FLETCHER: The problem with being our own best customer

Tom Fletcher has covered BC politics and business as a journalist since 1984.State-directed industry has worked so well for China that it’s a growing trend in Canada. This time, it’s a governing style that gained new life in Ottawa and is being emulated in BC and other provinces.Prime Minister Mark Carney’s “defence industrial strategy” mandates not only a huge increase in military spending, but a requirement that 70% of that spending be on Canadian companies, or at least Canadian branch plants of foreign companies. It’s an echo of Donald Trump’s “Buy American” strategy, implying a move to take military procurement out of US corporations and bring it home.Economic commentators Terence Corcoran in the Financial Post and Andrew Coyne in the Globe and Mail were in rare agreement on what’s wrong with this. It’s another set of trade barriers and subsidies that get in the way of finding the best product for the best price.We’ve seen this take shape with the saga of Lockheed Martin’s F-35 stealth fighter jets, a program Canada has been involved with for almost 30 years. Carney set up a new defence procurement agency, an additional bureaucracy that’s supposed to streamline the defence ministry’s glacial process for buying military kit.A personal example of this long-standing problem: my brother was 60 when he cleared battle fitness and was exempted from the Canadian Forces age limit of 55 to go to the combat zone of Kandahar. The World War II-design Browning Hi-Power pistol he was issued was older than he was.With the defence ministry and the new agency on top of it, what came next? Industry Minister Melanie Joly turned up in Sweden to kick the tires of the Saab Gripen jet, with the discussion turning to how many jobs can be created by producing some of them in Canada. For the Liberals, it’s just another regional economic development program, with guns..University of Calgary economist Jack Mintz notes that the new defence procurement agency expects to preside over $180 billion in defence equipment and $290 billion in defence-related capital over the next 10 years.“With a mushrooming bureaucracy to handle the affairs of 10 new agencies and programs, you can bet your bottom tax dollar that bureaucratic wrangling will add new Canadian-content requirements, prolong delivery times, and increase costs,” Mintz wrote.Carney has promised to bring Canada’s share of NATO military expenditures from 2.8% in last year to 5% by 2035. The US covered 62% last year, as Donald Trump has reminded NATO members.That 2.8% share is almost double Canada’s share of the previous year. One way that was achieved was to redefine Canada’s Coast Guard, with ships finally under construction, as part of the military. It was quickly clarified that, of course, Coast Guard vessels wouldn’t actually be armed and would sail away if confronted by any real military action.This brings us to BC’s latest move in state-directed industrial strategy. Fresh off a budget with a record deficit for next year, Premier David Eby staged a news conference this week to re-announce a portion of that deficit financing — a $400 million “BC Strategic Investment Fund.”.His chosen backdrop was a Coast Guard station. “As the federal government looks for projects to boost forestry, defence, and shipbuilding, our goal is to make sure British Columbia businesses are at the front of the line,” Eby said.The fund is to “consider loans, equity investments, and repayable contributions to allow the province to share in a project’s success,” the Ministry of Jobs and Economic Growth announced.BC Conservative jobs critic Gavin Dew wasted no time taking a run at it in the legislature, saying it was Finance Minister Brenda Bailey’s effort to distract from the NDP’s nine-year record of declining private sector investment.“Her solution, instead of addressing investment fundamentals, is a $400 million slush fund for the premier to pick winners and losers instead of making sure that every company can build and grow and invest in this province,” Dew said.Tom Fletcher has covered BC politics and business as a journalist since 1984.tomfletcherbc@gmail.comX: @tomfletcherbc

FLETCHER: The problem with being our own best customer

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