Canada Needs a Defence Industrial Policy
Stone, Craig, International Journal
In June 2006, the government announced $15 billion of military equipment purchases that included ships, trucks, helicopters, and transport planes. One might observe that the week of 26 June was a very good week for both the Canadian military and Canadian defence industries. The last time such an ambitious equipment acquisition plan was undertaken was in the 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 the 1980s, but only to highlight the size and scope of the more recent announcements.
However, the June 2006 announcements have not been without controversy. Opposition party members and industry lobbyists accused the 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 the planes would be manufactured and repaired in the United States" rather than in Canada.2 Controversy such as this is fairly typical in Canada.
The controversy continued periodically throughout the fall of 2006 and into the early months of 2007, as the government moved closer to announcing who would actually win the contracts to provide the new equipment. In particular, the issue of industrial regional benefits and where the benefits should go became politically charged when the Québec aerospace industry argued that most of the benefits should go to Québec since most of Canada's aerospace industry was located there.3
One of the reasons controversies like this surround large military equipment purchases is the lack of a clearly articulated defence industrial policy or strategy by the government.4 If a policy existed it would be easier for the government to justify decisions by arguing that the decision was in line with the 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 the time and effort required to develop such a policy within the Canadian political system. That might have been true in the past, but this article will argue that future capital equipment purchases for the CF should be made within the context of a defence industrial strategy.
The future is the important context for this issue because the $15 billion in procurement projects that have already been announced include agreedupon industrial regional benefits. Therefore, the development of a defence industrial strategy in 2007 will not have any impact on how these procurement projects play out. Since the CF has significant additional capital investment requirements (equipment and infrastructure), a defence industrial strategy can help reduce the amount of controversy that has been associated with the 2006-07 procurement projects.5 As a minimum, the 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 the argument, the paper will first discuss Canadian defence industrial policy in the past, examine the approach of other nations' existing defence industrial policy and then identify some of the key areas that a Canadian defence industrial policy needs to address.
INDUSTRIAL POLICY IN THE PAST
In theory, any defence industrial policy should be developed and implemented within the context of an overall industrial policy for the nation. A defence industrial policy should not be working at cross purposes to the national industrial policy and the industrial policy should, in an ideal world, be based on an overarching set of long-term strategic objectives established by the government. Canadian politicians have not really engaged in a debate about a strategic industrial policy since the 1982 royal commission on the economic union and development prospects for Canada, otherwise known as the Macdonald commission. …