Saturday, June 2, 2012

Five reasons why Canada doesn’t need a defence industry

By Steven Staples
Published in Embassy 

May 30, 2012

The defence industry is feeling very self-confident these days. So confident that today, the association that represents those hundreds of firms that sell to the Department of National Defence has organized possibly the largest military and security trade show ever held in Canada.

The organizers of CANSEC will literally bus in hundreds of government workers from office towers across the city to a new convention centre near the airport to hear speeches, meet salespeople, see displays, and in some cases, actually sit in the driver’s seat of combat vehicles and tanks.

The defence industry doesn’t just want to sell rifles and airport scanners to the government, it wants to sell the idea that Canada’s security depends on the very financial success of the companies.

But the defence industry doesn’t just want to sell rifles and airport scanners to the government, it wants to sell the idea that Canada’s security depends on the very financial success of the companies. And they want the Harper government to recognize their importance in a new defence industrial policy for Canada.

“Canada’s own 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,” declares boldly one of the defence industry’s recent reports to the government, lobbying for more support.

The government should “align defence procurement strategies and processes to support the [defence industrial] policy,” it added.

But is that true? There are at least five good reasons why Canada doesn’t need a defence industry. The defence industry demands constant government funding, regardless of the state of the nation’s finances or other priorities.

The only customers for military goods and services are governments, and so companies heavily invested in military production are dependent upon government spending to ensure their profitability.

The defence industry is deaf to the other priorities of taxpayers, and insists that its slice of the budget pie remains as large as it always has been, even if everyone else has to do with less.

For instance, in the depths of the financial crisis in early 2010, the Canadian Association of Defence and Security Industries wrote to Finance Minister Jim Flaherty about the upcoming federal budget.

“CADSI understands the fiscal challenge Canada faces as we emerge from a global recession,” it noted with sympathy; nevertheless, “We specifically ask you to confirm the Government’s 20 year funding commitment of $240B in non personnel related defence spending…[and] proceed on an expedited basis with land, sea and air defence projects that are in the procurement pipeline.”

The defence industry is so dependent upon government funding that even the organization that lobbies on the companies’ behalf receives federal grants. In a recent release, CADSI expressed “the appreciation of its 860 members to the Government” for a $139,000 operating grant to fund the lobby organization. Maintaining arms factories at home requires selling the arms abroad, potentially to regions of conflict or governments guilty of human rights abuses.

Once the company fulfils its military contract with the government, its only options are to close the production line or find other buyers on the international market.

The Canadian government is responsible for controlling exports through permits, but often turns a blind eye to arms sales from Canada in order to help the companies sell to the United States and elsewhere.

Weapons sold to the US, where they could be resold or used in Iraq-style invasions, don’t require an export permit. Even when permits are required and authorized, Canadian-made arms find their way to conflicts.

For instance, light armoured vehicles produced in Canada and sold to Saudi Arabia are now being used by their security forces to suppress the pro-democracy movement in neighbouring Bahrain. More jobs can be created through government spending in other areas.

Certainly defence spending will create some jobs, just like other forms of government spending. But it is not clear whether defence spending is the best way to create jobs, nor if all those jobs be in Canada, as the defence industry often asserts.

According to researchers at the University of Massachusetts, US government spending on education creates twice as many high-paying jobs as defence spending. Government spending in other areas, such as health care, mass transit and infrastructure creates even more jobs (but at slightly lower levels of pay, according to the 2007 study).

Ironically, most of the big members of the Canadian Association of Defence and Security Industries are not even Canadian, and the CANSEC trade show’s corporation sponsors and exhibitors are overwhelmingly American and European.

So it’s easy to conclude that contracts with these firms are just as likely to create jobs south of the border or in Europe than in their Canadian branch plants. Military production can leave the Canadian economy vulnerable.

Too great a concentration on defence production can actually leave our economy more vulnerable and less able to adapt to international economic shifts.

When the Soviet Union collapsed and global defence budgets declined accordingly, Industry Canada noted that Canada’s largely commercially-focused aerospace industry lost far fewer jobs than those countries more invested in military aviation production.

Bombardier, which has received generous government financial assistance over the years, is now the third-most successful commercial aircraft producer in the world as a result. The defence industry creates a vast political machine to influence military spending in order to foster the companies’ own interests.

With the polarized political environment in Ottawa today, the defence industry has aligned itself closely with the Conservative government, and in an unusual development, has taken to join in the political fray by chastising the government’s opponents on defence issues.

“We want all parties to support the government’s decision because it is in the best interest of all Canadians,” said Gregory Yeldon, president of Esterline CMC Electronics, at a 2010 Ottawa press conference intended to support the government’s controversial F-35 stealth fighter program.

The economic and political influence wielded by the defence industry can be overwhelming, and may distort defence policies toward the companies’ interests, instead of meeting the needs of the Canadian Forces.

Steven Staples is the president of the Rideau Institute, an Ottawa-based research and advocacy group. @stevenstaples

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