Mr. Speaker, it is a privilege to enter debate on the particular bill. I am very happy with the hon. member opposite who just outlined some of the provisions of the bill. I will go into the bill in a little more detail and perhaps suggest exactly its purpose and why it is needed in Canada today.
At the outset I assure the minister that we are here to support the bill. Although we have some questions about it, essentially we will support it.
Bill S-25 amends the Defence Production Act, as already indicated, to establish a new regulatory system which will regulate access by Canadian defence industries to certain controls, military goods or goods with military application. The bill reflects a new Canada-U.S. agreement on co-ordinated legislative measures to strengthen our control over trade in defence related goods and technologies.
The proposed regulatory regime will be administered by the minister of public works from whom we have just heard. It will ensure effective controls to have access to and the transfer within Canada of controlled goods and technologies. Under the proposed system persons would have to be registered by the minister or be exempt from registration under the regulations to have access to such goods.
I am sure some people listening to the debate will ask why we need the bill. On April 12, 1999, the United States state department amended the international traffic and arms regulations and removed many of the preferential elements in the Canadian exemptions contained in part 126.5 of ITAR. The amendments reduce the scope of the Canadian exemptions by imposing licensing requirements on a broad range of goods and technologies that had been licence free before April.
In addition, the U.S. narrowed the definition of a Canadian citizen and ruled that Canadians with dual citizenship could no longer take advantage of the Canadian exemptions. These amendments and the stricter interpretation of a Canadian citizen have significantly and adversely affected access to U.S. goods and technology, thereby affecting the competitiveness of the Canadian defence, aerospace and satellite sectors.
It has impacted these sectors very significantly in that this is a major part of the Canadian economy. There is a lot of trade between Canada and the United States in these sectors. It is essential that this part be secured because national security is at issue to a large degree.
The United States had reason to take action on April 12 of last year, despite the claim of the Minister of Foreign Affairs that decreasing the export of Canadian military related goods and materials controlled unrestricted defence related technology, which was being sent by private companies in Canada to places where it should not have been sent.
This was not some kind of willy-nilly action by the United States. It had a basis in fact. The hon. senator observed certain things in the action by the United States. For example, he had heard the suggestion that components of our frigate program found their way to the People's Liberation Army of China.
Additionally there was no provision under Canadian law to prevent controlled unrestricted technology, including data and other information, from being transferred between civilian companies and others within Canada. That was the instigator, the lever that caused the Americans to question whether they could trust Canadians to maintain secrecy and to assure national security both in Canada and the United States.
This state of affairs and insecurity in our defence production sector caused grave concerns. Our partner, the United States, said that it wanted to protect its security. If we would not do it, the Americans would protect theirs. The U.S. has threatened to relieve Canada and did so.
There was a reason why the Americans did this. The hon. minister mentioned just a moment ago that it gave us the opportunity to do something. The interesting comment I would like to make is that the Liberal government, over and over again, needs to be prodded to do something meaningful.
A government that is concerned about governing the country and its security would take and have the necessary precautions to ensure the security of the nation and ensure that the secrets of our technology and such intimate information would not be made available to anybody.
There was a good reason for the Americans to do this. I am very happy the government has now taken a step. I am also sad to say that it took an outside country to draw attention to a weakness that existed in our country.
On October 8, 1999, a Canada-U.S. agreement in principle was announced, recognizing a shared commitment of both governments to protect against illegal transfers or retransfers of controlled goods and technology from North America and to maintain a strong, integrated North American defence and industrial base. The U.S. provided assurance that it was prepared to reinstate many Canadian exemptions and enhance others in tandem with Canada's harmonizing controls in the USML items within Canada and introducing appropriate legal sanctions for infractions.
Is it not interesting that our government did not have the initiative or the courage to do the things it is now threatened with because it missed the point? As part of the agreement Canada has put forward new legislation, which is before us today. It will put forward new regulatory provisions that will strengthen Canadian defence export controls as a result of these changes. The Canadian export council list will control the same defence goods and technologies as identified in the U.S. munitions list.
The United States concurred with Canadian legislative and regulatory changes. It intends to revise its defence trade control regulations to reinstate most of the pre-April 1999 Canadian exemptions, allowing for licence free transfer for most U.S. origin unclassified defence goods and technology.
The United States confirmed its intent to expand the exemption to allow for licensed access to such U.S. origin exports by Canadian citizens, including Canadian dual nationals and Canadian permanent residents. The United States also intends to expand the prior exemptions to permit the export without licence of certain additional defence goods and technical data.
If this goes ahead we can be reasonably assured that we will now have the same kind of reciprocal relationship that we had before. Perhaps it will be even a little smoother than it was. That is good.
It is interesting that the bill originated in the Senate. Why did it not come from the government? It should have come from the Prime Minister's party because it should have been done at that level.
Why then is the legislation required? The bill is required to reinstate special exemption for Canadian firms under the U.S. ITAR so that permits for the export of defence goods and services are not required. Without special exemption Canadian companies are hampered from competing. An estimated $1 billion of the $5 billion business done by high technology, aerospace and other defence industry companies located in Canada have been potentially affected by the U.S. regulatory changes.
The bill will ensure a continued access to U.S. defence market and related technology. The Canadian defence industry stated that the Canadian exemption would be largely reinstated if there was evidence that three major issues were being addressed: first, the tightening up of our own export controls; second, the harmonization of the Canadian export control list with the American counterpart, which the joint agreement on October 8 states will be the case; and, third, the implementation of a registration system. All three elements would come into play with the passage of the legislation.
We are on good ground at this point in time to ensure there will be a smooth transition. The defence industry will be well served with this legislation.
According to the government the legislation is further required so that Canada establishes appropriate safeguards. It is not just good enough to make the statements, but safeguards are required to assure both ourselves and our U.S. defence partners that the controlled goods and technologies as set out in the Canada export control list are available only to authorized individuals and companies.
We need such assurance not only to protect certain controlled goods and associate technology of North American defence aerospace and satellite infrastructure but also to encourage trade and improve Canada's national economic stability. Since about 85% of our export market is with the Americans to the south, it is a very good idea to have good relations with them. That is precisely what is being set out.
We have the provisions of the bill pretty clearly in mind, but some other questions need to be addressed. Will the new regulations be costly to Canadian industries? The minister has already alluded to the fact that it will cost them something. The estimate is between $2.5 million to $3 million annually, but the cost to industry would be quite minor because a large percentage of the companies that have control of goods are already in the government's classified industrial security program. Thus government has already screened a number of their employees.
Under this program, however, industry would have to appoint a designated official to ensure that controlled goods are properly controlled within companies. That would be the main cost to industry. We do not know exactly what the additional cost will be.
Does the Access to Information Act apply to the provisions of the bill and to the Defence Production Act as a whole? The answer is yes. However, so too do the protections for commercially confidential information, as well as the possibility of applying coverage for national security purposes. That is important to recognize, but it places a tremendous onus on the minister and his personnel to be sure the national security is preserved.
We have to admit that although this part of the legislation is necessary and essential and although we will support it, the integrity, honesty, stability and accountability of the government and its officials will be very significant and important in terms of making the legislation provide for the security we want in Canada.
Will the regulations in question be printed in The Canada Gazette and therefore open to parliamentary review and comment? This is an interesting question because, as we heard this morning, much of this is done in secret behind closed doors. Because cabinet has the authority to make regulations under this act, it can make amendments to these regulations without making them transparent.
According to the Department of Justice the regulations to be made under the new part 2 of the act would have to be published in the ordinary way. It would require pre-publication in part I of The Canada Gazette to allow for comment and consultation and to take views of affected parties into consideration for revision of the proposed regulations. That would then be followed by publication of the ultimate regulations in part II of The Canada Gazette . The Department of Justice says that they will be available. Then the defence industry and the public will know that these are the regulations that have to be met.
Members in the committee proceedings in the Senate requested that the minister undertake to deposit the regulations with the committee once a year. The minister is on record as saying that he had no problem with the request. The minister spoke to the bill just before I rose to speak. We suspect he will do exactly that. If we become the government, we would undertake to do the very same.
Regulations respecting ongoing compliance would allow the department to conduct inspections and gather information on those registered. Would this give the government unreasonable access to information which could be used in a manner that would violate privacy? It is very easy to assume that could be the case. What is the assurance that the information gathered when these inspectors are in the highly secure industries will not be used by the government for other purposes?
Registration will authorize the registered company's directors, officers and employees to access controlled goods provided they are screened by the company. If an application is approved, it will be their responsibility to ensure ongoing compliance with the new regulations and to establish their compliance so it can be inspected. Companies will also be required to submit reports to the Department of Public Works and Government Services and to submit to periodic inspections by the department.
Specifically, then, the department officials responded this way. The intent, and I draw the attention of the House to the word intent, of using administrative inspection is to enable the inspector to look at the security systems in place and suggest alternatives that will be helpful, which is the normal practice of inspectors and other regimes throughout the government. The intention is not to have the inspectors do anything in connection with a criminal search.
If the inspector found something in the course of an ordinary administration inspection that he believed was appropriate for a criminal investigation, the inspector would have to present himself in the ordinary way to obtain a search warrant. Thus, he would have to withdraw from the premises and then, on reasonable and probable grounds, assert evidence sufficient to obtain a search warrant under the criminal code. That is absolutely critical and essential.
The difficulty will be that there is a judgment factor involved here and the person doing the inspection will have to make that kind of decision. The incumbent will have to be very careful and aware of what the security requirements are, what the regulations are and what criminal offences could be perpetrated by certain individuals or by certain companies.
In summary, the main provision in Bill S-25 is clause 5, which would add a series of new provisions to the Defence Production Act in the form of new parts 2 and 3 of the act.
The new part 2 of the act proposed in clause 5 of the bill would provide for the control of access to certain defence related goods. Essentially, part 2 would restrict access to such goods to those persons who were registered by the Minister of Public Works and Government Services or who were exempt from such registration.
Pursuant to the new section 35, the controlled goods subject to the proposed regime would be set out in a new schedule to the act which would be added to clause 7 of the bill.
By virtue of new section 36, the new regime would not apply to most public sector employees in Canada, when acting in good faith, in the course of their employment duties or to any member of a class of persons to be prescribed in the regulations.
New section 37 would make it an offence for a non-registered and non-exempt person to knowingly examine or possess controlled goods or to transfer controlled goods to another person. This section would also make it an offence for any registered or exempt person to knowingly transfer a controlled good to or permit the examination of such a good by a non-registered and non-exempt person. The section would clarify that transfer would mean to dispose or disclose the contents of a controlled good in any manner.
Section 37 would also clarify that a person's registration extends to authorized corporate officers and directors as well as authorized employees of the registered person.
New section 38 of the act would provide for a scheme of registration of persons by the minister for access to controlled goods. The minister would furnish registered persons with a certificate. Registration and renewal of registration would be subject to conditions to be prescribed in regulations made under the act in addition to those that the minister considered appropriate.
Moreover, the minister would be able to request any information from applicants for registration which the minister deemed necessary. The minister would be able to deny any application for registration or suspend, amend or revoke a registration on the basis of a security assessment to be prescribed in the regulations. We can see the significance of the minister's role in this operation.
New sections 39 and 39.1 would provide for a system of ministerial exemptions for individuals or classes of individuals.
Under new section 40, registered persons would be required to provide the minister with information, as prescribed by the regulations.
New section 41 would provide for the designation of inspectors to ensure compliance with the proposed rules.
New section 42 would give such inspectors the power to enter and to inspect any place; to require the attendance of and question any person; to require any person to produce for inspection a document; to detain or remove any controlled goods until satisfied that it was in compliance with the requirements of the act and regulations; and to require any individual in charge of a place that is the subject of an inspection to take any measures that the inspector considers appropriate. While exercising the authority under this new part, inspectors could be accompanied by another person.
New section 43 would provide the governor in council with authority to make regulations for carrying out the purposes of the provisions of this new act including: prescribing classes of persons to whom the new restricted access regime to be established by the purposed new part 2 of the act would not apply; prescribing procedures for authorizing employees, corporate directors and officers of registered persons to have access to controlled goods; prescribing various matters pertaining to registrations and exemptions under this proposed new part. This would include: eligibility conditions; applications procedures; the factors to be considered by the minister in deciding on registrations or exemptions; the minister's power to renew, suspend, amend or revoke registrations or exemptions and make regulations of conditions of registration or their renewal; conditions of exemptions and their renewal; security assessments; and amending the schedule of controlled goods on the joint recommendation of the minister and the Minister of Foreign Affairs.
This last point is significant. We now have a countervailing balance of one department with another department. It cannot be done unilaterally by one minister alone. That is a wise thing to do.
The proposed new part 3 of the act would create a new offence to cover various acts of obstruction in relation to the inspection and reporting scheme proposed in the act.
New section 44 would make it an offence to: provide false or misleading information; destroy any record or document required to be kept under the act or the regulations; make a false record or document which the act or regulations required to be kept; interfere with anything detained or removed by an inspector; or fail to comply with any reasonable request of an inspector or otherwise obstruct an inspector in the performance of his or her functions.
It is a comprehensive act. There are very significant powers given to the cabinet and to the minister in particular.
Pursuant to new section 45(2), violation of new section 44 and any other provision of the act would be punishable on summary conviction by a fine of up to $25,000 or imprisonment for up to 12 months or both.
Pursuant to new section 45(1), the punishment for violating new section 37, that is, the access to controlled goods by a non-registered and non-exempt person, would be on summary conviction a fine of up to $100,000 or imprisonment for up to two years or both, and on an indictment, a fine of up to $2 million or imprisonment for up to two years or both.
There is now a punishment or a fine that is given to people who violate the provisions of the act. That is a significant impact that gives the minister some power to do things and make it meaningful.
There are two other sections that I would like to look at but I will skip that for now.
I will conclude by saying that while we support the bill and the provisions of the bill, we also recognize that there are some serious questions with regard to the bill.
I appeal to the minister and to all members in the House that something as significant as this, which deals with the national security of a nation, cannot be treated seriously enough. The threat can come from people giving information, technology and access to controlled goods. This could fall into the wrong hands and be used against our nation, which would make us less secure.
I commend the government for doing this. At the same time, the record of this government does not give me the kind of assurance that the minister will be open and accountable for all the things that are in this act. I have some doubt about this because of the results of the last report of the auditor general. I begin to wonder sometimes just exactly how open and how forthcoming this government will be about information like this. I wish it well and I certainly want to give it a try.