PRIVATE MEMBERS' BUSINESS
[English] - October 28, 1998
TAX ON FINANCIAL TRANSACTIONS
Hon. Lorne Nystrom (Regina-Qu'Appelle, NDP) moved:
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.
He said: Mr. Speaker, I have consulted with all parties and I understandthere is unanimous consent for the following motion:
That the motion be amended by removing the words "all OECD countries" and replacing them with the following: "the international community".
The Acting Speaker (Mr. McClelland): Is it the pleasure of the House to adopt the amendment?
Some hon. members: Agreed.
(Amendment agreed to)
The Acting Speaker (Mr. McClelland): Debate is on the motion as amended.
Hon. Lorne Nystrom: Mr. Speaker, I thank the House for the unanimous consent to make that change which reflects a broader consensus in the country and in the House.
The purpose for this private member's motion today, which is one of the few votable motions in the House, is to start a debate on a new idea which in many ways is an old idea. It was first suggested by James Tobin, an economist who won the Nobel prize in 1992. He suggested in 1981 that in order to bring some regulation or order to the international financial
marketplace in currency transactions there be enacted a very small foreign currency transaction tax. This has to be done in concert with the world community. One country by itself cannot do it. This would bring some semblance of order to what we are seeing in the world today.
The secondary purpose of the motion would be to use the funds to establish in part an international development fund which would be useful for many projects around the world. I will get into that a little later on.
The time has come when we have to start looking at new ideas as to how we work toward the common good not just in this country but around the world. Dr. Tobin made the suggestion a number of years ago. The idea is to impose a very small tax on foreign currency transactions. The idea being talked about now by most people around the world is a tax of .1%. In other words, one dollar on every thousand dollars of foreign currency transactions. If we buy a condo for $100,000 that would be a $100 transaction tax.
I want to give the House some idea of the magnitude of what we are talking about. In the 1970s the daily trading in the world in foreign currency was about $17 billion. Today it is about $1.3 trillion. It is a figure so large it is impossible to even imagine. To give a comparison the trade in goods and services around the world annually, 365 days of the year, of all countries is $4.3 trillion and the currency exchange is $1.3 trillion a day.
That is a lot of money.
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The consequences of this is that there is a feeling among a lot of people that nation states have given up a lot of sovereignty to what we sometimes call the boys in red suspenders as they speculate on currency around the world.
Talking about this at this time is really appropriate because much of the world is in recession and many people are predicting a worldwide depression.
We have seen the tremendous effect on currency around the world and the effect on Canadian currency. We have seen the problems in southeast Asia, in places like Thailand and which have spread to other countries in that part
of the world, to Japan and Russia, which is now basically without a government and in total chaos. The problem is spreading into Brazil and parts of Latin America.
A large part of it is because of the rapid movement of short term capital seeking a place to maximize its return. This is being done at the flick of a computer key when billions are moved, as I said $1.3 trillion every day.
Are we as a country powerless or do we want to assert our sovereignty and try with our fellow people around the world to come up with a method of bringing some order to the turmoil that exists today in terms of international currency markets? I think the answer is yes.
The Governor of the Bank of Canada was before the finance committee last night. We have had the Minister of Finance before the finance committee last night. They both talked about trying to bring some order to the currency markets around the world. This is one idea I think we should be looking at in terms of trying to bring some of that order.
One of the consequences of technological change and of globalization as we see it today has been the demise in the power of the nation state. I do not thing there is any denying that. But that opens up new opportunities in terms of how we govern ourselves as the human race. I believe that many of the things we used to do nationally as nation states and country by country
we will have to in the future start doing internationally as the borders become more and more erased right around the world.
When we look at the attack on social programs around the world, the environmental problems around the world, the lack of real sovereignty in terms of monetary policy country by country, I think we realize we have to do something about these in common cause with other people around the world.
That opens up an exciting vision of the world of tomorrow, a new vision where people regardless of the colour of their skin, regardless of where they live, work together toward a common cause and a common good.
One way of doing it is for the first time to have a small tax on financial transactions applicable around the world. That is one thing we should look at. Private members' hour is the time to do this where we can all vote freely of our party whips and party discipline to say yes or no to the idea.
This motion does not bind the government. It 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.
The Minister of Finance has made public statements where he is interested in principle in the concept of a Tobin tax. He looked at this very seriously in 1995 at the G-7 conference in Halifax. He had papers commissioned on the Tobin tax at that time.
One of the reasons the Minister of Finance became rather pessimistic on thisin the last year or so was that he did not think it would fly because of thegovernment position in Britain and the government in Germany, two big countries in Europe.
In the last year there has been a change in government in both those places. In Britain it is now Tony Blair and the Labour Party and as of three weeks ago in Germany there was the election of Mr. Schroeder and the Social Democrats. In both cases they are governments open to examining the possibility of the Tobin tax to see whether we can work out some method of
making this a feasible part of a new world order and new world vision.
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It could be an exciting time for our country and our parliament. We should ask the Minister of Finance to take the lead on this very important issue for the world of tomorrow.
As I said, this has been debated before. It began with Mr. Tobin, the economist who won the Nobel prize. It was talked about in October 1987 during the stock market crash around the world. It was also debated in 1984 when the peso in Mexico collapsed, causing a tremendous exodus of capital from that country. The result of that exodus of capital was a tremendous
amount of hardship and poverty for the ordinary Mexican person.
The excess capital around the world seeking a safe haven and seeking to make money, although much of that money is going to the United States, has once again precipitated a debate. This is another reason we should be looking at it.
I want to give three examples of the so-called Tobin tax. First, I say to some of my friends who are concerned about tax issues that it is a very small tax; .1% is what is being talked about, maybe even less than that.
This would have virtually no impact whatsoever on long term investment in the world, long term investment that is needed in developing and developedcountries alike. It would be so small that it would not affect long term investment.
On the other hand, it would deter short term speculation, money that moves into a market for a few minutes, a few hours or a few days and moves out of that market after it makes a short term amount of money on a small margin.
This money is sort of slushing back and forth around the world and is operating on very small margins. The effect of this is that it creates great distortions in national economies like Mexico, Brazil or what is happening in Russia today. It even affects us where our dollar is weaker than it should be because a lot of dollars are going to the United States to seek refuge.
It would not have an impact on long term investment but it would bring some semblance of order to the world community and to the boys in red suspenders who are trading currency back and forth like a gigantic casino around the world that affects working people in every country. It would bring more stability for exporters, importers, investors and the government in terms of planning budgets, public policies and monetary policies of nation states right around the world. It would bring morestability because that great volatility of the casino economy would be tempered to a certain degree.
Finally, as I said, it would reduce the power of the speculators andincrease the power of national governments to do more things in theircountries and to be able to share increased power through international bodies and organizations. That is the main reason for the so-called Tobin tax, the tax on international transactions.
The second reason for the motion is to raise revenue for worthy projects around the world. This is the secondary objective but it is still a very important objective. Many times we have world disasters and there is a great deal of difficulty trying to raise money for those world disasters. The United States is now in a great debate in terms of what the Americans should
pay in terms of a stipend to the United Nations to keep it going, a debate between the Republicans and the Democrats, between the office of the president and Congress.
I remember the disaster in Chernobyl, the great disaster with the reactor in Ukraine and the time it took to get funding and money to help the victims and do the clean-up. There are many purposes the money could be used for in terms of development around the world.
I think of the whole issue of jobs, the economy and the millions of people being thrown out of work now because of what is happening in many parts of the world. Some money could be used for employment and jobs. Some money could be used for peacekeeping, for the mines issue, for medical research and for environmental research and funding. There are many uses for this money.
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I will give a few examples. If there were a 0.1% Tobin tax on foreign currency transactions, that would raise, in 1995 dollars, $176 billion U.S.
That is a lot of money. A Tobin tax of 0.003% would be enough money to fund United Nations peacekeeping around the world. It could fund the project initiated in large part by our Minister of Foreign Affairs on land mines. There are many worthy causes around the world.
One of the consequences would be the establishment of a global village which would have a common good amongst all nations of the world. There would be a strengthening of international organizations. The United Nations would become a meaningful world government and would share things with national governments around the world. There could be permanent international peacekeeping forces. There are many things that could be done.
How would this be implemented? There are a number of ways of doing it. The International Monetary Fund could be reformed to do it or the World Bank could be reformed to do it. My preference would be a new international financial agency to administer the Tobin tax.
Who would collect the tax? National governments would collect the tax around the world.
The time has come for this country to consider taking leadership in a new idea, in a new vision that seeks to bring some order to the chaos we see around us every day. This cuts across political lines. I differ from time to time with colleagues in other parties, the Reform Party or the government.
However, I know from talking to people in the Reform Party, the Liberal Party the Bloc Quebecois and the Progressive Conservative Party that there is a great deal of concern in all of our constituencies.
People feel helpless and hopeless by what they see happening in the stock market today and by what they see happening to our dollar. People were scared last August when the dollar started to plummet and the bank rate went up twice. People are concerned about what is happening in Brazil. Thailand was one of the most successful countries in the world a year or so ago.
The Asian tigers were held up as an example of how to run an economy. They were virtually running it on very small debts. All of a sudden it started to tumble down like a deck of cards. An hon. member: It brought down some of my stocks.
Hon. Lorne Nystrom: It probably brought down some of the member's stocks. I am sure the member for Souris-Moose Mountain will be a very enthusiastic supporter of this motion.
This motion would empower people. It would give back some sovereignty to people through their national governments and through world agencies. Rather than just the law of the jungle with a few people on computers trading on the futures market, the currency markets and the stock markets around the world, it would have a great impact on the lives of so many people.
I want to ask the House to take this motion seriously. It does not say that we should do this by ourselves. Of course we cannot do this by ourselves. It does not say that we should do it along with Zimbabwe and Peru and five or six small countries. It says that we should do it in concert with the international community. To make it work the United States has to be there, the Republic of Germany has to be there, France has to be there, Britain and many of the bigger countries in the world that form the OECD or the G-7 have to be there.
Change only comes if we pursue an idea. Canada is a highly respected country in the world. Canada could start talking about this idea with the new governments in Europe and France. In France there has been a new government in the last year, led by Lionel Jospin of le Parti socialiste français.
There are new governments in France, Germany and Britain. With new governments around the world, perhaps we can make some headway. If we do not do this we are going to continue becoming more and more impotent in terms of exercising the power and the sovereignty that people around the world should have.
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I look forward to listening to the debate. We should put aside party differences and get behind an idea whose time I think has come.
Mr. Tony Valeri (Parliamentary Secretary to Minister of Finance, Lib.): Mr.Speaker, let me begin by saying that we share the hon. member's concern over the volatility that often occurs in financial markets and it is actually for this reason that we can support the motion put forward by the hon. member. Certainly financial instability is a threat to global prosperity and I think it is incumbent on governments to examine all of the options to address the problem. A Tobin tax is one such option.
But let us be clear. Canada is already exercising international leadership as part of a broad strategy to attack the underlying causes of financial market volatility and we are enjoying considerable success in working with our partners on practical ways of improving the functioning of international markets and preventing and managing crises.
We would all prefer a world where markets always get things right, a worldwhere exchange rates always behave in a way that we could clearly understand in the context of our economic circumstances and policies, a world where exchange rate movements were always helpful in promoting solid growth and job creation for our citizens. But financial markets are not perfect institutions. Clearly they do not always get it right. They travel in herds. They run on rumour. They sometimes ignore fundamentals and all too often they overshoot.
Exchange rates can sometimes move erratically and these erratic movementscan cause economic problems, affecting competitiveness or requiring authorities to take some actions to defend the currency that they might otherwise prefer not to do.
The challenge that we face is to find the best way of dealing with these problems which economists call market imperfections.
Proponents of the Tobin tax argue that such a tax would put sand in the wheels of international finance by imposing a very small percentage tax on all foreign exchange trades. So the argument goes that this would discourage speculation and stabilize financial markets without interfering unduly with longer term trade or investment.
Others are attracted by the tax revenue that they believe the tax could raise and which they believe could finance many worthwhile programs. The arguments surrounding the merits of the Tobin tax are certainly interesting and have been debated for quite some time by economists and others. I am sure that they will be debated for some time to come.
But the more important question from our perspective is not the theoretical benefits that might result from introducing such a tax, but the very practical question of whether this would be feasible. Here it seems very unlikely that a Tobin tax could be imposed on a scale that would actually give rise to the benefits its supporters claim without penalizing some countries severely.
The reason for this is that for the tax to be at all effective in stabilizing markets or raising revenue it would need to be applied globally, and given today's advanced communications and computing technology, transactions can be conducted anywhere in the world and can shift from one location to another in the blink of an eye. If a Tobin tax were not universal in its coverage, transactions and the incomes and the employment they generate would simply shift to any jurisdiction that did not impose the tax.
Canada in fact explored the idea during the Halifax summit, at which time it became apparent that a number of G-7 countries were adamantly opposed to this idea. Their positions have not changed, despite, as the hon. member has mentioned, some change in governments.
But even agreements among the G-7 or all of the industrial countries would not be sufficient for the proposal to work. All countries would have to agree. There would always be an incentive for some group of countries to opt out, thereby establishing themselves as an off-shore financial centre. I do not believe any member of the House would support a policy that merely encourages the growth of off-shore banking centres.
There are other practical problems. Enforcement of a Tobin tax would involve a constant cat and mouse game of closing loopholes discovered by market players.
So it is for these reasons that the Tobin tax has not attracted widespread support from other countries.
I am not here today to tell the House that nothing can be done to address the question of volatility in international financial markets. In fact, a great deal is being done on this front and Canada is exercising considerable leadership in these efforts.
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Our aim, working with our international partners, is to address the underlying causes of international crises such as the Asian crisis and to develop mechanisms to help manage them when they occur.
Although the crisis in Asia had complex roots, it is clear the governments in the region contributed to the problem by allowing, and sometimes even encouraging, imprudent lending on the part of local financial institutions.
Moreover, the promise of fixed exchange rates, a promise that ultimately proved hollow, encouraged local banks and companies to borrow huge amounts of foreign currency. Financial turmoil was the inevitable result of these inappropriate policies and practices.
Canada has provided leadership to the international community on reforms that would address the underlying cause of financial crises and not just symptoms.
At the spring meeting of the IMF and the World Bank our finance minister proposed measures to strengthen supervision and regulation of financial sectors including peer review. Simply put, peer review would allow experts from Canada and other countries to share their expertise with their counterparts in emerging markets and ensure that best practices are being followed.
I am pleased to inform the House that our Canadian proposal was endorsed by the G-7 and the IMF at the annual meetings in Washington. The IMF will begin to use peer review as a way of strengthening financial sector supervision and regulation starting next year.
Canada has also proposed a mechanism to ensure that private sector investors such as banks will be involved in the resolution of international financial crises in a much more integrated way than has previously been the case. Standard operating procedure today is for the IMF, the World Bank and national governments to put up money first. The private sector gets involved only at the end, if at all. Quite clearly that is not an equitable way to share the burden. More to the point, it is no longer on.
Our finance minister proposed a mechanism that would allow for payment standstills during financial crises. This would give hard-pressed countriesthe time needed to put economic reforms in place much as solvent but illiquid companies can be shielded from their creditors.
A great deal has been accomplished on these concrete measures to address the volatility in international financial markets. Obviously there is still workthat needs to be done on this subject.
Canada is determined to carry on its efforts toward leading theinternational community in its efforts to develop a more stable andprosperous world economy. It is in this context that Canada could accept theimposition of a Tobin tax if the problems that we have outlined wereresolved and if all-and I need to be very clear on this-other jurisdictionsagreed. Unfortunately those are very big ifs.
Our finance minister, the government and in fact the country, rather than sit back and wait for a Tobin tax or for some other option, acted in a way showing leadership. We put forward a six point plan to attack the underlying causes of financial market volatility. By putting forward that six point plan we have the support of the IMF and the support of the G-7 countries.
We have countries around the world looking to Canada for leadership on this issue. The finance minister has demonstrated that leadership. We will continue to do so as we continue to explore this issue with other major countries. We will continue to show leadership on a much broader strategy to attack the underlying causes of financial market volatility.
I commend the hon. member for bringing the motion forward and for allowing the House an opportunity to debate an issue which has been debated for some time now and will continue to be debated. It is an honourable thing to do, but there are flaws in this tax from the perspective that the one underlying principle which must be adhered to is that all countries must participate in a Tobin tax. They must all do it at the same time so we do not create any offshore financial centres. We can support this motion in principle.
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However, I caution the House and the hon. member that there are many obstacles in the way to seeing this tax come to fruition. In the meantime, we will continue to show leadership as a country. Our finance minister will continue to show leadership at the IMF by adopting a strategy for addressing the broader underlying causes of the crises that are faced by the world.
Mr. Paul Forseth (New Westminster-Coquitlam-Burnaby, Ref.): Mr. Speaker, to put it directly, I oppose the Tobin tax because I care about the poor and I care about the average Canadian who might wind up paying the bill in the long run.
Today we are really having a discussion about socialist myths. It is fine to have an academic debate for intellectual discourse but heaven help us if we ever allowed the world to slide into such a state where today's proposal would actually be realized. It would really hurt millions of people if the tax were ever large enough that it actually worked to its policy objectives.
The member for Regina-Qu'Appelle is urging the government to introduce a financial transaction tax, or the Tobin tax as it is known in the academic and university circles. In plain terms a financial transaction tax can be any tax. It can be any tax, fee or duty imposed by a government upon the sale, purchase, transfer or registration of a financial instrument. It can be broadly based or it can exempt a variety of instruments. It can be levied against transactions by Canadians or it can be levied against transactions in Canada, or both, cutting various ways across borders.
I think that I speak on behalf of Canadians when I say that taxes discourage positive activity, especially excessive taxes and disincentive penalty taxes. A financial transaction tax would ultimately discourage financial transactions. This would not be good for our economy. This idea responds to the symptoms rather than the causes of financial disorder.
Several weeks ago representatives from all opposition parties got together and in unison voiced a concern to decrease the premiums placed on employment insurance. All opposition parties wanted a reduction in a specific tax. What each party wanted to do with the surplus was rather different, but every party was at least against the increased levy because it hurt the employment rates we desire in Canada.
It is obvious the financial transaction tax is not viewed in quite the same way as the employment insurance tax. However my illustration was simply to show that people hate taxes, period, and in general they are hurtful if they are usurious.
Why was it that Canadians were so opposed to the GST even though some prices on consumer goods were reduced as a result? It is simply that new taxes are hard to sell to the public and they almost always create distortions in the market.
The NDP and socialists around the world want this tax to be implemented. They see it as a way to raise money for social issues but often without practical political accountability. One of the areas Professor James Tobin uses in selling his proposed tax to various countries around the world is that revenues could be used to finance the United Nations, or as others have suggested, to aid in various worldwide campaigns like that on land mines. A nice result to help the medicine go down.
To the uninformed or the resentful the idea may sound good on paper but we need to examine it closely to see how the revenue is handled. The main purpose of taxing something is for the revenue it brings. The NDP can say what it wants about how this tax would straighten out the world markets, which it certainly would not, but the bottom line is its secondary agenda.
In 1995 a group of environmental NGOs got together to form the Halifax initiative. Spearheaded by the Sierra Club of Canada the group urged for Canada to be a leader and initiate a financial transaction tax during the Halifax meeting of the G-7 leaders.
One of the briefs put forward by the Halifax initiative stated: "There are two key political issues involved with putting such a tax in place. First, it would be necessary to forge agreement amongst the major countries to implement a uniform tax, and second, there would have to be agreement on the collection and distribution of the revenue". Perhaps it should have added a third issue, for all countries to simply agree there also is a Santa Claus. I could say that collection might theoretically be done but even that is the easier part. The hard part is where does the money go? If the proceeds are returned to various governments, what rules would determine which country gets what amount? Whose money is it anyway?
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Would redistribution favour countries that have important financial centres? Would redistribution favour countries based on their voting shares, say in the International Monetary Fund? What about assigning revenues to global causes? How could any international organization possibly get all the countries to agree? The power struggle that would occur would be disastrous.
Proponents of the tax are suggesting that all countries in the G-7 get together to create this tax. Perhaps these same proponents should look at what is happening with other countries that have had some experience with such types of disincentive taxes and how they hurt people.
Japan has a financial transaction tax in a form and has had some considerable difficulty with it as the tax has had negative effects on theJapanese market. The story is similar in the United Kingdom. It has raised some money but there is concern that much more could be achieved without the tax. The U.K. is considering getting rid of the tax. Sweden has also had bad experiences with the tax. Germany has decided that the costs and the problems of the tax far outweigh any benefits when we get into that kind ofrevenue generation.
To get all countries onside appears to be an insurmountable task. According to Tobin, "a transaction tax on purchases and sales of foreign exchange would have to be universal and uniform, would have to apply to all jurisdictions, and the rate would have to be equalized across all markets". That is his criteria. Obviously that would be absolutely impossible to achieve.
There are other reasons to oppose the financial transaction tax, one being to shift to other jurisdictions. It is impossible that all jurisdictions will subscribe to the methods of the Tobin tax. Therefore, members of the financial community will simply use offshore tax havens in order to evade the tax. Complicated schemes will be developed to get around the tax. There is no end to it.
In 1995 the IMF wrote a paper on financial transaction taxes. It spoke clearly about substitutions. It is stated in the paper, "If transaction taxes applied to transactions only in domestic markets, investors could substitute foreign trading as a means to avoid the tax. Shifting the location of trade in financial assets is relatively easy, with trade shifting to other countries or to locations with established financial markets. For instance, a considerable amount of trading in the equities of the United States takes place in London".
The stated goal of the tax is to slow the velocity of foreign exchange markets. But once the tax was established, pressure would be there to continue to raise the tax until it actually began to work. It would then become a very difficult disincentive for the overall world economy.
The bottom line is that there are insurmountable loopholes through this idealistic scheme. Financial markets contain numerous products that are close substitutes to other products. A government bond is a close substitute to a high quality corporate bond. Bank deposits are substitutes for money market funds. If we tax one product, any investor is going to search out for a replacement.
I think my NDP friends would agree that even in a perfect world not every country would sign up to such a tax treaty as they are proposing. Therefore, if a country refused to institute a financial transaction tax, it would essentially become a magnet for foreign exchange trading operations of major banks worldwide. This would be disastrous for countries that went ahead and implemented the tax. It would be a disincentive for them. It would be a competitive advantage for those countries that stayed out of the scheme.
The volatility of foreign exchange markets is a fact of life in the global economy. My recommendation is for governments to pursue credible fiscal policy and encourage strong transparent financial sectors instead of punishing currency traders. Money moves when there is a failure to perform. Accomplishments in a working market are rewarded. Those who do not perform wither. Often the volatility of money in the world has to do with seeking higher performance. That is the best kind of discipline wherein we all may be better off.
On paper the theory may be convincing to some, however in reality it simply would not work. Therefore, I directly oppose the idea of a Tobin tax.
Within our purview, the government has much more pressing matters to deal with with respect to its financial house and getting our finances in order.
It is my hope the government will begin to diligently work at reducing the employment insurance premiums for example in order to rebuild the deteriorating confidence Canadians have shown in respect of our domestic financial markets. We need lower taxes. For markets to work better, rather than have a bureaucrat deal with money, it is better to leave the money in the hands of a taxpayer, a consumer or an investor.
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Money markets worldwide are volatile. Eventually it is revealed that the underlying fundamentals of these- The Acting Speaker (Mr. McClelland): I am sorry but the time for the hon.member has expired.
Mr. Benoît Sauvageau (Repentigny, BQ): Mr. Speaker, I want to congratulatethe hon. member for Regina-Qu'Appelle on his great idea of presenting Motion M-239, as amended to read 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.
My colleagues in the Bloc Quebecois and I generally support in principle motions as presented. And my colleague from Lac-Saint-Jean clearly demonstrated this. Wholesale unregulated globalization is a little scary. So, as far as we are concerned, some regulating of international financial transactions, of shameless speculation, is good. Members will see why later in my remarks.
The meaning of "financial transactions" in general ought to be specified. This may be a simplistic example, but let us say I have $100 Canadian changed for American money because I will be travelling to the U.S. tomorrow morning. Is this kind of financial transaction likely to affect the Canadian or American dollar? I think not. Should there be a tax on this simple transaction? Again, I think not.
To sum up, yes, speculation should be taxed or regulated. Perhaps the meaning of the word "transaction" should be further defined, as we will see later.
Listening to the Reform member who spoke before me, it is clear that the Tobin tax can be interpreted any number of ways. People see what they want in it and it is blamed for many things. When James Tobin-I want to make it clear that the premier of Newfoundland and former minister on the other side is not the one who came up with the idea of imposing such a tax, but rather an American economist named James Tobin-won the Nobel Prize in 1972, I am sure no member of the Reform Party sat on the jury, otherwise he would probably never have received this well deserved award.
Just because an idea is difficult to implement does not mean it should automatically be rejected. When my Reform Party colleague says it cannot be implemented and is unfeasible, and that a third issue could even be to consider reinventing Santa Claus, I think he is going a bit far.
When he says it is impossible to get all countries to agree to go along with a decision that would place legal limits on international financial speculation, he is perhaps forgetting that today, in 1998, we have the WTO, to which the very great majority of, if not all, countries belong. Only a few are missing.
Nonetheless, after several years of talks and negotiations-starting with the GATT, and moving on-we now have harmonized customs tariffs. Ten years before the first GATT rounds and before the WTO, various parliaments perhaps had debates in which they said that it would be impossible and unthinkably utopian to consider harmonizing customs tariffs internationally.
But this is what we have today. Why? Because countries realized that, if countries who engage in this sort of international trade wished to evolve in a constructive and secure manner, it would be a benefit to rich countries and poor countries alike to have a legal framework, a consensual framework for trade and tariffs, in order to increase international trade and revenues in countries that can benefit from such trade.
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But there is a framework. How does it work? Who decides where meetings are held? The first ministerial meeting was held in Singapore, the second in Geneva, not too long ago, and amendments and improvements are being made.
International institutions are capable of working in harmony. Why do people say that, if it is complicated, they will give up, abdicate their responsibilities and go home. I disagree completely.
The motion calls on us to move forward and give the matter more thought, in light of the new reality. Some will say that the idea was first put forward 20 years ago and that it has been discussed for just as long, but that it is not feasible.
Twenty years ago, Mexico had yet to go through a money crisis. Twenty years ago, Asia had yet to go through the crisis it is now facing. Twenty years ago, nobody had heard of George Soros who, with $10 billion, was able in only one day to make the pound sterling drop and make a billion dollars in profit.
The economic situation has evolved, why can our vision and our policies not do the same? Why stick to the idea-and I hope it is not shared by the majority-put forward by the Reform Party, that says "If it is too complicated, we give up and we will vote against it".
We also have to use our head and say we sincerely do not believe that, with this tax, we want to tax everything. If I were to invest $1,000 on the stock market or put $1,000 in a mutual fund, I do not believe I would be a dangerous speculator with a lot of influence on the peso or the U.S. dollar.
However, people are playing Russian roulette with foreign currencies. People in Thailand and Mexico know full well that sometimes, and more often than not, it has a direct impact on their currency and hence on their national economy.
Let me give you an example. In the last edition of L'Actualité, we can read that Bill Gates, whose assets total $51 billion, could in one day restore the Russian economy. In today's economy, there are some people, some consortiums, some investment groups who can at any time use their money to influence and destroy whole national economies, and this will then trickle down to the regions.
This can have an impact at the international level. A few months or a few years down the road, unfortunately, Canada will be affected. In today's new economy, do we have to ask ourselves that question?
I was listening to the parliamentary secretary and I was somewhat surprised. He also talked about the difficulties related to the implementation of such a tax. He made reference to the May 1995 report of the Standing Committee on Foreign Affairs entitled "From Bretton Woods to Halifax". If I may, I will quote from page 57 of that report. It says:
At this point, the Committee's view is that the feasibility of the concept has yet to be proved but that an attitude of openness is warranted.
The objectives of a tax on currency speculation at least have sufficient merit and promise to deserve serious longer term examination within a G-7context. We are aware of some research that has already been done, including within the Canada's Department of Finance.
However, ideas of this sort are still only in the very preliminary stages of investigation, much less deliberation. As even supporters of the concept willingly acknowledge:
-an in-depth feasibility study is needed to analyse the highly complex mechanics of foreign exchange transactions.
That was written in 1995, three years ago, nearly four years ago. "An in-depth feasibility study is needed". What did the government do with those recommendations? What did the government do since May 1995 with this idea of a study committee? We never saw such a committee.
In closing, I want to propose an amendment to Motion M-239. I move: 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"
This amendment to Motion M-239 would stress the notion of transaction, as I pointed out at the beginning of my speech, and would make the motion consistent with the Tobin tax.
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I hope all members of the House will support the amendment and then Motion M-239 as amended.
The Acting Speaker (Mr. McClelland): The Chair was advised earlier of the amendment and it is in order.
Mr. Scott Brison (Kings-Hants, PC): Mr. Speaker, I commend my colleague in the New Democratic Party for having brought forward this issue to the House of Commons.
When James Tobin introduced the concept of a Tobin tax 20 years ago it did not make much of a ripple, which were his words. In fact, it sank like a rock. Periodically we hear about a Tobin tax and the idea flares up again typically during times of economic turmoil.
In the current context, with $1.3 trillion traded daily in global capital markets, it has raised its head again similar to the Loch Ness monster. Periodically this monster pops up. Some people see it, typically during periods of turmoil.
I think the hon. member has done us a service by bringing the issue forward so that we can debate and discuss the Tobin tax in the House. I have significant concerns about the Tobin tax. Not that I do not recognize the importance of developing market controls or developing some way to effect the prevention of the types of financial disasters we have seen in Southeast Asia, prior to that in Mexico and with the Barings Bank and some of the spinoffs of that debacle, or BCNI. These types of disasters have been very damaging to economies not only within the sovereign borders of those states where they emanated from but in a global sense.
I do disagree with the concept of a Tobin tax. I feel there is a certain amount of economic naivety that ignores some of the unintended consequences of this type of tax. One of the