can say is that when the bill and section 19 were passed, we already had a Canadian publication. We were not on the point of deciding what we were going to do.

It could be said that we might have had less truly Canadian content and that we perhaps might have been less attracted by the idea of getting to know and develop Canadian artists and their contribution. That would probably be the honest answer.

Mr. Mauril Bélanger: I think that goes without saying since we can see the results of this initiative. We now have an industry that stands on its own.

Ms. Barbara Robins: In British Columbia we have a person whose only job is to try and find new writers.

Mr. Mauril Bélanger: Mr. Chairman, our colleague from the Reform Party is trying to get us off track when he brings up the matter of content. At no time, as far as I know, has there been any question of dealing with this problem from the point of view of content or imposing content, unless the Reformers want to become censors for all of Canada. It is a matter of discussing international events from a Canadian viewpoint. That is perfectly valid and that is what normally takes place when there are Canadian publications. But to stipulate that periodicals must publish such and such an article... That is not the kind of exercise we in the government are willing to engage in. Thank you.

• 1715

The Vice-Chair (Mr. Ted McWhinney): Is that all, Mr. Bélanger?

We may then begin our second round. Mr. Bonwick.

[English]

Mr. Paul Bonwick: Thank you, Mr. McWhinney.

I found Mr. Flavell's comments quite hilarious—“in the bag, out of the bag”. Just to be humourous, I wonder how many publishers are “half in the bag”.

There were some statements made by the people who came before you from Time, or some answers provided. I'm wondering if I could ask you to share some of your expertise in the industry to help address some of these statements or responses that were addressed.

First, would you consider there to be a cost-of-production advantage for a foreign publication that produces 20 million versus a Canadian publication that prints 300,000?

Ms. Barbara Robins: Yes. I mean, to me, the figures speak for themselves. It's clearly understood in the industry that editorial costs are really the most important costs of putting a magazine together.

I can give you an example from our case. We did a story awhile ago on whether dentists are honest in Canada. First you have to hire the writer, and you have to concern yourself with a retainer. Then you have to consider all the travel costs across Canada for an exercise of that nature, all the editorial research costs and so on. So absolutely; editorial is a very expensive factor.

Mr. Paul Bonwick: The response we received from Time was, no, there was no cost advantage to a larger publication versus a smaller publication. It was a very simple answer—no.

Mr. Michael Flavell: I don't think she said that, or meant to.

Mr. Paul Bonwick: No, not her; Time.

Mr. Michael Flavell: Oh, sorry.

Mr. Paul Bonwick: When Time was speaking earlier, it was a very simple answer, “no”, that there was no advantage to massive production versus smaller production.

That doesn't make any sense. I didn't think it was true.

I'm wondering if you might also provide me your opinions on government's role here. More specifically, do you see government having a responsibility to Canadians, to Canadian society, to ensure that they have an opportunity to hear these Canadian stories, these regional stories throughout Canada, and as I guess as I said before, the supplementary being to ensure that there are Canadian vehicles to deliver those messages?

Ms. Barbara Robins: Well, absolutely. I mean, it would be difficult for me to say no, given the fact that I work for a company that has a hell of a good amount of Canadian content, true Canadian subject-matter content, every month. But I think we have to be very sensitive to what we're talking about when we say “Canadian content”. How are we going to go about defining it or being concerned about it?

I mean, as I understand it, one of the policies that was being floated at the time before section 55, and has surfaced from time to time, is to tie this to a Canadian-content criteria.

As a publisher who is very willing and comfortable and wanting to serve the Canadian reader, what would I do with recipes? Would it have to be for apple pie with Canadian apples? That sounds silly, but once you start to raise the issue, you can fall into the very thorny area of how you define Canadian content.

So the answer philosophically is absolutely yes, and I think these measures are designed to implicitly stimulate the Canadian periodical industry, which in turn will keep the community happy and thriving.

Mr. Paul Bonwick: Do I have time for another short question?

The Vice-Chairman (Mr. Ted McWhinney): Yes, there's time for one more.

Mr. Paul Bonwick: Again, based on your expertise in the industry, with foreign publications that are doing split runs is there quite often a different card rate for secondary markets versus primary markets?

For example, if a foreign publication produces 100 million copies or whatever, and only 500,000 of those are going to focus on the Canadian market, is it quite possible, or does it happen, that the card rate or the line rate or the size rate for display advertising is different or perhaps subsidized to secondary markets?

• 1720

Ms. Barbara Robins: It could be. I would prefer, however, to consult with the experts I know in our company, and to provide you with some written information on that. I'd be more comfortable doing that.

Mr. Paul Bonwick: If you would, please.

Ms. Barbara Robins: Certainly. We will undertake to do that.

The Vice-Chairman (Mr. Ted McWhinney): We can put that into the record if you submit a further written testimonial.

Thank you, Mr. Bonwick.

Continuing the second round, Mr. Lowther.

Mr. Eric Lowther: Thank you, Mr. Chairman.

I have a question for Ms. Robins, I guess, or any of the witnesses.

I think you said it's hard to have 20-20 vision, looking back. I think your comment was along the lines that—and I'm paraphrasing very roughly here—you would probably have carried some Canadian content even without the criteria you've been working under for some number of years.

In that light, it might be hard to say how much Canadian content you would carry now if you found the marketability of the product was increased because of the Canadian content. It might almost be at the level it is already—perhaps; we don't know.

So I'd appreciate your comments on that. If you were not working under the constraints you are working under now, how much different would your content be from a Canadian perspective?

Ms. Barbara Robins: Do you mean Canadian subject matters and/or by Canadian authors? Is that what we're talking about?

Mr. Eric Lowther: Well, we've already established the principle that it doesn't really even have to be Canadian. As long as it's different from anybody else's, it meets the criteria of this legislation.

Mr. Mauril Bélanger: You've established that.

Mr. Eric Lowther: No, I haven't.

Mr. Mauril Bélanger: You have.

Mr. Eric Lowther: Excuse me.

Mr. Chairman, as I understand it, the committee is here to ask these witnesses questions. I'm not going to participate in a partisan conversation with Mr. Bélanger. If he wants to make comments at me or my party, I don't think this is the appropriate place to be doing it.

The Vice-Chairman (Mr. Ted McWhinney): You're completely correct. I apologize for not enforcing the rules. It is clear that members direct questions to the witnesses, and it's not proper to discuss in exchanges.

Mr. Eric Lowther: Thank you, Mr. Chairman.

Ms. Barbara Robins: I think what I could say is that clearly we would have continued to cultivate Canadian authors and articles, but undoubtedly there might have been a differential of, I don't know, perhaps 25% to 30% less without section 19.

Mr. Eric Lowther: But even that is subject to what the market would have told you. If there was a demand for more Canadian articles, or if sales went up if it had more of a Canadian flavour, you may have changed it. So you don't really know that for sure.

Ms. Barbara Robins: No. I'm speculating, no question.

Mr. Eric Lowther: Okay.

Thank you.

The Vice-Chairman (Mr. Ted McWhinney): Thank you very much.

That completes the second round. I would like to thank the witnesses for the frankness and freshness with which they've responded, and the raising of interesting questions by all our members, government and opposition.

I will wait, Ms. Robins, for those supplementary written statements, which we'll undertake to read into the record.

Ms. Barbara Robins: Absolutely.

The Vice-Chairman (Mr. Ted McWhinney): Thank you very much.

The meeting is adjourned.