House of Commons Hansard #64 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was companies.


World War IiRoutine Proceedings

10 a.m.

Cardigan P.E.I.


Lawrence MacAulay LiberalSecretary of State (Veterans)

Mr. Speaker, later today I will have the honour of leading a delegation of veterans to Italy. This pilgrimage will mark the 50th anniversary of the Italian campaign of the second world war.

Veterans from across the country representing all of the regiments and units which participated in the campaign will travel with me to sites throughout Italy. Together we will retrace the steps of Canadians who fought for democracy in Italy between 1943 and 1945 and pay tribute to those who gave their lives for freedom.

The story of the Canadians in Italy is a special chapter in our history. The first Canadians stepped on to the beaches on July 10, 1943. Well planned and decisive, the successful allied landings in Sicily marked an important turning point in the cause of freedom.

Then came 20 long gruelling months of fighting in which our troops proved themselves time and time again-Ortona, Monte Cassino, the Liri Valley and the push to the Lombardy plains and the industrial north of Italy. These fierce battles tested our Canadians fully and in every case our troops showed their exceptional ability and determination. Their proud record brought them respect from friend and foe alike.

All three of our services saw action in the Italian campaign. The flotillas of the Royal Canadian Navy successfully brought our troops ashore and, together with the merchant navy, kept them well supplied. The Royal Canadian Air Force provided vital air support, bombing strategic enemy positions. The infantry and armoured divisions of the Canadian Army renewed our country's reputation as the home of courageous and accomplished soldiers. The "red patches" of our Canadian Infantry Corps were some of the toughest troops in Italy.

Our troops left Italy and went on to northwestern Europe where they gained further honours in liberating Holland. But in Italy the important role they played in driving back the German army contributed to the downfall of the Third Reich.

I ask all members of the House to pay a very special tribute to the Canadian veterans of Italy who 50 years ago helped return freedom to Europe and brought such great honour to our country.

World War IiRoutine Proceedings

10 a.m.


Maurice Godin Bloc Châteauguay, QC

Mr. Speaker, I would like first of all to thank the Secretary of State for Veterans for taking the trouble to pass on to me, within a reasonable time, the text of his statement.

As the Official Opposition critic, I will be privileged to be part of that pilgrimage which will take us to Italy, in order to commemorate the 50th anniversary of the campaign to free Europe from Nazi control, a campaign in which Canada participated.

Certainly Canada must remember the incalculable price that the world had to pay in order to protect rights and freedoms. It must remember those efforts that were made in that terrible war, even at the cost of our innocent citizens' life. Veterans are still here to remind us of the courage that they showed in those events. So I agree with the Secretary of State that it is important to make sure that those events are never forgotten.

Canada also has other duties toward its veterans. It must never forget the situation that they are living in today. It seems to me that their living conditions should be of prime importance, since that is the best way for us to show our gratitude to those who fought for the preservation of these values and these collective interests. If it is essential to commemorate our veterans' achievements, it is even more essential to guarantee them decent living conditions.

The Bloc Quebecois is proud to salute all these people who made sure, 50 years ago, that Italy found the road to freedom.

World War IiRoutine Proceedings

10:10 a.m.


Jack Frazer Reform Saanich—Gulf Islands, BC

Mr. Speaker, I want to congratulate the secretary of state for veterans affairs for taking the lead in organizing this, if I may, pilgrimage to Italy to recognize the contribution of the Canadian forces who participated in the Italian campaign.

As has been mentioned, the Canadians landed in Sicily at Pachino Beach on July 10, 1943. After having assisted in the conquering of Sicily, they moved up the Italian peninsula. They were involved in the downfall of the famous Gustav line. On May 11 they commenced the attack on the Gustav line and four days later it collapsed.

They moved on to the Hitler line and on May 23 they breached the line with the loss of 1,000 casualties. This enabled the allied forces to combine with the American forces who had landed at Anzio, just south of Rome prior to that. This campaign for the first time saw a Canadian corps in the field commanded by a Canadian general, in this case, General E.L.M. Burns who later became famous as the commander of the first peacekeeping force recommended by Prime Minister Lester B. Pearson.

Moving up the Italian peninsula, the Canadians fought with great determination and great capability. At the Guthic line just south of Rimini on August 25, it took them five days to break through this last foothold before they moved into the plains of Lombardy.

By 1945 the Italian campaign had pinned down 27 German divisions and unquestionably had a great impact on the outcome of the war with D-Day. During the Italian campaign, some 92,757 Canadians served in the Italian campaign. Of those 5,500-plus were killed, 20,000 were wounded and 1,000 were taken prisoner.

Canada won three VCs, Victoria Crosses, the highest commendation during that campaign: Captain Paul Triquet of the Royal 22nd Regiment, Major Mahony of the Westminster Regiment and Private E.A. Smokey Smith of the Seaforth Highlanders.

It is not only appropriate that this return to honour and commemorate the Canadians who participated in the Italian campaign should be done, but it is appropriate that all parties should be represented in it. This is non-political. It is a Canadian venture and I commend the secretary and the members of the party who are going to Italy. It is not only right but fitting that Canadians remember the Italian campaign.

Income Tax ActRoutine Proceedings

10:15 a.m.

Victoria B.C.


David Anderson Liberalfor the Minister of Finance

moved that Bill C-27, an act to amend the Income Tax Act, the Income Tax Application Rules, the Canada Pension Plan, the Canada Business Corporations Act, the Excise Tax Act, the Unemployment Insurance Act and certain related acts, be read the first time and printed.

(Motion deemed adopted, bill read the first time and printed.)

PetitionsRoutine Proceedings

10:15 a.m.

Lethbridge Alberta


Ray Speaker ReformLethbridge

Mr. Speaker, I wish to present a petition on behalf of 187 constituents from Lethbridge.

They present the petition requesting that Parliament not amend the Canadian Human Rights Act or the Charter of Rights and Freedoms to include the undefined phrase sexual orientation.

I so present the petition to Parliament.

Questions On The Order PaperRoutine Proceedings

10:15 a.m.

Kingston and the Islands Ontario


Peter Milliken LiberalParliamentary Secretary to Leader of the Government in the House of Commons

Mr. Speaker, I ask that all questions be allowed to stand.

Questions On The Order PaperRoutine Proceedings

10:15 a.m.

The Deputy Speaker

Are the questions allowed to stand?

Questions On The Order PaperRoutine Proceedings

10:15 a.m.

Some hon. members


Questions On The Order PaperRoutine Proceedings

10:15 a.m.

The Acting Speaker (Mr. Kilger)

I wish to inform the House that pursuant to Standing Order 33(2)(b) because of the ministerial statement Government Orders will be extended by nine minutes.

SupplyGovernment Orders

10:15 a.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC


That this House condemn the government for its unacceptable delays in developing and implementing a genuine strategy for the conversion of the defence industries to civilian production, which would save and create new jobs in high technology sectors.

At the outset, Mr. Speaker, I would like to remind the House that if the Official Opposition has felt necessary to use its allotted day to deal with industrial conversion mechanisms and propose solutions, as the government will see, it is because we believe there really is a feeling of urgency. The reason why I raise this feeling of urgency is that we remember that 10,000 jobs have been lost in Quebec in the sole sector of defence material production and in the sector of arms production and that as many and even more have disappeared in the rest of Canada, where it is said that 47,000 jobs have been lost since 1987.

Despite the stagnation of markets, despite the urgency of the situation, the government is making no progress. This government, in spite of its commitments, and we will come back to that, has given no real indication of its will to go ahead in that

sector. There was no indication whatsoever in the Speech from the Throne, nor was there anything in the Budget brought down recently.

Of course, the difficulties that the defence material and arms industries are facing encompass much more than the national market. We of the Official Opposition are well aware, because we are responsible members, that the difficulties result from changes which have taken place in the international order. What kind of reality are we talking about when we deal with arms production? We are talking here about an international market worth $450 billion. Evidently, the streamlining, the adjustments made in these markets affect not only Canada but also Europe and the United States. I think it would be useful to point out that since 1987, Europe has lost 600,000 jobs in that sector and the United States 700,000. If you add that to the Canadian reality, it is easy to understand that the change is world-wide.

This is even more of a concern because jobs lost in the area of armament or defence production are high technology jobs; many studies show that jobs found in the area of defence equipment and military weapon production generally are better-paying for the employees. It is even said that these jobs pay 36 per cent more than comparable jobs in civilian industry.

Mr. Speaker, the causes of that streamlining are well-known. It began with the fall of the Berlin wall, which had been the symbol of the cold war for two generations. Because of the cold war various nation-states, including Canada, ratified a number of treaties providing for a limitation of the production of both nuclear arsenals and conventional weaponry. It is easy to understand that limitation treaties mean less contracts for producers.

Let us take as an example our neighbour to the south. Five or six years ago, when George Bush was President, the Pentagon was told to prepare for a significant reduction of its purchasing power. Even though it was the main source of defence contracts, the Pentagon will nevertheless have its purchasing power reduced by 27 per cent between 1993 and 1997. Of course, the whole thing will impact on Canada and Quebec since we are closely linked to the American defence market.

We must note also that arms deliveries to Third World countries dropped by more than 61 per cent between 1988 and 1992. Up to now, rationalization efforts have mainly focused on ground-based systems. Contracts for such systems dropped by about 77 per cent. Also, naval contracts, for which Quebec had some expertise, were reduced by 26 per cent. Thirdly, the aviation industry, with an important production centre based in Montreal, registered a 23 per cent drop in its contracts.

This is why the government should urgently propose a real conversion strategy. We should not forget-and we will keep reminding the government and the people listening to us-that while I speak, jobs are being lost and, despite the disappearance of tens of thousands of them, the government has not offered the slightest help, it did not propose anything to companies willing and even anxious to undergo conversion.

Mr. Speaker, it might seem strange, but Canada, a medium power, a peace-loving country, which never was the main belligerent in any war, was nevertheless an important producer of arms and auxiliary equipment. In fact, Canada ranks eighth in the world when it comes to arms production.

As for arms exports, we are ranked fourteenth in the world. I mentioned the difficulties experienced by the American market, and this is very relevant for Canada and Quebec since 70 per cent of the Canadian production of arms and military equipment is sold on international markets, and 80 per cent of that on the American market.

Therefore, the situation is worrisome, it is here to stay and it is structural. We cannot pretend that Canadian and Quebec defence industries are going through a temporary crisis. All indications point to a structural crisis caused both by the international situation and problems more specific to North America.

If the Official Opposition chose to have this debate, it is not only because the stakes are very high for English Canada, but mostly because the streamlining process is of the utmost importance for Quebec.

It concerns Quebec to the highest degree since there are some 650 companies, either prime contractors or subcontractors, which are directly involved in contracts awarded by the Department of National Defence. Quebec firms had gained expertise in four specific areas, namely communications electronics, aerospace, shipbuilding, and ammunition.

In spite of this expertise-which had been developed mainly through DIPP as we will see later-and Quebec's know-how in the four sectors I just mentioned, 10,000 jobs have been lost in Quebec since 1987, due partly to the international situation. As you can appreciate, the loss of 10,000 jobs in a market like Quebec is, to all intents and purposes, absolutely catastrophic. I say catastrophic, because these jobs, as was mentioned earlier, are in the high-tech field and if the conversion program is not implemented, there is no indication that Quebec will ever get them back.

As a member from Montreal, one of, if not the nicest city and region in all of Quebec and Canada, I must point out that the Island of Montreal is the centre of defence arms and materiel production.

Mr. Speaker, I want to back up my statements and focus on specifics, so that the government cannot accuse us of being vague and of not basing our demands on concrete facts. As you know, I have always made it my duty when speaking in this House to deal in specifics. Therefore, the following facts are for the benefit of the Minister of Industry who is honouring us with his presence today and who, I am told, will be taking part later in the debate. I would like to remind him that Montreal is affected most of all by the current crisis since 60 per cent of all contracts awarded either go to or are carried out in the Montreal area.

For example, between 1987 and 1992, a total of 15,000 sole-source contracts were awarded annually to the Montreal region. For those who are familiar with this issue, and I could name names because there are people in Quebec who have studied the conversion question, Montreal is considered the leading centre of military production in Canada, accounting for 26 per cent of all contracts awarded in the country.

We are shocked, saddened, worried to see the Montreal region, a region which has had its share of hardship these past few years-Montreal was said in the committee on social programs reform to have become the capital of poverty-suffer a 40 per cent overall decrease in economic activity from the defence industry over the past six years, while for the whole of Quebec, the decrease was 25 per cent.

So, there is a sense of urgency, an urgency that makes all the more unacceptable the attitude and inaction of a government the intentions of which in that respect are yet to be known.

But, in the past, back in the days when they were in opposition, the Liberals, the big guns of this government, had made firm commitments in terms of reconversion. They were aware of the need and supported this necessary transition. This transition stage is required because the good old days when governments could award lavish defence equipment contracts are gone, for ever.

If I may, I would like to quote three former members of Her Majesty's loyal opposition who had endorsed wholeheartedly the conversion process, but now seem conspicuously silent. I am referring to the current Minister of Human Resources Development, Mr. Axworthy, the current Defence Committee Chairman, Mr. Rompkey, who was the opposition's Defence critic at the time, and Mr. Jim Peterson, who was their Industry critic.

SupplyGovernment Orders

10:30 a.m.

The Acting Speaker (Mr. Kilger)

Order! I would simply like to remind all members that whenever they refer to other members, the proper practice is to call them by their official titles, for example parliamentary secretary, or member for such-and-such a riding.

SupplyGovernment Orders

10:30 a.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Mr. Speaker, I apologize for this breach of order. But you will still allow me to quote these three members whose constituencies I do not remember.

These people were saying, "We must expand the mandate of Industry, Science and Technology Canada's $200 million DIPP from developing defence technology to helping the industry convert and diversify into areas such as environmental technologies and high-tech peacekeeping technologies".

That is smart thinking, Mr. Speaker. And that is what we in the Official Opposition are demanding. We are telling the government that there is an urgent need to act on defence conversion and that this could be done by adjusting a program not currently used for conversion. However, if the government's intentions are serious, there is a program that would allow us to make conversion budgets available to businesses. It is the DIPP or Defence Industry Productivity Program.

We must never forget that this program, which in fact has promoted research and development, has been in place for over 20 years. It enabled businesses to conduct market studies and refine technologies mostly aimed at the defence industry. We think that the program which kept Canadian industries somewhat dependent on defence markets should now help them to pull through.

We say to the government that DIPP, which already had large budgets, $300 million in good years, but today it is more like $225 million, we say to the government that this is the vehicle to use. We will not accept an argument that DIPP is already being used for conversion. Because if they tell us that, we say to the government, "If this vehicle is really being used for conversion, come with us and meet various companies in the Montreal area that are having these problems. You will see that with these funds, they cannot really convert."

We say to the government that any conversion solution must involve regionalization, given the obvious fact that Canada's military industries vary enormously from one region to another. Each region has developed its own military specializations, so that each regional specialization has its own needs.

Obviously, an industry that makes munitions will not have the same needs, the same process, the same expectations for conversion as one that makes telecommunication satellites, for example. The Canadian reality is that each region has developed a very specific type of defence equipment production.

We must keep in mind that this debate is about the future and shows how forward-looking the Official Opposition is. I see my colleague opposite nodding and I am pleased to see that he agrees that we see things right.

One must never forget that conversion is a medium-term process, lasting five, six, or seven years. Now is the time to lay the groundwork for conversion. We must recognize that certain regions are further ahead than others in their reflection process,

because they know, and this is a basic point to keep in mind, that no conversion is possible without hard and constant co-operative work. In Quebec, we have come quite a long way in this regard.

We have come a long way with this co-operative work because, immediately following the recession of 1981, this approach to economic recovery was taken into consideration by the major players in Quebec, including the labour unions, starting with the CNTU, which just this last year organized a seminar on the subject. Even the Conseil du patronat, which can hardly be suspected of having any sympathy for sovereignty, apparently has easy access to ministers. There is also the current Quebec government; we are not talking here about some obscure future separatist government, but rather about a conventional federalist government ready for commitment, and which is asking the federal government to give its businesses access to available funds for conversion.

The government will have no choice because of the direct relationship that exists. That is precisely what the Official Opposition is attempting to show today, namely that there is a direct connection between the dependency of Quebec businesses on defence industries and the lay-offs now taking place.

I will give you six very real examples which should prompt the government to act much more speedily than it has up until now. I could have given about 50 examples, but I will only mention six, because of the limited time at my disposal.

Between 1990 and 1994, Bendix Avelex, an avionics company which depends on the military market for 70 per cent of its production, laid off 35 employees. As you will see, the more dependent companies are on the military market, the more massive are the lay offs.

Expro, which you will soon hear about in great detail, since the hon. member representing the region concerned will later make a presentation, makes ammunition. That company is also dependent on the military market for 70 per cent of its production and laid off 300 employees.

Héroux, an aeronautics firm, is dependent on the military market for 80 per cent of its production and had to lay off 131 people.

MIL Davie, which is well-known and which we talked about several times in this House, depends on the military market for 91 per cent of its production and laid off 2,740 employees-yes, Mr. Speaker, 2,740. This is unacceptable! It is a shame and a social disaster!

Oerlikon, which is well known, builds ground-based and missile systems. It is 100 per cent dependent on the military and had to let go 410 employees. As for Paramax, it is 100 per cent dependent and it laid off 1,000 people.

I do not know if the Minister of Industry is as shaken as I am, but I can hear him. I share his feeling of helplessness and I offer him my co-operation and that of the Official Opposition. We are telling this government that action is urgently needed. Stop procrastinating and let us work together; we, the Official Opposition, are willing to co-operate.

In the past, government members have said that we were only concerned by issues affecting Quebec, that we did not have a national vision and that we did not truly assumed our role. Now, this is an issue which concerns all regions of Canada, and particularly Quebec. And what we are saying is that, if the government is really serious about this, it should recognize that it does have that instrument, which, if improved, could help us to truly support businesses that really want to proceed with a conversion process. And let me remind those who are listening to this debate that this instrument is the Defence Industry Production Program or DIPP. We will see how serious the government is, since important budgets are involved in this program; we are speaking of $225 million.

For the program to be efficient, this budget must take into account local factors as well as local stakeholders, the main people concerned, who must work together and cooperate to achieve conversion.

You indicate to me that my time is up, Mr. Speaker. I simply want to tell the government that we want nothing more than to co-operate on this issue because we truly and honestly believe that time is of the essence.

SupplyGovernment Orders

10:40 a.m.

Broadview—Greenwood Ontario


Dennis Mills LiberalParliamentary Secretary to Minister of Industry

Mr. Speaker, I begin by saying through you to the member for Hochelaga-Maisonneuve that we welcome this debate today and we welcome the spirit and tone that he has put forward in his remarks. We too are going to be constructive and specific in responding.

By the way, I do share the hon. member's view that his riding in Montreal is one of the most beautiful parts of our country. One day when he comes to Toronto he will share the view that I have of my city.

The conversion of military technology to peacetime use is something to which we in this government are committed. The member cited many examples of how people through layoffs, et cetera, were in a disastrous state, unemployed, highly skilled people. We are aware of that. We are moving.

We have to expand our thinking and maybe look at new types of instruments to help in this conversion. I want to give a specific example. Amortek is a company in Stratford, Ontario, that made military fire trucks. About a year and a half ago the need for military fire trucks was really not there. It converted to

making an environmental garbage truck that handles wet, dry, and recyclable garbage all in one unit.

It used its skilled labour to do the conversion. It did not get any grant money from the Government of Canada. What it did was enhance its marketing team by one or two people and participated in a few more trade shows in South America and the United States. It used the resources of the Export Development Corporation for credit lines and guarantees and a combination of those instruments, plus its banks are becoming a little bit more receptive to this type of environmental technology that is exportable. Right now the company has so many orders it cannot fill them.

I think it important that we communicate to those people who are in this conversion mode that they cannot just rely on the old system of funding because we are in a very difficult fiscal framework and we have all acknowledged that. I know the member acknowledges that.

Could the member not see that we could use the existing instruments like the Export Development Corporation, the chartered banks and some of the new creative funds they have and the enhanced marketing services of the export marketing development unit of the department of the minister of trade. Maybe through a little bit more creative thinking we could bridge that transition and that could help us get people back to work a little more quickly without adding further to the deficit and debt.

Could he consider that as a possible option?

SupplyGovernment Orders

10:40 a.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Mr. Speaker, as you know, it is always a pleasure to debate with the member opposite, probably the most faithful listener I have, but I think the hon. member is mistaken on several counts. First of all, I specifically stated, at the beginning of my speech, that the tightening of the market is closely linked to international conditions. Now, I feel the question put by the hon. member is somewhat partisan, since it implies that the businesses I talked about are a little passive, that they depend on the government and are not really unhappy about the whole situation.

I found that a bit strange, Mr. Speaker. Do you not think that a business which has been operating on a specific market and which has to lay off 600, 700, 800, 900, or 1,000 workers would have, all by itself, considered developing a strategy plan to find some new niches and some new markets?

In fact, in some cases, businesses have, on their own, presented the government with a conversion plan. In a number of cases, the government was provided with conversion plans, and there is supporting material to prove it. However, according to professor Bélanger, whom I hope the hon. member will have the privilege to meet some day, there are structural obstacles to conversion.

First, in many cases, these firms do not know the new markets as well as the ones they used to operate on. Very often, in order to proceed with the conversion process, they need to change their production technology, which requires significant capital expenditures, something they cannot always afford.

But should this whole debate not rather deal with the fact that the DIPP, for historical reasons which cannot be denied, tried to maintain in a state of dependency a number of businesses involved in research and development in the military sector? Is it not socially responsible for the Official Opposition to argue-notwithstanding trade fairs, which I know the hon. member likes a lot-that there will be no conversion without a comprehensive approach, without the government's support?

Nobody says that that conversion process has to be the exclusive responsibility of business; no company says that either. Professor Bélanger interviewed people from over 80 companies. They are ready to play their part, they are aware that there is an element of strategic planning involved, and they also know that it is incumbent upon them to take the first step. No company denies that.

But we have to recognize that the government has a responsibility. It must take a comprehensive approach to this issue, provide a tool that will give impetus to the process and make funds available because of the studies that often have to be conducted. I am not talking here about annual funding. I am talking about funding a process over five to seven years.

I partly agree with my hon. colleague, and I will conclude my remarks by saying that, yes, businesses must take the initiative of looking for new markets, but they have the right to expect the government to provide them with a tool, and we are telling the government that the tool they need is the DIPP.

SupplyGovernment Orders

10:45 a.m.


Jean H. Leroux Bloc Shefford, QC

Mr. Speaker, first, I would like to congratulate the hon. member for Hochelaga-Maisonneuve for the soundness of his remarks.

We, in the Bloc Quebecois, consider the conversion of defence industries to be of great importance and we think that government members too, when sitting in the opposition, believed that to be important. It seems that changing sides in the House also means suddenly changing argument.

So I have a question for my hon. colleague. I would like him to explain the position of the Bloc Quebecois and also the different stages it would be important to go through. Government members opposite keep saying they want to listen; so I hope that at some point, after we have explained to them one last time what it is they should do, they will stop listening and finally take action.

SupplyGovernment Orders

10:45 a.m.

The Acting Speaker (Mr. Kilger)

The hon. member for Hochelaga-Maisonneuve has only a few minutes left. He should keep his answer short.

SupplyGovernment Orders

10:45 a.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Mr. Speaker, in school I was always told I had an exceptional talent to sum things up. My colleague is quite right when he says we should remind the government that three main steps should be taken.

Mr. Speaker, is the hon. member across the way trying to interfere systematically so I have less time to give my answer? So, there are three main steps.

First of all, the government should make tools available to businesses which, in many cases, have specific conversion plans in mind.

Mr. Speaker, I do not understand what the minister is saying.

SupplyGovernment Orders

10:50 a.m.

The Acting Speaker (Mr. Kilger)

I regret to interrupt the member, but the period reserved for questions and comments is now over. The Hon. Minister of Industry has the floor on debate.

SupplyGovernment Orders

10:50 a.m.

Ottawa South Ontario


John Manley LiberalMinister of Industry

Mr. Speaker, when the hon. member suggests that we make tools available to these companies, what he really means is a cheque book. That perhaps is where I should begin.

I would like to make a few general remarks about what the hon. member for Hochelaga-Maisonneuve has said this morning. I do welcome this debate. It is an opportunity for us to talk about an important aspect of industrial policy, that being defence conversion, but I want to put it in the broader context.

I have a few comments though arising from the hon. member's remarks. First of all, let me say how pleased I am that the Bloc Quebecois members are interested in talking about defence conversion. Realizing that their political objective is to create a new country, one which would have no army, navy or air force, one would have expected they would be anticipating massive expenditures on defence itself. If they succeed in their objective they may as well anticipate that. Therefore defence conversion is not what they should be concerned about, but in fact the creation of a defence industry.

Second, it occurs to me from listening to his remarks that he described the loss of jobs in this sector as a social catastrophe. I agree with him, if he means that any unemployment is catastrophic to the persons involved.

We have experienced over the last number of years many job losses in Canada in many sectors. We have seen it most recently in the fisheries in Atlantic Canada. We have seen it, although it is recovering well right now, in the automotive sector in Ontario. We have seen it in industries in western Canada. As we live at the moment with 11.5 per cent unemployment, 1.5 million Canadians out of work, for those people it is a catastrophe.

I suggest however it is no greater catastrophe for those in the defence industry than for those in any other industry. What we really are talking about-

SupplyGovernment Orders

10:50 a.m.

Some hon. members

Oh, oh.

SupplyGovernment Orders

10:50 a.m.

The Acting Speaker (Mr. Kilger)

Order. I know that members feel very strongly about these issues. Of course this is the place for that debate to take place, but I think we all want to do it in such a fashion that we maintain the respect of all our constituents.

In all fairness to members on either side of the House, given the strong views, I would ask members to allow one another to debate and I will do my utmost to maintain that debate in the most respectful fashion.

SupplyGovernment Orders

10:50 a.m.


John Manley Liberal Ottawa South, ON

Mr. Speaker, I have three children at home. I am used to talking when others are talking, so it is not really a problem for me and there are children here too.

The other comment I make arising out of the remarks of the member for Hochelaga-Maisonneuve is the notion which appears to underlie his basic thesis which is that we should give money to individual firms in order to assist them in converting.

He mentions DIPP and that is an important tool of industrial development. In fact it has historically given money to firms. As we revise DIPP, and I will say more about this in a few moments, what we have been doing is essentially making DIPP a refundable, repayable contribution to assist firms in developing products for markets.

There is quite a distinction between a strategic approach to an industrial sector and one which focuses on bailing out particular firms by writing cheques for taxpayers' money.

As we talk about defence conversion most members will agree that what we have here is a very complex process. I do not think there are simple answers or formulas. Furthermore Canada's position with respect to defence conversion is unique among industrialized nations. The hon. member for Hochelaga-Maisonneuve and many of his colleagues need to be informed about exactly what it is we are attempting to do. Let me try to provide some perspective on just where we are coming from in Canada in this area of industrial conversion.

In the red book we stated that many opportunities are available for industries which recognize and exploit the trends in global markets. We knew that the time had come to help defence industries to make the transition from high tech military production to high tech civilian production.

We are determined to achieve this objective. For that matter, we have made great progress in developing an effective strategy.

Our defence conversion program has three major components: first, redefining Canada's defence policy; second, rationalizing the military infrastructure in Canada; and third, rationalizing the defence industrial base. Really what we are talking about here is the third of these points, rationalizing the defence industrial base.

Our defence industry is largely composed of fully diversified businesses, most of which depend only moderately on military markets. For these businesses, the rationalization of our defence sector does not pose major problems. Sales of military material will be maintained at a relatively high level, but companies like CAE Electronics, Canadair and Spar will be able to make gains on both commercial and military markets.

We have a second group of companies capable of further diversification. These companies have the technology, skills and the manufacturing base to achieve long term growth in non-military markets. However, they may need assistance in analysing the most advantageous areas for diversification. This is where a broadening of the criteria for the defence industry productivity program, DIPP, will be particularly applicable.

We have a third group of companies. They are the strong niche players in the global military market. They fully expect to continue to grow and prosper in this market and nothing will be gained from attempting to discourage this growth. While they may remain primarily defence oriented they nonetheless are innovative and contribute to the advancement of technology which often leads to substantial commercial applications.

Finally, we have a fourth group of companies whose futures are very much in doubt. These are companies that are heavily dependent upon the domestic defence market, companies with little or no readily commercialized technologies. They have little export potential and may not be able to compete in the international marketplace. Conversion for these companies would likely be cost prohibitive and their futures must be managed on a case by case basis.

While we can make predictions about each of these groups of companies and their future prospects for growth and diversification, there are very few certainties. What it really boils down to is the fact that the future of defence companies in Canada will hinge on the defence market itself and the ability of companies to diversify into other product lines.

The future demands of the domestic defence market will not really become clear until we have completed a defence review. That is not something which is done overnight or even over a couple of months.

It is clear that we cannot wait for the completion of the defence sector review. Canadian businesses cannot wait. We are all very well aware of the fact that competition is intensifying on international markets; no one can afford to wait for the results of a review to be published. Therefore, the government must go ahead, resolutely.

Our main objective is to reduce the dependence of Canadian firms on defence sales. We want to encourage a greater focus on research and development, on dual use technologies to support product development and on improving market access.

In pursuit of these objectives there are a number of principles that I believe will guide us toward success.

First, the process must be industry led. It only makes sense that industry is in the best position to determine how it will meet the challenges and recognize the opportunities presented by defence conversion. There is a role for government in all of this, and it is a very important role. The government can facilitate that conversion by providing some assistance in identifying market opportunities and removing barriers to growth.

Second, defence conversion should not imply massive subsidies. There is no room for bailouts, for attempting to rescue companies that have suffered through market disruptions. Simply put, such an approach would be fiscally irresponsible and in the long term would do no one any good. What resources the government does have at its disposal-and I do not think I need remind anyone in the House that those resources are limited-should be focused on support for entering new promising markets. They should be focused on innovative projects and initiatives that will continue to contribute to economic growth and the creation of high value employment.

The government is aware that its primary responsibility is to the citizens of this country, the taxpayers of Canada. They would not accept massive financial help programs because it would go against the present thrust which is to try and reduce our huge deficit. But, they need not worry about that, the government will not launch such programs.

To that end we will be utilizing to the extent possible existing programs. That does not mean they will be infused with a flood of new funding. We are looking at what works, what does not work, and what can work better. We are asking industry to be innovative, and we intend to be equally innovative in the design of policy and program initiatives.

If we ask the Canadian industry to diversify its activities, if we exert pressure to achieve conversion, we must help companies respond to the needs of the military as well as the requirements of the commercial markets.

In order to do this we will work to introduce early into the procurement process industry views that can shape specifications to meet military requirements and diversify into production for commercial requirements.

Simply put, there is no room for the one-off, one of a kind military products of the past. No one can afford them. They do not fit into any logical equation for promoting competitiveness, innovation and economic growth.

It is no secret that governments, any governments, are always ripe for a little simplification of procedures and administration. This is an area we are looking at very closely. It is an area where changes will have to be made. The system as it exists now in Canada makes it difficult, if not impossible, for companies to support efforts in both military and commercial markets.

In fact the U.S. is already moving in this area and we will be following in the same direction.

I have a couple of final points to make, if I may. In no way do we intend to pursue a course that is defence conversion merely for the sake of defence conversion. By that I mean that the government has no intention of subsidizing the conversion of defence industries into commercial activities and commercial sectors that are already effectively serviced by existing firms. This is one of the dangers in the argument that was being made by my friend from Hochelaga.

I will not go any further into that, but I will just point out that when people try and criticize the government for not doing enough to help defence industries switch to civilian production, their arguments only underline the fact that this is a complex question, that many did not take the time to research fully.

No one gains when the end result of conversion is oversupply in another commercial sector. In fact the results would likely be more damaging than they would have been had there been no conversion effort at all.

Finally, job creation is still an absolute priority of the government and yes, certainly, the process of conversion of defence industries could result in the creation of new and very interesting jobs. However, we should not forget that this will lead to disruptions within the labour force. The market will take care of some of the affected workers and many of the highly qualified defence industry workers will find jobs in other sectors.

There is no doubt, however, that there will be some problems with less qualified workers. In those cases, to help the workers involved, the government will use, as much as possible, its industrial and community adjustment programs as well as programs geared to human resources.

I only mention this because it is an element of the whole question of defence conversion that is often ignored by those who wish to give advice or criticize. There are some knowledge gaps out there. There may be some knowledge gaps in the House. Over the course of the debate I hope we can perhaps fill some in.

For my part I am eager to hear the recommendations and suggestions of opposition members on this matter, especially those who have within their constituencies companies or sectors that have been affected by the changes in the international environment, particularly with respect to defence acquisition.

I should add that when we talk about the private sector we should remember that the shareholders and the managers of the companies also have obligations.

Shareholders and managers of companies have an obligation to invest in their own strategic development, to invest in marketing and to foresee changes that are coming.

We stand here today in 1994, almost five years after the Berlin wall fell. The fact that companies in the defence sector face significant challenges should not come as a surprise this year or last year to those companies. Government is prepared to work with companies that are trying to make conversions, trying to develop products that have dual use, or trying to find new markets for their goods.

Let us never lose sight of the fact that governments do not solve problems for firms. Firms, individual enterprises and individual shareholders have a big responsibility to help solve their own problems.

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11:05 a.m.


Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Mr. Speaker, I will try to keep my cool, but it will not be easy. I will do it out of respect for the Chair.

I feel I have been watching excerpts from a movie which got rave reviews in Quebec. It was called "The Unbearable Lightness of Being". With all due respect to the minister, I cannot understand his discourse. No later than March 26, 1993 A.D., Mr. Speaker, the Liberals, who were then getting ready to assume power, were calling for the solution we are offering in part today.

Because the Official Opposition claims that the government must play an important part in the conversion process, the minister began his remarks as follows: "The hon. member for Hochelaga-Maisonneuve-yours truly-suggests that the government make its cheque book available to these companies". In part, Mr. Speaker, in part. We do not see anything wrong in doing so; as a matter of fact, we believe it is acting responsibly. Why do we think that the government should give them money? Because, through DIPP, these companies have become dependent on government funding.

Does the minister not agree that most companies facing the difficult task of converting, have adopted or presented the government with their own conversion program? Today, the minister follows a laissez faire approach and tells us that it is up to the private sector to adapt. Yet, the Liberals were even more interventionist than we were, because in addition to recommending adjustments to the DIPP, they demanded the following in the second part of their press release entitled Liberals Announce Defence Conversion Policy issued on March 26 of 1993: ``The establishment of an Economic Conversion Commission, with the participation of industry and labour, to facilitate and coordinate the process of conversion in the 100,000-job defence industry''.

One would think from this press release that the Liberals agreed with our position that state intervention was essential to the conversion process. Therefore, I cannot understand the government's lack of commitment or why it has backed off and flip-flopped on this issue. We do, however, agree with the minister about one thing, and that is that unemployment affects everyone. Happiness, they say, may be the absence of misery. This is the kind of sophistry that is served up to us here today.

I will agree with the minister that unemployment is catastrophic for everyone, but will he agree with me that the money spent by the government on the conversion process will spare some people their jobs and allow them to continue investing in the economy? I fail to understand why no connection is being drawn between implementing a strong, immediate and urgent conversion strategy and the benefits that would accrue from it, in terms of national production and unemployment. I hope that the minister will review his position, that he will take a much more interventionist approach and that he will show some leadership. I have been told that he can count on the co-operation of his colleague, the Minister of Finance, and I know that the two ministers are prepared to work closely together. Their co-operation and the will of the opposition will ensure that we work together on this issue.

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11:10 a.m.


John Manley Liberal Ottawa South, ON

Mr. Speaker, the hon. member is trying to misrepresent what I said. In my remarks, I tried to explain that in a strategy for the conversion of defence industries, we need to have, first of all, in the private sector, the sort of initiative that can provide direction to every company affected.

Take for example Paramax, now Unisys GSG, the prime contractor for the helicopter contract the government cancelled on November 4.

I am quoting from a Canadian Press article published in the Gazette of April 19, 1994:

Paul Manson, president of Unisys GSG-says the company may end up better off than it might have had it carried the multibillion dollar helicopter contract through to its conclusion.

"We've gone through the worst of the setback from the helicopter", he said.

The articile goes on:

He said Unisys is using the expertise gained in military work for commercial contracts, especially in the field of total systems integration. "Once you would sell a mainframe or a mini-computer or a PC and then walk away", he said.

"Now we're involved in the whole package-maintenance, software, systems and integration.

The article goes on:

The cancellation cloud may have had a silver lining in that it forced Unisys into diversification at a time of "intense downward pressure on defence budgets".

My point is simply that I hope this indicates a success for the particular company. It has a highly motivated very professional manager as president, Mr. Manson. He has done a good job trying to anticipate where his company can find new successes. He spent a fair bit of time discussing strategy with Industry Canada. We have tried to be helpful to him as a government should be in identifying opportunities and in looking for possibilities.

Indeed the DIPP fund may prove useful in this exercise again as a repayable contribution to research which will lead to the production of new products to sell into new markets.

This is a very clear strategy. It is not a do-nothing strategy as the hon. member has attempted to characterize it. It is a practical pragmatic strategy that reflects two things, first of all the important contribution that these firms make to Canada's base of highly skilled, highly educated technical people. Second, it reflects the reality of the fiscal situation of the Government of Canada.

With all due respect to the hon. member who makes quotations from press releases at a time when the government in office was projecting $30 billion deficits, times have changed. Any government is forced to see how it can make most effective use of the resources that it has available.

If he has practical suggestions on that or if he would like to come forward and say that he thinks the DIPP fund should be increased by another $250 million and here is where we take the money from then let him suggest that. So far, other than his ranting and raving I have not heard any specific suggestions from him as to what it is exactly he wants us to do.

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11:15 a.m.


Jack Frazer Reform Saanich—Gulf Islands, BC

Mr. Speaker, mine is a very brief intervention because I know the time is short. I would ask the minister if he could provide us with the figures on the DIPP program as to how much was invested and what the payback was in the most recent figures he has available.