Thursday 16 June 1991

Cross-Border Shopping

City of Cornwall

Canadian Shoe Retailers' Association

Elaine Vacher

The Lumber and Building Materials Association of Ontario


Afternoon sitting

Retail Council of Canada



Chair: Mancini, Remo (Essex South L)

Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)

Abel, Donald (Wentworth North NDP)

Bisson, Gilles (Cochrane South NDP)

Drainville, Dennis (Victoria-Haliburton NDP)

Duignan, Noel (Halton North NDP)

Harrington, Margaret H. (Niagara Falls NDP)

Mammoliti, George (Yorkview NDP)

Murdoch, Bill (Grey PC)

O'Neill, Yvonne (Ottawa Rideau L)

Scott, Ian G. (St George-St David L)

Turnbull, David (York Mills PC)

Also taking part: Carr, Gary (Oakville South PC)

Clerk: Deller, Deborah

Staff: Rampersad, David, Research Officer, Legislative Research Service

The committee met at 1011 in room 151.


Resuming consideration of the designated matter pursuant to standing order 123 relating to cross-border shopping.

The Chair: I call to order the standing committee on general government. We are resuming consideration of the matter designated by Mrs O'Neill pursuant to standing order 123 relating to cross-border shopping.

Last week we heard from the ministers and the deputy ministers of Revenue, Labour, Industry, Trade and Technology and Treasury and Economics and used a total of two hours and 29 minutes. This leaves nine hours and 31 minutes for consideration of this matter.


The Chair: The agenda before all members this morning indicates the first presenter for this morning is the Cornwall Business Council being represented by Mike Metcalfe. I call Mr Metcalfe forward. Please have a seat and make yourself comfortable, sir. For the record, we would like you to identify yourself and whom you are representing. You have been allocated a total of 20 minutes. That includes your presentation and questions, if there is time within that 20-minute time frame.

Mr Metcalfe: Thank you and good morning. I am Mike Metcalfe from the economic development department, city of Cornwall, representing both the city and its business council. I am delighted to be here and that I am first up.

Cross-border shopping has been high on a number of agendas in recent months. Border communities are being affected to varying degrees, ranging from moderate to alarming. That Cornwall is being affected is an unalterable fact. To what degree is difficult to pinpoint at this juncture, but indications are that its local economy is suffering. The lines of traffic aimed southward across the Seaway International Bridge most certainly attest to that.

There is increasing anger and frustration over the issue, along with strident cries of, "Do something." The brunt of the demands to do something and to solve the problem are focused at both you, the provincial government, and the federal government. Everyone knows it is your fault, that you have created this mess and it is up to you to get us out of it.

You will be relieved to know that my remarks today will chart a different course. Name-calling and blame-casting are counterproductive, and besides, you have heard it all before. Instead, I would first like to inform you with some facts and figures about Cornwall, its economic condition and current quality of life, then I would like to identify from the city's perspective the reasons for the increase in day trippers to Massena, New York, and finally I would like to offer some suggestions, positive and perhaps useful ones, that may provide you with that elusive window of opportunity.

First, the facts and figures: Traffic has increased dramatically on the bridge between Cornwall and Massena. Paid transits, which generally mean the average motorist, made 650,000 trips across the bridge in 1988. In 1990, this figure had increased to approximately one million, an increase of 55%. The increase is significant and disquieting, I am sure you will agree. What is even more disquieting is the fact that for a considerable period of time in 1990, bridge traffic was dramatically curtailed by the Akwesasne affair. You will recall that was a time when Cornwall was affectionately known as CFB Cornwall.

As the figures are scrutinized further, it is revealed that 62% of those travellers came from Cornwall and Ottawa. Their destination generally was Massena, with its large new shopping mall. What is most significant, however, is the Canada Customs data showing that from 1989 to 1990, duty collections in Cornwall increased by 1,382%. That percentage is doubly alarming when compared to Windsor, which claims to have been devastated by the cross-border shopping issue. Its increase was a mere 458%.

If one zeroes in on the purpose for the day trips taken by our community, it is generally to buy gas, groceries, liquor and meals. As we examine figures for some of these items, a portrait of economic woe begins to appear. Take liquor sales, for instance. According to Ministry of Industry, Trade and Technology statistics, sale of liquor in the Cornwall region rose 27% less than the regional average. That converts to $750,000 in lost revenue to the province.

Gasoline sales are particularly hard hit in Cornwall. The Akwesasne reserve, with its tax-exempt status, is able to sell regular gasoline at a current price of approximately US$1 per gallon. A conversion to imperial gallons and the application of a 15% exchange rate results in the Canadian equivalent of $1.44 a gallon. The 10 June 1991 price of regular unleaded gas in Cornwall was the equivalent of $2.66 per gallon, or 58.5 cents per litre.

It is all very well to preach, "Stay at home," but there is an unfortunate reality here. Dollars spent on groceries and meals are hard to quantify, as no specific customs figures are kept, and to determine the number of meals eaten during a one-day trip would be sheer speculation. However, judging from remarks about grocery bargains and dinners at wherever made by local citizens, coupled with the number of Ontario licence plates spotted in Massena establishment parking lots, the problem seems obvious. Lest we forget, there are the bridge lineups.

From a retail perspective, the news is little better. Again using statistics compiled by MITT, we have been able to determine that the dollar loss in retail sales in Cornwall between 1989 and 1990 amounted to an estimated $12.5 million. That is an outflow of just under $300 for every man, woman and child in the city. With total retail sales in Cornwall for the period estimated at $350 million, the outflow represents 4% of our total sales. Nationally, retail sales losses due to cross-border shopping are said to be roughly 1% of the total. It is obvious that Cornwall is paying more than its share.

A recent study in the Niagara region suggested that a dollar outflow of between $120,000 and $150,000 equates to one full-time job. If the figures are true, then Cornwall has lost 100 jobs. That of course does not take into account the lost sales due to gasoline purchases made in the United States. The city has had a number of plant closures during the past 18 months, closures that have cost 1,400 jobs. It did not need the loss of the additional 100.

Enough of statistics; you already know most of them. They are, however, necessary to illustrate the extent to which Cornwall is being affected by this incessant US exodus. Coupled with the recession and its resultant plant closures, the gauntlet has indeed been thrown down at Cornwall. Let me assure you that the city is prepared to pick up that gauntlet and meet the challenge, but it cannot do it alone. So we have some thoughts and suggestions to present to you.

First, if I may offer a somewhat acerbic comment, one spawned from your dealings with the federal government, stop bickering. It is time to get on with the job. Unquestionably the problem is a serious and complex one and it requires considerable dialogue, but this continual rhetoric and finger-pointing must stop, because it is not solving the problem. It is time you erased provincial party lines and ceased to regard your federal counterparts as adversaries. While you continue to do so, Rome is burning.

From a Cornwall perspective, we see four principal components to the cross-border issue. While we do not claim sole proprietorship to them, we would like to identify each one: (1) a strong Canadian dollar; (2) a general GST backlash; (3) the media, and (4) marketing capabilities within the retail sector. As one examines the four points from a provincial perspective, two of them are issues beyond your direct control, specifically the strong dollar and the GST. While the city strongly urges you to continue your lobbying efforts towards reducing our dollar's value, the issue may well be beyond your jurisdiction.


While the GST is a federally levied tax and beyond your control, you do have the authority to collect the provincial tax, possibly at duty collection points. Mr Pilkey's 10 June announcement about a plan to collect PST has been guardedly welcomed by Cornwall city officials, although there is some confusion about the announcement. We will await with interest further developments.

The media: At the outset, the media have played an influential role in exacerbating the cross-border issue. At a recent meeting of national interest groups sponsored by the Retail Council of Canada, there was general consensus that the media have created a bias by highlighting what appear to be low prices in the United States while at the same time giving little or no coverage to the other side.

As a point of interest, the Cornwall Chamber of Commerce launched a service excellence program -- and there is an appendix in our presentation giving you some details on that -- to promote the city and its business community, and it was a successful program too, according to initial results. The program's media launch unfortunately took place the day after the announcement of the Peace arch crossing entry project. The media chose to focus on the negative implication of it rather than Cornwall's positive initiative. Further, a comparison shopping report, which is another appendix in our presentation, clearly showed that grocery prices were highly competitive in Cornwall. Our local media were supportive; the Ottawa media, a mere hour away, were completely indifferent.

The city of Cornwall would like to recommend that the government launch its own media campaign. It has the expertise; it must have the will. We cannot sit back and wait for something to happen or for someone else to do it. We must be proactive and aggressive. Ontario has good businesses with top quality goods and services. It is time to tell the story. Why not take a page from the Ontario brewers' book of advertising? Moral issues notwithstanding, they do a first-class job of promoting their product. As one views the outstanding promotional programs developed by our own tourism ministry, there is no question that the government is equal to the task.

Retail marketing: We hear consumers talk about choice. We hear talk about a better selection in the United States, and it is often given as an Ontarian's rationale for shopping there. The immediate Ontario retailer's response to that kind of talk would be swift and indignant. The fact remains, however, there is talk.

Let us suppose for a moment there is some truth to the rumours, that perhaps there is room for improvement. Suppose further that the pundits who have been suggesting current woes result from retail's inability to compete are right. If those suppositions are true, then it is time to act.

The Retail Council of Canada has taken a leadership role in bringing together representatives from a cross-section of retailers, manufacturers and associations, all of which are being affected by the cross-border issue. We suggest the government articulate with the retail council to develop a province-wide, indeed, a national program of marketing enhancement.

The program, aimed primarily at small business but useful to large ones too, would focus on effectively identifying and targeting market segments specific to the goods or services they sell. The result will manifest itself in a highly competitive retail business community which, speaking metaphorically, would have the bulldozer to level its own playing field.

There are logistical hurdles to clear to be sure, not the least of which being a venue from which to deliver such a program. It occurs to us in Cornwall that with 23 community colleges strategically located across the province, that hurdle might well be cleared through the government's own Ministry of Colleges and Universities.

There is also an advertising restriction on Ontario business wishing to target US customers. It seems that the incurred expense is not allowed as a legitimate tax deduction. What that means is the Americans can advertise in the Ottawa Citizen and they can claim it as a business expense. If one of our merchants advertises in the Massena papers, it cannot be claimed as a legitimate business deduction. Your lobbying efforts to the federal government in this regard would help to eliminate the practice.

To close, I would like to share a recent incident with you. As a result of a local news item, my office received a telephone call from the port director, port of Massena, New York. He wanted to discuss consumer perceptions, and was I interested in listening to his perspective? I was.

The meeting lasted three hours and it was one of the more interesting meetings I have ever been in, and if anyone is interested afterwards, I would delight in telling you about it. The theme of his remarks was simple yet telling. In effect, he said this: "You people are good people. You have much to offer, but you do not promote yourselves enough. I realize that we Americans tend to flag-wave too much sometimes, but it is time you did more." By the way, this guy has Canadian roots. He has United Empire Loyalists in his background.

The suggestions from Cornwall may result in more flag-waving locally, provincially and nationally, but let us be clear on these points: We can be as competitive as the Americans, we have the ability to meet them and beat them at their own game, we can level our own playing field.

The Chair: The committee has approximately seven or eight minutes left.

Mr Mammoliti: I have a short question. Recently, Otto Jelinek increased the fines at the border for smuggling. Do you think that will have a significant impact on smuggling?

Mr Metcalfe: Let me answer it this way. At a 22 April meeting of the Retail Council of Canada, Canada Customs reported on bridge traffic, duty collection and so on. They reported to us that they have never apprehended more than 7% of the population for untoward smuggling. This has to do with customs parachuting in, for want of a better term, a SWAT team unannounced and doing some very thorough checks on traffic going over the bridge. You may have experienced, if you have been crossing over, that all of a sudden customs officials were a little fussier than they usually were. That is probably what it was. They claimed that whenever they do this, and of course they can only do it for a short period of time because the word gets out fairly quickly, 7% was all they were ever to apprehend. That being true, and it being such a low figure, I am not so sure that there is an issue as far as Jelinek's announcement is concerned.

Ms Harrington: I am from Niagara Falls, so I can appreciate some of your remarks. I would also very much like to have our economic development person here to see if his feelings are the very same as yours. I imagine they would be similar.

I want to first of all let you know that another standing committee of this government, the standing committee on finance and economic affairs, has been looking at this issue and in the last two weeks has been putting together recommendations which should be out soon. I believe one of those will be a sort of educational, promotional campaign. We do not have the details of it, but we certainly are going in that direction. I believe that is the most helpful way to go, as I think you are feeling as well.

I was going to ask you about how Cornwall was implementing this marketing strategy. Maybe I could talk to you or you could give me some more information about that, because that sounds like a very good idea.

I was also going to mention to you that our Niagara College of Applied Arts & Technology -- you mentioned community colleges -- has sent out letters to almost 30 different agencies and people and politicians, saying that it wants to get involved in a course.

The Chair: I am sorry, Ms Harrington. Mrs O'Neill.

Mrs Y. O'Neill: I thank you very much for coming. I certainly heard about your situation every day almost from John Cleary, your member.

Mr Metcalfe: I wondered how my name was passed down.

Mrs Y. O'Neill: In any case, I really thank you for the charts you provide at the back. I think it will be most helpful to us regarding the pricing of groceries.

Mr Metcalfe: Can I interject a point right there? If you look at that chart, contrary to perceptions that it is all cheaper in the United States, 22 of the 40 items we shopped for were either cheaper or the same price in Canada.

Mrs Y. O'Neill: The Retail Council of Canada has proved the same thing.

Would you tell me a little bit about the work you are doing with MITT and the interaction you have with the framework structure. I know you are one of the seven cities. Could you tell us a little bit about how that is going.

Mr Metcalfe: I will define that a little more tightly. We are one of the three awarded a $10,000 grant last fall to implement some marketing initiatives.

Mrs Y. O'Neill: They tell me now it is seven.

Mr Metcalfe: There are seven involved, but we got some seed money from them subject to matching funds from Cornwall. Our flagship program is what we call a service excellence program, and there is a brief press release summary of it in your notes. It has worked very well. What it does is recognize top-quality customer service performance rather than complain about those who do not do a good job. The results have been very positive. We are getting comments coming back to us from a variety of sources that seem to indicate that service, if anything, is getting better in Cornwall. People are getting caught up in this idea of providing the best possible service and making it so inviting to shop in Cornwall that suddenly a trip across the bridge is really, "Why bother?"


Mrs Y. O'Neill: So the MITT experience has been a good one.

Mr Metcalfe: They have been very helpful. Peter Friedman, who is director of Small Business Ontario, has been most encouraging and most helpful and I believe we can expect even further co-operation from his office.

Mrs Y. O'Neill: Do we have time for a very short question from Mr Brown?

The Chair: Very short question.

Mr Brown: I was in Sault Ste Marie last week and it is of course another community with a big problem. They had spent a great deal of money on a study asking the question, "Why do you go the United States to shop?" One of the prime reasons given was the lure of gas. Specifically they would go across the border just to buy gas and then they would buy a number of other items. But the real reason people would go on a weekly basis was the fact that they could save about half the price by going across. Is that your experience?

Mr Metcalfe: Yes, and not only is it our experience, it is doubly hard on us because the reserve does not pay any tax. I will plead guilty to this one, but I have an excuse: I have family in the United States and I have stopped and purchased gas on the reserve on my way through. A $36 tankful in Cornwall costs me about $19, including exchange.

Mr Turnbull: Mr Metcalfe, a very good, thoughtful presentation. Above all, I am impressed by the comment, "Stop bickering between all the levels of government." I agree with you completely. Have you done a demographic profile on who is going across, or is it all societal levels that are going across to shop?

Mr Metcalfe: As we speak, a study is currently under way, again with co-operation from St Lawrence College in Cornwall, to take a look at our community to find out who is going over and why.

Mr Turnbull: What are your feelings about the fact that clearly liquor and gas are two items that traditionally governments in Canada have heavy taxes on to support our social network?

Mr Metcalfe: If we all stopped drinking and smoking, the economy would collapse, so I do not think it is a practical solution. By the same token, if I can go back to this media campaign, instead of admonishing people for going over and saying, "You're crippling our social benefits system," blah, blah, blah, why not promote the fact that when you shop in Canada, you support one of the best health care systems in the entire world, and take that very positive approach? When you talk to a millworker in Cornwall and say, "Look, don't you go shopping in the United States; we need your money here," the millworker's response is: "Hey, I work hard for my money. It's hard to come by. Don't you tell me where to spend it." He is right, so let's be positive.

The Chair: Mr Metcalfe, I wish I could give you more time, but I am not allowed to. Thank you for your presentation this morning.


The Chair: Moving right along, the Canadian Shoe Retailers' Association is next on the agenda. Please come forward. If you could identify yourselves and whom you represent, what organization, and the position in your organization. The committee has allocated you 20 minutes and we are going to work on the same basis as we did with Mr Metcalfe.

Mr Assaly: My name is George Assaly and I really represent the downtown Cornwall business improvement area. With me is Sharon Maloney, who is president of the Canadian Shoe Retailers' Association. As I said to start with, my presentation will probably be a little different from Mr Metcalfe's, whom I work with very closely on cross-border shopping in the Cornwall area. As I said, I am chairman of the downtown Cornwall business improvement area, a member of the MITT border communities task force on cross-border shopping, an executive member of the Cornwall Business Council and a member of the executive of the Canadian Shoe Retailers' Association. My business is Jay-Gee Shoes, a retail shoe, luggage and accessories store I founded in Cornwall 45 years ago.

The statistics on cross-border shopping are well known to you, but statistics alone cannot clearly illustrate the social and economic costs this plague is exacting from our province. We have all read in the past week the MITT committee figure of a $2.2 billion loss -- I say billion, not million -- in retail sales and over 14,000 jobs lost in Ontario alone. I do not know if you believe these figures. I personally believe them to be too low and too immediate. They do not include the estimated job losses which result at the manufacturing and distribution levels of our economy. For this reason, the data published this week by the Canadian Federation of Independent Business carries greater credibility when it predicts an even greater loss in dollars and jobs.

The federation's survey showed that over 13% of the respondents believe the survival of their business to be in serious jeopardy. In addition, over 8% of the respondents said their survival would depend solely on the move of their retail business to the United States. I can tell you as an aside that one of the largest producers of women's hygienic products in Canada has reported the last two months were probably the worst sales that it has had over the history of the company. Here is something, and I do not say it facetiously, that does not depend on the weather and it does not depend on the seasons, and yet their business, reported by the retailers, is drastically reduced, which will cause a drop in their manufacturing jobs because of shopping in the United States.

The costs of cross-border shopping are compounded by the rise in duty-free parcels, which we forget about, entering Canada from US catalogue sources; 2.8 million parcels crossed in 1989 and this increased to almost 30 million in 1990. These are duty-free parcels. That is like 30 million additional one-day crossings because of the duty-free situation. I could go on and on, but the real tragedy is in the lost jobs and the lost dreams of thousands of small businesses in our province. Most of you sometimes forget that small business and the tourist industry are Ontario's largest employers. Believe me, if it was the automobile industry, there would be panic in the streets. We are frustrated. Federal and provincial politicians pass the blame, pass the buck, talk about long-range solutions and say they do not want Band-Aid solutions.

When you have a cut on your finger, you put a Band-Aid on it and then later you go to the hospital to get the stiches. Believe me, in the present situation we do not need a Band-Aid; we need a tourniquet because we are haemorrhaging to death in this province. We are frustrated to see politicians -- I am going to name them and I wish they were here -- like Ian Scott, one of Canada's most brilliant lawyers, attack the Attorney General and the Solicitor General on every subject you can think of, Mr Harris leading a filibuster on the budget, Mrs Akande demanding jobs for the handicapped, the visible minorities and women. What the retailers want to see is our members on their feet using that much energy and expertise to come up with a solution to cross-border shopping, or there will not be any jobs for the people Mrs Akande is championing or many others. I know what is happening in your constituencies and I charge you to lead a fight in your caucuses to find a solution. This is a very important problem.

I cannot understand why our members have not demanded an emergency session to debate the most serious economic problem to confront Ontario since the Second World War. Is the estimated loss in tax dollars in Ontario, which is almost $500 million in provincial and municipal taxes, irrelevant? Are these not the funds which underpin the superior social benefits we in Ontario have worked so hard to achieve? Where will the moneys comes from to continue our universal health system, our safe communities and our superior and universal educational system? Sault Ste Marie, Sarnia, Cornwall, the Niagara area, Windsor and Thunder Bay were the first to suffer, but now it is even Owen Sound and Ottawa.

Let me tell you that those places are now feeling the pressure. The lost jobs and the lost incomes are devastating, and these are people we are talking about, not statistics. We must have a solution, not Mr Jelinek's solution, which makes every cross-border shopper a criminal. People should be free to shop wherever they want, but we want that choice to be Ontario. To do this we must be competitive in price, product, quality and service so that the shopping experience in Ontario is the most logical choice for the consumer to make.


To do this, it is essential that the gasoline taxes in Ontario be reduced drastically so that the price of a litre of gasoline is only marginally higher than the price in the United States. It is generally accepted that the price of gasoline, and that alone, is what triggers cross-border shopping. It was mentioned just briefly by the previous gentleman.

Losses in gasoline taxes would be offset by the greater volume of gas sales and increased revenue resulting from increased retail sales in the province. Reduced gasoline prices will also rejuvenate -- and it needs rejuvenating -- the $15-billion Ontario tourist industry, which is suffering because of the present cost of gasoline in the province. I am very concerned about the tourist industry. I am a commissioner of the St Lawrence Parks Commission and I can tell you that in our discussions about tourism, we are so concerned about the cost of gasoline, which is hurting our tourism industry across the province.

We must also have immediate implementation of provincial sales tax at the border. Our communities can no longer afford to be caught in a battle of wills between the provincial and federal governments. We need this action now.

I could finish by citing the names of dozens of businesses in your ridings, some second- and third-generation businesses, which will disappear because of cross-border shopping. I ask you to help us protect the legacy we will leave for generations to follow. You people are our leaders; we depend on you. We need your help. Please, do not let us down now when we need you.

Ms Maloney: I have no brief that I am submitting this morning; we have submitted a brief to the standing committee on finance and economic affairs, which has been sitting and dealing with this issue. We also have provided to Mr Friedman at the Ministry of Industry, Trade and Technology a proposal on behalf of the Canadian Shoe Retailers' Association and four other organizations which deals with training, improving service in Ontario and using associations such as ourselves as resource people to go into these communities and work with government to develop some programs.

It is our belief that certainly there are some very substantive problems that have to be addressed. The most obvious is the price differentials that we are dealing with in a variety of commodities, which is contained in our brief that we have already delivered.

That being said, we are also of the view that a number of our retailers, both in our sector and in other sectors, are not equipped to deliver the kind of customer service to compete in terms of merchandising, in terms of marketing. There are many things that can be done to make us competitive. There are many things that can be done by the retail community within the communities themselves, and these are not necessarily expensive things, nor do they require a lot of timing, but they are immediate things, and I think Mr Assaly put his finger on an issue here. I have heard a number of people talk about Band-Aid solutions. The difficulty that we find ourselves with on this issue is that we have a series of problems and a series of programs and a series of taxes which have accumulated to create a major differential between the prices in our commodities as well as the way we market ourselves. What we have to do is go in and perhaps deal on a very immediate basis with small problems and hopefully address the larger issue by doing that.

That being said, we are here to lend support to Mr Assaly's submissions. We endorse completely what he has said. Our organization is a national organization. I think Mr Assaly has articulated extremely well what our members are facing, not just in border communities but in all of the provinces across this country. It is a very desperate situation and it is becoming more desperate, because frankly our members are not seeing any action and are tired of hearing people talk about this issue. We would like to see somebody take some steps to deal with it.

Mrs Y. O'Neill: I just have one question. Mr Assaly, you did mention the duty-free parcels. I know you have extensive experience and knowledge about that subject. Not many people do. Could you tell us a little bit about how that is affecting your business?

Mr Assaly: This again will mean that when you are discussing cross-border shopping, there has to be some communication and co-operation between the various levels of government. Our Canadian consumer is being flooded with catalogues from the United States, selling everything you can think of, different products from shoes, which affects us, to clothing, to hardware, you name it, and the federal government has said that these parcels coming over by the mails are duty-free -- it does not stop them -- if they are under $40.

There is no random check that we know of being done on these, and people are bringing over an unbelievable amount of merchandise. There are stores opening -- there is one opening I think in Ottawa very soon that will have just catalogues from American companies for sale. You can go in and buy a catalogue for $1 or $2 or $5 or just pay to look at all the catalogues and order there from all these American companies. There is one in Toronto now. Now, that is 30 million parcels. As I said, that is almost like every man, woman and child in Ontario going over and buying something three times a year, and this is a very serious thing that has to be addressed.

Mr Turnbull: Mr Assaly, as you know, many years ago, import licences were applied to importers of shoes and those were of course put on by the federal government in order to protect the jobs of Canadian manufacturers of footwear. My understanding is that this has caused the people who have those licences, which were just dependent on how much they were importing at the time -- these have become a tradable commodity and they literally rent out or sell their licences. In addition, they have gone up market to the extent that they have a licence for so many pairs of shoes, so they have gone to more expensive shoes because they are more valuable. There is a tradeoff it seems, in my mind, between protecting Canadian jobs and ensuring that we have a supply of reasonably priced goods in the retail stores, which extrapolates your point.

Mr Assaly: Do you mind if I let Ms Maloney answer that? She is our expert in that field.

Ms Maloney: Mr Turnbull, I would like to refer you to the brief that we submitted, and in point of fact you are correct. In the footwear industry, which in our view is an industry that is representative of a number of industries in this country, the attitude of the federal government has always been that the part of the industry which should be supported and protected is the supply side, as opposed to the distribution side, of the industry. We have had a philosophy therefore for almost 50 years of severe protectionism being put into place to protect our domestic suppliers, the belief being that the market they should be addressing is the domestic market rather than the American market or global market.

As a result of that, quotas were introduced. Quotas restricted supply. Quotas benefited a number of people who had licences; you know, import permits. They moved up market. It meant that lower-priced footwear was not available to Canadians, particularly Canadian women, I might add. I think Canadian women have suffered by far the most from this regime.

Quotas were removed when it was recognized or believed that we were moving into a slightly different era and we should be a little more competitive, but within a year of the removal of quota, an antidumping complaint was filed. The materials you have received this morning refer to that complaint. You will note in this document that as early as 30 April 1990 we said, "If you proceed with this dumping complaint and if you find that there is dumping and impose severe dumping duties, what you are going to do is force the issue and force people to cross over to the United States and buy their footwear there."

We knew the GST was coming in. We recognized that the additional expense put on footwear, especially in the low-end categories, would only lead to what we are currently experiencing, certainly in the footwear industry, and although different industries have had a variety of forms of protectionism put into place, what they have all amounted to is additional taxation on these commodities. It was fine as long as we lived in a community where people were not aware of the fact that they could access these materials immediately south of where they were living. That is no longer the case.


Ms Harrington: I appreciate your coming, Ms Maloney and Mr Assaly. I appreciate your straightforward approach.

I want to briefly comment on your concern about the priorities of the way government is run. I believe that economic health is basic, and I have brought directly to our leader, Bob Rae, the Premier, the concerns I have about economic health in my riding, specifically things like food processing. We cannot proceed with our social justice agenda or even our constitutional agenda without the very basis of our society, and that is the economic health, and I would like to assure you that the Premier understands that. In fact, this was the basis of his speech to the NDP convention on 3 March, I believe, so I would like to assure you that we realize that reality.

Mr Assaly: That is greatly appreciated, but perhaps I should point out that with the previous speaker, Mr Metcalfe, the question came from somebody about what the Ministry of Industry, Trade and Technology was doing and how Cornwall was one of three communities that had received $10,000. I was the person who applied for that for the business council, and it was very well used. There was $50,000 allocated approximately a year ago, which was divided among three communities. This year we asked for additional moneys for that particular segment, and this year there is nothing in the budget. The $50,000 is not even available this year. We now have gone from $50,000 to help cross-border shopping for seven communities to nothing, so I thought I should point that out to you.

The Chair: Thank you very much for your presentation. Unfortunately, time is limited and we would like to hear the next delegation.

Mr Assaly: Thank you very much.

Mr Mammoliti: Thank you, Mr Chairman.

The Chair: Very good, George. I cannot manufacture the time.

Mr Mammoliti: With all due respect, you cut me off halfway last time I was asking a question.

The Chair: I also cut off Sharon Maloney halfway during her response to Mr Turnbull.

Mr Mammoliti: My question was pretty important as well.

The Chair: Well, if there is consensus in the committee to increase the time that you want to use for every delegation, then the Chair will work to your instructions. If not, I can only work to the clock, which is directly in front of me. I have no alternative.

Mrs Y. O'Neill: I think we held a discussion about these things last week and we came to agreement on the rules, which you are enforcing.

The Chair: Thank you. Okay.


The Chair: Elaine, if you could just identify yourself for the record, and whom you are representing. The committee has allocated you 20 minutes and that includes any time left over for questions.

Ms Vacher: My name is Elaine Vacher and I am from Tallmire's Fashions in Ottawa. I am spearheading a group which is meeting in Ottawa this morning that will represent over 3,000 Ottawa retailers to try to handle this cross-border shopping issue.

It is a pleasure to come before this standing committee to discuss with you cross-border shopping and I thank you for the opportunity. The cross-border shopping issue has become a very frustrating issue for many retailers and businesses throughout the province. Many of us fear for our future if billions of consumer dollars continue to travel south of the border. Cross-border shopping has already had a devastating effect on some of our communities. Border towns are fast becoming ghost towns. This is an issue that will not go away; in fact, it is increasing at a very alarming rate. Same-day trips in Cornwall increased 89% from 1989 to 1991.

While it is true that Ottawa is approximately 50 miles away from the US border, we in Ottawa have felt the effects of consumer shopping south of the border, some more than others. We have our share of bankruptcies and business closures creating unemployment, businesses hanging on by cutting overhead and reducing staff and staff hours, and a loss in revenue to our local economy. Many businesses in Ottawa are experiencing serious difficulties and many will not survive. The fewer businesses there are, the fewer jobs there will be. This will create greater unemployment and an even greater burden on our social services, which are already stretched to their limit.

Many local businesses, retailers as far away as Kingston, mall managers, hoteliers, tourist operators and concerned members of our community are meeting in Ottawa this morning, as we speak, on this very issue to determine what initiatives we can put in place to help revive the local retail and business activity in our community, as well as to come up with some very aggressive strategies to help protect our local economy against cross-border shopping. It is time that local retailers, businesses and politicians worked together to try to find solutions to this problem.

While it is not the intention of our group to tell Canadians they cannot cross-border shop, it is our intention to inform and to educate them about the consequences cross-border shopping will have to themselves, their neighbours and their communities if billions of dollars continue travelling south of the border. At the same time, it is our intention to involve and encourage all politicians, businesses and concerned Canadians to work together and to participate in finding solutions to this growing problem, also recognizing the need to protect our local economy, our communities and Canadians at large.

As we see it, local businesses have two choices: either to stand idly by and go bankrupt or close, adding to the unemployment figures and becoming another statistic, or to pull together and protect our market share. By pulling together, we feel we can pool our resources, our talents, ideas and finances to develop some very viable initiatives.

Cross-border shopping is not just a retail problem; it is a problem which affects all Canadians. Nor is it just a federal government problem. While it is true that free trade, recession, high unemployment, higher taxes in Canada, higher operating costs in Canada and the GST have all contributed to Canadians spending their consumer dollars south of the border, Canadians must realize we pay more because we have more. Nothing is free. As Canadians, we must ask ourselves if the short-term gain of shopping south of the border is worth the long-term pain all Canadians will definitely feel down the road.

Many argue that cross-border shopping is in fact a consumer tax revolt. Others say consumers need to shop across the border to make ends meet. Others believe everything is cheaper south of the border. Canadians surveyed, as well as those we have talked to who shop south of the border, do so to buy cheaper gas, cheaper tobacco products, liquor, dairy and poultry products, clothing and appliances.

If we are to encourage Canadians to shop in Canada and at the same time promote Canadian tourism to the Americans, we must address the reason Canadians flock across the border and the items they are purchasing, which this provincial government could address first by reducing some of the gas tax brought in with the last provincial budget. I listened with great interest Sunday afternoon to a replay of a debate which took place last week in the Legislature regarding private member's Bill 102. The member for Cornwall was requesting a reduction in the tax on gas brought in with the last budget, which he believed would help the local economy of Cornwall, encouraging those residents to support their local economy by removing one of the major reasons Canadians cross the border. We believe not only that this initiative would be beneficial in the Cornwall area but that this should be implemented across the province. We believe the provincial government could use this opportunity to finally help the business community by working with it to create concrete action to help curb the ill effects of cross-border shopping.

There is no simple solution to cross-border shopping. We need politicians in all levels of government to show leadership in addressing this issue. The provincial government must encourage all residents of Ontario to support their local economy. They must educate all residents of Ontario that shopping in their local communities is indeed a wise investment in their future and in Ontario.


We urge the provincial government to collect PST from cross-border shoppers at the border. If the provincial government is unable to collect that tax at the border and if the only way the federal government will agree to collect the PST at the border is to harmonize PST and GST, then the provincial government should move with all haste to do that. Assuming that the provincial government would recover most of the taxes now lost at the border, perhaps then in order to offset the loss of exemptions this would cause, the provincial government could look at reducing the harmonized tax. We believe those Canadians who go south on day trips would be discouraged from doing so if in fact they had to pay duty, GST, PST and, in most cases, New York state tax, thus removing the incentive for most Canadians to travel south to shop and encouraging them to shop in Canada.

If we are to survive as a community, as a province and as a nation, we must be prepared to sacrifice in order to survive and succeed. To this end, each time we cross the border to shop we forfeit a small piece of our independence. Each time we choose to support an American business, we not only discount goods and services but we inadvertently choose to discount our collective self-worth as a people and as a nation, because if we will not support our economy, how can we expect anyone else to do what we are not willing to do ourselves? In our quest to escape the taxman, inevitably we will abandon our neighbours, our communities and ourselves.

The provincial government must take the responsibility and must show the leadership to address this issue now if small businesses, local economies and border towns are to stand a chance of survival. We do not have the luxury of time on our side while we all argue who is to blame. It does not matter who is to blame; it matters who is going to do something about this. We urge the provincial government to form a partnership with the business communities throughout the province of Ontario, working side by side together with them to initiate strong policies which would address this problem now.

We are in serious trouble. Nearly 2,000 retail companies with 27,000 full-time employees will be forced to close up shop in Canada if we do not do something. Time is running out for many businesses, retailers, their employees and their families in the province of Ontario. The time to act is now. We need your support, we need your leadership, we need your assistance and we need a commitment.

Mrs Y. O'Neill: Thank you so much, Elaine, for making the choice to come to Queen's Park. I know that with the meeting this morning it was a difficult one. I am sorry there are not more members here. We do have the House sitting at the same time. Everything you have said is recorded and this is a high-profile issue.

I would like to ask you to say a little bit about some of the strategies you have suggested, because I know your group has already done some creative thinking which you did not mention.

Ms Vacher: I have given everybody a copy.

Mrs Y. O'Neill: Would you please suggest a few of the strategies that you, as retailers, are beginning to work on? I do hope you will get the co-operation of the government in doing some of these things.

Ms Vacher: One of the suggestions the meeting in Ottawa which I was to chair this morning will discuss will be that if we cannot sell Canada to Canadians, then in order to protect our market share we are going to have to go after the American market and fight fire with fire.

We will send Canadian buses down across the border and we will bring Americans back to the Ottawa area, including Cornwall as we come through. We will offer them a weekend of shopping and sightseeing. We will work with the hotels, restaurants, shopping centres and stores and direct those Americans into the Ottawa area so they can both shop and sightsee, hoping to pick up the tourism area in Ottawa, which is suffering greatly. A lot of our hotels are in trouble. We had thought to put students on the buses to use them as Canadian ambassadors.

Another idea we have come up with is to send 20 to 30 people from Ottawa to every border, alternating each weekend. We will hand out Canadian flags to remind Canadians they are Canadians, those who are going south of the border. We will print up pamphlets which list all the services our tax dollars pay for and what they will lose if millions of dollars continue going across the border. I do not think people understand that. I think people have been misled. I think it is up to this government to tell them, and if not, we in Ottawa will start telling them. That is one suggestion.

A suggestion has come through that we open a post office box. We will ask Canadians who shop on the other side of the border to send us their receipts, no names. We will tabulate those on a daily or weekly basis and we will deliver them to the Prime Minister's desk so that he will know exactly how many dollars this country and this province are losing across the border.

Another suggestion is that we make up buttons somewhat similar to the one I am wearing.

We are going to encourage the media to be more responsible. I do not know if anybody here gets the Ottawa Citizen, but this is how we have succeeded in Ottawa to make the Citizen more responsible to this community, through a Shop Canada supplement with all the reasons why we should shop in Canada. We will be doing, hopefully for the 1 July weekend, Shop Canada windows -- strictly Canada, we are hoping -- all through the city of Ottawa to make a very silent but positive statement. Those basically are the ideas they are tossing around in Ottawa this morning.

Mr Drainville: It is a great pleasure to have heard your response. I want to say as an individual person, not so much as a member of the government, that it has always been my own policy and the policy of my family not to shop anywhere other than in Canada. When we buy clothes and when we buy things like televisions and what have you, we buy Canadian. We have always done that. Even on my business trips going south, I do not get duty-free goods from other countries. That is the way I have always approached it.

The things you have suggested are extremely important. It is my hope as well that the government give strong leadership in this area. There is no question, and again I am expressing my own personal opinion here, that it does make it very difficult when Canadians go and spend their money in the United States. For those who are retired and spend a great deal of time in the United States, I do not at all begrudge people the opportunity to go to other places, but they have to realize that there is a price to Canada when they go and travel for long periods of time and spend their Canadian dollars in the United States and not in Canada.

We have a very severe problem and it is one that is going to need a great deal of effort at every level of society. I just want to commend you for your very comprehensive approach to the issue here and to say how much I personally support that.

In terms of the taxation, there is no question some Canadians are going south because of provincial sales tax and GST and other taxes. It is a perplexing problem. I do not want to downplay it in the least. As a member from a rural area who spends a lot of money on gasoline, as my constituents do, this has been a major consideration and problem for us. I would love to see the gas tax go, but I also realize that the government is facing a dilemma: Do you get rid of the tax on gas? What do you do with the deficit? We are talking about a significant amount of money which we are going to then have to tack on to the deficit, because somehow we have to pay for the services and the programs we have.

There are others who say the way to get at this issue is to cut those programs and services. That is where, of course, we are in a bind, are we not? Canadians are now very used to having a fine educational system, a fine health system, a fine social service system and therefore they feel that with all that back at home, why not go to the United States as well and make up the difference by getting goods at a cheaper price, but of course buying them in a place where people do not have health, education, etc.

Ms Harrington: I would like to particularly thank you for coming today when you had other obligations which were important. I found your presentation one of the most thoughtful I have heard, a very good presentation, not specifically focused on your own concern but on concerns we all have.

I just wanted to tell you that I believe our government and every level of government should be involved. I will tell you why. I believe that when we do shop in the United States we are buying into the whole US system, which is something you mentioned, the US culture. I happened to be in Niagara Falls, New York last Sunday sitting at a table with some US politicians and businessmen. This was brought home to me when I heard them discussing their delight at meeting in Washington with Norman Schwarzkopf the week before. I am thinking, we are buying into US foreign policy, we are buying into US labour policy, we are buying into US environmental policy and people do not realize this.

The other thing I wanted to congratulate you for is your direct access to the federal politicians. You in Ottawa have a unique opportunity there.


Ms Vacher: Thank you. Being born and raised in Ottawa, it scared me when 100 business people recently attended a seminar in Ottawa to find out how one could set up a business south of the border. I attended a breakfast meeting just before I came here and listened to business people from Toronto saying, "You know, if this continues and somebody doesn't do something, we are going to pack up and move across the border."

I think this problem is much more serious than I, sitting here, could ever stress to you. I have never heard so many Canadians who own businesses in this province say: "Enough's enough. We're getting out." I urge you to address this today, this week, not next year.


The Chair: The Lumber and Building Materials Association of Ontario is listed as next on our agenda. Please come forward and make yourselves comfortable. We ask you to identify yourselves, your position and whom you represent for the record and we will be proceeding along the same manner as with our other presenters.

Mrs Hancock: My name is Hannah Hancock. I am the executive vice-president of the Lumber and Building Materials Association of Ontario. My colleague is our members' services manager, Steve Johns.

The LBMAO is a not-for-profit association that represents approximately 58% of the retail lumber and building supplies stores in Ontario. That includes home centres and some hardware stores. The LBMAO's retailer members, ranging from the major chains such as Beaver Lumber and Cashway to the small independent stores, generate over 80% of the industry's total annual sales volume in Ontario, which runs around $2 billion. The LBMAO also has some 260 associate members. Included in this category are manufacturers, wholesalers, distributors and buying groups, among others. In short, the LBMAO is the largest regional building supply association in Canada.

The LBMAO has been taking a proactive role in attempting to seek solutions to the cross-border shopping phenomenon for the past two years. As a matter of fact, we had alerted the former Minister of Revenue, Remo Mancini, about this because of the problems our members were having in Sault Ste Marie.

While the seriousness of the issue was originally brought to my attention by a member from Sault Ste Marie, numerous LBM dealers from such border towns as Windsor, Sarnia, Niagara Falls, Fort Erie and Cornwall have since appealed to us to place the cross-border shopping issue at the top of the government affairs agenda. The LBMAO believes that all levels of government in Ontario, and for that matter Canada, have a fundamental obligation to take any and all measures falling within their respective jurisdictions to improve the competitive environment for Canadian business in today's globalized economy. Moreover, the Canadian economy is starving for stimuli, and I know that LBM retailers and suppliers are looking to government at least to lay a foundation from which they can build a degree of competitiveness with their international, and in particular US, counterparts.

With regard to the cross-border retailing issue, I can assure this committee that LBM retailers in border communities are willing to do the work necessary to present themselves to the marketplace as viable alternatives to the US-based Grossman's, Builder's Square, Wickes and other US-based LBM retailers that are vigorously pursuing our markets. All they ask from government is a competitive climate in which to operate.

In a meeting organized by the Retail Council of Canada that took place in Niagara Falls on 23 April 1991, representatives of some 50 trade associations, chambers of commerce, all three levels of government and assorted other interests identified certain key factors that combine to make shopping in the United States an attractive alternative. While anomalies such as distribution channels, price competition, margins, raw material costs, transportation costs, regulatory burdens and the inflated value of the Canadian dollar were acknowledged, the greatest degree of concern related to labour costs, taxation and the lack of collection of the 8% provincial sales tax on goods being delivered into Canada -- walking across, driving across or being delivered across from the United States.

It is precisely these issues that the LBMAO views as being resolvable within the spirit of responsible government of bilateral co-operation between Queen's Park and Ottawa. We agree with the former speaker on the bickering between the federal government and the provincial government on the issue of one tax.

At this time, I would like to take a couple of moments to deal with those issues of greatest concern individually.

On the issue of labour costs, notwithstanding the Ontario government's close alliance with labour, this government must be prepared to curtail what has been, since the election of the Liberal majority government under former Premier David Peterson, a rapid-fire imposition of measures that have formidably escalated the cost of doing business. I am talking about small business. The Employer Health Tax Act, Bill 208, the Occupational Health and Safety Amendment Act and Bill 14 respecting pregnancy and parental leave are but a few such measures which have impacted small business dramatically. Other initiatives such as Bill 70, the proposed employee wage protection program and promised minimum wage increases, while well intentioned, carry with them formidable implementation and compensatory costs that must be borne by the business sector.

On the issue of taxation, the much-ballyhooed tax increases applied to gasoline and diesel fuel included in Treasurer Floyd Laughren's recent Ontario budget have been greeted with dismay by LBMAO member companies with large sales staffs out on the road in delivery trucks. When combined with excessive municipal and federal taxes and corporate taxation measures of the sort promised in the throne speech that opened the first session of the 35th Parliament of Ontario, some LBMAO border town retailer members have directly stated that if they cannot make money here, they are thinking of disposing of their businesses and moving south. Needless to say, these are daunting alternatives, given the thousands of jobs that are possibly at stake and the associated potential additions to our unemployment and welfare rolls.

With regard to the collection of the 8% provincial sales tax on goods being brought or delivered into Ontario from the United States, the LBMAO views the resolution of this issue as not only the most important step in levelling the playing field, but also as the one which the provincial government is obliged to carry out under the Retail Sales Tax Act.

Recent media accounts have quoted National Revenue minister Otto Jelinek as being willing to co-operate in this regard. Now is the time for Mr Jelinek's Ontario government colleague, the Honourable Shelley Wark-Martyn, to join forces with him in facilitating an efficient provincial sales tax collection process. Furthermore, it is the LBMAO's position that the magnitude of this issue transcends all political and philosophical considerations. One need only examine some of the relevant numbers such as the following, to substantiate this view.

Statistics Canada estimates the value of lost retail sales in Ontario to same-day trips to the United States in 1990 to be approximately $600 million; 1991 estimates of Ontario PST lost as a result of cross-border shopping are as high as $115 million; the net outflow of same-day travel to and from the United States in the second quarter of 1990 was $1,447,236. Of the seven quarters between the fourth quarter of 1988 and the second quarter of 1990, inclusive, a net outflow has been recorded in six of those quarters.


In July 1990, the LBMAO conducted a comparative pricing survey on 14 high-traffic building materials. The survey sample included LBM retail stores located in border and non-border communities. With two exceptions, the border town store prices were lower, with the differences ranging from 1.5% to 15.3%. All that was profit margin. The subject data are attached to this submission as appendix A.

Given that pricing in the retail LBMAO industry is predominantly market-driven, these pricing data clearly illustrate that border town LBM retailers are facing formidable challenges in their efforts to remain competitive while sustaining some profitability. After all, while suppliers may sympathize with the plight of border town retailers, they are not in a position to adjust their pricing on this basis. In the meantime, border town retailers are also subject to the byproducts of recession, the same regulatory burdens imposed on non-border Ontario retailers and of course declining sales volumes. Their problems are simply exacerbated by their close proximity to the United States, and consumer products that by and large are less expensive and destined to remain so under a regulatory and taxation structure of the sort currently in place in Ontario.

In closing, the evidence that cross-border shopping in its current form has catastrophic potential for Ontario border town retailers is clear and irrefutable. Therefore, the LBMAO recommends the following:

1. That the Ontario government, in considering policies and legislation directly affecting Ontario business, endeavour to make decisions within the context of competitiveness in a global environment;

2. That the Ontario Minister of Revenue immediately initiate discussions with her federal counterpart aimed at devising and implementing an efficient process by which provincial sales taxes owing on products brought or delivered into Ontario from the United States for use in Ontario may be collected, harmonizing the PST with the GST;

3. That the Ministry of Consumer and Commercial Relations, in collaboration with the Ministry of Industry, Trade and Technology and the Ministry of Revenue, initiate a comprehensive consumer awareness education program highlighting obligations under the Retail Sales Tax Act for remittance of provincial sales tax on goods destined for Ontario from the United States, and the potential negative revenue and/or employment implications of removing economic activity from Ontario border communities.

Mr Brown: Thank you very much for your presentation. It is valuable to us.

I want to pick up on your second recommendation, which has to do with the GST and collecting provincial tax at the border points. I think we were all concerned with the meeting Ms Wark-Martyn had with Mr Jelinek and what came out of the meeting, although we do not know what was discussed behind closed doors, the sense that Mr Jelinek said, "Fine, if you harmonize with the GST; there's no other way." It seems to a lot of us that there could be another way. Is the recommendation you are making here, though, that the GST and the PST be harmonized? Is that really what you are telling us?

Mrs Hancock: Yes. Is that not correct?

Mr Johns: I do not think there is any question that would be the cleanest, most efficient way of dealing with the problem. Given certain partisan political considerations, that may or may not be something that will come to pass, which is unfortunate. At the association, our government affairs committee has bandied about a couple of alternatives to that. One would be actually having provincial personnel at the border crossing points involved in collection activities.

One of the other items that we have discussed briefly, and I think it came out at that meeting in Niagara Falls on 23 April convened by the Retail Council of Canada as well, was the possibility of simply having Revenue Canada share its duties and excise documentation with the Ministry of Revenue so that the Ministry of Revenue could then go after the person in question who is bringing in product or has ordered product from the United States. These are all hypothetical possibilities that we admittedly have not really examined in any great depth, but clearly there seem to be alternatives, although I think the harmonization alternative would be the cleanest and most efficient.

Mr Brown: Just picking up on that and forgetting about cross-border shopping for a moment, I have heard some retailers speak about harmonization, that it would make a cleaner operation at the cash register no matter where you are.

Mrs Hancock: It would be at the cash register as well, definitely.

Mr Brown: I am just trying to solicit your opinion. Would you agree with that?

Mr Johns: Absolutely.

Mrs Hancock: Yes.

Mr Brown: Fine, thank you.

Mrs Y. O'Neill: I certainly feel you have brought another kind of perspective. With all the building codes and regulations -- and we heard about this earlier this week in Kingston -- I am wondering how you feel about what is happening with the environmental policies, those that are energy-saving. Have those changed some of the products that you supply and has that helped your business?

Mrs Hancock: Are you talking about products coming in that do not meet the Ontario Building Code?

Mrs Y. O'Neill: No, I am actually talking about the kinds of things you are selling. Are there new products that are helping your business because there are environmental concerns, or are you finding that you are importing things that do not meet the standards?

Mrs Hancock: That is an issue.

Mrs Y. O'Neill: Would you speak to that, please?

Mrs Hancock: There is an issue of product coming into Canada that does not meet the building code standards -- insulation, steel doors and so on -- that the federal government is aware of but is not doing anything about at this time.

Mr Carr: I want to thank you for your presentation. It was very helpful and informative and you were fairly detailed in your presentation, which I like to see.

I just want to see if you could expand a little bit. I know you did that during your presentation, but in your recommendation 1 about being competitive, there are various areas, whether it be taxes, regulation, even things like getting skilled workers, which can affect our competitiveness. I was wondering if you could expand a little bit on the real key areas that we could act on as a provincial Legislature to help make it more competitive.


Mr Johns: I think I understand what you are driving at. The feedback we are hearing from a lot of our members is that it is not only the taxation issue but the regulatory burden. I think Mrs Hancock pointed out some of the legislation that has imposed costs on businesses, and small business in particular. That tide perhaps has to be stemmed.

Furthermore, and maybe this is picking up a bit on Mrs O'Neill's question, there are certain things that are imposed upon Canadian manufacturers, not only standards requirements but labelling requirements, that again necessarily drive up the costs of product. It goes on and on. We have noticed that there are a number of products being brought up from the United States that clearly do not comply with certain standards and labelling requirements, bilingual labelling and some of our environment-related packaging requirements. Nevertheless, these products are being brought up and, quite frankly, being sold at the retail level. That is another bone of contention that we did not really get into here.

Mrs Hancock: We are not here to represent our supplier members, but they have some major problems. Canadian manufacturers are having great difficulty with the US product that is coming in here that does not meet our standards but is being sold here; for example, insulation or steel doors. Our retailers are selling that product. The federal government is allowing it to come in. We have alerted the federal government to these issues. In some cases, if a building inspector sees the products, they are taken wholesale out of the buildings. That is a whole other issue.

They are much more reasonable to purchase. Actually, some of our members are US companies. What we are finding is that US manufacturers are coming into this country, joining us and selling products here.

Ms Harrington: I represent Niagara Falls. I hope you had a very good meeting in Niagara Falls, without going across the border to shop, of course. I understand it was a good meeting and I was hoping to be there. Unfortunately, I had to be up here that Monday morning.

You gave a very clear presentation here stating exactly where you are coming from and you offered what I feel are some helpful solutions from your point of view. Certainly the third one, the consumer awareness and education program, is something I believe we have to move on while looking at these others as well.

I am with the Ministry of Housing, and I just want to say that we must work with you to make sure the standards are met and that we move in the direction of environmental concerns for our housing.

Mrs Hancock: Exactly.

Ms Harrington: I had one question. On page 6 you discussed that in border cities certain commodities are cheaper. How could that be?

Mrs Hancock: They have to reduce their prices to compete with the US product.

Ms Harrington: But does it help in any way?

Mrs Hancock: It helps, but the retailer is taking such a loss that he is not making any money. He can make the sale; he just will not make his margins, his profit.

Mr Mammoliti: This is the same question I wanted to ask earlier.

The Chair: George, we are on overtime.

Mr Mammoliti: I want to apologize first of all, for walking in halfway through your submission. I am going to read through it, but I am a little concerned. Earlier we heard that we should not be finger-pointing at other levels of government, and for the most part that is true. But I feel compelled to finger-point. All I am hearing is that most of the responsibility lies with the federal government when we talk about this topic and this problem. I agree it does, and I see your point.

You may have touched on this in your report, and I am sorry if you have, but my question to you concerns free trade and how it affects our business, and how people may get the two confused somewhat and blame cross-border shopping, when in essence a lot of the problem comes from free trade, as you touched upon earlier, Americans being allowed to come in and do their thing in our country. Perhaps you can answer that question. How does free trade affect you, and does it have a significant impact?

Mrs Hancock: Of course it does, particularly in the lumber. You know the lumber issue and the surtax that has been put on our lumber. That is still on, I believe. It is a penalty that we paid for free trade. I think it is up until 1996, then gradually the tariffs come off, and eventually there will be no difference between the US and Canadian.

Mr Johns: Further to that, I think the free trade issue has obviously encouraged US manufacturers and, for that matter, retailers to try to tap into the Canadian market, and in our case, the Ontario one. Clearly our manufacturers and our dealers have the same opportunity to go Stateside except that, again, it is extremely difficult to be price-competitive, given other extraneous factors such as those we have touched on. I think we can go toe to toe with the United States in terms of our quality of service, our quality of product, but currently it is very difficult to compete in terms of pricing, which I think is ultimately most important to the consumer. So to that end, in this issue one can draw a relationship with free trade. I really think they are two distinct issues, by and large.

The Chair: Thank you, Mrs Hancock, Mr Johns, for your presentation before our committee.


The Chair: I would ask all committee members to remain, as we have a couple of items of business that we should look after. I understand that all members have before them a copy of the 1991-92 budget. This will take us to 31 March of next year. I want you to note that we have suggested that for this coming summer and the winter break after Christmas, between those two sessions when the Legislature is not sitting, we have allocated about eight weeks' worth of committee time. I think that should be sufficient. If we run into difficulty with that, then sometime late next fall or early winter we will have to review the work of the committee.

Basically, all the other items are things that are a matter of course. We have very little leeway. The only other point I want to draw members' attention to is the travel and the potential for public hearings in Ottawa, Windsor, Thunder Bay, Sudbury and other locations in Ontario as required. Other than the number of weeks and where we are going to hold these hearings, as I said earlier, the budget is pretty well fixed.

Mrs Y. O'Neill: Mr Chairman, I move the adoption of the budget. I would like to make one small statement in addition to that and have clarification perhaps from yourself or the clerk.

Regarding the eight weeks; we have a very major piece of legislation before us. If another piece of legislation comes before us, will we automatically get an extension? The majority of these eight weeks will no doubt be taken up in hearings on the major piece of legislation, plus its clause-by-clause consideration.


The Chair: Maybe I could partially answer that by saying that last evening I received a call from the Liberal whip, who suggested that some discussions had already taken place with the appropriate party officials and that four weeks were going to be set aside this summer for hearings into the new rent control legislation that is going to be referred to our committee. If memory serves me correctly, the whip suggested -- I do not know whether he was telling me or suggesting to me -- the weeks of 29 July, 6 August, 12 August and 26 August as the time set aside for hearings for that particular piece of legislation.

He also suggested the week of 16 September was available if it was necessary. I do not think at this point it will be necessary to have that week of the 16th and I would like to save it for the winter session if I can get concurrence from the committee members. But if need be, if 1 December rolls around and the committee sees that we are going to need more than the eight weeks, then we will certainly make a supplementary proposal to the Board of Internal Economy. If we use up four weeks of summer and we hold four weeks for the winter, even if we have to go back to the board, I do not think we will go back for more than one or two weeks anyway. It is matter of one week more.

Mr Drainville: I just want to indicate also, if we could do without a week in September, I would certainly be in favour of that, seeing as we will be sitting all through August.

The second thing is, I would like to second the motion that Mrs O'Neill has put forward.

The Chair: Okay. All in favour?

Agreed to.

The Chair: The budget has been carried as proposed.

Okay, the schedule: We have had a short discussion on it in regard to the discussion we just completed with the budget. I refer again to the weeks that were suggested: 29 July, 6 August, 12 August, 26 August. I do not know whether that is firm or how much leeway we are going to have in changing those dates. Do the committee members feel that we can work with those particular dates that have been suggested to us?

Mr Drainville: Every time I hear about the House leaders' meetings, they are changing all the time as to what the score is, so it is going to be very difficult for us to get a firm reading until maybe next week.

Mrs Y. O'Neill: I took part in the whips' meeting that this result is likely coming from. I feel that this will be the last week for any latitude. Their decision will likely be made next Thursday, so if we have any input, it should be today. They will be meeting at the same time we are next Thursday morning.

Mr Drainville: I heard the last week of July was back on the table again.

Mrs Y. O'Neill: It is on the table, yes, very much so.

The Chair: That is the week of 29 July, which I spoke to.

Mrs Y. O'Neill: Right.

Mr Duignan: Further to what Mr Drainville was saying, possibly we could leave this in the hands of the subcommittee to report back to the full committee.

Mrs Y. O'Neill: It would be helpful to know what people prefer.

The Chair: Does anybody feel there is a problem with any one of these major weeks?

Mr Drainville: No.

The Chair: Okay.

Mr Brown: Which weeks were they again?

The Chair: They were 29 July, 6 August, 12 August and 26 August.

Mr Brown: The week of the 19th is the week in August that we would not be sitting.

The Chair: Exactly. Perfect?

Mr Brown: Well, it is not perfect.

Mr Duignan: I have a personal problem with 29 July. That is not the committee's problem, however.

Mr Brown: I thought it was the week of the 12th.

The Chair: Well, we are allowed substitutions. If members run into difficulties in their ridings for important events or family occasions, we will have to carry on.

Mr Duignan: Otherwise, it really fits my schedule.

Mrs Y. O'Neill: So these are basically hearing weeks. Is that the understanding?

The Chair: We can have part of the work done here in Toronto, as we have in the past, and then set aside certain amounts of time to travel the province.

Mrs Y. O'Neill: These are for hearings.

The Chair: These are for hearings, yes.

Mr Drainville: When would clause-by-clause be under such a plan?

The Chair: The clause-by-clause could take place the week of 16 September, which I understood some members did not want to have happen, or could start when the Legislature convenes. I do not know when else we could do it.

Mr Drainville: Why do we not allow the subcommittee to discuss that, because obviously I do not think it would be helpful to discuss it right now, not knowing what the firm plan is by the House leaders.

The Chair: Okay. It was brought to my attention that the committee also wanted to talk about the days of the week we would be having hearings. I suggest we go back to the original schedule that committees used at one time, and that was Tuesdays, Wednesdays and Thursdays. I would like some discussion on that.

Mr Abel: I think that is an excellent idea. If you remember back, it was really quite tiring when we were going five days a week. It will also give us an opportunity to work our constituencies on the Monday and the Friday. So yes, I support the Tuesday, Wednesday and Thursday.

Mrs Y. O'Neill: I have a lot of difficulty with that, simply because in the last set of hearings -- and you know I brought this forward several times -- there were more people turned away than were received.

The Chair: I understand that.

Mrs Y. O'Neill: This is permanent legislation; the last was interim legislation. I do not like working five or four days a week any more than the last person, but either we are going to have to extend the days or we are going to have a very angry public.

The Chair: That was going to be my suggestion.

Mrs Y. O'Neill: The other thing is we will definitely have to travel on the Mondays, I would think, where we are going to travel. I do not think we can expect to take half a day on a Tuesday and then start hearings at 1 or 2 o'clock in some other city. It is just not realistic to cover. This province has nine million people; every one of them has a house or an apartment and is interested in this subject.

The Chair: I think your points are well taken. What is the committee's view then of having extended days?

Mr Duignan: The suggestion by Mr Abel was that Monday would be basically a travelling day, with hearings starting at 9 am on Tuesday morning.

Mr Abel: I guess I was not quite clear. I was thinking we would have Monday mornings to be able to do what we have to do in the constituency, but certainly Mondays would be a time to get there, and sit for a full day on Tuesday.

Mr Duignan: Basically Tuesday, Wednesday and Thursday are full hearing days, Monday and Friday travelling, especially if we are travelling outside Toronto, getting back to our own ridings.

Mr Abel: We really do not know how many presenters there are going to be right now either. There may be the odd night we may have to sit.

Mr Duignan: Or we may have to extend it. Maybe we can be flexible on that and view that at the time.

The Chair: I think we should be prepared to sit evenings, a couple of hours every evening.

Mr Abel: Yes. We do not have a problem with that.

The Chair: Mrs O'Neill, what do you think?

Mrs Y. O'Neill: I definitely want to have this bill as well discussed as possible. I know it has high interest. We still have, as I am sure our clerk knows, a lot of people who were not heard the last time who will no doubt, as soon as the ad goes out, try to be first in this time. I just leave that with you. I tend to feel that we have an obligation on a major piece of legislation.

Mr Brown: I have a little difficulty in discussing this in what I consider to be somewhat of a vacuum, just because we do not have the information. We do not have any real idea, although we could guess, of how many presenters will be in front of this committee, or wish to be.

I think it is our obligation to accommodate as many as sensibly can be done, given that we do not know, first, how many there might be, second, where they might be, and third, exactly what obligations will be put on us in terms of whether the government wants clause-by-clause during this period of the bill as it comes down to us. I do not know; I do not think it does.

I think we want four weeks. What I understand now is that we have four weeks of public hearings and the week of 16 September is maybe for clause-by-clause or whatever is kind of talked about. I just think we are in a vacuum. I think at this point we should have the subcommittee talk about what is the best possible result. I would be most pleased with Tuesday, Wednesday and Thursday. Being a northern member, I am going to spend most of Monday travelling anyway. Generally what happens is, if we sit Monday, I come Sunday. It is a six-day week for me, is what I am saying. That does not leave you a lot of time in the constituency.


Mr Duignan: I think that is a good idea too. Let's leave it at that point and let the subcommittee examine it as more information becomes available.

The Chair: We have another item too.

Mrs Y. O'Neill: I am sorry, I have to leave to get ready for a meeting of the subcommittee.

The Chair: No problem. Mr Drainville?

Mr Drainville: Very simply, I am willing to agree with Mr Brown as well in terms of letting the subcommittee deal with this. I would like to say that it is always good to have some understanding of where we are coming from in the committee before the subcommittee. In terms of that, the Tuesday, Wednesday, Thursday idea is one that appeals to me in the summer months, added to it that the first order of increasing time would be the evenings of those three days; the next one -- I believe we did this last time -- would be the addition of a Monday, if that is ever necessary, and then the very last possibility is of course the addition of Friday, but to see that as the means by which we expand, depending on how many deputations are made and what demands are made on us as a committee.

The Chair: I think that was outlined fairly clearly. Exactly; we will increase the evenings and we will go to Monday afternoons, and then if we need more, the committee will discuss it.

Mr Brown: Along that line, just so that everyone is clear, I think it is incumbent on all caucuses to meet, discuss this with their members and keep everybody informed so that the subcommittee meeting will actually be the meeting that decides what is going on.

The Chair: The last item. Unfortunately, Mr Turnbull is not here, but Mr Carr is.

Clerk of the Committee: No, we want to leave that for the subcommittee.

The Chair: Well, I want to bring it up now anyway -- I cannot bring it up now.

The researcher has some questions about the timing of the cross-border report.

Mr Rampersad: Yes. As far as I am aware, the House will be sitting for another couple of weeks, and I assume the committee will want the final version of its report two Thursdays from today, on the last Thursday of this month. Consequently, I would like to know, first of all, whether the committee would like summaries of the various presentations, that is, the major issues raised plus recommendations, and when it would like a draft of the report, as well as a final report.

The other point is I would like to know the kinds of issues the committee would like to have in the draft of its report. One thing I should point out is that in the presentations so far we have not had a particularly good sort of overall view of what the issue is. We have had various people come and sort of talk about their particular turf and we have not had a good overall issue. I would like to know whether I should go ahead and write what I know about generally or whether I should merely stick to the presentations that were provided by the presenters who have presented so far.

Mr Duignan: I am just wondering. There has been another committee of the Legislature looking at this particular issue and I think it has formed a report at this point. It may be useful if each member of this committee had a copy of that report to see what issues have surfaced at those particular hearings. It may help guide this committee.

Mr Rampersad: That committee is at the moment considering its draft report. Two of the parties have actually presented recommendations. This morning I believe it was going to be trying to provide a final report, or at least come to some kind of agreement on a final report. In fact, that draft report of the standing committee on finance and economic affairs is fairly substantial and it has looked at the issue in great detail. It has analysed the issue. It has heard from a awful lot of presenters who have actually presented very detailed briefs.

Mr Duignan: I happened to sit in on one of those days and I understand the report is nearly complete, except one of the political parties had not presented its recommendations at the time. Hopefully that was done this morning. I think it will be a useful guide for this committee.

The Chair: I think you should start with the summaries anyway.

Mr Rampersad: Okay.

Mr Drainville: This was Mrs O'Neill's standing order 123 matter, was it not?

The Chair: Yes.

Mr Drainville: I was just concerned that she have appropriate input at this point, because she would have some vested interest in this.

The Chair: Maybe the clerk can call Mrs O'Neill. That is all for this morning. We will reconvene at 4 o'clock this afternoon.

The committee recessed at 1156.


The committee resumed at 1606 in room 151.

The Chair: Members will recall that we adjourned shortly after 12 noon today to proceed to the Legislature for other business. We are reconvening this afternoon to hear from the Retail Council of Canada.


The Chair: I would like to call Peter Woolford to address the committee. We have allocated 40 minutes and that includes time for your presentation and/or questions. We would ask you to introduce yourself and state the position you hold within the council.

Mr Woolford: My name is Peter Woolford. I am vice-president of the Retail Council of Canada. First of all, let me bring the apologies of our president, Mr McKichan, who could not be here this afternoon. This is probably the most important issue for the retail community, but he is off this afternoon in Ottawa worrying about the environment, which is another matter of great concern to our members.

The Chair: He is not cross-border shopping, is he?

Mr Woolford: No. It is a slightly different issue, but of almost equal concern to both our members and their customers.

The retail council is a trade association representing about 6,000 retailers from coast to coast. By our estimate, 65% to 70% of the retail sales in Canada are made by members of our organization. I would suspect that in Ontario, because of the concentration of the retail trade in this province, we account for a rather higher percentage. We cover all aspects of the trade, both grocery and general merchandise, large stores, medium-sized, small, independents, franchises and corporate stores. While the large corporate chains, of course, account for the bulk of the sales, the great majority of our members are in fact independent stores with perhaps one or two outlets.

I would like to go briefly through the dimensions of the problem, some thoughts about the features that lie behind it -- the nature of the problem, if you will -- and then talk a little bit about what we feel can be done.

The retail council has not spent a lot of time or effort, in fact very little, in trying to put a handle on the dimensions of the problem as such. Based on the comments that we get from our members, from the various studies done by different organizations, we would not argue with the kinds of numbers coming out of the Ontario government itself which suggest that in this province we are losing sales in the order of slightly over $2 billion a year. As I say, we have not done any specific research ourselves, but that certainly seems to be in the ballpark. It is a difficult number to get hold of and we feel that once there is a consensus there is a problem, it is much more useful to start focusing on what to do rather than trying to measure it in ever-increasingly fine dimensions.

I note that the most recent data for the first quarter of 1991 are now out; they show that the trend is continuing. The number of visits Canadians made across the border went up by about 22% in the first quarter of this year. I think in March alone they went up by about 25%. So Canadians, and Ontarians especially, still have a strong flavour for cross-border shopping.

Equally, I think the economic consequences of that are well known to any MPP who has ever been back to the main street in his or her town. I do not plan to expand on that here.

I think it is useful, though, to spend a couple of minutes on what we think is the nature of this problem. We believe there has been a substantial misunderstanding of the nature of the cross-border problem. It is the view of our association and indeed, I think, of probably the majority of our members that the cross-border shopping issue is not primarily a question of ineffective border control. That certainly is an issue and an important part of the cross-border shopping phenomenon, but it is not the primary problem, nor is it the primary place we will find solutions.

Even when we fix the border issue, we will still find we have very substantial questions that we must resolve as a province and as a country. Some of the factors influencing Canadians to go across the border we can correct or counteract and there are others which we cannot compensate for. In this latter category, I think of the fact that Canada is dark and cold for a lot of the year. We have large spaces that are devoid of population. Our population is strung out in a band 3,000 miles long and 100 miles thick. These natural disadvantages we have as a country add to the cost of doing business in Canada and they are handicaps we have to accept as part of our heritage and somehow work around them.

Second, we find from the business point of view that our consumer markets are in a state of flux. This is a condition which affects retailers both north and south, but because of the relatively smaller market we have in Canada, the dramatic changes in consumer behaviour, in expectations and in their buying habits have a relatively more severe impact on the Canadian business community.

To the extent that the business community in Canada has weaknesses, the pressure of the competition, of course, is felt that much more severely and will highlight those weaknesses in the business community very quickly and very apparently. However, it also tends to be a self-correcting pressure because, as those weaknesses become clear and as the pressure builds on firms, they either adjust or they are not around to continue to be part of that problem.

With regard to domestic suppliers, the suppliers to our trade face the same impediments as we do. Indeed, they and we also face a handicap in that tariff levels in Canada are about twice those for products going into the United States, so our suppliers face the problem that the duty burden they bear in bringing goods across the border is about double that which their American competitors face.

Another disadvantage is the relatively heavy public sector burden -- taxes and government -- that we carry in Canada as compared to the United States. That is a feature of the kind of government Canadians have asked for and voted for over many years. Many of the burdens and policies that we are carrying today are the result of public policy choices made many years ago. We understand that but we suggest there may be some scope for change there too. I will return to that in a few minutes.

We have seen some suggestions in the public press and in a variety of forums that a couple of high-profile measures might be the magic bullet that could solve this problem. One is that this is the fault of the free trade agreement and that if we had not signed free trade with the United States, we would not have this problem. I suggest that is a myth. In point of fact, the tariff concessions that were granted by Canada under the free trade act apply almost exclusively to firms doing business north-south. The average consumer going across the border cannot get a certificate of origin and so cannot take advantage of the tariff reductions that merchants or suppliers can take advantage of. As a result, if anything, the free trade deal has probably lowered prices to the retailer marginally rather than raising them.

On the other hand, I think the discussion about free trade certainly piqued people's interest in what was going on in the US market. They became aware that there were very attractive bargains to be had. By curiosity, they were drawn over there and found that indeed there are some.

The second magic bullet that is often suggested is a forced devaluation of the Canadian dollar. I suggest that would be a tragedy for this country. What that effectively means is impoverishing our people. We are an active trading nation. Many of the goods that we as consumers buy are imported. Devaluing the dollar means that our standard of living is driven down as an express government policy. I do not think that is an appropriate way to go. It means that many of the goods we buy, relative to those we would buy in the States, would become somewhat more expensive, whether they were bought across the border or imported. That would be a burden I do not feel public policy authorities would want to put on the individual consumer in difficult and tough times.

Let me talk a little bit about solutions and then we can get to the discussions. We started from a position about a year ago that the solutions would be achieved with more agreement and with more effectiveness if there were a dialogue among the various parties and we had better facts and consensus on some of the dimensions of the issue and the way to tackle it.

As a result of that, last October we had a meeting of federal, provincial and municipal governments, national and provincial trade associations, and local community groups and consumer representatives to review the issue, to see what might be done, jointly or separately, and what further research might be required on the issue.

We had a second meeting, two months ago, on 22 April, in Niagara Falls to review the work that had been done in the interim. We feel we have made some good progress. We heard at that meeting the results of a study done for the federal government, at our request, by Ernst and Young on cross-border shopping. If the committee has not seen that, you can get it from Ontario officials, either in the Ministry of Treasury and Economics or the Ministry of Industry, Trade and Technology. I am sorry I do not have one here this afternoon.

In addition to that study, which gave us a bit of a fix on how our structure is different in Canada and where the costs come in, we set up a number of committees that went away to do some work on specific aspects of the issue. First of all, we set up a committee of a number of associations and government representatives to steer the work of the whole group and give us a sense of strategic direction. We set up a group to review the accelerated customs lane experiment in BC, the so-called PACE experiment, Peace Arch Customs Entry. We set up a committee to look at communications options, at ways we can communicate effectively to Canadians, Ontarians and other provincial people what the burden of cross-border shopping means. Finally, we continued the work of a committee which is looking at further analytical tasks. The next meeting of this task force takes place on Monday 17 June and we are hopeful that we will get some good progess out of that meeting as well.

I should note that we have had excellent co-operation from the Ontario officials on this, officials from MITT, Peter Friedman and Rena Blatt, and from Treasury and Economics, Gary Rygus. They have been very helpful to us.

One of the pleasures we have had in this is that the officials from federal and provincial levels, and from municipal governments, have worked very co-operatively with the private sector on this exercise. Because we are all implicated -- nobody owns this problem -- we have found that this co-operative approach to the problem has been very fruitful.

Let me turn now to what to do specifically. There are certainly some constructive things that the private sector can do on a joint basis. Merchants and local groups in some communities have attempted to fight back through a variety of measures -- public communication programs stressing the benefit of keeping economic activity in the community, special promotional events, comparative advertising, improvements in service and attempts to adopt, where possible, more aggressive pricing postures.

Some of these initiatives have been undertaken with the assistance of the Ministry of Industry, Trade and Technology. That ministry has provided advice and help, especially with respect to marketing. Last fall, they put together a nice marketing package for chambers of commerce, boards of trade or local business improvement areas, that has been very welcome and helpful. But obviously, while that is helpful, neither those initiatives nor the help are long-term solutions.

Another response of the private sector is in the form of accelerating improvements and getting even greater efficiency and competitiveness out of our operations. Again, that is just part of the normal pressure you get in response to the marketplace.

I would like to turn now to the side which perhaps is less used to dealing with pressures for change, and that is the public sector. We believe it is within the public sector that more can be done to help the problem than in other areas.

The first action is relatively simple and easy of achievement. We believe the federal and provincial governments should come to an agreement whereby federal customs inspectors collect not only the federal duty and goods and services tax, but also provincial sales taxes. Obviously, that would be much more practicable if provincial sales taxes were harmonized with the goods and services tax. We have recommended harmonization to the Ontario government and all other provincial governments for a number of other reasons, but efficient collection at the border is another very powerful argument for doing that as quickly as possible.

We certainly welcome the action in Saskatchewan and Quebec to harmonize and collect at the border. We were encouraged by the very recent statements by Treasurer Laughren that he was considering some action in this area and we certainly hope that a positive response can come of that willingness to look at it.

The Chair: I think he has been denying those statements lately.

Mr Woolford: Oh, has he?

The Chair: I think so. I am not sure.

Mr Woolford: I am aware that certainly Ms Wark-Martyn was in Ottawa, talking with Mr Jelinek and making a number of proposals, so there is an interest in the Ontario government in trying to find a way of resolving this problem. We would certainly encourage that.

The Chair: I was just trying to be helpful to my colleagues.


Mr Abel: Thanks. We appreciate that.

Mr Woolford: As well, we welcomed the announcement on Monday by Mr Jelinek of more effective and efficient measures to collect duty at the border, but again I would say that this is not a border problem.

If you would permit me a brief digression, I think the cross-border shopping issue is another tranche of the problem that the truckers face, that is, Canada, Ontario, we all face much tougher competitive pressures, much tougher market pressures than we have been used to in the past. The world has come to call in a way that perhaps it has not in previous years.

The private sector knows how to deal with that kind of challenge. They are for ever having to fend off new competitors, especially in retail. They have to deal with fickle consumers, new technology, new products, new ways of presenting their goods and so on, so they are used to responding to market changes.

We have arrived at a state in public economic policy where governments now are going to have to build that same ability to be flexible and responsive to new developments, to pressures coming from other competitive parts of the world, and we are working that through. As I say, the cross-border shopping, the problems that truckers face, the problems our manufacturers face, are all examples of that kind of broader pressure that is being brought on our economic actors.

However, retailers, like many of the other businesses, face a couple of particularly specific government-related issues that I would like to finish with. Essentially, the twin problems of relatively higher taxes and explicit or implicit costs from regulatory action tend to be of higher dimensions than those bearing on our US competitors. We believe the provincial government must start reappraising all its existing and planned activities and programs affecting business, with a view to weighing their design and utility against the economic realities of this new set of conditions that we face.

We will certainly be making a case for this with the Fair Tax Commission, of course, but the mandate of that commission, we do not feel, is sufficiently wide to capture all the forms of costs that firms have to bear and on which they have to be competitive. We need to look at some of the other government programs already in place or now being contemplated which deal with the labour market, product markets, property markets and things like that. These bear on our suppliers, on retailers and on manufacturers generally, so what we are finding, I think, is that in a number of areas we have a series of built-in cost disadvantages which we are going to have to examine. Many of those were put there for good public policy reasons. We understand that, but we are going to have to look at those with a very clear set of eyes so that we are very clear about which costs we want to continue and which ones we can either manage downwards or eliminate in order to be able to continue to earn our livings.

We are not necessarily suggesting that any of the objectives of this legislation are undesirable or inappropriate; we are just going to have to take a very good, clear, hard look at them. We believe the government should be looking at these and deciding which are expensive add-ons that may be achieved in better ways and which ones are really key to ensuring the best quality of life for Ontarians. Some programs, we suggest, will not just represent a good bargain in terms of their side effects -- competitiveness, jobs and so on -- and we may have to make some fairly radical changes to them. We are very aware that this is a formidable and a challenging program for the government, as it is for the private sector. We believe, however, that the project is better attacked now, rather than two or three years from now, when we would be in a position of even greater weakness.

Those are my opening remarks. I look forward now to a discussion.

The Chair: Okay. We have lots of time.

Mr Brown: I certainly appreciate the presentation. I think you brought us some well-thought-out views. I was interested in your comments on the devaluation of the dollar as something that might be reasonable in terms of helping Canadians and Ontarians compete. You cannot see the devaluation of the dollar, obviously, by itself. It is connected to interest rates, which are still significantly higher in Ontario, in terms of the spread, than for our American friends. It is my view that if the interest rates were lowered, so would the dollar be slightly, and that would enhance our competitive position vis-à-vis other economies, not just the American economy, and also in the long term perhaps make the quality of life in this province better and help certainly with this particular issue. Your view is different and I am just interested in why that is.

Mr Woolford: I guess there are a couple of things to think of here. First of all, when as a country we owe half a trillion dollars, we do not get to choose our interest rate. The international capital markets are so interconnected and so fluid now that we do not have the opportunity to set our own interest rate in isolation from those markets, and they will react very quickly if Canada's interest rate gets out of line with what they feel it should be. There is a very grave danger that we mistake how much capability we have to manage that interest rate. Certainly dropping it would bring the dollar down. The fear, of course, is that it will bring the dollar down in a rush and we will find ourselves either in an exchange crisis or in a very inflationary situation.

Certainly we would like to see Canada get to a situation where interest rates are substantially lower than they are now. Interest rates and the cost of borrowing money are very important issues for retailers, more perhaps than many people realize. Most retailers finance their inventory on revolving credit or on lines of credit, and that is a very expensive way of doing business. They also feel high rates, of course, because if the rates are high, their consumers are not in their stores spending for the larger purchases either.

The trick there is not simply to reduce the rate of interest arbitrarily but to get our economic house in order so that in fact Canada becomes such an attractive place, our public finances are in good shape and we can find that the world feels that Canada is such a safe place to put money that we can reduce the premium we now pay. Unfortunately, that means for governments that they are going to have to restrain their public expenditures.

Mr Brown: I am certainly not denying that. I was just interested in that we have been in the odd situation in Canada, in the last few months anyway, where the chartered banks have actually been leading the Bank of Canada with rate reductions, and I am just wondering if the Bank of Canada is not being unduly slow in reacting, but I guess that is another issue, really.

What I really wanted to ask --

Mr Woolford: Can I just finish that one off? I think the other side we need to think of here is the inflation side. Any of us who was at the age of majority or older in the 1970s knows what high inflation can do to our ability to earn a living in the world. For people on fixed incomes, seniors, low-income people, pensioners, people on welfare, inflation is a very destructive virus, and one of the ways of getting into it is through the good intentions of just letting the interest rate come down a little further so we can get some growth or so we can get some more things going in the economy. That raises all our imports in terms of their price and blows through the price structure very quickly. It is a dangerous thing to do.

Mr Brown: My only point on that was, I think we are a little slow.

The other thing is, if you look at Canada, or Ontario specifically, as one big retail store and Michigan as a big retail store, obviously that retailer across the border has some loss leaders that seem to be attracting customers. From our point of view they are loss leaders. Gasoline, for example, is a major lure which brings people over into the United States for one item really, but while they are there they might as well go out to dinner, they might as well pick up some milk, they might as well buy a turkey, etc.

What are your comments on that? What should we be doing, recognizing that even if Ontario totally eliminated its tax on gasoline, the price would still be higher?

Mr Woolford: That is a difficult choice. One of the reasons we have good roads, one of the reasons we have good policing services is that we pay for those through our taxes. I think one of the first things we need to do is make clear to Canadians that they enjoy a standard of living here, they enjoy a level of public services which is really excellent and in return they must be prepared to pay for it. They cannot live in this wonderful middle world they have now of being able to enjoy those services but slip across the border to avoid the pain of paying for it.

I think as well this is part of the whole painful business of looking at those costs that we have placed on certain key aspects that are so prominent in the daily purchases of Canadians. Gasoline is the classic case. You need to fill the tank once a week pretty well, and for somebody who is within a couple of minutes driving of the border, it just makes so much sense to cross. Tobacco and food products are the key ones.

I do not have solutions in the gasoline area. I think, for example, in the food product area we are using consumer prices to cross-subsidize the farmer, and what that means is that people are definitely able to avoid the pain of paying for that subsidy by going across the border. So that is perhaps one area we should be looking at, the structure of our policies.


Mr Brown: This is a suggestion I heard in Sault Ste Marie the other day. It is interesting just because it is rather different and I had never heard it before. It was suggested that we put gas pumps at the border and you could not get out of Canada without a full tank.

Mr Woolford: In fact that is what they do, I am told, in Singapore. If you show up at the border with less than three quarters of a tank, you are actually fined $500 Singapore right there on the spot. They just nail you. That is how they handle the price differential; I do not think Canadians would appreciate that.

Mr Brown: I do not think so either, but I thought it was an interesting suggestion.

The Chair: They have had several coups there recently I understand.

Mrs Y. O'Neill: Mr Woolford, I really wanted you to be here today and I am so glad you have accommodated us. I was in Niagara Falls with you on 22 April. I was very uplifted by the sense of co-operation you have relayed here among all the people there, whether they were people gathering data or consumers or people in various levels of merchandising.

I would like to ask you to be a little more specific about things you think the provincial government can do. I know you said you are coming to the tax commission, I know you have said you are going to make other interventions. The reason I really thought it was important, I know you appeared before the committee on finance and economic affairs, but a lot has been happening with your council since. You are certainly taking a very strong leadership role and are basing your decisions on a lot of very up-to-date data.

Could you be a little more specific? I guess what I am asking you about, if I may lead you a bit, is the interest-free loans or loan guarantees or the breaks that municipalities give, these are the kinds of things that you are surveying and that others have brought forward to us as things that happen on the other side of the border to give what is not a level playing field. I just wonder if you could say very briefly what you think the province can do, the kinds of things we can look at. We want to bring some recommendations from this study.

Mr Woolford: I would be pleased to do so. Let me try talking, first, for the retail sector and perhaps for the wider group, because I think we have a bit of a sense in the Retail Council of Canada of what the wider group would like.

First, I do not think anybody is asking for additional subsidies, additional benefits for people opening new stores. Traditionally, this country has not subsidized the opening of stores or operations like that. I do not think that is appropriate government policy, least of all in the retail sector. I think most of my members would agree with that, even those who dream late at night that they might like it.

Second, over the long term that is probably not going to help you very much. If you get a bit of a grant to locate in one place or another, I do not think that makes a lot of difference over the long term. What do affect us are the ongoing policies of governments that place a cost burden all the time. Certainly every government everywhere has to place a cost burden because they need funds to operate, they need to establish the rules of the game, and complying with those imposes costs. Those are equally as true for the United States as for Canada.

Let me cover at least two areas that we at the Retail Council of Canada think could be areas for government action. Two of the most important areas of expense for the retailer are property costs and labour costs.

On the property side, the commercial concentration tax in Ontario has proven to be a very heavy burden for retailers. There is no question. That has just sucked additional money out of companies utterly in no relation to their ability to earn that money. It is an expensive burden. In many stores in downtown Toronto now, I am told by some of my members, the additional costs they pay for the property, the common area charges, the taxes and so on, are in excess of the rent their US competitors pay. That is a very heavy burden.

Second, in regard to the business and property assessment which has been working its way through Ontario, moving to market rate assessment, we have just completed some research with a series of consultants which shows that over about the last decade the commercial sector has been assessed relatively more heavily than the industrial or the residential sectors. Within the commercial sector it is the retail trade and the fast-food restaurants, interestingly, which have borne the highest increases in assessments. Those are two heavy burdens that the retailer then faces.

On the labour cost side, the employer health tax hit the trade very, very hard indeed. We are major employers of second- or third-incomers in households. As such, those people usually had their OHIP premiums paid by the primary income earner. Either the husband or the wife was paying the OHIP premium. The other spouse who was working in a retail store part-time, students working their way through school, seniors who were working after retirement -- these people did not pay premiums. The employer health tax put a heavy additional burden on firms; again, completely unrelated to their ability to pay, completely unrelated to their profitability.

Third, the current intention to raise the minimum wage from $5.40 to as much as 60% of the average weekly wage will be extremely costly for the retail sector. The average minimum wage now in many states runs around $5. At $5.40 we are already over that. In some states it is down around $3.50 or $4. Many firms do not pay at that level in the States, but it sets a whole series of pay rates from that level on up. Many of our store managers, supervisors, department heads and so on set their salaries or their expectations in relation to the minimum wage. They expect to get minimum plus two or three bucks or twice as much as the minimum wage. When you raise the minimum wage, the impact blows right through the whole salary structure, up to and including wage rates of $15 an hour, because they compare themselves to what the new entrants are earning. Major changes in that will be very destructive to the ability of the retail trade to compete.

Pay equity certainly has been a cost to many retailers who are major employers of women, as that has raised their wages.

Finally, the changes that are being noised about in terms of the Labour Relations Act will add to our costs, will add additional rigidities and perhaps drive up wage rates in a trade that has to earn its living in a very, very tough market.

That is a menu of items that we would identify as major aspects for consideration. We recognize that there are very substantial social implications of many of those changes, but we really have to think about those as a province because the reality is that if we do not find a way of solving those problems, those jobs will not exist. We are seeing that now. If you look at the food retail trade, many of the large firms have simply drawn back from border cities. They have closed their stores. Why? Because they just cannot compete. They cannot sell products in those cities, and so they are gone. The jobs are lost and those people are no longer employed in the retail trade.

Mrs Y. O'Neill: Thank you very much, Mr Woolford. I hope to see you Monday.

Mr Woolford: Talk to you then.

The Chair: Ms Harrington.

Ms Harrington: I will let Mr Duignan go first.

Mr Duignan: Loss-leaders are a good attraction for many people going to the United States to shop. Have you looked at the prices beyond the border cities in the United States and done a comparison between those cities and cities further inland, 60-odd miles inland?

Mr Woolford: We have not looked at them directly ourselves. I have heard that the northern-tier states are a dumping ground, if you will, for many US manufacturers, importers and indeed for some of their retailers. Merchandise that is off-price -- ends of lines, unusual sizes, slight defects, seconds, that sort of thing -- often is put into that part of their country for sale. It may have started because that was the rust belt 10 years ago, and so people were looking for bargains more vigorously than ever; I do not know. It certainly has become an attractive place for Canadians to shop for that reason as well. So, yes, there seems to be some evidence that, unfortunately for Canada, US prices in the northern tier are ultracompetitive. That is a burden that we have to face.

Mr Duignan: I had an opportunity to visit the United States some weeks back, South Carolina. I drove down and drove back, and what struck me was the price difference between the border cities and those as you went further inland in the United States. In fact, depending on what state you were in, the gasoline price was up to $1.60 a gallon. If you went into the ordinary grocery stores and looked at the prices -- I did shopping at home so I would have a good idea of the price differential and there was little or none, in some cases, between what the item was in the United States and what it was here. I think the city of Cornwall in its presentation here this morning had a comparison between the United States and Canada and it found little or no difference. Would you speculate, then, that loss-leaders such as gasoline, etc, are in fact the major attraction going, and when they get there, people just buy extra commodities?


Mr Woolford: There are a couple of things there, yes. Certainly the loss-leaders are very attractive for Canadians and draw them over. I think a second thing we find is that Canadians compare prices in a discount house -- where there are 25 Ralph Lauren seconds on a table all jumbled together, with a slight pull in them or a smudge on the collar or something -- with a brand-new, top-line quality Ralph Lauren sweater in Eaton's or Sears or the Bay in downtown Toronto. That is an unfair comparison. In one case you are buying a product at its very best from a store which provides service, quality, satisfaction, a range of sizes and so on, and in the other you take what you can get. There are no change rooms and so on. So it is an unfair comparison there as well. They are not exactly loss-leaders, but again it is an unfair price comparison.

We see as well that in some instances US standards are different. For example, I believe their standard for flammability of children's sleepwear is different, and many Canadians are not aware of that. I would prefer to have my children in sleepwear that is not easily flammable or that is self-extinguishing rather than sleepwear which is less safe. So some of those differences account for the price.

The US are also just superb marketers. They know how to pull the customer in, and if they have a loss-leader that is attractive, they use it. They use it very effectively to draw Canadians across the border, and then while they have us there they sell us the other products. What many of my members tell me, particularly those who are in the price-sensitive areas, is that their customers say, "Well, you know, I went across for a carton of cigarettes and to fill the tank. The shirt was the same price or a little higher than in Canada, but I'd saved so much already that it was there, I was there, and I paid for it anyway."

Mr Duignan: It is like going into a supermarket that has loss leaders. You go in and you buy other goods that actually may be a little higher than where you would normally buy them.

Mr Woolford: That is part of retailing strategy, to encourage you to come into the store and to make many of your purchases there, not simply the sale prices.

The Chair: Can I be rude and interrupt to ask you if you believe that the thousands of people who leave Windsor and Essex county every day and every weekend and on Sundays to go shopping in all the border cities that border Detroit are actually going to pay more for their products?

Mr Woolford: Oh, no, not at all.

The Chair: Of course not.

Mr Woolford: Canadians are very smart shoppers. The very vigorous competition in Canada has trained Canadians to be very smart shoppers in terms of price and quality.

The Chair: I really would like to have the documentation that we received this morning from the Cornwall people examined more closely, not because I disbelieve it or because I think they made errors, but there has to be, for lack of a better word, something missing there. We cannot have that many thousands of people leaving the community that I represent on a regular basis just to go over there and pay more.

Mr Duignan: Mr Chairman, I do not want to get into a cross-debate here, however, I was in the United States and I went into the grocery store and I saw the prices on the shelves.

The Chair: I think we are trying to delude ourselves a little bit here this afternoon.

Mr Duignan: Sure, there were some items that were cheaper, the specials that were on that week, but the main grocery items in most cases were around the same price. However, no matter what we do in Canada here, when you compare the market, roughly 25 million people living in Canada versus 250 million in the United States, the United States is always going to have some sort of competitive edge simply because of the buying power of some of the stores involved, the discount stores. Is that correct?

Mr Woolford: Yes, and what helps to distinguish that in some areas, for example, is that we have set standards that are very slightly different from the United States, so that the suppliers, the importers or the manufacturers, can distinguish between those products going to Canada and those going to the United States. In the US, for example, you need a UL sticker on electrical products; in Canada it is the CSA sticker, so right at the plant they know which products are going to the world's most important market and they also know which products are going to the pimple on the north end of the world's most important market, and they can price differentially. The US is where they have to be competitive. They can afford to take slightly fatter margins in Canada, or have been able to until now. That is perhaps an area that governments can look at as well.

Mr Duignan: There was some question in the standing committee on finance and economic affairs -- I think you presented the same brief, did you?

Mr Woolford: Yes, we did. I am sorry; with only a week's notice, this was the best I could do.

Mr Duignan: That is okay. You indicated that you would have liked to do a study. Have you completed that study?

Mr Woolford: No. In fact, there will be some further study done as part of the task force on cross-border shopping, which is meeting on Monday. We had hoped that on Monday we would have a proposal back from a range of consultants on how they would get us some better fixes on where the cost differentials are. The time between the two meetings has been so short that we have not been able to get that work done. It will probably come to us this fall, but the hope is that we will get some co-operatively financed research into the problem, both government- and private-sector financed.

Mr Duignan: Very briefly, marketing boards: What is your opinion on, say, for example, the milk marketing board?

Mr Woolford: Every country in the world subsidizes its agriculture industry. It is a question of how you choose to do that. In Canada, we have chosen to do that through the consumer's pocketbook. In the United States, they have chosen to do it through the public purse. What it has created, then, is a wonderful opportunity for Canadians to avoid paying for that subsidy.

We are well aware of a number of studies that are going on in Ottawa and in provincial governments about how we should start changing that. I think we will see some changes in marketing boards. The associations representing the supply-managed commodities are starting to recognize that if their prices are wildly out of sync with those in the United States, they are going to lose more through lost sales than they would through reducing their prices. That is going to take some time, but we are hopeful that through a process of dialogue with them, we can arrive at a position where we can shrink that price differential without damaging their interests and without damaging the interests of the consumer.

Mr Duignan: One final question.

The Chair: There is lots of time; go ahead. The only time George is not here, we have lots of time.

Mr Duignan: I wanted to refer to the Europeans at this point and how aggressively they market tourism in their particular countries. I followed this idea, along with Don Cousens from the third party, at the time of the committee on finance and economic affairs; that is, attracting the Americans to come to Canada and how we get that tax rebate back to them. You know how aggressively the Europeans go after that now, an extremely aggressive campaign promoted within the store. If you go into a store in Europe and buy a particular article, you can go to the service desk and they will fill out a form for you which you put in an envelope and deposit at your point of departure. In some cases now, there is an exchange desk at the point of departure where you get your money back. Would that be something worth while to pursue for this province, if not for all of Canada? We could get some sort of agreement with the federal government to promote it aggressively with the retail sector.

Mr Woolford: Indeed.

Mr Duignan: The retail sector in Europe is very involved in promoting that scheme.

Mr Woolford: Indeed. In fact, I am surprised that you are so supportive of the goods and services tax, because that is --

Mr Duignan: I am not supportive of the goods and services tax.

Mr Woolford: That is exactly what it does.

Mr Duignan: It is a fact of life here. You have the GST along with the PST. In fact, a selling point to visitors coming into certain European countries is that they can actually get a certain amount of money back that they paid at the retail level.

Mr Woolford: One of the many reasons we did support the GST, as the trade that has to collect it at the end, is exactly that reason. Today, indeed, consumers coming up from the United States can get their GST back on purchases. It has been a slow and difficult transition, we are aware of that, but right now many of my members have brochures and forms explaining how tourists can get back their GST at the border, right at the point of sale. Unfortunately, Revenue Canada has not gotten those forms out as quickly as it might have liked, but that is in fact possible.

Harmonization of provincial taxes with the goods and services tax will enhance that. It would mean that the consumer coming from the United States would pay 15% less than he is initially charged. I know now that the consumer returning to the United States has to stop at the border and make that rebate at that point. Down the road, it would make a lot of sense to see if we could do that -- well, I guess you cannot do it right at the point of sale, because then that person simply could turn the goods over to a friend in Canada, so you probably have to make the rebate at the border or mail it to a location in the United States. But yes, indeed, one of the great attractions of a goods and services type of tax is that you can relieve the tourist of that burden.


Mr Duignan: In fact, it would be worth while doing an aggressive campaign.

Mr Woolford: Yes. We have advised all our members, particularly those who are in the tourist trade, to get hold of those brochures and display them prominently at cash registers where tourists shop. We are starting to see those come out in the stores. As I say, we are only five or six months into the process now, but we are quite hopeful that those will prove to be a selling point for Canadian retailers.

Mr Duignan: At the point of sale, does the store then write out the necessary form, fill out the information?

Mr Woolford: We are advising our members that this is called good customer service. If you are trying to close the sale on a fine Canadian coat, a Canadian piece of fashion merchandise or a pair of Canadian shoes, whatever, it is a great advantage to say to the customer: "Look, you have to pay 7% GST right now, but we have the form right here. We'll help you fill it out. All you do is hand it in at the border as you're going back and you get your money back." We think it can be used as a very attractive way of closing the sale.

Mr Duignan: It can be used as quite an effective tool selling Americans to come to Canada more.

Mr Woolford: Yes.

Ms Harrington: Where is your meeting on Monday?

Mr Woolford: It is at the Airport Hilton International hotel in Mississauga, starting at 10 o'clock. It will run from 10 until about 2:30. If there are committee members who would like to attend, or if you would like to send one of your staff, you are more than welcome. We had somebody from the staff of the standing committee on finance and economic affairs at the one in Niagara Falls, if I am not mistaken. You are more than welcome. Certainly officials will be there as well from MITT and the Ministry of Treasury and Economics, and probably the Ministry of Agriculture and Food.

Ms Harrington: I represent Niagara Falls. I have been talking to our visitor and convention bureau about trying to help tourists particularly get the rebate back and to try and make them feel special.

Mr Woolford: Certainly, if there is any town that knows about tourism, it has to be Niagara Falls.

Ms Harrington: I really think you have given a good view of what the public sector can do and where you see some of the problems. You also talked about the things the retailers themselves can do. One of the things I think you mentioned is communications, which I would interpret as being marketing, getting the message across in various ways, not just your message of "My goods are superior or worth buying," but also the big picture of why we should in fact think of this as a country and have integrity in our border. Are there any other particular things I could note down today that you think retailers can do?

Mr Woolford: Let me pick up on the communications point, because I think that is one of the things the private sector can do beyond its own, if you will, narrow interest that is difficult for the public sector to do. Typically, when governments have operated Shop Canada campaigns and so on, they have been less than fully successful because Canadians view communications from governments with some scepticism. We believe there is enormous power in local merchants saying to their fellow citizens, their neighbours: "You need to shop here because if your son or daughter wants to come and work in my store, he or she will get a job only if I am still open. We need to support our community, we need to build a sound economic base here and we cannot be taking our dollar south of the border."

There are some very creative things being done in that regard. Apparently the road from Thunder Bay down to Duluth has billboards at intervals. One says, "Have you thought about taking your dollars out of Canada?" the next one says, "Stop, it's not too late to turn around," and things like this. Clever communications like that make people think twice before they go.

The Sarnia Lambton Chamber of Commerce has put together a one-page brief for its sales staff with some thoughtful responses to consumers who challenge them on why they should shop in Canada. There are some very positive things that can be done there.

Just on the straight marketing, downtown merchants need to recognize that the enemy is not the mall on the outskirts. The enemy is across the lake or across the border or across the river. They need to start making more common cause. I have heard of US retailers lining up with hotels and putting together packages, "Stay in our hotel and get a 10% discount on everything you buy and a free shopping bag." Why can we not be doing certain things like that in small communities? I know some of them are doing that, the kind of effort that Cornwall did at Christmas where banks were providing attractive loan rates to people who were going to buy in local stores. There are a lot of creative things the private sector can do to communicate the reality of the economic challenge that Canada faces and also to present their goods and services in a very attractive way.

The challenge, of course, is that we are up against probably the world's best marketers. That is tough competition, but Canadian retailers and their suppliers, Canadian hospitality providers, are pretty sharp business operators too. I think that in response to that we will see a lot more creativity, a lot more clever ideas. What else? Special events and loss leaders of their own. We may not be able to compete across the land, but again, do some market research, find out what products are key in the consumer's mind and get very aggressive on those prices, working out co-operative deals with your suppliers and co-operative advertising. There is a whole range of things that retailers do. Those all tend to be things we have done before, things the private sector knows how to do.

The Chair: We are going to have to wrap it up, Mr Woolford.

Mr Woolford: I am sorry. I think they will come in the natural course of events. They may not be dramatic, but there are things that I think we can see the private sector contributing to.

Ms Harrington: We look forward to working with you, because people do not want government telling them what to do.

Mr Woolford: Our pleasure.

The Chair: Peter, thank you very much for joining us today. We appreciate your brief.

Mrs Y. O'Neill: I am sorry. We all got our committee meeting notices today. I would just ask for special consideration from the committee regarding the meeting next Thursday afternoon. On 20 June, the 10 ridings in the Ottawa-Carleton area have an annual fund-raiser. Since each of us is responsible for a certain number of guests and a certain number of our other colleagues coming to Ottawa, I really do feel I have to be in Ottawa for 5:30 next Thursday night. We have no one scheduled at the moment for 4 o'clock -- I checked with the clerk today -- so I would really appreciate it if we did not meet next Thursday afternoon and just met in the morning. Can we go for that?

The Chair: I do not think that is a problem. That sounds very good.

Mrs Y. O'Neill: We will work towards completing this the following week then.

The Chair: Certainly.

Mrs Y. O'Neill: Thank you very much. I appreciate that.

The Chair: Thank you all for your co-operation. We will see you in a few days. Have a nice weekend.

The committee adjourned at 1658.