House of Commons Debate on the Tobin Tax on Feb 3, 1999
PRIVATE MEMBERS' BUSINESS
TAX ON FINANCIAL TRANSACTIONS
The House resumed from October 28, 1998, consideration of the motion and of the amendment.
Mr. Ovid L. Jackson (Bruce-Grey, Lib.): Madam Speaker, I am certainly pleased to speak today with regard to Motion No. 239. I infrequently speak in this place primarily because most of the time when I do want to speak it is not always possible and also because I speak only when I have something to say. I know my hon. colleague has the best interests of our country in mind when he indicates that financial speculators apparently do have some play in some of the problems that occur in a lot of countries where there is not a lot of good control over finances.
I ask this question with regard to the financial transaction tax, the Tobin tax. Economists will tell us anything we want to hear or there are ways to build models to indicate what is good and what is bad. As I understand it, the best way of avoiding a financial disaster is to have good management, good fiscal policy, good regimes and legislation to make sure that financial institutions and people who deal in financial transactions are managed properly. The second thing which apparently is a myth is that foreigners are responsible for creating speculation in countries. There are a lot of greedy people in the world. Machiavelli said the strong will do what they can and the weak suffer what they must. There are people like that in this world. It does not matter what kind of situation they are in. If we were to give everybody in our country, all 30 million people, $1 million each some would have goodwill. They would want to help their neighbours and do not really care about money. After 10 or 15 years a lot of them would end up with zero cash and some would end up very rich, saying "We are all right, thank you very much. We do not care about all of these other people. Let them suffer because they did not do X and they did not do Y".
<<...>> 1735 <<...>> <<...>>
That kind of world is not a good world to live in. It is a world where the law of the jungle prevails. Sometimes people say to me Liberals are soft. I can be as strong and as vicious as any of my colleagues around the table. But if one really gets out in the jungle, as I did one time, and looks at the real wild animals they are not well dressed, they do not have three piece suits. They are ugly. They roll around in a lot of stuff, they smell like the jungle and they are vicious.
Some of the people who wear tuxedos, drive the big limos, live in places that are fenced in with servants and slaves and what have you think this is great. It is not a good environment to live in. In that kind of environment even the people who are working for them do not like them.
I will get back to the second point I want to make. Speculation starts in their own country for some people. They understand the rules. They understand the regulations. It is the stock brokers or the local banker who gives these tip-offs. They trigger these things. It is kind of like a BRE-X. The next thing we know all kinds of things happen. Then in come the speculators. The speculators become involved. If we could only get a buck every time somebody makes a transaction it would be good for the common good of all Canadians and this would not happen.
The third point which is probably the most important reason why this Tobin tax would be problematic is in this world there are many countries where trading occurs. The capital will flee to the country that does not have a regime in place where moneys are taken during transactions.
Although I know what we do in this House is very important, our discussions about how we regulate things and we are here as legislators, I am not here just to make laws. An old farmer told me when I was first elected "Go to Ottawa but don't make a lot of rules and regulations that you are going to place in a stand somewhere. Remember some times things like the ten commandments. That can get you very far".
Sometimes notwithstanding that our colleagues come up with good legislation and there are a lot of good private members' bills that have been passed in the House, the best thing about private members' bills is that we discuss them. We look at all the angles and we pry and we probe. Sometimes the good ideas are stolen by ministers or by colleagues or by some group and used. We have to be mindful that we are just not here to make rules and regulations, put them in some kind of document, place them on a shelf somewhere or try them and they do not work or they make the system worse.
I understand the finance minister has looked at it and the department has looked at it. We hear the concern of the hon. member, but Canada is already exercising international leadership. We have a broad strategy to attack the underlying causes of financial market volatility. Big financial markets are not perfect institutions.
As well, I am told, the challenge we face is to find the best way of dealing with these problems, which economists call market imperfection. In other words, no market is perfect.
Proponents of the Tobin tax then argue that such a law would put sand in the wheels of international financial markets by imposing a very small percentage tax on a foreign exchange trader. And so the argument goes. This would discourage speculation. It would stabilize the financial markets without interfering unduly with longer term trade or investment.
<<...>> 1740 <<...>> <<...>>
Others are attracted by the tax revenue. There are a lot of people looking for these big slush funds, tax moneys. Politicians would love it so we could spend it and so that we could raise some funds which they believe would finance and enhance worthwhile programs.
We do have regimes for raising taxes. Those regimes are well thought out. This discussion is very good but as far as I am concerned this is not the way the government should go because of those reasons I mentioned.
Mr. Jason Kenney (Calgary Southeast, Ref.): Madam Speaker, I was delighted to hear my colleague from Bruce-Grey. I have not heard him speak often, as he mentioned, but I wish he would do so more often. He certainly provides an excellent view on this subject. I also enjoyed his member's statement yesterday. He was on all the national networks mourning the loss of the rodent in his riding.
I am here this evening to talk about the motion of my hon. colleague from Regina-Qu'Appelle on the financial transactions tax, that in the opinion of this House the government should show leadership and enact a tax on financial transactions in concert with all OECD countries.
Like many ideas that come from my colleagues in the aging New Democratic Party this is a noble one I think with a good purpose and a thoughtful objective in mind, to find some way of governments imposing some discipline on the increasingly unwieldy currency and financial exchange markets which really seem to many of us to be out of control at times. I think we, like all Canadians, share at times a feeling of helplessness as we are adrift on the sea of trillions of dollars being exchanged daily across the world electronically, affecting our standard of living, affecting the value of our currency, affecting our international purchasing power and yet to a very large extent beyond the control of us as individuals or as communities or as government. So I recognize the frustration which gives way to the kind of impetus we see behind this motion.
It would be wonderful if we could find a fiscal policy lever, a tax if you will, to slow down the sometimes destructive and irrational nature of these speculative currency markets. That I admit. It would also be marvellous if we could live in a world where everybody had a marvellous standard of living where there was no poverty, no unemployment and no economic inequities. But unfortunately that is not a world we live in and it never will be. That is a Utopian world. There are some things which government simply cannot do. One of the iron laws of economics is that people will generally act in their own self-interest and maximize their own returns. This is an irrefutable fact of economic history.
Essentially what I am saying is that the imposition of a financial transaction tax proposed by this motion would be unworkable, impractical and would create unintended consequences that would be far more devastating on developed countries like Canada than are the current vagaries of the currency exchange markets.
One example springs to mind about the kind of perverse unintended consequences that result from governments when they choose to establish certain outcomes through tax policy. In the 16th century in England the crown was looking for an efficient way to tax people based on their wealth.
<<...>> 1745 <<...>> <<...>>
The tax collectors then noticed that wealthier people tended to have homes with a relatively new luxury of windows. Lovely Tudor homes with windows were being built throughout the land. The tax collectors decided to advise the crown that they should impose a window tax. It was a brilliant idea to soak the rich. The 16th century version of the NDP said "Let's soak the rich and redistribute that income. Let's have some Robin Hood economics here in jolly old England".
They imposed this punitive tax on windows. The tax collectors went around from town to town and county to county and counted how many windows people had in their homes and assessed a levy based on how many windows they had.
Inevitably we can imagine the consequences which tax collectors could not possibly imagine in their linear minds. What happened was that everybody throughout the land boarded up their windows and darkened their homes to avoid the taxes they would otherwise have to pay.
This marvellous new innovation of Renaissance architecture, the window, became blackened and covered up because of a punitive tax which was designed to achieve some kind of equity. To this day in some small villages in England we can see what were once framed as windows covered up by plaster. To this day we still see the unintended consequences. That is the kind of natural, inevitable, historical, human reaction to the effort by the state to impose taxes on people to penalize them for certain activities.
We have seen this in more recent history where other developed economies have tried to impose financial transaction taxes such as the one contemplated in this motion. We have seen that jurisdictions such as Brazil, Sweden, Japan, Germany and Switzerland, all in the past five years or so, have removed or eliminated financial transaction taxes which they had at one point levied principally on the trading of equities and other financial instruments. The United Kingdom, while not yet having eliminated the FTT which it imposed on the registration of securities, cut it in half back in 1986.
Why did all these countries that were theoretically generating revenue from this painless small levy on financial transactions end up eliminating it? What they found was much like the window tax, that these financial transaction taxes were counterproductive.
By imposing a levy on securities and equities and the trading of those instruments there was less activity in their equities market, less securities were being registered. Why? It was because investors acting rationally in their own self-interest moved their financial investments, their equity tradings and so forth into other jurisdictions. The tax base which these governments had sought to derive revenue from began to diminish. By imposing a tax not only did the revenues from that source decline year after year as investors moved more capital trading out of the country, but it became completely counterproductive because all the FTTs in various jurisdictions had a dampening effect on economic growth. There is absolutely no doubt that we would see a similar unintended consequence were Canada and other OECD countries to impose an international tax along the lines proposed by economist James Tobin in his now notorious Tobin tax. There is no doubt that it would be impossible to compel every national jurisdiction in the world to comply with such a tax. It would also be impossible to impose sanctions on those sovereign jurisdictions that refuse to do so.
Even if we could persuade all 26 OECD countries and all G-7 countries to impose a 1% or .5% levy on financial transactions, of which I am highly skeptical, we would still have some 130 international sovereign jurisdictions to persuade to participate in this kind of tax.
<<...>> 1750 <<...>> <<...>>
Inevitably some would do what banking havens like the Grand Caymans, Bermuda, Switzerland and the Channel Islands do today, that is act as havens for investment. We would find that capital would flow to the point of least resistance. We would end up with an enormous distortion in international financial markets which would be devastating to equity markets and the prosperity and economic prospects of countries like Canada.
With respect to my colleague from Regina, it is a nice idea but it is impractical. It would not work. It could not work. Let us not hamper Canada's economy by imposing such an unworkable international tax regime.
Mr. Yves Rocheleau (Trois-Rivières, BQ): Madam Speaker, I am very pleased to take part in this debate, which I feel is an important one, in light of my personal values.
First, I want to congratulate the hon. member for Regina-Qu'Appelle for tabling Motion M-239, which reads as follows:
That, in the opinion of this House, the government should show leadership and enact a tax on financial transactions in concert with the international community.
An amendment to this motion has already been proposed by the hon. member for Repentigny and reads as follows:
That the motion be amended by removing the words "enact a tax on financial transactions" and replacing them with the following:
"promote the implementation of a tax aimed at discouraging speculation on fluctuations in the exchange rate."
I hope the majority of our colleagues in this House will support the amendment as well as the main motion. The hon. member for Regina-Qu'Appelle is to be commended for putting forward this motion, which parallels the current debate surrounding the issue of globalization. This is a good example of globalization and how the world has shrunk, given that, with the extremely sophisticated technology available today, financial transactions can be performed 24 hours a day, seven days a week, and have a major impact on economies worldwide.
This has been done extensively, and it makes this motion today, the Tobin tax, all the more interesting in light of recent developments.
In a word, as we know, the purpose of this tax would be to levy a very small amount-one tenth of one percent-on international currency transactions around the world. It is estimated that such transactions total, and that is where it becomes interesting, between $1,500 and $2,000 billion a day. It is hard to imagine what $1,000 billion a day represents. That is order of magnitude we are talking about here. At the end of a year, given a rate of one tenth of one percent, $150 or $175 billion would have been raised and managed, as a world fund, by the UN or another organization designated by the international community for this purpose. As a result, and this is very important, wealth would be better distributed.
It would act as a mechanism to curb rash exchange speculation on the currencies of countries, sometimes the most vulnerable countries. We would kill two birds with one stone with this world fund, which could be used effectively to fight poverty worldwide.
And better distribution of wealth would be achieved. This would have the effect of counteracting the negative effects of globalization and slowing down the progress of the unbridled neo-liberalism which has reigned for far too many years already.
We have seen the way these faceless speculators, with no sense of social responsibility, no accounting to anyone, whose job it is to type away on computer keyboards everywhere on this planet, checking out interests rates that are too low, fostering their own clients' interests, thumb their noses at community or national interests.
<<...>> 1755 <<...>> <<...>>
When we refer to national interests, we are not referring to some vague concept. We are referring to what has happened in recent years, first of all in Asia, in Japan, Malaysia, Korea, Indonesia. All of Russia has been through it since the wall came down, and now has become a haven for all manner of crooks and criminals. Things seem to be out of control. A few years ago Mexico too was experiencing some very hard times, as Brazil recently did.
A full-scale attack is launched on certain economies-often developed ones such as Japan but sometimes still fragile, such as Indonesia perhaps-so that these economies must suddenly face some devastating times. This may be seen in the document I am going to read. This has devastating effects on economies and on the individuals in them.
Fortunately, an awareness is developing internationally. I would like to take the opportunity to thank Charles F. Johnston of 5th Avenue North in Saskatoon for alerting me to the debate and inviting me to take part. He summarizes very well the problem with the Tobin tax: "A tax like this not only would impose a number of constraints on short term speculation, but it would generate a fund destined to support economic growth and restore social programs throughout the world".
Mr. Johnston is one example of the awareness that is developing, especially in France. That is not new. We all know about the acuity of the French on social issues. They have always been in the forefront. They are there thanks to a publication you are no doubt familiar with, Madam Speaker, Le Monde Diplomatique, which, in January of this year, published a ground-breaking article on the question, entitled "For the reconstruction of the international financial system: at the root of the evil". The root of the evil for Le Monde Diplomatique is the processing of financial transactions, including those involving currency and rates of exchange.
I will quickly read several quotes: "So, since the crash in the winter of 1994-95, half of the population of Mexico has fallen below the poverty line. Malnutrition and famine are again raging in Indonesia. In Russia, ten years of economic liberalism have done more to tarnish the reputation of capitalism than 70 years of propaganda on the "real" socialism. Average life expectancy for men has dropped by seven years, unprecedented in the 20th century. In Korea and Thailand, IMF suicides continue. Workers who have been laid off and are without resources kill their wives and children because they are unable to provide for them."
I will read another excerpt from this excellent article: "The top 20% of humanity consumes 86% of the wealth, while the bottom 20% is left with 1.3%. The fact is, and we hear it often enough, that the gap is widening yearly at the same time as official development assistance is declining. It is the debt that is the worst threat to the future of the south, particularly the future of less developed countries that are in the process of almost disappearing off the face of the earth because of debt that they are unable to repay now and will never be able to repay in the future.
The less developed countries are spending an average of over 20% of their export revenues on servicing this debt. If this were lowered to 1% or 2%, as it was for Germany after the war, these countries could invest the money saved in health, education, and the environment, thus generating a virtuous circle. The more a country could invest in human capital and sustainable development, the more it could reduce its debt, to the point of eliminating it entirely."
This is what would be done with the international fund resulting from the Tobin tax on international currency transactions.
<<...>> 1800 <<...>> <<...>>
Still in France, I would like to mention the Association pour la taxation des transactions financières pour l'aide aux citoyens. The purpose of this association is to denounce financial globalization, which adds to economic insecurity and social inequality by circumventing and limiting the choices open to nations, democratic institutions and sovereign states responsible for the general good. The association wishes to show that it is necessary and possible, contrary to popular opinion, for people to put the public interest ahead of the interests of financial markets and transnational corporations. This Paris-based association also has a Web site. I urge everyone to contact it. [English]
Mr. Gilles Bernier (Tobique-Mactaquac, PC): Madam Speaker, I am pleased to speak today to the motion of the hon. member for Regina-Qu'Appelle on whether we should enact a new tax on financial transactions. During the Christmas break I had the opportunity to travel throughout my riding and talk to many of my constituents, as I like to do whenever the House is not sitting. I also held a number of town hall meetings and many private meetings where my constituents voiced their concerns on a number of issues. They told me that they need more money for better health care. They said they need more jobs and better opportunities in rural Canada. Many people also told me that politicians need to get to work to solve our national unity problem.
In all of my travels in the last six weeks and in all of my discussions with constituents not one single person said that what this country needs is a new tax. Since I was elected in June 1997 I cannot think of one single time when any voter asked me to raise their taxes.
I read several newspapers every day. I also look through many press clippings. This may be hard to believe, but I cannot recall ever seeing an article or an editorial calling on the government to raise taxes or to bring in another tax. Yet we are discussing how we can take even more money out of the pockets of hard working Canadians.
I have heard other members talk ad nauseam about James Tobin, the International Monetary Fund and the Asian financial crisis. I will talk about why introducing a new tax is a bad idea.
It is important for members on all sides of the House to remember that when taxes go up there are very real consequences on the lives of every Canadian.
Whenever I hear a politician suggest that we should increase taxes I think of a gentleman from my riding by the name of John Minard. John Minard did not come from a wealthy family. He did not always have an easy life, but he made the most of his life and shared his successes with others. John built a successful building supply business that employs his family and many members of his community. He and his family worked very hard at making this business successful and at making sure that the family's needs were always looked after.
John was usually the first one at work in the morning and the last one out at night. He worked six days every week to make sure that his family and his employees had a job to go to and that their bills were paid. However, John Minard did not stop at providing for his very large family. John always felt that he should give something back to his community. Mr. Minard gave time and money to minor hockey, to baseball and softball for children. He was involved in the local Rotary Club and he always had money for the Christmas Miracle for Kids.
Unfortunately, John Minard is no longer with us. He passed away just over a year ago. I bring up his name not just to pay tribute to this good man, but to make a point to my hon. friend from the NDP. There are many John Minards in every community around this country. All across Canada there are people who work days, nights and weekends to make sure their families have enough to eat. These same people are the ones who always have a few dollars for the scouts, for the hospital drive or for many other worthy causes in their communities.
<<...>> 1805 <<...>> <<...>>
What I want us to consider before we forge ahead and raise taxes is this. Whatever project we would spend this new money on, we are taking money away from the John Minards of this country. Is this project important enough that people like John Minard should have less money to feed their families? Is getting money for whatever whim happens to strike members of parliament this week so important that we should deny that money for all the kids in John Minard's community who benefited from his generosity? I do not think so.
Yes, I understand that the hon. member thinks it would be a neat idea if we could get all of the countries and all of the principalities of the world to agree to do something about the nasty currency trader, but that tax fails the John Minard test.
Lots of Canadians buy Canada Savings Bonds and lots of Canadians save for their retirement. Those are the people who would have to pay this new tax.
Is it more important to bring in this trendy new tax just so we can say "We showed those money traders in Singapore who is boss"? Or is it more important that the kids who play minor hockey in Woodstock, New Brunswick still have people like John Minard and those who have come after him who they can count on to help support their communities? In my opinion, I say let us support the hard working generous people like John Minard in our communities and take a pass on this tax.
Mr. Nelson Riis (Kamloops, Thompson and Highland Valleys, NDP): Madam Speaker, I want to say at the outset what a joy it is to be participating in the debate today which has been made possible by my colleague from Regina-Qu'Appelle. I had the pleasure to second this bill. In a sense, I am a co-sponsor with my colleague.
It is interesting to listen to the debate and the commonality. Every speaker on this topic speaks against the currency speculators. Everybody is against those who make their living by speculating on currency. I have not heard anybody yet say that they are in love with the currency speculators, that currency speculators are somehow helpful, that currency speculators have done anything good for the economy, or that they are doing anything good for society generally.
We are in complete agreement that currency speculators who sit up 24 hours a day in some parts of the world are causing problems, causing havoc to the attempts of sovereign nations to develop their economies.
While listening to the previous speaker, I could not help but think of our debate around gun control. Some people say that gun control will not stop all murder. Therefore, why do we have gun control?
No one said that it would stop all murder and that it was either one or the other. We have gun control in our country to attempt to reduce the rate of murder. I think we have been successful.
On balance, we can argue about whether this gun control initiative is appropriate or another control is appropriate, but the fact that we are not all packing sidearms like they are in Texas makes this place a better place to live, a safer place to live. The fact that everyone packs sidearms in Texas makes it a terrible place to live.
When we talk about currency speculators, let us agree that it is worth the effort to try to control these characters. No one can make a convincing case that this is good for anybody other than currency speculators and some of their bosses.
When we look at the media and listen to some of our colleagues we hear a financial elite who just do not want any kind of meddling in their marketplace. They want to have carte blanche freedom to do whatever they want. If that results in countries being devastated, like we have seen as a result of currency speculators, so be it. We even came close in our own country just a few months ago when we watched our dollar collapse day after day. In August last year our currency collapsed day after day, hour after hour, simply because speculators were speculating on our currency. It had nothing to do with the state of our economy. But it caused problems. It caused uncertainty in the marketplace. A lot of investors and consumers were concerned about making important investments or consuming the items or services they wished.
<<...>> 1810 <<...>> <<...>>
A long comes an idea. Is it a perfect idea? My friend from Regina-Qu'Appelle says:
That, in the opinion of this House, the government should show leadership and enact a tax on financial transactions in concert with the international community...
In other words, if the international community is in support of this, then this will proceed. We cannot do it unilaterally. We do not want to do it unilaterally. We want to show leadership. The world is calling out for leadership.
I am pleased to say that our Minister of Finance a few months ago was completely against this idea. Now the Minister of Finance says that he is open to these ideas. The Parliamentary Secretary to the Minister of Finance says that he thinks there is merit in this. That is why I am puzzled by some of my friends in the Liberal Party who are against this initiative. If the Minister of Finance thinks it is a good idea and if the Parliamentary Secretary to the Minister of Finance thinks it is a good idea, why are those Liberals across the way bad-mouthing this concept?
That is what they are doing. But it is a free country and I appreciate that they have a right to say unusual and perhaps uninformed things. Let us look at what we are talking about. We are talking about a form of the Tobin tax. In 1972 James Tobin, Nobel Prize economist, first proposed the idea of a tax on foreign exchange transactions. This has now been updated. The most recent suggestion is that this would be a tax as low as .1% of transactions in order not to swamp the normal commission charges and so on. It is fair to say that the first $10,000 would be exempt. We are not talking about the person buying a Canada Savings Bond. We are not talking about a person buying a car. We are talking about people who are currency speculators.
There would be another charge, but the reality is that it would only be with the support of the international community.
If the international community was in support of some form of a Tobin tax, why would Canada not be in support of it? I listened to the leader of Germany the other day. He is in favour of some form of a Tobin tax. I returned not long ago from the Asia-Pacific parliamentary forum. Twenty-two nations from around the Pacific came together. This was a major item. Unanimously they agreed that some form of a Tobin tax was appropriate for their countries. Yet some of my friends in the Liberal Party bad-mouth this concept. They are bad-mouthing the leadership of Asia-Pacific. What are these people thinking?
I know that some of my friends are here as voices of the financial elite of the country. I can understand why they would not support this legislation. However, most people representing constituents in the House of Commons would say "Show me a constituent in this country who would vote against the idea of a Tobin tax". If I went to Calgary today and said "Do you folks in Calgary like the idea of some form of control on international currency speculators?", I bet there would not be a single Calgarian who would stand and say they would not want this kind of tax.
An hon. member: Oh, yes there would be.
Mr. Nelson Riis: Oh, no there would not be. The financial elite spokespersons would say that. However, I know the average Calgarian well. My previous home was on the outskirts of Calgary. A Calgarian will not say "Give free rein to the international currency speculators. Let them destroy economies around the world. Let them smash the Canadian dollar".
We are a major trading nation. The value of our currency is crucial in our ability to work in the international marketplace. The stability of our currency is crucial. That is why I cannot understand my friends in the Reform Party who do not want to bring some meaningful rationale to this process. As I say, it is a free country. If they want to be on the side of the international currency speculators, who I am to say they ought not to be there.
<<...>> 1815 <<...>> <<...>>
We are quite enthusiastic about this initiative for two major reasons.
First, it would have the ability to control international currency speculation. There is no question about that. Some have said we have to talk every country in the world into this. My goodness. Eighty per cent of global foreign exchange trade takes place in only seven cities in the world, Tokyo, New York, London, Singapore, Hong Kong, Frankfurt and Bern. It would not be bad if if we could control 80% of foreign currency speculators.
There is another way. If the international community buys into this why could it not be a provision of membership, as my friend from Regina-Qu'Appelle suggested, in the IMF? If you are going to participate then you buy into this concept. The leading nations of the world have bought into it. Why would you not if you were a small country that wanted to join this organization?
Another very significant benefit of the Tobin tax is the money it would raise for international development. The suggestion is it is probably in the range of $150 billion that it would raise to solve the problems of poverty and environmental degradation around the world. That is why I asked my Liberal friends across the way why they would be against such a massive initiative which could really solve the significant global problems we have today. My friend should be ashamed of himself.
For extremely good reasons we support this concept of the Tobin tax. We support enthusiastically the suggestion by the hon. member for Regina-Qu'Appelle that in the opinion of this House the government should show leadership and enact a tax on financial transactions in concert with the international community.
Mr. Roy Cullen (Etobicoke North, Lib.): Mr. Speaker, I am pleased to participate in the debate today on the motion put forward by the member for Regina-Qu'Appelle, a very thoughtful and considered individual. I had the opportunity to participate in a debate with him not too long ago on our caucus task force report on financial institutions. We dealt with the bank merger. It was supposed to be a debate but it turned out to be more like a love-in. I was a little concerned given our different political stripe but most political parties were in favour of the recommendations we made, although we never did hear much from the Reform Party on bank mergers. I guess it was in a difficult spot on that issue.
The motion by the member for Regina-Qu'Appelle calls on our government to show leadership and enact a tax on financial transactions in concert with the OECD countries. The Bloc Quebecois has proposed an amendment that enlarges it to the international community in lieu of the OECD. This is one of those rare occasions where I find myself in agreement with the Bloc Quebecois. I would support enlarging it to the international financial community if we are to consider it as a motion.
In principle I support the motion in general terms but we need to clarify a number of issues. Given the events over the past year or so, I do not think many Canadians would argue with the fact that global financial markets are interconnected. There does not seem to be any doubt about that. The financial meltdown in Asia started in Thailand over a year ago. It was followed by the financial crisis in Russia and more recently the events in Brazil. They have had an enormous ripple effect throughout all the economies and financial markets of world.
Although our Canadian dollar has shown some improvement recently, it has been taking a beating. This is for reasons I believe are largely unrelated to the underlying factors of the Canadian economy. While some might argue that the markets are always right, in some circumstances they are somewhat irrational. In this case they seem to be acting irrationally. One has to wonder what is going on behind this apparent irrationality.
<<...>> 1820 <<...>> <<...>>
Our finance minister is pushing for an international agency that would monitor financial institutions worldwide. I gather its purpose would be to identify emerging problems and develop more time sensitive and co-ordinated solutions. The proposal is a good one and one that I support.
Other solutions have been proposed to address the destabilizing effect of currency traders and speculators like the Tobin tax which has been much mentioned here today. The Tobin tax would be a tax on individual financial transactions. However, unless all countries agree to such a tax it would not be workable.
Imagine 27, 28 or 40 countries around the world enacting a Tobin tax and a number of countries not. It would not be a surprise if suddenly the financial transactions migrated to those jurisdictions where they did not incur the Tobin tax or financial transactions tax. Unless all countries are in harmony with such a tax it is just not workable.
The member opposite talked about the finance minister saying he thought it was a good idea. The finance minister realizes that there are a lot of good ideas out there. The question is which ones are feasible and which ones would he implement. I think his approach in pushing for an international agency to monitor financial institutions worldwide is a more workable solution.
It is important to acknowledge that the issue of global financial market speculation and its impacts on global and domestic economies is one that deserves the attention of world leaders and deserves the attention of the House.
Our government is showing leadership on this issue in the G-7 and other international fora. There are solutions to the downward pressure on the Canadian dollar that can be found right here at home. Statistics Canada recently reported that Canadians are investing abroad in stocks, bonds and bank accounts at record levels. This is a result in part of changes the previous Conservative government made in 1990 to the foreign content rule of RRSPs. The limit at that time was increased from 10% to 20%. Perhaps that should be revisited given the effect it is having on the Canadian dollar.
I am sure there are people in this Chamber who would disagree and perhaps argue that the limit should go the other way. However, I am of the view that we should be very cautious in that area and perhaps consider moving it back.
If Canadians want to have foreign investments in their RRSPs no one would debate or argue that but why should the Canadian taxpayer support that, particularly when it could be having a detrimental effect on the Canadian dollar?
I am offended as I am sure all Canadians are when the international financial markets are disturbed profoundly by speculators.
Let us examine a tax on financial transactions. Presumably such a tax would be targeted on foreign currency transactions. The targets hopefully would be short term capital movements because investors should really not be penalized or inhibited from moving capital from one currency to another based on long term decision making or structural decision making. I throw out a word of caution. We often hear Thailand cited where huge capital outflows caused a crisis. Was the movement of capital a symptom of some deeper underlying problems? In other words, where was the chicken and where was the egg? The answer to that in the case of Thailand is a categorical yes, there were some underlying fundamental problems. Some good Canadian friends of mine who have lived in Thailand for many years described to me recently the financial devastation in that country. Did the migration of capital from Thailand precipitate the financial crisis there or vice versa? This is an important question.
I am told by my colleagues in Thailand that the banking system collapsed as a result of three major issues. There were some very bad investments by the banks, a lot of cronyism in the banking system and a lot of corruption in the banking system. So foreign investors in Thailand perhaps could see this coming and decided to relocate their capital. I think the causal chain of events is important here and we should not be just looking at speculative movements. There are often some underlying reasons for the movement of capital.
<<...>> 1825 <<...>> <<...>>
I do applaud the Minister of Finance in pursuing the establishment of an international agency, perhaps created from within the resources of the existing international agencies, that would track the fundamental financial stability issues in countries around the world and proactively develop strategies and actions required to prevent problems, not respond to events after the fact.
Coming back to Canada and the downward pressure on the Canadian dollar vis-a-vis the U.S. dollar that we have experienced over the last year, we are told we experienced a flight of capital to so-called safe havens. I find this curious when the economic fundamentals in Canada are so strong, if not the best among the developed countries.
In Canada we still suffer with the prospect of another referendum in Quebec. This creates uncertainty in financial markets. I am sure this had some bearing on the fate of our Canadian dollar. Our colleagues opposite in the Bloc Quebecois and the Parti Quebecois in Quebec should be held accountable for this.
I applaud the member for Regina-Qu'Appelle for his interest in this important topic. I think it is very worthy of debate and discussion in the House and indeed around the world in the various international fora. I think it is a very important issue. I support the motion in principle and the concept, but we do need more discussion and debate. The main thrust of the motion is that our government should show leadership. We are showing leadership.
Mr. Wayne Easter (Parliamentary Secretary to Minister of Fisheries and Oceans, Lib.): Mr. Speaker, I appreciate the opportunity to enter into this debate.
The motion is that the government should show leadership and enact a tax on financial transaction in concert with the international community. I certainly applaud the member for Regina-Qu'Appelle on that motion and I very strongly support it.
Of course we need an international agreement and we know that will certainly not happen unless somebody takes leadership. It only makes sense to me in the kind of government we have. We show leadership in a lot of areas. We certainly could show leadership in the international community in this area.
I am told that Canada has explored the idea during the Halifax summit, at which time it became apparent that a number of G-7 countries were very strongly opposed to the idea. I recognize their positions have not changed.
But they will never change unless we provide the evidence to them on why it should change. We have to enter into that debate at a global level and go out there and make the arguments for putting in place a Tobin tax. I realize that even if we had all the industrial on side it would not be sufficient for the proposal to work. But we have to start somewhere. I suggest we can start here, that we need strong political will on the part of the Government of Canada and on the few allies that we can achieve in the beginning and exercise that political will so that we can institute a Tobin tax some time down the road.
We are not talking about a big percentage tax here. It would be a very small percentage tax. But imagine on the amount of speculation of money in this world what that small percentage tax would do in terms of benefiting and improving the lives of people around the world, in Canada, in Nicaragua, in Honduras, in Central America. All around the world it would improve the lives of people and those are the kinds of things that we should be doing.
<<...>> 1830 <<...>> <<...>>
I heard the member from the Conservative Party speak earlier. He used the example of someone in the community who did a lot of volunteer work. I respect what that individual did. I applaud what that individual did. But the member tried to leave the impression that this was a tax that would hurt that individual. It would not. I doubt that individual was a money speculator. He was not a financial money speculator. Who are these people? I am a primary producer and I know about speculation in terms of the hog market, the grain industry and the beef industry. I know very well that those people that play those markets make huge profits many times by shuffling a little paper around and playing with the futures market and so on. The primary producer who does all the work, who takes all the risks, who creates the investment and puts his family to work and works himself, ends up many times loosing money. The speculators make money.
It is even worse when we get to the financial speculators, the money speculators. They play games, not only with countries, and with the new technology that is available today millions even billions of dollars can be moved in the flash of a second.
There was a rumour in New York where someone said that Canada was a basket case. Of course when we became the government we changed that and the government is no longer a basket case. Remember what happened? One trade, a supposedly respected trader, said internationally that Canada was a basket case. Suddenly our dollar started to go down. That was the financial money speculators playing games and they are not playing games only with countries, they are playing games with people's lives.
The Deputy Speaker: I am sorry to interrupt the hon. member.
The time provided for the consideration of Private Members' Business has now expired and the order is dropped to the bottom of the order of precedence on the Order Paper.
I can assure the hon. parliamentary secretary that he will have five minutes remaining in his remarks the next time this item is called for debate.