Mr. Speaker, I am pleased to have this opportunity to speak about the many stringent conditions this government set with Boeing for the purchase of strategic airlift planes.
The motion suggests the government was soft on Boeing during the negotiations. Nothing could be farther from the truth. Economic spinoffs must be high quality and involve high technology. Here are a few examples of acceptable projects: the production of mission avionics for helicopters; the installation of radars and other electronic material in fighter planes; the production of composite high-tech parts for large commercial planes; the establishment of a research and development centre; or investments in Canadian universities for research in aerospace engineering.
But if a company wants to buy raw materials like steel or iron ore, trade wheat, foodstuff or farm products, or goods and services with a low technological content, these proposals would be refused.
Once a company has prepared a proposal for high quality and high technology industrial benefits, that proposal is evaluated according to three strict criteria. First, the work must be generated by the procurement program. Second, the work must be carried out during the period defined in the contract. Third, the work must comply with the growth principle, which is that existing business relationships may be used, but only the new work will count toward meeting the obligation.
Industry Canada then insists that the spinoffs be truly Canadian. To determine this, the department examines the precise value of the Canadian content of the transactions between the principal suppliers and the Canadian suppliers. In other words, officials examine the precise quantity of materials or work from Canadian sources that a transaction involves and award it points.
Consequently, if a contractor buys a product from a Canadian company and the product is entirely manufactured in Canada, it receives full points for that factor. However, if 60% of the product is manufactured in Canada, it will be awarded only 60% of the points assigned for that factor. That also means that the total value of contracts with Canadian companies often exceeds the amount that the government pays the principal supplier. Canadian companies receive that income, and the Canadian economy automatically benefits.
As well, half of Boeing's transactions in relation to industrial spinoffs must be in the aerospace and defence sector. Boeing operates primarily in the aerospace and defence industry, and so a majority of its activities in Canada should be in that industry. However, by imposing that minimum, the government has left the door open for other high technology industries. Boeing must also allocate 30% of its industrial benefits contracts to key technologies, as set out in the list drawn up for that purpose.
The list of key technologies was developed in collaboration with the industry. It sets out the nine main priorities for technologies that will help to preserve and expand the aerospace and defence industry, while ensuring its long-term sustainability. The list includes the following technologies: advanced manufacturing and emerging materials; avionics and missions systems; communications and control; propulsion and power management; security and protection; sensors; simulation, training and synthetic environment; space; and unmanned vehicle systems. Boeing has already identified a number of transactions that meet the requirements of the key technologies list. The company will be undertaking major projects that use technologies relating to composite materials, simulation and training, communications and control, and space.
Finally, 15% of Boeing's industrial benefits contracts must be awarded to small and medium sized businesses. These are vital to ensuring the growth and viability of the aerospace and defence sector and of the economy as a whole. These have proven their lead role in economic growth models. Boeing is a huge company with multiple divisions and it is often hard for small businesses to make a place for themselves in Boeing's supply chain. This is why it is important to ensure that these businesses will also be able to take advantage of this opportunity.
To date, the industrial benefits relating to the strategic airlift project have been solid in all these sectors and show promise as far as potential long term impact on the Canadian economy is concerned. Through Industry Canada, the new government of Canada places strong emphasis on the importance of Canada-wide participation and showcasing the skills of Canadian companies. Our government is making every effort to ensure that international corporations are aware of the scope of Canadian industry and of its many and varied assets.
Industry Canada officials will be working closely with the regional development agencies, that is the Atlantic Canada Opportunities Agency, Western Economic Diversification and the Economic Development Agency of Canada for the Regions of Quebec. Together they will seek out Canadian businesses with a potential interest in the opportunities available.
In addition, departmental officials will work directly with Canadian businesses throughout Canada in order to draw attention to existing opportunities and to help companies interested in obtaining contracts, in order to underscore the importance of Canada-wide participation and to showcase these companies' abilities.
We also make it very clear to potential bidders that they are expected to work with companies throughout Canada. Boeing, for example, held four sessions with regional industries, one in each region of Canada. The one in the Atlantic region was held on September 7 and 8, 2006 in conjunction with the Halifax air show. They were in Calgary for the western region on October 3 and 4, 2006, in Montreal for the Quebec region on October 24 and 25, 2006, and in Toronto for the Ontario region on November 7 and 8, 2006. Boeing was thus able to meet hundreds of Canadian businesses and to gauge the strengths and abilities of companies all over the country. Boeing has undertaken to work with Canadian businesses in order to achieve 100% industrial benefits. This will be achieved through logical business relations leading to real markets and the forging of lasting and viable partnerships.
The spinoffs in Canada are serious contract obligations. Industry Canada requires annual reports, audits and performance guarantees. Each year, contractors must report on what they have accomplished in that respect. Financial penalties can even be applied in case of a failure to comply, but until now, it has never been necessary to impose such penalties.
I would like to sum up the strict requirements which I just described. Boeing must ensure that there are high quality spinoffs worth 100% of the eventual contract value. The company musk work with businesses throughout Canada, including Quebec. At least 50% of the spinoffs must be for the aerospace and defence industry, at least 30% for the nine key technologies identified by the aerospace and defence industry and at least 15% for small and medium sized businesses. The value of the spinoffs in Canada must equal 100% of the contract value.
The work must come from the acquisition program. It must be performed during the period defined in the contract. It must be in agreement with the principle of growth. Existing business relationships may be used, but only new work counts in assessing compliance with the obligation. These are rigorous conditions which define a serious contract obligation.
The government is very serious about its responsibility to negotiate firmly with potential suppliers and to obtain optimal spinoffs for all of Canada. The government has respected its obligations.
I will stop here in order to be able the share my time with the member for Beauport—Limoilou.