Evidence of meeting #12 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aircraft.
A recording is available from Parliament.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thanks so much.
Mr. Kasurak, we just heard the Conservatives open the door to the conversation about building our ships in other countries for the sake of speed—to get them done in a shorter time frame.
Can you talk about the importance of the economic benefits—in terms of job creation and the multiplier effect, and also just the economic leakage—of building ships here at home, and how important it is to develop shipbuilding capacity in our country?
Fellow, Centre for International and Defence Policy, Queen's University, As an Individual
I think Mr. Collins actually addressed this previously. Having a shipbuilding industry is a strategic requirement if you're going to have a navy. Certainly, we would not want to lose our shipbuilding capacity.
As for how great the economic benefits would be, I'm sorry, but I'm not qualified to give you much of a guess at that.
NDP
Gord Johns NDP Courtenay—Alberni, BC
I think we can all assume they'd be quite large and significant, especially in coastal communities. I think Mr. Collins touched on the importance of developing ships in terms of our sovereign capacity.
That being said, we've seen policies in the past. We saw a 25% tariff put in place so that Canadian companies wouldn't build ferries abroad. We saw huge harm and impact on our shipbuilding sector as a result. We saw, even in my home province, how BC Ferries was building ferries in Germany, Turkey and Poland. We've seen our capacity gutted by policies.
Mr. Collins, do you see the importance of creating policies or reinstating policies from the past to support our shipbuilding sector and protect jobs here at home in Canada?
Adjunct Professor, University of Prince Edward Island, As an Individual
Mr. Johns, my answer's going to touch on your question, because it overlaps with what your colleague from Quebec mentioned earlier, about one core compartment of the NSS being small ship manufacturing, that is, boats under 1,000 tonnes. The only information I can ever find on this is the occasional annual report and press releases. It is very hard to piece together what exactly is going on in the pipeline in terms of benefiting smaller yards and facilities that have the ability to bid on these contracts.
It really is the missing piece, I think, of the NSS, which you touched on, which is about all these other boats we need. You know, provincial governments in Newfoundland and B.C. have bought their ferries offshore, but those are provincial decisions and this is a federal shipbuilding plan. Nevertheless, it factors into the equation that if we had a more dynamic small-vessel—that is under 1,000 tonnes—sector, maybe those provincial governments would be more open to looking at domestic manufacturing.
It's a great question, and it's something I'd welcome more communications on.
NDP
Gord Johns NDP Courtenay—Alberni, BC
The 25% actually generated $118 million a year. That money could have been reinvested in Canada, in creating more capacity. That's what we see as New Democrats. When you remove a tariff, and you remove barriers for Canadian companies to go and develop boats overseas, we see that as a really important tariff that was in place but was removed, which opened the floodgates.
In terms of capacity, I went to the Pacific NorthWest Economic Region conference. They stated that there are about $3 billion in refits every year on the coast between Oregon and Alaska, including Washington and British Columbia, and they were near capacity. They needed more floating dry docks. The PBO identified that the cost of labour is extremely high and very competitive in the markets where they are developing large ships.
You talked about smaller shipyards. The federal government still doesn't have a program to develop floating dry docks. I live in Port Alberni. We have the only deep-sea port on the west coast of Vancouver Island. The federal government port authority and Canadian Marine Engineering, which is employing a lot of people, including a lot of indigenous people, can't get funding to build a floating dry dock. The demand is there.
Do you see a lack of cohesiveness in terms of interdepartmental pursuits of supporting infrastructure between Transport Canada and Public Services and Procurement Canada?
Adjunct Professor, University of Prince Edward Island, As an Individual
Well, I should say that what goes on outside the naval realm is not really my area of expertise, but as a general rule, I think there's always room for interdepartmental coordination to avoid duplication and ensure that we're actually leveraging the expenditure of dollars, for sure.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Mr. Kasurak, do you want to comment a bit on what I said? I think it's really important to ensure that we get a fully rounded perspective.
Fellow, Centre for International and Defence Policy, Queen's University, As an Individual
Yes. I think one of the points that the government needs to keep in mind is that the naval and coast guard program is going to come to an end, and then we will have paid a premium for building up the yards and for doing our naval building at home. If we don't get sustainment out of it, because other policies are in conflict with sustaining the shipbuilding industry, we will have wasted a good deal of our investment, so in the long term—
NDP
Gord Johns NDP Courtenay—Alberni, BC
Here's a question that I'll come back to you with, then. That 25% tariff was a really good barrier. It ensured that a lot of B.C. ferries were built in British Columbia. When that was removed, those boats got built offshore. Do you believe we should reinstate those policies to ensure that shipbuilding happens here at home?
Fellow, Centre for International and Defence Policy, Queen's University, As an Individual
I don't believe I'm really qualified to say what size of tariff is required, but I think the government needs to look at the shipbuilding industry as a whole over the very long term. Tariffs would certainly be a part of that.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Kasurak. If you have anything further in response to that answer, then by all means submit that to the clerk, please, and we will forward it to committee members.
We will now go into our second round. We are moving along very efficiently.
Mr. McCauley, you have four minutes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Thanks, Mr. Chair.
Mr. Johns, I'm surprised you're bringing up building in B.C. I wonder if you forget the NDP decision to spend half a billion dollars to build ferries in B.C. that were sold for $19 million for scrap. They were never really used. I think that sums up our capacity sometimes.
Mr. Collins, you talked about sovereign capacity, and I want to chat about that. We have the NSS, and we're perhaps down a road that we can't turn back on. You know, if it takes us 20 years to build a ship, I'm curious to know how you could claim that as a security issue, say, or sovereign capacity, when we really don't have an ability to build a ship within 10 or 15 years.
I'm wondering what you think the opportunity costs are in relation to the ITBs and also building here in Canada. I think in the PBO's original report from about four or five years ago, it was about a 25% premium. Should we perhaps re-examine that, or perhaps loosen it a bit, to look abroad and return that money to taxpayers, or to develop other industries within Canada? We don't build our own tanks here, and yet we don't claim that's a sovereignty issue. We don't build our own missiles here. We don't declare that a sovereignty issue. Why do we do it around ships?
Adjunct Professor, University of Prince Edward Island, As an Individual
That's an excellent question. I think it's the nature of shipbuilding. The dollar values are associated not just with building the ship, but with sustaining it over decades. That's really a key distinction.
The other is that aircraft—
Conservative
Kelly McCauley Conservative Edmonton West, AB
We could have done that the same way if we had taken Fincantieri up on its offer to build here. We'd still have the ships built and sustained here.
Adjunct Professor, University of Prince Edward Island, As an Individual
I would love to see the details on that pitch they made off-the-cuff after losing. They never had to explain it and they never had to be held accountable. That's the beauty of losing while making a Hail Mary pass like—
Conservative
Kelly McCauley Conservative Edmonton West, AB
Neither does Irving, or PSPC for that matter.
What do we need to do to increase our capacity?
I know Mr. Housefather gave his required praise of the public service. We're not dissing the public service, but we don't have the capability, we don't have the capacity, and we don't have the specialty within PSPC and Public Works to do this. The PBO has further stated that down the road, when “Strong, Secure, Engaged” starts kicking in, we're going to have less capability.
How do we address that in the near term and far term? Do we reach out to our allies to import help?
Adjunct Professor, University of Prince Edward Island, As an Individual
All of our allies are encountering this global professional skill demand. If you go to—
Conservative
Kelly McCauley Conservative Edmonton West, AB
I'm not talking about the skill demand, necessarily; I'm talking about the skill demand within the purchasing capability.
Adjunct Professor, University of Prince Edward Island, As an Individual
That's what I'm talking about. It's not just the manufacturing; it's the project management side.
As I mentioned before, there is no school pumping out loads of people to manage these projects. Once you shut down things after a decade and try to rebuild them, which is what we're doing, you're going to encounter these massive human resources constraints.
This goes back to my earlier points. What are the trade-offs you're willing to entertain? You could go—
Conservative
Kelly McCauley Conservative Edmonton West, AB
Let me interrupt you quickly.
One of the comments we had in an earlier study on this was that the way we work, you could be in one part of Public Works, buying pencils and papers, and you get transferred over to this division. All of a sudden, you're doing something else.
Do we need a separate division within Public Works or a separate division within DND to start developing this specialty capacity? It doesn't work the way we're doing it.
Adjunct Professor, University of Prince Edward Island, As an Individual
It's one of the key arguments behind creating this separate defence procurement agency responsible for acquisitions in defence. You start building the human resource capacity and the institutional knowledge.
To your point, you don't have someone who is simply buying photocopiers in one part of their career and is now moving over to do massive, complex shipbuilding acquisitions. It's one of the core arguments in favour of a separate defence procurement agency.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you.
Now we'll go to Mr. Jowhari for four minutes.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you, Mr. Chair.
Thanks to our witnesses for their testimony. I found it quite useful.
I want to go back to Mr. Collins and, specifically, talk about customization. In your submission and opening remarks, you said that in both ambition and scope, the NSS has no parallel in this country's history. You also talked later on about how building a 21st-century navy and coast guard is a complicated business and a geopolitical challenge.
We all agree that there have been requests put forward for customization. The customization, to the extent that it's been put forward, is a determinant of the amount of investment that we need to make.
I want to go back to the fundamental question of whether you consider this a desire by our national forces, or whether you consider this to be a need. If you consider this to be a need, what are the factors that drive that need for us to be able to look at this type of customization?
Adjunct Professor, University of Prince Edward Island, As an Individual
It's a great question. We lost the ability to do localized Canadian design of complex naval shipbuilding after the 1990s.
One of the risks that's presented when you're doing the NSS is whether we rebuild that capability, as well, to try to do designs. How much time and cost does that take? Alternatively, do we partner with another state that's using a design that is or will be in production and, therefore, “take advantage” of a variant that is used by another partner? Over time, that can potentially help streamline supply chains and learning curves about how to build, maintain and operate that ship.
That's my—