April 14, 2020 | Local, Land
ANALYSIS: Cloud lifted from GDLS Saudi deal, but future business uncertain: analyst
Canada's $14-billion deal to sell armoured vehicles to Saudi Arabia is going ahead and will keep a London defence giant rolling, but some say questions remain about future business between General Dynamics Land Systems Canada (GDLS) and the desert kingdom. NORMAN DE BONO Canada's $14-billion deal to sell armoured vehicles to Saudi Arabia is going ahead and will keep a London defence giant rolling, but some say questions remain about future business between General Dynamics Land Systems Canada (GDLS) and the desert kingdom. The federal government said it's lifting a moratorium on new permits for military exports to Saudi Arabia, a critical step for London since GDLS, with about 2,000 employees in London, has a nearly 40-year relationship supplying armoured vehicles to the Saudis. But Ottawa also said it's appointing an advisory panel of experts to review Canada's arms export process and to push for an international inspection for arms sales. That could threaten future business, warned analyst David Perry, vice-president of the Canadian Global Affairs Institute. The Canadian-Saudi deal, with GDLS at the centre, negotiated by the former Conservative government and inherited by the Liberal successor, had come under sharp attack, with some critics calling for it to be scrapped, amid concerns about Saudi Arabia's poor human rights record. “If I was a worker I would be tremendously relieved and happy they made the decision,” Perry said of the federal government. He stressed reviews of the contract determined there was no indication GDLS vehicles were involved in human rights violations. “This went back and forth for a few years, and the government reviewed and threatened to cancel this contract outright. I think there has been irreparable harm. If you're another country open to exports, they may be thinking twice about doing business with Canada,” said Perry. “They (Saudi Arabians) have options when it comes to sourcing. I think they may be thinking in the future about where they source (their military equipment).” Lifting the cloud from the Saudi deal comes at a critical time on the London business landscape, with the fallout of the coronavirus pandemic and the lockdowns that have brought new uncertainty for many employers. In clearing the air on the deal, the federal government also revealed it would have been on the hook for up to $14 billion if it had cancelled the contract to sell light armoured vehicles to the Saudis, a deal that dates to 2014. The review panel, however, poses a level of uncertainty in future business dealings, Perry noted. “A new export panel will offer another layer of review. I don't know how to interpret that. It depends on who is appointed to that panel,” he said. In 2018, after news broke that the Saudi government had ordered the murder of dissident journalist Jamal Khashoggi, the Trudeau Liberals announced a review of all Canada's existing arms sales to Saudi Arabia. Ottawa also slapped a moratorium on new export permits for shipments of military goods to Riyadh. Existing military contracts, such as the GDLS deal, were not affected by the moratorium. But in 2018 Prime Minister Justin Trudeau publicly talked about trying to find a way to end shipments of armoured vehicles to Saudi Arabia. Thursday, Foreign Affairs Minister François-Philippe Champagne and Finance Minister Bill Morneau said the suspension of approval of new Saudi permits is now lifted. They cited a government review last September that found no credible evidence linking Canadian exports of military or other controlled goods to Saudi human rights violations. But the moratorium on trade with the Saudis has already affected the Canadian defence sector to the tune of about $2 billion, according to a memo sent to the foreign affairs minister from two top foreign affairs and international trade officials. “(Twenty) companies that have a history of exporting to KSA (Kingdom of Saudi Arabia) suggest that approximately $2 billion in trade has been affected since August 2018. A number of Canadian exporters to KSA have suspended their business development operations . . . The open-ended nature of Canada's moratorium on new export permits, and the lack of identified conditions that would allow a resumption of permit issuance, present a high commercial risk for Canadian companies,” the memo says. Perry, who shared the memo with The Free Press, said he has heard similar concerns from the Canadian defence sector. “I have spoken to businesses that have lost business opportunities” from the moratorium on arms trade with Saudis. “This is welcome news,” he added of the lifting of restrictions, “but the government has introduced uncertainty into Canadian defence industry and exports.” Political scientist Erika Simpson at Western University also questioned the role of the panel, saying there are few details about its authority and adding that only Global Affairs has the authority to impact trade agreements. She also questioned why the contract appears to have been reduced by $1 billion in value. When the Conservatives announced it in 2014, it was worth $15 billion. Ottawa now says it is a $14-billion contract. “I think $1 billion is a lot of money. What happened to $1 billion?” asked Simpson, an associate professor of international politics. “This is good news, but I want to know where the $1 billion went.” GDLS Canada declined comment Friday. Perry also questioned the timing of the announcement. With more than three million Canadians expected to be left unemployed due to the COVID-19 crisis, Ottawa could not jeopardize thousands of jobs across Canada, he said. “As important as this is in Southwestern Ontario, it is not just Southwestern Ontario,” he said. London Liberal MP Peter Fragiskatos downplayed down the idea the review panel could dampen further GDLS business. “I don't think so. This government is behind this contract, this workforce, 100 per cent. On the contrary, I would say a review is a good thing. It will bring greater transparency to the arms program. I welcome it,” the London North Centre MP said. He also stressed the Saudi deal is only about half complete, meaning about six more years of work may remain before there needs to be a discussion about future contracts. “I am pleased to say the least. It was in the making for some time, but it is a very good result not just for the company and its workers, but for the city,” said Fragiskatos. It's too soon to draw conclusions about the future of work by GDLS for the Saudis, since that depends largely on who is at the table negotiating future deals, said Bill Pettipas, former president of GM Defence, which General Dynamics bought and renamed. Pettipas bargained several arms contracts with foreign powers, including a multi-billion dollar deal with the U.S. army to supply it with Stryker armoured vehicles. “It depends on individuals, on relationships. It will get resolved. It will normalize eventually. That relationship has been going on since the early 1980s,” said Pettipas. “Time takes care of things.” Officials with Unifor Local 27, the union for many GDLS workers in London, couldn't be reached for comment Friday. Unifor's national office declined comment. https://lfpress.com/news/local-news/analysis-cloud-lifted-from-gdls-saudi-deal-but-future-business-uncertain-analyst