Legislative Assembly of Ontario

CROSS-BORDER SHOPPING

AFTERNOON SITTING

CONTENTS

Thursday 30 May 1991

Cross-border shopping

Afternoon sitting

Adjournment

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair: Wiseman, Jim (Durham West NDP)

Vice-Chair: Sutherland, Kimble (Oxford NDP)

Christopherson, David (Hamilton Centre NDP)

Hansen, Ron (Lincoln NDP)

Jamison, Norm (Norfolk NDP)

Kwinter, Monte (Wilson Heights L)

Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

Stockwell, Chris (Etobicoke West PC)

Sullivan, Barbara (Halton Centre L)

Ward, Brad (Brantford NDP)

Ward, Margery (Don Mills NDP)

Substitutions:

Harrington, Margaret H. (Niagara Falls NDP) for Ms M. Ward

Daigeler, Hans (Nepean L) for Mrs Sullivan

Clerk: Decker, Todd

Staff: Anderson, Anne, Research Officer, Legislative Research Service

The committee met at 1017 in committee room 1.

CROSS-BORDER SHOPPING

The Chair: Good morning. I see a quorum. Unfortunately, not all parties are represented, but there are seven members and I think we should begin this morning's proceedings on the cross-border shopping interim report.

Mr Sutherland: Mr Chair, if you recall last time, the government side had presented proposals, we had some discussion about them, and we heard comments from the opposition members that they did not think those proposals were adequate. We are anxiously waiting to see what they are willing to bring forward in terms of proposals and recommendations, so I would think that would probably be the logical place to start today.

Mr Kwinter: If I could give just a bit of a preamble as to what I think we, as a committee, should be doing, without being partisan or provocative, there seems to be a tendency every time a tough question is asked to try to lay the blame somewhere else. We notice this all the time, that cabinet ministers have been given instructions, whenever you get up and ask a question, to put it somewhere else. "Do not buy into it." As a result, they always get up and the first thing is "high interest rates, the exchange rate" -- blame it on the feds. That is great political policy, and I have to admit we did the same thing every time we got the opportunity.

But I do not think this committee can come forward with any credibility and say, "We're blaming it on everybody else." We are going to have to do something about it. There are things that are within the jurisdiction, within the purview, and within the responsibility of the province that can be done, and I think we have to do it. There has been no real addressing of those opportunities. There has been a lot of fuzzy, warm things that we should talk about this and do this and do that, but there has been no real saying: "Here is the issue. Here is what we can do to help it."

I think, when we listened to all of the witnesses, that the number one thing that came through is that it has nothing to do with a feeling for Ontario, it has nothing to do with patriotism, it has nothing to do with anything. It has to do with cost: "If you can bring the cost down, we'll shop in Ontario. If you can't, we're going to go where it suits our economic wellbeing and where we can get the best value for our money. If you want to talk patriotism, we are paying our taxes, and we are paying what we think is an inordinate amount of tax. That is fine, and we're prepared to pay it, but we're also prepared, and we have an obligation to our families, to go out and get the best value we can for our money."

I think that is really the crux of what we have to address. Having said that, there is no question that there has to be some co-ordination between the federal, the provincial and the municipal governments in order to address what is becoming a very serious problem.

We have some recommendations. The first one, the one we think is the most important one, is that there has to be this recognition that the province has to be a player. As I say, it cannot be a finger-pointer, it cannot be just sitting there saying, "You should be doing this and you should be doing that." They have to become a player, and it means there have to be solutions from all three levels of government, but the Ontario government has to be actively in there and participating.

We think the first thing is that the government should appoint a superminister. That does not necessarily mean the guy or girl or whatever is going to be super -- hopefully, he or she would be -- but someone who can co-ordinate the government's activity; someone who has the strength, who has the ability to go in and negotiate and really pull this stuff together, and not just sit there and voice platitudes and get up and read from a prepared text that has been given to him by someone, whether from the Treasurer's office or someone else; someone who can take charge and say: "Here are the problems. Here are some of the solutions that have to be implemented if we are really going to address this problem."

Having said that, I think there are some practical solutions that can be made.

Mr Christopherson: A point of information, Mr Chair, if I could: Will there be written copies of your recommendations?

Mr Kwinter: I am glad you asked. I can give it to you right now.

Mr Christopherson: Ask and ye shall receive.

Mr Kwinter: Our second recommendation deals with the issue that, it seems to us, has been targeted as the number one trigger to get people over to the United States, particularly in the border communities, and that is the price of gasoline.

When you are structuring a budget, if you are the Treasurer you have many options, and most treasurers and most Treasury officials usually will take what they consider to be the easiest options. The easiest options are the ones where they feel they can get to things like gasoline, liquor, cigarettes. It is easy to do. You add it on. It is paid for by the people who use it. The people who do not use it do not pay for it, and as a result it gives Treasury officials a lot of comfort.

On the other hand, it allows them to not make the tough decisions, and this budget was no different. It allows them not to take a look at cutting programs, cutting costs, cutting salaries, or doing any of the other things that are available to them, because by adding this tax you can generate the kind of revenue you need without creating any other problems.

Given the fact that gasoline tax or gasoline prices have been identified as one of the major contributors and triggers to cross-border shopping, we think something this province could do is to rescind immediately the 30% increase in gasoline tax; that means the 1.7 cents that has been implemented should be removed, and the 1 January 1992 increase of another 1.7 cents should be abandoned. I think the same thing should be done both with the alcohol tax and the tobacco tax.

It is interesting, we were up in Collingwood a couple of days ago. It used to be a shipbuilding centre and had some industries, but it is primarily a tourist industry. Witness after witness came forward and said, "The tourism industry is absolutely critical to our economic wellbeing, and nothing is being done for us." All of these taxes, cigarettes -- not so much cigarettes; they did not really mention that -- the gasoline and the alcohol were singled out as being terrible deterrents not only for tourists from outside the province but for tourists inside the province. Their revenues are down because people do not want to pay the price for the alcohol, and with the price of gas they are not travelling. We think that is something that should be removed.

Then, of course, there is another excellent way of stimulating both the economy of Ontario and lessening the impact of the cross-border shopping, and that is to reduce the sales tax by 1%. You should know, and I think it is important that you know -- when did we raise it from 7% to 8%? I think 1986 -- a 1% increase in sales tax at the time represented $1 billion of revenue. At the time it was done, the feeling was "We have to raise this extra revenue." There were all kinds of ways of doing it: raising income tax, corporate tax, all of these things. The Treasurer, in his wisdom at the time, said, "Let's go for the sales tax."

Again, if you do not buy anything, you do not have to pay it, and that was the way. The total rationale was to get another $1 billion. That is fine when the economy can absorb it, but now we are in trouble, we are in a recession and even though it is bottoming, we are not going to see the results of that for a while, and we are in this competitive situation. It is my feeling this is the time to give that $1 billion back.

Naturally, the first question that is going to come up is how can we do that; we have to get it somewhere else. That is exactly right. We have to look somewhere else for that revenue. Recommendation 2 deals with that. Gerry, do you want to carry on with some of the others?

Mr Phillips: Sure, Monte. We are dealing with a crisis in the cross-border shopping and we have to find some solutions very quickly. The long-term solutions we all look at are restructuring the economy and all those sorts of things, but in the meantime we have communities that are really struggling. So all of these things are designed to provide the communities with essentially immediate help.

The third recommendation I think is an important one, and that is the retention of the option for communities that feel it is in their best interests that they can remain open on Sunday. The more I have actually had a chance to work with the Sunday shopping bill, the more sense I think it makes. We will find there are many communities that believe this is going to be quite important to their survival on the cross-border shopping issue.

The fourth one is somehow or other getting co-operation with the federal government on the collection of the provincial sales tax. There has been one meeting where both sides take shots at each other and in the meantime the cross-border communities are suffering. The government has to take another run at the federal government to find a way to collect the provincial sales tax.

Recommendations 5 and 6 are around helping our agricultural community through these tough times, because we heard the numbers in Sault Ste Marie were quite staggering, in terms of the impact on the agricultural community, of cross-border shopping. We have two recommendations here. One is taking the current quota system, and during negotiations with the other provinces getting our share of the quotas up higher, and also looking at the temporary import licences that allow US products to come into Ontario.

Recommendation 6: Some of our agricultural community feel that they are clearly playing a big role in the environment and helping to ensure that our products are as safe as they possibly can be, but they are competing against products that do not have the same criteria applied to them, thus the idea of what we will call the Ontario seal of quality being applied to the products so that Ontario consumers realize these meet the standards in Ontario.

Recommendations 7, 8 and 9, frankly, are not inconsistent with some of the recommendations that have been proposed by yourselves. For whatever reason, we heard a lot of comments that somehow or other people feel there is a slightly higher service orientation in some of the US centres. I do not know whether that is the case or not. We have heard it often enough that there must be some truth, maybe not consistently, in that. If all of us realize that we all have a stake in developing a service culture, it probably means everything from store personnel to, I do not know, government employees.

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I think that, as my colleague said at the outset, in the final analysis, it is difficult to persuade people on emotion when many people are struggling economically. Having said all of that, though, I think there is still some merit in trying to communicate to people the benefits of shopping in Ontario beyond just, "It's a nice place to shop." I think there are a lot of benefits that we all derive from that. So I believe it is consistent with one of your recommendations.

One thing I was struck by in the presentations is, it is always somebody else's fault. That is why our recommendation 9 is to try as best we can to get the facts. I think we heard retailers say: "Well, don't blame us. It's our cost of acquisition." Somebody else says: "Well, don't blame us. We produce our products here in Canada. We are faced with these costs, so don't blame us." The agricultural community will say, "Listen, we're producing quality products under all these standards; don't blame us." I think we need to know what the facts are. What is the real basis for the difference in costs? One suspects in the end it is probably 100 different things and you add them all up and that is what represents it.

As my colleague said, in these committees you like to start off on as non-partisan a base as we possibly can, but I think all who sat here appreciate that we have a short-term crisis and a long-term problem on our hands here. I guess our first nine recommendations deal with the short-term crisis. The 10th one is, we are going to have to find a way to deal with the long-term issue, because my own view is that, as I said in this committee before, I think we are just merely seeing the start of this. Like any war, it often breaks out along the border, but the symptoms are going to move inland. What we see in differences in costs across the border eventually gets lobbed right to the centre of Ontario and impacts on our manufacturing sector and other sectors. Like it or not, I think the new government is going to have to deal with that. I guess our clear feeling is that the budget is, rather than being helpful, going to be harmful to that.

Just to summarize, as my colleague said, I think it is going to be convenient to kind of say, "Well, this is somebody else's problem," but I think that the government is going to have to take some leadership on the issue. Rather than saying it is partially the Minister of Revenue, it is partially the Treasurer, it is partially the Minister of Industry, Trade and Technology, we are going to have to designate one minister who is going to take on the ownership of this issue or the cross-border cities and towns are going to be at the mercy of the marketplace.

I think there are some short-term things we can do to stimulate the economy. I think one of the members here made some statements on the gas prices, but the gas tax increase is just like, pardon the pun, throwing gasoline on the fire. Certain cross-border communities and the trucking community feel that you have taken a problem that we acknowledged existed and then done almost the worst possible thing for that, which is to put the tax on the price of fuel up 30%.

The other recommendations I have covered. So I would hope we could have a good discussion using your recommendations, our recommendations and their recommendations, whenever they arrive.

Mr Kwinter: Could I just add one little addendum to that which I think is quite significant? We met with the Ontario tourist association on Tuesday and there were some rather startling statistics. They certainly startled me. We all know how important tourism is to Ontario: It is the largest single employer and it is the third largest industry in all of Ontario, and they were saying that right now, 92% of all of their business comes from Ontario and only 8% comes from foreign tourism -- dramatic, dramatic change, so much so that the Tourism ministry has virtually decided to sort of forget about the foreign stuff and concentrate on Ontario.

Now, if you listen to the radio, you hear the commercials saying: "Where did you go last summer? I stayed home." And then they extol the virtues of staying in Ontario. The reason for that is that this is where their market is, and with this cross-border shopping and with the problems we have, that market in itself is eroding. So it is a double thing. They found that more and more Ontarians are spending their vacations in the United States, and they are doing it for one reason only and that is the economics of it. It is just cheaper to go there, it is cheaper to eat there, it is cheaper to be entertained there, and that is why they are going. That is something we have to address. We can only do it by making some concrete changes. We cannot do it by putting out fancy reports that have platitudes about we have to do this, that and the other thing, but nothing to change the root cause of the problem.

Mr Christopherson: First of all, just to respond briefly to Mr Kwinter's preamble, I was pleased to hear him say he was going to try to be as non-partisan as possible and then immediately disappointed when the first thing he did was become, in my opinion, very partisan. I can appreciate the concern by the opposition that there is a lot of reference to the federal actions in terms of the made-in-Canada recession and the high interest rates, high dollar etc that we refer to. As much as the opposition would like to trivialize those, we feel they need to be constantly put out front because they are a major cause of the situation we are in.

I think where we get into difficulties is where you draw the line in terms of where the partisanship is. But again, for every time that we sense somebody is trying to downplay those issues, we are going to reinforce the fact that they are a major reason, and if you look at any analysis anywhere, you will see that almost invariably, off the top of the argument, come the problems that the feds have generated. I will leave that there.

The other thing is, and I think back to the presentation of Mr Winters, which is probably one of the presentations that stands out the most -- it certainly got the most reference in the media -- if I recall correctly, right in there he stated that there was no single panacea for this. I think that is probably reflected in both our position papers because nobody really has tried to say, at least not from these two parties -- the Liberals and the New Democrats who are present today -- that any one solution would take care of everything because we have such a range of recommendations.

However, if I can try to be as non-partisan as possible, having responded in a very partisan fashion --

Mr Phillips: I can tell by the decibel level of your-voice whether you are being non-partisan.

Mr Christopherson: I make a habit now, Gerry, that when I am giving a speech, I check with you to see what the volume is like. I thought it over the other day after you came over and talked to me, and if we can just get the Tories to lower their level, I will gladly lower mine. But I want to make sure you hear me, Gerry, and I know you are really interested in everything I have to say.

Recommendation 1, and again this is just off the top without having consulted with my colleagues: I like the recommendation. I am not keen particularly in the label of superminister because that --

Mr Kwinter: I agree. That is why I said I do not mean it has to be a superperson per se, but someone who has --

The Chair: Someone to lead.

Mr Kwinter: Not even lead, someone who buys the issue and has a responsibility to address it, someone who can be like the organizer and the spokesperson and the driving force in tackling this problem.

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Mr Christopherson: I think it is a good recommendation. I am not aware that we have specifically, actually designated a minister to be responsible, with certain authorities and powers beyond what he normally would have as a co-ordinator and as the key player. Again, the idea of superminister is dangerous, because what it does is it means that other issues -- if there is a minister designated to be the co-ordinator and if he does not get the title of superminister, then that issue does not carry the same weight as others, and that is problematic.

So I think there is merit in that and I think it is a good recommendation. Unless I am overruled by my colleagues, I think that is something we ought to look at very carefully. I think it is a good recommendation.

On recommendation 2, the honourable members across from me will recognize that we are obviously not going to be in support of that.

Moving right along, recommendation 3: Again, we have always had a problem with the fact that the provincial government was not prepared to take a stand on the issue. We always felt the municipal option as the general policy for the province was a bit of a copout. I know you disagree, and that is fine. So now that we are in government, we are clearly going to be taking a stand on one side or the other and let the chips fall where they may. But the idea of the municipal option is not something we have been comfortable with as the general policy.

As for the other recommendations, most of them are consistent with ours, as mentioned -- the latter recommendations. And the others, I think there is probably room for some negotiation on our part in terms of just wording and in terms of approach. I do not know if we can be as finite as you have been and would like to be, but I think you can recognize from the government side that merely to say, "We're not going to get enough; it is our job to get more and nothing less is acceptable," when you are dealing with other provinces that are also facing their own recessions and their own difficulties, they are going to be as close to the vest in terms of keeping their interests in the forefront as we would be. But the initiative has some merit and I think we would be willing at least to take a look at that. Maybe we could find some common ground there to move on.

By and large, I would just like to wrap up by complimenting the Liberal caucus for the obvious sincere effort they have put into this and the amount of work. I think maybe between us, if our friends from the third party show up and are willing to play the same kind of role, we can put together a good report that might go a long way to resolving some of the difficulties.

Mr Sutherland: If I could just make a few comments, in terms of the opening remarks, there was some reference to the fact that we did not want to take ownership of the problem. I find that in our recommendations we tried to highlight the fact that the province does have a role in that in terms of participating in the trilevel task force, in terms of negotiating with municipalities over different issues, again the trilevel task force on duplication of services and who should fund those types of services, and looking at two options of collecting provincial sales tax. So I think we agreed with that, that there is a role the province has to play and that it needs to be in there and be one of the partners in attempting to find the solutions to the problems.

Mr Christopherson commented on recommendations 1, 2 and 3. I just want to comment on a couple of others. Picking up on Mr Christopherson's words about the common ground, it is nice to see there are at least four recommendations that are pretty well similar, as I think Gerry highlighted when he was going over that.

Recommendation 5, in terms of what you were saying about negotiations on the quota system, I think that is a very valid recommendation. Where those negotiations will lead, given the nature of how provinces have been negotiating on issues, is hard to say, but I think it is certainly something worth pursuing and for the Ministry of Agriculture and Food to be pursuing. I am sure our farmers would be appreciative of that and some of the processors as well.

Recommendation 6, where you talk about the seal of quality, I would be interested in knowing some more details about that in terms of -- you say this is a way of recognizing that it is a local product or an Ontario product. We already have our Foodland Ontario signs in many of the stores, which help to recognize that. And I guess in terms of some questions about how people will get all the information or knowing the standards that you outline, I would be interested in having more details on that.

I want to make one comment on recommendation 10, where you talk at the end about avoiding heavy future taxation burdens on Ontario consumers and business, and that last line, "much of which lies at the root cause of this problem." I am sure if our friends from the third party were here, they might comment on the fact that you may be admitting that over the last five years taxation has been increased dramatically. I just found that line rather interesting, that you would put it in your report.

But overall, as I say, I agree with Mr Christopherson. I think there is some good common ground here to work from and develop from.

Mr B. Ward: I concur with my colleagues. I think we should be able to develop good, concrete recommendations by massaging both our and your recommendations. I have some concerns with some of the recommendations. In essence, they are around recommendation 2, which deals with proposing that the retail sales tax be cut and the gas tax be rolled back, and recommendation 10. I firmly believe, not being partisan, that we do have our fiscal house in order. Our Treasurer has developed a long-range plan based on fiscal responsibility.

I think Gerry mentioned, we had one of the delegations here, and every action has a reaction. Recognizing that we have a social and economic platform that we want to implement as the government, if we adopted recommendation 2, then this committee would in essence be suggesting that we allow the deficit to go higher than it is, because we are taking away potential revenue from the Treasurer. I am not sure if we want to make that recommendation. I do not think that is where the Liberal caucus is coming from in that recommendation. But every action does have a reaction, and if you withdraw revenue, either the deficit goes up or we should be recommending where additional revenues can be gathered, whether it is an increase in the income tax or whatever. I am not really sure we want to get involved with that.

I think most of the recommendations are similar in thought to the direction that we want in the cross-border shopping issue. I think that by working together -- and we seem to be able to communicate quite well together -- we should be able to come up with an excellent report for our government to examine as a plan of action.

The Chair: I was just conferring with Ms Anderson about the cost of recommendation 2. The cost of dropping the sales tax by 1% could be -- it probably is not around $1 billion now because of the downturn in the economy. So the true cost of that would be between $800 million and $1 billion.

Mr B. Ward: To be fair, recommendation 4, if it were adopted and if in fact we could negotiate with the federal government, there would be revenues from the collection of the provincial sales tax at the border. So there would be some revenue gathered from that recommendation.

The Chair: Just to conclude my thought, we do not know what the impact of a 1% reduction in sales tax would be in terms of total tax revenues. If it has the effect of stimulating the economy and purchasing in Ontario, in fact the revenues may or may not go up, depending on how much that has impacted. I think it would be interesting to know from the Ministry of Revenue if it has any studies, any kind of analysis of the elasticity of this kind of tax and whether it contributes to stimulation and how much and what kinds of revenues it could produce. From that point of view, it is tough to tell what the results of that tax would be. In commenting on that, you are looking at I think somewhere in the neighbourhood of $1.5 billion in forgone tax revenue in recommendation 2, which we have to be cognizant of.

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Mr Jamison: That is basically the point. If you drop the provincial sales tax by 1%, you would have to generate business from there to really balance without adding taxes in another area. I do not think that would make any significant difference in solving the problem.

As Mr Phillips has said, there are a hundred different things that contribute and that have developed over a number of years. That happens to be very correct. I do not think dropping the PST by one percentage point would create a different frame of mind in the cross-border shopper, in that mentality. I really do not think it is significant enough to do that. Sure, we have some responsibility to look and see what areas we can move in and what we can do, but again Mr Kwinter indicated that 1% in the PST rate would work out somewhere around $1 billion. If what I am saying was true, that we were to convince our colleagues to go that way, that revenue would have to be assured, made up, or new taxes of one form or another would have to be implemented. There are no two ways about it.

My feeling is that would have very little impact on the cross-border shopping mentality, if any. We are in a situation where we are experiencing a $9.7 billion deficit and we are talking about, on a chance, taking another $1 billion and adding that to the deficit, without any assurance of the type of impact that would have in stimulating and generating more economic activity on this side of the border and whether or not there would be a balance there that would at least see us break even on that move. My own impression, quite candidly and honestly, is that I do not believe that would be effective in doing just that.

The Chair: Before we go on we should be thinking a little bit about how we can agree on recommendations that we can then have injected into the report, on what recommendations have common cause and little disagreement so that Anne Anderson and David Rampersad can move ahead. On the ones that are more contentious, we might want to see if there are rough edges that can be smoothed out and if agreement can be reached. I know that in some cases there will be no agreement and that would be a minority report. I am just trying to think of ways we can expedite this and move ahead so that we can have something to give to the Treasurer if the budget and all that will descend upon us in the near future.

Mr Kwinter: Mr Chairman, before you do that can I just respond to some of the comments that were made and then we can do that?

The Chair: I was just throwing it out as an idea to think about. We have about two or three more speakers and you were next.

Mr Kwinter: I just want to respond to a couple of things that were said. I think as a basic premise there is a misconception as to how committees work. When I was a minister, I used to tell this to my bureaucrats. They would come in with recommendations and then immediately say, "But politically you won't be able to sell this." I would say to them: "Don't play politician. That is my role and that is my colleagues' role. Your role is to give me the best recommendation you have and do not tell me what the political ramifications are. We are going to make that decision." Quite often, the best recommendation was not the one that was accepted by the government, only because of the politics. I am saying that because that is the same --

Mr Daigeler: Are you sure you are telling the truth?

Mr Kwinter: We have exactly the same problem here.

The Chair: Their problem was they did not listen to him for the last six years.

Mr Kwinter: I do not think it is our role to worry about the Treasurer. That is his role. If we are going to make our recommendations based on what we think the Treasurer will accept or will not accept or where he is going to get the revenue, then this is an exercise in futility because he has already gone through that exercise, and we have his budget, which is the result of that. If you are just going to say, "That's his budget and this is what he has decided," then we might as well go home.

What I am saying is that we make the recommendations. Whether we can sell it to the government is problematical.

That does not matter. What we should do is take a look at it and say, "Here is what we think could help this problem," and let the Treasury people and the Premier and the cabinet worry about whether or not they are prepared to accept it. But if all we are going to do is say, "Well, if we do this it is going to do that and how are they going to this," forget about it.

If you take a look at the response of Mr Christopherson, there are 10 provinces in Canada and different provinces are being affected by the recession and by cross-border shopping in a different way. The province that is being most severely affected is Ontario, for a variety of reasons. We have had a 3% drop in the gross domestic product of Ontario. British Columbia is just about even or slightly ahead. They have actually had some growth; very little, but they have had growth and they have exactly the same interest rates, exactly the same value of the dollar, and they have had some slight growth. Even the Maritimes -- of course they have a chronically depressed economy -- have not suffered as badly as Ontario.

To just say we have to recognize that these are problems that affect everybody and that the federal government has a role to play -- no question: I think we have a responsibility and an obligation to keep pushing the federal government to get its house in order. But there are still things that can be done in Ontario. It is interesting that in all of the comments -- I was listening -- there seem to be only two areas where there can be movement: Either increase the deficit or increase taxes. Not one member on the government side said that we may also have to take a look at cutting costs or cutting programs. That may seem to be a holy cow that you cannot touch.

That is why I am talking about the sales tax. We implemented the 8% sales tax, and in the last election, because of the deterioration of the economy, we said we would reduce that sales tax by 1%. Now, it was a response, without question, to the deterioration of the economy. That was really what it was. The economy was going into a free fall and we are seeing the results of it.

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If the feeling is that, "Well, we can't do that because it would take $1 billion out of that and where is the Treasurer going to find it?" that is his problem. I think what we have to look at, as a committee, is where do we think we can address this problem?

We have had a comment from the parliamentary assistant to the Minister of Industry, Trade and Technology saying that he does not think 1% is going to make a difference. He does not know. He just says, "My gut feeling is I don't think it will make a difference." I think we have to take a look at it. There should be a way of determining, for every decrease in the sales tax, what does that do to stimulate the economy and what does that do to lessen cross-border shopping? He may be right, but I do not think we can make that decision based on, "I don't think it will make a difference," because I cannot say I think it will and I do not think he can say that it will not. I think there has to be some mechanism for gauging what the impact would be and to determine whether or not that would be a significant effect on the problem. I think that is what we have to do.

I am quite happy to go through these recommendations and if we can get agreement on some, then put aside the ones that we cannot, then we can see what we can do with those.

Mr Phillips: I am trying to figure out how we proceed too. Maybe Mr Kwinter has a solution of trying to work our way through the two sets of recommendations, and where we have agreement, to give some direction to the staff to draft something. The material we presented was kind of just draft for discussion purposes. I think we all appreciate that and I assume --

Mr Kwinter: Can I just interrupt for one minute? There is another concern that I have. The concern is that we do not have any representatives from the third party. The concern I have is that we sit down and agree on something and then they come in and say: "Well, that is ridiculous. We do not agree with that." We are sort of back at square one. It would certainly be my feeling that if we go through this exercise, we should have representatives of all parties, so that at least when we agree on something, we know that we have agreed to it and do not have to go and revisit it when these guys walk into the room.

Mr Christopherson: In fairness, we should remind them, and I see the clerk leaving now to remind them, that we are at some crunch time. Bear in mind that we went through something similar when we did the pre-budget consultation. They felt there were major chunks of the decision-making process they did not want or feel a need to be a part of. We did a lot of it without them being here. I am not going to hold up the process personally if they just decide not to be here. If they have a good reason and request that we accommodate them, I am prepared to consider that at any time for anybody of any party, but if it is just a question of other priorities, I do not think we should slow down this business. It is your colleague who recognized it as a crisis and I think the Chair is anxious for us to produce a report as quickly as possible.

The Chair: I have a sense here in what we have before us of the making of a good report with recommendations to the Treasurer. I have perused both documents again and I think that at least with the people who are here, we are not far apart, except on maybe one or two issues and perhaps some of the language. If you eliminate some of the partisan language, I think there is a lot of consensus and recommendations that both sides can live with.

I just perused the government party's. For example, under long term, they are talking about sending an examination of municipal taxes and services to the Fair Tax Commission for an assessment. To me that seems to say something about the long-term solutions.

I think we are not far apart and I would like to see if we can move in that direction within a short amount of time so that we can get a recommendation. I feel, as the Chairman here, that we have to move along, because I think very shortly this committee is going to be given an awful lot of work to do. If what we are hearing about the budget coming to this committee is in fact going to happen, I feel a little bit of a compulsion to move along.

Mr Jamison: I am sorry, I did not hear that last statement.

The Chair: This committee is going to have an awful lot of work coming and I feel an urgency to get a report together, even if it is just an interim report, so that we can get something to the Treasurer for a number of reasons.

We have in the rotation now Mr Christopherson --

Mr Phillips: I think the Hansard would show I was not finished. I was interrupted.

The Chair: Okay, then I will allow you to continue, and if Mr Kwinter would not interrupt you again, I think we could move along.

Mr Kwinter: That was actually on a point of order.

The Chair: I am not sure that was a valid point of order, Mr Kwinter, but I had to listen to it to hear it.

Mr Phillips: I do think there is considerable merit in seeing what the third-party recommendations will be before we actually go through point by point. I am just thinking that, as my colleague said, we may agree on certain things, but they may bring in another twist on the recommendations. I think we run the risk of it not being as productive as it could. My own instincts are that we should spend whatever time we need to clarify each other's positions in case there are questions now, then come back together again this afternoon, hopefully with the Conservative recommendations before us so that we can kind of work our way down where there is three-party agreement on it. It seems to have a lot more merit. We also see where their recommendations may come. They may be improving on these two.

Mr Hansen: Just taking a look at the 1988 budget we were talking about which the Liberals brought in, where they brought -- to me that was GST when it was on goods and services at that time. That was when the economy was good, and yet there was an increase. I cannot see how we can decrease 1% off the 8% retail sales tax. When we were discussing that, Mr Kwinter was saying that we were going to drop 1%, but that was to put the Ontario sales tax on top of the GST, which would work out to close to 8% again. So there was no reduction at that particular time in the last election. That is the partisan part.

The other part is that in the United States right now they are taking a look at setting up a milk marketing board. There is supposed to be a report on 19 June. They find out, with the surplus amount of milk over there, that it is costing the US government too much money. So they are actually looking at the model we have here in Canada. There is a good possibility that in this particular area, and maybe some of the other areas, the Canadian farmer will be coming on to a level playing field.

The other thing is the price of gas, that we increased the tax by 30% by putting it up 1.7 cents and this would effectively drive more people across the border to shop for gas there. There was not anything much in the paper that the oil companies raised the price seven and eight cents a litre -- I think it was on the long weekend. There was nothing said at that point, and yet everybody is throwing their hands up that 1.7 cents is a whole lot of money, 30% increase. If we are to wind up matching prices with the United States by dropping tax on gasoline, which was noted, the oil companies are picking up what we drop. So we will not wind up being very competitive in that particular area.

The other thing to note here is that we have a lot of people shopping across the border, but they want to live in Canada. What we have to do is take a look that we are a caring nation, that we take a look at the social benefits we have here, and I do not think we see people readily moving to the United States because of high taxes, etc. They might be shopping over there, but they like the benefits. That is what we have to sell people, that they like to live here in Canada but only shop in the States, and we have got to entice them to come back. I think we have to say that we have to pay the pricetag for living here in Canada.

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Mr Christopherson: I want to ensure that the record is at least clear from both sides on some follow-up comments, and I suspect that we can move on. I would acknowledge that some of Mr Kwinter's comments probably narrow the gap in terms of our stand on the feds' role in all of this. There is still some disagreement, but I think we have come a long way in recognizing how much is legitimate to claim as part of the problem and where some of the political rhetoric begins to pick up. I am prepared to leave that, and in the areas we disagree, just agree to disagree.

I am surprised, however, that he would mention the 1% sales tax. In my opinion it is universally accepted that that was a rather discredited move that was done in a panic time in the election. It was not well-thought-out. There are even reports that the Premier and the Treasurer of the time were not even in concert on their approach to this. So to suggest that a well-thought-out idea that was meant to mitigate some of the damage of the ensuing recession is something we should now look at, quite frankly, I find an absolute non-starter and I really am surprised that you would raise it, because I think the history shows that was not why it was done. At this point we have no intention of following up on that recommendation.

That leads me to the idea that -- and I think again there needs to be some comment on the record from the government side regarding the Treasurer's role. I am sure if I were sitting on the other side, I would feel exactly the same way and I would damn the torpedoes on every single issue. That is the role of the opposition; I would feel that is my role if I were there.

We have an obligation, as you can appreciate, to deal with all the issues, and we are the ones who have to answer to it as a government and our ministers in the House every single day. To suggest that we do not need to be considering the financial impact on the Treasury and on the government I just do not think is realistic and does not make common sense. We have to be concerned about it. For someone to ask us even in our own caucus, once the report was tabled, "Did you not even take a look at what that would do in terms of the dollars?" We just came out with a budget. Do we just turn to our colleagues and say, "That is Floyd's problem, not our problem." It is a government problem, it is a caucus problem. I think, though, that we should not be absolutely bound by every utterance of the Treasurer, Premier and cabinet on committee recommendations, but in the process of developing those opinions we are going to consider what the impact is, and I think people would expect us to do that.

Cutting the costs and programs, again it was mentioned that none of us referred to anything like that, and Mr Ward talked about the fiscal restraint concerns acknowledged in the budget, and in the budget there is a short-, medium-, and long-term plan presented by the Treasurer for dealing with the deficit and other matters. The development of the new Treasury Board is exactly the response to the very concerns raised by Mr Kwinter. Indeed, one of the things we are going to be doing through the Treasury Board is taking a look at cost-control measures to ensure that we get a handle on those things, and where we can cut, we will be doing it.

To end on a positive note -- I will try to begin and end that way if I can -- I agree with the process that is being suggested, and I think maybe Mr Phillips' suggestion that we at least wait until this afternoon to see if there are any recommendations tabled by the Tories is not unreasonable. Maybe we can just conclude our general remarks when we are done and then start that process. I would ask that we then recognize, if the third party is not present, that that not hold up our business, that we begin to work through, as the Chair has suggested, those areas that we can agree on, set aside the ones we cannot, and take it from there. I am still feeling very positive that we could put together a pretty helpful report that the government and the ministers affected could use.

Ms Harrington: I am very pleased that we have these two pieces of paper. It shows that you are serious, as we were last week, in coming forward with recommendations. Off the top, as a sign of goodwill, I would appreciate it if the opposition party could drop recommendation 10, which I find offensive, because we do want to work together.

With regard to the comments at the beginning about our role as a government and as a province, I think I have stated here before that the basic underlying problem is a national one and does fall to the national government. Whether it is the interest rates, the dollar or the duties at the border, these are all federal matters. I believe that we, as representatives of our individual communities, do have a role to play although it is fundamentally a federal problem, that we as a government do take that responsibility seriously, and that is why we are doing this. That is why we came up with that paper last week, and that is why we are happy with the fact that you came up with this paper. I think it is very positive that we are involved in some way, but we cannot take ownership of the basic, underlying problem.

You have mentioned a 1% retail sales tax cut. When this was done last year, first of all, I do not think it stimulated anything in particular that I know of. That was a trial run, decreasing the sales tax, and I do not think it proved to be effective. With regard to any kind of tax impact coming from a border community, I would say that that kind of direction would have the most impact if it was towards the gas. I believe there is merit in that quote you have here: "If it wasn't for the cheaper gas, we'd probably not bother coming over." I think there are enough people in border communities who do not want to spend the time at the border crossing and the hassle of going across, but if we could somehow lessen that difference of $10 a tank, and give our Canadians half a chance not to go over, then they would not spend those other dollars other than gas while they were over there. If there is any movement in this direction at all, with regard to the Treasurer, I think it could or might be more focused on the gasoline issue.

The last question I want to ask the opposition is that cross-border shopping has been an issue for a while. It just did not all of a sudden happen in January, but I know it was accelerated by the GST. What do you feel the previous government did in the way of leadership on this issue, because maybe I was not aware of any? Maybe I do not know.

Mr Phillips: Two or three points: One, Mr Christopherson kind of thinks that the 1% cut in sales tax is just a throw-in thing. Actually, our leader has constantly raised that, and we believe it is an important element in kickstarting the economy again, so it was not thrown in as sort of a neat little throwaway to anger you.

Mr Christopherson: You are trying to save face, Gerry.

Mr Phillips: No, I am just saying that we feel it is a good recommendation, and it would not be there otherwise.

I think we would be happy to look at the wording of recommendation 10, if it is too offensive.

On the last point on what the previous government did, the fact is that we went through five years of the best economic growth the province has ever had. Employment growth, the economy, during those five years, by your admission and by everybody's admission, was the most robust in the history of the province, and I guess we would have --

Mr Hansen: There were 33 tax increases.

Mr Phillips: It is all part of the strong economy, and I guess if we were in government now you have many of the recommendations we would be looking at.

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The Chair: I would like to interject here for a moment about an observation I have in the last debate we had on the floor here before the break. I made a comment that when the manufacturing sales tax was put into place, the rebates to the retailers was less than the 13.5%. A comment from Mr Wilson, who is here, said that the retailers had done very well by the manufacturers' rebate. So I took it upon myself to do a survey. It is not scientific in any way, but I was looking for specifically any retailer who received more money back from his or her manufacturing sales tax than was paid. There were none. The consensus is that there is a 5% to 6%, and in some cases as high as 7%, loss in revenue because of the changeover from the manufacturers' sales tax to the GST.

I further questioned them, and it became quite apparent that as of 1 January, the tax on goods in some cases was not 13.5%, but in fact where they had received only an 8% or a 6% rebate, the tax on those goods that were being sold was still somewhere between 11% and 14%. So there you have a situation where people have the expectation that these prices should be lower because the taxes are lower, but in fact the retail merchant who was in the store with his inventory in place on 1 January saw literally no decrease in the tax on the goods he had in inventory in the store at that time, and if that inventory is still there, he is still not seeing any kind of decrease in the cost per item in the store.

I stand by what I argued prior to the break. The amount of impact in terms of lowering the price that the GST was supposed to have has not in fact been passed on to the consumer in all cases, even to this point, five months into the GST. I think that is an important consideration to look at in terms of why the prices have remained high and why in some cases the prices are still higher now than they were prior to January 1991. That retailer has still to deal with that as a problem.

This is of course open for discussion here, but I would also like to add a recommendation that the federal government increase its rebate of manufacturing sales tax to the retail merchant to close that gap between what he in fact paid and what he got in return. If that is 5% or 6%, even if he receives only 3% in terms of a return, that will be a huge injection into the retailer's pocket and I think would have a fundamental effect on the survivability of some of the retail merchants in the cross-border areas.

I know from the fact that the Stoney Creek Furniture presentation -- I will admit up front he is a friend of mine. He and I have had many discussions. The difference between the manufacturer's sales tax on his inventory and what he received in return was $250,000. I talked to the Canadian Tire store owner in my riding. It was $160,000. I talked to a small business person who works on making frames. He told me that his was $1,800, and his is just a small retail store. From my point of view, there is a huge amount of money that the federal government has acquired because of the switch from the manufacturing sales tax to the GST. I think that is worth debating and worth considering as a recommendation, but of course it is up to the committee.

Mr Kwinter: If I could just respond briefly to that, and then I want to make another comment, this problem with cross-border shopping did not just start 1 January. Jim, your recommendation -- unfortunately you are going to get exactly the same response that we have from the government side. What you are saying to them is, "Give up some of your revenue," and they are going to say, "Well, that is very nice of you to say, but we are just not prepared to do it."

That is exactly the point I am making; I think we should recommend that. Now, the chances of its happening are zero and nil, but it depends on whose ox is being gored. You are saying, "We are not prepared to do that within ourselves, because we have to account to our colleagues for it, but we are quite happy to make that recommendation to the federal government, because we do not have to answer to them, and let them respond and say why they are not prepared to do it." It is just a matter of practical politics.

The other thing I want to respond to is that cross-border shopping is not new. We talked about this as teenagers. It goes in waves. If all of my friends wanted to have a weekend where there were things happening which were not happening in Ontario, where we could buy things, everybody went to Buffalo. It was sort of a part of the provincial culture that you went across to the United States.

What has happened that has exacerbated it is, number one, the economy is in severe recession, which means that people are looking for their economic interests, and the advent of the GST, which means that a whole range of products that were not captured by the federal tax are now captured. I talk to people all the time and their first attitude is that there is 15% in tax that is added on right there without anything. All of those things, plus the differential on the price of gasoline, the differential on the price of cigarettes, the differential on the price of alcoholic beverages, are compounding the problem.

The problem is not new, but the severity of the problem is relatively new. We are never going to stop cross-border shopping. Right now, the major driver of cross-border shopping is the economic difference, but there are other things that we cannot address, and those are selectivity, variety of products, products that just are not available in Canada, where people will go across and buy it. Price is not the object; it is just that that is the product they want, and it is not available here.

People will be going across the border, and I do not think any government will be able to stop it, or would want to stop it, because it is a two-way street, but there is no question in my mind that it is being exacerbated by all of the things we have heard, whether it is Sunday shopping, taxes or the price of gas, all of the things that are going on. This is what is accentuating the problem and these are the problems we have to address.

The Chair: Might I suggest a form of process here, that perhaps we could go through some of the recommendations we find consensus on.

Mr Jamison: Mr Chairman, I think we have been presented by the opposition with 10 recommendations. I would like to think we would have had the ability to really consider each recommendation and see where in fact we are able to meld our position with yours.

The Chair: Are you asking for an adjournment?

Mr Jamison: I think it is important that we have time to do that. Time is of the essence on this question also, but when we have 10 recommendations in front of us that we have indicated we are willing to look at, I think we should be given time enough to really consider them in their full scope. That, I think, is a logical recommendation and one which would allow us to further evaluate these recommendations and try to give as much attention to them as possible. Like you were saying, it is the government side that will really be the side that will put forward the report.

I would move at this point that we adjourn until 4 o'clock and give us on the government side enough time to really, fully discuss internally within our side the potential of combining a number of the points put forward here today. I would like to thank the opposition for taking the time to put these things together. We may not agree on all the issues, but certainly I think you have worked hard putting them together.

The Chair: Is that the consensus of the committee, to adjourn till 4 o'clock?

Agreed to.

The committee recessed at 1131.

AFTERNOON SITTING

The committee resumed at 1609.

The Chair: I see a quorum.

Mr Kwinter: The clerk is distributing a revised version of our recommendations. There are a couple of grammatical additions in number 1 and number 7. Number 1, as I say, they are relatively minor, but they are there; and, number 7, we just added the word "labour." This is on recommendation 7.

Mr Cousens: Read the sentence so I have it.

Mr Kwinter: "The NDP government should recognize...." You have it there, so you would not know it. You do not have the old one.

The other thing we did is that I took to heart some of the comments about recommendation 10, and I have toned it down and modified it somewhat. You still may not be happy with it, but I think it is less pejorative, and I have done that.

The other thing that happens is that to recommendation 6 on the third page I have added one sentence, again, to address some of the concerns about the Foodland project. This would complement it, because Foodland Ontario deals with some produce and not others, and this would just complement it. That is what has been distributed.

Mr Christopherson: Have we formally started, Mr Chairman?

The Chair: Yes we have.

Mr Christopherson: Then I would suggest that what we do is just follow what we talked about earlier today, first ask the Conservative representative, through you, if they have any recommendations to table.

Mr Cousens: Sorry to say at the present time, Mr Chairman, that I do not have them with me. I know there are some considerations under way, but was there a deadline to have them in today? Is that what you were hoping to have?

Mr Christopherson: As I understand it, at the last meeting there was discussion of the NDP proposals by all parties, and then the Liberals came this morning with their recommendations. Unfortunately there were no Conservative representatives here this morning. We agreed to wait till this afternoon before we start to move on the report. It was, I think, everybody's intention that in the afternoon session of today, we would begin to actually put the report together. I guess we are a little bit on the horns of a dilemma here in terms of where you are at.

Mr Cousens: I do apologize if I am causing any inconvenience to the committee. I do not have the series of recommendations or proposals from our caucus at the present time. I would be prepared to proceed with the consideration of your report. I have just had a chance to glance at the recommendations that have been tabled by my friend the member for Wilson Heights, and I think there can be a great deal of service to the whole committee if they are considered, and if, after that time there are further points that we would want to bring forward, we would do so. I would defer at this point, in part anyway, at first blush to what Monte has brought forward as being good points, and if there are further ones, I will see that they are brought up at the next meeting.

Mr Christopherson: Okay, then the only amendment revision to that is that since we tabled first and went through ours, then the official opposition presented theirs and we went through those this morning, I would suggest, Mr Chair, that we return to our original document and walk through those and find out where we have got some common ground. In fact, maybe at that time, as we move through, if the Liberal members want to point out where we are close to proposals they have, we can maybe look at some kind of meshing at that time. Those things that clearly there is disagreement on, we will set aside for the time being, and then when we are finished our document, go back to the Liberal document, and anything that has not been discussed, we would review at that time with the same intent.

Mr Kwinter: Mr Chairman, this is a point of procedure. What I assume happened after the meeting this morning is that the proposals that were put forward by the official opposition were discussed and some were approved, moderately approved, totally rejected, things of that kind. It would be helpful to me to know which ones were in each category, because some of these things really overlap some of the recommendations that were made by the government, and if I knew that this was, for example, recommendation 1 and if I knew that was, in principle, acceptable, that could go to your number one recommendation, which is to participate in some task force. If there was agreement that there would be a lead minister, we could incorporate all of that into one recommendation.

It would certainly be helpful to me if I knew what the feeling was as to what areas were non-starters, and then, of course, we have the option of putting it into a minority report. But it would be helpful to me to know where there was general agreement, so we would be able to look at your recommendations in a different light, as we could then incorporate them.

Mr Cousens: I like the approach that has been tabled by Mr Kwinter. I think in that way we can go through your proposals. Have they been gone through in detail by the committee?

Mr Christopherson: If I can, Mr Chairman, my point answers your question. I was on a different committee when our document was tabled, but it is my understanding that a similar process took place with that document that took place this morning. So it just seems natural to me that we would return to the original document and I think, Monte, all the things you would like to see happen, as we get to number one of ours and we are talking about it, at that point you say, because you know your document better than anyone, "Hey, I think our number one has some room; what do you guys think?" Then we will take it from there and then just move through ours. When we are done ours, we will move immediately to yours and talk about any recommendations that have not been dealt with. I think that is fair.

Mr Kwinter: Okay.

The Chair: Would you like to proceed then?

Mr Kwinter: Thank you, Mr Chair. Recommendation 1: "That the province of Ontario participate with the federal government and the municipalities in a tri-level task force on cross-border shopping." I will let that stand.

The Chair: Should we just deal with that one the way it is? Does anybody have any problems with that?

Mr Cousens: Do you include the regional governments at that point? Is that what you mean by municipalities or do you want to say the regional municipalities and the local government? In some cases there are not regional municipalities. I mean, down in Brockville you do not have it.

Mr Christopherson: I think there is already a group coalition of municipalities that have offered themselves as representatives to participate on such a task force. That came out a couple of weeks back, when that request and suggestion was first made by municipalities.

If I can just push ahead a little, Mr Chair, item 2 is, "That individual ministries that have an interest in cross-border shopping continue to gather more data on the impact on their ministry and continue to work with local organizations in dealing with the issue." I would suggest that both of those and the recommendation 1 that came from the official opposition this morning could be meshed -- I think that is what we are looking at, just a general agreement -- and then we will ask our staff to pull this together based on our discussions. Then in terms of just one minister -- again, we are not really keen on a superminister -- but a minister be designated who would be the representative on the task force and who would be responsible for co-ordinating the other ministries that are impacted, both the gathering of information and the generating and presenting of recommendations from the various ministries.

In your last point, Monte, the new paragraph, you have caught us flat-footed, and I suspect we might have a little bit of difficulty with talking about specific goals other than to recognize the expediency that we want things to move in. If you could perhaps expand on that to raise our comfort level on it, I think we are open to it. What we do not want to do, obviously, is allow ourselves to be boxed into something that we are going to regret later.

Mr Kwinter: Mr Chairman, if I can just comment, there are two separate issues here. One is that a task force, which is going to consist of federal, provincial, municipal, regional, whatever it is -- there should be participation. We have no quarrel with that. If there is going to be a task force, we should be there.

The concern I have is that -- and I alluded to it this morning -- I would hate to see the province of Ontario, in a task force that had representation, say, from New Brunswick and Quebec and British Columbia and whoever else was in there, come back and say, "Well, this is what the task force decided and unfortunately it didn't address all of our concerns but we were part of the task force and it is a democracy and there had to be some kind of accommodation."

My concern and the reason for our first recommendation is that it is all well and good that we should participate in a task force. If that is going to do some good for us, that is great. But on the other hand, I think we should not be totally captured by that task force, so that if there are things that can be done in Ontario, for Ontario, that we do not have someone who is pursuing that. It may in fact be outside of what the task force is doing.

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I can tell you, this is something that is a very practical problem. When I was the Minister of Financial Institutions, I would go to ministerial meetings, and because the financial institutions were so prevalent and dominant in Ontario, everybody else used to tune out. They had no real interest in what was happening with financial institutions. When you talk about déjà vu, I remember meeting with Connie Osterman, who was the financial institutions minister in Alberta, and telling her that unless she took a look at her trust companies and some of the problems there, she was going to find herself in trouble. She said: "There are no problems. We don't have your kind of problems." If you have been following what happened a couple of years later, they had lots of problems. She had to resign as a result of it.

The point I am making is that Ontario is relatively unique in economic terms in Canada. It has 42% of all of the economic activity, and things that impact in Ontario do not necessarily impact on other provinces that may have a problem. I just want to make sure that is not the resolution that is going to be there, that whatever this task force does that is going to be our response to the problem.

Mr Christopherson: I think I can jump in and alleviate your concerns. I do not think it is in our best interests to allow ourselves to get hedged in that way either. If you want to throw in a clause -- and I just jotted down the beginning of a clause, "Blah, blah, blah, shall not prevent the Ontario government from pursuing independent actions" -- something that raises that comfort level, I do not think that is a problem at all.

Mr Sutherland: Mr Chair, maybe it is more of a question than trying to combine the Liberals' recommendation 1 with recommendation 2, more or less in terms of the co-ordinated approach of the ministries gathering more information, and just leave recommendation 1 in and of itself. That will allow for both to deal with those concerns.

Mr Kwinter: I have no problem with that.

Mr Christopherson: Whatever works. I think you hear our willingness to recognize your concern and to ensure that the concern is alleviated in the language and the format of the recommendations.

Mr B. Ward: For clarification, Mr Chairman, do we have consensus that we leave recommendation 1 alone and incorporate recommendation 2 with Monte's recommendation 1?

Mr Christopherson: Maybe at this point it would be a good time to just leave the staff with our general understanding.

Mr Phillips: Let them take a look at it.

Mr Christopherson: They are very good, I have found, at the nuances.

Mr B. Ward: The flavour of the discussions.

The Chair: I think there is a consensus around the merging of the two.

Mr Kwinter: Mr Chairman, I would agree that we need recommendation 1, but the government's recommendation 2 is really a laissez-faire kind of attitude, that those who have an interest continue to gather additional data and "to work with local organizations in dealing with the issue." What our recommendation 1 is saying is that we want one minister to be designated, we want him to take action, we want him to be proactive, to go out there and do it.

Mr Christopherson: If you want to walk away from today's meeting with an understanding that your recommendation 1 and our recommendation 2 will be merged in the draft that comes forward, we do not have a problem with that.

Mr Kwinter: Okay.

Mr Phillips: Someone once said, "We don't have to say it, they know what we are thinking." Who said that?

Mr Daigeler: I wonder who that was.

Mr Christopherson: You had better watch it, Gerry, because I think I can go back to some Hansards at this very committee where you said: "Dave, don't worry too much about the details. The staff are really good at taking care of that for us. It has to come back for our approval," etc, etc.

Mr Daigeler: When he speaks, it can be printed.

Mr Christopherson: "If you do not like that one, we have another one," right?

The Chair: Could I just ask at this point if all the committee members are happy with this recommendation 1 merging with the general recommendation from the government's paper? Is that agreed? Agreed.

Mr Christopherson: Moving to our next recommendation, the first one is, "That the Canadian interest rate differential with the United States be reduced to more traditional levels," and second, "That the Canadian dollar be allowed to decline to a more realistic level." Obviously the preamble there is just recommendations that we would make to the federal government that we feel would assist us.

Mr Kwinter: I have a few problems with the wording. Who is to say what was traditional is now relevant? What I would prefer is that the federal government be urged not to hold the interest rates up artificially. What may have been traditional in the past may no longer be relevant. It may be something we will never see again.

Notwithstanding the political rhetoric, I do not think governments have too much say as to what the world market decides the value of their dollar is. I have given this lecture so many times, but just very briefly, the reason the dollar is where it is is that the interest rates are where they are. Interest rates are where they are because the central bank has made a policy decision to keep them at those artificially high levels to try to dampen inflation. Once the interest rates are allowed to find their own level, then the dollar will find its own level, but that level may not be the traditional relationship with the United States, and that is the point I want to make.

Mr Christopherson: It is a good point and we accept it. I am not sure our friend from the third party does, but we do.

Mr Cousens: The intent of where both the government and the opposition want to go is coincident with the direction that I share. In other words, I agree, but the terminology used by the former minister -- and it is just a matter of interpretation and words. Interest rates, I feel, are at too high a level and need to be reduced. They really have to come down dramatically and I think it will stimulate the economy. The word "artificial" is open to interpretation, how real or artificial it is. Let's just sort of move towards more competitive interest rates within this country and allow us to become even more competitive outside this marketplace, so remove that "artificial."

I just do not like the wording, as much as anything. I like the direction you are taking, but change the intent of how you are saying it. If it is going into a report, I could not support the way you have put it here.

Mr Kwinter: We do not have the word "artificial." The point is that the central bank has the authority to set its rate of interest, the rate that it charges to the banks. That, in turn, reflects on what the interest rates are generally. They use that as a matter of government policy to either have tight money or loose money. At the present time, they have had a policy of having tight money because they have felt that the number one economic concern of this country is inflation.

Notwithstanding that the United States feels differently and there is a five-point spread, that is what they are doing. That is a matter of government policy. If the government decided, for whatever reason, that it wanted to subsidize interest rates and it wanted to drive them down to 5% and pay people a subsidized premium, it could do that as well. So it is in fact using those interest rates as a matter of economic policy. Although the term "artificial" may grate, what I am saying is that it is not allowed to find its own level; it is being stimulated by policy.

Mr Cousens: Having said that, I agree. I think it is an excellent recommendation as long as you understand that "traditional" -- I mean, what should interest rates be? Did the committee ever come up with an idea of what they should be?

Mr Sutherland: Could I just clarify? The focus of this recommendation was not on where Canadian interest rates by themselves should be; it is in terms of more traditional differential levels between ours and the American rates. We heard evidence in the pre-budget consultation that that is where there has been a change. We know that Canadian interest rates have come down significantly, really, over the last few months, but we still have not seen any impact on the dollar, because of that differential. Again, "traditional" may not be the appropriate word even for describing the differential, but it is key. The focus of this recommendation is the differential between ours and the American rates, rather than just what our rates are.

Mr Cousens: I concur with that.

The Chair: I might also interject that the dollar is artificially kept high by the feds buying Canadian dollars in the international market, and that would have an impact on what you are saying.

Mr Cousens: You have agreement. It is how it is worded, in such a way that I do not offend my own other conscience.

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Mr Kwinter: Do you have a sense of what we are talking about?

Ms Anderson: I think so.

The Chair: Is it fair for me to say at this point that there is a consensus around the idea and that we can revisit this when the draft comes back? Okay.

Ms M. Ward: Another point on that: I think what we are really looking at too is not just the difference between Canadian and American interest rates but the real interests which you have to take into account, because that is what you are looking at, what your interest rate is and what your inflation is. That is often what you see mentioned, the difference between the inflation rate in the United States and their interest rate, and what the situation is in Canada. That is just an additional point I thought we should consider.

The Chair: Is there any further debate on that point, anything else we would like to add? No? Can we then move on to the next point.

Mr Christopherson: I think so. Okay, number two, any problem with the way it is worded?

The Chair: "Border Controls," is that where we are?

Mr Christopherson: "That the Canadian dollar be allowed to decline to a more realistic level."

Mr Cousens: What do you mean by realistic? Is there any sense as to what that is?

Mr Sutherland: Actually, if I may, we also heard in our pre-budget consultations -- I believe it was Alex Thomson from the Royal Bank and a few others──some said as low as 81 or 82, some said maybe even a bit higher, 83, but certainly at least three to four cents lower, minimum, from where it is now. Again, that wording may need to be adjusted.

Mr Kwinter: There are two sort of forces dealing with what the dollar rate should be. Manufacturers, exporters look at it and they say, "If I had the dollar down to 78 cents or 79 cents, I could really be competitive." I remember when the dollar was going up. You have to remember that when the free trade agreement started, it was at 72. When I had people appear before my committee, they said if it ever got to 80 or 81, we would be finished. They thought that was the top level of tolerance where they could be competitive, and now of course it is around 87.

What is happening is that that figure is a direct result of the interest rates. What the government is controlling are the interest rates. It is not controlling the level of the dollar. The market is controlling the level of the dollar. We do not have enough money in Canada to support our dollar to the point where we can artificially maintain it anywhere. What is happening is that if there is a 5% spread between what the US banks are paying and what Canadian banks are paying, people offshore are buying Canadian dollars because they are getting a 5% greater return on their investment. That, in turn, is making the dollar valuable, and that is what is putting the price up. If you reduce the interest rates, it becomes less attractive. There is no way the central government can say, "We are going to take our dollar to 71 cents."

The Chair: I think Mr Cousens was next.

Mr Cousens: I like what Monte just said, so I defer.

Mr Sutherland: If I may, then maybe what we need to do is take this recommendation 2 and somewhat add it on, as that is the goal of some of the interest rate differential in terms of that.

Mr Kwinter: What I would suggest is we combine 1 and 2 and talk about dealing with the interest rates, which in effect will give a positive impact on the value of the dollar. As I say, I do not think it is a practical situation to tell anybody, "You've got to change the value of the dollar."

Mr Sutherland: Sure, but as I say, the intent of the interest rates was to have some impact on the dollar, so tying them together seems like a good idea.

Mr B. Ward: I may be nitpicking, and it probably would not happen, but if the federal government listened to this committee's recommendations in its wisdom and did allow the interest rates to be lowered, I would hate for the federal government, through the Bank of Canada, to artificially keep the dollar high. If interest rates go down, the Canadian dollar should go down, but sometimes they intercede.

Mr Kwinter: Let me tell you something that is really quite interesting. Interest rates have been falling quite dramatically and the dollar is going up. The reason -- that is the point that was made; I cannot remember whether it was made by Kimble or somebody -- why it is still going up is the differential that they can make that spread. So it does not matter if the interest rates go down to 8% --

Mr B. Ward: The point I was trying to make was I would not want to see the federal government intercede to artificially keep the dollar high. As long as the market forces are there, it will go down.

Mr Kwinter: They do not have enough money to do that, but right now interest rates are coming down quite dramatically. They are down just at the 10% level and slightly below that. The dollar has never been higher in modern times; it is up around 87 cents.

Mr Christopherson: Can I suggest that we let staff take a crack at what they have heard here? I realize we have not reached a consensus yet and in some things it is best to sometimes let someone take stab at it and then we will look at it in the draft and recognize that this is something we may ultimately not agree on, but let them take a crack at it and then both of us will review what is presented.

Mr Cousens: Agreed.

Mr Christopherson: I will read quickly 1 through 5 just to enter it into Hansard.

"1. That the federal government collect the provincial sales tax at all border crossings.

"2. That if unwilling to collect the PST, then Ontario revenue officials be permitted to review remitted customs forms for the purpose of collecting PST, similar to New York, Pennsylvania and California.

"3. That fast-track lanes should be established solely for American tourists and not for Canadians shoppers returning to Canada.

"4. That more customs staff be hired for greater enforcement.

"5. That the government work with border states to collect our PST on state-exempt products coming into Ontario."

Mr Cousens: Was there a gathering of a consensus on that? I apologize that I have not had the pleasure of being here for all your committee hearings.

Mr Christopherson: It is certainly our loss.

Mr Cousens: I can believe that. I really can.

Mr Christopherson: Then I have got some swamp land for you.

Mr Cousens: I could not afford it with the way the taxes are.

Is there any chance that this committee could support that the federal government collect the provincial sales tax right across the province? Is this the wrong time to bring that kind of suggestion up? What happens is that we need to develop some new habits in tax collection, the whole duplication all over this country.

Mr Sutherland: Can I get a clarification of what Mr Cousens just said? He said "the federal government collect the provincial sales tax right across the province," not just at border crossings.

Mr Cousens: That is right.

Mr Sutherland: Is that what you were saying?

Mr Cousens: That is just what I said. What is the answer to that? Does the committee have a consensus on that one? Because then that would really mean you just have one collection agency right across the whole province and reduce the cost of collecting it.

Mr Daigeler: The previous standing committee on finance and economic affairs had in fact a recommendation somewhat to that effect. So it would not be a totally new idea to put that forward, not that the committee said it should be done, but that a serious study should be taking a look at the possibilities.

Mr Christopherson: I do not know that we would be really comfortable with that at this stage in terms of the context of this report. I think if the opposition parties want to make that recommendation in terms of tax collection and revenue policies, then there is a time and a place for it, but I do not think we would be too comfortable with that in this report.

Mr Sutherland: That might be one issue to be examined under point 3 of the taxation issues that we put forward, where we call upon another task force of all levels of government "to examine the issue of duplication of services and division of responsibilities." That might be one of the items they could examine at that point.

Mr Cousens: Maybe there could just be some reference that there be a future study into that as something that opens it up.

The Chair: Could I perhaps take this one at a time? Is there any debate on the first part of "Border Controls" "That the federal government collect the provincial sales tax at all border crossings"?

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Mr Cousens: I would just have to say that there are an awful lot of border crossings. It is a good step forward and I support it, but I also think that it really has to be expanded far beyond that because of all the problems we are having in this country with the duplication of tax collection mechanisms. So I support it, it is a step in the right direction, but I put the qualifier on it and say, "Come on, guys and gals across the province of Ontario, we are digging holes for ourselves because of all the tax collectors we're paying."

Mr B. Ward: Is it possible to merge recommendation 4 of the Liberals into that item 1 under border controls? It basically says the same thing.

The Chair: Are you asking me if it is okay? The committee has to make that decision.

Mr B. Ward: Okay. It is the same.

Mr Christopherson: If I can, just so that we are clear at least on where we are coming from, to Don, I think we are going to have a disagreement on that one and if you feel that needs to go to the next step, then I think you need to look at that individually.

Mr Cousens: Your intent of what you are aiming for here, I am with you. There are other ways of starting that battle.

Mr Christopherson: I am sure we will deal with it.

The Chair: Can I get a consensus that 4 and what is here are the same? Okay? Thank you.

The second part: "That if unwilling to collect the PST, then Ontario revenue officials be permitted to review remitted customs forms for the purpose of collecting PST, similar to New York, Pennsylvania and California." Do I have a consensus on that, or further discussion?

Mr Kwinter: I would be a little more comfortable with that if I had some indication from our research staff whether or not this would in fact be feasible under the free trade agreement; whether it would constitute a non-tariff barrier or whether or not there would be reciprocity. I do not think these things can be done unilaterally.

Mr Sutherland: If you remember, after John Winter was here, he sent us another article that he had cut out which indicated that that was going on in those three states. That is why that recommendation has been put forward. So I can hardly see how they could do that type of thing in New York, Pennsylvania and California and then see how it would violate the free trade agreement.

Mr Kwinter: What happens is that lots of practices are carried out, and as long as there is not a concern or as long as it does not get any profile, they just happen. But the minute it becomes a cause célèbre, suddenly someone launches an action. Before you know it, you are in the tribunal.

I would just feel a little more comfortable if we had someone just take a look at it and get an opinion as to whether or not this in fact would create any problems.

Mr Christopherson: Without taking a definitive stand on the substantive issue, let's ask the researchers to give us that information and then we will take a look at it.

The Chair: Okay. "Border Controls" number 3, "That fast-track lanes should be established solely for American tourists and not for Canadian shoppers returning to Canada."

Mr Kwinter: I have a problem dealing with the politics of it. I think for a government to impose these restrictions on its own citizens without imposing them on other people is going to be a political problem. I think people who will be coming back to Ontario will be saying, "Why are these Americans getting preferential treatment when I live here and I don't get this sort of thing?" without there being some kind of reciprocity going the other way. Again, it may present some problems. I do not know exactly, but it may create more problems than it solves.

Mr Cousens: I share the sentiments that have just been expressed by Mr Kwinter and I guess it depends on the amount of delinquency that we continue to experience in cross-border shopping. If people are continuing to have large numbers of merchandise that are coming through and which we are not collecting our sales tax on, then we will have to continue to stop just every car and collect it. I think that is really what it amounts to. Because if it turns out that everybody is cheating, then I would make sure that we start collecting as it comes across. As it improves, I think that you statistically are in a position to know that every fifth car you are going to have enough there to remind them.

It is the same as when you have speed checks on Highway 401. It takes a while for people to settle in and realize you are going to get a ticket every time you speed between Yonge Street and Highway 427, and it brought the traffic speeds down along in that section when the provincial police monitored it more closely.

Therefore, when you come in with a policy statement that could have a continuing long-term segregation of Canadians from Americans, I think it poses a set of questions as to our own freedoms as citizens in coming back and forth across the border. I would say that what we really want to temper the motion with is a sense that as long as there is going to be a continuation of abuse of the laws of our country as people are coming back, then there will be a closer scrutiny of all people coming through without a separation of fast- and slow-tracking.

Mr Sutherland: A couple of points here: First of all, this recommendation is to deal with the PACE pilot project, which is the one in British Columbia where they are fast-tracking Canadians coming back across the border where you can just pull up, fill out the form yourself, pay whatever duty, put it in the envelope and go on your merry way. We certainly did not agree that that was a way of dealing with cross-border shopping. As a matter of fact, we just thought that was going to encourage more cross-border shopping. So it is kind of a response to that.

I guess the other thing that relates to this specific recommendation is, we have seen where US customs now has its auto pass and it is offering that to Canadian citizens going through, I believe, at the Niagara Falls border or Fort Erie, one of them now, and maybe if not this specific recommendation, then Canada Customs should be looking at something like an auto pass for American residents coming through as well, because that is a way of fast-tracking.

The other related issue to the whole issue of cross-border shopping is the fact that the number of American tourists has declined. You can debate what all the reasons are, but there certainly is a general feeling that they simply cannot get across the border because of the long lineups of Canadian tourists coming back. So that is really what we are trying to deal with, those three issues, with this recommendation.

Mr Hansen: I know what Don is talking about there, but the fast-track lane should be established solely for American tourists, not for Canadian shoppers. Those are people who have something to declare. I think the wording just needs to be changed a little bit, because if I go over to school in the United States, which I did for years, I do not want to be held up by people who have to do declarations. I have gone there for one purpose, to go over to school, visit my aunt over there, whatever the case may be.

We are talking about non-shoppers. What is written in here is a Canadian shopper and they are just going to slow up the traffic coming back in if you have all these shoppers making declarations in this express lane. So I think it is mainly the wording here and I think you would go along with that, Don, that maybe we just change the wording a little bit there to make it look more like it is a Canadian shopper who has something to declare.

Mr Cousens: There is a concept involved and I like the balance that Mr Hansen is coming in with, but you see, if we have more customs staff hired -- and we have got to have greater enforcement, and I have a belief that once we have stricter enforcement, number 3 is not going to be as required as it is right now. I think we need a lot more enforcement right now, but that is just one guy's view right now and I hope it diminishes to an extent that we can go back to traditional levels.

Mr Hansen: I think more enforcement will slow down the process also, so you are going to wind up, if you do not have these fast-track lanes -- but I can tell you, I can remember going to school. You brought something back worth $2 at that time, you did not dare bring it back in case they would impound the car. As it is now, there are so many going across, everybody says: "They're not going to do anything to me. I'll go through the express lane that I haven't got anything. If I get caught, I'll just pay $10 or $15 or lose the bottle of whisky." I think the enforcement is a very important part of it on these express lanes, so that if you get caught in there, it might cost you a lot more than just paying the duty on a bottle of whisky or a carton of cigarettes.

Mr Christopherson: Are we maybe comfortable at the point where maybe we would ask staff if they want to recommend a word change? The intent, obviously, when we do these, is that staff is asked to try to find a common ground in terms of the language and we will take a political stand based on that at our next meeting. Okay?

Mr B. Ward: I think the intent was that we should be encouraging American tourists to come as quickly as possible.

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Mr Hansen: Could we use the word "visitors"? That would cover "Canadian", because that could be a visitor in the United States returning back to Canada. It could be an American tourist or a Japanese tourist, or visitor.

The Chair: Are we comfortable with that section?

"4. That more customs staff be hired for greater enforcement." Can we be happy with that?

"5. That the government work with border states to collect our PST on state-exempt products coming into Ontario."

Mr Kwinter: Can I just get clarification of exactly what is being addressed with that?

Mr Hansen: I gave the example of what was happening at the border as it is right now, that if you go over and order a pool in the States, they will bring it back over here to Ontario. As it is now, they take the state tax off, they do not add 8% on over there. There is no duty. You only pay the 7% GST and the duty on the pool, which might be 8.5%. They tell you clearly that there is no Ontario sales tax coming in. These products are coming in exempt, but if it was a rule that anything sold in New York state, that dealer when he is bringing it to the border would have to collect that money for the Ontario government at the point of sale --

Mr Kwinter: The reason I am querying it is, why is it any different than recommendation 1?

The Chair: Could I help there a little? Recommendation 1 is collecting sales tax at the border. If I understand Mr Hansen's explanation, you are asking the vendor in New York, say, to collect the Ontario sales tax and remit that and become a tax collector for the province of Ontario.

Mr Hansen: We are looking at a whole bunch of areas here. If we can collect at this point until we get an agreement with the federal government, it is one step forward. Rather than taking one big giant step, let's take some little steps to get to this point. Then maybe we can explain to the federal government: "Look, we already are doing this. It would make it a lot simpler if the collection could be done right at the border all at once."

Mr Kwinter: My question is that if the federal government decided tomorrow that it would in fact collect the provincial sales tax, there would be no reason to have that particular provision.

Mr Hansen: That is correct.

Mr Kwinter: That is where I was a little confused. I thought that if you get both of these recommendations, you do not need both. I do not know whether you want to do it because it immediately sends a signal out you do not expect the federal government to collect the tax, but what I am saying is that there should be some mention in there that if the federal tax is not being collected, then at the very least this should be done.

Mr Hansen: I think the staff should change the sentence at the beginning, rework it there to make an explanation that if it is not collected at the border then possibly this is another area that can be done.

Mr Christopherson: I am seeing an indication from staff that they are comfortable with what we have said.

Mr B. Ward: Ron has been talking about that pool since we started the meeting.

Mr Christopherson: All his neighbours have one.

The next page takes us to our next subject, under the heading of "Retailing and Marketing." I will read it for the record:

"1. That Ontario retailers become more aggressive in their marketing through the use of such techniques as discount cards for American shoppers, more selective advertising, and putting American prices in ads.

"2. The Ontario Milk Marketing Board (OMMB), grocery distributors, retailers, gas companies and their dealers engage in a joint marketing strategy involving coupon exchanges for milk and gasoline.

"3. That retailers increase staff training and product knowledge and service."

I think now might be an ample opportunity, Monte, for you to jump in with some of the recommendations you made about the Ontario seal, and see if we cannot mesh this.

Mr Kwinter: In this whole retailing and marketing area we really cover some of the same things and expand a bit more, and that really has to do with recommendations 6, 7, and 8, our three recommendations that cover the same areas. When we talk about the service culture, we deal with it in your recommendation 3, recommendation 6 is covered in some way in recommendation 2, and our recommendation 8 deals with recommendation 1, so if we could just incorporate the good parts of ours and get rid of the bad parts of yours, or vice versa --

Interjections.

Mr Kwinter: I said "or vice versa."

Mr Cousens: Look at this one here in recommendation 6 that the member for Wilson Heights brought in, in paragraph 2, "as announced by the Liberals." I mean, gracious sakes. The fact is that they still have not been done and they are still not all in place, but we have a high goal and expectation. It is still a good recommendation, except for those few words.

Mr Christopherson: We accept the fact that the opening gambits are entitled to be as partisan as hell, as the closing positions of everyone can be as partisan as everyone likes, but the middle ground, when the staff come back, is going to be as neutral as possible and that will be the formal report.

Mr Cousens: I just let you know that I am still awake.

Mr Christopherson: On behalf of the government, we would be comfortable to let the staff take a run at that meshing, similar to what Monte has outlined, and see what we come up with in the draft.

Mr Cousens: Could I add one recommendation? Whether or not it fits in here, there is a tremendously large misunderstanding among American visitors to our country who do not realize that the GST is a recoverable tax when they cross back into the States. Is this the place where we could do a little bit of promotion on the positive side for visitors to our country on going back, because I do not think we are doing it all that well right now? They are discouraged from coming across the border because of the value of the dollar and because of the lineups and a number of other reasons. There really have got to be two things. One is a better explanation to US shoppers coming into the country that they can recover the GST portion of the tax. That would be one recommendation. The second one I think has to be done is the extent to which we are advertising and promoting in the United States to get shoppers to come up here. Is that a part of the equation that this committee is looking at or are we only or exclusively worried about Canadians shopping in the US?

Mr Hansen: If you read "Retailing and Marketing," you have to understand we have been talking about this for about two months now, so we have sort of condensed it, "That Ontario retailers become more aggressive in their marketing" and then we got a few examples, but we already went over the rebates at the border, the Ontario sales tax and the 7%, so we sort of incorporated that right in there.

Mr Cousens: That is included.

Mr Hansen: Being here for a long period of time, and walking in one day, I understand the problems. We all know this already, in a sense, but we just did not lay it all out.

Mr Cousens: That is included in the thinking --

Mr Hansen: Yes, the marketing aspect of it.

The Chair: It does raise an interesting point, though, about making sure that when the report is written people who are reading it for the first time will understand that.

Mr Duignan: I quite like Mr Cousens's suggestion, especially if we do it the same way it is done in some of the European Community countries, where actually the retailers do an aggressive campaign around the whole idea to visitors that they can get their tax back when they leave the points of entry, both at airports and at border crossings. They have a really aggressive campaign, and hopefully this committee has taken a look at that.

Mr Cousens: I appreciate that. The other half of the equation, though, is the extent to which we are trying to attract American visitors to this country. Is that part of your discussions or presentation at all? It is not as explicit in the three recommendations here as I would maybe have liked to have seen it.

Mr Sutherland: Going back to the border crossings, I think that was one area where we had mentioned about the fast-track lanes in terms of helping and abetting. If need be, if we want to list a few options under "Retailing and Marketing" to give people some advice, we tried doing that in ours in terms of just picking up on some of the things we heard, such as the discount cards. I think again of Goodyear or Goodrich down in St Catharines which now advertises the American price for tires along with its price when it is putting ads in the local paper, so people know what the true difference is. There are those types of things. We are hoping that people will be able to pick up on what the different techniques are if they have some of the background information attached to the report.

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Mr Hansen: I think one thing we are looking at here is actually how we could stop the stream of shopping over the border, but we do have the problem there and try to realize some of the other problems that we have at present and try to correct a few of them as we are going along with this report. This fast lane would help the tourist industry here in Ontario also. We are looking at some other things other than just people going over the river and shopping, but what are the complications at the borders?

Mr Cousens: I guess I am raising a point that has been a hobbyhorse for me for some time. It has to do with the attractiveness of the Ontario marketplace to outsiders, and our environment, our history, our way of life, our culture. There are so many things that make people want to come to Ontario. During the regime of the last several years, the advertising has not been all that effective in increasing the number of American tourists. In fact, there has been a decline over the last several years for a combination of reasons, the cost of the dollar and whatever reasons.

To me, it could be one way from within this committee, to go back to the province, to the Ministry of Tourism and Recreation to increase -- I do not want to say the money, but to make sure that they are giving a good focus to American tourists on why they should be coming into Ontario and what the advantages are so that we have got an effective program to entice or to encourage or to trap, to bring across the border people with money and something to do within our economy. I just think this could well be a place to do it. We are talking about retailers doing advertising, but the province also has to have an effective mechanism to make it happen.

Mr Duignan: Again, I have to agree with Mr Cousens. The problem of cross-border shopping is two-way. We have to stop the flow going to the States as well as encouraging tourists to come here. I was recently in Europe and some countries aggressively market the whole idea of getting the tax back to attract tourists to their countries. It is done very simply. What happens is that when you buy something in a store, you take your receipt and go to the local service desk. They fill out a form and when you leave that country, you put it in a slot and the revenue people of that particular country mail you the tax back in the form of a cheque. Or in some cases you actually get it back on the spot, at the border crossings. I think the committee should seriously take a look at that and make some recommendations.

Mr Christopherson: I think again, as Mr Hansen has pointed out, it is unfortunate that the two previous speakers have not been here to listen to the development of the discussions. When we get to page 5, there is a comprehensive recommendation there that deals with what is under the heading of "Education."

Mr Cousens: We do not go to page 5.

Mr Christopherson: In ours.

Mr Kwinter: Page 3.

Mr Christopherson: Sorry. Mine is a copy that has more of the explanatory notes on it for members of the committee. I understand in the pages that you have it is on page 3.

Interjection: It gives you the bare facts.

Mr Christopherson: That is right, just the facts. It is like Dragnet. Anyway, that should cover the concerns both the previous speakers have.

Interjections.

Mr Christopherson: Mr Chair, I believe recommendation 2 is in order.

Mr Kwinter: Where are we now?

Mr Christopherson: Recommendation 2 under "Retailing and Marketing."

The Chair: The Ontario Milk Marketing Board?

Mr Christopherson: Yes.

The Chair: Does anybody have any comments?

Mr Kwinter: Other than it should be incorporated with our recommendation 6.

The Chair: Okay, 6, 7, 8.

Mr Kwinter: Recommendation 6 really addresses number 2, recommendation 7 addresses number 3 and recommendation 8 addresses number 1 -- those three areas.

Mr Sutherland: If I can just add, on number 2, anyone looking at that should not look at it as limiting by only mentioning the milk marketing board. I think there is a lot of option there for other of the supply management areas to become involved in that type of marketing scheme.

Interjection: Why don't we just take out "Ontario Milk" and leave "marketing boards?"

Interjection: Okay, sure.

Mr Phillips: What about the brewers? I would like to see brewers included.

Interjection: Beer in corner stores.

Interjection: It worked once, you know.

Mr Phillips: Where did Floyd get his shoes resoled?

The Chair: I have a place in my riding, and he really is very good. Just throw them in a bag and I will get them done.

Mr Cousens: On 3, one of the things is that probably for every good deed that is done, only two or three people hear about it. For every bad deed that is done, about 10 people find out about it.

Mr Christopherson: Yes, we found that out.

Mr Cousens: Yes, we did in 1985 too.

As it stands now, what happens is that you have some retailers out there who are just insensitive to the needs of visitors to their community and their shops and so on. I do not how you do it. The Better Business Bureau is probably one of the better ways in which we, as a community, police ourselves. Probably the best policeman is when people stop shopping at a store because the stores do not do it.

To me, when you start talking about point 3 you are talking about chambers of commerce and ways in which we, as a government, are working with the community so they can help themselves and build those marketing things.

It becomes rather an empty statement. It is almost like the preacher in church saying to the empty pews that they should be filled. What you want to find is a way of getting a mechanism so those storekeepers who are not really being responsive and doing their job are really responding to the opportunities that are on their doorstep.

The fact of the matter is that a tremendous amount of stuff is done through the Ministry of Industry, Trade and Technology to give them data and information on the types of people who are coming across and the types of people in their communities -- learning workshops, marketing programs. It is a matter now of not just saying "the retailers increase...." It can well involve all levels, where the government is working with the community and through the boards of trade and chambers of commerce to make that circle complete.

To me it would embellish that fact with a little bit more meaningful meat if it had some of those tangents on it to make that happen, rather than just a bold statement. We are never going to get the dumb retailers. They will just be out of business and they will have missed it. The opportunists and entrepreneurs will find ways of finding that.

Mr Sutherland: I think Mr Cousens's direction in terms of the support MITT gives is fine. We had MITT in and we know the support it is in terms of marketing and other areas. Recommendation 3 was specific -- staff training, development, product knowledge -- because several of the surveys done in the cross-border communities highlighted that service was one of the areas -- obviously not the major one or the only one, but it seemed to be a consistent area coming up -- where there was some concern.

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We also had a couple of presentations here where we know of areas where they do very good training. The shoe retailers' association indicated that it has a specific program designed for many of its retailers in terms of product knowledge and service and training, but there were other areas that seemed to be severely lacking. Some of us, from our own personal experience, thought that staff training in some cases was poor. That is why we have focused specifically on retailers. That is not to take away from the comments you made about MITT, but that was one specific point that was highlighted.

Mr Kwinter: On that point, the difference between our recommendation 7 and your recommendation 3 under "Retailing and Marketing" is that your recommendation 3 calls for retailers to increase their staff training on product knowledge and service. What we are saying is that this should be part of the skills development program and that the government should take the role, realizing that instead of training there are other areas of skills training. Most people think it is teaching someone to operate a computer or teaching someone to operate a machine tool, but it is just as valid to teach someone to provide a service. That it should not be sloughed off as being, "Well, that's something that can be done by non-professionals," or something that can be done just on their own. That is a valid training program that generates business revenue and economic development.

Mr Christopherson: Your point is well taken. We accept the concept you are putting forward.

The Chair: "Sourcing and Distribution."

Mr Christopherson: Under that heading, number 1, "That a more comprehensive analysis of wholesaling and distribution network be undertaken to examine the reasons for the extra cost and alternatives," and number 2, "That the committee does not support increased foreign sourcing for products manufactured in Canada." I believe this may fit nicely with the Liberals' recommendation 9.

Mr Kwinter: Mr Chairman, I have no problem with number 1. Number 2 is a weird statement. I am sure it was not intended to be, but if you read it, it really says we do not support foreign sourcing for products manufactured in Canada, which means we should not be buying Canadian products in foreign countries. That is not obviously what you are saying. What you are really saying is that we should not be buying a foreign product if that same product or a comparable product is made in Canada. I assume that is what that is meant to say. It is not what it says, but that is what it is meant to say. Is that correct?

Mr Christopherson: The correction stands, yes. You are right.

Mr Kwinter: The point then is that we get to the basic philosophical problem of cross-border shopping. Today the Minister of Revenue stood up and said, "We are not going to in any way prevent people from cross-border shopping." We are in a competitive situation. We have to try to make ourselves more competitive. In the final analysis and in the ultimate resolution, if we are not competitive there is nothing we can do about it. You are not going to stop people from going across that border and buying.

By the same token, if a product is made in Canada and it costs 10 times what it does to make it anywhere else, it is very difficult to say we are not going to encourage people to buy it. What you really have to do, and it is coming up a little later on, is this whole educational program, that if it can be bought in Canada and if it is competitive, then buy Canadian. I think you will have a tough, tough time trying to tell someone, "Look, you're going to pay six times what it's worth, but it's made here, so buy it." They are going to look at you and laugh and they are going to say: "Thanks, but no thanks. I'm not going to buy it."

What you have to do of course is the whole restructuring of our economy. We are going to have to get out of that business where we are not competitive. And what we have to do is where we are competitive and where hopefully we will be competitive, we have to convince people they should be buying it here. I think there is a problem if you think you are going to be able to convince people to pay more for a product when they can buy it somewhere else just by a sort of program of saying, "The job you save may be your own" or whatever it is. It is something that sounds wonderful when you are discussing it in a committee, but I can tell you, the guy who is sitting there is saying: "Screw you, I'm going over and I'm going to save some money and I'll worry about the other thing. I'm paying my taxes. You guys look after that. But if I can save the money, I'm going to save the money, because I've got lots of problems. I've got lots of bills to pay and I'm not just going to pay money just for the sake of paying it." That is a concern that I have.

Mr Duignan: I happened to be down in the southern part of the United States last week, and they have a campaign down there to buy made-in-USA products. There sometimes is quite a big differential between what they produce and what the foreign product was on that particular shelf. It was working very effectively down there as well. There were a number of slogans such as "Keep Your Jobs in the US," etc. I may not agree with how they worded some of them, but it is working and it is working very effectively down there.

Mr Kwinter: If I could just respond to that, I have a place in the States that I spend a bit of time in and I have seen those campaigns. With all due respect, those campaigns are waged by the unions, and rightfully so. They are trying to save their jobs. But I can tell you, when you go into shopping malls, people look at the price tag, they look at the quality, and if it is made in Yugoslavia or made in Taiwan or wherever it is made, if that is the product they want to buy, that is what they are going to buy. Without question, the hard-core unionists and the guys who are out there may say, "Look, I'm prepared to pay extra to save my job." But when you consider that the people who belong to unions represent about 30% of the population, the other 70%, and many of the ones even in that 30%, are going to shop their economic interests, all things being equal. I can tell you that my wife happens to be that kind of person. All things being equal, she is even prepared to pay a little premium if it is Canadian. She may be dumb but she is not stupid. She is not going to go somewhere and see a product that has exactly the same value, the same quality, and say, "I'm going to pay twice what this is, just because it is made in Canada." They are prepared to pay a premium, but you have to decide where that differential stops.

Ms M. Ward: I just wanted to comment on maybe where this recommendation came from, some of the background. I believe we heard one of the presenters talking about grocery products; I think it was Pepsi or Coke. He reported that the product could be bought much cheaper, the retail price was much lower in the States than the wholesale price was here in Canada. I think this might have been Mr Winter; I do not recall for sure. He said he did not know where in the distribution chain this happened, and there was discussion at that point about allowing retailers to go and buy in the States at the wholesale level to get the cheaper costs. I think that may be the source of that recommendation, that the retailers could go and buy the very same product, something like Coke or Pepsi, a lot more cheaply over there wholesale. Part of the difference, I assume, is in the distribution, maybe in labelling where we have the bilingual requirements.

The Chair: I think the retailers are saying that they wanted to use American distribution networks and that this was directed to say that --

Ms M. Ward: That is the point that I wanted to make.

Mr Kwinter: Mr Chairman, we have a situation that is quite interesting. The wife of one of our members has a retail store. She finds that she can buy cheaper at the Price Club than she can from her wholesaler, and that is in Ontario. It has got to the point where they set aside one day for retailers. The retailers come in, buy the product and then go out and sell it at a markup. They sell it at a price higher than what any individual can who is a member of the Price Club, by just going into it. Of course, what they trade on is the convenience of not having to go to the Price Club, which may be four, five, seven miles away. Again it gets back to the point where, if you are in business and you want to make a profit, you are going to buy where you can buy the cheapest and sell at the highest rate of return. If that means you are going to go across the border, then you are going to do it. You are not going to go out of business and salute the flag as you sink into this mire of bankruptcy and say, "I may have gone down, but boy, I bought Canadian all the way." It is just not going to happen. They are going to go out, and if need be, they are going to buy where they can buy it.

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I have no problem at all with a campaign that highlights the fact that when you buy in the States you are doing yourself, you are doing your neighbour, you are doing the economy out of this economic thing and to try and encourage people to do it. Where I do have a problem is where there is an overt intent to almost prevent people from buying things just because they are cheaper and to say, "We don't want you to buy anything that's cheaper if it isn't made in Canada." That is where I have the problem.

Mr Duignan: Very briefly on that point, my whole point on the whole issue is that if people had a choice, and knew they had a choice because the made-in-America article was very clearly identified with a tag that said on it, "Made in the US," then the people have a choice whether to buy it or not buy it. I think that is an idea we could look at, that the stuff made in Canada is clearly identified as made in Canada with a tag on it.

Mr Christopherson: A couple of those points were covered under the recommendations. Certainly the discussion is not wasted or lost, because the explanations given by the former minister, who has a great deal of experience here, is respected and in many cases educational for new members of the Legislature.

However, if I could bring us back to the matter before us, on item 2 we could have the wording changed to correct the misunderstanding based on the way it is worded and a commitment to our colleagues across the way that we will review the principle based on what has been suggested here and see whether we want to remain firm or amend this in some fashion.

Mr Kwinter: If I could, I would like to suggest that should really be in conjunction with the last item, under "Education," item 1, because it really is part and parcel of the whole thing.

Mr Christopherson: We will take a look at that.

The Chair: "Taxation" is next.

Mr Christopherson: "1. That the Fair Tax Commission be encouraged to speed up its examination of the property tax base to fund municipal services.

"2. That the provincial government continue discussions with the municipalities over issues of responsibility and funding of services.

"3. That a task force between all three levels of government be established to examine the issue of duplication of services and division of responsibilities with the purpose of making all levels of government more efficient."

Mr Sutherland: I need to make one clarification on item 1, "examination of the property tax base to fund municipal services." Maybe that should say "the property tax base to fund certain services," in terms of some of the discussions that have been going on around that area.

Mr Kwinter: I have no problem with any of those three recommendations, other than I would like to see our new recommendation 10 incorporated in them as well.

Mr Christopherson: Yes, we have no problem with that.

Mr Kwinter: What I am saying is that you cannot point your finger at all these other guys and say, "But we're okay." I am just saying that you have got to incorporate your own obligations and responsibilities as being part of the problem.

Mr Christopherson: I will tell you what. We appreciate what you have said and we appreciate the fact that you revised a rather harsh first draft. In fairness, we still have some difficulty with this kind of wording, but we will submit to the staff, if you will, a counterproposal and then let you comment back on that in the draft. If the staff would be good enough to remind me in my office that we made that commitment, we will get it to you by the first of the week.

Mr Sutherland: That makes sense. If I just may make one comment on what Mr Kwinter said, I would think that in terms of all the final discussions around particularly 1 and 2, the type of comment he made would have to be taken into consideration anyway.

The Chair: Consensus? Okay. "Education" is next.

Mr Christopherson: "1. That the government of Ontario engage in a comprehensive education campaign to demonstrate the impact of cross-border shopping and the benefits of shopping in Ontario. This campaign should be conducted in conjunction with business and labour education campaigns of their own members similar to what the Ontario Teachers' Federation (OTF) has done."

Mr B. Ward: I think we expanded on that as well as we held our discussions on all the other issues about what needs to be done in the education aspect.

Mr Sutherland: I just think it is very important to reiterate with this recommendation that we have heard a lot of calls for education, and we saw what OTF did sending out the notice to its own members and having it put out in the boards, but I think if we are really going to have an impact, it is important that government campaigns be coordinated with private sector campaigns and with organized labour campaigns to have the true impact. The campaigns done individually, while commendable, I think, by themselves do not have as great an impact.

The Chair: Further discussion? Okay, that ends the session for the recommendations for the government.

Mr Kwinter: Just for the record, I want it understood that we have our recommendation 2 and our recommendation 5 that we would certainly like to discuss at another time, but I think we have already talked about it this morning and we could get the staff to prepare the comments based on what we have done to date, and the members of the third party will be coming forward with something, I would assume, at some time.

The Chair: Any comments on those two sections from the government party?

Mr Christopherson: On recommendation 2, clearly we are going to have a major falling out there, and I do not think that comes as a shock. On recommendation 5, how far off are we, in your opinion, Monte, from what we have got on supplies? Are you suggesting that is a whole different area?

Mr Kwinter: What we are doing is saying it is almost like Mr Hansen's description about the tax-exempt. We are saying, if you are going to address the whole area of supply management and either eliminate it or not, whatever, that is fine, but if it is not going to be addressed, I think one of the big problems that we have got is the quota system. What is happening is that we have a situation that is kind of bizarre in that we have quotas.

I will give you a perfect example. My family is in the food processing business. We are the largest producers of processed eggs in Canada. We work on a quota. There are times when there are incredible quantities of eggs that are not made available, only because of the supply marketing system. Yet those products, in order to supplement shortages, will be brought in from the States. Other parts of Canada have ample supplies, but because of the quota system, they cannot be accessed.

What we are saying is that there is an opportunity to rationalize the market and get it to the point where a consumer can benefit if we can take a look at the whole quota system. That is really all that talks about.

Mr Christopherson: Thank you. I appreciate that. It is very helpful. I think we would be comfortable right now in including a recommendation that there be a review of the quota system outlining some of the concerns you have.

I have to say that we have not had a chance to talk through in detail the temporary import licence issue and what we would like is a chance to review that and maybe be prepared to comment on that when the draft comes down. We would not like to see that in the draft right now, but we will commit to you that we will review it ourselves and be prepared to discuss it at the next meeting.

The Acting Chair (Mr Sutherland): Are there any other recommendations that we have not dealt with from either two of those documents that we have had presented?

Mr Christopherson: Our document is completed.

The Acting Chair: If that is the case, I do not know if there are any additional recommendations we want to deal with at this time. Maybe we could just ask Mr Cousens -- I am not sure if he will be back next week -- if he could inform his fellow caucus members, if they would be willing to come forward. I think we are pretty close to tying things up.

Mr Christopherson: Just a comment before Mr Cousens responds so he can maybe consider this also: Although we have not set where we are going after this issue -- we all know that is still up in the air right now -- there is a chance that we could wrap this up completely in terms of finalizing a report at the next meeting. If there is a way your submission could still accommodate that time frame, I think we would all appreciate it very much, especially if we move on to budgetary considerations.

Mr Cousens: I do not think we have any desire to hold it up, having had a chance to see where the committee has gone. If it is -- I do not think it is going to be -- it could be one recommendation. I am not sure what it would be. I think there is a good consensus in this room right now and I respect the spirit in which both the Liberals and the New Democrats have proceeded with it. If there is, it is something unbeknown to me at this point. So it would not change an awful lot of the work that researchers or others would be doing.

Mr Christopherson: If you could carry that back to your caucus, we would appreciate it very much.

Mr Cousens: I will.

The Chair: Are there any further comments on the recommendations or any further recommendations at this time?

Mr Christopherson: No. I think we can move to just a quick discussion of when we can have the draft ready, and then if that is acceptable to all of us, I think we are ready for an adjournment motion.

Ms Anderson: Do you want it before the next meeting or at the next meeting?

Mr Christopherson: Before would be preferred.

Ms Anderson: So we will try for some time on Wednesday.

Mr Christopherson: I have to look at schedules. We are going to need a caucus meeting, and I am sure the other parties will too, before we can take a final position. If we cannot get it until Thursday morning, as long as the majority of our committee is available for a meeting in caucus, we can do that. That would be next Thursday.

Mr B. Ward: So that would be the agenda for next Thursday at 10.

The Chair: This is on the agenda for next Thursday at 10. Perhaps the suggestion could be that if we could have the document by Wednesday, we do not have a committee hearing on Thursday morning but have time to review it and then meet on Thursday afternoon. Is that a possibility?

Mr Sutherland: The only difficulty in doing that is that if the Tory caucus is coming forward with its recommendations, we may want to meet at 10, hear their recommendations and then maybe break earlier and then come back in the afternoon to finish off.

Mr Cousens: Go with the Thursday afternoon. I see us all being pretty adept at coming through and around words. Do not get yourself into extra meetings right now.

The Chair: What is the consensus? Should we meet for a short time at 10?

Ms Anderson: I can get it to you by Wednesday morning.

The Chair: The researcher has just indicated that they could have the draft to us by Wednesday morning. Meet Thursday afternoon? Okay.

Mr Christopherson: Give us half a second. Mr Chair, what we would recommend to you and our colleagues across the way is that if we can have the document Wednesday morning, we would like to attempt to meet Thursday morning at 10, and what we would suggest is that the committee empower you to contact or have the clerk contact on your behalf each of the three parties, and if all three are a go, then we will meet at 10 o'clock Thursday morning in the hope that we could wrap it up by the end of the day. If one party is not ready, then that will be enough for us to hold off until 3:30 Thursday afternoon, at which time everybody is expected to be ready, and we will try to deal with it in that time. If we cannot, we will meet again the following week.

The Chair: Okay, that clears that item up.

Now the next item is, if you recall, on 22 April we had the researcher and the clerk go to the meeting in Niagara Falls that unveiled the federal government's investigation into cross-border shopping. There is a follow-up meeting on Monday 17 June 1991 at the Mississauga Ballroom of the Airport Hilton Hotel at 10 am, running to 2:30. The question is, it is $40, the participants are $40. We need a motion to either allow them to go or to say no.

Mr Kwinter: I move that we allow them to go.

Mr Cousens: I second that.

The Chair: That is quick. Are there any other items of business before this committee is adjourned? No? Thank you very much. It was a very good working afternoon. This committee is adjourned.

The committee adjourned at 1736.