Mr. Paul Crête:
Mr. Speaker, you have read the motion. It surprises me that we should have to come to Parliament to ask the government to ensure the fair distribution throughout the aerospace industry of contracts paid for with taxpayer dollars.
I would like to reread the motion:
|| That the House denounce the laisser-faire attitude of the government that prevailed in its negotiations with Boeing, regret the fact that Quebec did not get its fair share of the economic spin-offs of this contract given the significance of its aeronautics industry, nearly 60%, and call on the government to provide fair regional distribution of economic spin-offs for all future contracts.
Given these investments in the aerospace sector, the Conservative government's laissez-faire attitude will result in Quebec losing 18,500 jobs per year. We all know that with the way the government is now doing things, the best Quebec can hope for is about 30% of the economic spin-offs from these contracts even though Quebec represents nearly 60% of the aerospace industry. If they had simply said that they would take into account the geographic distribution of the aerospace industry in Canada relative to territory, Quebec would be receiving between 55% and 60% of the economic spin-offs.
The Conservative government deliberately chose not to impose those kinds of conditions. Yet the government did decide, for example, to require companies to direct 50% of the spin-offs to the aerospace sector and 50% to other sectors. With respect to the 50% for aerospace, the government even identified nine such sectors in advance.
There was nothing stopping the government from imposing these kinds of conditions, especially since it has the upper hand and can practically hand out contracts without a call for tenders and decide which company gets the contract. It was in an excellent position to ensure that Quebec would get its share. The Conservative ministers from Quebec failed dismally in this respect. That is why we have brought this issue before the House today. We hope that the members of this House will support this motion so that we can achieve satisfactory results. The government must change its position so that Quebec can get its fair share of aerospace investment.
Quebec is not looking for charity. Quebec's aerospace industry accounts for between 55% and 60% of the Canadian aerospace industry. It is only natural that Quebec should get its fair share, and that is what we are asking for. We want this House to tell the Conservative government that it did not do its homework and that it should have required that Boeing invest specific percentages in the regions, according to the existing distribution. That would have been truly fair.
When the Minister of Industry tells us that this is a private contract and he cannot intervene, he is clearly mistaken. In fact, he himself did intervene. He set conditions about spin-offs, but he did not have the courage of his convictions, or else his proposal was simply refused. Publicly, the Prime Minister told Canadians that there would be no geographic distribution. Even though the Minister of Public Works and Government Services claimed that he was trying to get as much as possible for Quebec, the Minister of Industry took exactly the same position as the Prime Minister. In that sense, he is particularly responsible for the mess that is going to result.
It is not just the Bloc Québécois that is frustrated and angry about this situation. This morning, in an article in Le Devoir entitled “The aerospace industry is angry”, Sue Dabrowski, general manager of the Quebec Aerospace Association, said:
|| The federal government has a responsibility. It cannot just wash its hands and say, “Sort this out yourselves”. If it keeps on like this, it will have a fight on its hands.
Because she has been trying to meet with the Minister of Industry for months, in fact, since the election last year, she added this:
|| I am very disappointed. I still hope to meet with him and tell him that there are problems with the process. We have to work as a team.
This laissez-faire approach of the Conservatives is distorting the process.
The government claims to want to give everyone an equal chance, but that is not what it is doing. The company that will get the Boeing contract already owns businesses in Ontario, Manitoba and the west. Naturally, the company will turn to its subsidiaries and its usual subcontractors. This means that the Conservative government has knowingly, deliberately decided to move the aerospace industry in Canada. Because of the government's actions, the percentage of investment in Quebec will be lower than was hoped and expected and lower than Quebec deserved in all fairness.
The result of this situation is that this hurts the aerospace industry which is very uneasy about this decision by the government. We absolutely have to express our disagreement with that position in this House.
The government could have imposed all the conditions it wanted. Military purchases are exempt from trade agreements. There is therefore no problem in terms of the WTO or other international organizations. Governments may make their military purchases where they want and impose the conditions they want. In this case, however, the government provided that the spinoffs in Canada would be equivalent to the amount of the contract, but did not provide spinoffs for Quebec. They knowingly made the choice to sacrifice the Quebec aerospace industry for the benefit of other parts of Canada.
Unfortunately, we know that the automobile industry is concentrated in Ontario. The practice is the same in Canada for aeronautics because expertise and skills have been developed, not only in the big corporations but also in the SMEs in that sector. They are all going to suffer from this decision. The greater Montreal area is not the only one that will suffer. We have obtained the number of companies that have aerospace contracts all over Quebec and they are in every region of Quebec. Today, it is those companies that are being penalized by the position taken by the Conservative government. Ottawa has undercut the only real aerospace centre in Canada. In the aerospace industry, we have a few big companies that manufacture airplanes or engines, but there are also a large number of suppliers that work on contract and the only centre of aerospace industry is the one in Quebec. The government's present position is therefore very unfortunate.
Quebec is the loser, because, since the Quebec industry is a centre in itself, it is less integrated into the American industry than the Canadian plants, which are already within the American orbit. We know that much of the expansion of the aerospace industry in Canada was due to the industry paying attention to the needs of the private sector. A part of it is associated with the army, with the air force, but that is much less a factor.
Moreover, on December 31, 2006, the Conservatives ended the Technology Partnerships Canada program. You can go and look on the department's website; there is no longer a Technology Partnerships Canada program. The minister had told us for months and months that the program was being analyzed and that a new program was going to be announced. We have not seen that new program. Now, the message that is being sent to the entire planet is that in Canada, if you want to invest in aerospace, you will not have government support as you have in Brazil, the United States or elsewhere. This means that for investments that are decided several years in advance, there is now a glaring absence in the Conservative government's attitude. This reflects the same spirit as saying that they do not want to intervene in the economy in any way.
Under the three contracts, they will be paying out about $10 billion, and it is a private company that will make the choices for the entire industry, and we know full well that there is no natural inclination at Boeing to invest in Bombardier. It is a competitor. There is therefore no natural inclination to do that. The government had a responsibility to rationalize the market in that respect and it decided not to take that opportunity. That is what we are criticizing it for today.
The spinoffs in Canada should amount to about $9.2 billion. As a result of the choice it has made, the government will be responsible for the loss of 18,500 jobs. This is undercutting the Quebec aerospace industry and the government is striking at the jewel in the crown of our economy. That is why no one should be surprised at the anger being expressed by all representatives of the aerospace industry in Quebec.
Not only is it happy to weaken the industry now, but the government is also casting a shadow over its future. There is a rule in the aerospace industry that the earlier a company gets involved in the development of a new product, the more it gets to work on technologically interesting things. Conversely, suppliers who come along later work on less important parts involving less technological research. That is what will happen in this case. We will get the crumbs rather than the main body of the research, the new products and the development. This too is a very negative effect of the Conservatives’ decision not to intervene. It makes us wonder whether the Conservatives are pathologically opposed to Quebec’s aerospace industry.
We used to see the vehement tirades of the Reform Party. We sure remember them. That is the spirit we see returning today, as if everything done in Quebec were bad and the fact that the government was helping the aerospace industry constituted an undue advantage for Quebec. Everywhere in the world, this industry is helped, assisted and supported by government.
In Canada, though, we are going backwards and in the other direction. That really is bad.
The Bloc Québécois has long been proposing a genuine aerospace policy. Unfortunately, what the Conservatives are doing is completely at odds with this. We need a major adjustment. The policy we want is the following. First, there should be a clear, predictable program to support research and development so that we can say to the world that if they invest in our aerospace industry, they will get assistance in the form of a research and development program.
We also need a solid and predictable commitment from the banks for financing, especially for export sales. There are already programs like this, but the government needs to do more.
Finally, we need a policy to support SMEs in the aerospace sector. In order for us to derive as many economic benefits as possible, small businesses, which are less able to penetrate international markets, must have the support they need to join forces and win contracts. Finally, we need a policy on military procurement that helps the industry develop. What we see before us now, though, is the very opposite.
I thought it was appalling to hear the Minister of Public Works state at a press conference that he was unable to say what percentage of the benefits would go to the various regions of Canada and especially Quebec. It was appalling to hear the minister say that the region would be Canada. Certain parts of Canada have worked very hard to develop this industry. Quebec is the heart of it. The Conservatives’ attitude is totally frustrating and unsatisfactory for all Quebeckers.
On Friday, February 2, 2007, the government purchased four C-17 cargo planes. In exchange for this high added value manufacturing, the federal government required the suppliers of the three projects to guarantee as many economic benefits as possible. But there was no way it wanted to say that Quebec’s share of these benefits would have to be assured. So these projects do not include the important things that we would have liked to see.
The aerospace industry is mainly concentrated in the Montreal area, and it includes many small and medium sized businesses. Quebec is a leader in this industry, with 250 companies, 240 of which are small or medium sized businesses. Their production has a value of more than $11 billion, and 89% of it is exported. This represents exactly what we have been told we should do for 10, 15 or 20 years, develop specialized sectors to be able to export. Quebec has developed expertise in this industry, it has developed products, and it has carved out its niche. Overnight, as a result of a decision made by this Conservative government, this stronghold will be shaken because an American company will be allowed to decide how the aerospace industry in Canada is to develop.
Jobs in the aerospace industry are high quality jobs which carry an average salary of more than $58,000 a year. In this industry, Quebec has become a world leader ranking sixth, behind the United States, France, the United Kingdom, Germany and Japan. The Montreal area, where 95% of this industry’s activities are concentrated, ranks fifth in the world in terms of jobs in the aerospace industry. The federal government gets $2.1 billion in tax revenues from this sector which is crucial for Quebec and Canada.
It is very hard to find the reasons why the Conservative government decided to ignore the existing distribution of the operations of this industry, but maybe it is just a way to destabilize the aerospace industry in Quebec. We need much more help for this industry. A specific gesture was needed from the federal government. It should have told Boeing clearly that it would get the contracts and that it could invest in Canada, but that it had to comply with the existing distribution of operations in Canada and grant to Quebec companies roughly 60% of its subcontracts, a proportion that reflects its present share of investments in this industry. That way, we could forge ahead, and Quebec and Canada could be an important development centre.
Now Boeing has the possibility of deciding to spread its investments around according to its objectives. As a private company, it cannot be faulted for taking that approach dictated by its shareholders. I do, however, find it unacceptable that the federal government has abdicated what was, and still is, its responsibility by handing it over to a private company. Unfortunately, it will have to answer for the outcome.
But I am aware that every time the Bloc Québécois has raised this matter here in the House or in a press conference, it has resulted in frantic efforts to place contracts in Quebec in order to make the Conservative government look good.
That is exactly what I want to see happen, for Quebec to get the best possible return on its investments. But the Conservative government's current attitude has held Quebec back and made it adopt an attitude that is not in keeping with its market position.
It is important for the House to make it clear to the Conservative government that we do not want to see its present approach continued, and that it ought to change its ways and move forward with investments respecting Quebec for what it is.
The Bloc Québécois maintains that the federal government needs to provide the aerospace industry with stable, predictable and substantial R&D support. The industry needs to be able to count on a federal government contribution in the 20% to 30% range for all R&D projects. The government must strike a program that is specifically tailored for the aerospace industry, and immediately inject the necessary funds.
We are nowhere near this at the moment. They favour that practice saying that this is a private market that needs to be allowed to play out, and that Quebec will,in the end, go after its share. This attitude, in my opinion, does not reflect market reality. Unfortunately, if the Conservative government does not change its attitude, within a few years we will be seeing aerospace jobs moving. There will be fewer in Quebec and more elsewhere in Canada, not necessarily because of the vigour of the industries in the other provinces, but rather because of the federal government's decision to give free rein to a company for the target areas of its investments. This approach must be rejected.
It is important, therefore, that this motion gain the support of the House. It is obvious that the future of some of the largest businesses in Quebec depends on it. In addition to such leading lights as Bombardier, there is also the small and medium business sector, which has also made its contribution and created considerable employment.
For all these reasons, we feel that the motion we have tabled today, for the House to denounce the laisser-faire attitude of the government that prevailed in its negotiations with Boeing, is important. It is equally important to us that the House support it because, given the present situation which we are defending, there is an absolute need to turn the situation around.
We have not been used to this sort of behaviour in the past from the governments here. The change we are seeing now represents a harsh blow which will result in a destabilized Quebec aerospace industry.
For all these reasons, I encourage the House to vote in favour of the Bloc Québécois motion.
Hon. Maxime Bernier (Minister of Industry, CPC):
Mr. Speaker, my hon. colleague from the Bloc Québécois talks about the expertise and competitiveness of the aerospace industry in Quebec and Canada. I wish to tell him that we are quite aware of this.
The aerospace industry is a high-tech industry that has successfully positioned itself among the best in the world. I saw this for myself last spring when I went to Farnborough, to London, to meet with the people from the aerospace industry in Canada and Quebec, and their colleagues from other countries. I met many stakeholders during that stay. Even here, in Canada, I have had the opportunity to meet people from the industry and to observe their ingeniousness and expertise. That is why we granted this contract to Boeing, since it was the supplier that met and meets all the conditions stipulated by the armed forces so that we could provide the equipment the armed forces have to have to do their job.
Canadian suppliers will benefit from the economic benefits arising from the purchase of military equipment. We think it is important for them to occupy a long-term position in Boeing’s supply chain. As you know, Boeing is a company that does both military and civil work. With their new plane, the Boeing 787, there are many business opportunities for companies. We want these companies to take advantage of the business opportunities that arise, instead of telling Boeing what contracts to give out. Economic logic being what it is, if we force Boeing to do business with a non-competitive player, Canadian taxpayers will all end up paying for these decisions and this political interference. We believe that Canadians and the Canadian armed forces should have the best equipment possible at the best possible price, while ensuring there are economic benefits for Canada. This is why we asked Boeing for these economic benefits to be high-level ones in nine technological sectors. We think that the Quebec aerospace industry will position itself well with regard to these contracts and will be able to position itself favourably in the Boeing supply chain for all these contracts on the world scene.
I am delighted with, and proud of, the investments that we have made in Canada in the aerospace sector, and of the investments to come. As I said in committee, these military purchases will generate over $12.6 billion in economic benefits. This will help all Canada’s regions. The aerospace industry sees very clearly that, under a Conservative government, it is treated well since it will benefit from these economic spinoffs.
Today I heard a most interesting story from my colleague about aerospace companies and the wonderful success of these companies in Canada. As I said, the industry is doing very well. Canada ranks fifth in the world with regard to production of aircraft and civil aircraft. The Canadian aerospace industry is an international leader, notably—and this is important—in leading sectors such as regional planes, small gas turbines, flight simulators, visual simulators, civil helicopters, landing gear for heavy planes, air-conditioning systems for aircraft and in-flight visual simulation. These are the areas of expertise to be found in the Canadian aerospace industry and we can be proud of them.
The four large Canadian aerospace companies are Bombardier, Pratt & Whitney Canada, CAE and Bell Helicopter. All of those companies have major facilities in Quebec. About half of the employees in the aerospace industry in Canada are in Quebec, that is a fact. More than half of all sales in the aerospace sector come from the province of Quebec. Quebec is a real pillar of the aerospace industry in Canada. Bombardier, as we know, has just announced the launch of its CRJ 1000 series, its new 100-seat regional jet. CAE is investing $630 million in research and development over the next six years. Innovation is essential in the aerospace industry. CAE is also continuing its successful expansion in the Middle East and Asia.
Also in Asia, it is establishing the global academy that bears its name.
Bell Helicopter celebrated the 20th anniversary of the opening of its Mirabel plant. The company is developing new, modular and affordable product line technologies that have already received more than 220 orders, unprecedented in the industry. These few examples clearly demonstrate that the Canadian and Quebec aerospace industry is a dynamic presence on the international scene.
The new government of Canada has done a lot to find markets for the Canadian aerospace and defence industry, both in Quebec and elsewhere in the country. This government is committed to building Canada's place in the international community, and that commitment includes honouring our obligations to our international partners, such as NATO, which means making wise purchases of military equipment.
Unfortunately, under the Liberals, military equipment was never replaced. The Liberals endangered the lives of our soldiers by their inaction. Our government has got things back on track. We did this by announcing military equipment procurement programs. Our government affirms its unwavering commitment to our brave soldiers who protect Canada, its people and its interests.
Our soldiers who are deployed abroad are defending our values, the values we hold dear, our Canadian values of integrity, free enterprise, individual liberty. Yes, we will never turn our backs on our soldiers, either here in Canada or abroad. First and foremost, we want to be sure that our military has adequate military transport equipment for their military deployments.
Whether here in Canada, on rescue missions and in disaster relief, or elsewhere in the world, we also want our military to have the equipment it needs, right here in Canada, for those kinds of rescue missions or for those operations abroad. That is why we have purchased the Boeing aircraft and have scheduled the purchase of other aircraft.
Under the former Liberal government, our soldiers had to rely on the goodwill of our neighbours and allies to arrange their deployments abroad. The era of turning our backs has ended. We are making sure, now, that our Canadian Armed Forces have the equipment they need to perform their duties.
In addition to that, Canada's new government is also determined to build a prosperous and competitive economy that will benefit all Canadians.
Our government has taken the right approach to create a supportive environment and to encourage and reward hard work, stimulate innovation and foster the development of Canadian industry and more especially, the aircraft industry.
We are energizing the Canadian economy by giving our industries an opportunity to help develop future technologies and by developing new, quality markets for this industry. Our way of handling the Canadian industrial benefit policy is based on our commitment to strengthening the aerospace and defence sector and stimulating the Canadian economy.
Unofficial measures to ensure that Canadian industry benefited from military procurement and spin-off effects go back to the 1970s. The federal government turned this into an official policy barely 20 years ago under Brian Mulroney. The purpose is to ensure that Canadian industry benefits from the purchases that are made, regardless of the company chosen to provide the equipment needed by our troops.
That is what is called industrial participation or economic benefits or offset purchases, and this practice has been adopted by many governments, including this one. This policy will produce lasting economic benefits for Canada.
Every time the federal government undertakes major defence procurement programs—and I would like to say this for the benefit of my hon. colleagues—three departments are involved.
The first, of course, is the Department of National Defence, which determines the equipment specifications. The second is Public Works, which handles the procurement process and the awarding of contracts. My department, Industry Canada, develops the industrial benefits plan to ensure that Canadian industry derives real, specific, strategic benefits from military procurement.
On February 2, 2007, the government announced the purchase of four C-17 Globemaster III aircraft for a total of $1.8 billion.
This sum includes the additional infrastructure required at National Defence, training and the administration of the program by the Government of Canada.
The modernized infrastructure, training and administration by the Government of Canada constitute direct investments in our economy right here in Canada. The industrial benefits policy does not apply to them, therefore, because these investments are made here in Canada.
Despite all that, the equipment that we are going to purchase for our armed forces will result in more than $1 billion in economic benefits, as I explained earlier.
When the planes are purchased, the government will also have to award maintenance and service support contracts for them. A service support agreement worth $1.6 billion was signed with the US forces. It has two parts. The first, worth about $900 million, will be subcontracted to Boeing. Boeing is covered by the requirements of the industrial benefits policy so that we will see an equivalent amount return to us here in Canada. This means basically that $900 million will flow back to Canada in economic spinoffs.
As for the second component, the services provided by the U.S. armed forces are not covered by the industrial benefits policy, since governments and foreign governments are not subjected to the requirements imposed on foreign companies. Therefore, our policy does not apply to a foreign government.
These benefits are similar to those that will be generated by the procurement project for aircraft, that we announced. These economic spinoffs for Canada will be spread over a period of more than 20 years.
Suppliers who will get contracts with Boeing can announce them as they win them, over the weeks and months to come.
In the past, it would take over two or three years to design similar procurement programs. However, in this case, with Boeing, I am pleased to point out that we were able to develop the transport aircraft procurement plan over a period of just a few months.
Our government succeeded in obtaining for Canada economic spinoffs totalling about $869 million so far—this represents the acquisition cost of the aircraft—and even more in terms of procurement and service. As I said, this additional $900 million in economic spinoffs is related to service and support for these aircraft.
Hon. members are aware that we also announced the acquisition of helicopters, ships, trucks and tactical airlift. I should point out that each procurement program will also trigger major spinoffs for the Canadian industry.
Under our industrial benefits policy, for every contract dollar awarded under our defence procurement process, contractors must commit a corresponding dollar in economic activity in Canada. This is a 100% return on investment for the duration of the contract. It means an investment of one dollar for each dollar, and that requirement is not negotiable.
We will ensure that this policy is complied with and that all its criteria are well understood by Boeing or by the other companies that will be suppliers for the Government of Canada. We will also ensure that all the businesses working in the aerospace and defence industry are aware of these business opportunities, as we have done in the past.
Moreover, we require companies that win these contracts to not only invest in Canada, but to do so in a significant fashion, over the long term, in leading-edge technology. The objective is to help Canadian companies become part of the global supply chain and continue to be. This means that the Canadian industry benefits from the government's procurement programs, regardless of where the successful bidder's head office is located.
Industrial benefits transactions have to meet three criteria to be considered by my department. The first criterion is that the work has to result from a procurement program. In the case of Boeing, it is a military procurement and we have made sure there are economic spinoffs for Canada.
The second criterion stipulates that the work has to be done over the period set out in the contract. It has to be new work for Canadian businesses.
The third criterion states that the work has to respect the principle of growth, by which companies can use existing business relationships, but only the new work counts for the purposes of respecting the economic spinoffs requirement. Quebec or Canadian companies can use their business relationships to get economic spinoffs, but only the new work counts for the purposes of respecting the economic spinoffs requirement, in other words, the new work done here in Canada.
Furthermore, for the C-17 procurement program, we specified that the aerospace and defence sector had to benefit from 50% of the industrial spinoffs and that at least 30% of these spinoffs have to target key technologies. The nine key technologies are the following—these are technologies we discussed with the Quebec and Canadian aerospace industry. We chose these technologies because they are technologies of the future for the Canadian aerospace industry and we want this industry to position itself favourably for future contracts. These nine technologies are the following: advanced manufacturing and emerging materials; avionics and missions systems; communications and control; propulsion and power management; security and protection; sensors; simulation, training and synthetic environment; space; and unmanned vehicle systems.
We are also requiring that small businesses benefit from 15% of Boeing's contracts that are subject to economic spinoffs. These businesses are critical for ensuring the growth and viability of the aerospace and defence sector. Generally speaking, they are the main drivers of our economy.
At the end of the day, the purpose of the industrial benefits policy is to allow companies in the Canadian aerospace and defence sector to demonstrate their capabilities and establish lasting business relationships with major corporations from other countries. Our government has obtained real strategic benefits for the Canadian industry.
For the first time ever, the Aerospace Industries Association of Canada and the Canadian Association of Defence and Security Industries have worked with the government, with my department, to develop the list of nine key technologies that I was talking about earlier. These are technologies that, in the eyes of the industry, are critical to the future of the aerospace industry in Canada.
We have also made it very clear to prospective bidders that we expect them to work with companies across Canada.
For instance, Boeing held four regional sessions for the industry, one in each region of Canada. In the Atlantic region, on September 7 and 8, 2006, during an air show in Halifax, Boeing met with Canadian stakeholders to ensure that they properly understand the business opportunities available to them. Similar sessions were also held in the western region, in Calgary on October 3 and 4, 2006; in the Quebec region, in Montreal on October 24 and 25, 2006; and in the Ontario region, in Toronto on November 7 and 8, 2006.
Thus, Boeing was able to meet with hundreds of Canadian businesses during these sessions and take stock of the strengths and capabilities of businesses from across the country. The procurement of strategic airlift is the first procurement strategy in a series of five, as I mentioned earlier.
For each of these projects, we will insist that Canadian businesses undertake quality activities and be able to reap the economic benefits.
Canadian benefits are a serious contractual obligation. My department requires annual audit reports and performance guarantees.
I would like to remind the House that I am very pleased with what we have done for the aerospace industry. Every year, businesses that are awarded contracts with the Canadian government must be accountable with respect to the Canadian industrial benefits policy. If those businesses do not meet their contractual obligations, there will be serious financial consequences.
I would like to emphasize that I will be very vigilant in ensuring that businesses respect their contractual obligations. The industrial benefits policy must be followed to the letter. Our approach to industrial benefits is based on the overall approach of this government. This is the approach taken by an honest, transparent government, a government that cares about its industries and cares about its aerospace industry.
I would like to remind the hon. member of the Bloc Québécois that his party is very familiar with the Quebec aerospace industry, as am I. I am certain that this industry will be able to position itself well in future contracts with Boeing and with other bidders for the other military procurement contracts that this government is planning in the months to come.
Hon. Scott Brison (Kings—Hants, Lib.):
Mr. Speaker, I will be splitting my time with the hon. member for Bourassa.
I will focus my comments today on the industrial benefit side of this.
Canada has the fourth largest aerospace industry in the world. Our industry employs 107,000 people across Canada. The sector grosses $21.7 billion per year, providing a direct contribution of 1.85% to Canada's GDP. This sector contributes $1.1 billion every year to invest in research and development and it creates thousands of Canadian jobs.
It is important to recognize the importance of that research and development. The research and development jobs are the ones that generate the most economic benefit, that create the most sustainable aerospace industry and that contribute to Canada's competitiveness the greatest.
I agree that the government needs to provide fair regional distribution of economic spin-offs across Canada. I also agree that it is important for the government to fight to get the best possible industrial benefit from defence and aerospace and government procurement in general.
Canada has a vibrant aerospace and defence industrial complex and it is one that is dispersed across Canada. There is an extremely strong industry in Quebec. We have in Nova Scotia, for instance, a significant infrastructure of small and medium size firms with expertise in military, aviation, defence systems, electronic assemblies, firms like IMP Aerospace , xwave, as well as Pratt & Whitney Canada which is located in Nova Scotia, employing over 3,500 people with over $300 million in annual revenues.
In places like Newfoundland, to give an example, Peter Kiewit Sons Co. Ltd., PKS, in Marystown, Newfoundland, is a perfect example of a firm with the skills and expertise and is participating in a $2.1 billion procurement bid through the Department of National Defence.
I know something about defence procurement because when I was minister of public works we were directly involved in defence procurement, working with defence, working with the then minister of industry and now the Minister of International Trade, and we fought for strong industrial benefits for the Canadian industry.
I have to say that the present government has failed Canadians in not finding the best possible combination of industrial benefits for Canada when it negotiated this deal.
It was the Liberal government in the 2005 budget that made the single largest investment in the Canadian armed forces of almost $13 billion. It was the single largest investment in 20 years, spanning both the Liberal government and the previous Progressive Conservative government. It was during my time in public works that we were actually involved in implementing some of those investments.
During that time, we recognized the importance of in-service support. In-service support is the area that our aerospace industry and our defence industry have probably contributed most to the industrial sector and it is the area in which we probably do best across Canada. It is the area in which the government has failed Canadians the greatest in terms of the industry.
I want to talk a bit about why it is important. To provide the long term industrial benefit and in-service support, the government needed to negotiate up front with the original equipment manufacturer, Boeing in this case, to attain the intellectual property to allow our Canadian industry to participate in the service of these airplanes over their life. The government failed to do that. That was a significant departure from our tradition and the traditions of successive governments in demanding and purchasing that intellectual property, such that Canadian industry could participate in the long term support of the aircraft.
It was that vigilance of previous governments in purchasing the intellectual property that enabled a Canadian industry and in-service support to develop and flourish.
In a February 2007 article in FrontLine defence magazine, written by Ken Rowe, the chairman and CEO of IMP Aerospace, one of the largest providers of in-service support in Canada, made the following comments about the government's decisions on defence procurement and industrial benefit. He stated:
|| Canadian companies will be denied the ability to directly and independently support DND on these programs.
Further on in the article he states:
|| The years invested in building this component of the Canadian industrial base are being jeopardized by the current ISS procurement strategy by placing Canada's world class Aerospace ISS industry under the control of foreign American companies.
|| Overall, this new process is not only a threat to thousands of Canadian jobs but also increases the sovereignty and security risks to Canada by reducing our independent capability to maintain our own military assets.
The fact is that we expect our defence decisions and industrial strategy to be made in Ottawa, not in Washington and not at the Pentagon. The government has eroded Canada's economic sovereignty by not providing the kind of vigilance at the negotiation stage to ensure we achieved the intellectual property that Canadian companies would benefit from for the next 20 years in providing the kind of support that has built a Canadian industry that is recognized internationally.
The government talks about standing up for Canada. It has failed to stand up for Canada. It has stood up for the U.S. aerospace industry. It is important to recognize that there was a stop production order issued by Boeing earlier this year for the C-17. According to the Boeing press release, this stop production order was “due to the lack of U.S. government orders for the C-17”. We are buying the technology that the U.S. no longer wants and, in the process, we are helping support the U.S. industrial base.
The press release further states:
|| This action will ultimately affect the 5,500 Boeing jobs...directly tied to the C-17, and the program's nationwide supplier workforce that totals more than 25,000 people.
The government is talking about ISS support, in-service support creating 25,000 American jobs, when it could have negotiated more professionally to defend Canadian jobs and ensure, as the Liberal government and previous governments had, that we have intellectual property here in Canada and those in-service support jobs would be here in Canada.
The government dropped the ball because of its laissez-faire approach. It believes there is no role for a government in creating an industrial strategy for the country. It does not believe that defence procurement or government procurement can be used to create growth and opportunity for Canadians. It is actually failing to create the kinds of opportunities for Canadians that previous governments had the foresight and wisdom to do.
Furthermore, this deal is not ITAR compliant, which means that Canadian citizens with dual citizenship in the 25 countries that are currently ITAR listed in the U.S. will not be able to work on these contracts. Some of the members of Parliament in the House who were elected by Canadians would not be allowed to work on these contracts because of the government's failure to stand up for Canada. The families of these members of Parliament would not be able to work on these contracts because the government did not have the guts to stand up and defend Canadian sovereignty in a contract negotiation as massive as this one.
As I mentioned earlier, the member for Bourassa will be speaking in a moment and covering further points on this.
The notion of national defence is to preserve and strengthen Canada's role in the world and to defend its sovereignty. The idea that we have a Conservative government and a Prime Minister that would actually diminish Canada's economic sovereignty as part of its approach to defence procurement is shocking.
We must recognize the importance of preserving and strengthening Canada's industrial base. Manufacturing jobs across Canada are being lost, whether it is in the auto sector or the food sector: 500 jobs lost at Hershey in Smiths Falls; the closure of the Maple Leaf plant; 300 jobs lost when Canard closed; and 2,000 Chrysler jobs lost under the government. It is because of its laissez-faire approach and the fact that it does not believe government has a role in helping create long term economic opportunities. The government is wrong and Canadians realize it is wrong and this deal was wrong.
Hon. Denis Coderre (Bourassa, Lib.):
Mr. Speaker, I thank my colleagues from the Bloc for choosing to discuss this matter on this opposition day.
I hear the member heckling, well the member can leave like the others. Nobody is here.
Today, we should talk about the branch plant policy of this government. What I find funny and pathetic at the same time is that barely a year ago, the Minister of Industry said at the Farnborough International Airshow that Quebec has 50% and that it is normal for Quebec to get its share. There is alternately the international air and space show at the Le Bourget airport, near Paris, and the Farnborough International Airshow. That was the first thing.
Today, we have “Boeing's employee of the month”. The Minister of Industry is now “Boeing's employee of the month“ for me. I would like to wish him a quick recovery because, after negotiating like he did, his knees must hurt quite a bit. Because of his size, I know that his knees must hurt right now. He spent so much time on his knees when he negotiated that they are now killing him. Therefore, I hope he will get well soon.
Today, we could be talking about several issues. There are many things we could be discussing. My colleague talked about ITAR, the International Traffic in Arms Regulations, that include all the safety regulations of the American government. Our government is but a franchisee, and the employee of the month did his job very well. He did such a fine job that even before the contract was signed, he travelled to Washington. I am not sure if he flew on a Challenger, but I know the Prime Minister likes to use it to go see a hockey game. People from Boeing and Lockheed Martin did not need bother coming here. He travelled to Washington. What did he negotiate? We do not know. But it seems things worked out just fine because both Boeing and Lockheed Martin will get contracts without any call for tenders.
I am ready to fight for the regions. I want to make sure Quebec gets its share, and the Maritimes and Western Canada should get theirs too. But the problem is we are fighting over a pittance, because they used a diversion tactic. If we want to make sure our aerospace industry gets its share, there has to be something to share to start with. I am talking here about intellectual property. I am talking about services and support. I am talking about maintenance.
This is the first time we are buying military equipment we will not own. We are buying, but we will not be the owners. What does that mean? For this equipment, there are three levels of maintenance. The third includes the integration of computerized systems, for example. The second includes motor maintenance. What we will get is the first level of maintenance, and that means we will top up the windshield fluid, change the oil and put gas in the tank. This is what Canadians got.
Not only did this government sell out Canadian sovereignty but, as a franchise, it is saying that it trusts us. ITAR is serious business. We do not own that aircraft, but we have a big heart. Let us suppose there is a disaster in Cuba and we need that aircraft to take food there but, unfortunately, it does not start. We turn the ignition key, but it will not start. We will phone Boeing and ask that they send us the necessary part. Do members know what Boeing will tell us?
An hon. member: Please, you have to say please.
Hon. Denis Coderre: You have to say please, but what is worse is that Boeing will not be able to go to Cuba. Why? Because the U.S. government has a foreign policy for Cuba. It will tell us that it is not appropriate to go to Cuba and we will not get the part. That is the number one problem and that is serious.
Earlier, we talked about ITAR and dual citizenship. I am disappointed, because the member for Abbotsford mentioned something earlier, referring to one of our colleagues who said he has dual citizenship and could be a member of Parliament, but could not work, and I would like to know what it means, because I am learning English.
He said that he does not belong here. That is what he said. So I want to know what that means later.
We are talking about dual citizenship. Currently, there is a problem at Bell Helicopter. Venezuela and Haiti are on the list of 25. The Haitian diaspora is present in my riding. Haitian engineers are not allowed to work on these projects. We would like to work with China, but those who have dual citizenship that includes the Chinese citizenship cannot work on such projects. It is not just engineers. The janitor who works in the building, close to the aircraft, is not allowed. This is serious. This affects not only engineers and those who hold important positions, but even manual workers who work close to the aircraft. Things are just fine. Does he believe in multiculturalism?
There is an even more serious problem. It means that, ultimately, we have not only surrendered because we now have second-class citizens, but we have also sold out our sovereignty and our industry. Whether in Quebec or elsewhere, regardless of percentages, if we want the industry to thrive, if we want things to work, we must have intellectual property.
What are the next generations of engines being built on? What did Kenroad, what did IMP grow on? It was maintenance. I am all in favour of starting up windshield washer businesses, but maybe we could be developing synthetic oils. But we will not have a real aeronautics industry in Canada with this government that gives us peanuts or with a Minister of Industry whose knees hurt and who goes to negotiate in Washington. We want to be sure that our government is doing its job. This minister said that he could not intervene because this would be political interference and favouritism. What is this Minister of Industry good for if he cannot work for the interests not only of his province but of the industry? The situation is quite worrying.
We could also talk about intellectual property. I am happy today because, with the official opposition, we passed a motion unanimously. I have just come from the Standing Committee on National Defence. Let those who are listening take note. We just unanimously passed a resolution in which it was recommended that the Auditor General look at all the contracts. I am prepared to fight for the industry, but I am not interested in crumbs from $3.4 billion and a blank cheque for $1.3 billion when maintenance is going to take place in the United States. When money is given, it has to be given entirely to Canadians so that they can benefit from it. I want a competitive process that enables us to get our money’s worth. Let them come up with their scenarios ensuring that every region will get what it deserves. But that is not what happens. I am very happy that the recommendation was made that the Auditor General look at the C-17 contracts. We might as well have simply leased these C-17s, given that we will not have the intellectual property, will not have the parts and will be unable to help our industry.
There was an alternative; Boeing could have leased them to us. We would have had the money to invest elsewhere. We could have invested in defence infrastructure. We could have invested in parts for which we know that we already have the intellectual property. Not only did the government abdicate its responsibility but, since we bought only four planes and we do not have the infrastructure, we are going to let the Americans have the jobs, too. They are going to get us excited with $577 million out of a contract worth $3.4 billion. That is what they established. Am I going to fight for 15% of 60% in Quebec? I want to make sure first that we are not falling into this government’s snare, that it will prove to us that we will get our money’s worth and that Canadians and Quebeckers, people in the Maritimes and people in the West, will get their due, that is, that we will really get this percentage. Right now we are fighting for peanuts.
I believe in a fair share. I believe in this country and I believe in true sovereignty because we need to equip our forces. As a matter of fact, the marketing strategy was easy. The government just brought back its blue paint and just changed the label because we already announced at that time $13 billion.
Nevertheless, I would say that the motion is appropriate. The government has to come clean and if it is not doing that then we still have question period. We have several questions, but I am pretty pleased that the Auditor General will now take a look at all those contracts because it smells.
Ms. Dawn Black:
I apologize, Mr. Speaker. I thought we were still on questions and comments.
Just a few minutes ago, we were at the Standing Committee on National Defence. We heard testimony from Alan Williams, who was the former assistant deputy minister of National Defence responsible for procurement. We also heard from Douglas Bland, from Queen's University.
At that meeting we were able to adopt, unanimously, a motion to ask the Auditor General to look into some of the issues around the recent procurement. I think most Canadians would appreciate that there is civilian oversight to all of this, but a lot of it is in retrospect and not happening in the way perhaps it should, through a very strong and active defence committee having the opportunity to do that.
It was been clear from the beginning of this procurement process that the government really did know what it wanted to buy before it started the process. For strategic lift, the government wanted the C-17. For tactical lift, it wanted the C-130J. For helicopters, it wanted the Chinook. It was not ready to allow the process to happen as an open and public tender. It used the ACANs, the advance contract award notices, and it used the national security exemption to get out of the agreement on internal trade. That is what I was referring to a few minutes ago.
The agreement on internal trade was meant to take out of the process the politics and the opportunity for political decisions being made about where these contracts would go and have a process that was based more on the industrial benefits for the country as a whole, without the suspicion of political interference taking place.
Canada has good laws available for tendering defence contracts. We are one of the only countries that has a mandatory system for the tendering of defence contracts. However, it is clear that the Conservatives took on this massive spending without thinking clearly about the implications on industry, and they brought in a very rushed process.
There are some key needs for the Canadian Forces now, and I think everybody in this House recognizes that. One of the needs is the fixed-wing search and rescue. Right now Buffalo aircraft, which are 40 years old, are doing search and rescue. When I raised this issue with the Minister of National Defence at our defence committee, he said the process was stalled.
The Government of Canada has been proposing new fixed-wing search and rescue planes for at least 25 years, but both the previous Liberal government and the Conservative government have failed to deliver.
All parties in the House should support new search and rescue. This is a huge issue for Canadians at home. It is a big issue in my province of British Columbia. It is one that neither government, the previous Liberal government nor the Conservative government, has addressed sufficiently.
I have proposed a motion in the House, Motion No. 283, which will allow the House to express its support for new search and rescue planes. Sadly, the Conservatives have not made this part of what they are presenting to the House. Nor have they made Arctic sovereignty a goal of their procurement strategy. That is contrary to all of their election promises in the last election campaign.
The Conservatives had promised that Arctic and Canadian sovereignty would be an important component of everything they did, in terms of defence. Instead the Conservatives have focused on the C-17s, which, as members said earlier today, are American built. Therefore, a big portion of the contract for service and maintenance will go to the U.S.
I have asked this question at committee, but I have never received a satisfactory answer from the government. What will happen when a number of American planes, U.S. air force planes, are lined up for important maintenance and servicing in the U.S., which is where our planes will need to be maintained and serviced? What will happen if six American planes and two Canadian planes are in a lineup for maintenance? Logically thinking, which planes would be serviced first?
I will also talk about the manufacturing situation in the country, despite the kind of rosy picture that has been presented by the Conservative government and even the Liberals. There are some very disturbing trends in today's economy. We are losing a lot of good jobs in key sectors. Through the softwood lumber agreement, another mill went down in my community just within the last month. The loss of these good, family supporting jobs really hurts middle class Canadians.
A report came out today from the Canadian Centre for Policy Alternatives, which shows the prosperity gap is increasing in Canada. Canadian families are working harder and yet the income gap is getting larger. We are told that the rewards of a booming economy are going disproportionately to a select few in Canadian society. This is a very troubling trend. The majority of Canadian families are actually falling behind or simply treading water.
Across Canada, one-quarter of a million manufacturing jobs have been lost since 2002. More than one in ten jobs in the manufacturing sector has been lost due to layoffs, plant closures or the non-replacement of retiring workers. One in three of those jobs was held by a woman. Among the hardest hit was Ontario and Quebec. This is unsettling news for working Canadians because manufacturing jobs pay almost 30% more than the national average.
Despite occasional promises by both Liberal and Conservative governments, Canada has no concrete plans for the auto sector , the aerospace sector or the manufacturing sector. There is no long term R and D or skills training strategy and no blueprint to seize the massive opportunities that are available for the 21st century green economy. This is why the World Economic Forum has Canada falling from 11th place to 16th in global competitiveness.
The World Economic Forum and others have warned us that there is a need for Canadian innovation and more original products and processes. Adding value to existing products and services is something that those of us from British Columbia have talked about and pushed for in terms of our lumber industry and adding value to our logs.
The NDP supports ensuring that procurement stays in Canada where it can create jobs and build up our industries. What we need for the aerospace industry is the same thing we need for large industrial sectors like the auto sector. We need a comprehensive policy that looks ahead to where the industry can grow, one that addresses skills and financial challenges. Canada's aerospace industry did not fall into place without a plan. On the contrary, Canadian aerospace was actively developed through a strategy that included public and private investment and innovation.
There are opportunities in British Columbia for the aerospace industry as well. B.C. has about 10,000 jobs in the aerospace industry, and these are good jobs. These kinds of jobs are family supporting jobs. They allow families to purchase homes and to have a quality standard of life. My colleague from Abbotsford will be familiar with one of these businesses, Cascade Aerospace.
One thing to note is the average industrial wage in British Columbia is $35,000, but in B.C.'s aerospace industry the average industrial wage is $50,000 a year. There are other companies in British Columbia that may be able to supply some of the military aircraft contracts as well, such as ACROHELIPRO Global Services Inc. at Vancouver International Airport and Delta's AVCORP Industries Ltd. and ASCO Aerospace Canada Ltd.
When decisions are made about how these contracts are awarded, I hope the people in charge will look at the country as a whole and that all regions of the country will have an opportunity compete for and perhaps win some of these contracts.
With the skills shortages that are upon us and with Canada slipping in global competitiveness under both the Liberal and the Conservative governments, the time for a comprehensive aeronautic strategy is here. In the past, many Canadian industries were not left to market forces, and there were strategic investments so we could prosper in key sectors.
That is what helped to build the middle class in Canada and to build Canadian prosperity. This is what provided families with jobs so they could support their families and so working Canadians could have some economic security to purchase a home, look after their children and look forward to a retirement with some dignity. The C-17 contract does not give us those benefits. It is effectively a sole source procurement to Boeing and to the U.S. Air Force.
However, we must look at the position of the Bloc Québécois. The Bloc members have been saying for years that they are pushing for a comprehensive aeronautics policy with predictable long term funding covering aspects of the industry. The members of the Bloc have to ask themselves how they are doing that with this motion.
The Bloc has been here since 1990. At times, the Bloc has had nearly 70% of Quebec's seats in the House. It was the official opposition in the House after 1993. The Bloc now has enough seats to keep a minority government in power. It used that power last spring to support the Conservatives' budget, a budget that gave nothing for employment insurance, nothing for Kyoto, only a pamphlet on equalization, and nothing for aerospace.
If the Bloc members were sincere in wanting a comprehensive aeronautics policy, why did they not use their power in this minority government to fight to get one in that last budget? The Bloc could have done what the NDP did in the Liberal minority government to secure overdue funds for cities, international development and the environment, but it did not, and the Bloc members will have to explain that to their voters the next time around.
In 2006, the NDP campaigned on developing industrial sector strategies in sectors such as auto, aerospace, steel, tourism, forestry and shipbuilding. We will continue with this economic vision. We hope other members of the House share our concerns.
Mr. Robert Vincent (Shefford, BQ):
Mr. Speaker, I would like to share my time with the member for Saint-Bruno—Saint-Hubert.
First, Quebec is not asking for a handout. The only thing it wants is its fair share. Quebec's aerospace industry represents, depending on the year, between 55% and 60% of Canadian aerospace industry. It would be only natural for it to receive its fair share of aerospace spinoffs from federal contracts. Its fair share is between 55% and 60% of total spinoffs. The Minister of Industry speaks nonsense. He says that government contracts are not like private ones. Does he not know that a government contract is not a private contract? The minister goes so far as to say that requiring spinoffs for Quebec would be like patronage. We must believe it, we must also see it, and we saw it. We are only asking him one thing: to ensure that Quebec's industry gets its fair share. This is his job as the Minister of Industry.
Quebec's aerospace industry is asking him the same thing, as well as Quebec's chamber of commerce and large labour unions, that is everyone, except perhaps Mr. Charest, who is willing to bend over and to get on his knees in front of the Conservative government. For our part, we will stand up.
The government could have imposed all the conditions it wanted. Since defence procurement is excluded from trade agreements, it can do what it wants. However, it did not specify that there be spinoffs for Quebec. Ottawa is weakening the only real Canadian aerospace centre in Canada. This decision means putting at a disadvantage Quebec industries that, instead of all being integrated into the American industry, are excellent, I repeat, excellent enough to measure up to competitors all over the world and to create centres of aerospace development at home. For a Minister of Industry from Quebec to approve such a bad decision for Quebec is shameful and unacceptable.
There will be 18,500 fewer job-years in Quebec because of the Conservatives. The purchase of the C-17 planes from Boeing, Chinook helicopters from Boeing, Hercules planes and C130Js from the American company Lockheed Martin totals $13 billion, including the maintenance contracts. The spinoffs in Canada should come to at least $9.2 billion. The Conservative government will therefore be directly responsible for the loss of 18,500 job-years in Quebec, the equivalent of 1,850 jobs over 10 years.
At the same time, I believe the Conservative government is turning its back on industry in every shape and form. We need only think of the textile industry, softwood lumber, furniture, and now it will be aerospace. By countenancing this kind of horror, to please their bosses in English Canada, the Conservative members from Quebec have fallen to a new low. By weakening the Quebec aerospace industry, the government is striking at the jewel in the crown of our economy. Aerospace in Quebec means 250 companies, 240 of which are SMEs, whose production is over $11 billion, 89% of which is for export.
Where I come from, in my riding, there are aerospace companies. In my riding, I have Air-Terre Équipement, Automatech Industrielle, Machine-Outils Henri Liné, Placage Granby, Produits intégrés Avior Inc., in Granby, and SIDO. Those companies should be getting economic spinoffs from these contracts, but they are really not sure this is going to happen.
Not only are they not supporting our industry today, the Conservatives are hurting its future too. The Bloc Québécois has long been calling for a real federal aerospace policy. In addition to the usual tax incentives, that policy must have the following objectives: a clear and predictable program to support research and development, a firm and predictable commitment to financing sales, particularly export sales; a policy to support aerospace SMEs; and a military procurement policy that encourages industry expansion.
The Conservative government can keep telling us that the Bloc Québécois can do nothing, but I can say one thing: when the time comes to put forward suggestions and plans, we are right there doing it.
That is when the Conservatives take our plans and ideas and put them to work. Then they realize that the Bloc Québécois does have some influence here, with the government, because it has the right ideas.
Let us talk about the Conservatives' military procurement. In June 2006, the Minister of National Defence, a former lobbyist for military manufacturers, announced the federal government's intention to increase defence equipment procurement by $17.1 billion in order to implement his "Canada First" defence plan.
The aerospace component of the "Canada First" project announced came to $13 billion: $7 billion to procure new aircraft, planes and helicopters, and $6 billion for in-service support and maintenance over 20 years.
The three aerospace procurement programs are: $1.2 billion to purchase four new Boeing C-17 heavy tactical transport planes, plus $2.2 billion for service and maintenance over 20 years. The total comes to $3.4 billion. There is also $3.2 billion to purchase new tactical airlift aircraft, of which the government might buy 17, plus $1.7 billion for in-service support and maintenance over 20 years. The plane that is preferred for this contract is the Hercules C-130J made by the American company Lockheed Martin, for a total of $4.9 billion. There is $2 billion to purchase 15 new Boeing Chinook medium to heavy lift transport helicopters, plus $2.7 billion for support over 20 years. All of that comes to a total of $13 billion.
None of these aircraft has been or will be built in Canada. The search and rescue helicopters were, at least in part, developed in Canada, but no purchase has been announced.
The expression "maximum economic spinoffs" means that the prime contractor must spend an equivalent amount in the Canadian economy, either in purchases or in investments, for each dollar received from the government, but not necessarily in the aerospace industry.
According to the contract, Boeing was to purchase or invest for a total of $3.4 billion, or the equivalent of the value of the contract, while complying with the following conditions: half of the spinoffs to be in aerospace and defence; 30% in technology-related areas, and 15% of spin-off generating contracts to small and medium sized businesses.
There is no specification whatsoever in the contract about the geographical distribution of these spinoffs. Boeing will purchase or invest where it pleases. The aircraft will be built and repaired in the U.S. Direct spinoffs from the contract will, therefore, be more or less non-existent. So will indirect spinoffs.
If, as one might well expect, Boeing depends on its existing supply chain, Quebec should get between 25% and 30% of the spinoff. Boeing has two western affiliates, in Manitoba and British Columbia, and its main suppliers are in Ontario, first and foremost a Mississauga company by the name of Magellan. And this when the aerospace industry in Quebec accounts for between 55% and 60% of the aerospace industry in Canada.
As for the loss of 18,500 jobs, had Quebec got 60% of the spinoffs, the contracts would have generated 37,000 jobs in Quebec. Since Quebec will instead likely see a mere 30%, the contracts will generate only 18,500 jobs annually.
I would like to give an overview of the aerospace industry, but since you are signaling that I have just one minute left, I will try to pick out the salient points I wanted to mention.
In connection with the military equipment procurement policy, the Bloc Québécois is calling for a new policy to be adopted which would comprise the following: give priority to Canadian suppliers; when a Canadian supplier is not in a position to provide the item in question, ensure that foreign contracts awarded generate worthwhile, positive spinoffs in Canada; ensure a fair distribution of spinoffs, i.e. in such a way as to respect the geographical distribution of the industry.
In closing, I would like to thank the hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup and read the motion he has presented to us:
|| That the House denounce the laisser-faire attitude of the government that prevailed in its negotiations with Boeing, regret the fact that Quebec did not get its fair share of the economic spin-offs of this contract given the significance of its aeronautics industry, nearly 60%, and call on the government to provide fair regional distribution of economic spin-offs for all future contracts.
Mrs. Carole Lavallée (Saint-Bruno—Saint-Hubert, BQ):
Mr. Speaker, my colleagues provided a brilliant account this morning of the importance of the aerospace industry to Quebec and the spinoffs we should be getting. They mentioned 55% to 60%. I am going to show the hon. member who just asked the question that it really is between 55% and 60%.
We said that the aerospace industry plays a major role in Quebec’s economy. That is true as well of the South Shore, where my riding of Saint-Bruno—Saint-Hubert is located. I would even say that the aerospace industry is without a doubt one of the strongest sectors in the South Shore’s economy. Longueuil Economic Development has done an excellent study of this, and I would like to share a bit of it with the House.
The pre-existing infrastructure in the South Shore, the concentration of world class companies and the tax incentives for research and development help attract new investors to the South Shore every year. Montreal’s South Shore is also an export powerhouse.
Among the lead aerospace companies, we have Pratt & Whitney Canada, Héroux-Devtech and the Canadian Space Agency in Saint-Hubert. Unfortunately, this federal government has been reducing its contribution to the space agency’s research year after year, in contrast to the other G-8 countries. There is also the Lemex Group. These companies all help to make the aerospace industry a pacesetter in greater Montreal.
The Montreal area is the only place in the world where, within a radius of 30 km or 19 miles, the main components of an airplane are all available. The Montreal area is the second largest aerospace centre in the world, after Seattle but ahead of Toulouse. It has a matchless concentration of companies that are leaders in their field—I already mentioned Pratt & Whitney Canada, Bombardier Aeronautics, the Space Agency, Bell Helicopter—and are supported by 10 research centres. The aerospace industry in greater Montreal employs 37,000 people, numbers more than 240 companies, generates more than $10 billion in annual revenues, and accounts for between 55% and 60% of the Canadian market. One job in six in the Montreal area is connected to the aerospace industry.
In six years, this sector’s sales have increased by more than 80%. More than 80% of its production is exported and it invests more than $700 million annually in research and development in Quebec.
In my riding of Saint-Bruno—Saint-Hubert, which is almost in the middle of the South Shore, many aerospace companies are to be found. There are about ten subcontractors as well as major companies. My riding even includes the Saint-Hubert airport, which I will talk about later, the Canadian Space Agency, which I mentioned, as well as the École nationale d'aérotechnique, a very important college in the aerospace industry.
The following businesses are in my riding: Aéro Teknik, Amphenol Air LB North America, Avtech, Beel Technologies, Brechbuhl, Lemex, Marinvent Corporation, Netur Usinage and Tecnar Automation. These are extremely important businesses and subcontractors with a few hundred employees. Officially, these nine businesses have 175 employees in all, but we also know that many men and women in the South Shore work for large companies. Thousands work for Pratt & Whitney, for Héroux-Devtech and also at the Canadian Space Agency. They have quality jobs—the average salary being $60,000—and they expect to keep these jobs in the years to come. Just talk to Camille Larochelle, for example, from the aerospace workers union. He has a lot to say about this.
Not only are the South Shore, the greater Montreal area and the province of Quebec in need of spinoffs from the purchases this government is making and from the purchases of the C-17 from Boeing, they also have other needs regarding the airport. Not only is the government unable to manage the conditions of a $3.4 billion contract, it cannot meet quickly and easily a very simple request from the people in charge of development at the Saint-Hubert—Longueuil airport, the DASH-L group, who need additional money and important subsidies to repair and lengthen the airstrip. We know that this work, which would cost $70 million, would enable a large aerospace industry, Pratt & Whitney, to continue testing its engines in Saint-Hubert, just as it has done for the past 75 years.
Pratt & Whitney has delivered 55,000 engines to its clients in some 190 countries over the past 75 years.
We know that the competition from other countries is very strong and very keen. The large foreign companies are supported by their governments. It is not just a financial matter. This is the future of our industry, and especially the future of our workers.
The Bloc Québécois wants a real aerospace policy. Let us stop this piecemeal management, with a bit here and bit there, a little contract with Boeing for a few billion dollars with no conditions negotiated. It does not make any sense. No one here would pay billions of dollars for something without setting any conditions.
In the fall of 2004, Bombardier, Pratt & Whitney and Bell Helicopter expressed their intention to invest large amounts in research and development to launch some large-scale projects. In all three cases, the lack of a clear federal policy resulted in long and painful negotiations.
Since 2002, the Bloc has been asking the government to establish an aerospace policy that would provide the companies with reliable and predictable support thus enabling them to plan their development projects ahead. Faced with the federal lack of interest, the Bloc even submitted its own policy, which was very well received by the industry.
In the fall of 2005, exasperated by repeated pressure from the Bloc Québécois, the Liberal government presented a list of standards that it would take into account in the development of an eventual aerospace policy. It must also be said that we were on the eve of an election campaign. The policy never materialized and the Liberal government was not re-elected. Through sheer tenacity, the Bloc finally convinced the Liberals that such a policy was necessary after they denied it for years.
The Bloc will continue to push this file in order to get the Conservatives to bend. The Conservatives are doing Quebec a lot of damage with their denial of the reality of this vital sector for Quebec.
A real aerospace support policy would include the following: support for research and development, the restoration of a real technological partnership plan, financing of sales contracts, support and, finally, a policy on the procurement of military equipment.
With regard to support for research and development, the Government of Quebec has succeeded in creating an environment favourable to the development of the aerospace industry. In Quebec there are close to 40 training programs aimed at the aerospace industry—graduate degree programs—that provide the industry with quality employees.
Moreover, the government offers investment support and generous tax credits which reduce the cost of doing research and make Quebec attractive for high technology companies.
The federal government also offers tax incentives for research and development. Nonetheless, federal funding for research is clearly insufficient.
Federal support for research and development in the aerospace industry is vital because the industry in Quebec and Canada is competing with Boeing, Airbus and Embraer, which can all count on their respective governments for support.
In OECD countries, spending on research and development averages 2.3% of GDP. Among G-7 countries, the average is about 2.5% of GDP. In Canada, spending on research and development is stagnating at 2% of GDP. Canada is falling behind.
Quebec is doing well, spending considerably more on research and development than the average of industrialized countries, in spite of the paltry support it gets from Ottawa. Indeed, federal dollars account for only 15% of the funding for research done in Quebec, which is less than anywhere else in Canada. Quebec's successes are attributable to Quebec's efforts, despite the obstacles Ottawa is putting in its way.
In concluding, I will summarize in one sentence the policy proposed by the Bloc for the aerospace industry: the aerospace industry has to be for Quebec what the auto industry is for Ontario.
Hon. Christian Paradis (Secretary of State (Agriculture), CPC):
Mr. Speaker, I am pleased to have this opportunity to speak about the many stringent conditions this government set with Boeing for the purchase of strategic airlift planes.
The motion suggests the government was soft on Boeing during the negotiations. Nothing could be farther from the truth. Economic spinoffs must be high quality and involve high technology. Here are a few examples of acceptable projects: the production of mission avionics for helicopters; the installation of radars and other electronic material in fighter planes; the production of composite high-tech parts for large commercial planes; the establishment of a research and development centre; or investments in Canadian universities for research in aerospace engineering.
But if a company wants to buy raw materials like steel or iron ore, trade wheat, foodstuff or farm products, or goods and services with a low technological content, these proposals would be refused.
Once a company has prepared a proposal for high quality and high technology industrial benefits, that proposal is evaluated according to three strict criteria. First, the work must be generated by the procurement program. Second, the work must be carried out during the period defined in the contract. Third, the work must comply with the growth principle, which is that existing business relationships may be used, but only the new work will count toward meeting the obligation.
Industry Canada then insists that the spinoffs be truly Canadian. To determine this, the department examines the precise value of the Canadian content of the transactions between the principal suppliers and the Canadian suppliers. In other words, officials examine the precise quantity of materials or work from Canadian sources that a transaction involves and award it points.
Consequently, if a contractor buys a product from a Canadian company and the product is entirely manufactured in Canada, it receives full points for that factor. However, if 60% of the product is manufactured in Canada, it will be awarded only 60% of the points assigned for that factor. That also means that the total value of contracts with Canadian companies often exceeds the amount that the government pays the principal supplier. Canadian companies receive that income, and the Canadian economy automatically benefits.
As well, half of Boeing's transactions in relation to industrial spinoffs must be in the aerospace and defence sector. Boeing operates primarily in the aerospace and defence industry, and so a majority of its activities in Canada should be in that industry. However, by imposing that minimum, the government has left the door open for other high technology industries. Boeing must also allocate 30% of its industrial benefits contracts to key technologies, as set out in the list drawn up for that purpose.
The list of key technologies was developed in collaboration with the industry. It sets out the nine main priorities for technologies that will help to preserve and expand the aerospace and defence industry, while ensuring its long-term sustainability. The list includes the following technologies: advanced manufacturing and emerging materials; avionics and missions systems; communications and control; propulsion and power management; security and protection; sensors; simulation, training and synthetic environment; space; and unmanned vehicle systems. Boeing has already identified a number of transactions that meet the requirements of the key technologies list. The company will be undertaking major projects that use technologies relating to composite materials, simulation and training, communications and control, and space.
Finally, 15% of Boeing's industrial benefits contracts must be awarded to small and medium sized businesses. These are vital to ensuring the growth and viability of the aerospace and defence sector and of the economy as a whole. These have proven their lead role in economic growth models. Boeing is a huge company with multiple divisions and it is often hard for small businesses to make a place for themselves in Boeing's supply chain. This is why it is important to ensure that these businesses will also be able to take advantage of this opportunity.
To date, the industrial benefits relating to the strategic airlift project have been solid in all these sectors and show promise as far as potential long term impact on the Canadian economy is concerned. Through Industry Canada, the new government of Canada places strong emphasis on the importance of Canada-wide participation and showcasing the skills of Canadian companies. Our government is making every effort to ensure that international corporations are aware of the scope of Canadian industry and of its many and varied assets.
Industry Canada officials will be working closely with the regional development agencies, that is the Atlantic Canada Opportunities Agency, Western Economic Diversification and the Economic Development Agency of Canada for the Regions of Quebec. Together they will seek out Canadian businesses with a potential interest in the opportunities available.
In addition, departmental officials will work directly with Canadian businesses throughout Canada in order to draw attention to existing opportunities and to help companies interested in obtaining contracts, in order to underscore the importance of Canada-wide participation and to showcase these companies' abilities.
We also make it very clear to potential bidders that they are expected to work with companies throughout Canada. Boeing, for example, held four sessions with regional industries, one in each region of Canada. The one in the Atlantic region was held on September 7 and 8, 2006 in conjunction with the Halifax air show. They were in Calgary for the western region on October 3 and 4, 2006, in Montreal for the Quebec region on October 24 and 25, 2006, and in Toronto for the Ontario region on November 7 and 8, 2006. Boeing was thus able to meet hundreds of Canadian businesses and to gauge the strengths and abilities of companies all over the country. Boeing has undertaken to work with Canadian businesses in order to achieve 100% industrial benefits. This will be achieved through logical business relations leading to real markets and the forging of lasting and viable partnerships.
The spinoffs in Canada are serious contract obligations. Industry Canada requires annual reports, audits and performance guarantees. Each year, contractors must report on what they have accomplished in that respect. Financial penalties can even be applied in case of a failure to comply, but until now, it has never been necessary to impose such penalties.
I would like to sum up the strict requirements which I just described. Boeing must ensure that there are high quality spinoffs worth 100% of the eventual contract value. The company musk work with businesses throughout Canada, including Quebec. At least 50% of the spinoffs must be for the aerospace and defence industry, at least 30% for the nine key technologies identified by the aerospace and defence industry and at least 15% for small and medium sized businesses. The value of the spinoffs in Canada must equal 100% of the contract value.
The work must come from the acquisition program. It must be performed during the period defined in the contract. It must be in agreement with the principle of growth. Existing business relationships may be used, but only new work counts in assessing compliance with the obligation. These are rigorous conditions which define a serious contract obligation.
The government is very serious about its responsibility to negotiate firmly with potential suppliers and to obtain optimal spinoffs for all of Canada. The government has respected its obligations.
I will stop here in order to be able the share my time with the member for Beauport—Limoilou.
Mrs. Sylvie Boucher (Parliamentary Secretary to the Prime Minister and Minister for la Francophonie and Official Languages, CPC):
Mr. Speaker, I am pleased to take the floor today to discuss this motion by my colleagues.
The motion before us calls on the government to provide fair regional distribution of economic spinoffs for all future contracts.
I am pleased to give the House the assurance that the government intends to provide fair regional economic spinoffs for future contracts, just as it has been doing up to now. And I can say that with confidence because of the rigorous process through which all Canadian industrial spinoffs are developed and approved.
As you know, the government is deeply committed to asserting Canada’s place in the international community. In order to do so, it needs to purchase important defence equipment. In the next few years, we will spend billions of dollars buying helicopters, ships, trucks as well as strategic and tactical aircraft.
These capital expenditures have to follow a very specific procedure. First, the national defence department identifies military needs. When that is done, it informs Industry Canada and Public Works and Government Services Canada that it intends to purchase new equipment.
Industry Canada’s role, after that, is to establish the requirements that are necessary for Canada to benefit from industrial spinoffs under the industrial and regional benefits policy.
This policy provides the framework through which the government levers large defence procurements to generate sound domestic economic activity. We demand that, for each dollar the Government of Canada spends for defence procurements, one dollar be invested in Canadian economic activity. We cooperate with potential suppliers so that Canadians can benefit from sustainable spinoffs based on high quality technology.
The investments do not have to be directly related to the equipment being bought, but we expect they will be linked to a line of products of similar technology or research and development that will improve Canada’s innovative capacity. The government’s role is to make sure all regions in Canada can derive some benefits from these procurements.
Industry Canada works with regional development groups, among others, in order to get advice on expertise and participation in outreach activities in the regions with the industry. We encourage the main contractors to engage in such activities in Canada as a whole, by travelling throughout the country to meet with potential Canadian partners and suppliers.
The final acquisition documents that Public Works and Government Services Canada will make public contain directives intended for potential bidders on the industrial benefit requirements.
When it gets the bids, the government does a three-part evaluation: a technical evaluation done by DND; a financial evaluation done by PWGSC; and an evaluation of industrial benefits done by Industry Canada in collaboration with regional development agencies.
Once the evaluation is completed, the government announces the name of the supplier that was chosen and starts negotiating the final general conditions of the contract. Industry Canada takes part in the negotiations and focuses on the main contractor's industrial benefits plan.
Furthermore, as I have already indicated, Industry Canada officials work closely with regional development agencies. They work directly with Canadian businesses across the country in order to point out existing opportunities and help businesses seeking contracts, in order to emphasize the importance of Canada-wide involvement and highlight the capabilities of these businesses.
The government encourages contractors to establish partnerships that make good market sense because that is how we can help create business relationships which will last long after the benefit requirements have been met. We also evaluate carefully the transactions being considered as benefits. These transactions must meet three criteria for Industry Canada to judge them satisfactory.
First, the work must be associated with the procurement program. Second, the work must be done during the period specified in the contract. Third, the work can be based on existing business relations but only the new work counts towards meeting the conditions.
Our government has tried to improve the spinoff process to integrate it more harmoniously into all procurement programs. In the case of aerospace projects, we now insist not only that the Canadian spinoffs have high value and be in high technology, but we require that at least 30% be in the nine key technologies. That ensures that our industry is getting the maximum benefits from our procurements, now and in the future.
Canadian benefits are a serious contract obligation and Industry Canada requires annual reports, audits and performance guarantees. Every year, contractors must report on what they have done in that regard. Financial penalties can even be imposed in case of non-compliance, but we have never so far had to impose such penalties.
In general, the procurement process is the result of the collective efforts of a number of departments. Industry Canada takes an active part in the process to ensure that aerospace and defence industries are getting the best possible benefits from the procurements.
Our position on defence procurements is clear. All regions of Canada can benefit from the spinoffs. All Canadian aerospace and defence companies have the necessary skills, expertise and capability to act.
We have been working with contractors from the aerospace industry to get the maximum benefits from opportunities in the area. And we will continue to do so.
Our wise strategic approach will allow us to establish lasting long-term trade partnerships that will benefit Canadian businesses and the contractors with which they work.
As can be seen, our government's approach to spinoffs is based on the firm confidence we have in the strengths and the capacity of our aerospace and defence industries. Our approach is fair for all regions of Canada. We will use the same approach in future procurement programs.
Mr. Claude Bachand (Saint-Jean, BQ):
Mr. Speaker, I listened carefully to the comments made by the Parliamentary Secretary to the Prime Minister and Minister for la Francophonie and Official Languages. I will be happy to explain fully to her the mysteries of life concerning the contracts we are talking about today.
First, I am very pleased that the Bloc Québécois has moved this motion, because I have been personally interested in this file for about eight months. I am also pleased that the Bloc Québécois has moved a motion in the Committee on National Defence to study the procurement process, and pleased as well that it is defending its territory, that is Quebec.
In this regard, I want to remind my colleagues—and I said so in committee—that only the Bloc Québécois will be defending Quebec here today.
The Parliamentary Secretary talked only about Canada. That is the problem with Canada, the problem with federal, federalist political parties: they are forced to defend the territory as a whole.
Liberals say this is an injustice for the Canadian industry, but why are they saying that? Because some of their members come from other regions, such as Winnipeg and British Columbia, where Boeing has facilities, and they are unable to say that they must defend Quebec, because 60% of the spinoffs should go to it. They say that it is not so bad if it does not get them. They use all the Canadian arguments: there must be Canadian spinoffs.
So I wanted to make it clear that only the Bloc Québécois is speaking up for Quebec's aerospace industry. I have heard no one else on this subject. Everyone is talking about Canadian spinoffs. We have nothing against that, as long as Quebec's share of the Canadian market, that is 60%, is taken into account.
I would also like to tell the House about the secret nature of all this. I was going on vacation in July when I turned on my computer. All the employees had left on vacation. That was when I saw on the Public Works and Government Services Canada website the Boeing bid submission for strategic aircraft, for the Chinook helicopters that also come from Boeing, and for tactical aircraft that come from Lockheed Martin. That is a lot of money. It was posted on the MERX site during the holidays, from July 5 to August 4.
So I phoned the big companies in Quebec. When we say that 60% of the aerospace industry is concentrated in Quebec, it is not small companies: Bell Helicopter, L3 Communications, Pratt & Whitney Canada, Bombardier, CMC Electronics, Rolls-Royce Canada, not to mention all the small and medium sized companies with aerospace connections. These are big players, and 60% of them are in Quebec.
I called them, therefore, and asked whether they had seen what was on the MERX site. They said that they had not seen anything. It was not only during the holidays but also during the Farnborough Air Show in Great Britain, a show like Le Bourget where the entire aerospace industry is present.
They wanted to put a fast one over on us. August 4 was the closing date. So I invited the companies and met with them on July 31. They told me then that something was wrong because they had not been informed that this was coming, they did not know anything about it, and their CEOs were all in Great Britain at the air show. They said that it was absolutely essential for me to defend the industry. In the middle of the summer, I sent out press releases saying that the industry was very concerned.
So now our fears are confirmed. They are saying that the benefits will be distributed all across Canada and no special consideration will be given to Quebec.
I wonder, though, what Ontario would say if there were an incredible tender from the federal government in the automobile industry and it wanted to give a large part of it to Quebec.
Everybody here would up in arms, saying that since most of the automobile industry—the critical mass, 70% of the Canadian automobile market—is located in Ontario, it should get 70% of the contracts. It is strange that this should still be the rule in the automobile industry, but when it comes to Quebec, another set of rules apply.
They are also starting to talk about dividing it up across Canada. The term in English is regional investment benefits, but now they have been talking for some time about Canadian investment benefits.
It is not regional anymore, it has become Canadian and that is an excuse to do anything.
Let us look at the way those contracts develop. I looked at the process. First, supposedly because of a defence policy, National Defence says what it needs to conform to that policy. Usually, before giving contracts, the department is supposed to produce a defence capability plan. If the government is satisfied with that plan, it buys the equipment needed to ensure the success of that plan.
But it is not how things went. The Liberals adopted a defence policy in 2005 and the Conservatives just extended it. All of a sudden, without any defence capability plan, the government spends an incredible $20 billion. Consideration must be given to the fact that parliamentarians are the true advocates of taxpayers but we have been completely excluded from the process. I will come back to that later.
When the Department of National Defence draws up its specifications or requirements list, it can get the aircraft it wants. It only has to say that it needs a plane that can lift 100,000 kg of cargo, knowing full well that only one plane can do that. With this requirement, it has eliminated all other planes.
Do the taxpayers get enough for their money when the Department of National Defence set its requirements according to the plane it wants? There is a first filter at that level and it has been applied. We can see that the department wants the C-17 and the Chinook by Boeing. In fact, the first contract has been signed.
Then, another department enters the game: Public Works Canada. That department has its own way of awarding contracts. As I saw last summer and as is being confirmed now, the department produces a draft contract award notice. That means that it wants a specific plane and a specific company to negotiate with, a specific company to service the plane and a specific company from which to buy the plane. That company name is written in the contract. That closes the door to all others.
This morning, the Auditor General appeared before the committee. She told us that she had already spoken out about the government's approach of using ACANs, which stands for advanced contract award notifications. The taxpayers are not getting their money's worth with that system.
All of a sudden, they choose just one plane. I will repeat the story I told in committee about buying my first car. The first car I wanted was a Camaro. I told my dad that was what I wanted and he said that was fine and that he would go along with me to see what kind of a deal I could negotiate. When I got to the place, I told the salesman that I wanted the car that was in the show room, that one and none other.
That is just like the ACAN I referred to.
The salesman agreed and asked if I wanted to know the price. Of course I did. He told me the price and I replied that I was prepared to take it. My father then told me that was not how things were done and that he would show me the ropes as soon as we left the show room.
An hon. member: A Firebird.
Mr. Claude Bachand:The hon. member is familiar with the story. It does end with a Firebird. So, we leave the show room. My dad tells me that is not how to do things. When a person has a particular car in mind, he absolutely must not say so, because that will mean he will not get a good deal. He has to visit all the dealers and look at comparable cars, then come back to the first and look at another car before coming back to the first one. That puts you in a position to negotiate, and that is what I did. I did not buy the Camaro. I got a Firebird. It was just as nice and I got a good deal. I paid a lot less because I told the salesman that if he did not offer me a certain price, the other dealer might.
The same thing goes for the planes. It is the same thing in the contract clauses we have before us. They are talking about an aircraft. The minute a company like Boeing is told we want only them, and that after-sale maintenance will also be done only by them, there is no bargaining power left. That is what I think.
In fact, I wrote an article about this lately in the Frontline Magazine. To me, the way this is done is not acceptable. Canadian taxpayers do not get their money's worth when people act this way.
I explained the first step of the selection process, the first filter, when the Department of National Defence defines its specifications. Then, the Department of Public Works gives out the contracts the way I just mentioned. Finally, to top it all, the Minister of Industry comes in with his disappointing approach for Quebec.
Everybody thought: “Our Minister of Industry comes from Quebec. Our Minister of Public Works is also from Quebec.” He sits somewhere else—I cannot mention where— in the other place. People thought: “They will speak up for us.” But suddenly, we learn that, although we have 60% of the aerospace industry, things will not happen this way. The free market prevails. Since when do they have to play by the free market rules when they are the ones signing the cheques? Since when can the car salesman say: “That is not the car I want to sell you, I want you to buy another one”? I would tell him: “I am the one signing the cheque, so I get to decide what I am buying”.
This is completely illogical. We said to Boeing: “You can do it where you want, when you want and the way you want.” I will explain later how I see this.
I cannot fathom that ministers from Quebec went to Trenton to sign a contract that was so unfair to Quebec, their native land. This is why we, sovereigntists, consider that the system is not working. This is why I say that the Quebec industry is better served by the Bloc Québécois, not by the Liberal Party nor the Conservative Party, who are stuck with a pan-Canadian vision and must satisfy people from British Columbia and Alberta.
We are having the wool pulled over our eyes. And the industry also told me that on July 31. The purchase is 100% aerospace product, but it is to have only 60% aerospace content. Why? What about the rest of the 100%, the missing 40%? Are we going to sell them northern spruce, or Atlantic salmon, to make high tech airplanes? We should have had 100% aerospace spinoffs, as the industry told me. Not only should we have had 100% aerospace for Quebec, but the geographic distribution of the industry in Canada, and the concentration of the industry in Quebec, should have been taken into account.
I went to the Ritz-Carlton when Boeing decided to go on a cross-Canada tour to decide whom it would be doing business with. Naturally, the president of Boeing Canada took me to the royal suite at the Ritz-Carlton to introduce me to the people from Seattle who are in charge of economic spinoffs. I told him: “We are not satisfied with it being only 60% aerospace, in terms of your obligation. Sixty per cent of the industry is in Quebec.” So by my calculations, 60% of 60% would give us at least 36% of the contracts in Quebec. But that was not quite the case.
Looking a little farther, in my research, I learned that they have operations in Winnipeg and British Columbia, very close to Seattle where Boeing is located. So they probably said to themselves: “There is no point in doing business in Quebec, it is too far away for us.” The company's interests came well ahead of geographic distribution, with the government's approval, which is even worse.
The government could have said: “We are the ones signing the cheque, so we are going to tell you exactly whom you will do business with. You are going to take Quebec into account, where 60% of the industry is. You are going to give them their rightful share.” But it did not happen that way and it seems that the same will be true for the rest of the contracts.
Our two ministers from Quebec went to sign the contract in Trenton, and $3.4 billion went up in smoke—$3.4 billion in Quebec and Canadian taxpayers' dollars that is going to the United States, with no guarantee of spinoffs in Canada and Quebec.
There are other contracts planned for the Chinook helicopters, also from Boeing, also awarded by untendered contract. This means losing bargaining leverage. The contract is for $4.7 billion. There is another contract for $4.9 billion for tactical aircraft, from Lockheed Martin, in the United States.
There is a $3 billion contract for search and rescue planes, as well. All this is in the works. Meanwhile, the minister steps into the lobby and tells the press that things are going to work just as they did for the first contract. Boeing is told, “do whatever you want, wherever you want, whenever you want”. I would also like to explain that. Why did I say “wherever, whenever and however you want”?
With regards to “however you want”, there is a program in the United States called ITAR, International Traffic in Arms Regulation. The United States is telling Canadian companies they cannot fill production, support or service positions with anyone who comes from a list of 25 countries. These people cannot come anywhere near these machines.
Our response to these American companies is that we will tell our companies that if they have employees who come from Pakistan or Afghanistan, they will have to move them to another department because they cannot come into contact with the plane, even if they are accepted as Canadian citizens.
Thus, the expression “however you want” is exactly what Boeing is doing. As for “whenever you want,” any delay in delivery is supposed to incur penalties. A few weeks ago, Sikorski, the company tasked with building the maritime helicopter that will replace the Sea King, said that because of a strike in one of its plants in the United States, they will be five and a half weeks late. The penalty, however, is $100,000 per day the company is late. What did the government have to say about that? It said it was not serious and that it would turn a blind eye.
What signal does that send Boeing? “Whenever you want.” This means that if they are late and the contract provides for penalties for delays, Boeing will say that it does not matter since Sikorski was late and did not pay any penalty. So no more penalties will be paid. And then it told Boeing “wherever you want”. This is the equivalent of writing a cheque for $3.4 billion to Boeing and telling it to do whatever it wants. I do not understand this. I am a sovereignist. I have said so and explained why earlier. This type of issue reinforces my political position. Sovereignty is not just in Quebec. There is also Canadian sovereignty.
How can we give our aerospace future away to the Americans and tell them to do whatever they want, wherever they want, whenever they want and however they want? How can we say that this is right? This is what makes us think there was probably some political interference. There were probably some top-level agreements and of course no one wants to tell us about it. Maybe some matters were settled in exchange for purchases of planes, boats or trucks.
There are $20 billion worth. This file is completely backwards. Not only is the process not being respected, but the Canadian and Quebec taxpayers are being had, the Quebec industry is being had and, for some reason that is hard to explain, everyone is a loser in this file.
The Standing Committee on National Defence is currently working on breaking into the process. There is a select club. A group of individuals from National Defence and other departments have reached an agreement among themselves and parliamentarians are excluded from this group, which does not want anything to do with them. The Standing Committee on National Defence is currently working on this issue and will continue to do so, because such injustices are unacceptable to Canadian taxpayers and, in our opinion, the injustices for the Quebec industry are even less acceptable. I repeat, and will conclude on this, only the Bloc Québécois is currently defending the Quebec industry and it is proud to be doing so. This confirms us in our sovereignist position.
Hon. Raymond Simard (Saint Boniface, Lib.):
Mr. Speaker, I will be splitting my time with the member for Thunder Bay—Rainy River.
I am very pleased to rise today to speak on this important motion from the Bloc Québécois. The aerospace industry is something that I have always been very keen on and I actually have been the representative in Manitoba who represents those interests I think the best.
First, along with my colleagues in this party and with probably every Quebec colleague from all parties, we are all very proud of the aerospace industry in Quebec and elsewhere in Canada. I do not think there is one of us here in this Parliament who has not travelled to Asia or other parts of the world and heard about the success stories of Bombardier, for instance, and Bristol Aerospace or Standard Aero. We have been very proud of those enterprises. I would also like to say that specifically for Manitoba I will be speaking on those in particular, but I am also very proud of that industry and we will talk about its importance for the Manitoba economy.
I am also very proud of the previous government's investment in this industry and of the support we provided this industry. This is not a coincidence. I am sure that this support has played an enormous role in making our aerospace industry the fourth largest in the world.
Before I speak on the aerospace industry in Manitoba, I would like to express my frustration over the whole C-17 purchase and how the government basically sold out Canadians on this deal. It is important for Canadians to realize exactly what happened behind the scenes.
That party always talk about being the party of accountability, but I do not think this is what Canadians are seeing. They are seeing exactly the opposite: the Minister of Industry flying to Washington and making side deals with the Bush administration. If we are going to talk about transparency, this kind of thing just cannot happen. The results of those dealings in Washington certainly were not to the benefit of the Canadian taxpayer.
For instance, the Conservatives did not ensure that the Canadian industry received the equivalent of 100% value of purchase and maintenance, which has become a standard in the world. My understanding is that the purchase price of these planes will be approximately $1.8 billion. The maintenance contract, over a 20 year period, is somewhere around $1.6 billion. But in fact, the return we are getting is $1.1 billion. It should be $3.7 million or $3.8 million. It is extremely frustrating that again for the sake of expediency we are leaving a lot of money on the table in the U.S., a lot of money that could benefit our Canadian industries.
Conservatives also neglected a small thing called our sovereignty, which is very frustrating. Canadians who come from certain countries will not be able to work on some of these contracts here in Canada. As has been said quite often in the House, one of my colleagues, who can be a member of Parliament, would not be allowed to work on one of these contracts because of the contract the government signed with Boeing. It is absolutely unconscionable.
The Conservative government also purchased the strategic airlift planes against the better judgment of General Hillier, who was asking for tactical airlift. I guess the government thought it knew better. All these decisions the Conservatives are making one after the other, against all common sense, have certainly hurt the Canadian taxpayer.
After the Conservatives ignored General Hillier, they moved on and manipulated the requirements of the procurement process. Basically it ended up being a sole sourcing of the planes. Anyone who knows anything about the bidding process will tell us that sole sourcing does not lead to better prices. It would normally lead to higher costs. I think everyone in the House would agree with that. All of this is from a party that has bragged about its tough accountability law and how procurement would be a lot more competitive in the future. It is actually laughable.
The Conservative government also announced its military spending without having a defence capability plan and without the input of Parliament. When we are spending $3.7 billion, when we are making that kind of investment, it would seem to me that Parliament should have input on this kind of decision.
Probably the most hideous thing the Conservatives have done is to not guarantee the regional economic spinoffs. Governments have a responsibility to set industrial policy and not to leave this to foreign private sector firms. As noted by some of my colleagues and by some people in the industry whom I have talked to, other countries are certainly looking after their companies. They have policies in place to protect and support their industries. Canada should be absolutely no different on that basis. Other countries also ensure there is a fair balance of work in their countries.
Everything the government does is politically motivated. The Conservatives are not concerned about the well-being of Canadians. They are concerned about how to get these planes here as soon as possible because they promised that in their election campaign. That is not governing.
I would like to speak briefly about Manitoba. We have heard a lot about the Quebec aerospace industry, but I would like to tell everyone that Manitoba has a very substantial aerospace industry, one that I am very proud of. I know that our Quebec colleagues from all parties are proud of their industry, but I have worked very closely with these people and Manitoba has the third largest cluster of aerospace firms in Canada. I have had the pleasure of working with representatives of these firms. They are very innovative and very practical. They are progressive people. Their industry has become indispensable to our province's economy.
This is a growing industry in Manitoba. We do not want it to stop growing. We want it to thrive. For it to do that, we need to be able to obtain our fair share of the contracts. I think that is what everybody is saying here. Let us ensure that the procurement contracts are distributed fairly. Let us not allow Boeing or a foreign company to make those decisions for us.
I want to tell the House about four companies that are world class players in the industry and that have changed the landscape of Manitoba in terms of technology. They have really added to our economy.
The first is Standard Aero. For people who do not know about this company, it is the world's largest independent small turbine engine repair and overhaul company. It is a huge company. I have visited the plant on several occasions. Its facility is one of the most modern in the world. The Winnipeg plant people have actually helped other people design their plants because of the phenomenal job that was done in Winnipeg. It is based in Winnipeg and also operates facilities in the U.S., Europe and Asia.
Bristol Aerospace is the largest of the Magellan Aerospace Corporation group of companies and is the only western Canadian company manufacturing space systems. Magellan actually has a satellite right now that apparently was supposed to die a couple years ago and is still going strong. The company is hoping it will last another couple of years. It is working on second and third generation satellites. I believe the company is the only one to do that in western Canada. We are very proud of those accomplishments.
Again, the company always talks to us about the importance of supporting its industry and making sure we are there.When it is competing against other countries like Germany or France for the satellite business, for instance, as those countries protect their industry, it is important for us to be there for our industry as well.
Boeing Canada has one of the most modern facilities in the country and provides parts for the new Boeing Dreamliner 787, plus the 777 and 747. It also is an amazing plant. Again, we are very proud of Boeing. These people have been second to none in terms of partnerships with the province, with the private sector and with our educational facilities.
Boeing also has the largest composite manufacturing facility in Canada. For those who know anything about composites, they will know that composites are the future in the airline industry. The materials are lighter and stronger, which obviously will lead to certain fuel efficiencies. What Boeing Canada is doing in Winnipeg is very important .
Air Canada Technical Services is huge in Winnipeg and employs a large number of people who provide maintenance not only to its own airline but also to many other airlines that fly their planes into Winnipeg under contract to Air Canada. Again, we are very proud of this firm.
These are the big players in Manitoba, but it is also very important to note that there are 20 regional and national firms in Winnipeg. They are a fair size and they and are growing. There are also some amazing training centres in Portage la Prairie. We funded that a couple of years ago. I think this is the largest in Canada, once again doing an amazing job.
The whole aerospace industry in our province is just blossoming. We cannot abandon it. We have to be behind it.
One of those smaller firms is Cormer Group Industries. It is important to note this, because a lot of these smaller firms have a hard time competing for these huge contracts. When we are talking about a $3.7 billion contract, in a lot of cases governments do not want to break it down to contracts of $5 million or $10 million. Cormer now can handle contracts of $100 million to $200 million. It is absolutely amazing.
We are very proud of our industry. I will wrap up by saying that it provides an amazing boost to our economy in terms of education and training. Ninety per cent of the people employed in that industry are trained in Winnipeg. I am very proud of the industry there.
I think the government has been very lax in not supporting this industry. This was a bad deal. I think that for once everyone here is in agreement. The government has made a very bad move in purchasing these planes.
Mr. Ken Boshcoff (Thunder Bay—Rainy River, Lib.):
Mr. Speaker, I am pleased to rise today to speak to the motion. My comments today will focus on the heart of the issue, ensuring that the government uses our taxpayer dollars to support Canadian industry.
It seems like a very simple concept, and it is one that most countries already wholeheartedly follow. Yet in Canada we are continually missing the mark. The concept is one I like to call “apply Canada policy”. The basic principle is this. When public dollars are being used to purchase any number of assets, the government should implement a policy that ensures that Canadian business and labour are given preference for the contract.
Most other countries have policies that encourage local content when awarding a government contract. These countries employ policies requiring certain levels of local content in projects that use public funding. These policies encourage the use of domestic based suppliers that in turn create jobs, tax revenues and other economic benefits in local communities.
The objective of these policies is to ensure that domestic businesses and communities experience some positive impact from public expenditures on infrastructure projects. Polices of this nature often provide in-country suppliers with a distinct competitive advantage over qualified suppliers from other nations.
Canadian manufacturers do not benefit from similar policies in force by their own government. There are no minimal requirements for Canadian content in publicly funded projects. This means Canadian manufacturers are at a distinct disadvantage pursuing contracts in other nations and they also have no particular advantage at home.
The reality is there is very little preventing foreign suppliers from winning Canadian government contracts and then taking the work offshore to benefit labour, business and regions in other nations. Canadian suppliers and manufacturers deserve to compete on an equal footing in the global marketplace. Our businesses, communities,and citizens deserve to enjoy some economic benefit from the projects funded from their own tax dollars.
Many countries around the world employ government policies encouraging or dictating local content levels. This is particularly true for transportation projects. For example, in the United States, which represents 90% of the North American passenger rail market, the buy America act imposes strict regulations for local content. In the area of rail rolling stock, for example, 60% of the components used to manufacture vehicles must come from the United States. Final assembly must also be performed there. In addition, state governments can impose their own local content requirements as well.
New York, one of the biggest rail markets in the world, imposes strict requirements for state based content. Requirements like these limit the ability of Canadian suppliers to access the largest rail market in North America. They also keep suppliers from using Canadian sub-suppliers on any contracts they win. There are no government policies, however, requiring local content when U.S. enterprises compete for contracts in Canada.
Most other countries have employed similar policies. Most of these policies provide for local content regulations for a mix of incentives and regulatory requirements. The Government of Canada currently has no incentives for local content. That is why I put forward a private member's motion for consideration by the House. The motion reads:
|| That, in the opinion of the House, the government should implement a policy, which is consistent with North American Free Trade Agreement and World Trade Organization policies and guidelines, to mandate Canadian content levels for public transportation projects, and to ensure that public funds are used to provide the best value to Canadians by supporting domestic supplier and labour markets.
I look forward to discussing this issue further when my private member's business comes forward for consideration.
With regard to the motion before the House today, I am very pleased to participate in this discussion, as it relates to the aircraft industry.
In my riding of Thunder Bay—Rainy River, we are privileged to have Confederation College's Aviation Centre of Excellence. Conveniently located at Thunder Bay International Airport, the 59,000 square foot ACE building brings together the programs of Confederation's School of Aviation all under one roof. The Aviation Centre of Excellence offers programs in aerospace manufacturing engineering, aircraft maintenance and aviation flight maintenance and will soon commence a program in avionics.
This centre of excellence makes Thunder Bay ideally suited as a potential candidate to take advantage of regional benefits and economic spinoffs from contracts for aircraft manufacturing and repair services on defence contracts. The Thunder Bay International Airports Authority has also been actively pursuing a variety of aircraft manufacturing opportunities to help diversify the economy of northwestern Ontario.
January 2007 statistics show that northwestern Ontario has already one of the highest unemployment rates in the province. The recent announcement of 500 further job losses in the forest industry will continue to drive those numbers higher.
Whenever possible, Thunder Bay and area needs have to be included in industrial regional benefits on future large contracts to ensure that our highly skilled workforce can continue to find meaningful employment within the community. My region, and regions similar to it, can ill afford the loss of further residents in search of well-paying jobs in the west.
Regretfully, not only are 40-somethings losing their jobs in the forest sector, but this government, a government that has a $13 billion surplus, is also cutting jobs and funding for jobs across the country. It is closing federal offices. The Status of Women was just closed in Thunder Bay. It has cut funding for economic development programs, such as the social economy program and FedNor, and now ACOA. It has eliminated the visitor GST rebate program, a cut that will not only hurt our struggling tourist industry in northwestern Ontario, but all across the country, which will cost us more jobs. It slashed $55 million from the youth employment strategy, which means for small communities in regions of high unemployment it will be an extremely difficult summer for our young people.
All these cuts are hurting our regions and costing jobs for our citizens when there is no need to make the cuts. The money jar is full and overflowing, yet the Harper government continues in the heartless and shameful penny pinching.
An hon. member: You can't say “Harper”.
Mr. Ken Boshcoff: Did I say that? I apologize immediately.