Thank you. Good afternoon, Mr. Chairman, honourable members.
Thank you for inviting me to meet with you today.
My name is Christyn Cianfarani. I am the president of the Canadian Association of Defence and Securities Industries, CADSI.
CADSI represents some 800 Canadian-based defence and security companies in Canada. Our industry accounts for some 63,000 jobs, contributes $6.7 billion to the GDP, generates 60% of its revenue from exports, employs 30% of its workforce in the engineering, research, and technologies fields, provides employee compensation that is 60% above the manufacturing sector average, and is diverse, with significant representation in every region of Canada.
These statistics are important in the context of Canada's Innovation Agenda and the Defence Policy Review, two measures that will be implemented at about the same time as Budget 2017.
CADSI has been urging the government to consider the defence review, the innovation agenda, and the recapitalization of the Canadian Armed Forces as an important opportunity to drive innovation-led growth in Canada. This is my essential message to you today.
What this requires is the development of a defence industrial policy tailored to Canada's unique security challenges and industrial base capabilities. To our knowledge, we are the only G7 nation that does not practise one.
What exactly do we mean by “industrial defence policy”?
A defence industrial policy does not necessarily require additional funding or even new programming. It does require that the government set goals and priorities for defence sector growth in areas of key industrial capabilities. These capabilities could be ones at which Canada already excels—such as quantum computing, for example—or that confer major economic and scientific returns to the country. They could also be in areas that are important to Canada's sovereign interests. They would, of course, need to be derivative of the planned acquisitions of the Canadian Armed Forces, which some estimates put at over $200 billion over the next 15 to 20 years. This is the starting point for a defence industrial policy.
Once these overarching goals have been established, we would need to better coordinate and connect the existing policies, programs, and instruments scattered across the government, notably national security exemptions, industrial and technological benefits, the Build in Canada innovation program, the strategic aerospace and defence initiative, and export supports like the Canadian Commercial Corporation.
The aim is to align and apply the various elements in a more coherent fashion along the chain, from R and D to procurement, to better achieve outcomes with respect to innovation, manufacturing, supply chain growth, and the scaling-up of firms. It's also important to note that defence procurement is largely exempt from the trade agreements.
One implication here is that Canadian prime contractors could and would be considered more strategically in procurements for major capital projects. Primes or OEMs do the bulk of the manufacturing in the defence industry, and they own the intellectual property, which is essential to getting innovative and sustainable manufacturing services and high-wage employment in the technology fields. When Canada has not done this, strategically important assets have been hollowed out through sales, transfers, or mergers.
lncentivizing intellectual property transfer from foreign primes into Canada is also important. We need to go beyond just raw investment dollars. This allows Canadian companies to engage in activities that come with owning and exploiting intellectual property over a long period of time, well beyond any initial acquisition phase.
When supply chain growth is the primary objective, the government needs to ensure that when foreign primes win contracts in Canada, Canadian firms are driven into the global supply chains of those primes.
These are but some of the essential elements that need to be included in Canada's industrial defence policy.
In closing, Mr. Chairman and honourable members, I'd like to reiterate that there is an important and rare opportunity now to drive innovation-led growth in the Canadian economy through the planned defence acquisitions, the value of which is large by any historical standards.
I urge this committee to highlight this growth opportunity in your report and to recommend that the government commit to working with industry to develop a made-in-Canada defence industrial policy.
The potential to leverage defence procurement to create innovation and growth in every region of Canada is very real and achievable.
Thank you for having given me this opportunity to speak to you today.
Thank you.