Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 6 - Evidence - September 17, 2009
OTTAWA, Thursday, September 17, 2009
The Standing Senate Committee on Social Affairs, Science and Technology, to which was referred Bill C-32, An Act to amend the Tobacco Act, met this day at 10:46 a.m. to give consideration to the bill.
Senator Art Eggleton (Chair) in the chair.
[English]
The Chair: Today we are meeting on the subject of Bill C-32, which is an act to amend the Tobacco Act. We will have two panels this morning. The first will be from three different organizations, which I will introduce in a moment. The second panel will be officials from Health Canada.
I have also scheduled our next meeting, which is on Wednesday, September 30, on this subject, Bill C-32, and some other organizations will come in at that time.
I want to welcome Sonya Norris and Trina Wall, who are here as our researchers from the Library of Parliament on this particular subject.
Before we get to the witnesses, we have two petitions to note. For the first one, I will call on Senator Keon to present.
Senator Keon: This petition is on behalf of Youth Action Alliance, which has sent 10,000 of these postcards to the government in support of the legislation. I have a sample of them here. There is a box of a few hundred of them here for anyone on the committee who would like to see these. This is a tremendous effort on the part of young people, and I emphasize "young people," to have this legislation passed quickly and without amendment.
The Chair: Thank you, Senator Keon. I want to note that we also have before us a petition of some 488 names. This comes from the Winnipeg area. I think you have the wording of the petition in front of you. It is in opposition to Bill C-32. If you want to look at them, I have here the various names on the petition. There are two petitions, one for and one against.
We will now move to the witnesses. I welcome them particularly coming on such short notice. On our first panel we have the Frontier Duty Free Association, represented by Laurie Karson, Executive Director. The Frontier Duty Free Association is the industry association representing the interests of Canada's duty-free shops. Active membership includes 28 Canadian land border duty-free shops, and associate members consist of Canadian airport and U.S. land border duty-free shops, as well as trade supplier members and others interested in the duty-free industry.
The second organization is the Association of Canadian Airport Duty Free Operators. That explains their membership. André J. Bergeron is here. He is currently acting director of the association. Part of his role includes interacting on behalf of governments, departments and agencies and coordinating activities and research between members to enhance the added value of the duty-free industry.
Also, we have the Ontario Korean Businessmen's Association. They are represented by Kenneth Kim, who is their chief operating officer and general manager. Mr. Kim came to Canada back in 1973 and started working at a convenience store as a helper. He owned a convenience store for six years and worked in wholesale distribution as a manager. He has been with the Ontario Korean Businessmen's Association for more than five years looking after its members' interests.
Welcome to all three of you. The speaking order, I understand, has been agreed upon and Mr. Bergeron will start.
André J. Bergeron, Executive Director, Association of Canadian Airport Duty Free Operators: We appreciate being asked to make a presentation so that we can be heard and consulted.
The Association of Canadian Airport Duty Free Operators, ACADFO, is a national industry association representing Canada's airport duty-free shop operators. We are a highly regulated industry, unlike any other retail sector. We are legislated through an act of Canadian Parliament and regulated through the duty-free shop program under the Canada Border Services Agency, CBSA. The intent of this program is to deliver economic benefit to Canada in increased economic activity. Some of the specific goals are to retain sales in Canada; provide revenues to the Crown and airport authority; have an impact on the local economy, especially through job creation; and enhance the Canadian tourism package to international travellers. This program has been a success and continues to deliver benefits to the Canadian government airport authorities and travellers.
We have concerns with Bill C-32 as currently stated and its negative impact on our industry.
First, let me state that we unequivocally support the Canadian government's proposed legislation with its emphasis on protecting young people from the hazards of tobacco consumption, especially through the elimination of flavoured tobacco that has special appeal to them.
It was our understanding that it is not the intent of Bill C-32 to ban the sale of all tobacco products, but rather to ban the sale of an emerging class of flavoured products that are clearly aimed at and appeal specifically to the youth market. We also understand that the intent of the legislation is not to undermine Canadian retailers who are legally selling other tobacco products in accordance with existing Canadian laws and regulations.
Based on our readings and consultations, it would appear that the current broad wording of Bill C-32 is such that it would encompass not just flavoured products for which the taste and marketing is targeted at young people. It would also prohibit the sale of traditional U.S. blended tobacco that is a long-standing core duty-free product available to an adult, mostly foreign traveller. Its historic ingredients are included in the schedule of prohibited ingredients in Bill C- 32. To the best of our knowledge, some of these ingredients formulate the traditional and distinct U.S. tobacco taste, which does not have a fruit or sweet tasting flavour preferred by the youth demographic. These U.S. brands in question are not specifically marketed to young people but, rather, to an adult audience.
Let us cover the duty-free industry. Duty-free retail is a unique environment. More than half of our customers are visitors to Canada. The vast majority of international air travellers are adult — over 95 per cent according to various Canadian airport surveys — substantially different than for domestic travel. Minors are usually accompanied by a parent or guardian and, when traveling alone, are under airline personnel supervision.
Access to duty-free stores is limited and all sales are controlled. Those controls and procedures are highly regulated, established and enforced through the federal duty-free shop program under CBSA. Access is restricted to people leaving the country; a valid boarding pass for an international flight must be shown. All airport travellers must possess a valid passport, facilitating even more the proof of age verification. Finally, shops must be located in a international secure zone to be cash and carry, and goods purchased otherwise must be delivered at the point of no return, beyond the boarding gate.
In terms of our customers' shopping pattern, we cater to adults who already smoke and who take advantage of international travel to purchase a legal product through the duty-free shop as they are about to leave the country.
American blended cigarettes are purchased almost exclusively by foreign travellers. The size of the package sold at duty-free shops discourages first-time buyers. We only sell in the 200 count. The first-time smoker is not a duty-free shop customer. Studies have shown that a first-time smoker will purchase a single pack, may try different brands over time and will require easy and frequent access to a store. We do not sell single packs and our stores are not easily accessible.
In terms of size, combined airport and land duty-free tobacco sales represent approximately 1 per cent of total Canadian market sales. These sales are crucial to the jobs of industry employees and the ability of our members to meet minimum annual guaranteed rent to the airport authority, as specified in our airport contract.
Duty-free is a highly competitive business. Our competitors are duty-free shops at foreign airports not subjected to the Canadian market's domestic rules and regulations. It is critical that we meet the needs of our customers, foreign and domestic alike, if we are to remain a successful industry.
We have a solid track record in the sale of restricted products. We are proud to claim that we are adhering to these controls as substantiated by the fact that our stores have been relicensed many times over, and no store has ever had its duty-free licence revoked by the federal government or its liquor licence revoked by a provincial liquor board.
Furthermore, the Canadian government, through the health department, has in the past recognized that we are a unique retail environment, lending us special considerations and exempting the Canadian duty-free industry from limitation on self-service display of tobacco products.
We are concerned that although Bill C-32 addresses a legitimate and pressing public policy concern, the existing wording will clearly have the unintended consequences of wrongly including the traditional U.S. tobacco products with the flavoured product segment that this legislation is targeting. We therefore request that you support an amendment to the wording of Bill C-32 to ensure it will not inadvertently impair our existing regulated channel.
We believe also that this brief highlights several issues in support of our platform that duty-free retailing is unique and, as such, deserves special consideration in the tobacco control proposed amendments.
Consequently, we trust that you will consider exempting our stores from this bill by either exempting the sale of traditional American blend cigarettes from this legislation or, at a minimum, exempting Canadian retail duty-free shops from Bill C-32, as was previously done in other similar circumstances by the Government of Canada.
We thank you for your consideration of our views, and we are available to address any questions you may have.
The Chair: Thank you, Mr. Bergeron. Next will be Kenneth Kim, who represents the Ontario Korean Businessmen's Association.
Kenneth Kim, Chief Operating Officer and General Manager, Ontario Korean Businessmen's Association: Good morning; I am very nervous as this is my first time to speak in front of this many people here. I am also quite honoured to be here today with all the distinguished honourable senators whom I admire most.
Mr. Chair and senators, I thank you for the opportunity to address the committee today on the matter of Bill C-32. I am the chief operating officer and general manager of the Ontario Korean Businessmen's Association, OKBA, which is part of the Korean businessmen's association representing over 5,000 convenience stores across Canada.
Let me be clear from the beginning that we supported the Prime Minister's campaign promise to ban all the sales of flavoured little cigars. In fact, we whole-heartedly support the government's goal of preventing youth from smoking.
What we do not support, however, are some provisions in Bill C-32 that have nothing to do with youth smoking in Canada. I speak, of course, about the banning of American blend cigarettes. More specifically, I am here today on behalf of my membership to ask that the Senate make a minor change to Bill C-32 so that we can continue to sell American blend cigarettes as they are currently made.
By "American blend," I mean brands such as Winston, Camel and Gauloises. They are internationally recognized brands of cigarettes that will be banned if Bill C-32 goes through as it is.
As you will come to understand after hearing my statement and as demonstrated by my coming here from Toronto on such short notice, this is an incredibly important issue for my members. It is important because, if you do not make this change and if you disallow us from continuing to carry this category of product, I can guarantee you that we will lose even more money to the illegal cigarette trade, and more of my membership will close their doors permanently.
For the most part, the OKBA's membership is an embodiment of the Canadian dream: first and second generation immigrants like me who came to this country to make a better life for ourselves and for our families and to make a meaningful contribution to this country. As a Torontonian, the chair of this committee, Senator Eggleton, understands that our membership — your typical corner store — makes up an integral part of that city's community fabric, just as it does in communities throughout the rest of Canada. The vast majority of our stores are independent, family-owned businesses, trying to make a living in a highly competitive marketplace. They are the small businesses that are the backbone of the economy.
As you may know, tobacco makes up a large percentage of a convenience store's business. Between 40 per cent and 50 per cent of all convenience store sales are from tobacco. Yet, in spite of our reliance on tobacco sales and the growing contraband crisis, we supported the Prime Minister's campaign promise to ban the sale of flavoured little cigars. Again, we share the government's goal of preventing youth smoking.
However, now, having seen the legislation, regulations and media reports on Bill C-32, we have serious concerns. Bill C-32, as Health Canada noted during the House of Commons Health Committee hearings, will ban American blended cigarettes as they are currently made. This goes way beyond what the Prime Minister promised in his last election campaign.
A ban on American blended cigarettes makes no sense to us. American blended products like Winston, Camel and Gauloises do not taste like candy. They are nothing like these little flavoured cigars. Banning blended cigarettes does not address the youth smoking issue. Banning blended cigarettes does drive demand for contraband.
The RCMP has reported extensively on the problem of contraband. It has gone so far as to identify where the contraband is being made. While some is being manufactured in Canada, the RCMP has reported that the largest part of the problem is tobacco manufactured on the U.S. side of the Akwesasne reserve in New York State. It makes sense that U.S.-based manufacturers are using American blended tobacco similar to that used by all the legitimate American blended products that my membership sells. Therefore, by banning legitimate American blended cigarettes you are actually expanding the marketplace for illegal cigarettes manufactured in the U.S. and smuggled into Canada. Put differently, if you ban Camels or Winstons, you will just drive people to find contraband versions of these products, and criminal elements will be only too happy to fill this market demand. As I am sure the committee also knows, contraband tobacco has already reached unprecedented levels, particularly in Ontario and Quebec.
Ontario's Auditor General reported that the contraband problem cost the province half a billion dollars in lost provincial tobacco tax revenue in 2007 alone. That is just provincial taxes, just for Ontario and for only one year. The problem has grown.
More recently, a study done by GfK Research Dynamics concluded that in 2008 over 30 per cent of all tobacco sales in Canada were illegal and that contraband cigarettes make up over 50 per cent of the Ontario market and over 42 per cent of the Quebec market.
We are concerned about this contraband problem. Every time illegal tobacco is purchased out of the trunk of a car in Toronto, Kingston or Ottawa, a legal, taxpaying sale is lost for convenience stores and government. Every time illegal tobacco is purchased from a smoke shack on a reserve near Cornwall, Hamilton or Montreal, a legal taxpaying sale is lost for convenience stores and government. Every time illegal tobacco is smuggled by organized crime in a truck to St. John's, Halifax, Edmonton or Vancouver, a legal taxpaying sale is lost for convenience stores and government.
We are losing out on more than just tobacco sales. When people buy tobacco somewhere on the street other than from a convenience store, we lose the ability to sell the customer a newspaper, a drink, a package of gum or candy. It all adds up, and in the convenience store business every penny counts. I repeat: Every penny counts.
Needless to say, the sale of tobacco is vitally important to our financial survival, and we have communicated this fact to the government on several occasions. We were here earlier this year and met with several members of Parliament and explained to them how bad the contraband problem has become for us. Health Canada understands this, too. During the House of Commons Health Committee hearings on Bill C-32 earlier this year, representatives from Health Canada acknowledged that this bill does nothing to address the contraband crisis. This concerns us.
It should be the Government of Canada's concern, too. Yes, I am concerned about how banning American blend products will hurt my members. As a Canadian, I am also concerned that in the current economic climate the government does not seem to care that their actions in fuelling the contraband problem will cost the country more than the $1 billion it is currently losing in lost tobacco tax revenue. This seems irresponsible.
In closing, let me be clear again that the OKBA supports the original intent of the Prime Minister's campaign promise. We support all elements of the bill that will work toward preventing youth smoking. However, we believe that Bill C-32 goes too far by banning American blended products. We ask the Senate to make a minor change to the bill to exempt American blended products as they are currently made. For our members and for anyone concerned about contraband tobacco, it is the right thing to do.
The Chair: Thank you, Mr. Kim.
Laurie Karson, Executive Director, Frontier Duty Free Association: Good morning. Frontier Duty Free Association, FDFA, is a national industry association representing Canada's land border duty-free licensees, which are mainly family-owned businesses, for over 25 years. Our industry consists of 28 shops that directly employ approximately 1,200 Canadians, particularly in border communities where unemployment can be an ongoing challenge.
I would like to thank the chair Art Eggleton and all the members of your distinguished committee for allowing me the privilege of presenting our industry concerns related to Bill C-32.
The FDFA believes that your committee should take the extraordinary step of amending the current wording of Bill C-32 for two reasons. First, as Canadian citizens and businesses, we expect that the Government of Canada will follow a transparent and democratic process in creating legislation. With respect to Bill C-32, not only was our industry not consulted by Health Canada as the current wording was being developed, but Health Canada has refused our subsequent requests to meet so that we might present and discuss our concerns. Please feel free to ask me detailed questions regarding that matter after my remarks.
Second and most important, the current Bill C-32 wording will have unintended consequences, as the 500 ingredients listed in the proposed legislation will affect American blend tobacco products that fall outside the stated intent of this bill. Under the titles and definitions sections of this proposed legislation, this intent is clearly set out as being "cracking down on tobacco marketing aimed at youth."
I would like to state emphatically that the FDFA and its members fully support the intent of the bill, which we understand was supposed to be accomplished by banning flavoured tobacco that, owing to its flavour and small package sizes, low price point, and marketing approach, is appealing to and targeted at youth.
In fact, when we learned of this concern with flavoured tobacco, the FDFA immediately asked its members not to make any future purchases of any products that fit this description.
However, American blend tobacco products, as a result of the 5,000 ingredients in the current legislation, do not fit the description of flavoured tobacco that is marketed at youth. Other countries have been able to address the exact same problem, most notably the United States and Australia, without this unintended consequence.
I would like to note briefly that Canada's duty free shops were created by the Government of Canada to operate in the export sector and to capture sales and related economic benefits for Canadians; in addition, land border duty-free shops were created to bolster Canada's tourism sector.
These goals are not in any way at odds with Health Canada's strategy. The shops do not affect the overall size of the tobacco market but rather just repatriate sales otherwise lost to Canada when individuals leave the country.
Essentially we will lose all of our U.S. American blend tobacco sales to all of the U.S. duty-free shops. Duty-free purchases are overwhelmingly made by persons over 30 years of age. Owing to the inconvenient and secure nature of our store locations, unaccompanied minors do not have access to land border duty-free stores. Further, the traditional U.S. tobacco brands in question are not aimed at youth and are predominantly purchased by Americans. American blend tobacco is sold in land border duty-free shops only by the full carton, not by the single packs that are appealing to youth.
If the current wording of Bill C-32 is accepted, a significant competitive disadvantage will result for our members because the products in question will remain legal in the U.S. The U.S. duty-free stores and U.S. retail competitors will continue to offer these products that appeal to American travellers.
I would also like to note that proponents of the current legislative wording have noted that American blend manufacturers have said they would reformulate the brands to conform to the lengthy list of ingredients banned under Bill C-32, so that they could continue to sell their products in Canada. American blend tobacco suppliers have emphatically told us that they will not reformulate their brands. To do so would create confusion with their American customers, thereby diminishing their brand.
Further, American blend tobacco products will remain legal and for sale in the United States, even though the U.S. has also implemented legislation to ban fruity and candy-flavoured tobacco, which is aimed at youth.
To sum up, our industry is asking the Senate to amend Bill C-32 because the current wording does not result in a transparent and democratic process, and even more so because this has resulted in flawed wording that will have clearly unintended consequences.
The duty-free industry is already hard hit by current economic conditions, Western Hemisphere Travel Initiative ID requirements, exchange rates, congestion, and other factors. As I am sure you all know, we are in a tourism crisis, with a 26 per cent decline in the number of American tourists. The current wording of Bill C-32 will further damage the competitive position of our industry without in any way advancing Canada's health strategy, as intended by Bill C-32. It will only cause a class of products that was not the intended target of Bill C-32 to be removed from our stores, with the associated sales and economic benefits transferred to the U.S. We anticipate that we will have store closures if this bill goes through without an amendment, as well as further layoffs.
We therefore request that your committee amend Bill C-32 to exclude American blend tobacco. We have submitted suggested wording for the amendment to your committee chair. Our industry does not believe this amendment will in any way impair the ability of Bill C-32 to fulfill its stated intent; otherwise, we would not be making this request.
Thank you so much for allowing me to speak.
The Chair: Thank you to all three of you. You represent different organizations and memberships, but there was a lot of commonality in the themes. You said you do not disagree with the intent of the Prime Minister with respect to this matter, but you think there has been some overreach and unintended consequences here, particularly centred on American blend products, like Camel and Winston.
I will ask you one question and then my colleagues will have a question each. We are running a little short on time.
Were you consulted by Health Canada at all? Ms. Karson gave some answer to that, but did you not raise this matter of the American blended product with Health Canada, or at the political level, with the minister or with any of the people who were involved in this legislation?
Mr. Bergeron: We were not consulted. You must also recognize that this legislation — I do not want to use the word "railroaded" — was passed with great speed through the process in the house. We were informed as the legislation was coming through the house. We sent a document to communicate our views, but we received no response. By that time, the legislation had already passed at third reading and then it was on your doorstep. We have had much a better response from the members of the Senate in terms of at least recognizing that we were sending documentation.
Ms. Karson: We found out about this at second reading during the Standing Committee on Health hearings. I immediately contacted Cathy Sabiston, the director general for tobacco controls. I asked her to clarify something for me: Will American blend be banned as a result of this proposed legislation, if this legislation is passed? She said, "Yes. Have a nice day." That was our conversation.
When Health Canada was asked during those hearings if they consulted specifically with the Frontier Duty Free Association, a question posed by Joyce Murray, they said they did consult with us. I beg to differ on that. I have subsequently contacted the Minister of Health to meet with her directly. I have been refused a meeting. I have contacted Leah Canning twice and have been refused a meeting. I am sure you would agree that we, as an industry, believe that is lack of consultation, and it is very disheartening.
The Chair: Mr. Kim, were you involved in any consultations? Did you get any answers from Health Canada about the American blend?
Mr. Kim: No, but some time in July, one of the key account managers from the tobacco company came into our wholesale outlet, and he said that American blend sales might be banned in our store. That is when I consulted with my executives and we sent out letters to some of the senators. Yesterday, the clerk called and asked if I could attend this meeting.
The Chair: Thank you very much. Again, colleagues, one question each. We are short of time.
[Translation]
Senator Rivard: If I understand you correctly, it is fair to say that you agree with 90 per cent of the bill's content, especially the ban on all flavoured products in an effort to prevent youth from taking up smoking. Is that correct? So we are all in agreement then.
You say that you were not consulted. So, this morning, we are hearing your point of view.
Ms. Karlson mentioned an amendment proposal, and it would have been given to the chair, I believe. Would it be possible to obtain a copy of the proposed amendment to the bill?
[English]
The Chair: Has this been distributed? Do members have it? You have it.
[Translation]
Senator Rivard: When an act is amended, the procedure must be detailed. We must refer to specific sections of the act. When you said that you had made a proposal, I thought that you had drafted the amendment, but then, we could work on that.
From what I understand, only two meetings were slated to study this bill. Was that intentional, or do we not have enough time to hear from Canadian cigarette manufacturers affected by the bill? I am thinking of the RBH plant in Quebec City.
[English]
The Chair: It was my estimate that to hear all the different points of view would require two meetings. If it turns out that we require more time to hear the different points of view, to get a thorough understanding of the different perspectives, then we could have more meetings. Also, if this committee wants more meetings, that is totally something that this committee can direct that we do. Right now we have planned for two meetings, but it could be more. If at the end of the two meetings you do not feel we have heard everyone or that we need to hear more people, then we can do that.
The specific amendment you mention from the Frontier Duty Free Association is here, and it has been distributed. It is very specific. It looks like legal language, actually.
We will not be getting into that until we get down towards the end, but it is here now for our information. When we are dealing with clause by clause with the bill, we can bring that into play.
[Translation]
Senator Rivard: Mr. Chair, I strongly suggest that this committee invite Canadian manufacturers to testify, including RBH in Quebec City, where 330 jobs are at stake if the bill passes as is.
[English]
The Chair: They may already be on the list; I am not sure. We will check on that.
Senator Martin: Thank you to the three presenters today. Your words today are definitely spoken on behalf of your membership, and spoken with great conviction. I empathize with all of your membership regarding the business they are conducting and how important they are to our Canadian economy.
Mr. Kim, on a personal level, I also know that the Korean business associations across Canada, in spite of the profits being eaten away for various reasons that you have cited today, also do a lot of good work in donating some of your profits to charity, scholarships and other good works for the community. I thank you officially in front of the senators.
My question is with regard to the American blends. What percentage of the total of tobacco products, on average, would be in a convenience store? What percentage of the total would be American blends?
Mr. Kim: It varies by the individual stores, but even the small percentage of the American cigarettes in small corner stores — as I said, every penny counts. When we lose a small portion of sales, we also lose the traffic. They come to the store to buy tobacco, but they pick up gum and candies and beverages and milk. Also, it will add more market shares in the contraband tobacco. Once we ban American tobacco, they will find contraband tobacco somewhere just across the border. It is easy to bring in. It is much easier than getting cigarettes from the Indian reserves.
The Chair: Does anyone else want to comment? It is also the general issue: What percentage of American blend cigarettes is sold?
Mr. Bergeron: Our total cigarettes compared to total duty-free business at airports represent 20 per cent of the total volume. Of the 20 per cent of the total volume, the U.S. cigarettes represent 7 per cent to 8 per cent, 7 per cent to 7.5 per cent of the sales of those cigarettes.
This also takes into account that the largest-selling brand of U.S. cigarettes is not sold in Canada — Marlboro — for other issues. The 7 per cent to 7.5 per cent probably represents a couple of million dollars in sales, but it is also the fact that customers want to purchase cigarettes that are not there. In our business, we have the occasional travellers and the repetitive, and the repetitive purchasers find out pretty rapidly what is carried and what is not. If they are in a rush, they bypass the store where otherwise they would have been purchasing their carton of cigarettes, bottle of liquor, fragrance for them or their spouse as well as food, snacks, gifts. It has a cumulative effect on the business.
Ms. Karson: I can tell you that in 2008 we sold approximately $2 million in American blend, but again, this is a poor year for us in terms of Americans coming with the 26 per cent decline. When we start bringing Americans back to Canada and the tourism numbers go up, that number could double.
It is important to note that American tobacco is a loss leader, so when the American tourists are in our stores, they end up purchasing the B.C. wines and the Canadian souvenirs and the perfumes and the liquors, et cetera. It does have a ripple-down effect to our other product lines.
It is mainly Americans in our stores, and we are trying desperately to keep them in our stores, and this certainly will not help if we are not given an amendment.
Senator Keon: There is no question that anything that interferes with the tobacco industry has a devastating effect on economies. There is no question about that. I happened to be in Italy last week, and Philip Morris was there sponsoring the Grand Prix. We have to take this a step at a time. There is no question about it. It is hard on people to adjust to this, but people must adjust to this because, as the population becomes educated, they will not smoke. Eventually tobacco sales will dwindle and die. It is true that tobacco companies now are selling in the Third World, but they are selling less and less to educated people.
Can you not find some way of adjusting your operations to get out of the tobacco business?
Mr. Bergeron: I also give some courses and seminars on airport commercial management, and I follow the international world regarding the breakdown of sales. The numbers I will quote now do not come from my own research. They are supported by the duty-free shop program under CBSA. They communicate sales of the various categories of products sold at duty-free shops, separate from the airport at that land border. Interestingly, the sales proportion of tobacco in duty-free shops has remained fairly stable. One of the key reasons really has to do with customer behaviour.
People in duty-free shops buy future consumption, so they buy the whole carton. Eight packs used to last the shopper eight days, and now eight packs will last them probably fourteen days for a regular smoker, whereas in the domestic market people buy basically the single pack. You rightly said let us reduce the consumption. Education — we used to say education, age and affluence are the best target markets to reduce the smokers, but another thing that has reduced smoking has been that governments have taken initiatives to reduce the incidence of smoking, and that has reduced the amount of consumption.
It has affected much more the domestic retail rather than the duty-free retail. I come from the domestic retail side of the business. Domestic retail sales are immediate consumption. Duty-free retail sells future consumption. We sell only a carton of 200 counts. People will come who can buy only whenever they travel internationally. It has maintained basically the flow of the business.
That does not mean we are not looking at new products. Over the years we have introduced icewine. We have expanded seriously in the icewine and in premium product in liquor. We have also expanded in Canadian wine and Canadiana-type products, such as salmon and maple syrup. We have also expanded in the souvenirs, not only what we call in the industry "the Niagara Falls souvenir," not to be disrespectful, but by basically trying to go more upscale and more Canadian-made. We are constantly expanding, reviewing our list of products in order to respond to the needs of the customers.
As you understand, in order to be successful in retail, you also have to meet and exceed the expectations of the customers. Tobacco is one of the products they are looking for at duty-free shops.
Ms. Karson: I echo Mr. Bergeron's comments. I am confused because the intent of this bill is very clear. It is flavoured tobacco. It is that strawberry cigarette, that chocolate-mint cigarillo. American blends, the Camels and Winstons, are apples and oranges. It is not a slippery slope. It is very clear.
The intent of this bill, in my opinion and that of my members, should be adhered to. We will support it and remove those products from our shelves without question, but this is not transparent. American blend is different than the flavoured tobacco, which is the intent of the bill, and an amendment should be provided to allow the businesses that represent American blend to continue to sell it in our country to Americans or to Canadians who prefer to smoke American blend; but for our business, it is Americans. While we do offer many products other than American blend, the reality is that some Americans do smoke what they consider "regular cigarettes," like the Camel, like the Winston. I urge the committee to look at the intent of the bill. If you feel that American blend is part of that intent, then there is not much more I can say, but I do not believe it is.
The Chair: Since we are running overtime, I will ask Senators Callbeck, Pépin and Segal to ask their questions all at once instead of individually.
Senator Callbeck: Thank you, Mr. Chair, and I will be brief. Thank you for coming this morning.
Menthol cigarettes — I see where they will be able to be sold. Does that mean that they are not appealing to youth?
Second, I am reading here that in December 2008 an Act to amend the Smoke-Free Ontario Act with respect to cigarillos was given Royal Assent. The act prohibits their sale unless the flavoured cigarillo has been prescribed. Prescribed by whom? Do doctors prescribe these?
The Chair: Please make notes and we will let you answer when we finish the questions.
[Translation]
Senator Pépin: If I understand correctly, you are saying that this will intensify the contraband phenomenon. Since young people can be sly, especially at the age of 17, they will most certainly find a way to get a hold of cigarillos. Do you have a way to recognize them so that you do not sell them these cigarettes?
[English]
Senator Segal: Could the witnesses reflect on what they think Health Canada is up to here? There is no lack of consensus around the proposition of doing away with the flavoured product that would attract children inappropriately. The fact that the American blend would be swept in reminds me of all the renovations I have done at home. The most expensive part is when someone says to the contractor, "While you are at it . . ." Officials sit down with the best of intentions to protect health and to reduce all of the illnesses caused by smoking, and someone says, "While you are at it, why not drop in this American blend thing," and then when you call and ask, apparently, if I take your testimony, they say, "Have a nice day." You have been regulated by these people for a long time. Your perspective on what is really going on would be helpful to the committee.
The Chair: Panelists, this would be your last opportunity. You have three questions from three senators. I will start with Ms. Karson and go in reverse order.
Ms. Karson: That is a good point. I do not know what is going on with Health Canada. I think their intent is honourable. We all agree it is clear that flavoured tobacco is being marketed towards children. It is flavoured chocolate and strawberry and so on, so it is obvious to me. By creating such a broad list, I get a sense that they will be able to create future strategies and so on to create a foundation, and I understand that, but American blend is not the flavoured tobacco. How do I explain their strategy? I cannot. It is not the same. Again, it is apples and oranges.
In my opinion as a Canadian citizen and as a representative, this should be a very transparent process, and it is not; it is flawed. An amendment would allow the intent of this bill to go through in the timelines that these committees would like to see it go through but also appease Canadian industry, which is being hard hit by this current economic recession and by other factors that are affecting our businesses. I think we can both win by an amendment.
The Chair: Do you have any comment on Senator Callbeck's question about menthol cigarettes and Senator Pépin's point about contraband?
Ms. Karson: I was at hearings for the Standing Committee on Health, and Health Canada can certainly answer that better than I can, but from my understanding of those hearings, menthol cigarettes are actually on a decline. They were looking to capture tobacco products that are clearly aimed at youth that are on an upswing. It is quite popular amongst children in the northern parts of Canada. They can buy these single packs, which they can afford. They even showed examples. It is so blatant that it is incredible. To answer what my little knowledge is, that would be the response.
The Chair: Mr. Kim, do you have any comments on the questions that have been asked?
Mr. Kim: I do not have the answer, no. If you can send me an email, we will find the answer for you and get back to you later.
The Chair: Thank you. Mr. Bergeron?
Mr. Bergeron: I will start by answering Senator Callbeck's question. With discussions of our members, as such, we sell cigarillos to adults and menthol cigarettes to adults because of the makeup of our market. Our members do not carry cigarettes targeting children. Having said that, we understand the unintended consequences, especially with the wine tip Old Port cigarillos. Our members say, "In order to support the intent of the law on the flavoured tobacco, if it has to go in, it has to go in. It will not kill the business." However, we do not like to lose products, and I think you understand that, but we understand that this product may have to go.
With regard to your question about what Health Canada is up to, I think they are trying to plug the holes in reducing consumption to youth. We have done presentations before with others. One was a number of years ago when we received an exemption as a duty-free industry regarding access to the merchandise rather than being behind the counter, because of the nature of our business.
We are building up two measures for the same product if it is an American blend or Canadian blend tobacco. This is probably what is far from being appealing. We are targeting those two products to adult customers.
[Translation]
In terms of the duty-free industry, we are not vulnerable to contraband, as such. That is not only because we are doing a good job, but also because we are subject to rigid restrictions under the duty-free shop program.
Senator Pépin: Perhaps I was unclear, but I think that there will be young people who will find a way to go to duty- free shops to buy cigarettes.
Mr. Bergeron: Access to tobacco products is more of a challenge in the domestic market. As someone who used to work in that market, I take your point. However, young people must have a ticket to travel internationally. And, according to surveys conducted by airport authorities, the proportion of these young people under 18 years of age is close to 3.5 per cent. They are accompanied by a parent or guardian.
It is mandatory to ask for their boarding pass and, to verify their age, their passport. The penalty for breaking this rule is very stiff, and it is not in the interest of our members to lose their licence. Because if they do, they will also lose their entire business.
[English]
The Chair: Health Canada, which you have mentioned, is coming up next. You might like to listen to them; they have listened to you. Thank you very much for coming here and for your presentations.
We will now go to our second panel on Bill C-32. In this segment we have officials from Health Canada, mentioned significantly by the previous panel. Joining us from Health Canada is Paul Glover, Assistant Deputy Minister, Healthy Environments and Consumer Safety Branch. He will make the presentation on behalf of Health Canada. He is assisted by three people from the department who will be part of answering any questions. They are Denis Choinière, Director, Office of Regulations and Compliance; Cathy Sabiston, Director General, Controlled Substances and Tobacco Directorate; and Diane Labelle, General Counsel, Legal Services Unit.
Welcome to all of you and thank you very much.
Paul Glover, Assistant Deputy Minister, Healthy Environments and Consumer Safety Branch, Health Canada: I have tabled my remarks with the committee in both official languages. However, I will shorten my remarks significantly to allow the maximum time for questions.
Canada has for many years been a world leader in addressing tobacco and tobacco issues. Despite the many successes we have had in protecting the health of Canadians, there are still today 4.8 million Canadians who continue to smoke. This tobacco use costs the health care system $4.4 billion a year. The tobacco industry is continually developing new products and marketing strategies and expanding into previously untapped markets.
We know that 75 per cent of those who try a cigarette become a smoker later in life. That is, 75 per cent of anyone who tries takes it up later on. Of those, 50 per cent die prematurely from smoking-related illnesses. This is a public health issue. Reducing the number of people who try smoking is key to our long-term success. Therefore, focusing on youth and particularly the products that are attractive to youth is a logical place for the government and for Canada as a society to focus its attention on this incredibly important issue.
[Translation]
The bill that is before your committee today, Bill C-32, addresses the need to stop the marketing of tobacco products to youth, particularly with respect to products that may encourage them to start smoking.
[English]
I will briefly outline what we do know. We know that following the 2007 Supreme Court of Canada decision to uphold the Tobacco Act there has been a 400 per cent increase in tobacco advertising in newspapers, in magazines and in the free entertainment weeklies that may be viewed by youth. Little cigars are the fastest growing tobacco product in the Canadian marketplace, and we know that 23 per cent of kids between the ages of 15 and 17 have tried them. Almost one quarter, 23 per cent, of youth between the ages of 15 and 17 have tried them. They are widely available in flavours such as grape and tropical punch, and they are often sold individually for about $1. We know that little cigars and blunts are often available singly or in what is referred to as kiddie packs, making them affordable to youth.
I would like to take a minute to show you some of these things. We talk about them in the abstract, but I would like to show you some advertising. Time magazine is in pretty much every high school library, and these are full-page advertisements you can find in Time magazine. These are the free weeklies that you often see at the side of the road while people are waiting for a bus. These are free, no subscription, so we cannot even track who reads these things; they are freely available to anyone who can walk up and open up the box. There are full-page advertisements there. This is happening; this is not abstract.
We talk about flavours of the products. This one is called "Aloha." The flavour on the back says "coco-banana." That is a product. Raspberry is available in the Canadian marketplace; so are Dreams, which is actually vanilla; Dutch Chocolate, and berry. These are all available today in the Canadian marketplace.
Here are some of the things we are seeing in small packs. This is a pack of two currently available. I am not sure how we read the health warnings on those when they are that small. I am not sure whether this other package is cigarettes or candies; what exactly does that look like? This, by the way, is four little cigars in vanilla flavour, available today. This is two in a cognac flavour. This pack of little cigars is a range of vanilla, strawberry and cherry — flavours all available today in the marketplace. I am not sure, but they are also available in singles, and I do not even know that that actually looks like a cigar if I saw that in one of in my children's backpacks. That is what is happening in the marketplace today.
This one I have in a plastic bag because, unfortunately, it was opened. This is a vitamin cigarette. It is available in the Canadian marketplace today. These are blunts, which are sold in singles. This one is called "Tropical Passion." This one is called "Black Cherry." It is available in singles. It is in the marketplace today. I have lots of other samples. Clearly this is not a problem that exists in the abstract; it is a very real problem we are facing today.
Consequently, the objectives of Bill C-32 are to ban all advertising in publications that may be seen or read by children and youth — that would cease — and to ban all flavours and additives in little cigars, cigarettes, blunts and wraps, with the exception of menthol, which has been noted.
Under the Tobacco Act there are currently no provisions on the addition and marketing of flavours and additives to tobacco products. The bill will ban the flavours, except menthol, and other additives such as the vitamins, the sugars, sweeteners and colouring agents from cigarettes, little cigars, blunt wraps and light products.
With this, we would also like to ban representations or pictures on the front of packaging so that they cannot imply that flavours are present when they are not, and we want to ensure that little cigars and blunts are in packages of 20, so that we would move away from those small units. The minimum package size number is 20, which exists today for cigarettes. We are moving to standardize those to something that the industry is already used to.
Finally, another objective of the bill is to create a schedule so that the government can take faster action in the future to ban other products or additives should they be found to be encouraging youth to smoke.
[Translation]
The amended Bill C-32 was approved by the House of Commons on June 17, 2009 and is now before this chamber for your examination and consideration.
In closing, the bill before you today is intended to ensure the continued protection of young people from inducements to use tobacco products.
[English]
At this point, my officials and I would be pleased to respond to any questions.
The Chair: I have six senators on my list. We will start with Senator Cook.
Senator Cook: This subject is not familiar to me, but I have a note here that says "blend" means "blend with U.S.- origin tobacco leaves." Is there anything else in that, or does "blend" mean a blending of different tobaccos?
Mr. Glover: There is predominantly one type of tobacco in Canada. Each country has different tastes, and the markets reflect that. In Canada, we use a particular type of tobacco, Virginia flue, which is pretty basic. The American blend tobacco that you have been hearing so much about is a burley tobacco. It is by its very nature incredibly bitter. The only way to make it even remotely palatable is to add flavours to it. The American blended cigarette has flavours such as licorice, maple, chocolate and other things. They are not meant to be a distinguishing flavour, so you have a chocolate cigarette in terms of an American blend; we acknowledge that. However, all of these sweeteners are added so that it is less harsh and easier to smoke, which is actually the target of the bill. A product that is easier to smoke and less harsh is easier for youth to start. This is not by accident. American blended cigarettes are less than 1 per cent of the total in Canada. Of that, we have known for a number of years now that some companies have reformulated, and their American blend cigarette has been reformulated to the Canadian market and does not include the favours that would be affected by this bill, and that is 56 per cent of American blended cigarettes currently sold in Canada.
Senator Cook: Are you saying that the blend is simply a blend of tobaccos and nothing else?
Mr. Glover: No, it is a blend of tobaccos and flavours to make it palatable.
Senator Cook: What are the flavours?
Mr. Glover: There is a long list. That is proprietary information, which they currently are not required to disclose to us, but we do know it ranges from maple to molasses to vanilla to chocolate to licorice.
The Chair: Let me follow up a little. The three panellists here were not from the manufacturers; they were representing retailers in airports and land duty-free shops as well as retailers such as the Ontario Korean Businessmen's Association members. They are all saying that this will create great difficulty for them for their ability to make enough money. As the representative from the Ontario Korean Businessmen's Association said, the convenience store is a penny business, so every penny counts. They emphasized that a couple of times. What do you say about that? They are saying that the Prime Minister originally talked about the little cigars, the cigarillos — the kind of things that you held up there, Mr. Glover — but they did not think he was talking about the American blend. Why have you now included the American blend? What do you say to the witnesses from whom we have just heard?
Mr. Glover: First, if we want to reduce smoking prevalence; by default, it means fewer cigarettes need to be sold. As a bureaucrat, I cannot find a way to develop legislation to propose to any government of any stripe that says you can reduce the smoking prevalence while still selling the same number of cigarettes. Those two things do not equate. Fewer people smoking means fewer cigarettes being sold. That is a public health objective from the Government of Canada and has been since this act was originally passed in 1997. That remains consistent as one of the original tenets of the act. If we want fewer people smoking and fewer people starting to smoke, there will, by default, be fewer cigarettes sold.
The Chair: We may all want that, but the object of Bill C-32 is to try to reduce the influence on young people, on minors. You talked about that extensively in your opening remarks, from even having that first puff, so they do not get on to smoking. How does that relate to the abolition of the American blend, which they think is a bit of overreach and an unintended consequence?
Mr. Glover: Mr. Chair and members of the committee, I would like to be as clear and as explicit as possible: Nothing in this bill bans any one product or product class. It bans flavours and additives. There are currently American blended cigarettes already on the market that have reformulated before this bill was introduced to comply with the tastes of the Canadian market. That is currently available.
The other tenet of this act, right from its inception, was to treat all product classes equally. It applies to all products sold or imported into Canada. We continue to believe that is an important tenet of the act as it moves forward. We do not create exceptions for imports or for exports. This is a public health issue that requires coherent, concentrated and consistent action across all product categories. Remember that the flavours that are being added to those American blended cigarettes are intended to make it less harsh right from the outset.
[Translation]
Senator Rivard: First, I must congratulate the Department of Health for initiating this bill, further to a statement made by the Prime Minister in 2008 in which he committed to banning flavoured tobacco products. I think that everyone supports that initiative.
My only concern is that Burley tobacco will be included in this bill, which would have economic repercussions. I am not a health expert, but from an economic standpoint, I would like you to confirm that facilities such as the Rothmans plant in Quebec City, which uses Burley tobacco to manufacture cigarettes that are then re-exported to the United States, or Gitanes or Gauloises will not be affected. I would remind you that there are 330 jobs at stake in Quebec City and surely others elsewhere in Canada.
That was my first question, and here is my second: Are you sure that Bill C-32 complies with GATT and the WTO and that there will not be any challenges?
Lastly, some witnesses have told us that other countries with populations comparable to Canada's, such as Australia, have banned flavoured cigarettes but still allow American blend products. Why was Burley tobacco banned?
As for everything else in the bill, I agree, not 100 per cent, as some have said, but 110 per cent.
Mr. Glover: My two colleagues will help me answer the questions. But first I want to say that the bill before you today does not propose a ban on that tobacco; it proposes a ban on the flavoured ingredients added to that tobacco.
Denis Choinière, Director, Office of Regulations and Compliance, Health Canada: First of all, I want to clarify for the purposes of this discussion that the type of cigarettes mainly sold in Canada are made from flue-cured tobacco, and they account for 99.2 per cent of sales. Cigarettes that contain a tobacco blend, thus referred to as American style, are made from a blend of flue-cured tobacco and air-cured Burley tobacco, and they account for only 0.8 per cent of sales.
In our opinion, the bill will affect approximately 56 per cent of the cigarettes made from a blend of flue-cured tobacco and Burley tobacco. Generally speaking, that means about 0.5 per cent of the Canadian market. The impact will be felt at the manufacturer level. And if we assume, for argument's sake, that each manufacturer produces 99 per cent of flue-cured tobacco cigarettes, half of the remaining 1 per cent represents the impact on manufacturers.
We estimate that the impact on retailers will be similar because, on average, retailers seek to satisfy customer demand. As we know, in Canada, that is 99 per cent. Therefore, we believe that 0.5 per cent of retailers' sales will be affected.
Senator Rivard: I agree with what you are saying, but don't you think that we are using a sledgehammer to crack a nut? If the percentage of American tobacco processed is so minimal, why not leave it alone if it means the survival of the Rothmans plant in Quebec?
That is why I suggested to the chair that they appear before the committee. They could tell us that if we leave the bill as is, the Quebec City plant would have to close because it imports American tobacco; they manufacture it for re- export to the United States. Therefore, it is not smoked here. The same goes for Gitanes and Gauloises cigarettes; the market share in Canada is very small, and the tobacco is re-exported to France. So if the bill passes unchanged, the manufacturers will no longer be able to make these Gitanes or Marlboro products.
Mr. Choinière: Obviously, we cannot speak for the manufacturers. Rothmans and Benson & Hedges should come here and tell you exactly what this means for manufacturing at the plant. On our side, we estimate that 99 per cent of cigarettes manufactured in plants are made from flue-cured tobacco, and the Canadian consumers who continue to smoke — because there will always be those who continue to smoke — will continue to smoke flue-cured tobacco. Thus, manufacturers will have to make a corporate decision as to whether they want to serve the Canadian market from that plant or a plant outside Canada. That is not in the bill.
To come back to the danger of opening a door that we will not be able to close afterwards, you see that there are already flavoured cigarettes, as we have shown here. And there is no way for the Canadian market to create an exception in order to solve the problem. We would not be able to control the exception afterwards. As we said earlier, the bill does not mention the type of tobacco. Manufacturers can use the type of tobacco they want. We know that some use sugars and flavours for tobacco blend cigarettes, and others do not. We are not about to start telling some manufacturers that they cannot use one type of tobacco or another. All we are telling them is that they cannot use flavours or sugars.
Senator Rivard: In other words, if Rothmans came and testified that using Burley tobacco does not add flavour to the smoke, the company would then be able to keep doing what it is doing because, if I understand correctly, the Department of Health's goal is to prohibit anything that could be considered an additive and thus lead to young people or even adults taking up the habit of smoking flavoured tobacco products. Thus, if the Burley recipe is not intended to alter and flavour the smoke, the plant could continue to manufacture it.
Mr. Choinière: I can talk about the Camel brand because, a few years ago, the Camel manufacturer publicly announced to the British Columbia government its ingredients and additives. We have the document here, but it is in English only. From their ingredient list, it is clear that there are no sugars or flavours. Camel, as you know, is an American brand. So it is up to the manufacturer to decide whether it wants to add or remove the ingredients that will be prohibited.
Senator Rivard: If the committee, in its wisdom, came to the conclusion over the next few meetings that it wanted to clarify what you have just said as the objective, I would suggest this: subject to the fact that the addition could solely affect cigarettes for which one or more additives give the cigarette smoke a sweet or fruity flavour. Would that be acceptable to the department?
Mr. Glover: No, it would not be acceptable because it creates a loophole in my opinion, that is, what would an identifiable taste be. This is similar to the issue of "intense flavour;" how do you define "intense?"
[English]
The Chair: We plan to hear from Rothmans, senator. Thank you.
Senator Keon: Obviously, you are preaching to the converted with me, but it seems that the word "blend" is of huge importance. I believe that the cigarette companies have as their important objective addicting people to tobacco and nicotine as quickly as possible and that they will put anything in a cigarette that will achieve that end.
I believe that we must be very firm about the word "blend" because, in my opinion, it leaves the door open to add whatever it takes to get anyone, child or adult, addicted as quickly as possible to tobacco and nicotine.
What do you think about that?
Mr. Glover: I am going to be very careful about how I answer that question. The intention of this bill is to focus on those flavours that we have evidence have been attractive to youth. There is an exemption for menthol. However, one of the unique characteristics of this bill is a schedule. If we had evidence that there are new products entering the market that are attractive to youth — and we survey youth on a regular basis — we would be able to take action to respond.
We want to continue to collect evidence. If this bill is passed, when there is evidence, we would have the ability to respond to the market and how it evolves.
The Chair: What if menthol, which is exempted under this bill, becomes much more of a focus in marketing the products and works to defeat your purpose? Why have you exempted that when there is that possibility?
Mr. Glover: The bill as drafted allows for the creation of a schedule. We could adjust the schedule over time based on the available evidence. Currently the Canadian market is very different from markets in Australia and France, for example, as we have seen. The use of menthol is on the decline in Canada and is not something youth find attractive.
The Chair: If you decided to add it as a prohibited flavour, would that be a Governor-in-Council decision, a ministerial decision or what?
Mr. Glover: It is up to officials.
The Chair: What does the legislation say on that?
Cathy Sabiston, Director General, Controlled Substances and Tobacco Directorate, Health Canada: The GIC process is used.
The Chair: In other words, there is no review of it by bodies like this.
Senator Cordy: Thank you. Since I am allergic to cigarette smoke, I would be happy if there were no cigarette or cigar smoking at all. I spoke in favour of this bill yesterday in the Senate, and I think everyone around the table would agree with its objectives. The objective of the bill is to eliminate or at least reduce the number of young people starting to smoke. Of course, the statistics show that if they start smoking, they will continue smoking.
Having said that, we just heard from the duty free and Korean small businesses of Canada who said that they were not consulted at all. The intent of the bill focuses on young people. They have said that Marlboros, Camels and Winstons will now be banned as tobacco products. Was that the intent of the bill? It seems that the intent of the bill, as far as I read it, was young people first. They said they were not consulted. In fact, when they heard that the bill was in the House of Commons, Frontier Duty Free Association tried to get a meeting with the minister and the department and was unable to do so. It would make things much smoother if there were true consultation, not just telling someone what will happen. We would eliminate meetings like this where we have to hear people who have had no voice in the decision-making process.
I have two questions. Was it the intent that Marlboro, Camels and Winstons be banned? My second question has to do with consultation.
Mr. Glover: With respect to consultation, this was a platform commitment in some ways. As a platform commitment, it was very visible and public to all Canadians through the election process. There was certainly a lot of dialogue and attention paid to it. As the process has unfolded, we have as a department attempted to reach out to industry through a number of conference calls and other means, to hear about concerns about the bill; in fact, a number of amendments were proposed and accepted at the house to respond to those concerns, so there has been an attempt to reach out to those who have been affected.
With respect to the intent of the bill, I would like again to clarify. The bill does not propose to ban products or product classes. It proposes to ban ingredients. Those companies can choose to reformulate to comply with the requirements of the Canadian marketplace. Some chose to do so before this bill was even introduced. It does not ban products. It bans flavours and additives.
The Chair: In complying with it, the American companies would see Canada as a very small percentage of their market. Why would they go to all that trouble just for Canada? For the Canadian retailer, it can make a difference. The U.S. is obviously a far bigger market. Why would the American companies adapt for our little market?
Mr. Glover: My objective is public health. The Tobacco Act is a public health act. That is its intention.
With respect to American blend, the difference between Canada and the U.S. is night and day. We prefer a type of tobacco that makes up 99.2 per cent of all cigarettes sold in this country. We are only 0.8 per cent American blend, because Canadians do not like it, and over half of that, 56 per cent of, have chosen to reformulate to comply with the tastes of the Canadian market.
The Chair: I think that is your main point. You are not banning any particular class of products, but the changes are such that the Americans probably would not adapt for such a small market at any rate. That is fine.
Senator Callbeck: Thank you for coming. My question has to do with the jurisdiction of enacting legislation for flavoured tobacco. I believe some of the provinces have already done this, and others are talking about it. I have read this in the newspapers. Is this legislation consistent with what the provinces have enacted? Has there been any discussion with them? Will we end up with a federal law and provincial laws?
Diane Labelle, General Counsel, Legal Services Unit, Health Canada: From a legal perspective, first, and then from a policy perspective by my colleagues, it is understood that, under the Constitution of Canada, under sections 91 and 92, that Parliament and the legislatures share certain jurisdictions. In the case of health, as you are likely aware given your past experience, it is not a single matter assigned through the Constitution exclusively to one level of government or another. Rather, health is this kind of amorphous topic that is distributed either to the federal Parliament or the provincial legislature, depending on the purpose and particular effect of the health measure.
In this case, the health measure is founded on the youth and criminal law power. From very early on, the Supreme Court of Canada recognized that a health purpose was a valid use of the criminal law power. That was again confirmed on the first constitutional challenge to the Tobacco Act in 1995, and the Supreme Court of Canada again confirmed the constitutionality of the Tobacco Act in 2007.
With respect to potential conflicts with provincial statutes, generally speaking the federal jurisdiction has preponderance. If there were a conflict, the federal legislation would apply. I have to define the nature of the conflict here. It would have to be a true conflict in the sense that complying with one statute would necessarily involve breaking the law or the rule in the other statute. That is rarely the case. In most situations, one law is more restrictive than the other, so an individual who complied with the more restrictive law would be fine.
Senator Callbeck: Have you had any consultation with the provinces on this?
Ms. Labelle: On the policy side, my colleague will answer that.
Ms. Sabiston: Yes, we have, and they are very supportive of the bill.
Senator Callbeck: Is the legislation that they are putting in more or less consistent across the country?
Mr. Choinière: Both Ontario and New Brunswick have passed legislation. The purpose is very similar to ours. The mechanism is slightly different. Both pieces of legislation have left the details to be worked out in regulations, but those regulations have not been put forward yet. I understand from many discussions with our provincial colleagues that their intent and end result will be similar to what is in this bill.
Senator Callbeck: You are trying to get some consistency?
Mr. Choinière: Exactly.
The Chair: Thank you. I have three more senators left, and I am trying to get done by the top of the hour.
Senator Segal: As a matter of history, were any of you in the employ of Her Majesty in the Ministry of Health when Prime Minister Chrétien radically reduced the taxes on tobacco back in the 1990s? Were any of you employed there at that time?
Mr. Glover: I was employed at the Department of Health, not in this current capacity.
Senator Segal: Do you know whether any of your colleagues working in their present capacities tendered their resignations at that time in disgust about the impact it had on the increase of smoking on the part of young people and young women in particular?
Mr. Glover: I do not know.
Senator Segal: It might be worth looking into to see if anyone did. Part of our problem is the problem of perverse outcomes. There is not a person in this room who wants young people to smoke. There is not a person in this room who wants more young people to smoke. Everyone in this room would like young people to stop smoking. However, the state makes decisions about instruments.
In response to the questions of my colleagues, I understand you to be saying, in the best of faith, "We will decide, in technical advice underlying the content of Orders-in-Council to the government, what ingredients will and will not be allowed. We will continue to have that prerogative going forward once this bill is passed. Anyone who is elected or has concerns can write the ombudsman, because we will have the power to proceed any way we wish." Are you comfortable with that answer? Obviously the government is of this view, but are you of the view as public servants that that is the best way to protect the public interest in this circumstance?
My concern about perverse outcomes is that I do not know why men and women working in plants in Quebec City should lose their job today because we were not prepared to face the real smuggling on the Indian reserves with our law enforcement agencies 15 years ago. I do not get the connection. I do not think the people who lose their jobs will get the connection. My question is this: Do you have any concern about the level of bureaucratic power this bill gives to you?
I lost my mom to smoking at 56 because of lung cancer. I get it. I understand what you are trying to do, and I respect what you are trying to do, but are you comfortable that this is the best way to do it, all things considered?
For example, if you had a much broader increase in taxes on tobacco, many young people who now think they can afford to smoke would find out that they could not. That may be the best public health measure we could possibly take. That is what we face in trying to reflect on this and be as constructive as possible in the process.
Mr. Glover: Mr. Chair, with respect, as an assistant deputy minister at Health Canada my job is to advise the minister. The minister renders her decision or his decision at that time, and it is the government, through the cabinet, that makes decisions, not I as an assistant deputy minister. Regardless of however senior I might think I am, I am a servant of the government. I do not make the decisions. The government does. I provide advice based on the evidence, and I do that with the best of intentions, with the best of the policy advice for the objectives that this bill has. That is my job.
With respect to the powers that this bill affords, they must be tabled. There is a process that goes through the Governor-in-Council and there are a number of steps here, including our going back to the house to table things so that there can be a further debate through the parliamentary process as this moves forward. It is an incredibly transparent process as it moves along.
With respect to tobacco as a societal issue, the Tobacco Act is not meant to deal with contraband. It is a public health issue, and this act deals with that and that is what I am prepared to speak to here. The government does have a coherent strategy that includes the Canada Border Services Agency, the RCMP and others to try to deal with the contraband issue. The Government of Canada's strategy is multi-faceted, but today, through the Tobacco Act, which is a public health act, we are dealing with public health issues.
I am sure if the committee had an interest in contraband and asked the appropriate departments and agencies they would be happy to tell you in great detail all of the measures they are taking to address that issue.
The Chair: Okay. I would like to ask you about one other thing in supplement to that. Is this compliant with various trade agreements and international obligations that we have on trade?
[Translation]
Ms. Labelle: That gives me an opportunity to answer your question, senator.
[English]
As a trading nation, Canada is very serious about its trade obligations, and the Department of Justice, working with colleagues in the international trade law section, does revise and scrutinize each and every piece of legislation for consistency with trade obligations.
In that course we take into account the views of various stakeholders, including the trading partners. As you know, the Government of Canada is committed to developing a bill that protects youth from tobacco marketing while respecting our international obligations, and in this particular case we have ascertained that Canada retains the right to set its health objectives as represented in the bill.
[Translation]
As for whether there will be any repercussions, it is entirely possible. We cannot predict that.
Senator Rivard: The WTO assured you that we were in compliance?
Ms. Labelle: Yes.
Senator Pépin: With respect to menthol products, you said that one reason the bill does not prohibit them is that people are consuming them less and less; I think it is around 2 per cent or something like that. What makes the menthol flavour different from another flavour? Do you think that it should be banned? Since people are consuming these products less and less, menthol products are being left alone; they will disappear on their own. I would really like to know what the difference is between menthol products and the others.
Mr. Glover: My colleagues will answer your question, Senator.
Mr. Choinière: In terms of menthol products, including cigarettes, there was a period in the 1980s when they were much more popular, and then consumption dropped. Given that the bill more specifically targets youth and emerging products that appeal to young people, we could not include menthol products.
Senator Pépin: Because they do not appeal to them?
Mr. Choinière: They are not within the scope of intervention targeted by the bill.
Senator Pépin: So we are leaving menthol products in circulation because we believe that they will disappear on their own? People are consuming them less and less, only 2 per cent nowadays.
Mr. Choinière: If there was ever another wave of popularity in the future, particularly among young people, then we would certainly have the evidence necessary to justify banning menthol products.
[English]
Senator Dyck: My question concerns the American blend cigarettes. You gave a very good example, set out on the sheet, of little cigarillos and cigarettes that appeal to youth. Apparently the taste has been altered to make them more attractive. Does the American blend Winston or Camel taste anything like these? You say they contain the flavours that go into these, but do they taste the same? In other words, do they appeal to youth? They were not in the display that you set up, so I am wondering. Surely it is the taste. You are starting with two very different tobaccos, one that is bitter and one that is not so bitter. If you put the same flavours in, they will have different results in the product.
Mr. Choinière: Let us go back to the issue of blended tobacco cigarettes, or so-called American style. As we said earlier, we think from the reports we get from the industry that American blend is 0.8 per cent of the sales, and of this number we basically have two types. Some of the blended tobacco cigarettes have added sugars and added flavours. The other half roughly does not. The two brands that you mentioned, both Camel and Winston, I can talk about because these brands have put public reports in the hands of the Government of British Columbia further to regulations they had. If you look at the list of ingredients, which can be provided later to the committee, those two brands do not declare any sweeteners or any flavours, and that is not true of the other others. The bigger point is that when you ban flavours you ban flavours for cigarettes or for little cigars. There is no mechanism where we think it would be suitable to come in and say one recipe works and one does not. It would be a large loophole, as was pointed out by Mr. Glover earlier.
Senator Dyck: I still do not understand, when you have two completely different tasting tobaccos; surely it is the end product that is important if you are talking about luring young people into smoking.
Mr. Glover: Certainly we appreciate the time and attention the committee is putting to this very complex issue. It is not by accident that we have arrived at our advice to the government on this particular issue. It is the ingredients that make these cigarettes more palatable. As a regulator, I would find it particularly challenging to look at one flavour at a time, as my colleague says, and say this one works and that one does not. I am not sure whose taste buds we would use or how we determine that. The ingredients that get added to the cigarettes make them less harsh. Less harsh makes them a starter product, and therein lies the problem.
With all respect to the senator's question, I understand the end tastes are different. The end taste between vanilla and chocolate is very different. It appeals to some and not others. We do not care. It appeals; it makes it a starter product and appeals to youth. That is why we are going after the ingredients that go into these products.
We seem to be struggling with this issue and I acknowledge it is complex, but it is the ingredient, not the finished product.
Senator Dyck: Tobacco is an ingredient. The type of tobacco is one of the ingredients.
Mr. Glover: Tobacco is not banned. It is an ingredient.
The Chair: You are saying you have to deal with it as the ingredients or you open the door. I think that is, in effect, what they are saying.
You mentioned that some organizations were consulted. Could you provide us with a list of the organizations and when they were consulted, please?
Mr. Glover: Yes.
The Chair: Finally, one thing I think needs some further addressing here is the question of contraband. The organizations that came before us previously said it, and I suspect some of the others we will see next time will say that it is all very fine to intend this, but you will end up having people get the product through contraband. Senator Segal referred to what happened during the 1990s, and in fact that was on the advice that lowering the taxes would hurt the contraband. That was the big concern at that time, because it was really getting out of control. Whether or not that worked, you can judge. However, that was certainly the intent.
What if all of this gets defeated by a massive increase in the amount of contraband? I understand that maybe part of your answer is you may be coming with some other legislation on it, but it would strike me that there is a point being made here, and a key point, that if you end up just transferring this over to contraband it will defeat the purpose of Bill C-32. Why have you not covered contraband in Bill C-32?
Mr. Glover: There is a long, technical answer. I could refer the committee back to the original Tobacco Act and its objective. It is a public health act and it has public health goals. Contraband is dealt with through other pieces of legislation by other federal departments. We work in partnership with them to ensure there is a coherent approach to tobacco policy and all of the legislative tools that are available to the government. With respect, these are legitimate policy objectives. This is a problem that is worthy of attention. Having a contraband problem does not negate the necessity to take the action we feel is appropriate and justified. There is evidence to warrant on this particular issue.
My colleagues in the Canada Border Services Agency, in the RCMP and others are also working to deal with that separate issue of contraband. Hopefully we can address both those problems, one versus the other.
The Chair: You have said throughout here today that your concern is public health. If they get these same cigarettes through contraband, then what have you done for public health with this legislation?
Ms. Labelle: With respect to the Minister of Health's mandate, it is not simply covered in the Department of Health Act, unfortunately. As Mr. Glover explained, through the legal services and through the various departments, the excise tax, the Income Tax Act and the Criminal Code are the main tools used in the strategies to fight contraband.
The Chair: We have come to the end of what has been very interesting information. We will have at least one more meeting on this matter. We may have to call you again if we need further clarifications, depending on the evidence that we hear in our next round on September 30 on this matter of Bill C-32. Thank you again for being here.
Mr. Glover: Thank you to you and your committee members.
The Chair: Colleagues, this meeting now stands adjourned.
(The committee adjourned.)