Debates of May 5th, 1994

Information Highway

[John Manley, Liberal, Minister of Industry]

Mr. Speaker, the question is a very good one.

I am sure the member is aware that the advisory council on the information highway has its first meeting today. In the booklet we produced on Canada's information highway with the announcement of the advisory council, we set out our objectives, including competition, jobs, accessibility and affordability for all Canadians.

Those fundamental principles and objectives are the ones that we are seeking to define. The means by which we achieve them over the course of the deliberations of the council during the next few weeks and months will define our view of the policies that should be pursued. We will be seeking the input of members of the House as well as the broader Canadian community about the impact of the regulatory environment in which we are going to operate.

It is a very important file, one on which the government will act with great care and with great interest in what the hon. member has to say to us about it.

[The Speaker]

Order! The hon. member for Laurentides has the floor on a point of order and I believe, also has the unanimous consent of the House.

Point Of Order

[Monique Guay, Bloc, Laurentides, QC]

Mr. Speaker, I believe you will find that there is unanimous consent to move the following motion:

That motion M-280, in the name of Mrs. Guay (Laurentides) in the Order of Precedence of Private Members' Business, be withdrawn and replaced by Motion M-294 in the name of Mrs. Guay (Laurentides), which is listed in today's Notice Paper .

[The Speaker]

Is there unanimous consent?

[Some hon. members]

Agreed.

(Motion withdrawn.)

Business Of The House

[Michel Gauthier, Bloc, Roberval, QC]

Mr. Speaker, could the Government House Leader please tell us what is on the agenda for the next few days?

[Herb Gray, Liberal, Leader of the Government in the House of Commons and Solicitor General of Canada]

Mr. Speaker, I would be happy to make my statement, which is quite straightforward. I think the Deputy Prime Minister will agree with me on this.

[Sheila Copps, Liberal, Hamilton East, ON]

Yes. Absolutely.

[Herb Gray, Liberal, Windsor West, ON]

Anyway, tomorrow the House will resume consideration of Bill C-22 respecting Pearson airport. If this is completed at second reading, we will turn to Bill C-25 to amend the Canada Petroleum Resources Act. If there is time, we will have Bill C-26 regarding the National Library.

Monday the House will resume business where it left off on Friday. When this is completed, we will proceed to Bill C-27, the income tax technical bill. On Tuesday, the House will consider the motion in the name of the Minister of Agriculture and Agri-Food in order to debate matters of importance to Canadian farmers.

I understand that discussions are going on aimed at having the House sit into the evening to accommodate all those who wish to participate in this important debate.

In any event, the House will resume business from where it left off on Monday and Thursday will be an allotted day.

The House resumed consideration of the motion.

Supply

[Georgette Sheridan, Liberal, Saskatoon—Humboldt, SK]

Madam Speaker, one key objective of the government in introducing these programs is to maintain knowledge in intensive industries and the high technology employment which is part of it. This, of course, is also an objective of our efforts to assist in the conversion of the Quebec defence industry.

While many of the approaches which I have just outlined would be applicable to the Quebec defence industry, I believe it would be a mistake to try to impose, for example, a U.S. style solution to the Quebec situation.

A number of quite marked differences exist in terms of defence industry conversion between Quebec and the United States and even other parts of the world, like Europe.

Basically, the Quebec defence industry conversion is unique and different from any other. A fair number of defence industries in Quebec would be more appropriately referred to as aerospace and defence industries. I say this because, unlike many of its international competitors, the Quebec defence industry has already diversified its production considerably. It is producing a wide range of commercial and defence products.

Quebec's industry is unique in another important respect, one in which we should all take pride. Quebec's aerospace and defence sector sells a large proportion of its products and services in world markets. To do this successfully it must, and in fact do, produce world class products at competitive prices.

Like the rest of the Canadian aerospace and defence industry, Quebec firms focus on high technology market niches. They export subsystems and components sold primarily to aerospace and defence prime contractors in countries around the world.

This is a remarkable achievement. A country as small as Canada ranks sixth in the world in total aerospace and defence sales, with between 70 and 80 per cent of all production exported to other countries.

We should be proud of these companies and of the workers in these dynamic industries who make this significant contribution to the economies of Quebec and Canada.

As my comments indicate, Quebec's aerospace and defence industries are in many ways different from their counterparts in other areas of the world. I realize that many aerospace and defence firms face uncertain prospects in the years that lie ahead. But I am also confident that based on their past track record Quebec's aerospace and defence industries can and will rise to this challenge.

I hope I have demonstrated today the importance of recognizing how unique the Quebec aerospace and defence industries are. By building on their relative strength in relation with the majority of industries in the rest of the world, Quebec industries are well on the way to diversifying their production and converting their technologies.

As mentioned recently in the budget, the federal government intends to change the Defence Industry Productivity Program (DIPP) in support of changes in the Quebec aerospace and defence industry. I have good hope that all the support provided by both the federal and the provincial governments to the Quebec aerospace and defence industry will foster conditions favourable to the pursuit of changes.

As I said earlier, given the unique circumstances of Quebec, it may not be appropriate to consider applying in that case

solutions used in the United States or in Europe. We all recognize that product diversification in the defence industry presents multiple difficulties. As indicated earlier today, this is no small task and there is no quick fix.

But this does not mean that problems cannot be resolved. They can and will continue to be resolved. Major efforts are already being made by the private sector, efforts which are proving successful in the Quebec aerospace and defence industry.

The government will continue to be a full partner in these efforts to ensure that this industry continues to deal successfully with the challenges and the opportunities which will come to Quebec in the future.

[Jean Augustine, Liberal, Parliamentary Secretary to Prime Minister]

Madam Speaker, we have had much discussion on the commitment of the government to defence conversion. Indeed we have indicated in both the Liberal plan for Canada "Creating Opportunity" and the budget the important role that the defence industry productivity program will play in this commitment.

I would like to mention some of the principal aspects of the role which the defence industry productivity program, or DIPP, can play in defence conversion. We believe that the effective use of this tool can contribute to the continuing reduction of the industry's dependence on defence sales.

DIPP, created in 1959 under the auspices of the Canada-U.S.A. defence production sharing agreement, supports the federal policy of participating in international co-operative production sharing agreements. It also plays a major role in supporting Canadian high technology defence related industries like aerospace.

Today Canada's defence industries are characterized by the international scope, high risk and intense competition both in Canada and abroad from subsidized foreign firms.

Under the current program DIPP makes repayable investments to qualified firms for research and development, source establishment, buying against production machinery and for conducting market feasibility studies. The program is market driven and industry led.

The government considered these as essential and desirable features which will continue in any new conversion program. These features can ensure that Canada remains internationally competitive.

The defence industry productivity program has been instrumental in the success in building high technology industries and generating substantive exports and creating jobs across Canada. Since its inception 35 years ago the program has brought extraordinary benefits to Canada. I would like to mention a few.

Seventeen hundred projects have been completed. The Government of Canada has contributed $3.4 billion to those projects. The program has leveraged $280 million from other governments, primarily the U.S.A.

Canadian industry itself has invested $6.8 billion. These projects have generated sales for Canada of between $25 to $40 per DIPP dollar invested primarily to the export markets.

In total around 60,000 person years of employment, most of it high tech, have been maintained in Canada's aerospace and defence industry sectors.

The program has been reviewed by the industry and considers it extremely successful as well as essential for their future growth and development.

The introduction of a viable defence conversion diversification component under DIPP must take into account the global context within which the program is situated: the substantial reductions of defence expenditures by major industrialized countries; the worldwide restructuring of the aerospace and defence sectors; Canada's obligations toward the GATT and other agreements; Canada's fiscal constraints in industrial infrastructure.

The challenge therefore is to introduce a defence conversion and diversification component that will best help firms wishing to diversify while at the same time ensuring that the projects being supported will have a reasonable chance of success.

Although the program was not specifically designed for defence conversion, it has nevertheless reinforced the conversion of Canada's defence industry through its flexibility and responsiveness to market conditions.

For example, sales of the aerospace and defence sector are now 70 per cent commercial versus 30 per cent military. This is the reverse of the mix that we had in the 1960s. However, in view of the new global realities, we must intensify and focus our conversion efforts so that we can attain the new objectives.

Consultations so far have raised a number of important issues that we will have to resolve before we finalize the new component. We will have to recognize that some firms in successful niche markets may not wish to convert and that some may be inconvertible. We may have to modify standard existing DIPP performance criteria to accommodate defence conversions. Repayment options are also to be considered.

From the analysis to date the government is considering the following five activities as candidates eligible for support: defence conversion market feasibility studies, research and development assistance for new technologies, limited capital assistance for tooling and retooling on an exceptions basis, a

training component through Human Resources Canada, and change of corporate culture perhaps for such activities as total quality management.

At the moment low on the list of potentially eligible activities are such items as software development, joint ventures, acquisitions, strategic partnerships, and shutdown of a production line or facility.

Although the new components of contribution programs such as DIPP will continue to assist companies in identifying new opportunities and in developing dual use technologies and commercial products to meet new opportunities, we will have to be careful. As members on all sides of the House are very much aware, Canadians want governments to spend carefully and look for high value for money spent to ensure maximum benefits at least cost. They also want us to put our best efforts into long term job creation.

The defence industry productivity program has indeed been one of the most productive programs which the government provided to benefit companies, employees and communities across the country.

As we heard earlier in the debate, since DIPP came on stream 35 years ago the success stories have been many, varied and extraordinary. The program can be a most effective tool for reducing the dependence of our industries on defence sales and for expediting the conversion of companies from defence production into commercial success in the new global marketplace. We can look forward to the defence industry productivity program serving as a catalyst to help ensure our economic future.

In Etobicoke-Lakeshore we look forward to those programs in our midst. As Canadians we will share in the challenge, fulfilment and prosperity which await those who respond to the needs of our training partners around the world in the 21st century.

[Claude Bachand, Bloc, Saint-Jean, QC]

Madam Speaker, I listened carefully to the hon. member's speech. Now, in this debate on conversion, I could not help making a little aside on Oerlikon, of course, which is a major company in my riding, and I will have a question for the hon. member.

Oerlikon is a pathetic situation. I admit, I also have a confession to make. At the time, I was in the peace movement and when Oerlikon came to Saint-Jean, even if it provided 700 jobs, what we foresaw as a long-term scenario is happening.

When a company stops making military equipment, very often it just closes down and moves elsewhere. Even if attempts at diversification have been made, and I will come back to that, the apocalyptic scenario which we feared is taking place in Saint-Jean. Perhaps parts will continue to be made for another year, to be stored in warehouses for future supply needs, but once that is over, I think that Oerlikon is likely to close.

At one time, it maintained a certain level of employment. In the riding, 735 jobs depended on Oerlikon, and now it is down to 325. When the contract ends, none will be left.

I remind you that Oerlikon produces low-altitude air defence systems, that is guns which can hit planes invading a territory. With the changed international situation, of course, these contracts are worthless. Although Oerlikon has made a big effort to sell a lot elsewhere in the world, I think that this equipment is no longer needed today. Only $90 million is left for the final year of operation of a $1-billion contract. Then nothing will be left.

I want to point out that unfortunately the federal government did not do its share when Oerlikon wanted to diversify. I thought that there was an attractive opening at the time. They wanted to diversify 25 per cent of their production to laser treatment for environmental protection. That was an interesting approach to diversification. Unfortunately, the federal government did not support it.

I agree with my hon. colleague on DIPP, but would the solution not be an industrial conversion fund instead? Would the hon. member promise to defend within her party the idea of a military industrial conversion fund? That industry has tremendous brain power and human resources and also money invested in infrastructure, so there is surely a way to capitalize on this immense human potential and on that infrastructure.

Can she at least tell us if she can make her caucus realize that the way to diversify is really to have a military industrial conversion fund?

[Jean Augustine, Liberal, Etobicoke—Lakeshore, ON]

Madam Speaker, I say to the member that maybe he has given us a bit of history and maybe that history predates the present government.

The company is currently pursuing export markets. There is support from the present minister to ensure that Oerlikon can diversify and look at all the options before it.

The government is providing full support for all marketing efforts. It will review all the proposals. It is working with everyone in terms of coming forward with as many proposals as possible to work toward diversification.

[Antoine Dubé, Bloc, Lévis, QC]

Madam Speaker, as the member for Lévis, I am pleased to participate in this special debate, which results from an Official Opposition motion, on the conversion of defence industries to civilian production.

In my riding, there is an extremely important company which is in jeopardy because of the existing situation. I am referring to the MIL Davie shipyard. In fact, until just a few years ago, this company was the largest shipyard in Canada.

The conversion of defence industries is undoubtedly an important issue for Quebec. As you know, military equipment industries have been experiencing difficulties since the end of the Cold War. It is estimated that, since 1987, the demand on the international market has dropped by close to ten per cent. According to international experts, this drop may very soon reach 25 per cent. In Quebec, since that same year, 11,000 of the 57,000 jobs in that sector have already disappeared.

If there is a company which illustrates the urgent need to convert military industries, it is the MIL Davie shipyard. One year ago, the company developed a business plan to switch from military to civilian production. This plan is not only designed to give back to MIL Davie its status of best shipyard in Canada, but also to make it a leader at the international level. The plan includes two transitional contracts. One concerns the construction of a ferry for the Magdalen Islands, for which there is a demonstrated need, while the other provides for the construction of a multi-purpose strategic ship for peacekeeping missions and environmental interventions, called "smart ship".

Unfortunately, the shipyard and the thousands of related jobs are in jeopardy because of this government's apathy. MIL Davie urgently needs to convert to civilian production, since this shipyard is among those Quebec industries which rely the most on military contracts.

Let me give you some interesting data compiled by the Groupe de recherche de l'industrie militaire et de reconversion, which is affiliated to the Université du Québec à Montréal. Until now, 91 per cent of MIL Davie's production has been related to military equipment contracts. MIL Davie is also in fourth place among the 16 companies identified by the UQAM group, after Oerlikon, which has so far been dependent on the military market for 100 per cent of its production, as well as Paramax and SNC Technologies, which depend on that market for 95 per cent of their production. Yet, the Liberal government only offers lame excuses to justify the delaying of its decision on the transitional contracts for the Magdalen Islands ferry and the "smart ship".

The latest of these excuses is the one provided by the Minister of Transport who, in early March, demanded a copy of MIL Davie's business plan before making a decision concerning the two contracts. But, as I said earlier, this business plan has been available for a year already.

Obviously, before making such a decision, the government must ensure that there is a real need for these ships. However, that need has been demonstrated in both cases.

Let us first look at the Magdalen Islands ferry. The useful life of the ferry which has been in use for over 28 years, the Lucy Maud Montgomery , will end in less than two years. After that, the ship will not be safe enough to get its certificate of seaworthiness, which is required by the federal government.

The Magdalen Islanders also consider that the Lucy Maud Montgomery is bad for business in their area, because the ship no longer meets the needs of the people. For example, the tweendeck is not high enough to accommodate some types of trailers and trucks.

On February 11, the mayors of the Magdalen Islands communities toured MIL Davie main dockyard, the only world-class dockyard in Quebec for now. All of them unanimously recognized the need to replace the Lucy Maud Montgomery . On February 22, these same mayors and representatives of the Coopérative de transport maritime et aérien, the company operating the ferry service, reached a consensus and all agreed that a new ferry was needed.

I am going over all of this because there seems to be some confusion created by the hon. member for Bonaventure, among others, about the possibility of replacing the ferry by a used ship. In January, and more specifically on January 18, the day after the opening of this session, the minister of Transport stated, in answer to questions put by our colleague, the hon. member for Beauport-Montmorency-Orléans and myself, that, where the Magdalen Islands ferry was concerned, an announcement would be made soon. Following pressures made by stakeholders, we were told that when the minister said soon, he really meant a couple of months. That was on January 18.

The only other time I heard the hon. member for Bonaventure-Îles-de-la-Madeleine comment on this very important issue for his constituents was in an article run by the local newspaper, Le Radar . The hon. member had nothing else to say but complain that the whole issue of the ferry service was his responsibility, not the responsibility of the Bloc Quebecois.

To tell the truth, he must have been outraged by one of the headlines in a previous issue of Le Radar , where it was said that never before had the Magdalen Islands been talked about so much since the arrival of the Bloc Quebecois in Ottawa. If I had been the hon. member for Bonaventure-Îles-de-la-Madeleine I would have felt piqued as well.

Nevertheless, March and April have come and gone. We are still waiting for an answer while the workers are being laid off by the hundreds and while Magdalen Islanders are wondering what their member and their government are doing.

If a decision is made shortly, the new ferry could be delivered in time, that is when the Lucy Maud Montgomery has to be replaced. I will take 9 to 10 months to prepare the final drawings. Then, construction will take 12 months and sea trials another month. The Liberal government has dragged its feet long enough, it must act now.

Let us now talk about the smart ship, a multi-purpose supply and general transport ship. The Canadian Armed Forces and the Department of Environment need that type of ship, the former for peacekeeping or humanitarian aid operations, the latter to intervene in case of a major spill. This project is by far the most important for the future of MIL Davie, because it would allow the development of a new organizational culture and new modes of production.

The concept was developed by the MIL Davie shipyards of Lévis. Plans, modelling and prototype development are done under the direction of an associated company, MIL Engineering System.

The construction of this type of ship would fit into the review of the Canadian defence policy, a review made necessary by the end of the cold war and the increase in the number of peacekeeping or humanitarian operations because of local conflicts.

The new international environment, a result of the end of the cold war, might very well increase the risk of such conflicts and Canadian Armed Forces have developed a sought after know-how in the area of peacekeeping. As matter of fact, the Canada 21 Council gave another boost to the smart ship project on March 16. This private council has been commissioned to review the Canadian defence policy in the new context of international relations. Its membership includes former politicians of various affiliations, some fairly well known like Donald MacDonald and Gérard Pelletier, both former Liberal ministers; former military officers like Admiral Robert H. Falls; and business people and economists of renown.

The Canada 21 Council recommends that the Canadian government cancel the planned purchase of three submarines and acquire instead three multi-purpose supply ships, or smart ships, to provide operational support to peacekeeping missions. These three ships proposed by the council would replace the AOR combat support ships, such as the Protecteur , which are nearing the end of their operational lives, and which are not multi-purpose and cannot transport vehicles nor launch small landing crafts or amphibious vehicles in great numbers. As a matter of fact, they are only used to supply navy ships at sea.

Moreover, the smart ship can be used for a whole range of logistic operations. It can be used as an aircraft-carrier and hold up to 24 transport helicopters and 600 troops for airborne operations. Such a capacity could be a real asset if, for example, Canadians or citizens of allied countries had to be evacuated on a moment's notice, as in Rwanda, for example.

At the present time, to transport the equipment of Canadian troops, we have to charter private ships, mainly foreign. And then it takes several weeks before our soldiers receive their heavy equipment and their combat vehicles. One smart ship could transport one battalion group with its equipment, armoured vehicles, tanks and artillery. It would have been very useful for our mission in the former Yugoslavia.

In the event of a natural disaster, the smart ship can be quickly transformed to carry a whole range of vehicles such as trucks and ambulances, building materials and equipment, water tanks, fuel tanks and bridgelayers.

Close to 200 containers holding food, clothing, tents and other supplies can be stored on the main deck. This feature would have been appreciated especially in Somalia and in Florida, after hurricane Andrew.

Moreover this ship can carry chemical dispersants, and devices to contain and absorb spills. It can accommodate a clean-up team of 600 and be used as a command, control and communications ship.

Recently, a director of MIL Davie told me that the Department of National Defence has enough information available to it this spring to convey its decision right away to government officials. A favourable decision would allow MIL Engineering System to proceed to build a model of the ship at a cost of only $6.5 million.

Time is of the essence here. It is highly probable that most of MIL Davie's competitors are now familiar with the smart ship concept. Rumours are swirling that other shipyards have taken up the idea and intend to have their own engineers take a look at the concept.

If we delay too long, someone will steal our idea, possibly foreign competitors who already possess the necessary technology to apply the concept developed by MIL Davie.

The smart ship project is the most important transitional contract, one which would allow MIL Davie to proceed with conversion. By building the smart ship, MIL Davie hopes to develop new production modes and to change the way shipyards in Canada operate.

The challenge ahead is a formidable one. The company hopes to be able to build this ship in 390,000 hours, instead of the normal 800,000 hours. The Danes have accomplished this feat and if a strategic agreement can be reached with them, MIL Davie could rely on help from a shipyard in Denmark, which currently ranks third in the world in this field.

MIL Davie would need new, more powerful cranes and its staff would have to be trained in computer-assisted design and production techniques and in the use of new procedures such as plasma welding.

The Quebec Minister of Industry and Trade has expressed his concern about the federal government's commitment to defence industry conversion and with good reason. However, the Quebec government is not alone in supporting conversion. The Conseil du patronat du Québec , not known as an advocate of sovereignty, also supports this process.

I would like to call to mind the resolution passed by Rendez-vous économique 1993 , an economic summit meeting organized by the Conseil du patronat in Montreal. This resolution called on the federal government to extend adequate financial support for conversion to all industries that depend on military contracts. This financial support would continue for however long it took to complete the adaptation, conversion and diversification process.

In recommendation 1B, the Conseil du patronat du Québec also called on the federal government to award a $6.5 million design contract and three-year $200 million construction contract for the smart ship prototype. This would also be the prototype for a series of similar ships for the international market, a highly promising and expanding market.

With the expertise acquired in building the smart ship, MIL Davie wants to enter the international market for commercial ships between 40,000 and 70,000 tons. It is estimated that half the current fleet of oil tankers and bulk carriers should be scrapped and replaced in the next few years. Moreover, the rise in global demand due to the increase in international trade is estimated at 2.5 per cent until 2005.

Under these conditions, average demand should grow by 30 per cent from an average of 780 ships per year in the last ten years to an annual average of 1,025 ships until 2005, with peaks of 1,500 ships weighing over 2,000 tons. Since the average ship lasts 23 years and almost half the fleet is 15 years old or more, large orders are to be expected.

When they were in opposition, some influential members of this government's Cabinet, like the current Minister of Human Resources Development who was the critic on External Affairs, clearly stated that the Defence Industry Productivity Program had to be redesigned for the conversion of defence industries.

In a March 26, 1993 press release from the Office of the Leader of the Opposition, the current Minister of Human Resources Development noted: "Canada has a golden opportunity to stake out new market niches for the Canadian defence industry in peacekeeping and environmental technologies". We can only conclude that the Liberal government is suffering from amnesia today.

On April 19, I asked the Parliamentary Secretary to Minister of Defence whether the contract for building the smart ship would soon be awarded to MIL Davie. He told me it would not happen before 1995. This answer shows this government's lack of concern for the tens of thousands of defence workers whose jobs are threatened. At MIL Davie alone, excluding companies like CAE, Canadian Marconi, Oerlikon, Paramax and many others, nearly 2,800 jobs would be lost. The shipyard would probably have to close for an indeterminate period of time or even permanently. Another 8,000 indirect jobs would vanish in the Quebec City region. So it is very important.

While I have a few minutes left, so you will not feel that MIL Davie and Quebec complain or demand too much, I will quote some figures concerning contracts awarded since 1986 to various shipyards in Canada. The ferry Smallwood , $130 million to MIL Davie; destroyer modernization, $286 million to MIL Davie but $1.2 billion to Toronto-based Linton; frigate construction, $400 million to MIL Davie but $6.2 billion to Saint John Shipbuilding; defence contract adjustments, only $263 million to MIL Davie; the Pictou ferry, $50 million to the Pictou shipyard; minesweepers, $450 million to Fenco Halifax.

In conclusion, I would like to come back to the press release of March 26. Just before, I would like to say that I did not complete the list, but in all, $13 billion was invested in the marine sector, of which the MIL Davie shipyard got only $1.094 billion, or about one thirteenth.

I come back to the press release in which the Leader of the Opposition, who is now the Prime Minister, said this: "Canadians deserve a government that can lead the way, a government that brings new ideas and new strategies, a government that helps them adjust to change. Our defence conversion policy is an example of how a Liberal government would meet the needs of Canadians in years to come".

I have only this to say to this government in conclusion: "Prove to the workers of MIL Davie and the employees of the 649 other defence companies in Quebec that what you said, Mr. Prime Minister, when you were in opposition was not just empty words".

[Francis Leblanc, Liberal, Cape Breton Highlands—Canso, NS]

Madam Speaker, I would like to address a brief comment to my colleague from Lévis. I know that he is familiar with the employer, MIL Davie, which is located in his riding. As the Minister of Industry and the Minister of Transport have already indicated in this House, the government is perfectly aware of the important role this company plays in the economy of the Quebec City region. The government has also received MIL Davie's

business plan, which has first to be approved by the government of Quebec as principal stockholder.

Why does his party insist on raising this issue today, when the hon. member and his colleagues know the government has the matter well in hand, is working on it, advancing it? The hon. member and his colleagues know full well that we are looking into the problem of industrial technology transfer for the benefit of employers in Quebec and elsewhere in Canada.

[Antoine Dubé, Bloc, Lévis, QC]

Mr. Speaker, I thank the hon. member, whom I know well given that he chairs the parliamentary committee on Human Resources, of which I am a member myself, for his question. What is the cause of my concern? Simply the facts. We heard that a business plan was tabled recently. I was not only concerned, I was also disappointed to hear the Minister of Transport mention just recently that he was waiting for a business plan. He even said so in a letter to the City of Lévis, the City Council of Lévis.

Last August, a few weeks before the election was called, MIL Davie officials presented this famous business plan to the present chief of staff of the present Prime Minister, who was a candidate in Quebec City, and to all the Liberal candidates in the Quebec City region. Considering that the Prime Minister's chief of staff already knew about this business plan then, one cannot come and claim eight or ten months later never having heard of this plan.

Like many other people of Lévis who took part in the election campaign and all the workers, I can remember the Prime Minister visiting Lévis days before the election and saying he agreed with the business plan. The fact of the matter is that this plan he had been shown minutes earlier provided for two transition contracts, that is to say the Magdalen Islands ferry and the smart ship, as well as for some infrastructure assistance. All this has been known since last August.

Now, the government was elected a few months ago. It is understandable that it would take until January to settle in, but I will remind the hon. member that, when I rose in my place on January 18 to inquired about the ferry to the minister, his answer was: "Soon". Later we learned that for him, "soon" means two months. If I am not mistaken, two months from January 18, that would bring us to March 18. We are now in May. Two months may not seem like a very long time, but for workers loosing their jobs a hundred at a time every week-there were 3,000 of them this time last year, but at this rate there may soon be only 400 or 500 of them remaining; that is 2,500 jobs lost, and it will be 2,800 by the time December comes around-to hear the government answer it is looking into the matter is becoming unacceptable. Hundreds of workers are waiting for an answer.

That kind of situation worries me. That is the reason why I wanted, as the member for Lévis, to take part in this debate on the conversion of military industries to civilian production. I rise not only for my own riding, but also because for the whole Quebec City region the MIL Davie shipyard accounts for a total payroll of $150 million. If you count all indirect jobs created by sub-contracting, it represents for the 10 ridings of the Quebec City region an economic activity of $600 million.

As you know, that type of venture yields secondary benefits. Therefore it is extremely important. Besides, that issue has been recognized by the Conseil du patronat and by all economic organizations of Quebec as a top priority. The present Liberal government knew that when they were in opposition and during the election campaign. And they still know it today. We are now in the month of May 1994 and no answer has come yet.

Meanwhile, the rumour has it that the contract might be given by tender and that there would be other shipyards, in the region of the hon. member by the way. And there is the smart ship-a concept that belongs to and was developed by the MIL Davie. At the beginning, that original idea was presented in a business plan in private but today it is becoming more and more public. But as months go by nothing happens.

I am not the only one to be worried. The Minister of Industry and Commerce of Quebec, Mr. Tremblay-I guess I can call him by his title since he is not here-is also getting impatient. A few weeks ago, a coalition of all federal and provincial political parties, including the Quebec City members of the federal Liberal Party, supported the position of the MIL Davie. Despite that, there was no answer. This situation is indecent.

I am once more urging the government-and it may be the last time-to respond at last and to stop penalizing the region of Quebec City because it has not voted for the Liberal Party. If that is the reason, it is dangerous. I have warned the government that there will soon be, in a few weeks, in a few months, a provincial election that could have major consequences for the future of this country.

[Barry Campbell, Liberal, St. Paul's, ON]

Madam Speaker, I am pleased to participate in this debate. Let me reinforce the comments made earlier today by the Minister of Industry with reference to defence conversion.

The plan recognized that the time had come to help defence industries make the transition from high tech military production to high tech civilian production.

We are determined to reach that objective and we have already accomplished significant progress towards the development of an effective strategy.

Our defence conversion program has three major components: First, defining Canada's defence policy; second, rationalizing the military infrastructure; third, rationalizing the defence industrial base.

Later today in this debate my colleagues will describe the government's policy and program for expediting the first two components of our overall strategy. We will also discuss the nature and direction for defence conversion of the industrial base.

Conversion of defence production can be described as industrial adjustment with an added element of national security. To understand the scale and scope of the challenge which Canada faces one must appreciate the evolution of Canada's aerospace and defence industry.

We have followed a path quite different from that of almost every other nation in the western world. We have long maintained a relatively small domestic military procurement budget. In order to sustain themselves and indeed to grow Canadian defence firms pursue two avenues. The first has been to focus on export markets. The second has been diversification.

As I said the Canadian aerospace and defence industry pursued export markets as suppliers of components for the manufacturers of major military systems such as radar systems to detect low flying aircraft and military flight simulators. Their clients were generally not governments but defence companies world wide. Canadian manufacturers have designed, developed and sold world-class high tech products aimed at buyers of sophisticated, specialized equipment and our industries have produced these special components at competitive prices.

By contrast most of the western world's defence firms have relied on large domestic military sales. They have produced entire systems for a closed and essentially less competitive market. They have had little export focus and have sold almost exclusively to their national governments.

In many countries domestic military budgets were cut back severely at the end of the cold war. The shifts in geopolitical power required nations to re-evaluate their defence role.

Suppliers in other countries which focused on a domestic market for major weapon systems found themselves suddenly without a traditional market. Add to this equation the fiscal and budgetary problems facing all western governments and the result has been what might be described as a double whammy of radically different requirements and a rapidly shrinking market.

The inevitable results: Significant downsizing, rationalization and large layoffs, what we all too readily identify with defence conversion.

But here in Canada, defence industries are faced with a very different reality. Most have concentrated on export sales. The size of world markets, as well as the number of world suppliers, are diminishing.

The reduction of military spending at the international level could put out of business some competitors of Canadian companies and thereby create new market opportunities.

Canadian industry reliance on Canadian government procurement is already small by world standards and it is declining. In aerospace for example, 30 years ago defence products comprised 65 per cent of total sales. Today defence sales are less than 30 per cent of sales and projections indicate that by 1997 the percentage will fall to 25 per cent.

These figures indicate that in Canada defence conversion has been going on as a gradual process for almost 30 years.

The sudden and precipitous changes taking place in the United States and Europe in the defence industries will not occur in Canada to the same degree. For example, between 1991 and 1993 in the United States the aerospace and defence sectors lost almost 300,000 jobs. That is 10 per cent of their workforce. In Europe the experience has been similar. Over the same period, 150,000 people have lost their jobs in defence and in aerospace.

In Canada, in marked contrast, we have lost 5,000 jobs in this sector and forecasts indicate they will be regained by 1998.

Our successful Canadian manufacturers aim at small niche markets around the world. The export focus of Canadian manufacturers of subsystems and components has cushioned our industry from the worst of the fallout occurring in the United States and in Europe.

As I stated earlier, the other major factor in our success in avoiding severe contractions has been diversification.

A large number of defence industries have developed technology which can be sold for both military and commercial purposes. These companies have gained the necessary skills to successfully manage operations producing both military and commercial products.

The Canadian defence industry is in a good position to make the necessary transition from a high tech military production to a high tech civilian production, as illustrated by the changes which have occurred in recent years.

Canada's defence industry comprises more than 500 firms. The majority of them have already begun the diversification process both in commercial and military production and in domestic and export sales. On average 60 per cent of sales by Canadian defence firms are for the commercial market and only 40 per cent for the defence market. Many of these firms also have strong export sales. More than 80 per cent of all commercial sales are to export markets and 35 per cent of defence sales are abroad.

The only notable exceptions are the large shipbuilders in the Atlantic provinces and in Quebec and the munitions manufacturers in Quebec. In recent years they have depended almost entirely on defence production.

In United States, defence conversion has been quite different. The U.S. defence industry has been a domestic market nearly 40 times that of Canada. It produces large scale, fully integrated systems. These include, for example, military aircraft, submarines and sophisticated weapons systems.

Until now, a large number of American defence industries have been almost totally dependent on domestic military sales. These industries do not follow the Canadian tradition of either diversifying, being geared to operations, or relying on an important volume of commercial sales.

An American solution to a typically Canadian situation is a highly unlikely solution.

As I mentioned earlier, Canada's solution is threefold: first, a defence policy review which will of necessity take time to complete; second, the rationalization of bases and defence infrastructure, both of which elements will be addressed by the minister of defence; third, the rationalization of Canada's defence industry base, a complex question but one on which progress is being made.

In the Liberal plan for Canada "Creating Opportunity" the government made a commitment to expand the mandate of the defence industry productivity program to assist in the conversion and diversification of the industry.

I am pleased to say that earlier this year the government followed through with a provision in the budget to redesign, DIPP for 1996-97. This will help industry convert from defence to high technology civilian production. This is the first step in redirecting existing government programs and initiatives. We are also proceeding on other fronts and will be announcing further initiatives soon.

Some elements of the government's support program, however, must await the report of the defence policy review and therefore will not be fully developed for some time.

This type of measured response will be problematic if the Canadian context for the conversion of military industries is similar to that of Europe or the United States. As I pointed out, the situation is very different in Canada. Generally speaking, Canadian companies are in the unique position of being much less vulnerable to military world market slowdowns than their foreign competitors.

This is not to say that Canada does not face challenges in expediting a smooth transition. Rather the defence industry and therefore some Canadian workers face a unique situation.

Canadian companies are generally well positioned in international markets. They have strong order books. They have good employment prospects. They have solid, diversified international export markets for both their commercial and defence product lines.

There are some exception to the quite strong positions enjoyed by many companies in Canada. These exceptions include munitions and shipbuilding where a number of specific problems generally beyond the scope of a defence conversion program continue to cause concern. We will address these problems through a combination of defence conversion programs and other programs that can help provide solutions.

I have outlined the unique challenge facing us in the matter of conversion of defence industries. In some, while the defence conversion problem in Canada is similar in scope to that in other parts of the western world, it is not by any means of the same scale.

Sales and employment prospects vary by company: some positive, some neutral, sadly some negative. Specific problems affecting a particular firm require specific solutions. We do not need to embark on sweeping programs offering sweeping and expensive solutions. Programs that are carefully targeted require careful preparation.

Targeted programs take time to develop but in my view are the most effective in the medium term. It would be naive to assume that the defence conversion problem in Canada can be solved overnight.

The solution which the government is in the process of developing will be responsive to market forces, fiscally responsible, properly directed and effective.

As specific elements of the program take shape in the near future, the government will be providing information on the scope of its provisions.

The member who brought forth the motion also brought to the attention of the House a most important question. As I pointed out, companies in the Canadian defence industry have long diversified their products and their markets. They have been carrying out, some of them for as long as 30 years, what the defence industry in other countries is just beginning to try, that is to produce other products and to market in other markets.

The government is determined to continue on the path to success with policies and programs which meet the needs of all the Canadians who are part of the industry.

Those companies in sectors where the challenges have been more demanding and more difficult are to receive the attention and assistance of this government which understands the problems and intends to contribute to the solutions.

[Darrel Stinson, Reform, Okanagan—Shuswap, BC]

Madam Speaker, I rise today to oppose the motion put forward by the Bloc. However I want to say at the start that I am personally concerned for the jobs of some 137,915 persons who the 1986 census showed were employed by the defence services sector. Their employment is threatened by the Liberal strategy of slashing defence spending before it has completed a full study of Canada's defence needs.

The Reform Party caucus believes that announced cuts of $7 billion to the Department of National Defence over the next five years prejudged and pre-empted the outcome of the defence review and should not have been made until Parliament, together with the Canadian people, had determined the mission of the Canadian Armed Forces for the 21st century.

Once the mission is determined we can make careful and well planned decisions on the military's main functions and organizational structure and on Canada's long term needs for hardware, bases and personnel.

The cuts announced by the government are already having impact on the defence industry. As I have said I strongly object to the government's action of cutting defence first and asking questions later.

I strongly oppose any suggestion that the government should fund the changeover of defence companies to civilian production. I oppose using Canadian tax dollars for this purpose for several reasons, not least of which is that half these firms are foreign owned.

I would also oppose using Canadian tax dollars for this purpose because as a Reformer I do not think on general principle we achieve anything good by providing grants to private industry. On the contrary, it goes against the grain that taxpayers should on the one hand be trying to operate their own companies while on the other hand competing with a company their own tax dollars may be propping up.

For instance, over recent years it has been a tactic of the old line political parties to spend some $160 million per year through the defence industry productivity program, which is almost like a regional development program, to dole out tax dollars to the military industry concentrated mainly in southern Ontario and southern Quebec. Such grants should be quickly phased out.

To understand this particular motion we must first define what we are talking about when we discuss Canada's defence industry. I note that figures being quoted in the House today have varied greatly so it is hard to know whose figures are correct.

Despite the discrepancy in figures we need to try to get to a general understanding of what the defence industry produces and how it compares on the world scale. In analysing world-wide arms production, nations are generally divided into three tiers or levels of production. The first includes nations like the U.S., which basically produces and sells anything it or its allies need. The first tier accounts for some 60 per cent of the arms transferred in the past decade.

Canada is in tier two with such countries as France, Italy and Spain, which together account for some 25 per cent of annual global arms exports. These countries do not have a big enough home market to benefit from economies of scale and must depend on exports to be competitive. Canada exports in large measure to the United States with which we jointly produce many weapons.

There is a third tier of wild card arms producers like China, India and Israel that can produce large amounts of less sophisticated, functional but cheap weapons on short notice. Among global arms producers Canada ranks about eighth, producing some $3 billion worth of military goods per year or about one per cent of the world total. Regarding more conventional weapons, according to the Stockholm International Peace Research Institute and for the period 1986 to 1990, Canada was the 14th largest exporter of major conventional weapons in the world.

Concentrated in southern Ontario and Quebec, the Canadian defence industry involves about 1,000 companies with special experience in what is called the new knowledge based industry, specifically aerospace electronics and communications.

Robert Gillespie, former assistant deputy minister in the Department of National Defence, gave the following description of the defence industry:

Our industry is composed of only a few large companies with sales in excess of $100 million per year. The vast majority of firms are in fact quite small and very few of those produce purely military products. The industry is over 50 per cent foreign owned with U.S. companies dominating the group and is very heavily dependent on the export market.

There has been great fluctuation in Canadian military exports over the period 1959 to 1991. For example, 1974 and 1975 were low years, each at $280 million. In 1985 the industry hit its recent peak at $1.9 billion in exports, with a similar amount in 1991 during the gulf war build-up and actual combat.

Research was based on three factors: first, public domain listings of unclassified prime military contracts awarded by the Department of National Defence; second, military export contracts arranged by the Canadian Commercial Corporation on behalf of foreign governments, primarily the United States; third, Pentagon contracts placed directly with Canadian companies, together totalling about 80 per cent of all Canadian military production.

According to research covering those three factors the top six Canadian military prime contractors are: SNC Industrial Technologies Incorporated and Bombardier, both of Montreal; Computing Devices Company of Ottawa; Standard Aero Limited of Winnipeg; Allied Signal Aerospace of Rexdale, Ontario; and Bristol Aerospace of Winnipeg. All six companies had total value reported prime contracts during fiscal year 1990-91 in excess of $100 million. For three of the six, their estimated or reported military sales were less than half of total sales.

Of the top 20 Canadian military prime contractors, accounting for some 60 per cent of reported military prime contracts in Canada, according to the same three factors which I listed earlier, 11 companies of the top 20 had estimated or reported military sales of less than half of total sales. Incidentally eight of those top 20 companies are located in Quebec. I believe we can see the source of the Bloc's concern with this issue.

What kinds of things do these companies produce? Although Canada does rank 14th in world-wide production of conventional weapons, the Library of Parliament has provided me with a list of some 180 companies engaged in producing defence electronics and avionics. These folks produce a whole lot of things that most people cannot even pronounce, let alone manufacture. Many of them are part of the new knowledge based economy, their employers being well educated, not to say out and out brilliant.

Because of the brilliance of these people and the highly specialized nature of what they produce, I seriously doubt that a notoriously inefficient federal government could do anything really helpful for these industries and would only end up throwing tax dollars at them, an approach which I strongly oppose.

Moreover, as I have shown, a large number of defence industry companies have less than 50 per cent of their production going into military purposes. Hopefully they can convert a greater percentage of their operations to non-military purposes. Because of the talents of the employees of these particular high tech companies, it would be a great loss to Canada if the employers were to shut down and the employees moved to the United States. Remember, we are talking about an industry that is already half foreign owned.

However, I am certain the sales and marketing offices of the bigger companies and probably the presidents of the smaller companies have long since smelled the coffee in so far as the end of the cold war is concerned. Certainly they have been hard at work tracing and developing new markets which could increase their non-military sales.

Even the average man or woman on the street is well aware of the remarkable growth in the knowledge based industry for such things as fax machines, personal computers and the transportation industry. Given the great land mass of Canada, we truly have become a world leader in communications, a technology needed all over the world for everything from moving information, people and goods to distributing TV signals or predicting the weather. I have great faith that Canada's technological leadership in this sector of the world economy cannot only be maintained but will grow steadily.

In conclusion it is high time for the government to smarten up its own overall defence planning. I also believe one of the worst things any of us could do to a given industry would be to encourage the government to increase its involvement and further upset the functioning of a free market economy.

[Francis Leblanc, Liberal, Cape Breton Highlands—Canso, NS]

Madam Speaker, I listened with some interest to the remarks on this motion by the hon. member for Okanagan-Shuswap.

I found it somewhat strange that he would mention a concern on behalf of his party for the defence cuts which the government introduced in the budget. At the same time as saying that these cuts were premature he argued that we should not support the conversion of our defence industry to civilian purposes and to help in the redirection of that technology into areas of greater demand.

Perhaps the member could elaborate on what seems to be a paradoxical position from his party's perspective. Why is he opposing cuts? Is that not what is party has been calling for? Why is he opposing economies which have been made with great difficulty and after much soul searching by this government? What other cuts is he proposing in order to keep the defence budget higher than this government has recommended?

[Darrel Stinson, Reform, Okanagan—Shuswap, BC]

Madam Speaker, we have always stated that there have to be cuts in military spending, but we have also stated that the studies should be done before and not after the cuts. It is rather foolish to make the cuts and then say they have to put them back in place again. The studies should be done before the cuts are made. That is what we are saying on that level.

As far as subsidizing an industry that was subsidized coming in is concerned, remember this industry was subsidized coming in and now government wants to subsidize it going out.

If the government is looking at subsidization levels what becomes more important here? Private enterprise tries to compete. It pays taxes but those tax dollars are being used in many cases to form a company that it has to compete against. It is pretty tough when a company is not being subsidized to compete against a subsidized company. They do not have the same worries, many times not even the same responsibilities.

I would like to raise another fact when talking about subsidization. We have to have priorities. Can anyone in this House answer this question: Why are we subsidizing companies in direct competition with companies in private enterprise when we are shutting down hospitals? This absolutely makes no sense to me, nor to anybody else in the House, but I am willing to listen.

[John Harvard, Liberal, Winnipeg—St. James, MB]

Madam Speaker, I am very pleased to take part in this debate because major aerospace firms and Canadian Forces Base Winnipeg are located in my riding of Winnipeg St. James.

In the red book this government identified the world-wide restructuring of the defence industry as a major issue for maintaining high technology jobs in Canada.

In speaking to the government's commitment to defence conversion, I must first be clear that it is not a passing fancy or for that matter a platform for simplistic grandstanding. The global market for the defence industry is already in the process of restructuring. This government will encourage a sound and structured response that will hold up for the long run, that will meet the needs of industry and the highly skilled workers in that industry.

The need to change is being driven by global markets for Canada's defence industry is particularly vulnerable to change. This cannot be otherwise when 50 per cent of the Canadian defence industry is foreign owned, mostly by U.S. companies. That has already been pointed out in this debate. The majority of Canadian defence firms supply subsystems and components and carry out subcontracted manufacturing for prime U.S. contractors. Indeed, most Canadian exports go to the United States.

The global giants, the American prime contractors, have been rationalizing their organizations and just as important for Canadian suppliers, their manufacturing processes. They are starting to drive this process down their supply chain, down to the suppliers of subsystems and components where Canada has developed its edge.

Furthermore the giants are diversifying into commercially advanced technology markets, squeezing our smaller and more diversified companies. The aerospace and advanced electronics industries in Canada could be vulnerable and they must be ready to adapt. This government is preparing to assist positively and in concert with industry.

I can assure members of this House and in particular the member for Nanaimo-Cowichan who suggested this morning that the government should talk to the industry leaders in the west that this government has been doing just that.

On March 3 of this year the hon. Minister of Western Economic Diversification, the parliamentary secretary for finance and I all met with the chief executive officers of 10 leading western aerospace and defence companies. We discussed the sector's views on defence conversion in the context of science and technology policy and the new long term space plan.

This broad focus is part of the western economic diversification's new direction to work with industry and the provinces through strategic initiatives, that is to deal with structural economic issues at their root and on a co-operative basis rather than treating the symptoms as they appear in individual companies.

The March meeting was the first of what will be a series of meetings on the subject and which will include an expanded list of companies right across the west. The next meeting will be later this spring at which time the private sector will present a broad strategy along with recommendations for specific activities required to facilitate defence conversion in western Canada.

We are listening to the leaders of industry and working closely with them as part of a broad concern for the health of the aerospace and electronics industries in the west. For instance we are fully sensitive to the immediate impact that can be felt from the defence cuts. We have worked closely with industry to ensure a smooth transition to new requirements.

This has been done with specific companies such as Bristol Aerospace which is located in my riding. We have also worked with Bristol and other companies in the west to help as they pursue opportunities in international markets.

All of this is part of the national issue of restructuring the Canadian defence industry. It is done to safeguard the positive contributions the industry has made and continues to make to Canada's economic well-being, while building something viable and sustainable for the long term future without side-swiping in the process the advanced technology companies that have already diversified and have already taken action for the future.

The blueprint for defence conversion contained in the red book sets out a program to pursue strategic and fiscally sound alternatives for high tech job creation. The program is to focus on alternative military requirements, dual use products and sustaining research and development.

Two major objectives were set, namely conversion of military bases to alternative uses, and economic conversion and diversification of the defence industry toward alternative military and civilian goods, including the development of peacekeeping technologies.

This government has already started down the defence conversion road. Those base closures that were long overdue have been announced as part of the recent budget. An example of the concrete conversion action being taken as a result of the base closures is the activity surrounding Defence Research Establishment Pacific in Victoria, sometimes referred to as DREP.

Defence Research Establishment Pacific is to close on March 31, 1995 as part of the reduction of defence infrastructure. However, there is tremendous potential here to build upon the critical mass of ocean industry and science which is resident in Victoria and centred at DREP.

For example, there are many companies both large, such as MacDonald Dettwiler and Associates, and small, such as Barrodale Computing with just 10 employees, which have transformed the science contracts they have undertaken with DREP in the past into major commercial opportunities.

To maintain this flow from research into a commercial business, western economic diversification in the next few days will commission a study of the opportunities open to the ocean industry based upon the critical mass existing in both the private and public sectors in Victoria. Science does exist at Defence Research Establishment Pacific. Highly competitive, high technology companies, world-class firms are already in place.

The Department of National Defence wishes to see the technology transferred to industry and the academic community, such as the University of Victoria, and is anxious to build further momentum. What better ingredients could be found for converting a defence establishment into a sound commercial enterprise than this one which is focused upon a growing, vital ocean industry?

Our defence conversion blueprint also set out the objective of diversification toward alternative military and civilian goods. This too is already getting under way with a number of alternate use concepts being actively examined by industry itself and government. This goes beyond program and policy responses on a broad sectoral front to the specific activities of individual companies which are right now pursuing the opportunities that are presenting themselves.

An example of government support to a winning defence conversion strategy is EDO Canada Ltd. of Calgary. This company has been manufacturing fuel tanks for the CF-18 fighter jets using composite materials.

In January of this year it won its first major commercial contract by which it will supply lightweight natural gas fuel tanks for General Motors 1994 Chevrolet Caprice and Corsica models. This contract will be worth $2.5 million to $5 million annually. To quote company president Doug Moore from a Calgary Herald article of January 12, 1994: ``The contract is the result of the commercialization of our aerospace technology''. It is also the result of this government's application of the industrial and regional benefits policy to defence conversion.

General Motors as part of its contractual commitment to the federal government for the sale of light armoured vehicles has agreed to undertake millions of dollars of industrial benefits in Canada.

The agreement of the government to allow IRB credit for GM or to GM for the EDO sale helped to cement for EDO a strategic alliance that it had been working on for some time. This is part of an ongoing government program with continuing discussions which could lead to a similar kind of contract for another growing western high technology manufacturer. Again IRB credits from the light armoured vehicle purchase could be an incentive to solidify the deal.

I want to conclude by saying that this government knows what defence conversion does not mean. It is not moving defence companies into mature commercial markets. It is not intended to be done in isolation from other economic activity and it cannot happen instantly. It most certainly cannot mean wiping out the existing defence industrial base.

I have described what defence conversion is or is not. This government has an equally clear understanding of what it should be and can be with a carefully planned program. Defence conversion can help defence dependent companies reduce their dependency on limited products and customers. It can be a co-operative effort between industry, labour and government to foster strategic alliances for pursuing international markets.

It can be an opportunity to work with our counterparts in the U.S. especially in fostering the development of dual use technologies. I assure members that it will broaden the industrial base for overall economic growth.

[Eugène Bellemare, Liberal, Carleton—Gloucester, ON]

Madam Speaker, the Bloc Quebecois has introduced a motion saying:

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

I congratulate the hon. members from the Bloc Quebecois for thinking about jobs. I hope they will raise, in Canada and in Quebec, concern for Canadian jobs. When I refer to Canada and Canadians, I mean all provinces, including Quebec. Their objective of separation is certainly not the ideal recipe for job creation. We need to belong to a strong community, a strong family, large and co-operative enough to develop its own industries.

We were informed today of the policies and programs which would guarantee the success of the conversion of defence equipment manufacturers into companies active on international markets. However, it is not simply a question of policies and programs. The main factors are the entrepreneurial spirit, the measures taken and the results achieved.

There are many examples of success. One of them is Securiplex Technologies of Montreal. This is the story of a successful conversion by a company which was well-known for its defence equipment. Recently, they had the good fortune of getting a $26 million contract from Bombardier BN, in Bruges, Belgium, for the production of a control system.

This system will electronically detect and extinguish fires in the 254 shuttle-cars that will be used in the Chunnel.

It is based on the system designed by Securiplex for damage control on warships and presently installed on 12 new Canadian frigates and ships of the British Royal Navy.

This system uses microprocessors to monitor and control the sensors and fire-extinction devices, as well as other security systems. It was developed under a procurement contract negotiated with the Government of Canada through the Defence Industry Productivity Program.

Since the completion of this project, and with the help of Industry Canada, Securiplex marketing has been targeting commercial companies. This firm is actively pursuing the industrial security market, especially in North America, Europe and the Middle East.

Among its achievements are the contracts it won to supply sophisticated fire detection and extinction systems for the headquarters of the European Economic Community in Brussels, the Alba power plant in Bahrain, in the Middle East, and the Hibernia drilling platform off Newfoundland.

ATS is a rather impressing example. It was created on the Montreal South shore in 1979. Originally, it was a small company specialised in ammunition testing. Aware of the limitations of this activity, it sought to put its considerable expertise to good use by creating software for new markets.

Today, this company has nearly entirely changed its field of activity. Its future lies now in completely new opportunities it created, namely air control tower and room simulators. Training air controllers is of the utmost importance, and yet nothing has been done to update training methods.

Presently, ATS is executing major contracts awarded by international customers. DIPP played a crucial role in the development of this firm's technological capacity. ATS was awarded its last contract in January 1992, and since then it has not asked for another loan.

The common denominator to these success stories is the fact that these manufacturers of defence equipment were able to adapt to the new reality and meet the demand of a new market. It is also our government's commitment to help these industries diversify. The pessimistic outlook of some concerning the future of our aerospace and defence industries does not reflect reality. As a whole, the news regarding defence industries is rather good.

For example, many members know that one of the leading Canadian aerospace and defence electronics firms is CAE Electronics Limited of Montreal. This company is a world-class operation in every respect. It is the main supplier of commercial aircraft flight simulators and records important sales to similar defence markets.

CAE Electronics employs more than 3,000 people, with scientists, engineers and technicians accounting for half of the workforce. Annual sales of nearly $350 million are made by the Montreal offices and the figure is expected to increase next year. The company has been experiencing tremendous growth and expansion for the past three decades. Annual sales now in excess of one billion derive primarily from exports.

The company is now busy expanding its facilities in order to welcome clients from around the world who will attend courses focusing on some of the most advanced technologies in the world, from aircrafts to ships. Several years ago, CAE Electronics acquired a major U.S. competitor called Link. This company is now truly world class with a diverse client base. Nevertheless, it continues to manage the electronics side of the business from its offices in Montreal.

However, CAE Electronics still needs the support of the government. This is especially true in the case of the project which it is carrying out with the American National Aerospace Administration and which involves exploring the application of virtual reality in the cockpit. Without the support of the Defence Industry Productivity Program, projects like this which are vitally important to the future of CAE Electronics would be impossible to carry out.

That is why the federal government has indicated in the red book it was determined to maintain this important program. CAE also takes an active part in other defence conversion projects, some of which in sectors far removed from traditional defence activities. It is currently involved in a marketing project for an artificial heart designed at the Heart Institute in Ottawa.

However, CAE still considers defence as an important part of the corporate strategy in its business plans. Defence contracts do account for the best part of its commercial activity and offer unique opportunities to explore the limits of technology applied to training and simulation.

The federal government plans on continuing its partnership with CAE as well as with a number of other innovative, creative and flourishing companies. The Canadian taxpayers' investments in companies such as this one have never been more important. CAE and the Montreal area can expect to prosper thanks to these investments. CAE has undertaken to design, develop and market new products and new services to meet the needs of the population in the 21st century.

There are many more success stories in the defence industry, stories of companies that have expanded their lines of activity and prospered by identifying a need and meeting it commercially.

Defence conversion is nothing new for many Canadian companies, and their success is envied by their competitors.

[The Acting Speaker (Mrs. Maheu)]

It is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: The hon. member for Manicouagan, Labour Relations; the hon. member for Rosedale, Rwanda; the hon. member for Laurentides, Anti-flu Vaccines; the hon. member for Lévis, the Olympic Games of 2002.

[Jean H. Leroux, Bloc, Shefford, QC]

Madam Speaker, it is always for me an honour, a pleasure and a privilege to speak in this House on behalf of the people of Shefford who elected me.

As you know, Madam Speaker, my region of Granby has been hit hard by the unemployment problem plaguing the country. In this speech, I want to express my support for the defence industry conversion program. I strongly support the motion of my colleague from Hochelaga-Maisonneuve, which condemns the government for its inaction in this vital sector with the potential to create high-tech jobs.

How can the government sit on its hands on such an important issue after making firm commitments in this regard in the last election campaign? As you know and since they talk about it all the time, these commitments can be found in the Liberal Party's red book and in a March 26, 1993 press release.

What is now left of these moral commitments? To impress upon the government the meaning of the words "active", "alert" and "enterprising", I will quote the motion of my colleague from Hochelaga-Maisonneuve:

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

I think this motion clearly expresses the goal we want to achieve, namely to convert defence industries to civilian production and create high-tech jobs. In the light of this information, I remind the government that it must honour its commitments and quickly develop a genuine strategy for the conversion of defence industries.

The main reason underlying my position is that, with the collapse of the Soviet Union and the end of the cold war, spending on defence industries is no longer based on the initial strategic foundation. Thus, as a member of the Joint Committee on Defence, I still maintain that the amount spent on military defence is quite high and we need a moratorium to stop the waste of public funds. However, in making cuts in military spending, we must act fairly to the provinces and the various components of the defence industry.

Although the EH-101 helicopter project promised economic benefits for Quebec, we in the Bloc Quebecois were opposed to this program, but we insisted on the need to ensure economic and industrial benefits for Quebec through a project like the high-speed train, and these benefits are not yet forthcoming.

In fact, the government is dragging its feet on several issues that are important for economic recovery. They often quote the red book but they do very, very little. Nevertheless, the companies that were penalized when this helicopter contract was cancelled urgently need government support to convert their defence activities. Since the new world order began, military industries have had a rough time, as everyone here will agree.

The arms production market, estimated at over $450 billion worldwide, has dropped significantly since 1987, by almost 10 per cent. International experts say that it could drop another 25 per cent in the next few years. The main exporting countries, including Canada, are thus directly affected by this problem.

As you probably know, Canada exports about 70 per cent of its production to international markets, of which 80 per cent goes to the United States. Under Canada-U.S. agreements, we are thus tied to this market. Since the late 1980s, the U.S. defence budget has steadily declined. What will the impact be on our local industries?

In this specific sector, the most conservative estimates are that more than 1.6 million jobs will be lost throughout the world by the year 2000. That is a lot. This prognosis is hardly promising for Canada's military industry. In Quebec alone, more than 650 companies of all sizes work directly or indirectly in military production.

In Quebec, the most dynamic sectors are communication electronics, aerospace, shipbuilding and munitions. More than 11,000 jobs in Quebec's military industry have been lost since 1987. The impact is considerable.

Here are some specific examples of layoffs between 1990 and 1994 in Quebec companies that produced weapons or components: Marconi, 1,480 layoffs; MIL Davie, 2,740 layoffs since 1990; Oerlikon, 410 layoffs; Paramax, 1,000 layoffs; Pratt & Whitney, 200 layoffs; Triplex, 200 layoffs; Vickers, 350 layoffs; and there are others. This is scary! It is unbelievable! Just compiling these figures is an exacting process. Between 1990 and 1994, no less than 7,391 jobs have disappeared in those Quebec companies which are formally identified as producing systems or subsystems for military use.

These figures, which merely represent the tip of the iceberg, confirm the dramatic drop in military production for Quebec alone. You can imagine what the figures are for all of Canada.

This illustrates why the need to convert military industries is so urgent and vital for the survival of our manufacturing and high tech industries.

We must act quickly to ensure the conversion of defence industries to civilian production. The elected government has a fundamental role to play in this sector of the economy. So far, federal government support to our defence industry has essentially taken the form of procurement contracts and direct assistance to industries.

This support is mainly given through the Defence Industry Productivity Program, or DIPP. It seems that it is through this program that support for the conversion of defence industries will come.

The program aims at helping military industries remain competitive on international and Canadian markets. Considering the collapse of world and domestic markets for military equipment, a thorough review of the program is a logical and necessary step.

The most appropriate solution to help our defence industries is undoubtedly the implementation of a conversion program funded with DIPP's budget.

In fact, the House of Commons Sub-committee on Arms Export asked, in its recommendation 18, that the DIPP be extended so as to include assistance for conversion and diversification. The Liberal members who sat on that sub-committee signed the report, thus confirming their party's position when they formed the opposition. Is it possible that such a change could occur when you change sides in this House? This is incredible! It is unacceptable!

Considering that stand from the Liberals, and given the need to implement a conversion program to help defence industries, it is important that the DIPP plays an accessory role in this transition from military to civilian production.

While ideas seemed to have been developing for some time, and while consultations seemed to support a quick transformation of this program into a conversion program, it now seems that the Liberal Party is hesitant to launch such a support program. The Liberals are now undecided. What happened to them since they took office? It is hard to tell. What happened to those nice promises made on every platform by the Liberals during the election campaign?

Even the leader of the Liberal Party, the current Prime Minister, tried to outmatch everyone else in a press release dated March 26, 1993, where he said: "Canadians deserve a government which can show them the way, come up with new ideas and new strategies, and help them to adapt to change. Our defence conversion policy is a good example of how a Liberal government", as he put it, "would meet the needs of Canadians during the 1990s."

Unfortunately, I must say that all these promises went unheeded, so much so that, in his budget, the Minister of Finance kept quiet about all the new programs the Liberals had promised.

If the government does not develop a defence conversion policy for the years to come, Quebec and the rest of Canada stand to lose tens of thousands of jobs in technological indus-

tries. Our capacity to create jobs will keep eroding, and the government is very much aware of the situation.

Recently, when questioned by my colleague, the hon. member for Hochelaga-Maisonneuve, the Minister of Industry was rather smug and cynical. He said that the federal government already has all the tools needed to promote conversion and that the existing programs were enough to help them fill their mandate. Is this the new tactic the Liberals are going to use?

The Minister of Industry probably confused the support provided to military production within the DIPP program with a conversion program that the government has yet to develop.

The Minister of Industry should, as soon as possible, review the existing programs. He would notice a difference between what he thinks is out there and the conversion program we are proposing.

By the way, I urge my colleagues opposite to read the statement released, on March 26, 1993, by the office of the then leader of the opposition, now the Prime Minister of Canada.

With the help of the current Minister of Human Resources Development and others, they came up with these proposals, while they were sitting in the opposition. People say life is easier when you are in the opposition, but still, if you are serious, when you are in office you try to do what you said you would do. At the time, the government promised Canadians jobs and now all it is talking about is the deficit. It was the Conservatives who talked about the deficit during the election campaign, not the Liberals. The Liberals promised us jobs. What happened?

The Liberal government has fallen into the trap. Caught without any conversion policy, the government must, once again, trust the market forces. Can you imagine? They keep telling us: "Wait and see. Wait and see." That is exactly what we are doing. We are waiting.

For its part, the Bloc Quebecois firmly believes that the government must take initiatives that can provide jobs for our fellow citizens.

A plan to encourage manufacturers of military equipment to move away from this type of production and export and onto other fields. A well-defined strategy is the key to success for the conversion of high-technology defence industries to civilian production.

Defence industries are a pillar of the high-technology, research and development sector, and our competitiveness and our future depend in part on high technology. That is very important.

A strong industrial fabric is essential to economic prosperity and job creation. High technology offers high-paying jobs and, furthermore, it uses our natural resources as well as products and services from our enterprises.

I want to enunciate the three main recommendations of the strategy we advocate. First, the government should create a conversion fund as part of its comprehensive industrial conversion strategy.

The main mission of this fund would be to improve and add to the assistance provided within existing programs, with the objective of ensuring defence facilities and businesses an adequate and long-term support in their conversion and diversification undertakings.

Second, the government will have to create conversion advisory committees at local and regional levels. Finally, the government will have to form an independent committee to examine the different existing programs that could be used.

Needless to say that this strategy must be aimed first and foremost at completely reforming the DIPP.

The federal government must assume a part of the responsibilities. When you are elected, you must assume responsibility for these businesses' dependency towards arms production.

My intervention today indicates well that we will continue our representations, and I hope that the federal government will respond as soon as possible to the legitimate expectations of businesses from Quebec and Canada.