CADSI's Tim Page. (Darren Brown, OBJ)

Are the feds doing enough to support domestic industry with defence-related purchases?

A recent CBC investigation discovered Canada's military exports, including products for tanks and rocket launchers, have more than tripled, rising to $3.6 billion over the past seven years.

The data showed Canada is now the sixth-largest arms exporter in the world, according to U.S. researchers.

But are these products that are apparently so attractive in the international marketplace also good enough for our own military? It's hard to say.

Canadian firms are accustomed to military contracts for fighter jets and submarines going offshore. After all, there are some things that Canadian companies just don't make anymore.

But some labour groups and trade associations are worried that companies that specialize in products that the Canadian military needs are nevertheless ignored during military procurement operations on the home front.

Federal NDP MP Pat Martin believes this to be the case. He participated in a protest in Ottawa last week to bring attention to the fact that the federal government is buying defence-related equipment from a non-Canadian supplier, adding injury to an already damaged Canadian manufacturing sector.

Mr. Martin was upset that Setra, owned by Germany's DaimlerChrysler, won a contract to supply 30 troop-ferrying buses after edging out bids by Canadian firms by about $60,000.

"We make the best buses in the world right here in Canada," Mr. Martin said in a statement. "Both Motor Coach Industries of Winnipeg and Prevost Industries in Quebec can build top-notch Canadian buses to carry our troops, but because of this government's asinine procurement policies, neither Canadian company won the contract."

Dave Ritchie, vice-president of the International Association of Machinists and Aerospace Workers, which represents the workers at the Winnipeg company, called on the federal government to reconsider the awarding of the bid to a foreign firm.

"How does this make sense?" he asked. "Not only do we lose the jobs to an offshore competitor, but the government loses all the income and business tax revenue which would have paid for a big part of the total cost of the buses."

"If we don't support our Canadian manufacturers, who will?" he asked.

But Alain Pellerin, executive director at the Conference of Defence Associations, said past experience has shown it can be an expensive proposition to manufacture defence equipment at home, only to have little or no interest for those products from abroad.

"We've gone through that sort of experience in the past (in) building our own," he said, recalling the Iltis, a small, open jeep used by the Canadian Forces in Afghanistan but recently phased out. The Iltis was built by Bombardier in the late '80s, modeled essentially on a Volkswagen design.

"At the end of the day, we didn't sell any except to the Belgian army, (but) it cost three times what it would have to buy it from the Germans."

Ditto for the Steyr, a heavy-lift truck based on an Austrian design, which was also manufactured in Canada at a high cost but with little interest from other countries, said Mr. Pellerin.

"Once they had finished the contract, no one else bought them, and the production line was closed. Once you close the production line, these vehicles, if they operate 25 years, need repairs (and) parts, and so you (end up) cannibalizing materials from existing vehicles.

"At the end of the day, you come to the conclusion that the best option (is) maybe the market abroad," he said.

David Luxton, CEO of bomb-disposal equipment firm Allen-Vanguard, doesn't need to be told how popular his firm's products are around the world. So he is perplexed as to why a proven product is so difficult to sell to a home audience.

"We're Canadians and we're nice guys," he explained. "We have the fairest, most open, most transparent acquisitions system, with a culture that's become terrified of being seen as anything else than that. So we're holier than holy on that. The rest of the world laughs at us . . . One shouldn't be distorting the acquisition process to indiscriminately favour domestic companies instead of foreign ones, (but) one should be looking for the best quality and best value."

The problem, said Mr. Luxton, is that the Cold War is over and international terrorism has become the threat of the 21st century, but the government hasn't caught on. The country has a good domestic munitions program in case of enemy attack, but nothing extensive in the case of a biological or chemical attack or accident.

"The kinds of things we may need tomorrow, to use a self-serving example, is the kind of chem/bio protective equipment that Allen-Vanguard sells. It was developed by the Canadian government. We sell it around the world. But we have difficulty selling it to the Canadian government."

Asked about the recent NDP and labour protest, Tim Page, president of the Canadian Association of Defence and Security Industries, said more attention should be paid to firms at home, rather than simply buying defence products that provide the best bang for the buck.

"I think this current government wants to buy best-value, off-the-shelf, already-proven, defence articles," he told the OBJ. "In principle, there is nothing wrong with that, so long as at the same time they are also looking at how to leverage those acquisitions for the long-term benefit of Canada's economy and our trade competitiveness."

Mr. Page said he does not have figures on how much Canadian firms are benefiting from programs like the Industrial and Regional Benefits (IRB) policy, which requires winning contractors on military tenders to spend an equal amount in Canada.

However, he reiterated that he wanted to see the government declare how it intends to beef up Canada's northern, coastal, military and other defence-related needs with the help of Canadian industry.

"I guess I would return to the point that I (was) making all along," said Mr. Page. "We believe that (Canadian companies) are vital partners in support of Canada's mission, and that the government should be identifying what strategic capabilities are important for Canada to produce and service, and it should be using the IRB program to nurture and develop those key capabilities."

Otherwise, there's no guarantee the industry will endure, said Mr. Luxton.

"We have a very tough time selling to the Canadian military because of this procurement process that invites all comers. You could ask the question, if the Canadian government invested money in an advanced technology like this, that's recognized outside Canada, (and) as the government claims is needed by its own military, why wouldn't it procure it? I don't know the answer to that. It's a black hole to me."