CANADA

Canadians at the arms bazaar

Marci McDonald June 17 1985
CANADA

Canadians at the arms bazaar

Marci McDonald June 17 1985

Canadians at the arms bazaar

Marci McDonald

At first glance, there was nothing special about the booths clustered in a corner of Washington’s vast new convention centre. Surrounded by six acres of state-of-the-art defence technology, the vendors offered the latest gadgetry designed to catch the eye of military purchasing agents window shopping at the 39th annual Armed Forces Communications and Electronics Association show. But on 22 tables,

the crossed Canadian and U.S. flags suggested that certain exhibitors hoped they had special status. Indeed, the leading electronics firms from Canada displaying their wares at the world’s largest military electronics bazaar last week eagerly explored just how special their status would be when it came to making deals.

The outlook was not immediately encouraging. For Canadian contractors with an eye on a bigger slice of the $294billion-a-year U.S. military pie, the show was the first test of whether closer defence co-operation pledged by Prime Minister Brian Mulroney and President Ronald Reagan in Quebec City in March could pay off. But as a joint government task force on broadened Canadian access to the U.S. defence market also met in Washington last week, most executives agreed that, so far, the new coziness has failed to produce contracts. In fact, U.S. Defense Secretary Caspar Weinberger recently had to intervene personally to convince one of his military pro-

curement officers that Canadian Marconi Co. of Montreal—a longtime supplier to the U.S. Army—was eligible for a bid invitation. Said James Soos, president of CMC Electronics, Canadian Marconi’s New Jersey subsidiary: “Policy has a way of taking forever to filter down to the trenches.”

Such auguries did not bode well for an industry hoping to profit if Ottawa decides later this year to participate in research into the United States’ proposed space-based Strategic Defense In-

itiative-otherwise known as “Star Wars.” Ever since a Pentagon team travelled across Canada last December advising Canadian firms on how to bid for U.S. defence contracts, the Mulroney government has promoted increased military co-operation as a motor to help revive a sluggish economy. Last year Canadians sold a record $1.4 billion worth of goods to the U.S. military—58 per cent more than four years ago, but less than one-half a per cent of the U.S. military business. That still left Canada a $400-million deficit for the year in military trade with its neighbor.

Indeed, some experts argue that, despite such measures as the 30-year-old Defence Production Sharing Arrangements, which exempts Canada from duties and Buy America policies, defence trade is skewed in favor of the U.S. suppliers. According to a study by Ernest Regehr, research director of the Institute for Peace and Conflict Studies at Ontario’s University of Waterloo, every $100 the Pentagon spends in Canada

generates $125 of imports from the United States, because Canadian firms often are forced to use American parts to fulfil their contracts.

When Foundation Instruments Inc., a small Ottawa-based fibre optics firm, won a $200,000 contract to help build the U.S. over-the-horizon radar system being installed in Moscow, Me., 60 per cent of its cost came from imported U.S. components. Said Foundation’s vicepresident Robert Parslow: “It’s a game.” But critics complain that game has left Canada without its own industrial defence base—a permanent subcontractor dependent on American whim. And defence experts argue that Star Wars research would only accelerate that trend. Moreover, Regehr contended that if Ottawa decided not to participate in Star Wars at all, the White House could then subtly retaliate against the rest of Canada’s arms industry, leaving it—as some industry insiders fear—increasingly in a technological backwater.

That thought haunts Canadian defence contractors who suspect that the Mulroney government, rather than arouse Canadians who oppose involvement in Star Wars, could com| promise by ruling out diz rect government funding ï of Star Wars research, 3 leaving private industry free to pursue contracts. But some contractors fear that without government backing, they would stand little chance of winning a share of Star Wars contracts. Said Menno Stoffels, a marketing manager of Foundation: “In defence areas, if you don’t bid you just get scratched off the list. That’s what would happen to Canada as a country.”

Other defence experts insist that while officially refusing to accept the Star Wars invitation, Ottawa could still discreetly fund a wide range of related space and communications research not likely to provoke public wrath. Toronto’s Spar Aerospace already has a government contract to research spacebased radar that could fit into a Star Wars scenario. But the company has barred all discussion of Star Wars. As indicated by a bombing in 1982 at the Toronto offices of Litton Systems Canada Ltd.—manufacturer of the guidance system for cruise missiles—Canadian industrial co-operation with the Pentagon is an issue that can prove to be literally explosive.