Hill Times - February 11, 2008
Ottawa Life Magazine – July 2008
By Colin Kenny
When it comes to military purchases, I have always been suspicious of Canadiana.
Governments clearly come under pressure to buy Canadian force foreign suppliers who win contracts to do some of the manufacturing or maintenance in Canada.
I have argued for years that this only makes sense if the work can be done as efficiently and effectively in Canada as somewhere else.
I understand the rationale for buying Canadian: there is both a payoff to the Canadian economy and the payoff to politicians in whose riding the work is being done in. But my point has been that the Canadian military is starved for funds – it shouldn’t have dollars drained away for political purposes. If the government wants to do regional development, fine, but don’t bill the military.
Having said all this, I have come to the conclusion that Parliament should be enacting a plan that would boost the Canadian shipbuilding industry.
This may seem like a flip-flop, but think of me as Saul on the road to Damascus. I think we could actually do this in a way that would be of benefit to both the Canadian economy and the Canadian military, without skewering the Canadian taxpayer.
The federal government is going to require more than a hundred new ships over the next two decades or so to handle critical assignments on Canada’s coasts and overseas.
Canada has traditionally ordered a lot of the ships it needs from Canadian shipyards, but the timing has always been hit and miss. What has been lacking is a two-pronged strategy assuring that our military gets the right ships at the right time, and that shipyards in Atlantic Canada, Quebec and British Columbia get enough regular work to retain skilled employees.
That isn’t happening now, and that doesn’t make sense at a time when the Canadian economy is losing many thousands of manufacturing jobs and when our Navy has no guarantee that it will have the ships it will need to operate effectively in the future.
Don’t ever discount the importance of the Navy. Asian countries are busy expanding theirs, and Canada’s international presence and capacity to advance the interests of Canadians will suffer if our Navy is allowed to continue its serious decline.
I estimate that Canada is going to require 133 new vessels of a significant size over the next 25 years – not to mention refits.
The Department of National Defence will likely need at least 45 ships. The Navy needs to modernize 12 frigates and plan for their replacements. It also needs four new destroyers, eight arctic/offshore patrol vessels and refits for four submarines.
The Department of Fisheries and Oceans will require at least 83 vessels. These include 9 icebreakers, 15 medium endurance and offshore patrol vessels and 42 Search and Rescue lifeboats.
Transport Canada will need three marine Atlantic ferries.
That’s a lot of manufacturing featuring increasingly sophisticated technology – enough to keep shipyards in both eastern and western Canada going as healthy, cutting-edge operations.
Could these ships be built more economically overseas? Costs do matter – no nation can afford to a huge premium on Canadian content on major purchases of military equipment.
The good news is that Canadian shipyards are no longer out of line on costs. Metal-bending isn’t the main component of modern shipbuilding. Today’s ships require the production of modules replete with complex technology, and Canadian shipyards have become extremely sophisticated producers.
Yes, there is always the danger that funnelling all the work to Canadian shipyards would lead to excessive costs. Monopolies tend to bump up costs. But there is no reason that a regulatory authority like the National Energy Board couldn’t be set up to assure fair pricing.
So why doesn’t the Parliament of Canada produce legislation to back a strategy that would assure steady work for shipyards across the country, under regulatory authority. We regulate oligopolies in the pipeline and power industries. Why not regulate a shipbuilding oligopoly to enhance Canadian security while stimulating the Canadian economy?
Profits on some projects would probably not be as sizable as they would be in the open marketplace. But neither would losses.
Contracts could be signed to guarantee major firms long- term work, contingent on regular audits. The contracts might require major shipbuilding yards to subcontract some work to smaller yards, to assure widespread capacity in the industry.
This plan would be assured some longevity because it would provide such economic and political benefit that any succeeding government would meddle with it at its peril.
This idea works politically, it works economically, and it could be designed to protect the taxpayer.
Three birds with one stone.
Prime Minister, I invite you to join me on the road to Damascus.
Colin Kenny is Chair of the Senate Committee on National Security and Defence. He can be reached via email at kennyco@sen.parl.gc.ca