Good morning, Mr. Chair.
Good morning, everyone. Thank you for giving me the opportunity to present our point of view on your debate and perhaps provide input for your recommendations to the Minister of Finance.
Mr. Chairman and committee members, you should have available to you our full submission to this committee. It addresses three areas that we believe go to this government's jobs and competitiveness agenda. The elimination of airport rent, the creation of true foreign trade zones, and the need to reduce the regulatory burden will all create more jobs and make our airports in Canada more competitive with those of our neighbours in the United States and elsewhere in the world.
In the next few minutes, for the purposes of keeping this brief, I will touch on airport rent and foreign trade zones.
First, on airport rent, for all the benefits and positive elements of Canada's unique airport management model, the payment of rent to the federal government by airport authorities remains the single largest impediment to our members' growth. This is why the Canadian Airports Council recommendation to this committee is that your report to the Minister of Finance include a recommendation that airport rent be eliminated.
Airports in the U.S. not only do not pay rent, but they also do not pay municipal property taxes, and they benefit from federal and municipal funds to cover their infrastructure needs. Our members compete with airports in the U.S., and indeed with airports around the world, in securing service from air carriers from all over the world. Airlines today have many options open to them when it comes to deciding which markets warrant their attention. If an airport in Canada is more expensive to service than a similarly sized market elsewhere, the Canadian airport is at a competitive disadvantage.
Meanwhile, for many of our members' airports near the border with the U.S., the competitive nature of air service is even more obvious. A prime example is the 1.7 million Canadian travellers each year who travel through Buffalo Niagara International Airport. That is one-third of Buffalo's five million passengers. As a result of so many Canadians, the airport is in fact expanding its infrastructure.
This is happening because U.S. airports enjoy a cost advantage. According to the World Economic Forum, Canada ranks seventh in the world in terms of tourism and competitiveness, but due to factors such as rent, taxation levels, and the excise tax on aviation fuel, Canada is ranked 110th out of 124 countries in terms of price competitiveness.
If airport rent is eliminated, then, what will happen? A recent study conducted by the Canadian Airports Council estimates that the elimination of rent would result in 590,000 new air travellers a year, who will pump an additional $304 million in spending into the economy. Total new employment generated would be about 5,330 person-years and total economic output would be $710 million a year. When combined with the tremendous economic spinoffs from the elimination of rent, as outlined earlier, we contend that this move would be a valuable direct investment in Canada’s aviation and tourism sectors.
Mr. Chairman, my second and final point this morning is on foreign trade zones.
As the federal government continues its efforts to improve Canadian industrial competitiveness through trade liberalization, which we fully support, we also seek your support for a program that has enjoyed success abroad but has yet to be developed in Canada, and that is true foreign trade zones. The Canadian Airports Council, the Canadian Chamber of Commerce, and the Canadian Manufacturers and Exporters are united in our support for this initiative.
A key component in the prosperity of global trading hubs is their proximity to foreign trade zones. Most, if not all, have foreign trade zones nearby. By lowering barriers to trade, these zones are designed to help countries improve their relative competitiveness as hubs of trade and transportation. Accordingly, the concept has grown quickly and has enjoyed economic success throughout the world.
Free/foreign trade zones are facilities where goods from outside a country can be stored or processed duty- and tax-free prior to (a) shipment to another country or (b) import via normal custom process into the domestic economy. Foreign trade zones have proven to be powerful economic generators providing a number of advantages to their users, firms involved in international trade.
The CAC requests that this committee recommend to the Minister of Finance that this government take whatever measures are necessary for the creation of true foreign trade zones in Canada.
Mr. Chair and committee members, I will end my oral presentation here. Thank you very much for the opportunity this morning.