NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 5, 2001

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[English]

The Chair (David Pratt (Nepean—Carleton, Lib.)): I'd like to call this meeting of the Standing Committee on National Defence and Veterans Affairs to order.

I would like to thank our witnesses for being here today: General Belzile, chairman of the Conference of Defence Associations, Colonel Alain Pellerin, executive director, and Colonel Sean Henry, senior defence analyst.

Before we hear from our witnesses, Mr. O'Reilly has a very brief announcement he would like to make as a follow-up to an earlier request that was made to the committee.

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): Thank you, Mr. Chairman.

It's maybe for the steering committee. When CSE appeared before us, we asked for a briefing—the illustrious 35-year-old Mr. Bachand asked for further information. In following that up, they suggested that we take a normal meeting day and they would pick up a bus for us. It's at Tunney's Pasture. The rules, of course, are that it'd be full committee members only, no substitutes; the clerk and the researcher would be invited. If we give them three dates, they can tell us which one would be the best. So I would suggest that you deal with that, either at the steering committee or later, as to the availability of the official opposition and so forth. They'll be quite pleased to show us the facility and give us a briefing over there.

The Chair: Thank you, Mr. O'Reilly, we'll take that up with the steering committee at the earliest opportunity, because I think all members are anxious to make that visit.

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We have a limited amount of time for our guests today, because they're splitting the time of the committee with the Defence Industries Association.

General Belzile, you have the floor.

Lieutenant-General Charles H. Belzile (Retired) (Chairman, Conference of Defence Associations): Thank you very much, Mr. Chairman. It's a pleasure to be back in front of your committee.

[Translation]

The Conference of Defence Associations, CDA, is the oldest and the most important defence association in Canada. CDA remains the main national voice on defence and security matters. Established in 1932, it now comprises 31 associations and its total membership consists of 600,000 Canadians from all parts of the country. We believe that credible defence and efficient armed forces can contribute to the well-being and prosperity of all Canadians.

[English]

Mr. Chairman, we last appeared before your committee on April 26. At that time I outlined the concerns of CDA over the state of the operational readiness of the Canadian Forces, and I undertook to return and report the results of a CDA study of that topic, which was then under way. My testimony today will deliver on that undertaking.

I will also mention that I and members of CDA were pleased with the recommendations of your second report on plans and priorities, published in June. We are grateful for your support for additional funding in the DND budget, and I hope my testimony today will reinforce your resolve on this subject in your final report.

We have also been encouraged by recent public statements, particularly those of the Honourable John Manley, that are in line with the CDA position. He has said that Canada must do more to “live up to” its commitments to international security, commensurate with its status as a member of the G-8 group of nations. Accepting our share of the defence burden contributes to our own well-being, and many agree that we have not done this well for several decades. In this respect, it is difficult to ignore recent statements made by Lord Robertson, the Secretary-General of NATO, and by NATO parliamentarians about the level of Canadian defence expenditures. Recent figures released by NATO show Canada's defence spending per capita is just $265 U.S., whereas the alliance average is $589 U.S.

This leads me to reiterate the key conclusion of our study from last year, which you will remember was entitled Stability and Prosperity: The Benefits of Investment in Defence. In it we demonstrate that although the barbarians are not at the gates of Canada, threats to Canadian prosperity and well-being exist nonetheless, as we are a nation that lives or dies on the basis of our success in the realm of international trade. In turn, successful trade is dependent upon a stable national and international milieu. The blows to our economy since September 11, unfortunately, prove my point. The need for a military response in these circumstances has also been driven home.

DND is faced with a yearly shortfall of $1 billion in its operations and maintenance account. That is the reason the additional money allocated by the government to defence over the past two years, although welcome, has contributed little to resolving the overall problem. It is absorbed immediately by the ongoing deficits, or the credit card bills, if you wish.

Our study this year, entitled Caught in the Middle: An Assessment of the Operational Readiness of the Canadian Forces, was released on September 27. So far it has earned plaudits from people across a wide spectrum, including government, the armed forces, academia, the media, and the public at large. It examines in detail the effects of DND underfunding on the Canadian Forces. For some time questions have been raised about whether the latter are operationally ready to undertake the commitments assigned to them by the government, as stated in the 1994 white paper on defence.

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These commitments, you will remember, are grouped within the following roles: first, protection of Canada, second, Canada-United States defence cooperation, and third, contributions to international security. Note, however, that the first two have tended to be confused since September 11 in the context of North American security.

Defining the components of operational readiness is often controversial. However, we have selected criteria, such as force structure, doctrine, manpower, equipment, training, and logistics, that are accepted by most analysts. All these elements must be made effective individually, and then be brought together to produce a fighting force. We have sometimes compared armed forces to a symphony orchestra, where a number of diverse elements are blended to produce harmonious results. If any of the parts are missing or weak, the results will be less than harmonious. That also applies to armed forces, except that in their case it may well involve matters of life and death.

The quick and simple solution to the shortage of funds in the DND budget has been to reduce the number of people in the Canadian Forces from 85,000 to some 57,000. The recent recruiting drive, I'm told, has raised the latter figure to 59,000, but the number of effective personnel that are trained and ready for operations is still only 53,000. This is one of the most serious aspects of underfunding, as it places heavy pressure on the dwindling pool of people who remain on duty. They suffer burnout, and many leave the service. It also undermines Canadian Forces organizational integrity.

Some sources point to newly acquired high technology systems, such as the Coyote reconnaissance vehicle and the light armoured vehicle, as equivalent replacements for decreased manpower. These systems do provide some improvements to military capabilities, but without a critical mass of people, replacement of other worn-out items, and a viable logistics system, the operational readiness curve remains on a downward slope.

The situation we allude to in the title of our study is that the Canadian Forces current capabilities are still declining, and new capabilities are unaffordable. Hence they are caught in the middle.

We conclude that because of insufficient funds in the DND budget, the Canadian Forces cannot fulfil their commitments beyond a marginal level within the resource stipulations and time limits specified in current plans. I refer you to the text of the study for the methodology we use to reach these conclusions. I particularly guide your attention to the excerpts from the level 1 business plans submitted by the chiefs of the navy, army, and air force, as well as logistics agencies. This is important, as it shows our evidence is drawn almost entirely from DND sources, and is not, as some have stated, the outdated thinking of retired generals and colonels living in the past and preparing for the last war.

Although it is unfortunate to ride that coattail, the terrorist attacks in the United States demonstrate a number of points made in our study. First, history has not ended, and the interests of some nations and groups will continue to be advanced through violence. Second, events such as those in Kuwait and Kosovo and the recent terrorist attacks in the United States are clear indications that threats can materialize with very little warning. Third, there is a broad range of threats in the post-Cold War era, and we feel it would be a mistake to focus on only one of them. Multipurpose combat-capable armed forces need to be maintained at a state of operational readiness that would allow them to respond effectively across the entire security spectrum. Finally, technology does not replace people beyond well-defined limits.

I would now like, if I may, Mr. Chairman, to make a few brief comments on the current Canadian military contribution to the U.S.-led coalition.

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In our new study this year we state that national security rests upon the dual pillars of national will to use armed forces in combat operations and the operational readiness of those armed forces to execute their missions.

On the first count, we are somewhat troubled by an apparent reluctance to acknowledge that the Canadian contingent has been assigned to a wartime mission. In this respect, there has been a tendency to speak almost exclusively of the Canadian contribution in terms of support and humanitarian objectives. Such roles, while worthy, would not give Canada the credit sought by the government, as expressed in Mr. Manley's recent comments.

There is no doubt that the Canadian naval commitment is substantial. However, its operational readiness is reduced because of the shortcomings identified in our study. The size of the naval task group, some 50% of available ships, if one considers hulls in refit and manpower shortages that exist now, will make it very difficult for the navy to sustain that level of commitment past the initial six to nine months. The problems of aging air assets, including Sea King helicopters, Aurora surveillance aircraft, and Hercules transports, are well known. With the additional problem of the shortfalls in logistics and material resources, a deployment beyond six months may encounter serious problems.

In conclusion, the aim of government must be to protect its citizens and nurture stability and prosperity. This is at the heart of our democratic way of life and our social order. I ask, is this worth fighting for? I am certain that you would answer yes. In that case, the security inherent in the Canadian Forces must be assured by moving DND funding higher on the list of national priorities.

Our recommendation is that the government embark on a five-year plan for the revitalization and modernization of the Canadian Forces, as your colleagues on the finance committee recommended in their report for 2000. For this to materialize, the defence budget must be increased by a minimum of $1 billion in each of the next five years, and I stress that this should be in the form of an addition to the DND budget base. To merely pay the bills of the current overseas deployment by so-called flow-through funds is not sufficient; it would not arrest the decline and operational readiness of the Canadian Forces as a whole.

Let me, in closing, praise the outstanding devotion to duty and professionalism of the people in the Canadian Forces, especially those recently sent as an overseas task force. Once again they will do us proud in the face of adversity. It is essential, however, that we not let them down by skimping on the tools they need to do their jobs. I therefore extend my appreciation to Minister Art Eggleton and to members of this committee for trying to meet this challenge.

Thank you. I will now be pleased, with my colleagues, to take your questions.

The Chair: Thank you very much, General Belzile.

For our seven-minute round we have Mr. Benoit off first.

Mr. Benoit.

Mr. Leon Benoit (Lakeland, Canadian Alliance): Thank you, Mr. Chair, and thank you very much, gentlemen.

I want to commend you, very sincerely, for the work you've done. I think all of you deserve a lot of credit. I think you're performing a great service for the men and women serving in the military and for the country, because it's so important to have a strong military and a strong security system all around, in which the military is a key part. So I do thank you all for the work you're doing.

I find it interesting and frustrating to have the difference in stated capabilities between the minister on the one hand, with the chief of defence staff and other top military people, and you and other experts on the other hand, who have been involved in the military, who study the military, and who are committed to making it better. I've been asking the minister over the past few weeks to explain how Canada can continue to meet its commitments, its NATO commitments, in the Balkans and elsewhere, and sustain its commitment to this war against terrorism. The minister said in response to one of my questions last week that it's no problem, we have thousands of people waiting to replace those who are on the front lines right now.

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I'd like you, if you would, General, to respond to that and explain to me how we have those thousands, and it's no problem. We have these thousands of people ready to fill in, so that we can indefinitely sustain the rotations.

LGen Charles Belzile: Mr. Chairman, if I may take the first cut at this, the divergence in our opinions is not totally surprising, because one accepts the fact that with new technology and with new capabilities, somehow, in certain selected areas, you can make a point for saying we're in better shape than people like us say we are. I want to make the point that our study was printed before September 11. This touches on the fundamental shortfalls in the Canadian Forces and in the three services. There's not much doubt in my mind either that up front there's a very good capacity to react, and I think we've just shown it again recently. Our concern, though, is with the sustainability of this. Also, there are another 10 scenarios you should have troops ready to respond to. If you have, for instance, at the same time a crisis in the Arctic, this is where the problems would start to show.

Mr. Leon Benoit: I'll just stop you, if I could. My question, very specifically, to the minister at that time was, considering our needs for homeland defence and all these possible scenarios that could arise here in Canada and our commitments overseas, how are we going to meet them? He said, no problem, we have lots of people to do it. So it was specifically on people. It wasn't on some of this new technology, which is very good. That's what's so frustrating, getting the difference of opinion on the very same questions.

LGen Charles Belzile: Our major concern is depth, sustainability, and the ability to respond without knowing what's at the end of the tunnel. What we've done recently is embark on a mission, which is very likely to be long-term. It is also very likely to be, at this moment, very ill-defined. What happens when you come out at the end of that tunnel and the picture gets a little clearer is really something I don't think anyone right now is capable of predicting—certainly not us either.

So what we're saying is, prudence demands that we have more depth and more sustainability in our system. With the first phase, if you want, of what the white paper of 1994 stipulated or asked for, I don't have much doubt. But a lot of those who keep talking about these thousands of people I think sometimes forget that some are tooth to tail ratio, and some are not the kind of people you can actually put in some of these missions, whether or not they are peace operations, which are mostly done, as we know, by foot soldiers, aided by tremendous technology today. But we only count them at about 6,000 infantrymen, plus 6,000 reservists, if you ever could manage to have them all in service at the same time. We state that this makes your rotation and your upkeep of those things extremely difficult, and so you do have an operational shortfall, from the sustainability point of view.

I obviously cannot—and I'm sure you don't expect me to—accuse the senior people in uniform of using the same information and arriving at different conclusions. I'm sure most of your members, Mr. Chairman, would reach conclusions that are different, one from the other. There's not much we can do about that.

The uncertainty of the thing and the prudence we feel we must have in the Canadian Forces demand that we should be at least, as we stated in this thing, at about 75,000 to give us the depth and the ability to respond to the multitude of scenarios at the same time, possibly. This is where you come into a crunch.

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I'm going to ask my colleague, if you'll permit it, to say a few words.

The Chair: We have only seconds left in this round.

Colonel Sean Henry (Retired)(Senior Defence Analyst, Conference of Defence Associations): Starting in part five of this study, under the heading of “Operational Readiness Assessment”, you will find page after page of material that is taken straight out of the level 1 business plans of the three chiefs and the logistics people in the headquarters. So it is not we sitting at this table or other members of CDA who are arriving at these conclusions, it's people within the senior ranks of DND itself.

To expand on the chairman's remarks right now with respect to the scenarios, which are also outlined in the study, going from search and rescue at home to full-scale war abroad, the current situation is extremely unstable, I'm sure most people will agree. It could very quickly switch over to a full-scale war, either in Afghanistan or in the Middle East. Canada might be called upon to produce a full-fledged army brigade group, which it says it can do, on very short notice.

Finally, with respect to sustainability, right now the naval members in the National Defence headquarters are being pulled out in preparation for the first rotation overseas. That's how tight they are with respect to manpower.

The Chair: Thank you, Colonel Henry.

[Translation]

Mr. Bachand.

Mr. Claude Bachand (Saint-Jean, BQ): Thank you, Mr. Chairman.

I would like to follow up on what you just said, Lieutenant- General Belzile and Colonel Henry. We have had here the chiefs of the three main armed forces who were all unanimous in saying—and you just mentioned, Colonel Henry, that you referred to the same numbers as they did—that the state of preparedness of the Canadian Forces is currently better than it was ten years ago. I would like to know if you agree on that.

LGen Charles Belzile: This is another way of putting the same question than the one that was asked earlier. Unfortunately, my answer won't be that different from the one I just gave. Using the same numbers and the same information and going somewhat on our own experience—after all, we lived through similar functions—, we arrive at different conclusions. Our own analysis brings us to draw different conclusions, and I maintain that it is correct, sufficient and adequate. I'm talking about the analysis, not about the Canadian Forces. Unfortunately, I cannot change the words or the opinions of others.

Colonel Alain Pellerin (Retired) (Executive Director, Conference of Defence Associations): I would like to add something to what our president said. If you look at our study, you will see that we are quite aware of all those arguments and that we take care not to get into a discussion that we find rather trivial about knowing whether the operational readiness of our armed forces is better now than it used to be 10 or 15 years ago, or 50 years ago, if we want to go back that far in the past.

What is important here and what we have tried to establish, it's whether we are operationally ready to carry out our today's and future missions. That's the important thing. Trying to draw conclusions from what we did 10 or 20 years ago is not very useful for this committee.

Mr. Claude Bachand: I think it would be important to understand that it is easier for one not in uniform to talk about that than for one who is in uniform. Am I right? So, I'm not mistaken. Okay then.

I have another question, Mr. Chairman. I find that the National Defence budget has been somewhat ignored for a long time. If I say that, it's because for many years we had the impression that we were under the American umbrella and that Canada couldn't be invaded since, of course, the Americans would not allow foreign forces to come and invade a friendly neighbouring country.

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Currently, we rank second last in the class. We talked about numbers earlier. I had discussions with NATO's people about those numbers, and I realized that we were just ahead of Luxemburg, who is bottom of the class. I think that only 1.2 % of our gross national product is for National Defence. Sometimes, however, choices have to be made. Now, I find that our Navy and our Air force provide some protection of our airspace and territorial waters. We certainly are at some disadvantage on the Navy side, because we have sent almost half of our fleet out there. But when we are at full capacity, we are able to take on the defence of both our airspace and our coasts, actually of our three ocean coasts.

As far as our commitments with NORAD are concerned, we are also in a position to take on the defence of the Canadian airspace.

I think that when we have a choice to make... You're talking of increasing the numbers to 60,000, and then to 75,000. Don't you agree that we are going to have a choice to make? Perhaps we will have to keep our navy and our air forces as they are now and put more emphasis on infantry, because we are more and more specializing in peacekeeping and observation missions.

Would you be in favour of not only increasing the budget, but also, if we were to augment our military personnel, ...? Don't you believe, as an association, that in order to fight terrorism within our borders while continuing to develop our expertise on international peacekeeping and observation missions we should put more emphasis on the army?

LGen Charles Belzile: Mr. Chairman, at the risk of seeming to favour the color of the uniform I used to wear during 37 years, I am going to be cautious in answering that question.

When I say that I'm going to answer cautiously, it's not necessarily that I'm scared of giving my opinion, but the fact is that it is more important to have a balanced force, with a spectrum of specialties broad enough to be able to face our 11 scenarios than going for the flavour of the month, if you want, and I deliberately used the term “flavour of the month”. After all, for many years we have been fully focused on peacekeeping operations, or on those so-called peace or peace support operations, to the detriment of things which were neglected even on the army side but also in the other services.

By specializing purely and simply in an area like that, it's our capacity to respond in other fields which suffers. So, in principle, I fully agree that we should have a balanced force and that all our three services are essential.

That being said, the army, which provides the vast majority of people on peacekeeping missions, is the organization which, should problems appear on the ground or even at the national level, would need more human resources. That has already been mentioned.

What would the Department of Defence do with those 15,000 additional people that are contemplated? It's for them to decide. They are, after all, responsible for such decisions; it's not for us to decide. We can always make a recommendation, but what we say is that the vast majority of those additional 15,000 people should probably go to the army.

That being said, we also believe that Canada is making bad use of its reserve forces. Reservists, particularly army reservists, are not as well used as they should be. The Navy and the Air Force, on the other hand, use their reservists in a much more consistent way. Their reserve forces are smaller and easier to integrate than those of the army.

So, we are talking of revitalizing our reserve forces, of enhancing the operational capacity of the army for its missions which, after all, require mostly manpower and balance. We are also talking of the importance of not loosing our expertise in other areas, namely our capacity to utilise aircrafts or ships in support of our ground forces when they are deployed.

Therefore, we cannot afford fully specialized forces.

[English]

The Chair: Thank you, General. Thank you, Monsieur Bachand.

Mr. Wilfert, seven minutes.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Mr. Chairman.

Through you, Mr. Chairman, again it's a pleasure to have these gentlemen back before us.

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General, after 1989 we talked about the peace dividend, and the forces were reduced from 90,000 to roughly 60,000. Within that context we had the 1994 white paper. I asked you before whether or not the white paper as it now stands is out of date, particularly in light of some of the changes we've seen in the post-Cold War period, and recently we have your comments with regard to moving the component back to 75,000. In light of what you have seen since September 11, and in light of the comments you've made to this committee in the past, would you change your position at all with regard to the relevance now of the white paper? In particular, what specific aspects of that paper should we change, or is it time for a new white paper?

LGen Charles Belzile: Yes, I have changed my mind, but I would like to qualify this by stating why before we were not too anxious to see a new white paper until the picture was a little clearer. It's because, quite honestly, we were afraid that a new white paper might be used to justify the status quo. To be quite candid about it, we said, well, better keep the one we have and we know than go with something that may just be a justification of the lowered capabilities.

With the September 11 events, very unfortunately—I can be accused of piggybacking on something rather unfortunate, but I can assure you it's not our intention—I don't think the time can be put back much longer. The rumour we hear is that the government is probably considering one for next year, something we would greatly support. I think it should not only contain the ability to respond to the problems as we see them today, but it must be based on a new strategic assessment that really tries to identify as accurately as possible the kind of problems we could face.

At the same time, however, it must, following particularly the Australian model, which I think I may have talked about the last time we were here, be something that is not purely National Defence. It's got to look at national security in its breadth. That includes the security forces inside Canada, police at all levels, firefighters, intelligence—all these things must be taken into account. So that means a multi-departmental paper, which must have, presumably, the Solicitor General, the Minister of National Defence, the Minister of Finance, and be endorsed, as was the case in Australia, by the Prime Minister and his cabinet, so that the finances associated with it are in there.

The 1994 white paper is a bad model. I think it's still a valid document, but as far as we're concerned, it's a bad model in two aspects. One of them is the fact that it was published before a foreign affairs equivalent white paper that should have taken place before or at the same time. It was done quite separately. The other aspect is that since 1994 the money to actually execute the desires of the government as stated in the 1994 white paper never came. If anything, the peace dividend you just talked about brought cuts and cuts and cuts to the budget, until the last two or three years—but the last two or three years, as laudable as they are, have paid mostly credit card bills.

Mr. Bryon Wilfert: Mr. Chairman, I would hope that we might have an opportunity to look at some point at the Australian paper. This is something that was alluded to before, but I think it is one we should be taking a look at.

I have lots of questions, but the chairman always restricts us, so I'm going to ask this question, General. I want to see how you respond to this, given defence industry issues.

The Canadian Defence Industries Association is a member of your organization.

LGen Charles Belzile: An associate member.

Mr. Bryon Wilfert: Okay. Can you explain what that means first, then?

LGen Charles Belzile: Very briefly, the 14 main associations, which include the Royal Canadian Legion, are what we would call in our conference umbrella the voting members, basically. The other ones are people such as the Air Cadet League, the Army Cadet League, the Defence Industries Association, who have a part to play as stakeholders in defence and security planning, industry particularly, but they are not voting members, nor do we ask them very much in the form of policy assistance. We try to develop that among the first 14, and then we run it past everybody. Actually, their comments are very useful to us, but they would not necessarily, except through cooperation, affect what we say in the paper.

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Mr. Bryon Wilfert: That is important, because I have read and have copies of letters I have seen that suggested that the CDIA represents defence contractors, and thus they have a vested interest in whether the budget for defence goes up. Therefore, is there not a perceived or a real conflict of interest? Now you're indicating to that it does not necessarily impinge on any of your activities.

LGen Charles Belzile: I do not think there's any conflict whatsoever. As to why they would want an increase in defence spending, I think you'd best ask them, not me.

Mr. Bryon Wilfert: I'm sure, General, you have seen those letters, and some people would then question some of the material you have put forth. And one thing you did put forth dealt with the issue of defence industrial capabilities.

A word we're hearing a lot of that I have a great deal of difficulty with is harmonization with the United States. You talk about harmonization of principles and processes you believe is achievable without in any way compromising this country's sovereignty. Could you elaborate on how you see that? When I see the word harmonization, the hair on the back of my neck goes up, because I have colleagues around this place who are talking about harmonizing absolutely everything under the sun, which they are certainly entitled to do, but I have great difficulty with that. There's not one case in recorded history where countries have gone to economic integration that has not led to political integration. Whether it's on the issue of immigration, environment, or defence procurement, I'm curious. I know we had a relationship after World War II with the Americans for a while. Could you elaborate on that?

The Chair: Could we get a very brief response on that.

LGen Charles Belzile: I think General O'Donnell, who is going to follow me, will probably have a more elaborate answer, but as a former chairman, in fact, of CDIA when it was called CDPA, Canadian Defence Preparedness Association, I don't see any problems in harmonizing with another nation. We have a lot of existing agreements with the United States, defence production sharing agreements, which have existed since the war, defence research agreements, and that sort of thing. It aids the whole aspect of interoperability and the ability to work with our allies, mostly because of the common nature of certain equipment and certain consumables, like ammunition and that sort of thing. So I don't see that as a threat to sovereignty, but perhaps other people see it that way.

The Chair: Thank you.

Mr. Stoffer, seven minutes.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you, Mr. Chair, and thank you very much, gentlemen, for your presentation. I can assure you, General Belzile, I will not hold you to changing your mind on a new white paper. I've said for quite a while, even before Sepetember 11, that it is time that Canada develop a new white paper to meet the needs of the new millennium.

You, sir, said we're down to about 53,000 to 58,000. Minister Eggleton in the Hill Times today says we're about at 58,000. A general the other day said we're at about 59,000. Why is it so difficult to get an accurate figure of how many regular troops we have ready to serve at this time?

LGen Charles Belzile: I really don't think it should be that difficult, but you must remember that the 59,000 or 58,000 you speak of right now includes everybody who is on the payroll. There are people who are on severance leave, who are waiting for their first pension cheque. This includes people in jail, to be complete. It includes everybody. And it includes people on the training list, and that is a constantly fluctuating number. People fail every day and are sent back home. People are accepted every day. What we must think of all the time are the long-tern capabilities. If I lose a sergeant who's taken me 12 to 15 years to produce, I cannot simply replace him by a recruit hired on Friday. I was given by the chief of human resources personally a figure, which I think was 59,384 or something on a given day, but I'm sure the next day it was different.

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Mr. Peter Stoffer: Thank you, sir.

In the executive summary of your report you say:

This unlimited liability of the sailor, soldier and airman must, however, be matched by an unlimited responsibility....

In today's Hill Times Senator Colin Kenny says:

Canada's military leaders should start offering the government their candid advice, rather than trying to guess what the politicians want them to say.

Obviously, if the soldiers are going to give unlimited liability and forfeit their lives if in harm's way, and the government has the unlimited responsibility, then would you agree with Senator Kenny's comment today in the Hill Times, which basically is saying that it's time for the military leaders within DND, not the political ones, but the generals, to get off their butts and start being more candid with the politicians?

LGen Charles Belzile: Yes.

Mr. Peter Stoffer: I was expecting a longer answer.

The Chair: Colonel Henry, did you want to have a word on that as well?

Col Sean Henry: Yes. There's one aspect about the strength of the armed forces that is covered in the study, and I think it should be brought out at this time with respect to the current question and the one immediately preceding it.

The reduction of the Canadian forces from 75,000 down to 60,000 was not driven by a rational process of deciding what was needed by consideration of factors that were brought out by a strategic assessment or otherwise. It was driven by one factor, and that was to save money, to live within a certain cap that had been placed on the defence budget at the time of program review. Program review said, this is what DND is going to get, live within that budget. That is what drove the numbers of people down, and it's still happening today. The army commander is faced with having to reduce his people even further to meet the cap of money that has been given to him. This is a tremendously important factor.

Mr. Peter Stoffer: I have two quick questions, Mr. Chairperson.

Sir, you asked for about $1 billion a year for the next x number of years. In a declining economy, where do you think that money should come from? Should it come from forgoing some of the tax cuts that were in last year's federal budget, or should it come from reducing other programs the government has responsibility for?

LGen Charles Belzile: Mr. Chairman, I don't think this would be for me to answer, other than to simply state that national security and national defence are so central to the stability and integrity of this country that one cannot deal with it on a zero-sum basis. I don't think we're in competition with the firefighters in Canada. We're not in competition with the health system. I maintain, and I've said this in many fora, we're not a poor nation. What we spend in NATO is nothing compared with what other nations spend. I personally think we can afford these things.

As to where Mr. Martin and his finance committee are going to find the money, it would sound rude if I said to them, well, it's your problem, not mine. But what I'm concerned about is that somehow, every time we talk about this, somebody says, what happens to the additional billions that are not now in health care and that sort of thing? You will understand that being a Canadian citizen like everybody else and wanting health care as much as anybody, I do not see one in competition with the other. Somehow you have to find a way to do that.

Mr. Peter Stoffer: Thank you.

At the Shearwater air base there's a divestiture of 1,100 acres of land, which this very long runway is on—the guys knew I was going to ask this one. Minister Eggleton and the chief of defence staff said the program will carry on, we will divest ourselves of that runway and of those lands. My concern would be that we may need that infrastructure down the road, if indeed we get into a full-scale conflict. Would you agree with the divestiture of lands post-September 11, lands we may require, especially that long runway at Shearwater?

• 1620

LGen Charles Belzile: If I may, Mr. Chairman, I won't speak specifically about the long runway at Shearwater, I will speak in generalities.

One of the problems I have with the Canadian Armed Forces today—and it started when I was still in uniform, so I can probably catch some of the blame on my own back—is that we are making a grave mistake when we close too many bases. We are putting our people in uniform away from the public, they're never seen. We just lock them into Cold Lake, and Bagotville, and Petawawa, and Valcartier, and the country never sees them until there's an ice storm or another crisis of some sort. Other than the reserves, who are still in society as a footprint, I think it's a mistake to close these things.

When I got back from Korea, we had to paint quarters of a camp that had been closed after the war and reopen it, because the army was growing. Divesting ourselves of capabilities is obviously a money-saver, and I can understand why people think that way, but I think we should keep enough flexibility in our basing system that we don't have to close everything, but leave people in the minds of the citizens of Canada.

The Chair: Thank you, General. Thank you, Mr. Stoffer.

Mrs. Wayne.

Mrs. Elsie Wayne (Saint John, PC/DR): Thank you very much, Mr. Chair.

General Belzile and Colonels, the finance minister will be delivering a new budget in December. Do you see a danger that increases for Operation Apollo and increases for the Communications Security Establishment will be perceived, or they will try to make them be perceived, as an overall increase for the military, while not addressing at all the shortfalls you have in the Caught in the Middle study you have brought forward? Those are the concerns I have.

I want to put it this way. I am one of those who feel very strongly that you take the politics out of the military, you don't play politics with the men and the women who are in uniform. This is one where you throw your colours, whether they're red, or blue, or yellow, or whatever aside, you turn around and do what's right.

You're saying you need $1 billion just to stabilize it. What we need, and what our men and women need, is not just to stabilize it. They need new Sea Kings, they need to get the rest of the submarines here and get them floating. We need to have more men and women in our armed forces. Is that billion dollars you're talking about just stabilizing, or is it going to allow us to give them the resources they require to play a role? And do you feel that when the budget comes down, because of what is happening right now, we will not be addressing the shortfalls that are there, but just looking after what is there?

LGen Charles Belzile: Mr. Chairman, I will not, for obvious reasons, make a political judgment here, because it's not my job.

Mrs. Elsie Wayne: No, it isn't.

LGen Charles Belzile: When we talk about a billion dollars a year, we have said many times that the next 2 or 3 years at a billion a year would stabilize the situation. I think we're talking about five years to add to it. The budget, after all, now has reached $16 billion, as opposed to $11.2 billion, and we think some revitalization can take place within that.

As to whether I hope the budget will give money to look after the fundamental shortfalls, as opposed to just a specific security thing—which is needed, no question about it—until I see what the budget says, it will be a little difficult for me to comment.

• 1625

Mrs. Elsie Wayne: Right.

You brought in your report prior to September 11 and what happened in New York, which shows that it isn't because of what happened then. You've had these concerns, all of you retired officers, and you have been speaking out for the military, as we have seen.

I have great concerns about the reservists. From the report we just received, I believe there are 14,700 and we need 30,000. Once again, in view of what has just happened, about 500 of them had a cut in their rate of pay, whereas some others got an increase of 15%. According to the minister, when I asked a question about this, there are a lot of businesses that will pay their salaries when they're called upon to perform their duties as reservists. But they're supposed to receive 85% of the pay of the level they represent.

I guess we haven't been pushing hard enough to get people in the reserves. How do you think we can go about this, encouraging them to be part of it? I honestly believe in my heart it is because of the fact that they perhaps have not been recognized as they should and have not received that compensation. I was told that some of them won't be able to pay their mortgages, some of them won't be able to look after their families or their children with the system that's there now.

LGen Charles Belzile: One of the things I was partially responsible for saying in 1995 concerned a restructuring of the Canadian Forces reserve. One of our recommendations was to make the membrane between the two, the regular force or full-time service and the reservists, permeable, so it's easy to shift from one to the other as family and career pictures change, ages of children, and so on. And we recommended then that a pension system should also exist for them on a proportionate or service basis, the number of months, number of years, if you want, they put in on regular or full-time service. You'll remember that I was one of the commissioners on this with the late Chief Justice Brian Dickson, and those recommendations are still somewhere in limbo, though I think they would go a long way in helping revitalize the reserves.

I can't say why most of these things have not been adopted, but I agree with you that there's a tremendous resource potential there and we've made the access very difficult. I don't see any reason why it should be that difficult.

The Chair: Thank you, Mrs. Wayne.

Mrs. Elsie Wayne: Thank you.

The Chair: We are at 4:30 now, gentlemen, and we have another set of witnesses to hear from today. So on behalf of the entire committee, I'd like to thank you for being here and providing us with information that I think is very important for the committee's deliberation and the preparation of our report. Thank you very much.

We'll take a five minute break while the new witnesses are coming in.

• 1630

• 1634

The Chair: Could we have members resume their seats please, and we'll get to the next phase of the meeting?

• 1635

The Chair: I am very pleased to welcome Lieutenant-General Paddy O'Donnell, retired, from the Canadian Defence Industries Association and Mr. Dave Stapley of DRS Technologies. Welcome to both of you. We're very interested in getting your comments.

Lieutenant-General O'Donnell, do you have a prepared statement?

Lieutenant-General Patrick O'Donnell (Retired) (President, Canadian Defence Industries Association): Mr. Chair, I am aware that the members of your committee were only provided with our document today, and I wonder if I might take the first five to ten minutes and work my way through the paper with your committee members to highlight some of the key points. I don't intend to read it all, but it may be worthwhile if we use this paper as the basis, and I'll highlight some of the major themes as I go through, if that's agreeable to you.

The Chair: That's fine.

LGen Patrick O'Donnell: Okay.

Mr. Chair, ladies and gentlemen, we appreciate the opportunity to be here this afternoon. We do consider this to be an extremely important item of national interest.

You've already identified Mr. Stapley as the president of DRS Technologies Canada. In addition to being the president of the Canadian Defence Industries Associations, I am a senior partner with CFN Consultants here in Ottawa, and I'm a former vice-chief of the defence staff. I retired in 1995.

You've had an awful lot of information over the past month, a lot of detail related to the readiness of the forces. It's our intention to abbreviate to the key points from our industry's perspective. We are a large organization. There are several thousand Canadian companies that make all or part of their living through the defence industries. Our revenues for the year 2000 were $5.2 billion, spread across the whole of Canada. We do have some extremely capable Canadian companies. In fact, many of them are world-class and have won very large international competitions.

We have two major themes in the presentation. The first relates to the direct issue of operational readiness of the Canadian Forces. The second theme is our defence industrial base and how that contributes to operational readiness of the forces, and in our view, national security overall.

With Canadian Forces operational readiness, the first principle, obviously, is that the security of citizens is a primordial function of government, and the readiness level of the forces is a crucial element of that security. You've heard much conflicting opinion on the actual state of readiness of the Canadian Forces, and as we've indicated in this paper, that's probably because it's an extremely complex issue to measure. It's a combination of independent items that are in themselves complex: the nature of the threat, the policy, personnel standards, equipment, doctrine, and training. By the very nature of readiness and the change in all those major factors, a measurement at any point in time is just that, a snapshot, so an actual statement of readiness may be quite transitory in its accuracy.

With all that said, it is our position that as a general assessment, it's fair to observe that some elements of the Canadian Forces are in a relatively positive state, but the general picture is that of a force under severe strain. Without doubt, the overwhelming issue for the force and the state of readiness is its level of funding. We think that in general, DND does an admirable job of delivering operational capability with the money they've got, but the reality is that there's just not adequate funding for the job they're called upon to do.

I would point out that Canadian Forces capability is actually a mix of internal domestic requirements, continental defence obligations, and our contribution to international peace and stability. The very framework of Canada's contribution to defence is based on a premise of sharing defence with allies, continental and international, the next step being that those who are sharing will contribute a fair share of that defence capability, based on their ability to pay. Canada is a relatively wealthy nation, and in point of fact, over many years we have failed to pay that fair share. I'll acknowledge that we have made substantial contributions to peacekeeping efforts, but I'm taking the very large composite picture of our overall contribution to international peace and stability.

• 1640

You've had a lot of opinion as to what constitute adequate levels of funding. It is our estimate that even with the recent injections of substantial moneys into the Canadian Forces, for which we congratulate the Minister of Defence and the government, a minimum annual increase of 10% to 12% of base funding would be necessary to achieve even the modest obligations of the white paper. As we point out, defence premiums are expensive. In Canada, by virtue of its geography, large land mass, lots of airspace, three ocean coastlines, we have a very major expenditure problem to begin with.

It is our very strong position that the affordability of defence is primarily a matter of government priorities: you can contribute to defence and international security or you can spend your money elsewhere. Difficult as these decisions are, it all boils down to an issue of political leadership. Our present predicament is a result of prioritization, decisions that have been taken over many years. The challenge we've got now is how to redress the situation we're in. I've made the point here that it's clear that we, as politicians, as business leaders, and as public opinion influencers, have to do a better job of convincing the Canadian public that defence is important and that we have to pay the annual premiums.

To finish off this section on Canadian Forces readiness, we have some recommendations on the way ahead. The first is that Canada should have an overarching framework of national security, of which defence capability is part. For that defence capability we have to affirm that the basis for our future commitment will be a fair contribution to international stability. That contribution is going to be substantially higher than 1.2%.

We've noted as well that internal to DND, there's an ongoing capability review that's both necessary and timely, in order to align the future force structuring requirements to the future operational scenarios—and I heard some of the discussion from General Belzile earlier on this afternoon. That realignment is particularly crucial for our land forces, and the bulk of the increase in funding we would be proposing would be dedicated towards the land forces.

We are also proposing, as an association, an acceleration of some already programmed equipment deliveries, particularly those that are related to intelligence gathering and surveillance. I'll come to some specific recommendations later on.

On page 9 we have a defence industry analysis. I'll skip over this rather quickly, because, intuitively, you're going to know what it is we do. Our mandate as an association is to promote the interests of the defence industry, although we do have a certain degree of altruism—we are Canadians, and a lot of the executive and people I work with are former military and government officials as well. We believe defence is an important element of national security, and in point of fact, our defence industry in Canada is becoming progressively more important, because we are assuming more and more of a direct support role with the Canadian Forces at home and abroad.

I've given you examples of some of our successful alternative service delivery programs, highlighting the fact that we in the defence industry are now promoting ourselves as the fourth element of the defence team: regular force, reserves, defence civilians, and our defence industry. We think by further integrating our commercial capabilities with the Canadian Armed Forces operational capability, we'll end up delivering more operational output for dollar inputs.

Putting our whole approach to our defence industrial base together, the Defence Industries Association is developing a position paper that's actually articulating the rationale for a defence industrial base, defining what it could look like and how we ought to get there. That document should be ready by the end of the year.

• 1645

I've also included a series of issues directly related to this defence industrial base promotion, such things as a leveraging of defence procurement, support of our own domestic industrial base, and exploitation of centres of excellence. We will be proposing mechanisms to further parallel procurement methodologies with those of the U.S., and this is where that point about the harmonization of our procedures and processes comes into play. We can return that in questions, if you like.

In addition to these, we're actively promoting a very aggressive government support for the reintegration of Canada's defence industrial capability with the United States. For a period of 40 years, from the late fifties until very recently, we had a very privileged position with the United States in the defence industry, whereby we were virtually integrated. That position has deteriorated. We're going to be proposing mechanisms to get back to where we were. All this can be accomplished, we believe, without compromising sovereignty.

On page 12 we're emphasizing how important we believe the Canada-U.S. relationship is across the full spectrum, political, economic, and defence. In fact, we don't think there's a more important element for government focus than the promotion of that relationship, particularly the economic and national security interests.

Looking more directly at defence contributions to Canadian Forces operational readiness, we've got a series of recommendations in the paper that have been made previously by the Canadian Defence Industries Association on reforms that can be taking place, procurement reform, earlier engagement of industry, more flexibility in DND control over their own financing. All these are procedural. They're very important.

We've also highlighted what we believe is a further priority post-September 11, the acceleration and compression of programs that are already in the defence documentation, in order to get us to a better operational state more quickly. More particularly, those we would be focusing on are related to intelligence gathering and surveillance. We've given some examples in surveillance from space, command and control upgrades, surveillance systems upgrades, the Aurora maritime patrol aircraft, coastal radar surveillance. There are a whole host of these, and we hardly need mention the maritime helicopter project. You've heard an awful lot about that, and we can answer some questions as we go through.

The industry's interest in accelerating these is based on both the operational requirement and the fact that with these very prolonged procurement cycles and delays in procurement, it's extremely expensive for defence industries, large and small, to keep skilled staff and expertise while they wait for these particular programs to evolve. That compromises both our national industrial capability and our national capability to support our own forces.

As a final topic of interest, we urge early government support of continued commitment to the joint strike fighter program. For what we consider a relatively modest annual investment, the returns are many in potential, for Canadian industries surely, but also for the defence department and their engagement with the U.S. in interoperability and high technology, and for our entire high-tech sector. In fact, decisions are being made now with respect to who the sub-suppliers will be to Lockheed Martin Canada and some of the other majors. The earlier we commit ourselves to the program, the better it will be for Canada.

Overall, we do solicit your support—and I'm very comfortable we're going to be supporting you—in pursuit of increased funding for the Department of National Defence. We'd ask for your support for our prosecution of the defence industrial base and our promotion of accelerating the specific programs we've referred to in the document.

Thank you.

The Chair: Thank you very much, General O'Donnell.

Mr. Anders, five minutes.

Mr. Rob Anders (Calgary West, Canadian Alliance): Thank you very much, Mr. Chairman.

I would like to thank our presenters today, just as I would like to thank the presenters who preceded you. I am somewhat frustrated with the way this committee is being conducted today. I didn't have a chance, for example, to even address the last presenters, because of the way things are being rushed, in view of a report.

• 1650

I'm going to make a motion, or at least talk about it, that in order to show respect for and consideration of today's witnesses, the report of this committee should be tabled for 24 hours, to give members time to actually read it before being asked to vote on it. The question I put to the rest of my committee members today is, how can we pass an interim report without having viewed it yet? We haven't seen it. We were promised it for the beginning—

The Chair: Mr. Anders, I have to cut you off there, because this is not an issue that is before the committee at this point.

Mr. Rob Anders: Mr. Chairman, no copies have been distributed yet.

The Chair: Your motion is completely out of order.

Mr. Rob Anders: Mr. Chairman, this is an attempt by you to shove a report down the throats of the members of this committee without due consideration. These witnesses are willing to testify before us here today, and yet you refuse to even—

The Chair: If you're not prepared to put questions to the witnesses, Mr. Anders, I'm going to go on to the next questioner.

Mr. Rob Anders: I'll put a question to them, Mr. Chairman.

The Chair: Very quickly.

Mr. Rob Anders: The question, gentlemen, therefore, is, how do you feel about sitting here and making a presentation before this committee, when you know full well that anything you say will not be taken into account in the report that's going to be presented here?

The Chair: Mr. Anders, your statement is not only out of order, it's incorrect. We have an interim report the committee is in the process of preparing that deals with counter-terrorism. The interim report will be followed by a final report on operational readiness issues—

Mr. Rob Anders: I didn't ask you the question, Mr. Chairman—

The Chair: I would have thought you would know that.

Mr. Rob Anders: I asked the question of the witnesses.

The Chair: Mr. Anders, I'm afraid I'm going to have to go on to the next questioner.

Mr. Bachand, you have the floor.

[Translation]

Mr. Claude Bachand: Thank you, Mr. Chairman.

You mentioned in your presentation, which I read virtually while you were talking, that 1,500 businesses were having contracts of over 100,000 $ with National Defence. First, are they all members of your Association? I guess no. Okay, they don't.

Are your members Canadian businesses or are they rather subsidiaries of American or international enterprises?

LGen Patrick O'Donnell: We have all three of them.

Mr. Claude Bachand: You talked much about interoperability and complementarity. You also talked about the American Lockheed Martin's program concerning the JSF, and that's what I am aiming at with my question. When our government buys products from abroad... I think that on their side, the Americans don't put themselves out for that, and I have an example of it just a few miles from my constituency. Bombardier was among the bidders for the New York subway and, of course, the Americans didn't say to Bombardier: "Build the cars in Canada, then bring them into the States, and we will pay the bill". They rather told Bombardier to make part of the work in the United States, and they built a plant in Plattsburgh, near Saint-Jean, where 700 jobs were created in order to prepare the cars for the New York subway.

I would like to come back to the JSF. I know that you didn't talk about it, but I also know that the motor is from Pratt & Whitney. There's a large Pratt & Whitney plant in Longueuil. Should the government of Canada give its early support to that project—a big contract which will bring Lockheed Martin and of Pratt & Whitney together to take part in the construction of the JSF for the Americans and probably for the British too—, would it be possible that it not only supports the project but also asks for direct economic returns for Quebec? That's my first question.

In addition, the government of Canada, in the case of its Airlift or its Sealift, for example, can decide to grant contracts to American firms. To what extent can the government of Canada, when it buys something from the Americans, tell them that it wants part of that production to be made in Canada? Is it possible for us to do that?

[English]

LGen Patrick O'Donnell: Mr. Chairman, as we have pointed out in the document—and it's a point I should have mentioned as well in conjunction with the request to accelerate commitment to the joint strike fighter—we propose that it be predicated on a strategic industrial plan. In point of fact, there would be negotiations undertaken, with the government's commitment, with respect to what the returns to Canadian business would be.

• 1655

Yes, there will be substantial opportunities, depending on how many fighters are actually produced—a minimum of 3,000, possibly up to 6,000, hundreds and hundreds of billions of dollars. We have some excellent capability in Canada. We're quite comfortable that we will get an appropriate share, based on what our commitment to the JSF program will be. These are the terms of negotiation for committing ourselves to the program. So I'm very comfortable that the economic returns to Canada will greatly exceed the contribution we're going to make. The expertise that will be exploited is in those niches we have already developed as centres of expertise.

[Translation]

Mr. Claude Bachand: I understand, Mr. O'Donnell, that you feel that if the government of Canada were to tell Lockheed Martin and the American government that he is ready to buy some of those aircrafts, there would be some economic returns for Canada. The JSF is an American program. The British are with them, but Canada didn't say yes or no yet. Moreover, the government seems to put more emphasis on upgrading our F-18s, but that is something else.

When Canada decides to buy a ship for its Sealift or some aircrafts for its Airlift, in your opinion, could we afford to tell the Americans that we are going to buy that from them, but that the ship or the aircrafts will include a Canadian component, that some of their parts will have to be built in Canada? Does the industry care about that?

[English]

LGen Patrick O'Donnell: I am not sure we're in a position to make a demand of the Americans for a specific production activity that's inconsistent with economics and their own legislation with respect to certain products and services that can only be built in the United States. I can't answer whether we would have that kind of leverage or not.

Mr. Claude Bachand: Okay.

LGen Patrick O'Donnell: I do know, from all indications, that the framework for the negotiations is very thorough and the opportunities for Canada are very strong.

The Chair: Thank you, Mr. Bachand. Thank you, General.

Mr. Price, five minutes.

Mr. David Price (Compton—Stanstead, Lib.): Unfortunately, I haven't had time to read the whole thing, but you were talking about keeping your staff and the expertise, particularly in the low times we have been going through. I'm just wondering how diverse our industries are, because as our industries go down a little, the Americans, mostly, come across the border and pick up these industries at bargain prices. I'm wondering what the industry is doing to try to solve that problem, to be more diverse in what they produce. Canada is certainly not alone here, because we look at our NATO partners, and they're all suffering the same type of situation.

Mr. David Stapley (Executive Vice-President, Canadian Defence Industries Association): First, I think industry in Canada on the defence side is relatively diversified. A few years ago we all thought we could stop making defence equipment on Friday and start making refrigerators on Monday, and we realized that was a recipe for disaster. But since that time I think there has been managed diversification. As a result of that, notwithstanding the ebbs and flows and ups and downs of the defence budget, the Canadian defence industry has stayed stable, and has in fact grown in a number of areas. So they've managed that element of diversity very well.

The issue that I think raised the question was one of human resources and how we've managed the talent pool through that period. That has been quite a challenge, particularly as telecommunications companies and so on have been rising. Up until quite recently it put pressure on the skill sets for defence. As you all know, that has since shifted. But overall, good managed diversification has been seen in the industry for a number of years, and I would suggest that we've done quite well.

LGen Patrick O'Donnell: I would just add one observation. A great deal of the increase in our defence activity over the past few years has been in the area of services, services directly to Canadian forces, some of which we would like to try to exploit internationally. There has been a substantial increase in market. It does two things. Obviously, it helps build our defence industrial base. Second, it frees up uniform people for front-end jobs. It's not exactly a complete three for one or two for one, but we believe that exploiting what industry can do to provide the support services frees up money for Defence to put in their front-end operation. So it's a mutually beneficial pursuit.

• 1700

Mr. David Price: I have another question that is maybe a little off to the side of industry, but it affects industry. On September 11 I was on the base at Trenton. Right off the command and control centre went into operation and said, okay, first, this base could come under attack, so all the contractors should be off the base. That creates a problem. Some of those contractors are actually used to pull the planes out of the hangars. How would you respond by way of solving that problem, because it does involve you indirectly?

LGen Patrick O'Donnell: I must confess to being somewhat surprised at that direction. At some point in an alert system, in an imminent situation, you can conceive of going into some hardened posture, but what we would be pursuing as part of the obligation, the commitment the defence industry would take, is exactly the opposite of that, to be there to provide those services in those environments of tension.

Mr. David Price: But you could be under combat conditions, absolutely not equipped to handle that as an industry.

LGen Patrick O'Donnell: You're right, depending on what those actual circumstances are. But in building this partnership with the Defence Department, we are proposing obligations within the defence industry companies themselves, such that they would undertake to provide those services in those circumstances.

Mr. David Price: That's exactly what I'm getting at. It becomes more important to have that in your contract.

LGen Patrick O'Donnell: Absolutely, but it is one of those key issues. We know the Defence Department can't fail to deliver. So the Defence Department has to be well assured that industry is going to be there on the day, that we're going to be capable of delivering under those circumstances, that we're going to meet performance and price commitments in the contract. Part of my role as president of the Defence Industries Association is to badger the defence industry into understanding how crucial these terms are, or we can't further this partnering with the defence department.

The Chair: We have to go to Mr. Stoffer for five minutes.

Mr. Peter Stoffer: Thank you, Mr. Chair, and thank you for your presentation, gentlemen.

First, do you support the defence split procurement process for the replacement of the Sea Kings? You mentioned the maritime helicopter project. Correct me if I'm wrong, but this is the first time for a major military purchase that this split procurement process has been tried or evoked. It has been delayed, it's befuddled, it's confusing, it's going to be more costly in the end, from what we hear. That's why I ask you people who will build these—hopefully—replacements. Do you support the split procurement process, or should it go to an initial single procurement process, in order to accelerate the purchase?

LGen Patrick O'Donnell: In our membership we have people who support split procurement, and we have those who are strong opponents of the single production. Personally, yes, I can support the split procurement. It is true that it will provide more opportunity for Canadian industry in the systems and systems integration phase of the program.

• 1705

I think it is not accurate to say this is the first time we have ever done this type of split procurement. In fact, my recollection of the NSA program that was cancelled is that we actually started it as one and ended up splitting it off. I think we did that to save money. So we were starting with one program that we ended up splitting into two. This time we're starting the other way around.

Mr. Peter Stoffer: So you're not concerned about the delay this split procurement process has incurred?

LGen Patrick O'Donnell: We would be well advised, as was indicated in the paper, to find a way of getting the system's half of this particular project under way as rapidly as possible, so delays to that procurement schedule will be minimized. We worry about the delay, and we would urge some methodologies to get the second half started, so we can bring these together.

Mr. Peter Stoffer: Okay.

It's nice to see a Canadian industry here, because with our Canadian dollar reaching record lows against the American currency, it's going to be more and more difficult, if we require replacement of military equipment, to purchase it overseas, especially if we purchase it from the Americans. Can you give some examples of what you can provide in the future by way of replacement equipment we require now? We had the frigates, for example, built here, the LAV III, and other things.

Mr. David Stapley: Maybe I can start. If you go back in history 40 or 50 years, the arrangements of the U.S. at the time would dictate the shape of the Canadian defence industry. The policy decision of the day was that very few major weapons systems would be built here. The exceptions to that over the years have been things like ships, where we've done a very good job in the Maritimes, light armoured vehicles with General Motors, which have been very successful internationally. There are a couple of others, but by design or by policy, we were at the second or third tier as suppliers, as opposed to purveyors, of tanks, fighter aircraft, and so on.

At the second and third level, it's amazing the breadth of capability that exists in Canada. From bullets to communications, surveillance, you name it, we have a tremendous capability here. It doesn't mean we're not reliant on foreign sources for components and so on, but that's true of any nation. It depends what the application is. If it's a homeland defence type application, I would think the majority of it could be satisfied by Canadian sources. At the other end of the spectrum, if we wanted to go out and build the equivalent of a joint strike fighter on our own turf, that would clearly be beyond our capability. So while relatively small by global standards, we are very capable horizontally at the second and third tier of the system.

Mr. Peter Stoffer: Thank you very much.

The Chair: Thank you, Mr. Stapley.

Ms. Wayne, five minutes.

Mrs. Elsie Wayne: Thank you very much.

To continue with regard to shipbuilding, as you know, between Saint John, my riding, and Quebec we built the frigates. We tabled a document—and it was an all-party agreement—in the House of Commons before it rose in the summer. That document covered many different areas with regard to the military, but one was that there should be a shipbuilding policy, not that you would contract out for eight or nine frigates at one time, but you would do a frigate, and you would rotate, and you would keep it going. At one time we had almost 4,000 men working when it came to shipbuilding.

When I asked a question one day about shipbuilding, the reply I got was that we're in the high-tech world now. I was in absolute shock, because our ships are high-tech. I couldn't believe that everyone didn't understand that the ships and those who are involved in building these ships have to be very knowledgeable of high-tech. It's not just those who work in the shipyards, it's all those companies that provide the parts, provide all the high-tech that is required. So you're talking about probably 10,000 or 20,000 people across the nation.

• 1710

Still, as you know, we asked for a shipbuilding policy for our navy. I feel very strongly, General, that there is a need for that shipbuilding policy here. I feel very bad when I see us buying used submarines from London, England. We have the ability here. They're coming up from the United States and they're taking our people down to the United States. Our people are going down there, our men are going down there to work, because there isn't any work here in shipbuilding. And I want to tell you something else. It has a very negative impact on the family when the father has to go to the States and the mother and the children are left behind. I have had hundreds and hundreds of them come to me, and they're still coming to me, begging for a shipbuilding policy. I think it is an industry that should be ongoing here. How do you feel about that?

LGen Patrick O'Donnell: Instinctively, one feels that we are a maritime nation and we should have the capability. Indeed, you're quite right, this is high-tech.

Mrs. Elsie Wayne: Yes, it is.

LGen Patrick O'Donnell: I went through this analysis in my previous life in the military, particularly towards the end of my career as the vice-chief—we do these analyses almost continuously. The issue became simply one of demand. We spent an enormous amount of resources to build the capability for those frigates.

Mrs. Elsie Wayne: That's right.

LGen Patrick O'Donnell: It is to this day a world-class capability—

Mrs. Elsie Wayne: It certainly is.

LGen Patrick O'Donnell: —an excellent ship.

Our problem is that if you take the total Canadian demand, there just isn't enough to build a sustainable industry solely on what the Canadian Forces will require, even at a rotation rate of one per year. That was just the hard economic reality we faced. If you roll in the rest of what Canada, as a maritime nation, could require in various other capacities, coast guard, etc., you can argue for a shipbuilding capability, but perhaps not on the scale you're talking about.

Mrs. Elsie Wayne: I met with Vice-President Cheney down in the United States the week before September 11, and I spoke to him about the Jones Act. I said, you can bid on all of our contracts for our military and otherwise in Canada, but we can't bid on yours, sir. I said, how do you feel about this?' I said, you're protected by the Jones Act. He said, I just want you to know, yes, Mrs. Wayne, that's outdated, it should be gone, we should do something about it. Therefore, if we had that opportunity to bid on their contracts and our people here were building the ships for them, then I think we could move ahead tremendously, Mr. Chairman.

The Chair: Thank you, Mrs. Wayne.

We have next on our list Mr. Dromisky for five minutes.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): I'll be very brief.

Our witnesses are quite aware of the fact that there's been a lot of talk about budget, that we're contemplating some major changes in the budget that will be coming forth before the House in the very near future. There's the problem of whether we should have a deficit or not. I would like to know what the industry you represent would think about going into a deficit position in order to meet the demands of all the reports and all the recommendations that are being presented before this committee and before the House of Commons pertaining to the requirements for our Canadian armed services.

LGen Patrick O'Donnell: There's a degree of nervousness about going into a deficit. Although there's a recognition that dramatic times require dramatic action, there's a certain psychological concern that if we start down the slope, we may not be able to stop ourselves. So the general sentiment is, try to avoid it.

• 1715

With respect to the issue of whether we should be going into deficit spending with the Canadian Forces, we want to turn this ladder other side up, so that you pay your defence premiums from the top, realizing that it is the fundamental security of your citizens. And however difficult it is, with your home life insurance etc., you pay those premiums, because you can't afford not to have it. Yes, they are difficult decisions.

David?

Mr. David Stapley: You've said it all.

Mr. Stan Dromisky: Very well too. Thank you very much.

The Chair: Mr. Price, you have three minutes.

Mr. David Price: Thank you.

With the U.S., we're very interoperable and, I'd say, interchangeable even; they're really back and forth with equipment. You mentioned that 10% to 12% is needed to maintain the white paper level. How much would be needed to maintain our industry level, so our industries don't drop down, so they're able to maintain the status quo, so we're not hurting industry?

LGen Patrick O'Donnell: I'll answer the first question first. The more that goes to industry, obviously, the better. But we, frankly, haven't measured it that way. We have a larger concern right now with the earlier issue we discussed. With these substantial programs sitting out there, but maybe coming later, it's an enormous drain on resources, and perhaps on sustainability. So rather than tallying up that the defence industry needs an extra $3 billion a year, we don't work the problem that way.

With respect to the issue on coordinating operations with the United States, I think it's fair to say that interoperability is a major theme and must be so. Virtually every force in the world has a difficulty being on the borderline of interoperable and interchangeable with the U.S. They are so far advanced in their technological capabilities and the volume of capability they have that almost no other nation has that same capability by technology, and certainly by scale. But the Canadian Forces are wise to predicate their future operational structuring on that closer interoperability with the U.S.

Mr. David Stapley: Maybe I could add a couple of quick points.

As General O'Donnell suggested, I don't think we're advocating subsidies for the defence industry—in fact, I'm sure we're not. What we're suggesting is that we try to even out the flow of programs. What happens in most aspects of the defence industry is similar to the experience Mrs. Wayne alluded to in the shipbuilding industry. When we have a valley, the talent pool migrates to markets where there is action. One of the issues we see all the time, whether it be in shipbuilding, aerospace, or whatever, is that if we lose these talent pools to California, Europe, or wherever, it's extremely difficult to get them back, particularly after their families move with them. So the management of flow of programs is probably more important than the budgetary side of it from an industry point of view. That's the element of greatest risk, time, not absolute dollars.

The Chair: Okay. Thank you, Mr. Price.

Ms. Gallant.

Ms. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): Thank you. I'll be brief, and I'd like to share my remaining time with Mr. Benoit.

I would like to ask you questions in regard to your alternate services supply. You mentioned that this would only be used in situations where there's absolutely no risk, no volatility inside the area whatsoever, for example, in Bosnia. Is that correct?

LGen Patrick O'Donnell: I was rather suggesting the opposite, that we would be promoting a commitment by industry to engage as close to that type of combat scenario as we could.

Ms. Cheryl Gallant: So not just in in actual peacekeeping missions?

LGen Patrick O'Donnell: We're talking principally about support services, logistic support, by way of illustration. I'm not talking about providing commercial capability in actual combat situations.

Ms. Cheryl Gallant: Okay.

LGen Patrick O'Donnell: So you're correct in that we're talking principally about the support base, if you will, for those activities.

• 1720

Ms. Cheryl Gallant: Do you think, given that the civilians are not in active combat in these situations, they should be entitled or that you as an employer, or your associate members as employers, should allow them to accept a UN medal in the same way that our national forces are allowed to receive medals? Do you think that's equitable?

LGen Patrick O'Donnell: Boy, that's tricky. It really would depend on the duties for which this particular award is being granted. If it's a mere theatre participation, occupancy, and you're not differentiating those who are actually engaged in a front-line operation, a near-combat operation, I suppose I could accept the case for parallelism. It gets a little more awkward if the circumstances aren't that level. So I'm giving you a hedge.

Ms. Cheryl Gallant: Thank you.

Leon.

Mr. Leon Benoit: Gentlemen, I appreciate your coming today to be witnesses before this committee. I have a couple of questions for you.

You said that Canada just can't sustain a defence industry, or something to that affect. Yet Australia does. Australia has roughly two-thirds the population of Canada, roughly two-thirds the gross domestic product, and they've been building their own frigates and subs, and now they're into patrol vessels. They've managed to stagger their production of military needs, and they are sustaining an industry. Why is it that Canada can't?

LGen Patrick O'Donnell: First, we do have sustainable capability in a lot of sectors, and as I mentioned earlier, some world-class capability. It comes down to a matter of economics and, I guess, the commitment you want to make to what constitutes your defence industrial base. If, for example, we universally conclude that as part of Canada's national security infrastructure we absolutely ought to have a shipbuilding capability, you would automatically build in a made-in-Canada capability. So I think it would depend on the circumstances.

For the Canadian Forces, what's really difficult is that a lot of those decisions have to be based on the pure economics. Quite frankly, we, as the defence industry, I don't think have yet built a sufficiently demanding case for our defence industrial base, our national security infrastructure. That's what we're working on. I think there are trade-offs you will always make with respect to the cost of building in Canada, as opposed to buying from abroad.

In addition to the cost factor, there's assured delivery of spares. We have a much higher level of confidence that you're going to get assured spares from nation x rather than nation y. So it becomes a very complex decision. But acknowledging that the Australians do pursue home production in activities we don't, we just look at the economic realities.

Mr. David Stapley: If I may just add a comment, Australia is an interesting model to look at, for the reason you mentioned, as is the Netherlands, which has a similar size of expenditures and requirements. The one thing that's different is—the point Mr. O'Donnell made about national infrastructure—that it's a policy decision. Unlike in Canada, where from time to time a disproportionate share of the procurement dollars either flow out of the defence sector into other areas of the economy or, in fact, out of the country, by policy, countries like Australia and the Netherlands try to mitigate that. They start off with a different set of objectives from those here. As a consequence of that, they have a relatively robust defence industrial capability for their size.

On the other side of that, they go to the international market and they attract companies' equity and investment, which is the cost of doing business with them. It's interesting that they haven't run into the same issues on offsets, for example, that we have encountered with our colleagues in the U.S. The Australians seem to be getting away with it, whereas we're under attack from time to time. Really, they're masters at it and they've figured out a way to do it with their trading partners.

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The Chair: Thank you, Mr. Stapley.

Mr. O'Reilly.

Mr. John O'Reilly: Thank you, Mr. Chairman.

Thank you very much for attending. Anyone who wants to have more funding for defence is certainly in the right camp when it comes to what I think about how it should grow. But I have a question in my own mind, having been to Kosovo, having been to Bosnia, and even in Labrador and some places where the alternative service delivery is in place.

In Bosnia, which some of us visited, alternative services involve carpentry, electrical, food, firefighting. It just seems that there are a lot of areas being taken over in alternative service delivery, and I think what probably worries the service people is, if a base or if an outlet in Bosnia, for instance, comes under attack, who do the troops who are there protect first, the people who feed them? How do you end up feeding and firefighting and so forth with civilians?

I understand that there is an incredible retention problem, that your turnover is very high in these areas, and that sometimes the rules for a military person are not the same as the rules for a person delivering alternative services. For instances, if you make a mistake working for someone like ATCO Frontenac, you may just quit and go home, whereas if you're in the services and you make a mistake, you have to pay the price for it and come under military rule. So I wonder how, in your mind, alternative service delivery is going to replace many parts of the military that the military feel to be their bailiwick. I think they, in many cases, have a great reservation about just exactly what job is going to be taken next by civilians.

LGen Patrick O'Donnell: I was there at the creation of the defence department's approach to alternative service delivery, and from the very beginning we accepted that this was a trade-off, that there were risks attendant on not having uniform people do the complete continuum of activities. The reality was that we could either spend our money having uniform people doing this spectrum of jobs or we could accept the types of risks you're referring to, commercialize it, in order to free up money, so that the uniform people could be dedicated to the operation. I was present for most of the major budget cuts that occurred in the early to mid-1990s, and it was absolutely evident that we had a choice between continuing to deliver operational capability with attendant risk of commercial support or having a significant decrease in our operational deliverables. We made the decision to take that risk. At the same time, we worked with industry to try to get the highest level of guarantees, the highest level of assurance we could that we could actually perform these types of operations, even in near combat scenarios.

The ATCO Frontenac experience is new, it's unique. We're learning as we go. I think the general results are excellent, when I relate the scores that ATCO Frontenac are getting for the types of services they're performing. It is true that when you're trying to work with two different groups of people who have different discipline mindsets, there can be issues that arise. What we have to do is ensure that we're dealing with these as effectively as we can. This is not the perfect solution, which would be to have uniform people continue to do everything. That's your highest guarantee. The reality is that it's just unaffordable, and the penalty you pay is reduced operational capability.

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Mr. John O'Reilly: But how can it save money if it's awarded on a contract basis, and people who receive the contract find out they're receiving more money than it would cost to do it internally?

LGen Patrick O'Donnell: Under those circumstances you do not use alternative service delivery for an activity. There's a massive evaluation that's undertaken before you get into an alternative service delivery situation. In fact, the guidelines we set were that if we couldn't identify a minimum of 30% to 40% savings in the initial examination, we didn't try. Because as we went through the process with those where we thought we'd save 30% to 40%, the savings were closer to 15% or 20%. So if they weren't significant to begin with, you didn't venture. They have a very disciplined process in place within the department before they embark on alternative service delivery.

The Chair: General, thank you very much for your comments, Mr. Stapley as well. We've really appreciated your being being here, if I could say that on behalf of the entire committee.

To be very clear about some of the things that came up earlier, we are in the process of doing a review of operational readiness. We started that process much earlier this year, in the spring, and it is going to continue until we produce a report sometime in February 2002. So your comments are going to form part of that final report. Again, we've appreciated your brief, as well as your comments today. Thank you very much.

LGen Patrick O'Donnell: It's a pleasure, thank you.

The Chair: For the benefit of members of the committee, we are still looking for official names, perhaps letters from members of the committee, in connection with participation in the Subcommittee on Veterans Affairs. We do need official notification, and perhaps the clerk could work with representatives of the parties and whips to ensure that we do get that representation on the subcommittee.

Mrs. Elsie Wayne: I didn't know you needed a letter—I had to leave, as you know. I'll get it to you tomorrow.

The Chair: Thank you very much.

Mr. Benoit.

Mr. Leon Benoit: On a point of order, my colleague earlier brought up the issue that we're supposed to meet tonight at 6 o'clock or some such thing to discuss the interim report of this committee. There are a couple of things that really concern me about that.

The last two groups gave information that is pertinent to an interim report on terrorism, talking about defending the homeland and that issue. I think it's important that their testimony should be included in an interim report, as well as the rest we've heard before.

Second, I'm wondering when the decision was made and why the decision was made to only have half of the committee meeting for each these two groups, the Conference of Defence Associations and the Canadian Defence Industries Association, rather than having a full committee meeting for each. I think they have a lot to offer.

Third, as a member of this committee, I haven't yet received a copy of that interim report, and yet we're going to be asked to go through it line by line later on. I think we need at least 24 hours to discuss this report, so that we know what's in it before we go through it line by line. It doesn't make any sense. I think the least that should be expected is that we have 24 hours to study the report. I don't care if it's only a one-page report, we need the time to go through it, study it, see what is in it, what isn't in it, so that we can properly evaluate whether that's what we feel is appropriate for an interim report. So I would ask the chair to move this meeting until at least 24 hours from now, so that we can do it justice.

The Chair: I don't think we want to prolong this, Mr. Benoit.

Mr. Leon Benoit: We're dealing with national security measures here.

The Chair: I realize that. Mr. Benoit, the committee has heard your points, and I'm going to respond.

Mr. Leon Benoit: I wasn't finished with my points, Mr. Chair.

The Chair: Well, I think you were in the process of repeating yourself on a number of things.

• 1735

Mr. Leon Benoit: No, I wasn't. I had not mentioned before that this is an issue of national security we're dealing with here with this committee. This is vital to the safety and security of Canadians, Mr. Chair. Why are we going to rush it through, when we haven't even seen a copy of the report? And we're going to be looking at it in three quarters of an hour? It doesn't make any sense.

The Chair: Mr. Benoit, first, there are a number of competing demands on this committee, not the least of which is that we try to hear as many witnesses as possible. The argument could be made that every witness we hear from now until January or February would have something to say, would have some relevance with respect to the particular issue of counter-terrorism. At some point we have to stop the process, if we want to produce an interim report. The whole purpose of producing an interim report, Mr. Benoit, is so that we can feed into the budget cycle, feed into the pre-budget deliberations, which is what we are trying to do. We're trying to hear as many witnesses as possible, but also take the necessary time to prepare, and to give our researchers, as well, the time to prepare, a report we can look at that has some credibility based on the number of witnesses we're hearing from.

I didn't construct the constraints we're operating under. I think we're all trying to work under those constraints, and it's difficult, to say the least, to try to put a report together of this magnitude on a very short timeline. So all I can ask is the cooperation of the committee members. This is not going to be the definitive word with respect to the operational readiness issue. We are trying to make a contribution to the debate and feed into that budget process, as I said, in a constructive way. We have strict timelines to do that, so I'm going to encourage members of the committee to attend the meeting we have tonight, to take the time—it's not a long report, I think it's a very pithy report, about 20 pages long—and to make any recommendations they see fit. There will be time to make recommendations once you see the report. Keep in mind as well that the final report is going to be the final report, which will be much more comprehensive in nature and will deal with the issue of counter-terrorism, as well as many of the other issues we've heard about from the witnesses.

Mr. Leon Benoit: Mr. Chair, I'd like to make a motion. I would like to move that we put off examining this report for only 24 hours—I'm not talking about putting if off for a week or two weeks—just so that each member of this committee can study this report before we go through it line by line.

The Chair: Mr. Benoit, I'm going to have to cut you off there, because this has been arranged for some time, blocking off this time in order to deal with the report, and it was based on the constraints—

Mr. Leon Benoit: We don't have a copy of the report, Mr. Chair.

The Chair: You will get it in 20 minutes, Mr. Benoit.

Mr. Leon Benoit: That's not good enough. We need some time for that, Mr. Chair.

The Chair: Well, it may not be good enough for you, but it's the best we can do.

Mr. Leon Benoit: You're not going to accept my motion?

The Chair: It's out of order. You have to give notice for that sort of a motion.

So on that, we're going to adjourn the meeting, and we will convene again to deal with the interim report. Thank you.