Mr. Speaker, I will be sharing my allotted time with the hon. member for Sherbrooke.
It is imperative that this government support the aerospace industry. In recent years, the Conservatives have abandoned the forestry and manufacturing sectors to their fate. It is time this government of inaction became a real leader in aerospace, as we face this economic crisis.
As we know, at the end of 2006, the Conservative government abolished Technology Partnerships Canada, a program to support industry-based research, because it was perceived as wasteful by the western provinces, whose economy is resource based.
In April 2007, Ottawa announced with great fanfare the establishment of a program to support research in the aerospace industry. The fact is that the government simply revived the Technology Partnerships Canada program it had itself abolished, but with a budget cut by one-third and with all industries but aerospace being excluded. Industries such as the pharmaceutical, biotechnology and environmental industries, which are well established in Quebec, have been abandoned.
The Bloc Québécois calls on the federal government to substantially increase its support to research and development, and industrial research in particular.
One would nevertheless expect to see Quebec get its fair share of federal R and D spending, regardless of how inadequate that spending is. But, as in many similar instances, such is not the case. While Quebec accounts for 29% of total R and D spending in Canada, it receives a mere 24% of federal funding, while Ontario gets 48.3%.
Quebec is a world leader in the aerospace industry. It ranks 6th, behind the major players: USA, France, UK, Germany and Japan. The Montreal region, where 95% of the activity is concentrated, ranks 5th in the world as far as employment in this economic sector is concerned.
There are 250 aerospace companies in Quebec. These include 240 small and medium-sized businesses, which account for 49% of total jobs in the Canadian aerospace industry, along with 57% of payrolls, 62% of business revenues, and 70% of R and D expenses.
Forty thousand people, over ten thousand of them engineers or scientists, work in the sector, which works out to 1 Quebecker in 200, and 1 out of 95 Montrealers. Per capita, there is no country in the world where aerospace occupies a more important place than in Quebec. And we are talking of quality jobs, with average earnings of $60,000. It is the main foundation of our cutting edge economy.
In fact, with its sales of more than $11 billion, 80% of that abroad, the aerospace industry is the mainstay of our cutting edge economy. It accounts for the bulk of our high tech exports and our R and D business investments.
While companies in the rest of Canada are mainly sub-contractors, Quebec is at the hub.
What is more, competition is likely to be stepped up, as the Chinese prepare to enter the field, and the Russians are interested in penetrating the regional jet market. If we are to ensure the survival and long-term development of our industry, the time to invest is right now. Let us not lose sight of the fact that research and development carried out today will result in the launch of a new aircraft only 10 or 15 years down the road. Today is the day to decide whether that aircraft will take off or stay stuck on the ground, and if it does the latter, our entire economy will be grounded along with it.
It is urgent that we develop a real aerospace policy. Whether the Conservative government likes it or not, laissez-faire, empty slogans and magical thinking are not policies. For a number of years now, the Bloc Québécois has been asking the government to establish an aerospace policy that would provide companies with reliable and predictable support, thus enabling them to plan their development projects. Faced with the lack of interest from the members of federalist parties, the Bloc Québécois even submitted its own policy, which was very well received by the industry.
Unfortunately, under the Conservatives, the federal government seems to have decided to take Canada out of the game, which is catastrophic. Not only does the government not have an aerospace policy, but all of its actions—whether out of incompetence, blindness or both—serve to weaken this cornerstone of our economy.
And what about military procurements and the fact that the Conservatives have abandoned Quebec? Military procurements are excluded from trade agreements, so governments can buy anywhere they like, under any conditions they choose and thus maximize the benefits for our industry. In June 2006, the former minister of national defence and former military industry lobbyist announced that the federal government would be increasing its purchases of defence equipment by $17.1 billion in order to implement its defence plan, Canada First. The aerospace component of Canada First totalled $13 billion: $7 billion for new aircraft and $6 billion for in-service support and maintenance over 20 years.
The three aerospace procurement programs are: $1.2 billion to purchase four new Boeing C-17 heavy tactical transport planes, plus $2.2 billion for service and maintenance over 20 years. The total comes to $3.4 billion. The second is $1.4 billion to purchase 17 new Hercules C-130J tactical airlift aircraft from American manufacturer Lockheed Martin, plus infrastructure, support and maintenance for 20 years. The plane selected for this contract is Lockheed Martin's Hercules C-130J, for a total of $4.6 to $4.9 billion. The third program involves $2 billion to purchase 15 new Boeing Chinook medium to heavy lift transport helicopters, plus $2.7 billion for support over 20 years. None of these aircraft have been or will be built in Canada.
On Friday, February 2, 2007, the government bought four Boeing C-17 military transport aircraft. The contract specified that Boeing would have to buy or invest $3.4 billion in Canada, with half of that for aeronautics and defence and 15% for SMEs. The aircraft are to be built and serviced in the United States. Direct spinoffs from the contract will therefore be negligible. There will only be indirect spinoffs.
The contract does not specify the quality or geographic distribution of the investments. Boeing will invest where it sees fit and buy from whomever it chooses, even though Quebec's aeronautics industry represents between 55% and 60% of Canada's aeronautics industry. The decision was poorly received in Quebec, but the government did the same thing again on January 16, 2008, when it announced the purchase of 17 Hercules C-130J aircraft from Lockheed Martin. Once again, the Conservatives failed to specify proper spinoffs and did not require the company to invest in Quebec. The initial tenders do not bode well. They do not include any technology transfer, and purchases will be minimal: warehousing, nuts and bolts, containers, printing. The good-quality contracts the government talked about appear to have been nothing but a mirage.
The government could have ensured that Quebec received its fair share of good contracts. After all, it is the customer. Furthermore, trade agreements do not apply to military procurement and so it had the freedom to set the conditions it wanted with respect to spinoffs as well. It decided not to do so. The Quebec industry fought for and managed to obtain a fair share of the spinoffs from the purchase of the Boeing C-17 planes. We do not yet know about the other contracts but it is not looking good. Spinoffs from military contracts for the aerospace sector, which may total $9.2 billion, will go elsewhere. If Quebec were to receive its fair share, these contracts would generate 37,000 person-years of employment in Quebec—those are years of work for full-time employees.
What would a true aerospace policy consist of? A transparent government would offer a clear and consistent program in support of research and development. It would make R and D tax credits refundable. It would re-institute the technology partnerships program, cover 20% to 30% of research and development costs and change repayment terms so that the risk is truly shared by both the company and the government. That would require a fixed and predictable commitment to financing of sales, especially exports. EDC financing of sales contracts would have to match Embraer financing of 80% of contracts, rather than the 40% provided here in Canada. EDC turns a profit; it earned $4 billion over the past three years.
The current level of funding provided by IRAP-TPC—the TPC component for small and medium-sized enterprises—to a program for aerospace SMEs must be increased substantially. A true loan guarantee program must be established to increase businesses' working capital. SMEs must be given a greater role in product development and allowed to bid on larger contracts. A program to help small businesses obtain certification and accreditation with larger companies should be implemented.