2011 Legislative Session: Third Session, 39th Parliament
HANSARD

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The following electronic version is for informational purposes only.
The printed version remains the official version.

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Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)
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WEDNESDAY, MAY 4, 2011

Afternoon Sitting

Volume 20, Number 13

Committee of Supply

ESTIMATES: MINISTRY OF
JOBS, TOURISM AND INNOVATION

G. Gentner: Recently in an article in a local newspaper, the Delta Optimist, there's been discussion of a foreign trade zone perhaps even coming to a municipality near me. On February 22, 2011, the then Ministry of Tourism, Trade and Investment issued an RFP for a feasibility of a B.C. foreign trade zone program. I'm wondering how much has been earmarked for such a study and where I can find it line by line in, perhaps, the service plan. I didn't find it.

Hon. P. Bell: The contract for this particular project actually rests with the Ministry of Transportation and Infrastructure. But I can tell the member opposite that the contract amount was for $76,785, and the contract completion date is July 31 of 2011.

G. Gentner: Well, I have a request for proposal in my hand, Feasibility of a British Columbia Foreign Trade Zone (FTZ) Program, Ministry of Transportation and Infrastructure and Ministry of Tourism, Trade and Investment. Maybe the minister can correct me, but this request for proposal was a joint venture by both ministries. Am I wrong to assume such?
Hon. P. Bell: We always work collaboratively with other ministries, and I'm happy to answer whatever questions, certainly, that I'm capable of answering relative to this issue.

G. Gentner: I'm intrigued by it all because why would it be issued in partnership along with the Ministry of Transportation and Infrastructure, which deals with freeways and the like, and yet this request for proposal is about opening up trade as a free or foreign trade zone?
Hon. P. Bell: I should also identify a new staff member that has joined me, Don White, who is an executive director in the trade, investment and innovation branch.

I think the answer to the member's question is reasonably simple. The Ministry of Transportation also has responsibility for ports. Foreign trade zones typically are developed in and around port areas, so it would be an area that would be collaboratively developed.

[ Page 6618 ]

G. Gentner: Now we're getting somewhere, because now we know that the foreign trade zone is coming to a port near you. I thank you for bringing that to our attention. It's very much important, if you understand what's happening in my community and in the member for Delta South's. We're seeing extreme development proposals hitting us in both ways.

Now, the request for proposal closed on March 10, 2011. Has there been a candidate chosen?

Hon. P. Bell: There has been a successful proponent. There were two proposals received, one from a company called InterVISTAS Consulting Group and the other from a company called CPCS Transcom Ltd., which was a Quebec-based company. The contract was awarded to the B.C.-based company, InterVISTAS.

G. Gentner: InterVISTAS — is that a company that is part of the greater Vancouver gateway committee?

Hon. P. Bell: No, they are, as I understand it from my staff, independent of that group.

G. Gentner: Has the provincial government been in discussions with the federal government relative to changing existing federal foreign trade zone programs?

Hon. P. Bell: I can assure the member opposite that since I've had responsibility for the portfolio, there have been no discussions between myself and the federal government, or staff members and the federal government, as I understand it, around foreign trade zones.

I can't assure the member opposite that at some point in the past there hasn't been some level of discussion around this, but it is an area that I personally find intriguing and one that I am eager to try and get more information on and what the benefits and challenges may be that would be associated with something of this nature.

G. Gentner: Intriguing indeed. Why would the province be encouraging a location-specific foreign trade zone in B.C. over a provincewide — now that the minister has admitted that it's going to be located by a port?

Hon. P. Bell: The contract that was issued was not specific to any given geographic location in the province. In fact, my understanding is that the federal government programs specifically exclude geographic locations for foreign trade zones. It's not an area that…. The three programs that I understand may be available through the federal government would not in any way identify a specific zone as a foreign trade zone.

G. Gentner: Yet regarding the requirements, in response, for the RFP, it specifically says that the study will analyze and make recommendations, including advantages and drawbacks of establishing a location-specific foreign trade zone in British Columbia. So is it not going to look at this? Is it or isn't it?

Hon. P. Bell: The answer is both. The contract allows for providing advice both on a specific location, if there was one geographically identified — or just the notion of a geographically identified area, wherever that might be — as well as a program that would involve no specific geographic locations but be available on a broader range. So the answer to the question is both.

G. Gentner: Obviously, the port is from the Kootenays all the way to Prince Rupert.

The consultant is expected to liaise with the steering committee, and that steering committee is the foreign trade zone coalition — this consortium. What does the province have and mean when it says "liaise"?

Hon. P. Bell: I should point out to the member opposite that foreign trade zones are often associated with airports as well as seaports. So, in fact, when the member said all the way from the Kootenays, I think he said, to…. I forget where his other location was. He's quite correct, actually. You could have a free trade zone around an airport, even in my home community of Prince George. That would be quite possible.

The purpose of having the contractor liaise with this group is simply information-sharing. They are individuals that have expertise when it comes to ports and how you might develop a foreign trade zone.

G. Gentner: Who or what entities make up this special foreign trade zone coalition steering committee?

Hon. P. Bell: I'm not sure whether this is a complete list or not, but I think it presents a flavour of the sorts of individuals that would be on this steering committee: Diane Gray, who is the president and CEO of CentrePort Canada; Claude Mungeau, who is the president and CEO of CN; David Miller, who is also at CN; Jane O'Hagan, who is the chief marketing officer for CP Rail; Michael Moore, president and CEO of Global Container Terminals; Lori Janson, who is also with Global Container Terminals; Bob Wilds, who is with the Greater Vancouver Gateway Council; Lloyd McCoomb, who is with the Greater Toronto Airports Authority; Karen Oldfield, who is with the Halifax Port Authority; Robin Silvester, who is with Port Metro Vancouver; Duncan Wilson of Port Metro Vancouver; Don Krusel, who is with the Prince Rupert Port Authority; Eric Waltz with TSI Terminal Systems Inc.; Larry Berg, who is the present CEO of Vancouver Airport Authority; and Barry Rempel, who is the president and CEO of the Winnipeg Airport Authority.

[ Page 6619 ]

G. Gentner: How can the government or its coalition partners assess the detriments of a foreign trade zone when the entities already support it?

Hon. P. Bell: The contractor has the responsibility to consult not just with this particular group of individuals but also with other groups of individuals. This is simply an analysis of whether or not there is value to moving forward on a more detailed level of work to determine if a foreign trade zone would be called for, and if so, if it should be a specific location or a non-described geographic location, perhaps something more industry-specific.

So it is an early piece of work that I think is important to do. The member opposite may oppose economic development initiatives and not be interested in creating jobs and wealth for the province. That is not the position of this minister or this government.

G. Gentner: And it's certainly not the position of the opposition. The opposition supports sustainable growth.

Now, when did the province begin its consultation with the federal government regarding the potential changes to the foreign trade zone? My understanding is, according to this proposal, we have customs and excise tax exemptions in two parts of Canada, but we're certainly looking at a change in that type of program. When did this discussion actually begin with the federal government?

Hon. P. Bell: I'm tempted to refer the member to the Hansard response that I provided him earlier, but I clearly said earlier that we've not engaged with the federal government at this point.

G. Gentner: Looking at the requirements and responses of the RFP, in its rationale for a foreign trade zone it states that the visiting foreign…. It's supported because "visiting foreign delegates and numerous port-related companies have commented on the lack of foreign trade zones in British Columbia."

I'm just wondering: can the minister name which companies have suggested to the government that we need a foreign trade zone?

Hon. P. Bell: As I think the member opposite knows, I have spent a fair bit of time travelling to China over the last three years or so, and I can assure the member that in some of the discussions I had there's an interest in part of Chinese industry to work with us collaboratively on a foreign trade zone.

I should also assure the member opposite that regardless of what it says, I am keenly interested in what benefits may be brought to British Columbians in the development of a foreign trade zone. Until I have the information fully explained to me about what both the benefits and challenges are, I would be unable to make a good decision on behalf of British Columbians in terms of whether we should move forward on this or not.

I am eager to see the results of the work that is going on, and if the results indicate that this has something that would be positive, then certainly I'll want more information in order to make a good decision.

G. Gentner: The current federal program includes the export distribution centres, the duty deferral programs, but in the proposal here it says, "there may be room for improvement within," which refers to the notion of changing the federal jurisdiction on foreign trade zones. How does a province see this change to benefit the province?

Hon. P. Bell: I'm in an awkward place here. Both the federal and provincial governments have responsibility for different policy and taxation levers. The question that we're asking of the contractor is: are there things within the realm of provincial responsibility that could be brought to bear to encourage investment in a foreign trade zone, and if so, what would be the advantages and disadvantages of a decision of that nature? Until we have that information, it would be impossible to know whether or not this is an economic strategy that we would want to follow, but it is information that I'm keenly interested in having.

G. Gentner: The jurisdiction of foreign trade zones comes under the purview of the federal government. So why is the province pushing this when the minister has admitted he has yet to converse with the federal government?

Hon. P. Bell: As is so often the case, the member opposite is wrong. The provincial government has many tools in its tool box that it can use to incent business activity. Whether you call it a foreign trade zone or anything, for that matter, is irrelevant. What the information is that we're looking for is how we build on the federal government programming that currently exists.

Part of the information that I would expect to acquire from this report also would be if there is a need to change some of the federal government policy in order to create something that does make sense for British Columbians, for high-paying jobs for families here in B.C. I would be interested in knowing that so I could make that presentation to the federal government.

G. Gentner: Maybe I missed it. Can the minister remind me when exactly this study, this report, will be available?

Hon. P. Bell: The report contract completion date is July 31, 2011.

[ Page 6620 ]

G. Gentner: So when will a copy be available to the opposition?

Hon. P. Bell: Once we have received the report and had an opportunity to review it, I'll be happy to provide the member opposite with a copy.

G. Gentner: Will that be a week or two after completion of the report and the minister's had it in his hands?

Hon. P. Bell: I'm not prepared to make a specific commitment around timing, but I will provide it at the earliest convenience, once I've had the opportunity. I don't know the size or scope of the report at this point in time, but certainly, it's something that I'd be more than prepared to share with the member.

G. Gentner: Exactly how much does the report cost again?

Hon. P. Bell: It's $76,785. I think I've provided that number already.

G. Gentner: Improving the existing foreign trade zone, according to the document, means developing an effective foreign trade zone model. Can the minister explain to me what is an effective foreign trade zone model?

Hon. P. Bell: I'm hoping to find that out via this report.
G. Gentner: It's really wonderful to know what direction the government knows it's going — putting the cart before the horse, so to speak.

"The value in enhancing" — I'm going according to the report — "mechanisms to avoid the costs of duties on manufacturing inputs that will be fully phased out by 2015." Can the minister elaborate what that means? Looking at the foreign trade zone models throughout the rest of the world, does that mean 100 percent foreign ownership in comparison to non-free-zone areas, and does it also mean a zero percent corporate tax for a certain period of years?

Hon. P. Bell: Maybe I'll just take a couple of additional seconds, if I may, on this answer. This report is intended to provide us with a preliminary view of how a foreign trade zone may work in British Columbia and if it is in the interest of British Columbians and British Columbia families to have something called a foreign trade zone.

Foreign trade zones vary hugely globally. In fact, to my understanding, there are well over 200 foreign trade zones in the United States. I didn't know that prior to having a bit of a briefing on that, so it was interesting to me. I knew of foreign trade zones or had heard of foreign trade zones in China, and you hear about them having some success in terms of economic development for different regions in China.

But this report is a preliminary report to provide us with some thoughts on what it is that we might do as a province to enhance the current federal government regulation and how that could work and if — or if not — it would provide economic benefits.

So the depth of questions that the member is asking I actually think at this point we don't have the answers to, because we don't have the report. I'm not even convinced that the report will answer all of the questions the member is asking.

The member just referred to a potential rule around foreign ownership in foreign trade zones. That is a question, clearly, that you would want to ask. What level of foreign ownership would you allow?

I know the member opposes NAFTA and opposes free trade, and we've heard that on many occasions in the House. But we actually embrace the notion of other countries investing in British Columbia. We'd like to be able to invest and have our British Columbia entrepreneurs invest in other jurisdictions as well.

We're not a closed economy. We're an open trading economy. It's something that we clearly differ on. I understand that. The member opposite doesn't share that view. But it is a point of difference.

To answer all those questions, we expect the report on a very early level to start to give us some information, but even this report I don't expect would put us in a position that would allow us to really fully understand all the details around what a B.C.-made foreign trade zone might look like.

The one thing I know is that foreign trade zones are hugely different, depending on what jurisdiction you're in. Each one is crafted in a way that I suppose meets the needs of the local community, or one would hope that is the case. Should British Columbia decide to move forward on foreign trade zones, we would clearly want to develop one that would meet the needs of British Columbia families.

G. Gentner: The minister obviously is suggesting that the foreign trade zone does not necessarily exclude 100 percent foreign ownership, zero percent corporate taxes, unrestricted repatriation of capital and profits, zero percent import or re-export duties or zero percent personal income tax, no currency restrictions, no labour restrictions or regulations on the hiring of foreign employees, the facility to mortgage owned premises on leased lands, or a company established in a free zone that has built its own facility may mortgage its premises to any bank.

So I get it that the minister is looking at all these possibilities. But before I leave this, since the government is indulging in this effort, can the minister explain to the House exactly how a foreign trade zone is going to benefit the province of British Columbia?

[ Page 6621 ]

Hon. P. Bell: We won't be restricting alien aircraft from landing in foreign trade zones too, and I know that's a concern of the member opposite. You know, the member just read out a whole realm of things, none of which I've said.

Hansard will duly show that he continues to fabricate at a level beyond the imagination of most members of this House and appears to be very good at that constant fabrication. However, the record will speak for itself, and we'll allow him to do that, because I haven't suggested any of those things.

In fact, what I have suggested is that we're eager to create a program, if it makes sense for British Columbians, that can work collectively for British Columbian families. I don't know what that looks like today. I won't know that until I've seen this report, and we've done much more work on it.
G. Gentner: Just a few remaining parts here under the proposal requirements. I'm quoting the documentation. "The proponent may identify additional research elements it believes would be necessary to achieve the objective of evaluating the benefits of the establishment of foreign trade zones in Canada or British Columbia and for consideration by the sponsoring ministries."

Can the minister explain to me what additional research will be needed if the proponents need greater evaluation in the benefits of the estimation of the foreign trade zones? Who or what agency will receive additional research, will be given the capacity to show the detriment of establishing the foreign trade zone in British Columbia?

We know where this study's going. It's foisted upon us by the proponents, but where are the safeguards and the counter-perspective in all this?

We know what the terms of reference are. It clearly shows, looking at…. The government is certainly in conjunction with the view that there is a need for a foreign trade zone. Where are the safeguards built in this, and does that mean there will be additional money to search that out?
Hon. P. Bell: This report is something that we asked for. Now, I know the member opposite may not want any information on what good economic development strategies might look like, and that appears to me to be what the member opposite is suggesting.

I am actually interested in building the economy of British Columbia and trying to create jobs and value for families and making sure we have the fiscal resources necessary to support important social programs like health care, education and other programs that are critical to all of our collective constituents.

This $76,785 report will not be the only level of information that's required in order to make decisions around whether a foreign trade zone might or might not make sense. If it does, if it should or should not be geographically specific or if it should be available on a broader-ranging basis and how that might be delivered…. There will be lots of time for information on foreign trade zones.

Clearly, the member opposite does not want that information, for whatever reason, doesn't want to know whether or not foreign trade zones should be considered. That is his choice. It is not my choice.

G. Gentner: We know what deregulation means. It seems to be quite the hollow onion when you look at it. You can deregulate, you can deregulate, and you can deregulate. We saw the deregulation and what happened when we sold the B.C. Rail and the derailment on the Squamish because of that lack of oversight.

We know that in 2007 the Minister of Transportation and Infrastructure took members of the B.C. Rail Co., which was being decommissioned to Dubai, to look at a free trade zone. Consequently, the vice-president of Dubai port later became the CEO and president of Global Container Terminals in south Delta.

So we have some grave concerns about this. It seems to me that the minister doesn't really know where they're going with this, but they've certainly directed it towards more deregulation and a lack of labour oversight relative to jobs. We have grave concerns.

That's about where I'm going with this. I will give it to the member for Delta South, who may have other questions on the matter.

FOREIGN TRADE ZONE IN PRINCE RUPERT - WHAT DOES THIS MEAN?

Well, my interest in free trade zones is their location, and in estimates we were told that it wouldn't necessarily be in Delta. It might be in Prince Rupert or Prince George or at the Vancouver Airport. V. Huntington:

The BC legislature brought up some concerns May 18, 2011, regarding the government’s pursuit in considering location specific Foreign Trade Zones (FTZ) to be set up in British Columbia, possibly in Prince Rupert.

On March 10, a Request for Proposal (RFP) was closed and a British Columbian company, InterVISTAS Consulting Group, was awarded a contract to conduct a Feasibility Study of a British Columbia Foreign Trade Zone Program. InterVISTAS has until July 31 to complete the study at which point the government will further explore such a program.

Setting up a FTZ would mean allowing foreign goods to arrive, be assembled, and stored in the zone duty and tax free before being shipped to its market destination. The subsidization of foreign companies is at the expense of British Columbians, who may in turn pay the price by paying the initial set up costs and/or allowing companies to work in an FTZ tax free until they find a better deal elsewhere.

Guy Gentner, MLA for Delta North and critic for Intergovernmental Affairs has some serious concerns about FTZs, and pointed out in the legislature that the responsibility for such zones normally lies within federal jurisdiction. There has been no consultation by the province with the federal government so far as stated numerous times by Minister of Jobs, Tourism, and Innovation, Pat Bell. A prospective homeowner would definitely make sure the house was for sale before ordering an inspection.

North Coast MLA Gary Coons is also concerned in the lack of leadership this province is taking. “Disregard for the opinion of British Columbians regarding developmental projects is becoming standard practice. Based on the way decisions seem to be made these days, whether the HST, BC Ferries, BC Rail, or TILMA, the question one seems forced to ask is how much will British Columbians have to pay in order to reverse a decision they didn’t make in the first place?

Will Canadian labour standards be enforced or will we create zones where one’s liberties are left at the gate? Will there be a negative effect on labour standards and will it threaten hard-won improvements in labour conditions, noting the ILWU Canada (Longshoremen) just agreed to an eight year contract? Will there be a “race to the bottom,” which assumes that competition will drive labour standards (and also environmental standards) to the lowest common denominator?

“I’m not against foreign investment in our region or BC, but I am against exploitation,” said Coons. “Research questions how to justify introducing an economic foreign zone to save existing manufacturing jobs and to encourage new ones.”

We seem to be on a slippery BC Liberal slope that may not be good for our region and not good for British Columbia. There are too many questions, with no answers! We need a full disclosure of what is going on!

Hasnsard Transcript from BC Legislature

G. Gentner: Who or what entities make up this special foreign trade zone coalition steering committee?

Hon. P. Bell: I'm not sure whether this is a complete list or not, but I think it presents a flavour of the sorts of individuals that would be on this steering committee: Diane Gray, who is the present CEO of Centre Port Canada; Claude Mungeau, who is the present CEO of CN; David Miller, who is also at CN; Jane O'Hagan, who is the chief marketing officer for CP Rail; Michael Moore, president and CEO of Global Container Terminals; Laurie Jansen, who is also with Global Container Terminals; Bob Wilds, who is with the Greater Vancouver Gateway Council; Lloyd McComb, who is with the Greater Toronto Airport Authority; Karen Oldfield, who is with the Halifax Port Authority; Robin Sylvester, who is with Port Metro Vancouver; Duncan Wilson of Port Metro Vancouver; Don Krusel, who is with the Prince Rupert Port Authority; Eric Waltz with TSI Terminal Systems Inc.; Larry Berg, who is the present CEO of Vancouver Airport Authority; and Barry Rempel, who is the president and CEO of the Winnipeg Airport Authority.

G. Gentner: John Ries from the Sauder School of economics has stated that foreign trade zones are simply a race to the bottom. With foreign trade zones, government has to provide subsidies and loosen environmental labour standards.

It is unclear what the benefits are to British Columbians, but it is clear that foreign trade zones are indicators of a failed economic policy. For the record, can the Minister of Transportation and Infrastructure explain what the benefits of pushing through a foreign trade zone would be for the average British Columbian?

Hon. B. Lekstrom: Well, we have posted a request for proposals in February for an independent research and analysis of foreign trade zones. I'm looking forward to receiving that. But my knowledge of foreign trade zones — and I'm sure the member has done his research — is that this is not about a tax-exempt status for workers losing their jobs and so on.

This is about the ability that's used around the world in foreign trade zones where commodities can be brought forward, products. They can be value-added. If they remain in the country — and in this case, it would be Canada — the full taxation statutes would apply. If they are then redistributed to other countries, they wouldn't.
I'm looking forward to the information that's brought forward, and we'll read it thoroughly, as I'm sure the member will do as well.
Mr. Speaker: The member has a supplemental.

G. Gentner: It's interesting. The minister seems to know what a foreign trade zone is, and yet they're still asking for a request for proposal to do a research study on it.
If those are the benefits, then why are the B.C. Liberals choosing to sneak this policy through, just like they did with the HST? Hon. Speaker, once a sneak, always a sneak.
Now, yesterday on Global the Minister of Jobs, Tourism and Innovation stated that the Premier asked him to have a hard look at the foreign trade zone. Now, can the minister explain to the House how the Premier can ask the government to initiate a foreign trade zone when the request for a proposal was already underway before she had even won the leadership bid?

It doesn't add up. The good old boys are back at it again — aren't they, Mr. Speaker?

Interjections.

Mr. Speaker: Members.

G. Gentner: The ministers will have their foreign trade zone blueprint in their hands this summer with no public consultation. It's a done deal. To the minister: if this is such a good deal for British Columbians, why so much secrecy?

Hon. B. Lekstrom: Probably some information that may change your mind on the question you've just asked, actually. The RFP is a public document posted on the Internet. I don't know how secret that could possibly be if it's available to the world for their consideration. I encourage the member to look at that.
Foreign trade zones — as well, in your earlier comments — are not a new concept. How would I know what they are? I've actually done some research, hon. Member, and I encourage you to do the same.

POTENTIAL USE OF DELTA LANDS FOR FOREIGN TRADE ZONE

V. Huntington: Well, my interest in free trade zones is their location, and in estimates we were told that it wouldn't necessarily be in Delta. It might be in Prince Rupert or Prince George or at the Vancouver Airport. But I have to say — and I hope the minister forgives me for being suspicious: when the former Minister of Transportation takes B.C. Rail to Dubai with him, when Global Container Terminals at Deltaport is owned in Dubai, when Global Container chairs the steering committee advocating free trade zones in B.C., when B.C. Rail has stockpiled more land than it requires for rail expansion and when a land consolidation group is secretly optioning agricultural land adjacent to the B.C. holdings in Delta.

Will the minister tell me whether this government is contemplating a free trade zone on the agricultural lands in Delta?

Hon. B. Lekstrom: The issue of foreign trade zones — as I said, I'm looking forward to receiving a document that will outline. This is not a new concept used around the world. There is no determination whatsoever, Member, that any determinations have been made, whether you're suspicious or not.

I have had the opportunity to meet with you on numerous occasions. There is no determination, locations of any such, and no decision has been made on that. I think that would be far too premature.

As I indicated, there was an RFP put forward through the Internet, a public document. Again, I want to reiterate that. I'm looking forward to the findings of that. I'm looking forward to the ability to review that document. But no, there has been no indication of any piece of property, whether it be in British Columbia or anywhere else that I know of, that has been committed to such an exercise.

Mr. Speaker: Member has a supplemental.

V. Huntington: I thank the minister for his response, but we've learned some hard lessons in Delta, and when this government secretly gets this far down the road in any planning, it's usually a done deal.

A Dubai model free trade zone has nothing to do with community. The whole point of a modern free trade zone is to protect business from community. This isn't about jobs. It's about greed. It's about flipping land in Delta, and it's about the destruction of the finest agricultural land in Canada.

I'm asking this minister: if this feasibility study recommends free trade zones in B.C., will the minister tell us today that his government will not remove land from the ALR to create an industrial wasteland in Delta?

Hon. B. Lekstrom: Recognizing your concerns and suspicions, I do want to point out they're foreign trade zones, not free trade zones, something that we're looking at.
I don't want to predetermine what the report will say. I'm looking forward to reading it, seeing what it has. Foreign trade zones do, though, when you look around the world, have the opportunity to create jobs.

There is a lot of speculation in your question, a lot of speculation that I think is unfounded, to be honest with you, Member.

I'm looking forward, as I said. A foreign trade zone concept is not new in the world that we live in. It is a concept that we have put out an RFP for. We have commissioned a report that will be brought back. I'm looking forward to that.

I am all for continuing to enhance our gateway to the Asia-Pacific. It is a vitally important part of our economy. If we have the ability to create jobs for British Columbians and their families and their children growing up here, I'm going to do everything I can to ensure that happens.

'Sanitized' proposal lacks details on labour, environment impacts: NDP's Gentner.

By Andrew MacLeod, 3 February 2012, TheTyee.ca

The British Columbia government is considering creating two foreign trade zones, one in the Vancouver region and one in the north.

The scenarios for zones where companies could bring goods into Canada without immediately paying tariffs on them are outlined in the report Feasibility of a British Columbia Foreign Trade Zone (FTZ) Program that Intervistas Consulting Inc. prepared for two B.C. ministries.

One zone, covering the Port of Vancouver and Vancouver International Airport, could add an estimated $5.1 billion in goods a year to the trade already happening, it found. The other is proposed to include the Port of Prince Rupert and the Prince George Airport and could bring an extra $46 million worth of goods through those cities each year.

"An FTZ policy can be an effective tool to improve the competitiveness of North American locations in the global supply chain," the report said. "They can be a powerful attribute for attracting economic activity to British Columbia that would otherwise take place overseas because of tariffs, taxes or other restrictions."

The zones would allow companies to bring goods or materials in from other countries to be assembled, customized or repaired in the province, said the report. The companies wouldn't have to pay any tariffs until the final products were put on the Canadian market. And if they were shipped out of Canada from the FTZ, they wouldn't be subject to Canadian tariffs at all.

Taxes reduced, delayed

"FTZs encourage overseas firms that are already exporting goods into the NAFTA economy to undertake some of the value added activity in North America," the report said. "Host countries use FTZs to attract new business and investment that ultimately creates new local employment and economic activity."

Companies could also use the zones to delay paying tariffs or, in some cases, to reduce them, the report found. It cited the pharmaceutical industry as an example where companies could save money by importing ingredients tax free, then later paying tax at a lower rate on the finished product.

Other industries might use the zones to warehouse goods, avoiding import taxes until they are ready to sell the goods, it said.

As the report put it, "Generally, as duties have been reduced, value added, sales and excise taxes have increased, and temporary postponement of these taxes are increasingly a raison d’être of a FTZ."

Dated Nov. 4, 2011, the report was prepared for the Ministry of Jobs, Tourism and Innovation and the Ministry of Transportation and Infrastructure.

Jobs, Tourism and Innovation Minister Pat Bell represents Prince George-Mackenzie, served by the Prince George Airport component of the proposed foreign trade zones.

The United States has hundreds of such zones, including 35 in west coast states, the report said. Canada has just two: one at the Gander, Newfoundland airport and one in Winnipeg, Manitoba at CentrePort.

Responding to a request for an interview, a spokesperson in Transportation and Infrastructure Minister Blair Lekstrom's office said JTI is taking the lead on the issue. A spokesperson at that ministry took questions, but Minister Bell was unavailable.

Bell hinted in the Legislature last May that Prince George might be under consideration for a foreign trade zone. "You could have a free trade zone around an airport, even in my home community of Prince George," he said, pointing out that they were not limited to ports. "That would be quite possible."

Bell was responding at the time to a question from the New Democratic Party MLA for Delta North, Guy Gentner, who along with independent Delta South MLA Vicki Huntington, was raising alarm about what a foreign trade zone might mean for Delta.

Huntington accused the government of putting economic interests ahead of all other values, including the protection of farmland. Gentner today noted that BC Rail had been buying land in the agricultural land reserve through a numbered company and said it wasn't clear why.

Report seems 'sanitized' says MLA

Having seen the InterVistas report, Gentner said, "It seems very sanitized." The report fails to address labour and environmental issues, he said. "It seems to be evading it."

While the report is full of "nice words", it remains difficult to know what it means and what the province plans to do, he said, adding he'll have lots of questions for the ministers responsible when the legislature resumes sitting after Feb. 14.

The report said that while early foreign trade zones created a few decades ago tended to be secured behind fences and exempted from local laws, including those covering labour and the environment, modern ones are different. Recent foreign trade zones are subject to local laws and the regulation tends to be done administratively rather than through security, it said.

Canada already has some policies that are "FTZ-like" in how they apply duties and allow companies to defer their taxes, but little actual FTZ activity, said the report. "In B.C. and elsewhere in the country there is currently a high level of interest in reforming the FTZ policy and the federal government has indicated it is willing to review and possibly simplify and enhance the programs."

Bell told the Legislature last May that the Foreign Trade Zone Council was to liaise with InterVistas as the consulting company worked on the report. Committee members included representatives of CN Rail, CP Rail, Global Container Terminals, the Greater Vancouver Gateway Council, Port Metro Vancouver, Prince Rupert Port Authority and the Vancouver Airport Authority.

Federal decisions to come

A key question the report addresses is whether FTZs would be bringing new business into Canada, rather than poaching from already existing trade.

"If structured properly, an updated FTZ policy would cause no displacement of any existing B.C. economic activity," the InterVistas report said. "Rather, a revised FTZ program would only generate new economic activity for B.C. -- activity that would otherwise be located overseas or in a U.S. FTZ."

Based on the experience in the U.S., the authors estimated the Vancouver zone would bring in enough new trade to generate 3,100 direct person years of employment and a $200 million boost to GDP.

The northern zone would handle just an extra $46 million worth of goods a year, creating 30 direct person years of employment and adding $2 million in GDP.

For comparison, the province's GDP in 2010 was $203 billion, or about 1,000 times larger than the amount the Vancouver proposal is estimated to add to B.C.'s economy.

The next step, the report said, is for the federal government to develop a new foreign trade zone policy that would keep many existing policies that are working, but also "expand the range of activities that can be done within the FTZ" to match the United States.

Canada and the provinces should also develop a "single window" service where "applicants can deal with a single point person to handle all government issues, regardless of source." The person would act as a "concierge" co-ordinating across federal, provincial and muncipal governments. "While the behind-the-scenes action of the concierge may be complicated, it should appear simple to the actual user."

In June the federal government said it would be reviewing it's policies on foreign trade zones to see if they were competitive with other countries and "able to support Canada's gateway development initiatives."

The NDP's Gentner said he'll be watching to see how fast the file moves now that the Conservatives have a majority in Ottawa and BC Liberal Premier Christy Clark is trying to demonstrate a strong relationship with Stephen Harper's government.

Andrew MacLeod is The Tyee's Legislative bureau chief in Victoria. Find him on Twitter or reach him here.