Foreign Trade Zones are a means of importing and exporting goods while avoiding the payment of tariffs on goods. This is done though the institution of zones that are solely relegated for this purpose which are operated outside of the government. The ultimate goal of FTZs is the abatement of tariffs and excise taxes within the zone, thus stimulating economic growth in the area that the zone is located by attracting foreign business interests. FTZs offer a level of flexibility to those who wish to make use of them, as they allow for money to be free rather than in bond while providing facilities for storage, manufacture, or manipulation of products. Business operating within a Foreign Trade Zone often also benefit from other economic incentives such as competitive utilities, access to multiple modes of transportation and skilled labour pools. However, there are a three key things that make FTZs successful. Foreign Trade Zones are often:
- Clearly demarcated areas or territories which are governed by a different set of laws and regulations than the rest of the country
- Trade hub cities or areas within a territory that are utilized mainly for the import, export, re-export storage, manipulation, or manufacturing of goods flowing through the area and exchanging hands
- An area or zone which is geared towards attracting international trade and foreign direct investment through economic incentives such as the elimination or reduction of trade barriers or taxes on production
While this is the regular profile for a Foreign Trade Zone, this is not how Canada operated their FTZs for many years. Canadian FTZs existed in the form of programs administered by the government rather than the traditional model of FTZ operation found everywhere else in the world. This lead to Canada being left out of the system of FTZs around the globe due to the fragmented nature of our FTZ system as well as the fact that there was no one set territory for FTZs within the country.
The Harper government made reforms to Canadian FTZs by creating the first "traditional" FTZ in the country in 2008, situated in Winnipeg. The Centreport FTZ Point has proved to be a success in demonstrating that the changes are more efficient and user friendly. Centreport follows the three key factors necessary for a successful FTZ, is now used as a basis for future FTZs elsewhere in Canada. Just recently, Windsor-Essex County has been granted FTZ Point Designation status. What does this mean for Windsor? How do the reforms of 2008 improve how Canada operates FTZs in relation to the way FTZs are run in other countries? This paper examines the differences between Canadian FTZs and more traditional FTZs by comparing and contrasting Canada's system with the American method of operating FTZs. In conclusion, the FTZ point reforms bring Canada into the fold insofar as FTZ operation is concerned, while also maintaining the flexibility that made Canada's system so unique to begin with. By offering single window service at FTZ Point locations, both international and domestic firms can utilize traditional FTZs, or use the FTZ type programs outside of the zone. Windsor's recent FTZ point designation is sure to be a boon to the economy, as it now gives even more incentive to invest in an area already so critical to Canadian trade.
Dr. William P. Anderson
Dr. Jamey Essex
Master of Arts
Major Research Paper