BRIEF FROM THE CANADIAN ASSOCIATION OF DEFENCE
AND SECURITY INDUSTRIES (CADSI)
Executive Summary
The Canadian Association of Defence and Security Industries (CADSI)
is pleased to have the opportunity to contribute to the House of Commons
Standing Committee on Finance’s 2011 pre-budget process. Specifically, CADSI would like to highlight how the Government
of Canada, together with our defence and security industries, can work together to capitalize on our
world-class capabilities in a way that contributes to our national security, the safety of Canadians as well as strengthens our
economy.
CADSI is a not-for-profit, national business association that
promotes the excellence of Canada’s defence and security industries and
advocates on behalf of member companies who employ over 90,000 Canadians and generate
$10 billion in annual revenues.
The primary responsibility of every national government is the
safety of its people and the protection of its country. Canada’s success in
defending its sovereign, economic and national security interests depends
largely on how two important stakeholders - Canada’s military and its defence
and security industries - operate independently
and together. Individually, each must be strong; together, their efforts must
be coordinated. This makes the issues affecting defence procurement
efficiency and effectiveness an important public policy issue and a matter of
national security interest.
In 2009, CADSI released
Canada’s Defence Industry: A Vital Partner Supporting Canada’s Economic and
National Interests (the Defence Procurement Report) commissioned by the
Minister of Public Works and Government Services, the Minister of National
Defence and the Minister of Industry. The Report provided a road map to modernize
and streamline major procurement processes with a perspective on how to best
serve our military and security personnel
while also leveraging knowledge-based jobs in the interest of the national and
economic security of Canada.
CADSI believes the Report’s specific recommendations are consistent
with the Government of Canada’s Budget 2011 commitment to continue efforts to
modernize the Canadian Forces by developing a procurement strategy to stimulate
job creation, support Canadian manufacturing capabilities and innovation, and bolster
economic growth in Canada. CADSI is hopeful that the Government of Canada acts
quickly to fulfill this commitment in order to maximize economic returns for
the industry and Canada as a whole.
Canada has world-class capabilities in its defence and security
industrial base that should be developed and nurtured
and require the support of a more strategic and prescriptive approach by
government.
The
Canadian Association of Defence and Security Industries (CADSI) therefore
recommends the creation and implementation
of an Industrial Strategy, as well as the establishment of a world-class
procurement system, which contributes to the defence, sovereignty and
prosperity of Canada.
Defence spending provides Canada with a unique, direct and
immediate opportunity to leverage investments to build Canada’s military
capacity, support industrial growth, stimulate domestic research and
development, and create and sustain knowledge-based jobs in Canada.
Defence Spending and the Economy
Canada’s defence and security industries not only make a difference
in the lives of Canadians who protect our sovereignty
and our streets but also contribute to the prosperity and development of our
country. For example, investments in defence and security support our
national security, keeps Canadians safe, and contribute to the vitality of our economy with over $10 billion in
economic activity every year (roughly 50% of which comes from international
sales) and approximately 90,000 well-paid, knowledge-based jobs.
A number of recent studies have found that defence spending has a
significantly positive impact on real economic growth. A 2004 study by Nigel
Wilkins examining 85 countries found that defence spending was positive for 39
of the countries and significantly positive for eight of these, including
Canada which saw that a 1% increase in
defence spending has a positive co-efficient on GDP of .47%.[1] Similarly, a 2007 study by
Bremmer and Kesselring found that
increased defence spending in Canada leads to an increase in its GDP.[2] The significant positive
impact for Canada arises as a consequence of their having highly capital
(equipment) intense militaries that can source their equipment and
service needs from technologically-sophisticated, highly-skilled domestic
industrial bases.
With the majority of companies in the defence sector also selling
to commercial markets and supporting domestic supply chains, their direct and
indirect contribution to the Canadian economy is much greater than their sales
to defence and security customers.
Together, industry and government can capitalize on opportunities
to strengthen our economy, improve trade relationships and protect our military
and security personnel at home and abroad.
Government’s Commitment to National Defence & the Canadian Forces
While the current economic climate has required that government
balance spending priorities with austerity measures and deficit reduction,
Canada has made demonstrable commitments to national defence and the Canadian Forces. In May 2008, the Government of
Canada announced the Canada First Defence Strategy (CFDS), which provides
long-term, stable, and predictable funding to modernize the Canadian Forces.
Canada has also begun to make meaningful progress in streamlining
and improving military procurement processes, including through enhancements to
the Industrial and Regional Benefits Policy. Most recently, the Government of
Canada announced in Budget 2011 a commitment to continue efforts to modernize
the Canadian Forces by developing a procurement strategy to maximize job
creation, support Canadian manufacturing
capabilities and innovation, and bolster economic growth in Canada.
While CADSI is encouraged by these positive steps, Canada can do
more to support the defence and security companies who make a vital
contribution to our Gross Domestic Product and our balance of trade, and
whose products and services contribute to the work of
those who defend our nation’s interests and keep Canadians safe. In particular, CADSI is hopeful
that the government will maintain its direction and move swiftly to develop and implement an industrial strategy for these sectors.
This approach will help to provide made-in-Canada products and solutions that
are tailored to the needs of our men and women in uniform, and will further stimulate
the economy with R&D opportunities, high-value jobs, and will maximize
opportunities to position Canada’s defence and securities industries for global
leadership.
Canada’s Defense Industry Expertise
Canada’s defence and security
industry provides world-class equipment and technology that keep our economy moving
and our land strong and free. Canada’s defence industrial base includes, but is
not limited to, shipbuilding and marine industries, aerospace industry,
automotive sector, munitions, electronics, simulation and training, information and communications technologies, textile
industry, in-service support and satellite and space technologies. This
industrial base produces projects, technologies and services across the
industrial spectrum that equip, enable,
support and protect men and women in the Canadian Forces and security agencies as
they safely and effectively perform the duties assigned to them by the federal
government. For example, Canadian employees in the defence and security industry
produce:
· High-technology telecommunication and information systems, that
are used for a variety of applications such as the protection of our
coastlines, the detection of drug smugglers and illegal immigrants, and for search and rescue;
· Clothing that protect our men and women in the military, policy
and security forces;
· Vehicles and equipment that are used by Canadians and Allied
troops in UN and NATO missions;
· Simulators that provide realistic and yet cost-effective training
to the personnel that operate our military
aircrafts and vessels;
· Aircraft that carry supplies to devastated areas of the country.
The breadth and depth of Canada’s defence and security industries
is not well-known. This has led to misperceptions about the industry as uniquely
purveyors of war rather than a leading-edge industrial base contributing to the
physical safety of Canada, the economic well-being of our country and our
leadership position on the world stage.
Canada has penalized itself as few other nations do by delaying
essential military materials, adding non-value-added costs to itself and to industry, and inhibiting its industrial
champions from winning business at home and abroad. Instead, these key
domestic industrial capabilities with economic value should be supported, if
not leveraged, by the federal government.
As a market heavily influenced by technology-based solutions,
Canada’s defence industrial base sees R&D as a key driver of its
competitiveness. However, the industry believes its technology edge is slipping
and that government can and must play a
greater funding role in private sector-led defence R&D.
CADSI therefore encourages the creation of a defence industrial
strategy that is built on the following building blocks:
· Establishing procurement strategies and improvements to existing
processes that reward and encourage direct Canadian industrial participation at
both the acquisition and sustainment phases of defence projects. Only if
industrial objectives are set at the start of the procurement process will the government
be able to achieve an optimal economic return on taxpayers’ investment in
defence spending for the acquisition and maintenance of military equipment.
Additionally, the government can promote the maintenance and creation of highly
skilled jobs by developing new government procurement and contracting processes
that:
o Recognize the
importance of Canadian companies in the defence and security sector that can provide
products and services that are competitively priced and meet the requirements
of our military and security forces;
o Increase the
percentage of IRB’s dedicated to the defence and security sectors, and the
strategic use of IRBs in initiatives such as targeted R&D and centres of
excellences;
o Select domestic
industry to undertake the maintenance, repair and overhaul of military equipment
acquired from foreign equipment manufacturers;
o Provide a
balanced risk framework for acquisitions.
· Promoting the competitiveness of Canada’s defence and security
industrial base through export market development support. Export market access
and success is critical to the long-term competitiveness of Canada’s defence
and security industrial base. The federal government can assist by committing
to be a ‘first buyer’ of Canadian defence and security products, technologies
and services to facilitate export sales.
· Enabling the establishment of capability clusters and centres of
excellence. The federal government can play a key role the identification,
development and sustainment of key industrial capabilities that contribute to
the national and economic security of Canada. This can be done through the
development of “centres of excellence” and/or key ‘industrial capability
clusters’ made up of university, industry, government and non-governmental
partners in areas of strategic national interest. The strength of this network
and expertise can then contribute to the development of the industry and
stimulation of our economy by using them as preferred suppliers and/or
promoting them through R&D, IRBs and export strategies into OEM global
supply chains.
· Recognizing the importance of the defence and security industrial
base as a priority for federal R&D funding programs. The federal government
should create and support an environment at the federal level that promotes
synergistic, innovative and leading-edge R&D activities within the private
sector producing market-ready technologies of strategic value to the defence
and security of Canada.
Canada has world-class defence industrial capabilities with defence
and economic value to the country which can be nurtured and developed for
success through Government policies, procurement strategies and processes. Investing
in the future of our defence and security industry will create innovative and
leading-edge R&D, helping our companies and our forces to succeed at home
and abroad.
Our Recommendation
CADSI recognizes that defence
procurement is complex - that there is no ‘silver bullet’ to address all
issues, and that Canada is not the only country seeking to maximize the
economic returns of its military expenditures. However, Canada’s defence
industry is convinced that conditions for a more positive environment which supports
effective and efficient military procurements, and which builds industrial
capability in the Canadian economy can be established.
The Canadian
Association of Defence and Security Industries (CADSI) therefore recommends the
creation and implementation of an Industrial Strategy, as well as the
establishment of a world-class procurement system, which contribute to the
defence, sovereignty and prosperity of Canada and which would be composed of
the following
key elements:
· Procurement
strategies and processes that reward and encourage direct Canadian industrial participation
at the acquisition and sustainment phases of defence projects.
· Export market
development support mechanisms that contribute to the competitiveness of
Canada’s defence and security industrial base.
· The establishment
of capability clusters and centres of excellence.
· Targeted federal
initiatives that capitalize of the innovative capabilities of Canadians to
produce leading-edge R&D activities which lead to the production of
market-ready technologies of strategic value to the defence and security of
Canada.
In an era marked by fiscal restraint, the adoption of policies and
practices which promote the growth and competitiveness of Canada’s defence and
security industries will ensure that Canada is able to maximize the economic
return on investment from defence spending by stimulating job growth and
increasing business investment. This action
will ensure shared prosperity and a high standard of living for all Canadians.