Thank you.
Good morning, Chairman Easter, honourable members, and of course, our legislative staff. Welcome to the Toronto region.
I'm Jeff Parker. I'm the manager of policy for the Toronto Region Board of Trade. Thank you for giving me and our organization the opportunity to appear before the committee today.
The board is the Canadian Chamber of Commerce's largest urban centre, connecting more than 12,000 members in the Toronto region. The board seeks to make Toronto one of the most competitive and sought-after business regions in the world. In service of that goal, we pursue a robust policy agenda aimed at making our residents and businesses more productive and competitive, which also happens to be the focus of the finance committee's consultations this year.
In August the board provided a written submission to your pre-budget deliberations that includes a more complete discussion of the steps we believe the federal government needs to take to make our country more productive and competitive. In my brief time this morning, I want to focus on three areas of that submission: trade, transportation, and the supercluster initiative.
As a medium-sized economy of 35 million people in a world of seven billion, Canada's continued prosperity is dependent upon our ability to export and compete in global markets. Trade makes us more efficient and productive, focusing Canadian businesses on the goods and services that succeed globally. According to Export Development Canada, businesses that sell internationally are 30% more productive and 25% more innovative than businesses that do not.
Trade is also a source of employment. For every $100 million in new export activity, 1,000 jobs are created, often in well-paid sectors.
Despite the clear benefits of trade, Canada isn't doing enough to seize this opportunity. Specifically, our small and medium-sized enterprises, SMEs, are less likely to export than larger firms with more than 500 employees. Currently only 4% of Canadian SMEs are exporting compared with 23% of our larger firms. According to the research featured in the board of trade's recent priority export markets report, this is the lowest figure in the G7. In Germany, 28% of SMEs export, as do 27% of French SMEs, and 21% of British ones. This is a lost opportunity. If Canada increased its share of SMEs exporting to the same level as larger firms, 23%, it would mean an extra 219,000 businesses generating an estimated $225 billion in new export activity. This is the type of economic transformation we should be striving for.
Since the 1980s, the federal government has taken the first step by negotiating free trade agreements with dozens of countries, including the recent deal with the European Union, but more can be done, and we urge the committee and the government to adopt the following recommendations.
First, partner with the board's World Trade Centre Toronto to expand our trade education services nationally. The World Trade Centre Toronto has already provided trade education to more than 170 SMEs through its trade accelerator program. The federal government should work with us to extend the program nationally to prepare more firms for international trade.
Second, prepare businesses to take advantage of CETA. Our trade agreement with the EU provides new opportunities for SMEs, but unfortunately, according to our research, many businesses are not sufficiently informed or prepared to take advantage. In partnership with chambers of commerce and industry associations, the federal government needs to do more to provide SMEs with information and resources to fully engage with CETA.
Increasing trade among Canada's businesses also requires the more efficient movement of people and goods throughout our cities. Unfortunately, a lack of investment in transportation infrastructure by all levels of government has caused congestion to increase, reducing productivity of businesses and residents alike. In the Toronto region alone, congestion is estimated to cost as much as $11 billion every year. The funding pledged to public transit in budget 2017 is a necessary step to address this, and we urge all members to ensure the government maintains its commitment to spend this money based on ridership and population growth.
Beyond funding, the federal government has a special responsibility for trade-enabling infrastructure, particularly at our borders and airports. If we want to expand trade, grow our economy, and increase our shared prosperity, the federal government can do more to enhance the movement of people and goods through the following measures.
First, speed up improvements to border infrastructure at crossings and airports. While the government pledged new investments in budget 2017, the border remains a major impediment to businesses such as automotive and food and beverage manufacturing that rely on the integrated North American supply chain. Border delays can mean increased costs and decreased productivity.
Second, invest in improvements in airport connectivity. In Toronto's Pearson and Hamilton's Munro airports, the Toronto region hosts the first and third most important airports for handling cargo. Pearson also centres an employment area of more than 300,000 people, and that's Canada's second largest, next to downtown Toronto. The federal government needs to work with the provinces, municipalities, and airport authorities to improve the infrastructure around these critical transportation hubs.
Finally, implement a regional airport strategy for southern Ontario. By 2030, Pearson, Canada's busiest airport, will be closing in on its passenger capacity limit. The federal government should work with stakeholders to implement a strategy that will accommodate rapid growth at the region's airports.
Finally, the board has been encouraged by the federal government's innovation superclusters initiative as a new approach to economic development. The board is proudly involved with the advanced manufacturing supercluster bid, which has brought together industry, municipal governments, chambers of commerce, and research institutions along the Toronto-Waterloo innovation corridor. The bid has attracted more than $600 million in cash and $148 million in in-kind commitments from the private sector.
Beyond our own involvement, though, this economic development strategy has much to recommend it. Rather than sprinkle subsidies across the country, the supercluster plan correctly acknowledges that Canada must focus on improving and scaling up existing areas of strength. The stipulation that the government will match funds from the private sector will further restrict the focus to clusters that are already achieving success.
The board urges the government toward final supercluster funding to the bids that are the most developed and will generate the greatest economic return. For this initiative to succeed, the government must resist the urge to make funding equitable by region and instead use transfer programs such as equalization to address regional disparities.
Despite the uncertainty presented by the current NAFTA negotiations, this is a moment of opportunity for Canada. To truly realize our potential, however, we must invest in our urban centres such as the Toronto region, the key drivers of our economic growth, and focus on bringing world-beating Canadian goods and services to global markets.
Thank you for your time. I look forward to your questions.