Thank you very much, Mr. Chair.
Members of the committee, I am Bruce Christie, Canada's chief air negotiator, and I am from the Department of Foreign Affairs, Trade and Development. I am grateful for this opportunity today to appear before the committee to discuss Canada's air transport agreements.
With me from Transport Canada is Marc Rioux, whom you have already been introduced to, who is executive director of air policy, international.
Mr. Chairman, over the next few minutes I'll provide an overview of Canada's air transport agreement program and the blue sky policy and its alignment with Canada's broader international trade agenda, namely the global markets action plan, or GMAP as we call it, and its role in advancing Canadian business interests at home and abroad.
Canada's vast geography, low population density, and trade-focused economy drive a reliance on the air transport sector. As a trading nation far from important overseas markets, Canada relies on air carrier service through Canadian airport hubs to support economic growth and long-term prosperity.
The air sector directly employs 140,000 Canadians and annually contributes over $35 billion to our GDP and $12 billion to federal and provincial treasuries. Canada's relatively small internal market means that growth prospects for the industry are limited unless it competes in global markets. However, Canadian carriers operate in a deregulated, user-pays aviation system in Canada, unlike many of the international competitors, including U.S. airlines, whose national and subnational governments support their domestic aviation.
These characteristics create challenges for this strategic sector of the Canadian economy.
Through the negotiation of bilateral air transport agreements, or ATAs with other countries, the government helps Canadian carriers compete internationally by facilitating their access to new markets and supporting a stable “doing business” environment as well as helping Canadian airports market their services to Canadian and foreign airlines. When new or expanded air services are launched, the whole Canadian economy benefits.
The Chicago convention signed in 1944 established a legal framework for the provision of international air services and created the International Civil Aviation Organization or ICAO, which is headquartered in Montreal. A byproduct of this convention, which Canada and 190 other states signed, is the negotiation of bilateral air transport agreements that govern the provision of international air services.
The primary issues covered by an ATA include: operating rights, for example, the city served and frequency of flights; the rules for doing business, like access to airport facilities and the avoidance of double taxation; and provisions dealing with pricing, safety, security, and dispute resolution. Once they enter into force, ATAs become treaties under international law.
It is important to understand that ATAs simply establish a legal framework within which Canadian and foreign carriers make decisions based on their own commercial interests. In this sense one should not confuse air rights with air services. In a large number of cases, air rights are available but are not being used by carriers. Consequently there is a significant unused capacity in our suite of ATAs. This means that new or expanded air services could be launched in the short term without the need to negotiate the relevant ATA. This also means that non-open ATAs are not automatically restrictive.
Canada has a long history of successful ATA negotiations. Most recently in 2006 the Government of Canada modified its approach and adopted a more proactive approach to liberalization of ATAs and the negotiation of open sky-type agreements where doing so is in Canada's overall interest. This is called our blue sky policy.
The main objectives of the policy are to ensure long-term and sustainable competition for the benefit of consumers across Canada, to provide opportunities for Canadian airlines and airports to grow and compete internationally, to support Canada's international trade objectives as well as business- and tourism-sector priorities, and to ensure a safe, secure, efficient and economically viable air sector. The blue sky policy does not advocate a one-size-fits-all approach to air transportation negotiations and recognizes that in some instances it is justified to be more prudent, especially where there are concerns about a level playing field or where new services run the risk of destabilizing existing ones valued by Canadian communities.
The implementation of the blue sky policy requires interdepartmental coordination among Transport Canada; the Canadian Transportation Agency; and Foreign Affairs, Trade and Development Canada.
The Minister of Transport is responsible for the overall implementation of the blue sky policy, with mandates approved by both the Minister of Transport and the Minister of International Trade. While I report to both ministers, my role as chief air negotiator resides at the Department of Foreign Affairs, Trade and Development, which maintains the negotiation lead for ATAs.
Since its inception, the policy has become an important vehicle to promote connectivity between all Canadian regions and the world. It has also provided Canadian consumers with more choices in terms of destinations and the number of direct flights. Since November 2006, Canada has concluded new or expanded ATAs covering 80 countries. Including pre-blue-sky open skies agreements with the U.S., Canada has now concluded open agreements with over 44 partners, including the 28 member states of the European Union, with which we have a comprehensive agreement. We also have expanded agreements with 20 countries and first-time agreements with 21 countries.
As of October 2014, the open agreements we have concluded cover approximately 72% of Canada's international passenger traffic. Canada has also concluded with or offered an open agreement to countries representing about 91% of Canada's overall international two-way merchandise trade. Currently, about 2% of Canada's overall international passage traffic is under agreements or arrangements that contain practical constraints on airlines' commercial plans. Since 2006, the number of bilateral partners has gone from 73 to 112, which amounts to a 58% increase.
There is strong alignment between the government's air transport agreement negotiating agenda and its international trade agenda, specifically the global markets action plan, or GMAP. You will recall that GMAP is Canada's blueprint for creating jobs and opportunities for Canadians through trade. It consists of comprehensive action plans to advance the interests of Canadian businesses in a specific group of key markets and priority sectors.
GMAP identifies three types of priority markets: emerging markets with broad Canadian interests, such as Brazil, China, or Korea; emerging markets with specific opportunities for Canadian businesses, such as Kuwait and Panama; and established markets such as the EU, the U.S., and Japan. It also identifies 22 priority sectors, including transportation and tourism.
Of the 50 markets listed in the GMAP, there are only five with which we do not already have or are not seeking to negotiate an air agreement, and the main reason for this is that these markets are too small to sustain viable own-aircraft services. Of the 21 new or expanded air agreements concluded in 2013 alone, 11 were with GMAP markets.
ATAs are an essential facilitator of trade, supporting the sectoral action plans under the GMAP both directly and indirectly. For example, ATAs also cover cargo flights, which allow for the transportation of time-sensitive, high-value goods to and from Canada. Provisions in ATAs provide for more convenient and diverse travel options for Canadian engineers, lawyers, and consultants who need to travel abroad to provide their services. Finally, this directly supports Canada's tourism and higher education sectors, providing access for tourists and international students coming into Canada. In this regard, Canada has ATAs with all of our target markets identified for tourism in the GMAP.
For the first time this year, Canadian officials consulted with key business organizations—namely, the Canadian Council of Chief Executives, the Canadian Manufacturers and Exporters association, and the Canadian Chamber of Commerce—in the development of the ATA negotiating strategy for 2015. Involving these important stakeholders at the planning stage of our negotiating agenda will help to ensure that the air connectivity interests of our business community are taken into account and that our ATA program is aligned with Canada's trade objectives.
Canada will continue to seek more ATAs to promote the interests of Canadian consumers, as well as our trade and tourism sectors. The outcome of future negotiations will continue to support a range of federal government policies, such as the economic action plan, the global commerce strategy, the federal tourism strategy, gateways and corridors initiatives, and the Americas strategy.
In conclusion, Mr. Chairman, my colleague Marc and I would be delighted to respond to any of the questions you or members of the committee might have on Canada's ATA program, its blue sky policy, and its role in facilitating Canada's trade agenda.
Thank you very much.
