Canadian Commercial Corporation: A Crown Company as Arms Middleman

Kenneth Epps Americas, Conventional Weapons

Author
Kenneth Epps

The Ploughshares Monitor Spring 2011 Volume 32 Issue 1

Out of the limelight, an Ottawa-based Crown corporation has long played a central—and recently more focused—role in the export of military goods from Canada. The Canadian Commercial Corporation (CCC) brokers mostly military export contracts between Canadian companies and foreign governments. Unlike sister Crown corporation Export Development Canada, which provides loans and other financial assistance to Canadian exporters, the CCC is not a financing organization. Rather, the CCC acts as a go-between, matching contracts from foreign governments with contracts to Canadian suppliers.

The CCC guarantees payments to Canadian companies and deliveries to foreign government departments. Its income is derived from fees and other revenues related to its brokering services and from funding provided by the Canadian Parliament. During the fiscal year 2009-10, parliamentary appropriations—essentially a public subsidy to CCC operations—totalled $15.7-million.

The CCC (2010, p. 8) calls itself “Canada’s foreign military sales agency,” offering “comprehensive aerospace, defence and security solutions to friendly nations and assist[ing] Canadian exporters selling to foreign governments.” Indeed, up to 70 per cent of CCC-arranged contracts involve the supply of Canadian goods and services to foreign military departments, primarily the US Pentagon.

Since 1956 the CCC has been responsible for the US-Canada Defence Production Sharing Agreement (DPSA), which has established a kind of free trade in military goods between the two states. US federal regulations require all Pentagon orders in Canada worth more than $100,000 (US) to be placed with the CCC as the prime contractor (CCC 2011).

During the past decade the CCC awarded $11-billion in contracts to Canadian-based companies on behalf of foreign military customers. The total annual value of these contracts fluctuated around $900-million in the first half of the decade and, since fiscal year 2006-07, has climbed steadily. Across the period, annual totals rose from $947-million (in current dollars) in FY 2000-01 to $2.1-billion in FY 2009-10. In other words, CCC-arranged military export orders have more than doubled in 10 years.

Table 1 lists the 10 largest recipients of CCC contracts for foreign military customers during the 10-year period. Significantly, the contract recipients ranked No. 1, 2 and 5 are all subsidiaries of US military corporate giant General Dynamics. Together they dominate military production and export in Canada, producing armoured vehicles, ammunition and military electronics respectively.

In contrast to the rising value of total military export contracts over the period, there was a decline in the number of major CCC partners involved in military trade. Indeed, the contracts awarded through the CCC became more concentrated at both ends of the supply chain. By the end of the period a much greater portion of total military contracts had been awarded to the largest suppliers.

As shown in Figure 1, about one-fifth (20.26 per cent) of the value of all military contracts arranged through the CCC was awarded to the 10 largest contractors in FY 2000-01. By FY 2009-10 this portion had increased to more than four-fifths (83.79 per cent). At the same time, as seen in Table 2, the number of governments receiving Canadian military supplies through the CCC dropped significantly: from 15 in FY 2000-01 to two—the US and Saudi Arabia—in FY 2009-10.

Recent trends suggest that the Canadian Commercial Corporation is operating on behalf of a declining number of foreign military customers by placing a growing portion of their orders with the largest Canadian suppliers. It is not apparent why these trends have emerged, but one result is the concentration of public funds that subsidize CCC operations. According to the CCC’s latest annual report (CCC 2010, p. 28), “CCC charges fees for service only on its non-DPSA transactions, as its DPSA transactions are funded through parliamentary appropriations.” In other words, public funding supports the brokering of US military export contracts in particular, and recent trends point to a greater portion of these funds being directed to the largest Canadian suppliers.

The US military corporate giant General Dynamics is a particular beneficiary of recent developments. The portion of CCC-brokered Pentagon contracts awarded to the three subsidiaries of General Dynamics shown in Table 1 increased from less than 10 per cent at the beginning of the decade to three-quarters by the end.1 It is reasonable to assume that the majority of CCC’s support to Canada’s military export industry is used to support these three dominant contractors. In effect, Canadian public funding is subsidizing the subsidiary operations of one of the largest and most profitable US military corporations.

Although the CCC claims to handle three-quarters of Canada’s export sales to the US military (DFAIT 2006, p. 3), these brokered sales may actually represent less than half of Canada’s total arms exports to the United States.2 Additional sales occur in the form of small direct contracts between Canadian companies and the Pentagon, each worth under $100,000 (US). As well, Canadian companies subcontract directly with US military contractors to produce components for weapons systems that are sold to the United States and other foreign military agencies. By tallying the information provided by Canadian industry announcements of these subcontracts, we arrive at an annual total of hundreds of millions of dollars.

Even so, the CCC is a key source of data on Canada’s military export orders and it provides substantial detail on the Canadian companies and the prime contracts that they have been awarded. For more than a quarter century Project Ploughshares has obtained contract data annually from the Canadian Commercial Corporation via written requests under the federal Access to Information Act.

While the Canadian Department of Foreign Affairs and International Trade (DFAIT) is responsible for authorizing and monitoring Canada’s arms exports, it does not compile or report data on Canadian military exports to the United States and, in recent years, has reduced the transparency of all Canadian military exports.

CCC data provides important insight into Canadian arms export trends and actors. By default, the CCC is also the sole source of primary data on US trade. Thus, if and when the United Nations negotiation process results in an effective Arms Trade Treaty, the Canadian Commercial Corporation will be an important source for the data that Canada will need to better meet reporting obligations under the treaty. (See Why not use Canadian Commercial Corporation’s Own Data to Estimate Canadian Export Figures? The Ploughshares Monitor Spring 2011)

Notes
1. See also Epps 2010.
2. Until 1991 DFAIT published totals of prime contracts and subcontracts for arms exports to the US. Over the previous decade the averages of these totals were close to equal.

 

References
Canadian Commercial Corporation. 2011. Service offerings: Selling to U.S. DoD.
———. 2010. Leadership and Growth: Annual Report 09/10.
Epps, Kenneth. 2010. Pentagon orders with General Dynamics in Canada exceed $1-billion. The Ploughshares Monitor, Summer 2010.
Foreign Affairs and International Trade Canada. 2006. CanadExport, October 16.

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