Fighter jet mess reeks of cowboy economics
Let me see if I have this straight. In order to meet an urgent “capability gap” with regard to its aging fleet of fighter jets, the federal government is kicking the competition to produce a replacement jet that it promised two years ago another year into the future. A winner will be chosen no sooner than 2022, five years from now, or a dozen years after the winner of the previous competition was declared. The planes will be delivered in 2025.
In the meantime, as an interim measure, it will upgrade its current fleet of 30-year-old CF-18 Hornets with 18 virtually identical second-hand Australian F-18 Hornets of the same age. This follows its decision to cancel a previous agreement to buy the same number of new F-18 Super Hornets from Boeing, in retaliation for Boeing’s invocation of U.S. trade remedy laws against Canada’s subsidies to Bombardier. The earliest the interim planes will be in the air is the “early 2020s,” leaving perhaps two years before they are mothballed.
Boeing likewise faces effective exclusion from the competition for a long-term replacement for the CF-18s owing to proposed new rules against procuring military equipment from companies who do “economic harm” to Canada. Not excluded from the competition: Lockheed Martin’s F-35, the plane that was first chosen in 2010, but which the incoming Liberal government had promised it would not choose, in the same platform in which it promised to immediately launch an “open and transparent competition.”
The F-35, by the way, is the plane that Australia has chosen to replace its aging F-18s: the one it is now selling to us. It may well be the plane that Canada eventually chooses to replace, er, itself. But that’s not until after the next election, so it hardly counts.
Everything about this whole sorry mess reeks of politics, deceit and cowboy economics — or in other words, procurement as usual. The “capability gap” suffers from a pronounced credibility gap: virtually no independent expert agrees it exists, defined as it is by a standard of military readiness — the ability to meet both our NORAD and our NATO commitments, simultaneously, in full — that has never been asked of us and is unlikely ever to be.
The cancelling of the Boeing purchase, likewise, while an obvious money-saver — used jets are cheaper — is unprecedented in subordinating the needs of national defence to the prosecution of a private trade dispute. As an attempt at blackmail it is also spectacularly unwise: there is no indication Boeing has any intention of withdrawing its suit, and in any case Canada has an interest, as the smaller party in any dispute with the United States, in maintaining a rules-based approach to its resolution.
But it is the proposed new rules governing military procurement that are the silliest part of this shemozzle. Procurement has long been disfigured by attempts to attach local content requirements, such as the notorious Industrial and Technological Benefits (ITBs), in an attempt to rope international arms manufacturers into the dubious project of propping up the Canadian defence sector.
Or rather, to pretend to. The burden of such disguised subsidies is almost certainly not borne by the contractors, who compete for capital on international markets and can ill afford to hand out freebies. Rather, it is priced into the contracts. As such, it is subject to the same criticism as any other industrial subsidy. The cost is borne not only by the taxpayer and/or the military, but by other sectors of the economy, from whom capital and labour are thereby diverted.
Now the government proposes attaching still another non-military condition to future military purchases, starting with the $19-billion fighter jet contract. The details have yet to be revealed — or, it would seem, written down — but apparently it would involve some sort of test of every competing bidder’s “overall impact on Canada’s economic interests,” assessing their “economic behaviour” in the years prior to the contract being awarded. “Bidders responsible for harming Canada’s economic interests,” the government warns, will be at a “distinct disadvantage.”
The best word for this, other than petulant, is eccentric. No one knows how any of these terms would be defined, still less how this novel approach would square with Canada’s obligations under international trade law. Which types of “behaviour” would be assessed? What sorts of “harm” would count? The prospect is for still further delays and still higher costs as these highly subjective judgments are worked out, with still greater uncertainty the result.
Is Boeing, a major employer in Manitoba, really doing “harm” to Canada by defending itself against alleged unfair trade practices on the part of Bombardier, a major employer in Quebec? A strong argument could be made to the contrary: that by calling out the federal government’s decades-long history of favouring Bombardier, to the tune of billions of public dollars, Boeing is doing Canada an enormous service.
The government may pretend that the economic interests of the country are synonymous with Bombardier’s. But that’s no reason the rest of us have to.
Correction: In a recent column, I said the first three of 15 frigates to be supplied to the Royal Canadian Navy under a proposal put forward by an Italian-French consortium would be built in Europe, with the rest constructed by Irving Shipbuilding in Halifax. That was part of an earlier plan proposed in 2016 by the Italian partner, Fincantieri; it is not part of the current proposal.