Industry Committee on April 3rd, 2008

[Dr. Lucy Stojak]

I have two quick points.

I'd like to underline that there is obviously a possibility that the Canadian law would continue to apply. But with regard to the extraterritorial application of U.S. law, there are examples other than these regulations that apply to commercial and remote sensing operators. One need only think of ITAR and the fact that ITAR doesn't just follow a piece of technology. If you read through the ITAR, it also applies to things like defence services, to data, and to knowledge. I believe, certainly from what I read in the press a few years ago, there were already issues concerning things like whether, if a Canadian company employs someone who has dual citizenship, there could be difficulties down the road if this is a U.S. heavy-involvement project. There are issues, from the U.S. side, regarding who some of the staff dealing with the project are.

So the extraterritorial application of U.S. law has been an annoyance on certain issues and has been a sore point--let me put it that way--among other countries that are active in the space field.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Part of the concern about Canada's selling this technology after Canadians have paid 90% of its development costs is the potential end use by ATK. Does anyone here have concerns about the nature of ATK, of which almost 90% is for defence purposes, and what this could lead to in terms of the use of the technology, what it means for defence applications, what it means for compliance to treaties that we've signed? Could any of these end uses be in conflict with not only the legal obligations Canada has made, but also the spirit in which these technologies were designed?

Ms. Stojak, you outlined the satellite technology.

[The Chair, Conservative, James Rajotte]

Your time is running out here, Ms. Nash. Let's get a comment.

Who would like to address this? Ms. Phillips.

[Carol Phillips]

We have, from the beginning, expressed concerns about this. We as a union have been involved for 10 years in the issue of land mines and cluster bombs, so to see the crown jewel sold to a company that is one of the world leaders in some of these vile weapons is really, really disgusting to us. In terms of the larger picture, we also opposed the testing of the cruise missile back when some of our members designed and built the guidance system for the test missile.

There is no doubt that you have members who are concerned about their job security and then the bigger picture. What we're addressing here today--with the full support, by the way, of our national executive board membership--is our concern.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

Thank you for being here, witnesses.

As my first comment, someone mentioned the loss of the intellectual properties. As far as I'm concerned, that's probably the most important thing here. If you look back at the Avro Arrow case, we suffered for 50 years because of that decision.

When we're talking about MDA, we were told by the CEO the other day that it is the jewel in the crown. One problem we have is that there's nothing else that's even close as far as we're concerned. We're talking about Canadarm, we're talking about Dextre. If you ask Canadians about our claim to fame in the aerospace industry, they would probably name those two things.

By selling our intellectual property to the American company--there's nobody else in the wings--what are the consequences? Someone was saying that it's zero to 10 years to develop this from scratch. There's not a second company that's 50% of MDA that can take up the fight, if you will, for Canada.

What does that mean for Canada over the next 10, 20, or 30 years?

[The Chair, Conservative, James Rajotte]

Ms. Cartwright.

[Dawn Cartwright]

It's interesting you raise the Arrow. You're absolutely correct when you talk about where people point to in terms of what our icons are and our expertise in space and aerospace. The first thing, of course, is the Avro Arrow, which just recently celebrated its 50th anniversary of flight, and now the next piece, of course, is the Canadarm.

Certainly our experience with respect to the Arrow was that indirectly lost were 14,000 jobs, and indirectly, in total, 30,000 jobs, many of which, in terms of our expertise in engineering, went south, quite frankly, and in many cases eventually ended up in NASA.

Clearly we have a history and a pattern here that says if we don't continue to grow, and we don't continue to invest in development and expertise, then in fact we're going to lose that base. We did; our experience at least with respect to the Arrow was that this in fact did happen. There's no question that here we see the same thing.

[Raymond Simard, Liberal, Saint Boniface, MB]

Mr. Royer, at our last meeting we asked who would have priority in terms of observation. I believe you raised this issue. In my view, this is a very important matter. You talked about floods, but there could also be much more serious situations, for example acts of terrorism or an invasion, who knows? Who would have priority use of the satellite in such a situation? I believe this is the key issue. Is Canada going to lose its priority, in your opinion?

[Alain Royer]

If the Canadian Space Agency or MDA are no longer part of the Canadian observation system, it seems clear to me that we are going to lose the ability to decide the time of the intervention. The satellite cannot observe everywhere at the same time. It goes around its orbit and its camera is pointable. Who will decide to where it will be pointed? The system is presently managed by the Canadian Space Agency but obviously we do not know who will exercise this control in the future. It is extremely worrisome.

[Raymond Simard, Liberal, Saint Boniface, MB]

Ms. Stojak, you spoke about sovereignty concerns. We've been speaking here in this committee about the Northwest Passage, which is a concern, obviously, to everybody. But you also spoke about possible national security implications. Could you give us some idea of why we should be concerned about our national security through the sale of this company?

[Dr. Lucy Stojak]

Well, I would answer that there could be instances when Canada is involved in a conflict or in an alliance and there is a need for the very high-resolution information you get, and you wouldn't be able to provide it. Or there could be a specific issue that would be applicable to Canada whereby you would need that kind of information and you would not have it. It's not just for sovereignty; flooding can also be seen from a national security perspective.

An example that pops into my mind is being in an alliance in an area of conflict where the U.S. perhaps is not involved, but we are, and we would be required to furnish data and would not be in a position to do that. It's national security, but it's also the defence of Canadian Forces abroad. The five stipulations are national security, defence of Canada, safety of Canadian Forces, Canada's conduct of international relations, and.... So it could be placed here, but Canadian armed forces obviously are not stationed only here.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Simard.

We'll go to Mr. Stanton, please.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Good morning to all the witnesses. It's good to see some of you again.

There are obviously reams of questions here, but I want to go back briefly to Mr. Shrybman and this question of U.S. law trumping Canadian law.

Would it not be true that the U.S. law would only pertain, in this case, to a contract? MDA is a company operating in Canada that's providing contract services for different countries in the world. The U.S. contracts it to build some remote sensing devices under licence by the U.S. for the United States, and that law would apply to that particular device. Do I understand that correctly?

[Steven Shrybman]

The U.S. has its own satellites, including remote sensing satellites. This is legislation that applies to commercial satellites and simply applies to all commercial satellites that are owned by U.S. companies.

Perhaps I misunderstood your question.

[Bruce Stanton, Conservative, Simcoe North, ON]

Okay. Why would you think, though, that a satellite, RADARSAT-2 for example, that was produced by MDA for Canada and under licence by Canada would in any way be subject to U.S. law?

[Steven Shrybman]

It is because of the provisions we've been reading from, including section 5622 in the Land Remote Sensing Policy Act, which says, “No person who is subject to the jurisdiction or control of the United States”, which would mean ATK, as the rule goes on to stipulate, “may, directly or through any subsidiary or affiliate, operate any private remote sensing space system without a license pursuant to section 5621 of this title”.

[Bruce Stanton, Conservative, Simcoe North, ON]

That would be a U.S. licence. What we're talking--

[Steven Shrybman]

Yes, the company will require a U.S. licence.

[Bruce Stanton, Conservative, Simcoe North, ON]

Let me just clarify. What we heard yesterday—and Mr. Friedmann was very clear on this—is that there is work that an MDA/ATK company, irrespective of its ownership, will provide to other countries in the world. And when they do so, those contracts are done for those countries, and they're licensed by those countries. Ultimately, those devices will be controlled by those countries in the same way as RADARSAT-2 was developed by Canada for Canada and is controlled and will continue to be controlled by Canada.

So that's the distinction I wanted to make. We did hear that loud and clear.

I wonder if I could move on to Dr. Stojak. On the same question of the law.... We actually had some very pointed questions yesterday in regard to the distinction between the ownership and the law. We heard, for example, that when MDA was a subsidiary of Orbital, for example, which was 100% U.S. owned, it was still subject to the laws of Canada.

Have you seen anything here that would in any way trump that Canadian law, particularly the Remote Sensing Space Systems Act, on a contract and on a project like RADARSAT-2, which was licensed by Canada? Is there any way that a foreign law could trump that?

[Dr. Lucy Stojak]

Let me just provide the following comments in response to that question. I've also read in the press the oft repeated comment that in the past MDA was already a subsidiary of a U.S. company called Orbital Sciences.

The one question that I have, and I don't remember the answer to it, is in what five-year timeframe did that happen? That's important because the MDA we're speaking of today does not have the same technological capabilities as, I believe, MDA had under its first iteration as a subsidiary of Orbital Sciences. I think the technology that needed to be developed for RADARSAT-2 came a little bit further on during that relationship.

Just as an another example, in 1999 the United States tightened the ITAR rules, based on something called the Cox report. There had been huge concern in Congress that there had been high technology leaked to the Chinese. What this did—and again, it is important to put these things into their historical context—is this. Until that time, ITARs were regulated in the U.S. by the Department of Commerce. The goal of the Department of Commerce, just as it is of Industry Canada and of Foreign Affairs and International Trade, is to promote the industry so that they achieve benefits and revenues—and that's normal. Once the ITARs were tightened, that was passed over to the State Department, and one can argue that the national security, foreign obligations, etc., aspect came into play.

So the sale of MDA today is a different sale of different technology. Maybe the key thing that should be mentioned is that as of December 2007, RADARSAT-2 is not just a bunch of technology that was built here, but it produces images, and those images can be bought.

[Bruce Stanton, Conservative, Simcoe North, ON]

But not without the licence being—

[The Chair, Conservative, James Rajotte]

I'm sorry, but your time is up, Mr. Stanton.

We're moving to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

Welcome. My two questions are for all of you. The first is about possible job losses. After the sale of MDA to ATK, the first two pieces of international law to apply will be ITAR and the Patriot Act. What impact will this sale have on the workers? We know that ATK does 90 percent of its business with the U.S. Department of Defence. Canadian workers will be subject to ITAR and the Patriot Act.

My second question has to do with the service contract that Canada has with MDA. Under this contract, MDA will transfer 445 million dollars to ATK for the acquisition of satellite images. But we know that it will obviously be the U.S. government who will decide what images will be transmitted.

Under these circumstances, do you believe that we will get our money's worth or will we end up on the losing end?

[The Chair, Conservative, James Rajotte]

Mr. Shrybman.

Who would like to take that?