National Defence Committee on Sept. 24th, 2024

[The Chair, Liberal, John McKay]

We're going to have to leave those questions in a vacuum.

With that, Madam Lapointe, you have six minutes, please.

[Viviane LaPointe, Liberal, Sudbury, ON]

Mr. Mueller, in your opening statement you mentioned needing not only a policy but also an industrial strategy. What specific elements do you envision being part of an industrial aerospace strategy that would complement the defence policy update, and how would such a strategy address the gaps in Canada's current aerospace defence sector?

[Mike Mueller]

Again, we're very appreciative of the government's commitment to that aerospace strategy through Minister Champagne. An aerospace strategy will provide predictability and certainty for industry, so he asked about a couple of things that need to be a part of that.

The defence component absolutely needs to be a part of that, and one of the areas we're really looking for is how to define the sovereign capabilities and capacities we need as a country. We talk about moving to war footing and things like this, but as a country we need to have a clear understanding of what capacity and capabilities we need here from a defence perspective and from an economic prosperity perspective. We need to do that hard work with respect to that strategy. Strategy is absolutely critical. Operationalize the aspirational pieces of the defence policy update that was released.

[Viviane LaPointe, Liberal, Sudbury, ON]

How does this policy position of Canada's aerospace industry help us compete internationally, especially in terms of partnerships and exports?

[Mike Mueller]

I mentioned Australia, but if you look internationally at the U.K., the EU and the U.S., they all have defence industrial strategies. It really provides industry the certainty on where to invest, on where the government is going and on where the country is going, because right now we're stuck in a cycle of a transactional approach to defence procurement. Without that strategy in place, how do you start to align all the different things that need to be discussed?

I was listening to the earlier panel, and workforce development is an example. You have the CAF struggling with that, and you also have industry struggling with that, but without that strategy in place to operationalize and institutionalize the aspirational parts of the defence policy update, we're left in that vacuum again of not knowing where to invest, where we're going to go and what the timelines are, and that's absolutely critical.

[Viviane LaPointe, Liberal, Sudbury, ON]

In your opinion, what are the key strengths of the new policy of Canada's aerospace sector? Do you believe these strengths will have long-term benefits for the industry?

[Mike Mueller]

We were consulted by two previous defence ministers on the defence policy update, and we were pleased to see some of the language we had proposed within that, like making sure there is consultation with industry, that renewed relationship with industry and a four-year review. Again, that is incredibly important.

There are very good things within the defence policy update, but the question is, what's next? Regarding the industrial policy that is required to align this, how do we institutionalize and operationalize that new relationship that the minister has put down? There's a lot of work that needs to be done, and we need to send that signal to industry, to our international allies and to our competitors.

[Viviane LaPointe, Liberal, Sudbury, ON]

Would the other two witnesses like to add to that question?

[Christyn Cianfarani]

I think certainly having some of the capabilities.... In the case of the DPU, it looks more like equipment purchases than capabilities. It's described as, “We're going to buy these things.” I think that at least gives a signal to industry on the direction we're going to go in in terms of what we're going to buy.

From that perspective, it does contain important and very necessary commitments to how we are going to start to build up our defence industrial base. What it doesn't do, though, is distinguish between what will be sovereign and protected, if you want to call it that, and what we will acquire from other nations. That's like a shortcoming of the policy itself. I'll leave it at that.

[Brian Gallant]

I would simply add to my colleagues' comments that it's great to have a plan, and certainly I want to acknowledge that the update, the review, contains some elements that we think are important for space, and it felt like there was a bit more of a recognition of the importance of space when it comes to defence. However, a plan is worth what it's written on in the sense that unless you actually execute and procure the things you plan to do, then it's not really worth much. Certainly we are concerned about the delays in procurement in defence in general, and then even more specifically for space-related defence capabilities.

We think that space is a very innovative sector, and if it takes years to procure something that you think you needed seven years ago, or whatever the case might be, then what you actually end up getting through that journey of procurement might be outdated. Certainly we would just like to see these investments made as quickly as possible. I think, if we're being honest with ourselves, we can come and say that—and we've said that to the minister and the team. We can say that, but unless there is some type of structural change to figure that out, then we're going to be waiting for some of the investments that I think are good from a space perspective to actually come to fruition.

Let me just add as well that I'm of the view that we need to get to 2% to meet our NATO target. For various reasons.... I'll just add this, and this isn't really with my Space Canada hat on—it's more just as a Canadian citizen. We had a Democratic president on the floor of Parliament, when Barack Obama visited, and it was all positive except he addressed the fact that we needed to invest more when it comes to defence. Then we had then-president Trump, a Republican, obviously saying the same.

Both parties in the U.S. are saying it, and they're saying it for a reason—maybe for different reasons, but nevertheless, they're hearing that, and/or it's a very palatable argument that will resonate with Americans for the U.S. to be able to retreat from important multinational institutions that we need to be a part of.

[The Chair, Liberal, John McKay]

Unfortunately we're going to have to leave the answer there.

[Brian Gallant]

It's all good.

[The Chair, Liberal, John McKay]

It's the former politician you have to rein in. That's the issue.

Madame Michaud, welcome to the committee.

Ms. Michaud, you have the floor for six minutes.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for joining us. We'll benefit from their testimonies.

I want to talk about the contradictions between the planned cuts and the subsequent investments announced.

Ms. Cianfarani, you touched briefly on the topic in your opening remarks. You said that the cuts should simply be cancelled. You also said that there wasn't necessarily a clear vision of how the 2% target would then be achieved. A number of observers have also said this. How can we navigate between the cuts and the announced investments?

The Parliamentary Budget Officer carried out a further analysis this past summer, but didn't necessarily come up with the same estimates.

Do you find that the strategy provides a clear vision for defence investments or funding, or should it be a bit clearer?

My questions are for Ms. Cianfarani. However, the other two witnesses are welcome to weigh in if they have anything to add.

[Christyn Cianfarani]

There are a lot of items within the defence policy review that are under exploration. The government came out and said that if those items were costed and put within the defence policy update, it could arrive at close to a 2% number. We don't know for sure, because it needs to cost out those items and actually create a path and a plan year over year for us to see whether we can arrive at the 2% number. We're under no illusions that it will take decisions, a sort of reconciliation, if you will, among all the aspirations we have as a nation—health care, pharmacare, etc.—and in some cases weighing those against what it would take to meet not only our NATO commitments but that floor of 2% to 2.5% of GDP and, then, what our expectations will be coming back from our partners for that return on investment. I think there are bones in this defence policy that, if actualized, could show a plan for us to get to 2%, but the way in which they are in the exploration phase isn't a plan; it's merely an announcement. We need to do the process of actually costing them out, putting them in a budget framework and then showing how that budget will arrive at 2%—over the next 20 years, for example.

[Mike Mueller]

Thank you for the question.

To chime in from a company's perspective, no company can wait a decade to understand where the investments are going to be going. As a country, I don't think we can wait a decade either to figure out where we're going to go with respect to defence procurement. I believe that time is of the essence, and there needs to be a sense of urgency in that discussion.

The other piece that is so critically important on the need for a strategy is that we need to send that signal to the rest of the world that Canada is serious, is credible and has a plan, both from an investment perspective with respect to industry but also, as we've said before, to our allies around the world. It's absolutely critical.

[Brian Gallant]

I would just add that it isn't unusual to increase investments in one program while making cuts in other areas to adjust the funding. This can be done. However, it's obviously necessary to look at each proposed cut and determine whether it makes sense.

My colleague, Ms. Cianfarani, touched on a matter that certainly worries our members. It concerns the professional service cuts. We know why this happened. The news wasn't good for the government. Professional services were shut down. However, some of the contracts were quite important.

Our members' comments show that this certainly isn't the type of contract that Canadians, and ultimately the government, were trying to eliminate. Unfortunately, these contracts ended up in the wave of professional service cuts. In our members' view, these cuts, driven by the political environment, were unnecessary. Unfortunately, this will affect contracts that were important to the government, and ultimately to Canadians.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you.

I gather that a sense of urgency prevails, and that we need a fiscally transparent plan year after year.

This strategy and vision belong to the current government. Given the present circumstances, the government may change. I really don't want to play politics. However, I want to hear your thoughts on this possibility.

Are you concerned that a change of government could delay the achievement of objectives, such as the 2% target?

We can expect a new government, regardless of its political stripe, to take a totally different view of defence funding. Are your member organizations generally concerned about this?

[Christyn Cianfarani]

No. I do think that one challenge in Canada is that we approach defence by government instead of holistically, across parties, in a non-partisan way. I think that hurts us as a nation. We're not aligned in our thoughts around defence so, yes, it is a worry for our members.

[The Chair, Liberal, John McKay]

Thank you, Madame Michaud.

You have six minutes, Madame Mathyssen.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Thank you, Mr. Chair.

I just wanted to clarify this, Ms. Cianfarani.

You said that the department didn't give you any clarity on the changing of those arms exports in enough time or with any sort of clarity. They still haven't, to date, given you that clarity that the industry needs. Is that correct? Is that what you said?

Okay. That's interesting. If Canada were consistent in how we treat our arms exports in terms of sticking and being consistent to those nations that violate international law, would that provide the industry with the clarity and the consistency that it needs?

[Christyn Cianfarani]

I think there is an element of predictability that we would like to have, but we do recognize that this is an area in which the government will take decisions that may or may not be in response to an action by another nation. We understand that there may be a speed at which decisions are made that we have no influence on, so there's predictability, yes.

I think, for us, once a decision is made, we can go to the department, and the department is very, very clear on what, how and the degree to which a product will be restricted from its exportability.

Our inability to get those answers and the inability of companies to adjust their practices immediately are the most problematic aspect of it, notwithstanding the fact that it's unpredictable and that the method by which we are often informed is in a public domain space as opposed to being informed before a decision like that is made or we're given a warning that this may transpire.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

You represent quite a few companies, but I would imagine that many of them don't necessarily wait for a government to make those decisions, especially when we're talking about the instigation of war crimes. I mean, those are individual decisions as well for industry.

[Christyn Cianfarani]

No, companies will not make those decisions on their own, because they don't have access to the information that the government has to be able to make those decisions. They wait for the government to signal that there is a challenge in a particular country with a particular good. Then we wait for the details of how that export and/or sanction will roll itself out.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

To shift gears a bit, I've certainly talked a lot about and we've heard from this committee a lot about the aligning of defence policy with industrial policy and that we need the robust domestic industry to get to where we need to be. That “made in Canada” approach that I've often tried to discuss at this committee ensures that we're spending the money, taxpayers' money, within Canada to benefit Canadians and workers.

Can you talk about that a bit more in terms of how the DPU is or is not addressing that?