Canada Needs a Defence Industrial Policy

Abstract

In June 2006, government announced $15 billion of military equipment purchases that included ships, trucks, helicopters, and transport planes. One might observe that week of 26 June was a very good week for both Canadian military and Canadian defence industries. The last time such an ambitious equipment acquisition plan was undertaken was in late 1970s and early 1980s when new fighter aircraft, ships, maritime patrol aircraft, and an air defence weapon system were purchased. This is not to imply that no equipment purchases have been made since 1980s, but only to highlight size and scope of more recent announcements.However, June 2006 announcements have not been without controversy. Opposition party members and industry lobbyists accused government of giving up Canadian sovereignty and not providing a competitive process.1 Then Liberal party opposition defence critic Ujjal Dosanjh indicated that the purchase would be a blow to Canadian sovereignty because planes would be manufactured and repaired in United States rather than in Canada.2 Controversy such as this is fairly typical in Canada.The controversy continued periodically throughout fall of 2006 and into early months of 2007, as government moved closer to announcing who would actually win contracts to provide new equipment. In particular, issue of industrial regional benefits and where benefits should go became politically charged when Quebec aerospace industry argued that most of benefits should go to Quebec since most of Canada's aerospace industry was located there.3One of reasons controversies like this surround large military equipment purchases is lack of a clearly articulated defence industrial policy or strategy by government.4 If a policy existed it would be easier for government to justify decisions by arguing that decision was in line with stated policy. Arguably, there has not been a need for such a policy because there has not been sufficient spending on defence equipment to justify time and effort required to develop such a policy within Canadian political system. That might have been true in past, but this article will argue that future capital equipment purchases for CF should be made within context of a defence industrial strategy.The future is important context for this issue because $15 billion in procurement projects that have already been announced include agreedupon industrial regional benefits. Therefore, development of a defence industrial strategy in 2007 will not have any impact on how these procurement projects play out. Since CF has significant additional capital investment requirements (equipment and infrastructure), a defence industrial strategy can help reduce amount of controversy that has been associated with 2006-07 procurement projects.5 As a minimum, government should provide a strategy that articulates a set of principles in order to provide industry with some sort of basic policy intent.In order to provide a context for argument, paper will first discuss Canadian defence industrial policy in past, examine approach of other nations' existing defence industrial policy and then identify some of key areas that a Canadian defence industrial policy needs to address.INDUSTRIAL POLICY IN THE PASTIn theory, any defence industrial policy should be developed and implemented within context of an overall industrial policy for nation. A defence industrial policy should not be working at cross purposes to national industrial policy and industrial policy should, in an ideal world, be based on an overarching set of long-term strategic objectives established by government. Canadian politicians have not really engaged in a debate about a strategic industrial policy since 1982 royal commission on economic union and development prospects for Canada, otherwise known as Macdonald commission. …