Aerospace Policy

Talbot Boggs
July 11, 2007
By Talbot Boggs
The debate over government subsidies and whether Canada needs a national aerospace industry has heated up again, sparked on the fixedwing side by the sudden resignation of Bombardier CEO Paul Tellier in December, and word that the federal government is considering a $1- billion package for the sector.

On one side is the aerospace industry, which has made a case for a national strategy, arguing that aerospace is one of the four industry sectors that drive the Canadian economy. It is a $20-billion industry that directly employs 75,000 Canadians in more than 400 companies throughout the country. So it’s not just Bombardier. Major players in the helicopter sector include Bell Helicopter Textron Canada, Eurocopter Canada and Pratt & Whitney Canada, which manufactures engines for both helicopters and fixed-wing aircraft.

“The bottom line is if we don’t have a national aerospace strategy, we are going to be losers on the world stage.

And it’s not just the established players Canada is competing against, warned Peter Boag, president of the Aerospace Industries Association of Canada (AIAC). “China, India, Korea and Japan are all building a national aerospace capability. If you want to play in this game, you need a national strategy with government and industry that lays out where the industry is going and roles of the players in it.”

On the other side are the free-market supporters who say no industry or company should be given a guaranteed right to survival, and that the concept of government industrial policy is antiquated and void of a sound economic foundation. There is no shortage of targets including government support to Bombardier to goose political fortunes in Quebec, grants by Technology Partnerships Canada and support from the less-than-transparent Export Development Corporation.

Jason Clemens, the Vancouver-based Fraser Institute’s director of fiscal policy, said that government assistance to the industry is just another example of market intervention and picking corporate and industry winners. “When companies and industries start depending on guarantees they become less competitive.”

Cordiano disagrees. “We don’t have to go down an old path. Just because it was like that in the past doesn’t mean it has to be like that this time. If we don’t have a strategy the fallout will be dramatic - not just because of the 21,000 highly skilled, high-paying jobs here in Ontario, but because of innovation in our [national] economy.”

The AIAC noted that aerospace is a strategic industry that operates with a consistent trade surplus and pays back wide economic and social benefits to Canadians. “Past Canadian aerospace successes,” Boag said, “have not been an accident but the product of an effective industry-government partnership.”

He predicted that Canada’s aerospace industry would disappear in a decade without government assistance.

Douglas Reid, a business strategy professor at Queen’s University, wonders if that would be such a bad thing. “Every nation has its set of irrational beliefs, and in Canada those beliefs are that aerospace is a strategic industry,” he said. “Maybe we should ask ourselves if there is something else that would provide equal or more benefit for the money. There are lots of countries that do very well without an aerospace industry.”

Federal Industry Minister David Emerson disagrees, going on the public record as saying the government won’t abandon the industry.

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