Canada First in emerging military markets?

Conventional Weapons, News

The controversy surrounding the government’s plan to buy F-35 Joint Strike Fighter aircraft has usefully shed light into the darker corners of Canada’s military procurement system. Even government leaders appear to have concluded that the process by which Canada buys military equipment is broken. The latest evidence that Ottawa is looking for a new approach is the Canada First defence procurement report requested by Public Works Minister Rona Ambrose and released earlier this week by Special Advisor Tom Jenkins.

The report seeks “to promote Canadian defence-related industries through better leveraging of procurement.” It calls for Key Industrial Capabilities (KICs) to be cultivated within Canada’s military industry at a time when the rise in Canada’s planned defence spending ($490-billion over 20 years) is running counter to the spending decline in major military export markets in Europe and the United States. It proposes three criteria to shape the KICs:    

▪ Specific needs identified by the Canadian Forces—the operational requirements perspective;

▪ Success in penetrating global markets—the market opportunity perspective; and

▪ Potential for new or improved (i.e. innovative) products—the innovation perspective. (xiv)

The report unfortunately ignores or omits significant facts. First, and perhaps most glaringly, the report accepts existing projections of Canadian defence expenditures, noting that it “anticipates the totals will not be materially changed.” Yet cuts to National Defence budgets have begun already, thus stale-dating current projections. Cuts will bring not only material changes to the spending totals but also to defence procurement plans in the next two decades. The “operational requirements perspective” should be the dominant one, as the report notes, but until there is a thorough policy debate on what those requirements will be, there is little point in building a procurement strategy on them.

The innovation perspective is a recycling of old arguments that military spending produces ‘spinoffs’ that are useful to other sectors of the economy. As Paul Robinson noted in The Globe and Mail on February 14 (‘Canada First’ military spending a surrender to bad policy), there is no evidence that defence industries are more innovative than any others. Military spending may have led to automotive GPS locators, but it also led to expensive aircraft toilet seats.

Although the report states that “the key to sustainable long-term growth lies in export markets,” its weakest analysis is the discussion of the global market. The report correctly notes that lower defence spending in the United States will mean not just fewer opportunities for Canadian military suppliers in their largest foreign military market, but greater competition with U.S. suppliers for Canadian defence orders. And the same applies to European markets. The report looks to opportunities in “emerging markets” in the Middle East, Asia, and Latin America as one solution, noting the example that India’s defence market “is expected to grow 5-10% annually in real terms over the next fifteen years.”   

What the report does not mention are the problems that come with some of these emerging markets: internal armed conflicts, governments that use weapons on their own citizens, and procurement officials that like fees under the table. The report acknowledges that a global military market that is exclusively dependent on government orders is unusual, but fails to factor in the unique laws and regulations that control legal international arms transfers. Canada’s current export controls limit or prohibit the export of Canadian military goods to many states in emerging markets. The government may move to weaken or override these controls, as it did in approving the recent sale of armoured vehicles to Colombia (see Colombia orders armoured vehicles from Canada). If control standards are maintained, however, the market opportunity analysis is well off the mark.

There is widening political support for a new take on defence procurement in Canada. The Canada First report is perhaps a necessary false start.  

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