I contributed to this report that appears in today’s Hill Times, an influential Ottawa newspaper. You can download the entire Aerospace supplement.
THE HILL TIMES, MONDAY, AUGUST 18, 2008
POLICY BRIEFING – AEROSPACE
Committee report should push for trade exemptions, more in-service contracts in Canada, say critics
‘I think Canada should be proud of its successes, but always vigilant because … without vision, without government leadership, and without the dollars … industry can quickly flounder,’ says Peggy Nash
By HARRIS MACLEOD
The report on science and technology now being worked on by the House Industry, Science and Technology Committee should call on the government to push the U.S. for better trade exemptions for Canada’s aerospace industry, award more in-service support contracts to Canadian aerospace companies, and call for a permanent head to be named to the Canadian Space Agency, say critics.
The Industry Committee came into the public spotlight earlier this year when it urged Industry Minister Jim Prentice (Calgary Centre-North, Alta.) to block the sale of MacDonald Dettwiler and Associates’ space assets to an American firm.
“I think the Industry Committee played an important role in focusing on the need for Canada to maintain the space industry, and to have the industry suit Canada’s needs, as opposed to almost letting it slip through our fingers and become militarized by being taken over by a U.S.
defence manufacturer.” said NDP MP Peggy Nash (Parkdale-High Park, Ont.) who is a member of the Industry Committee. “It would have been ironic, for example, with the melting of the polar ice cap, and the disputed arctic terrain, to have our satellite fall into the hands of the Americans, who are one of the key countries disputing our border in the Arctic.”
Liberal MP Scott Brison (Kings-Hants, N.S.), also a member of the committee, told HT that MDA wanted to sell its space division to American interests to gain access to the U.S. market, as well as access to the increased capital that comes along with it.
He said that U.S. protectionist rules under the International Traffic of Arms Regulations (ITAR) make it impossible for Canadian companies to win American space and defence contracts, and that the government should do more to negotiate exemptions for Canadian aerospace companies.
“The U.K. and Australian governments had negotiated extensions for their companies, but our government, Harper’s government, has done absolutely nothing to stand up for Canadian industry.
He’s cozying up to George Bush, he should be standing up to George Bush and saying, ‘It’s not fair to discriminate against Canadian companies,” he said.
“We’re a defence partner with the Americans, we’re a security partner with the Americans, we’re a trade partner with the Americans, we do not deserve to be treated as second-class partners when it comes to the aerospace industry.”
The Rideau Institute on International Affairs, an Ottawa-based think tank, recently published a report called “Flying High: A plan to rebuild Canada’s space capabilities,” which made many of the same recommendations that Mr. Brison hopes to see in the Industry Committee’s science and technology report.
“Our view is that the space sector in Canada is very important; it provides us with all kinds of capabilities that are necessary for us in areas such as environmental protection, national sovereignty, even national defence.
This technology plays an important role in ensuring the safety of our troops, and is a vital capability. It also creates a very good return on Canadian public investment in terms of leveraging other investments from the public sector and job creation,” said Steven Staples, president of the Rideau Institute.
Conservative MPs on the House committee were not available for interviews, but Stephanie Power, a spokesperson for Industry Canada, told The Hill Times in an email last week that the government has been “pressing hard for progress on the ITAR industry issue.” She didn’t say exactly what was being done on the ITAR file, but said, “The Government of Canada continues to seek solutions for industry which would be consistent with Canadian laws and values, and which would attempt to minimize, to the greatest extent possible, legal risks and costs for both industry and the Government of Canada.”
Liberal Ontario Senator Art Eggleton, who is the chair of the Senate Social Affairs, Science and Technology committee that released a report on science and technology last spring, said he knows from experience that obtaining exemptions from the ITAR rules is not easy.
“I was once minister of trade in the Chrétien government, and not only in trade but also defence, so I’ve had some experience in dealing with that, and it’s a rough road. It doesn’t matter what the colour of the government is in Ottawa, it’s a very tough challenge dealing with it,” he said.
Ms. Nash said that, although there is a need for greater support for Canada’s aerospace industry by the federal government, she still believes it is the “one bright light” of Canada’s manufacturing sector that is “still on the upturn.” She said the Conservative government should be commended for its support of Bombardier, because it invested $300-million, along with the Quebec and British governments, to help get the CSeries aircrafts off the ground.
“I think Canada should be proud of it successes, but always vigilant because, as we see in the space industry, without vision, without government leadership, and without the dollars to actually develop the technology, the industry can quickly flounder,” she said.
‘Every industrialized country with a defence or aerospace industry recognizes a need to validate its industry through its own procurement. That has always been the case in Canada, too.’ -Liberal MP Scott Brison
Mr. Staples said Canada’s space sector has had many important successes, however he said it is in decline and that without government support, the downturn will continue.
“It is an important Canadian capability that is waning; we are far below the average G8 spending on space, and slipping behind.
We’ve had a number of very high profile achievements recently such as the Canadarm2 that is on the International Space Station, we’ve had Dextre go up, we’ve had the Phoenix project that has a piece of Canadian technology on Mars right now,” Mr. Staples said. “But all of these are basically the grand finales of these programs; when you actually see it on TV going up into space it means the program is over essentially, but there’s nothing else coming through the pipe.”
One key recommendation in the Rideau Institute’s report is that the government immediately act to appoint a head to the CSA, which hasn’t had a permanent leader since former astronaut Marc Garneau resigned in 2005.
“I have written to [the minister] calling on him to act now and appoint a permanent head to the CSA, because we are lacking leadership at the CSA and we have been for three years,” said Ms. Nash.
Mr. Staples said the lack of leadership is symptomatic of an overall lack of coherent strategy for the space sector.
“There’s no single guiding policy, and the result of that is that a lot of people in government and in industry are standing around with their hands in heir pockets waiting for the government to decide in which direction we want to go, and they’re left to reading tea leaves to find out what is the priority of the Canadian government,” said Mr. Staples.
Mr. Staples said that as countries like China, India, Brazil, and Iran continue to advance their space programs there is the risk of space becoming militarized, and that Canada must be proactive to prevent that from happening. “The risk is that without very clear rules of the road and international cooperation, space will become another militarized frontier, that it will be a source of conflict rather than cooperation.
Right now the rules of the road are not clear, and we don’t want to have a survival of the fittest in space where the most powerful dominate.”
Mr. Brison said that historically one of the key ways Canada built its aerospace industry has been ensuring that the “lion’s share” of procurement and in-service contracts went to Canadian companies. In-service support refers to the maintenance and improvement of aircraft, particularly military planes.
“Canada is trusted in the U.S. as a trade, defence, and security partner, and is respected by the world as a multilateralist,” Mr. Brison said. “We should be in a really good position to compete globally, with both the EU countries and with the U.S. Every industrialized country with a defence or aerospace industry recognizes a need to validate its industry through its own procurement. That has always been the case in Canada, too.”
Mr. Brison said the Harper government, particularly under former Industry Minister Maxime Bernier (Beauce, Que.), have moved away from that model and have started “completely ignoring the industrial benefits side of defence and aerospace procurement.”
Maryse Harvey, vice president of public affairs for the Aerospace Industries Association of Canada, said that traditionally, if the Canadian government bought aircrafts from the U.S. or Europe, the contracts to maintain the planes- which are often worth more than the planes themselves because they can span 20 to 25 years-are awarded to Canadian firms.
The Conservative government, and in particular the Department of National Defence, decided that for accountability reasons, it only wanted to deal with one company, so it gave American firm Lockheed Martin the mandate of awarding MRO (maintenance repair and overhaul) contracts, with the stipulation that 75 per cent of the value of the contract would be invested in Canada, she said.
“They’re supposed to give 75 per cent of the value of the contract back to Canada, but so far we don’t know how much the in-service support is worth. How much is 70 per cent of zero? We don’t know what the absolute number is because we don’t know how much the maintenance is going to be worth over 20 years,” she said.
Ms. Harvey said the other important issue involved with awarding MRO contracts is that it often in involves the transfer of intellectual property, and that the U.S. is “very reticent” to part with research and development capital.
“We don’t only want to change the screws on the airplane or change a little thing, we also want to find solutions to make it fly longer and better. It involves brain, it involves knowledge, it involves research and development, and it involves engineers; it’s much more than just bolts and screws,” Ms . Harvey said. “When a company develops those solutions, then you can export that knowledge and you can do the same work on the fleets of another country, for example, so that’s where your industry gets wind beneath its wings.”
Mr. Brison said he would support the idea of an all-party committee that could more closely examine at the different aspects of Canada’s aerospace industry.
The Hill Times
Findings from the Rideau Institute’s 2008 report ‘Flying
High: A Plan to Rebuild Canada’s Space Capabilities’
• The Canadian space sector requires $1.53-billion in new funding
over five years to rebuild Canada’s space capabilities
• Canada’s funding of its space sector is the second lowest
amongst G8 countries as a percentage of GDP and is less than
half of the G8 average
• The Canadian Space Agency budget has remained virtually
unchanged since 2001, at approximately $300-million per year,
while shortfalls and delays have resulted in “phantom” budget
growth and risk eroding existing programs
• The Canadian Space Agency needs leadership after having three
presidents in only three years