Growing innovation and sustainability [CANSEC2016D2]

26 May 2016

House of Commons Standing Committee on Industry, Science and Technology, CADSI president, Christyn Cianfarani, made a strong case for more government action in facilitating the growth of an innovative and sustainable Canadian defence manufacturing base. To translate this vision into reality, Cianfarani called for government and industry to work in partnership to develop a Made in Canada Defence Industrial Policy, tailored to Canada’s unique national security requirements and domestic industrial capabilities.

“The basic message I want to leave you with,” Cianfarani said, “is that the Canadian defence industry is a vital, innovative part of Canadian manufacturing that the federal government should be paying more attention to, especially at this point in time.

In the context of a Canadian manufacturing sector that has lost at least 400,000 jobs in the past decade due to fierce offshore competition, the size of Canada’s defence industry has remained relatively stable.”

“By this, I mean the growth potential for defence manufacturing is highly sensitive to federal government actions… or inaction. Federal government policies, programmes, but especially procurement decisions, influence heavily, if not determine outright, our sector’s growth path.

I don’t think you can say that about any other part of Canadian manufacturing.”

A new report of the Canadian defence sector completed by the Department of Innovation, Science and Economic Development (ISED) and Statistics Canada (StatsCan), in collaboration with CADSI and members and released yesterday at CANSEC, found that the defence sector accounts for about 63,000 direct, indirect and induced jobs, 60 per cent manufacturing focused, and generates $6.7 billion in gross domestic product annually. The report also highlighted the fact that the sector is largely export intensive, with 60 per cent of revenues from foreign sales.

“I hasten to add,” Cianfarani continued, “that this strong export performance takes place in the context of a highly protected and regulated international marketplace for defence goods and services. Almost all countries protect, promote, develop, subsidise and favour their domestic defence industries for a combination of national security, sovereignty and economic reasons.

That is just a reality we all have to understand.

“As a result, when Canadian defence firms compete abroad, we are up against some formidable and often unpredictable forces.

And yet those export numbers tell us our companies do very well.

I would suggest to you that our export success is a measure of our industry’s innovative nature, the value for money it provides, and a barometer of the high-quality goods that Canadian defence firms sell into global markets.”

The ISED-StatsCan report found that the Canadian defence sector comprises about 650 small, medium and large firms. These firms are a mix of Canadian-owned and Canada-based foreign affiliates, largely from the US and Europe. The data shows how the sector is a pan-Canadian industry with pockets of industrial strength in every region of Canada. It is also quantifying that two-thirds of Canadian defence firms have significant commercial, non-defence business operations.

Today the opportunity of a generation stares our industry and the Government of Canada in the face. Over the next 20 years the Canadian defence manufacturing base has the potential to grow significantly due to the planned recapitalisation of the Canadian Armed Forces. Shipbuilding and the fighter jet replacement programme are the two largest pieces of this puzzle financially speaking, accounting for at least $35 billion in capital equipment.

To execute on this opportunity, Cianfarani suggested there are two key ingredients needed to grow defence manufacturing in this country.

“First, we need to recognise that Canadian prime contractors, of which there are not that many, must be considered more strategically by the government in procurement strategies for these major capital projects,” said Cianfarani. “Second, we need to find ways to incentivise intellectual property transfer from foreign primes into Canadian firms, so that those Canadian companies will also be able to engage in the kind of innovative manufacturing that comes with owning and exploiting intellectual property. Procurement strategies need to do more than just drive Canadian firms into supply chains,” the president added.

“What we really need is to develop a Made in Canada Defence Industrial Policy, tailored to our unique national security requirements and domestic industrial capabilities. Canada needs alignment at the political level to drive strategic thinking into defence procurement projects using the tools we have to achieve the outcomes we want,” Cianfarani said.

“The moment to fix this policy gap and grow defence manufacturing is now with the government simultaneously launching both a Defence Review and an Innovation Agenda. These two major policy reviews need to be joined up to develop a Canadian defence industrial policy to build a stronger, larger and even more innovative Canadian defence manufacturing base.”

• The full ISED-StatsCan report, entitled State of Canada’s Defence Industry, 2014, can be found at:

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