Industry Committee on April 3rd, 2008

[The Chair, Conservative, James Rajotte]

I call to order the 29th meeting of the Standing Committee on Industry, Science and Technology.

Pursuant to Standing Order 108(2), we're continuing our study of the proposed sale of a part of MacDonald, Dettwiler and Associates to Alliant Techsystems.

We have two panels before us today of an hour each. In the first panel we have representatives from the Canadian Auto Workers, the National Automobile, Aerospace, Transportation and General Workers Union of Canada. We have four members of the organization: Dawn Cartwright, the national aerospace director; Carol Phillips, assistant to the president; Steven Shrybman, legal counsel; and Mr. Roland Kiehne, president of CAW Local 112.

We are supposed to have a professor of the Institute of Air and Space Law from McGill University, Ms. Lucy Stojak. Hopefully she's on her way.

And then, from the University of Sherbrooke, we have Mr. Alain Royer, professor and researcher member of CARTEL—Centre d'application et de recherche en teledetection—department of applied geomatics, faculty of literature and social sciences.

You've all been told you have up to five minutes for an opening statement.

We'll start with the CAW, then we'll go to Professeur Royer, and then hopefully Professor Stojak will be here.

Ms. Cartwright, are you presenting on behalf of the CAW?

[Dawn Cartwright, National Aerospace Director, National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW - Canada)]

No, it will be Carol Phillips.

[The Chair, Conservative, James Rajotte]

Okay. Ms. Phillips, you can begin at any time.

[Carol Phillips, Assistant to the President, National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW - Canada)]

Thank you.

We appreciate this opportunity to come before you and speak on an issue that we think is of paramount importance to the future of our country on a number of grounds, as we'll lay out. You see that you have before you a written submission. I'm going to make a verbal submission this morning. We have various participants here, too, who can answer questions.

We have about 11,000 members as a union in the aerospace sector, and in our union we have 260,000 members. We came together in council this past weekend, and I can tell you that the issue of the sale of MDA was a very high priority in that body, which is representative of citizens in this country. We had a lot of speakers, a lot of concern about what this means.

Many of you will have received a legal document that we made available. We mailed it out to you. The clerk has it, because it's in for translation right now. In our view, based on this legal opinion complementing our opposition, we believe that this sale cannot in fact go ahead.

Also, in view of MDA's comments earlier this week where it made assertions about who controlled the shutter, the U.S. or Canada, we have Steve Shrybman here today, our legal counsel, who will be able to speak to any questions you might have on our opinion, which is that U.S. law triumphs.

We're here today for a number of reasons. As a social union, we're concerned about anything that threatens the well-being of Canadian workers as a whole. This not only threatens our members at MDA and their future, but it also threatens our country.

We've been asked a number of times, as a union, about job security. It's a prominent preoccupation of manufacturing workers generally in this country today, the issue of job security. At MDA these days, especially at the robotics division in Brampton, the company has worked hard to cast fear about how the sale of ATK is necessary to save their jobs.

You heard earlier this week CEO Friedmann saying that essentially they were in a situation where the sky was falling. We're here to say that the problem at MDA was not that we needed a foreign buyer, but that we needed the Canadian Space Agency to release funding for ongoing development.

We've seen in written comments by Andrew Eddy from Athena Global, who is formerly from the Canadian Space Agency, that there are lots of possibilities, lots of contract opportunities for MDA, and in fact they weren't interested in selling the company until a $1.325 billion offer came in from ATK, and suddenly they got interested in selling the company.

MDA had an overall profit increase last quarter of 37%, projected a rosy future, and badly needed an influx, however, of Canadian Space Agency money to get the next generation. And that's very important to understand in this industry. There has to be a constant development of the next generation of technology. They needed that badly, to get the next generation in robotics and RADARSAT-2 going, to improve their already excellent product.

The sale is about what ATK wants MDA for, what purpose ATK wants MDA for, and we hope you'll get a real answer today—a real answer, not a public relations answer—about exactly what their intentions are for MDA.

In the world overall, there's about a $200 billion market in aerospace. Only a part of that, only a part of the potential customers for that, is in the United States. There's huge competition going on out there. The United States is being left behind. You can find customers. We know there are customers out there for this product, and there will be, ongoing, as well.

In our view, what ATK wants is intellectual property rights, and our view is that that is especially why this sale should be blocked.

We're going into the next generation, 3-D imagery of RADARSAT, which will pinpoint accuracy. Ask them, please, what their intentions are for the future of the robotics division in Brampton. Does anybody in this room seriously believe the assurances that once ATK completes this sale there will be security? We certainly don't, and we would be very surprised if you did.

In conclusion, the proposed sale of Canada's leading domestic supplier will erode Canada's national and Arctic sovereignty. It is contrary to existing Canadian law. It will transfer ownership and control of vital technology and data to a foreign nation, contrary to our national security interests. It will wipe out future opportunities for Canada to enhance domestic expertise in space technology and know-how. And the supplier firms that support Canada's space program will result, once again, as we saw with the Avro Arrow, in the emigration of countless high-skilled aeronautical engineering and technical positions to the United States and provide no guarantee for employment levels in Canada.

We're asking you to block this sale.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Phillips. Thank you for your presentation.

We'll now go to Monsieur Royer, please, for his presentation.

[Alain Royer, Professor and Researcher member of CARTEL (Centre d'application et de recherche en télédétection), Department of Geomatics Applied, Faculty of Literature and Social Sciences, University of Sherbrooke]

Good morning. I will be concentrating my remarks on RADARSAT, the Earth observation satellite developed by MDA and the Canadian Space Agency. With your permission, I would like to make my presentation in French. I will thus be more comfortable in defending this jewel of Canadian Earth observation technology.

I will deal mainly with five concerns relating to the sale and the loss of control over the RADARSAT-1 and RADARSAT-2 satellites.

The first concern relates to the environment monitoring capability provided by RADARSAT. This satellite is unique and is extremely effective for the monitoring of flooding, ice areas and oil slicks. Who will now decide on the purchase of these images? Who will decide on the control of the satellite in situations of natural disaster or conflict? Imagine a scenario — not that it is something I would hope for —: two simultaneous floods, one in the United States and one here. Who will decide on intervention priorities? That is a source of concern. The loss of control over the satellite could be harmful to environment monitoring. That is one of the major aspects.

Secondly, I would like to underscore Canada's participation in the International Charter on Space and Major Disasters. In 2001, Canada was a pioneer when it initiated, along with the European Space Agency (ESA) and the French Space Agency (CNES) the creation of this Charter, the signatories of which committed to making available throughout the world means of Earth observation for follow-up and assistance in the management of natural disasters. If we lose the satellite, what will Canada have to offer under this Charter for which Canada was a pioneer and to which RADARSAT presently makes an extremely significant contribution through these images and its enhanced observation capability?

The third issue pertains to the applications and innovations flowing from the use of these images. At present, MDA and a whole host of companies throughout Canada have developed expertise and are carrying out research and development in the use and exploitation of these images. This technology is extremely advanced, but it has not yet been completely assimilated. Much remains to be done to improve the interpretation and analysis of these images. RADARSAT-2, in particular, has a polarimetrical capability that significantly augments the information included, but there is still much research to be done in this area.

What will these industries become if they no longer have access to these images as they did previously? The Canadian Space Agency had an entire promotion and distribution program for these images in view of developing this expertise within Canadian SMEs. These services companies transformed the raw material into a product that could be used by the Coast Guard, the Canadian Ice Service, the forestry industry, for logging monitoring, agriculture monitoring, etc. There are all kinds of applications for which radar technology is in the process of being developed. I am somewhat concerned about their chances of survival. What are the risks if we lose control over these images?

The other important issue is that of the international projects in which Canada is involved. These projects are funded by the Canadian Space Agency or by other agencies such as CIDA or IDRC. The projects that the university played a role in were research and development projects, including demonstration pilot projects. We had access to radar images in view of promoting this technology. I am worried by Canada's loss of independence with regard to the running of these pilot projects. There was, for example, the flooding project, MekongFrom Space, in which radar images were used and were of precious help.

In such situations, will Canadian interests not be in conflict with foreign interests?

My final point is the one that concerns us most directly. I am talking here about this fear that we have with regard to research. At the present time, there are programs that are developed by the Canadian Space Agency in order for these images to be provided to universities and research centres, the purpose being to increase the analysis potential for this data. Will we still have access to this data? Will we continue to develop this expertise which, in the end, might wind up serving interests other than Canadian interests?

I wish to thank you for having allowed me to speak to you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Our third presenter will be Ms. Lucy Stojak. She's a professor at the Institute of Air and Space Law at McGill University.

Ms. Stojak, you have five minutes for an opening presentation.

[Dr. Lucy Stojak, Faculty Member, International Space University, As an Individual]

Thank you, Mr. Chairman, members of the standing committee, for the invitation to appear before you.

For the record, I would like to make a correction. I do not hold the title of professor. I am a doctor—that's a title that I earned and worked for—and I am a consultant. My contractual links with the Institute of Air and Space Law, as of very recently, are no longer there. I just wanted to clarify that for the record so there is no misinterpretation as to my affiliation and title.

I have a few points that I would like to highlight this morning.

Canada has a very long and proud history in the space industry, and I think sometimes it's good to go back in time and remember what the government policy drivers were at the time the decision was made to develop RADARSAT-1.

The three primary drivers were to allow Canada to be able to manage its own resources, to have sovereignty over the northern regions of Canada, and to allow environmental monitoring. These three issues have, over the years, increased in importance. Every government in the past 10 years—and most recently the throne speech that was pronounced in 2007—has indicated that strengthening Canada's sovereignty is a clear priority.

Within the next 10 to 15 years the Northwest Passage may be open to routine maritime traffic. Canada must ensure that it has the ability and capability to monitor the comings and goings in the Arctic. Clearly, space-based technologies such as RADARSAT-2 are...in terms of SAR, radar technology is really the jewel in the crown, and it is the most highly available commercial SAR satellite on the market today.

Another point I would like to highlight is what other countries around the world are doing. When Canada entered this field there was only a handful of space-faring nations. Now the competition is much fiercer. Countries, even small-scale countries like Nigeria for example, are coupling with private companies in the U.K. to launch their own satellite packages for remote sensing purposes. Clearly, they will not have the resolution and the amount of finite valuable information that a three-metre SAR can provide, but the trend, if you look around the world, is increasingly for countries to have their indigenous remote sensing systems. The reason for that is to not be overly dependent on those countries that traditionally, for the past 30 or 40 years, have developed an extensive market in that field. I think there are valuable lessons to be learned there. At least questions should be asked as to why it seems that we're going in the opposite direction.

Another point I'd like to raise is the need, in the very near future, if not today or tomorrow, for this government to really think about the adoption of a coherent space policy. Again, the United States adopted a new policy in 2006. For the first time, the European Union adopted a policy in 2007. Though the interests and the drivers may not be the same—because national interests are important and they vary—all of them will agree that it's a strategic decision.

It is important for the development of industry to retain competitiveness. It's extremely important for the research and development and future training of individuals in the science and engineering fields. There are socio-economic benefits that have already been tabled in terms of numbers, and future technologies can only increase with time. The dependence of governments and citizens on space-based technology has increased dramatically, and this trend is not going to stop; it will only increase in time.

My colleague mentioned that Canada has international obligations to meet, as well, in terms of providing certain imagery under international agreements like the UN charter, for example, and I would also raise the whole issue of public good.

The technology that MDA developed for RADARSAT-2 is not equivalent to a technology for a new widget or a new paper clip. This is extremely valuable high technology with national security implications. Millions of Canadian taxpayer dollars were invested in this. The space industry is one that needs an extremely long lead time, so to develop something like RADARSAT-2, or to try to repeat it.... If you lose the IP, you lose the stepping stone on which to build the future generation. You really have to start at zero, and the lead time is extremely long. It's between seven and ten years. It's high risk, with a lot of financial investment, and stakeholders need to be gathered to make this happen.

I feel that some of these points really need to be answered very clearly.

Last but not least, I would like to raise a question.

Canada's Remote Sensing Space Systems Act, the legislation that entered into force in 2005, and the regulations that just entered into force in March 2007 were clearly inspired by the U.S. legislation. The United States has by far the biggest stakes. It has the broadest legislation, and that's normal because they have the biggest fleet and the biggest stakes.

Again, I don't have an answer; I'd just like to flag this for discussion. But when you read the regulations that apply to the United States' operators of private land remote sensing space systems, what's interesting to note is the definition of “person” under this act. The act applies to “any person subject to the jurisdiction or control of the United States who operates or proposes to operate a private remote sensing system, either directly or through an affiliate or subsidiary”.

Therefore, because it is my understanding, at least from what I've read in the press, that the potential sale of MDA to ATK would make MDA a subsidiary, I just raise this point for discussion.

Thank you for your attention.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation, Ms. Stojak.

I do want to clarify for the record, for myself and for the committee members, you're a professor at McGill Institute of Air and Space Law. You said you're a consultant. So can you clarify your position for the committee?

[Dr. Lucy Stojak]

Yes, Mr. Chairman. I believe that title was taken...Institute of Air and Space Law certainly was correct. I was affiliated for many years with the Institute of Air and Space Law. I'm a graduate of the Institute of Air and Space Law. I'm no longer under contractual obligation.

As for the title of professor, I have never held the title of professor. I'm a doctor, certainly, with a specialization in aviation and space law, but not a professor.

I am a member of the faculty of an organization called the International Space University, which is based in Strasbourg, France, so I do a lot of teaching. I am a faculty member of ISU, but I certainly am not a professor as one in the academic milieu understands that term to be.

[The Chair, Conservative, James Rajotte]

Thank you for clarifying that for us.

We'll now start questions from members.

Mr. Brison, for six minutes.

[Scott Brison, Liberal, Kings—Hants, NS]

I want to follow up on Dr. Stojak's comments on U.S. security laws and the genesis of RADARSAT-2 in Canada and the intentions.

RADARSAT-2 was developed by the Canadian government in part to strengthen our ability to protect Arctic sovereignty. The Americans do not recognize Canada's claim on the Northwest Passage, and as late as December 2005, there was an issue around an American submarine in the Northwest Passage. It seems indefensible that we would take $445 million of Canadian tax dollars to invest in a satellite to defend our sovereignty and then have that satellite fall to the use of the Americans, to be used against Canadian sovereignty in a dispute on the Northwest Passage.

I'd like you to quote the U.S. security law, the specific phrase, once again on the affiliate side.

Further, I'd like your opinion, or that of any one of the experts here, on whether there is any way that a Canadian government, can protect a Canadian company against U.S. security law. If this transaction were to go through, is there any legislative or legal means to absolutely, totally inoculate the RADARSAT-2 technology against that law?

[The Chair, Conservative, James Rajotte]

Dr. Stojak.

[Dr. Lucy Stojak]

In answer to your question concerning the quotes I read earlier, I have one very important point for clarification. What I'm about to quote again is not a national U.S. security law. In 1992, the U.S. adopted something called the U.S. Land Remote Sensing Policy Act, just as we, in 2005, adopted the Remote Sensing Space Systems Act. In order to implement the act, governments usually pass regulations that go into more of the minutiae of the licence details, etc., so what I'm reading is a clause from the latest set of the federal register, Department of Commerce, the regulations to the licensing of private land remote sensing space systems final rule.

Paragraph 960.2(a), under the scope of the act, states:

The Act and the regulations in this part apply to any person subject to the jurisdiction or control of the United States who operates or proposes to operate a private remote sensing space system, either directly or through an affiliate or subsidiary, and/or establishes substantial connections with the United States regarding the operation of a private remote sensing system.

Then there is a list of clauses as to what could be taken into account to figure out whether or not there is substantial connection with the United States.

I just want that to be made clear.

[Scott Brison, Liberal, Kings—Hants, NS]

It seems very clear to me that it's fairly locked in. It would be impossible to protect yourself...or it would be highly unusual to be able to protect an affiliate of an American company. Any technology that belonged to an affiliate of an American company would be subject to that regulation.

[Dr. Lucy Stojak]

Of course, regulations are open to interpretation. But if you go to the historical background of when this and the Canadian legislation and regulations were being drafted and thought of, clearly the national security interests of countries that have privately owned and operated remote sensing satellites was of extreme concern, and therefore legislation was required.

If I could make one point, and perhaps other members have provided the answer to this--

[Scott Brison, Liberal, Kings—Hants, NS]

Doctor, I have one other question. I may want to check that out, but I just have one minute left.

On December 14, the day the satellite was launched, the parliamentary secretary to the minister said, “This satellite will help us vigorously protect our Arctic sovereignty”. The very next business day—Monday, December 17—MDA agreed to sell the satellite to the Americans. Can any of you name one other country anywhere in the world that would invest $445 million in a satellite technology to defend its sovereignty and then sell the satellite or allow the satellite to be sold to foreigners the day after it was launched?

[Dr. Lucy Stojak]

I do not know of any.

[The Chair, Conservative, James Rajotte]

Mr. Shrybman, do you want to comment?

[Steven Shrybman, Legal counsel, National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW - Canada)]

The provision Dr. Stojak refers to is also set out in the authorizing legislation under which the regulations are promulgated. As she indicated, that's the Land Remote Sensing Policy Act. So it's not simply a regulatory proviso that stipulates that you need a licence under the U.S. regime, and that applies to any subsidiary you happen to be operating in a foreign country; it's a matter of law as well.

In response to your question, the only way to inoculate this satellite from the application of U.S. law would be for Congress to amend the statute to specifically exempt RADARSAT-2, and I think we know how likely that would be.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

We will go to Madame Brunelle.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Welcome, Ladies and Gentlemen. Thank you for appearing before us today.

I note that the representatives of CAW obtained a legal opinion regarding the possible sale of MDA to ATK. In this respect, representatives of the Canadian Space Agency, of MDA and now of ATK have given us the assurance that all clauses of the contract between MDA and the government of Canada through the Canadian Space Agency would be fully respected. It is of critical importance to us to know your opinion on this.

Canadians made a huge investment in this company. This is why I would like to know if, in your opinion, Washington will have the last say about access to services, especially those provided by RADARSAT-2.

[The Chair, Conservative, James Rajotte]

Mr. Shrybman.

[Steven Shrybman]

Ms. Brunelle, the short answer to your question is yes, that's true. U.S. law applies, and it would trump any agreement that MDA or any successor corporation would have with the Government of Canada. The regulations from which Professor Stojak was reading are quite explicit in that regard too.

I quote from them, in the opinion you have, just to highlight the provision on point under paragraph 960.10. These are the consolidated federal regulations, part 960, which are promulgated under the legislation we referred to:

The licensee may be required by the Secretary

—and this is the secretary of the NOAA—

to limit data collection and/or distribution by the system as determined to be necessary to meet significant national security or significant foreign policy concerns, or international obligations of the United States.... During such limitations, the licensee shall, on request, provide unenhanced restricted images on a commercial basis exclusively to the U.S. Government....

That's U.S. law. A U.S. company subject to this law has no opportunity to contract out of the statutory obligations that apply to it. It's that simple.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

This sale must be authorized by the minister of Industry. Do you believe that he has the information required under the Investment Canada Act or should this decision rather be made by the minister of Foreign Affairs who is responsible for granting the operating license to the satellite? Would the legislation governing remote-sensing space systems provide him with better tools to prevent this sale? Does one of these departments have precedence over the other?