Donat Raymond
Liberal
Hon. Raymond O'Hurley (Minister of Defence Production):
Mr. Speaker, I have
quite a lengthy statement concerning defence production sharing with the United States. As hon. members are aware, a Canada-United States ministerial committee on joint defence has been established as the result of discussions between the Prime Minister (Mr. Diefenbaker) and the President of the United States, to consult periodically on any matters affecting the joint defence of Canada and the United States. It was envisaged that these periodic reviews would include not only military questions but also the political and economic aspects of these joint defence problems. Defence production sharing has been and will continue to be one of the subjects of concern to this committee. At the last meeting held in December, production sharing was one of the important subjects discussed.
A committee of senior officials of Canada and the United States has been established to deal with the development and production sharing aspects of our military requirements. I would like to point out that this committee includes representatives of all the departments of our government which are concerned with this highly important subject. This committee has established working groups for certain specific programs and projects. These working groups are dealing directly with prime and subcontractors, as well as with the procurement agencies of the United States government.
Within the framework of these arrangements numerous meetings have taken place with appropriate authorities of the United States government. These discussions had as a starting point the fact that the economic interdependence of the two countries in relation to defence has been accepted as a general principle by the governments concerned for some time. The Hyde Park declaration of April, 1941 and the statement of principles for economic co-operation of October, 1950, recognized that the production and resources of Canada and the United
States should be used co-operatively for defence in order to achieve the best combined results.
We are now determined to make these existing agreements effective in action. The government is taking every step open to it to ensure that Canadian manufacturers be given access to the United States defence procurement program. This has an immediate importance in relation to the Bomarc, Sage and radar programs. Working groups have been established in these areas, and frequent meetings held with the United States Air Force and prime contractors. The approach has been to identify equipment for which Canadian industry is competent to undertake production as prime contractors or as subcontractors for United States prime contractors.
Both governments are helping to establish better inter-industry contact than has existed in the past. We are also facilitating the exchange of information and personnel between United States prime contractors and potential Canadian suppliers. United States prime contractors have made visits to Canadian plants to obtain a better knowledge of Canadian capabilities. As a result, Canadian firms are already having their names placed on United States industrial and governmental tender lists. Many of our companies have already submitted technical proposals and quotations, and several contracts for engineering services, development and the manufacture of components have been placed with Canadian firms. Progress along these lines will, I am sure, become more and more evident. However, time and continuing efforts will be required to achieve our objective.
I emphasize, however, that the efforts of our government can only be directed towards the setting up of the necessary arrangements whereby Canadian industry will have equal opportunities with United States industry to participate in the production of the technical equipment which is required for defence programs of mutual interest. The real success of production sharing endeavours depends, to a large degree, upon the determination of Canadian industry vigorously to seek defence business in the United States either as prime or as subcontractors. In assuming this responsibility, Canadian industry must bear in mind that it will have to
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Statement on Defence Production Sharing be competitive with United States industry in terms of technical competence, delivery and price.
We must look, however, beyond immediate programs in order to work out effective arrangements for sharing in the production of future weapons related to the defence of North America. Our continuing objective is to co-ordinate the defence requirements, development, production and procurement of Canada and the United States in order to achieve the best use of our respective production resources for our common defence. The attainment of our objective will be made easier if the sharing of tasks can be initiated at the development stage. It must be recognized that in the final analysis the degree of participation by Canadian industry in the production of major weapons will be governed largely by the extent to which Canadian scientific and engineering skills are able to share in co-ordinated programs of development.
There has always been co-operation between the two countries in utilizing each other's defence production resources. Production sharing arrangements will now place greater emphasis on across the border flow of defence work. From April, 1951 to the end of 1958 Canada has placed contracts for defence equipment in the United States amounting to $590 million. The United States, on the other hand, has contracted in Canada for defence equipment totalling $540 million for the same period. In 1958 Canada placed contracts in the United States to the value of approximately $55 million, but the net value of business placed was reduced to approximately $10 million primarily as a result of the termination of the Astra and Sparrow programs, and decreases in some older contracts for aircraft equipment. In the same year the United States placed $40 million worth of contracts in Canada. These figures represent prime contracts only, and do not take into account any subcontracting which is handled by prime contractors.
Here it is true that Canada subcontracts a greater volume of work into the United States than the United States prime contractors place in Canada. Although statistics on these transactions are necessarily approximate, I believe that about an average of 20 per cent to 25 per cent of our aircraft and electronic equipment contracts are subcontracted into the United States. It is in the United States subcontract field that the greatest results can be achieved through the production sharing arrangements which we have set up in conjunction with the United States.
One of the largest contracts placed in Canada by the United States was the mutual aid purchase of CF-100 aircraft for delivery to
[Mr. O'Hurley.1
Belgium. The United States has bought 5 Caribou aircraft for evaluation purposes, and continues to buy Beaver and Otter general purpose aircraft. There are also continuing contracts being placed for R-1340 engine spares, F-86 aircraft spares and maintenance support for the United States-financed Pine-tree radar sites. Other purchases include radomes and support items for the distant early warning radar line. Not included in the foregoing figures is a recent United States contract placed in Canada covering radar sets for installation in the United States-financed Pinetree radar sites amounting to $6.5 million.
As I previously pointed out, it will take time and continuing efforts on behalf of the government and Canadian industry to make any significant headway in our recently organized production sharing arrangements. I am pleased to point out that as a result of production sharing efforts, a Canadian company has been selected for the production of wings and ailerons for the Bomarc missile. The present value of this contract is $1.7 million. Also Canadian engineers are working on the Bomarc missile for the United States prime contractor on a subcontract basis. In addition, certain other contracts covering electronic equipment have been placed in Canada. We expect as time goes on that further contracts will be placed in Canada.
As the Prime Minister has previously pointed out, the defence of North America has become a joint responsibility of both Canada and the United States, and the skills and resources of both countries must be utilized in the most economic manner.
Subtopic: STATEMENT ON COST-SHARING IN DEFENCE PRODUCTION