NOVEMBER 11, 1982
Canada's Military Industrial Complex
AN ADDRESS BY The Honourable Barnett J. Danson, P.C.
CHAIRMAN The President, Henry J. Stalder
Distinguished members and guests, ladies and gentlemen: If war is nothing else but the continuation of politics with different means, as Clausewitz claimed in the early nineteenth century, then it is ludicrous to believe that those "different means" would stand for anything civilized like a conference table talk.
And if we need an older testimony, then we might find it in the work of the Greek philosopher Herakleitos who, almost twenty-five hundred years ago, said: "War is the father of all things, king of all things; he turns some into gods, the others into men; some into slaves, the others into free men."
This leads us to the conclusion that we must choose between idealism and realism, for things have changed in all this time but men definitely have not. Idealism would be the heavenly state of affairs in which your only weapons would be wings, a halo, and a harp. Realism is the good old poker game with the deck, the cash, and the gun. Liberty lets you play the game, cash measures advances and declines, but your security depends on your defence. Therefore, let us not forget that our intellectual and material liberty is the most valuable asset we have and that that liberty can never be assured. Like happiness, it has to be created and recreated, assured every moment.
Our guest of honour has been a soldier, a politician, and an industrialist, which highly qualifies him to speak with authority about today's issue--Canada's Military-Industrial Complex. The Honourable Barnett J. Danson, P.C., was born in Toronto in 1921 and educated in this city. He served with the Queen's Own Rifles of Canada in the Second World War and was wounded in Normandy in 1944. Subsequently, he served as the Honorary Lieutenant-Colonel of the Regiment. He founded the Danson Corporation Ltd., a firm engaged in the engineering, manufacturing, and distribution of production and processing machinery for the plastics industry, in 1953. He has served as Chairman of the Board of the society of the plastics industry of Canada and was a board member of the associated American society as well as the Society of Plastics Engineers. He was elected to Parliament for the constituency of York North in 1968 and served until 1979. He has served on commons committees of finance, trade and economic affairs, external affairs and defence, and he was the Canadian cochairman of the Canada-United States inter-parliamentary group. He joined the federal cabinet as Minister of State for Urban Affairs from 1974 to 1976 and he was Minister of National Defence 1976 until 1979.
Currently, he is Chairman of csPG Consultants, Acting Chairman of De Havilland Aircraft of Canada Limited, a Director of Victoria and Grey Trust Co., Methon Energy Corporation, and Scintrex Limited.
Mr. Danson is a Director of The Empire Club of Canada, the Ontario Safety League, the Canadian Council of Christians and Jews, and the Canadian Institute of Strategic Studies, as well as Chairman of the Back Association of Canada.
Ladies and gentlemen, would you please welcome our guest of honour, the Honourable Barney Danson, P.C.
Mr. Chairman, ladies and gentlemen: The term military-industrial-complex implies a cohesive relationship of an influential arms industry in league with a military structure which exerts significant influence over government. policy, which in pursuit of its own interests tilts or distorts the policy orientation of governments. It conjures up visions of cigar-chomping, crew-cut generals dripping in medals and gold braid, and sinister civilian merchants of death exulting over destructive weaponry as ill-gained profits are amassed. Even to the extent that these caricatures may represent some close-to-real-life elements in some nations, they have no valid counterparts in Canada.
This is not to suggest that we should not, or do not, have people, organizations, and companies who are genuinely and deeply concerned about our ability to maintain our sovereignty and security and the need to be capable of responding in the event of an emergency. It would be recklessly irresponsible, in both security and economic terms, to allow ourselves to be exposed by ignoring or eliminating our defence-industrial capability as some would have us do.
I am sure that all of you here share my hope and determination to seek all realistic measures to reduce the dangers of war, especially to eliminate the spectre of nuclear war, and to see our leaders find more rational methods of resolving international conflicts and disagreements. On this Remembrance Day, we are reminded of the dreadful human costs of war. We are also reminded of the consequences of being unprepared. I can never forget the day when, as a teenager, I marched with my regiment down University Avenue to Union Station, across the street from where we are now, onion sacks over our shoulders holding our meagre gear, and wearing what we called "Coca-Cola hats." Some of us lacked proper uniforms, but we had arm bands lettered Q.O.R. We couldn't even manage the full name of Canada's most distinguished regiment.
It took years, countless lives, and immense treasure before the resources were ultimately mobilized to enable us to snatch victory from close defeat. We allowed ourselves to be tragically vulnerable. My three closest friends did not emerge from Union Station when the Regiment returned some five years later; that story describes the experience of tens of thousands of Canadians and millions of others around the globe. Indeed, had we been prepared, Mr. Hitler could well have been deterred from his perverse adventures, which cost far more than preparedness would have, and, more importantly, millions of human lives would have been spared, and nations now subjugated would still be free.
But I'm not here to talk about the tragedy of war--that is all too apparent--nor to put a positive light on the arms race.--Even if we were to be successful in eliminating nuclear arsenals, if the current tensions and the imbalance of conventional weapons capacity continued to exist between east and west, we would still be faced with the need to substantially upgrade our conventional capacity to provide a credible deterrent. Even if our leaders were wiser than they have been throughout history, and we could normalize relations, I doubt if anyone would suggest that we could ever be without our own Canadian forces. Indeed, any nation which cannot demonstrate its sovereignty over its own land, sea, and air space is not a truly sovereign state. In military terms, few, if any nations, can go it alone. Really only two nations can, and, prudently, they choose not to do so. This requires us to align ourselves with like-minded nations who share our values and, to an extent, our geography, and to carry our fair share of responsibility in such an alliance.
I am not dealing today with any specific types and levels of military capacity, but with the equipping of a continuously _ existing armed force. We have the choice, at least in theory, of making all or most of it ourselves, like the neutral Swedes and Swiss whose expenditures and armaments industries far exceed ours as a percentage of GNP. Alternatively, we can purchase offshore, like many small under-developed countries, with all the economic, industrial, and security consequences that that implies. I believe that most Canadians would opt for a reasonable balance between what we spend and what we build. The cost and complexity of modern defence equipment and the need to achieve as high a degree of standardization within our alliances as possible, necessitates that we work in concert with our allies to achieve the best balance and greatest economies possible. Wisely and in our own self-interest Canada has chosen to specialize in areas which complement our requirements as dictated by our geography, climate, strategic location, scientific and technological skills, and objectives. These areas include communications, aerospace, transportation, electronics, surveillance, ship-building, and cold-weather survival.
We have a huge land and air mass with the longest coastline of any nation on earth. We need to generate all the capabilities we can to function in this environment. We are good and we have unique skills to contribute militarily as well as meeting the civil needs that have to be fulfilled.
Yes, we do make some things that go bang, or we carry things that do, such as the small arms and artillery ammunition at Valcartier Industries in Quebec, or the armoured cars at GM Diesel Division in London (which just received a large order from the American military totalling at least $625 million and possibly $1.3 billion). This armoured vehicle general purpose (AVGP) created a demand for high-quality armour plate; the best of this was available from France. In seeking a Canadian source, which is standard procedure, we found that Canadian Heat Treaters of Richmond Hill, Ontario, had developed a formula which rated 30 per cent better than any other armour plate available; thus another Canadian company had developed new markets. The CVR-7 air-to-ground rocket missile at Bristol Aerospace in Winnipeg was developed by the Defence Research establishment in Valcartier; it is filling an important requirement in our air force and in those of our allies. It is the height of hypocrisy to accept the need for such ordnance and then to display the self-righteousness some demonstrate when we or others produce it.
Until recently, our largest military expenditure in the defence budget, some 60 per cent of the total, was for personnel pay and allowances. Most of the balance was for infrastructure and logistics; only 9 per cent went for new equipment. This created a close to desperate situation; not only were we illrepared to meet our security commitments, we were exposing our military personnel dangerously, and the cost of maintaining the old equipment that could still be maintained was staggering. In 1975 the federal government shifted defence priorities as it became apparent that the conciliatory words from Moscow were accompanied by the greatest build-up of military hardware in peace-time history. Today some 22 per cent of the $7-billion defence budget is directed to new and replacement equipment. By the end of this decade we should achieve the desired balance of 30 per cent for new equipment, 45 per cent for pay and allowances, and 25 per cent for operations and maintenance. Defence expenditures not only enhance our security with and commitment to our allies, they also enhance our industry, economy, and, very significantly, our scientific and technological capabilities.
Defence procurement in the aircraft and aerospace field, with which I am most familiar, has been critical in making companies like De Havilland, Canadair, Pratt and Whitney, CAE, Fleet, SPAR, and others world leaders in the civil hightechnology marketplace. These companies and their suppliers from coast-to-coast conduct some 20 per cent of the research and development done by industry in Canada and are suppliers to the airlines and aerospace industry around the globe. The much-maligned Litton Industries supplies over half of the inertial navigation systems in use by commercial airliners. I find it hard to take seriously those people who would have us transfer this sort of defence business, this technical capability, and these Canadian jobs to California. The expertise and skills developed in making these products is a very significant contribution to our high-technology capability that is absolutely essential to maintain our position as an advanced industrial nation. What really concerns me is our ability to meet our commitment to Western security and to have the capacity to respond in the event of an emergency. We once had a Department of Munitions and Supply and a Defence Industries Preparedness Association. Neither exists now because there are few companies or industries dedicated strictly to defence. Munitions and Supply has been absorbed into the Departments of Industry, Trade and Commerce and Supply and Services. Strong industrial organizations such as the Air Industries Association of Canada, and the Canadian Electrical and Electronic Manufacturers Association, to name only a couple, work together with the Departments of National Defence, Transport, Communications, and Science and Technology, with the vital support of Industry, Trade and Commerce and the procurement and development role of the Department of Supply and Services, to advance the industrial base of the country. They are not just defence industries; they are major elements in our total industrial fabric. Through our NATO relationships and our Canada-United States defence production sharing agreement we aim to maintain a balance, over time, between procurement and purchases with other nations and to maintain the flow of technological interchange.
Since 1962 we have achieved a cumulative trade surplus of close to $2 billion on overseas defence trade. Our deficit with the United States, however, is now some $500 million, and this could increase, largely as a result of our CF- 18A fighter aircraft purchase, in spite of the fact that we have guarantees for almost $221 billion in industrial benefits and conditional commitments, based on competitiveness, for almost $450 million. On the Aurora Long Range Patrol aircraft, offset commitments approach $1 billion and are ahead of schedule. This imbalance with the United States is why the Gm Diesel division armoured car contract is important, as is the recent United States navy purchase of Canadian haul-down equipment--from Daf Indal of Mississauga--to secure helicopters to the decks of ships.
Pratt and Whitney of Longueil, Quebec, are the acknowledged world leaders in Turboprop gas turbine engines with 1981 sales of some $770 million, a large portion of which is generated by export sales. Employment at P & w, until the current general economic decline, averaged eight thousand people. These are high-skill jobs and are of great benefit to Canadian workers and industry. These jobs and the company development would not have been possible had Pratt and Whitney not cut their teeth on a contract for one thousand Wasp engines for Harvard trainers required by the Canadian and American military. When this capacity was developed and Canadian capability proven, the parent American company transferred increasing elements of its business to the Longueil operation with world product mandate, which allowed the company to grow to what it is today--the world's largest builder of turboprop engines, supplying De Havilland and its competitors internationally.
De Havilland is a respected and successful world leader in civil STOL aircraft, selling in 77 countries. This would not have been possible if we had bought Tiger Moth trainers and Mosquito bombers off the shelf from the United Kingdom. Now De Havilland is looking beyond its traditional STOL and commuter aircraft role and is negotiating to become a possible partner in the European Airbus Civil Jet Airline Consortium. Canadair is a world leader in business jets and forest-firefighting water bombers, plus other sophisticated equipment. This would not have been possible had they not built the North Star for what was then the RCAF and TCA. After the North Star, Canadair built a large number of more sophisticated airplanes, including 1,815 F86 Sabre jets, 656 T33 trainer jets, 340 F104 fighters, 33 Argus maritime patrol aircraft, 12 Yukons, 210 Tutor aircraft, and 340 CF5 fighters. Many of these aircraft were exported and used in defence and civil airline applications by our NATO partners and friendly forces. This accumulated experience and expertise provided Canadair with the background which enabled the company to design and build the highly regarded and successful Challenger. Each of these productions was a building block which enhanced Canada's high-technology capability.
SPAR Aerospace, which grew out of De Havilland, is now a legend with its space arm, satellites, and other very hightechnology products, as well as contracts in largely civil, but also military fields. SPAR has literally given Canada a foot--or an arm--in space.
Canadian Marconi and Canadian Aviation Electronics in Montreal, imp in Halifax, Fleet in Fort Erie, Bristol, Boeing, Standard Aero and others in Winnipeg, plus a wide range of specialized suppliers and skilled sub-contractors across the country each have their own remarkable stories to tell. These are stories that would not exist if we had not taken the best advantage of defence expenditures and used them to advance our high-technology industry and skilled work force.
I can't overemphasize this last point, because our future in an increasingly competitive world hinges, not on our raw resources, but on our ability to use our skills and brain power. We trade with developing nations with whom we cannot compete on a wage basis, and enjoy the competition of others, most notably Japan, a country which will move too far ahead in the technology race if we don't use every possible opportunity to increase our involvement in high-tech areas, developing and honing our skills to produce high-quality goods and services at competitive prices. Many of the same ingredients nurtured and demanded by the defence industry are essential to our economic future. For example, there is hardly an airplane flying in the non-Communist world that doesn't have Canadian manufactured components aboard.
In winter, arctic, anti-nuclear, and anti-biological clothing, our textile and garment industries rate with the best in the world and are supplying our own and other forces abroad.
As I have said, the development and production of major defence systems and our overall defence concept with our allies are based on the premise that we cannot go it alone. We must become partners with others.
We learned this lesson in February 1959, when we terminated production of the Arrow, the most advanced interceptor aircraft of its day. We did not have a requirement for the Arrow in our own air force that would come close to making it economically viable to produce and we couldn't find customers elsewhere. Today we buy major systems such as tanks and virtually all military aircraft offshore, and procure, through off-setting industrial benefits, significant production of the world-wide production of the selling company, or other commercial, industrial, scientific, and economic benefits which are frequently unrelated to the equipment purchased and which, in many cases, are unrelated to defence. These offer strategic benefits to Canadian industry in jobs, world markets, or technology transfers which will outlast and be unaffected by the vagaries of defence spending, an expense which hopefully will decline over the years.
The Canadian approach is especially important now because it means that while we are maintaining our capability, indeed enhancing it, we do not have a deep vested interest in armaments, which in some nations has had more than casual impact on its foreign policy. While the defence segments of our industries are important in terms of our security and technology and economic base, they are largely geared to areas that can be exploited to take advantage of new and peaceful opportunities and significantly contribute to the enrichment of the nation and the quality of life. It is only with the maintenance of our sovereignty and security that we can have the basis for such a quality of life. Thus, obviously, we must maintain a reasonable state of preparedness.
We don't necessarily engage in defence spending because it is good for the economy. It is not an efficient use of our resources in a purely economic sense. The day that news headlines tell us that the superpowers have agreed to disarm will be the brightest day in the history of mankind. I'm sure that if this happens we will find more productive ways of using our resources. But, in the meantime, our approach to defence spending must be as productive and responsible as possible. And I believe it is.
There are other areas of the economy, basic to our security in total economic terms as well as at times of emergency, that cannot be left out of any discussion of defence preparedness. If we fail to improve our competitive position in the automotive field our steel industry falters, as do hundreds of dependent industries and companies across the land. The very capabilities required to prosper as a modern industrial state are those which would have to be mobilized rapidly in the event of emergency.
Our agriculture base is absolutely critical, and our ability to sustain our food supply, and that of our allies, is in itself a deterrent to a period of sustained emergency or war. Soviet agriculture's well-known deficiencies would make them reluctant to engage in a prolonged conventional engagement if they were certain that our military readiness would not allow them to quickly over-run Western defences. Peter Drucker once said that "nations are divided into those who know how to use technology to create wealth and those who do not." Only a prosperous industry can afford the innovation that generates more industry and jobs. And only a stable industry, reliable in an emergency, can underwrite the needs of national defence. National security and economic prosperity are opposite sides of the same coin, in this sense. We require both. But all too often we think only in terms of economic trade-offs. We are inclined to think of national security only when there is an obvious and immediate threat, and then it is usually too late. It should not be pigeon-holed in our priorities until an emergency arises. As the word implies, security is the capability to prevent emergencies from arising and that translates into a state of reasonable and adequate preparedness.
We cannot afford to bury our heads in the sand like the ostrich; if we do so, the family of free nations could well become an endangered species.
The message I want to leave on this Remembrance Day is that a strong defence demands a strong economy and one leads to the other. The approach Canada is now taking ensures defence spending results in stimulation, development, and sustainability across the broad spectrum of our industrial base. This, in turn, translates into jobs and expansion of our industrial capability and capacity.
We have just voted overwhelmingly to express our deep desire for disarmament. (And incidentally, I voted for it as I would have for a world crusade against cancer.) But let no one deceive us that the wording on the ballot last Monday was for any unilateral action or for a lessening of our commitment to collective security. Nor should the result be read by the Warsaw Pact as meaning that we should be other than prepared. We are prepared to preserve our values; prepared to seriously seek every path to mutual and balanced arms reduction. But we are also determined that in doing our share we are not exposed to the blackmail which, in the past, has cost those precious lives which we remember with love, reverence, and sadness today.
The appreciation of the audience was expressed by Major-General Bruce J. Legge, President of The Empire Club Foundation.