May 25, 2020 | Local, Aerospace, Naval, Land, C4ISR, Security
May 22, 2020
A few months into the COVID-19 pandemic, the first signs of impact on Canada's defence procurement plans are showing. The government has been following an ambitious multi-decade blueprint, starting in 2010, to kick-start the domestic shipbuilding sector, but some yards have had to scale back their workforces under public health orders. What this means for the National Shipbuilding Strategy and its more than $85 billion (by my calculations) in ongoing and planned construction of large ships is as yet unclear.
The $19-billion Future Fighter Capability project, designed to replace the four-decade-old CF-18 fighter with 88 new jets, could also be affected. Government officials were adamant until early May that the June submission deadline for bids remained unchanged — before granting a 30-day extension. But with industry and public sector workers largely stuck at home, it is difficult to see how even the new July deadline can be met.
In earlier times of economic strain, Ottawa found defence spending an easy target for cuts. This time could be different, as governments around the world reassess what national security means and how best to achieve it.
Heading into 2020, things were still looking up for the capital spending plans of the Department of National Defence (DND) and the Canadian Armed Forces (CAF). The Trudeau government's 2017 Strong, Secure, Engaged (SSE) defence policy had allocated $108 billion in capital expenditures over a 20-year timeframe, 2017-37.
Then came the pandemic. There were more than a million job losses in March alone, and as of early May, the Parliamentary Budget Office was predicting a $1-trillion debt by 2021. Given the rapid drop in both domestic and global consumer demand, the price collapse in the country's key commodity, oil, and the accompanying decline in the Canadian dollar, the country is now in a recession for an unknown period. If past is prologue and the virus persists without a vaccine for the foreseeable future, the likelihood of the government delaying or cancelling projects or trimming its orders for ships and planes is growing.
When faced with economic pains in the past, federal governments scaled back procurement plans. The staggering debt and deficit in the late 1980s and 1990s led the Brian Mulroney government to drop its ambitious bid to acquire up to a dozen nuclear submarines in 1989, a mere two years after announcing the project in the 1987 defence White Paper. In 1993 the Jean Chrétien government infamously scrapped the contract to replace the 1960s-vintage Sea King helicopter (at a cost of $478 million in penalties). The following year's defence White Paper outlined $15 billion in delays, reductions and cancellations to the DND's procurement budget; this was in addition to large-scale base closures and 20 percent reductions in both CAF regular force personnel and the overall defence budget.
The ostensibly pro-military Stephen Harper Conservatives announced 20-year funding plans, as ambitious as the SSE, in the 2008 Canada First Defence Strategy but deviated from them in the aftermath of the 2008-09 global recession. With a goal of returning to balanced budgets after $47 billion in stimulus spending, the Harper government delayed or cut over $32 billion in planned procurement spending and laid off 400 personnel from DND's procurement branch. Among the casualties was the army's $2.1-billion close-combat vehicle.
There are several reasons why this pattern has repeated itself, but two stand out. First, defence is a tempting target for any government belt-tightening drive, typically accounting for a large share of discretionary federal spending. With most federal money going to individual citizens (employment insurance, pensions, tax benefits) and provinces (health and social transfers), there simply is little fiscal room left outside of defence. To remove money from these politically popular programs is to risk voter resentment and the ire of provincial governments. In short, when past federal governments confronted a choice between cutting tanks and cutting transfers, they cut the tanks.
Second, Canada's geostrategic position has helped. Sitting securely atop North America in alliance with the world's pre-eminent superpower has meant, in the words of a defence minister under Pierre Trudeau, Donald Macdonald, that “there is no obvious level for defence expenditures” in Canada. Meeting the terms of our alliances with the United States and NATO means that Canada has to do its part in securing the northern half of the continent and contributing to military operations overseas, but generally in peacetime Ottawa has a lot of leeway in deciding what to spend on defence, even if allies growl and complain.
Yet it is this same geostrategic position that may lessen the impact of any cuts related to COVID-19. Unlike the Mulroney and Chrétien governments, who made their decisions amid the end of Cold War tensions, or the Harper government, which was withdrawing from the combat mission in Afghanistan, this government must make its choices in an international security environment that is becoming more volatile.
The spread of the virus has amplified trade and military tensions between the world's two superpowers and weakened bonds among European Union member states as they fight to secure personal protective equipment and stop the contagion at their borders. Governments worldwide are now unabashedly protectionist in their efforts to prevent the export of medical equipment and vital materials. As supply chains fray, pressures mount for each country to have a “sovereign” industrial capability, including in defence. In fact, the Trump administration has turned to the 1950 Defense Production Act to direct meatpacking plants to remain open or to restrict the export of health products (three million face masks bound for Canada were held up, then released).
The pandemic is intensifying the Trump administration's skepticism of alliances and international institutions; in late March, there was even discussion of stationing US troops near the Canadian border (the plan was eventually abandoned). Smaller powers like Canada that have traditionally relied on American security guarantees will have to maintain their defence spending, or even increase it, as they try to strengthen old alliances and create new ones. As Timothy Choi, a naval expert at the University of Calgary, has told me, an irony of the pandemic is that it may see the National Shipbuilding Strategy become a “major destination for stimulus spending in times of recession.” Either way, by the time the pandemic subsides, Canadians may yet find out that there is indeed an “obvious level” to defence spending.
This article is part of the The Coronavirus Pandemic: Canada's Response special feature.
Photo: The Halifax-class navy frigate HMCS Fredericton in the waters of Istanbul Strait, Turkey. Shutterstock.com, by Arkeonaval.
July 10, 2023 | Local, Other Defence
Trudeau held a joint press conference with Latvian Prime Minister Krišjānis Kariņš at the Ādaži military base outside Riga on Monday, where he also greeted some of the 800 Canadian Armed Forces members deployed to the mission.
May 8, 2019 | Local, Aerospace
David Pugliese, Ottawa Citizen The defence and aerospace industry is abuzz about the letters the U.S. government sent to Canada over the upcoming competition to acquire a new fleet of fighter jets to replace the RCAF's CF-18s. In short, the Trump administration has given an ultimatum to Prime Minister Justin Trudeau and his government. If Canada insists that industrial and technological benefits must come from the outlay of $19 billion for a new fighter jet fleet then Lockheed Martin's F-35 stealth jet is out of the race. Full stop. The U.S. argument is that because Canada is a partner in the F-35 program it cannot ask Lockheed Martin to meet specific industrial benefits for a Canadian competition if the F-35 is selected. Under the F-35 agreement, partner nations are prohibited from imposing requirements for industrial benefits as the work is determined on the best value basis. In other words, Canadian firms compete and if they are good enough they get work on the F-35 program. Over the last 12 years, Canadian firms have earned $1.3 billion U.S. for their work on building F-35 parts. The U.S. had boldly stated it cannot offer the F-35 for the Canadian competition if there are requirements to meet for set industrial benefits. But that ultimatum could seriously backfire on the Trump administration. Trudeau and the Liberal government has never been keen on the F-35 (Trudeau campaigned against purchasing the jet). There have also been a number of negative headlines over the last year outlining the increasing maintenance costs for the F-35s, not a good selling point for the jet. The U.S. ultimatum may have just given Trudeau a way out of his F-35 dilemma, particularly if the prime minister can say that it was it was the Americans themselves who decided not to enter the F-35 in the Canadian competition. Trudeau will also be able to point to the other firms ready and keen to chase the $19 billion contract. Airbus, a major player in Canada's aerospace industry, says it is open to producing its Eurofighter Typhoon in Canada with the corresponding jobs that will create. Boeing, which has a significant presence in Canada, will offer the Super Hornet. Saab has also hinted about building its Gripen fighter in Canada if it were to receive the jet contract. To be sure, if the U.S. withdraws the F-35 from the competition, retired Canadian military officers and the defence analysts working for think-tanks closely aligned with the Department of National Defence be featured in news reports about how the Royal Canadian Air Force will be severely hindered without the F-35. Some Canadian firms involved in the F-35 program may complain publicly about lost work on the F-35 program but companies tend not criticize governments for fear they won't receive federal contracts or funding in the future. There will be talk about how U.S.-Canada defence relations will be hurt but then critics will counter that U.S. President Donald Trump used national security provisions to hammer Canada in ongoing trade disputes. And let's face it. Defence issues are rarely a factor in federal elections or in domestic politics. The Trump administration, which is not the most popular among Canadians, may have just given Trudeau a political gift. https://nationalpost.com/news/national/defence-watch/trump-may-have-given-trudeau-the-excuse-he-needs-to-ditch-the-f-35/wcm/08b1313f-81eb-4adc-9ebf-b54ffc19c2c7
September 25, 2019 | Local, Aerospace
By DAVID PUGLIESE, OTTAWA CITIZEN Shortly before he retired, Pat Finn, the Department of National Defence's procurement chief, told this newspaper there was always a risk that some companies would drop out of the future fighter jet competition but that extra efforts had been made to ensure the process was fair. “We're not getting all kinds of signals that (companies are) losing interest” in bidding, Finn said in an interview July 23. On Aug. 30, the United Kingdom's Ministry of Defence and Airbus Defence and Space informed the Canadian government of their decision to withdraw from Canada's future fighter competition. Airbus had been offering Canada the Eurofighter. At the time the Canadian Press news service reported the Eurofighter withdrawal was a surprise. It wasn't. For the last nine months the various competing firms, Boeing, Airbus and Saab have been sounding the alarm about how the fighter jet process is structured and their worry that it is stacked in favour of the Lockheed Martin F-35. The RCAF, which originally selected the F-35 as the CF-18 replacement before that selection was put on hold by the previous Conservative government because of cost and technical issues, came up with the new requirements. Industry representatives say these requirements highlight the strengths of the F-35 such as stealth and a first strike capability. The primary role of the new fighter jets is to protect North America, or so government officials have said. Lockheed Martin's industry rivals question how stealth and a first strike capability fit into that role. Representatives from Lockheed Martin's competitors have also made overtures to federal officials about their concerns about the procurement process but say they received little response. In early July Reuters news service reported that both Airbus and Boeing were considering dropping out. Airbus followed through on its concerns and as noted decided it wasn't worth competing because of how the process was designed. Last year the European firm Dassault informed the Canadian government it would not be competing in the competition. It had been planning to offer Canada the Rafale fighter jet. There were two key changes in the $19 billion procurement that caused Airbus to leave. One was the decision to change the industrial benefits needed for the program. Airbus was willing to outline and guarantee specific industrial benefits for Canada. That was the way previous defence procurements had worked. But that has been changed because of concerns the U.S. government raised for Lockheed Martin. U.S. officials had warned that the F-35 development agreement Canada signed years ago prohibits partners from imposing requirements for industrial benefits. Although Canada is a partner in the development of the aircraft that does not stipulate it is required to buy the F-35. But under the F-35 agreement, partner nations such as Canada are prohibited from demanding domestic companies receive specific work on the fighter jet. Instead, Canadian firms compete and if they are good enough they receive contracts. Over the last 12 years, Canadian firms have earned more than $1.3 billion in contracts to build F-35 parts. But there are no guarantees. The other problem that Airbus and Rafale faced was linked to the requirement that bidders need to show how their aircraft will integrate into the U.S.-Canada system to defend North America. Airbus would have been required to show how it planned to integrate the Eurofighter Typhoon into the U.S.-Canadian system without knowing the system's full technical details, the Canadian Press news service pointed out. Saab, which is offering Canada the Gripen fighter, could be facing the same problem. Boeing, which is considering offering the Super Hornet, would not have such a problem as its aircraft is being flown by the U.S. military. It is still unclear, however, whether Boeing or Saab will even continue in the competition. Bids must be submitted by the spring of 2020 but there is a growing sense among the defence industry that the F-35 will ultimately be selected as the new aircraft for the RCAF. https://ottawacitizen.com/news/national/defence-watch/will-other-firms-withdraw-from-fighter-jet-competition-leaving-f-35-last-plane-standing