12 novembre 2018 | Local, Naval
Andrea Gunn (agunn@herald.ca)
Ongoing steel and aluminum tariffs between the United States and Canada will not drive up costs for the first five Arctic and Offshore Patrol Ships, but could contribute to the final price tag for the sixth, the Department of National Defence says.
There have been tariffs in place on imports of Canadian steel and aluminum to the U.S. of 25 per cent and 10 per cent respectively since the end of May. In response, Canada implemented its own dollar-for-dollar duties on steel and aluminum being imported from the U.S. Both the American tariffs and Canadian countermeasures remain in place, even with a new tentative agreement to replace NAFTA.
On Tuesday, Prime Minister Justin Trudeau confirmed the signing of the new trilateral trade deal was not contingent on the lifting of those tariffs.
In an emailed statement, Department of National Defence spokesperson Ashley Lemire said these tariffs will not have an impact on the cost of the first five Arctic and Offshore Patrol Ships (AOPS) being built by Irving Shipbuilding as part of the National Shipbuilding Strategy. Lemire said most, if not all, of the steel has already been purchased for these vessels and none of it comes from the U.S.
“As part of its contract with the Government of Canada, Irving Shipbuilding Inc. is responsible for the procurement of steel used for the construction of the Arctic and Offshore Patrol Ships,” Lemire said in an email. “Irving procured the majority of steel from a foreign supplier who sourced it from Europe and, to a lesser extent, from China. A small amount of steel was procured in Canada.”
Lemire said for the sixth AOPS, which the government confirmed plans to build last week, the department has planned and budgeted for the risk of increased steel and aluminum prices.
Earlier this week a DND spokesperson said buying a sixth AOPS will increase the cost of the $2.3 billion project by about $810 million. Of that, $250 million is set aside for “adjustments” — things like labour rates, inflation, and exchange rates.
Lemire said any additional steel costs will come from that $250 million fund.
David Perry, senior analyst with the Canadian Global Affairs Institute, said the materials needed to build a navy vessel are so specialized that it's not uncommon for governments to do advanced purchases
“There's a limited supply; you can't just go and call it up at the last minute kind of thing,” he said.
Perry said in the case of the AOPS, having a separate fund set aside for potential cost increases — rather than paying the company a higher contract price to assume all the liability for changes in commodity or labour prices — will likely save taxpayers money if costs do go up.
Ian Lee, associate professor at Carleton University's Sprott School of Business told The Chronicle Herald the federal government is lucky to have avoided any major increases with the AOPS.
But, Lee said, if the tariffs remain in place, they are likely to impact future builds either directly or indirectly.
“It's not going to affect the (AOPS) program but it's still a burden on the economy it's going to be passed on through the cost of doing business,” he said.
This is perhaps concerning given the most expensive build of the National Shipbuilding Strategy — the Canadian Surface Combatant — is on the horizon.
But how much that project would be impacted if tariffs remain in place is anybody's guess, Lee said.
“Historically governments have been very, very involved in the shipbuilding industry with subsidies, and offsets and that sort of thing, so it's hard to predict how it might affect future builds,” he said. “It's not a normal competitive market like the stock market or most commodities.”
That said, Lee said there will likely be a big push on the federal government's part to get the tariffs sorted ahead of the upcoming election.
“Generally speaking when you look at the trade agreements that have been signed in the last 10 or 20 years whether it was the original NAFTA, CETA or the TPP, one of the first things and most important things you do is reduce or eliminate tariffs,” he said,
“I think it's going to make it more difficult for Mr. Trudeau and his government to defend this in the fall 2019 election, that's why I think they're going to be working assiduously to try and remove them.”
15 juillet 2021 | Local, Naval
OTTAWA — The Royal Canadian Navy is launching a push to replace Canada’s beleaguered submarine fleet, setting the stage for what will almost certainly be a debate around the need for such vessels.. . .
12 juin 2020 | Local, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
BY LEE BERTHIAUME THE CANADIAN PRESS Posted June 11, 2020 7:58 am The Defence Department's top civilian official is touting the importance of continued investments in the Canadian Armed Forces, and says she has received no indications the Liberal government is planning to cut spending because of the COVID-19 crisis. The comments by Defence Department deputy minister Jody Thomas come amid questions about how the Liberal government plans to find the tens of billions of dollars doled out in recent months to support Canadians during the pandemic. The emergency support, estimated at $153 billion at last count, has far surpassed expected government spending and significant belt-tightening is likely after the crisis as Ottawa will start searching for ways to keep the country from drowning in red ink. Military spending was previously slashed in the 1990s as Jean Chretien's Liberal government wrestled with massive deficits while Stephen Harper's Conservative government followed a similar course after the 2008-09 financial crash. That has prompted concerns within defence circles that the pattern will repeat itself after COVID-19, with fears the Liberals will lean heavily on the country's $29-billion defence budget to help get government spending back under control. In an interview with The Canadian Press, Thomas said she had not received any order or direction to slow or cut defence spending and that officials are continuing to work on the planned purchase of new warships, fighter jets and other equipment. “We are not experiencing any slowdowns,” she said. “We are continuing very aggressively and ambitiously to continue our plan.” That plan is the Liberals' defence strategy, which it released in 2017. Known as Strong, Secure, Engaged (SSE), the strategy promised $553 billion in military spending over 20 years. Much of that is to buy new equipment such as jets and warships. “There has been zero indication from anyone that there would be a cut to the budget,” Thomas said, adding Defence Minister Harjit Sajjan “has been very clear of his expectations of us to execute on SSE.” She went on to suggest the planned defence spending is actually needed as much now as before the pandemic as the crisis amplifies the already significant global uncertainty that existed before COVID-19. A scan of recent headlines underscores that uncertainty, from U.S. President Donald Trump's administration suggesting it may pull troops from Germany to China imposing its will on Hong Kong and flexing its muscles in the South China Sea. There are also ongoing concerns about Russia and the situation in the Middle East. “Canada has to be equipped,” Thomas said. “In a post-COVID world, there is, I would say as the deputy minister of defence, a need for SSE to in fact be done more quickly rather than slow it down or cut the budget.” The government last week tabled its latest request for money in Parliament, which included $585 million for the continued construction of two new naval support ships in Vancouver. The first of those ships is due in 2023. Defence analyst David Perry of the Canadian Global Affairs Institute said the Liberals have significantly ramped up military spending, but no one knows how fast the economy will recover or how deep Ottawa will be in the hole when the pandemic ends. “Without knowing more about these things, it's way too early to know what the impact will be to defence,” he said. “But it's a basic fact of Canadian federal budgeting that if a government is looking to reduce all federal spending, DND plays a part in that because it spends the most money.” And while trimming military spending was the route taken by previous governments, there are implications, as evidenced by the age of Canada's CF-18s and other old equipment and its lack of naval support vessels until the new ones are finished. “Part of the reason we're having issues with procurement today is because of the decisions that were taken before,” Perry said. “The reasons they were taken — rightly or wrongly, I would say largely rightly — in the 1990s to reduce spending then, we're still dealing with the after-effects of it now because we didn't buy stuff then and we're trying to make up for lost time now.” https://globalnews.ca/news/7053393/canada-military-spending-coronavirus/
25 mai 2020 | Local, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
As governments around the world reassess national security, Ottawa could find it harder to delay plans for new ships, helicopters and fighter jets. Jeffrey F. Collins 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. https://policyoptions.irpp.org/magazines/may-2020/defence-procurement-wont-be-so-easy-to-cut-in-a-time-of-covid-19/