The Canadian Government's Role in Shipbuilding:
Past, Present and Future ¹

by

Peter Haydon

For the past one hundred years, Canada's shipbuilding industry has seldom enjoyed the luxury of full order books. Since the end of the Second World War in particular, the industry has largely relied on government work to keep going. Today, its survival almost certainly depends on further government contracts and the willingness of government to allow exports of warships and components. For a maritime nation boasting the longest coastline in the world and one of the largest exclusive economic zones, the apparent disregard of the national shipbuilding and repair industry makes little or no sense to outsiders. Yet, when looked at through Canadian eyes, the complexity of the problem begins to emerge. Unfortunately, the recent cycle of "feast and famine" may have imposed a penalty from which the industry may not be able to recover. The question of the hour is: "Can a solution be found, or is Canadian shipbuilding destined to be an art of the past?"

The answer to that question is a function of politics. In searching for solutions to the present problem, one must accept the reality of the situation that the Canadian shipbuilding industry has become part of the political process. This did not happened overnight. Rather it was the result of a long slow process, and it is meaningless now to point accusing fingers in an attempt to attribute blame to any one factor or group of individuals. The point is that as much as the problem was created by political factors, any solution will largely be political. This means, simply, that the industry has to acknowledge that it is part of that political process and learn to work within it to achieve its aims.

In Canada, the shipbuilding industry has largely become a function of defence policy and the government's marine regulatory role with only a small amount of private sector work. However, the industry's future health will be a function of many other factors, including domestic shipping, the oil industry, off-shore contract opportunities, and its ability to innovate in other industrial sectors. There are, in fact, five primary customer groups to which the shipbuilding industry could look for future work:

• the Canadian military;
• other government agencies, federal and provincial;
• Canadian private sector shipowners;
• off-shore contracts; and
• the "opportunity" market.

Each of these, in one way or another, is intensely political, and part of the convoluted structure of Canadian federal, provincial, and municipal government.

Even though the industry engages in some direct lobbying, it must become far more broadly involved in the overall political process. This, of course, means that the industry has to understand the mechanics of government; the fabric of interwoven agendas -- of appointed as well as elected officials - - at all levels of the political spectrum; and, perhaps more importantly, why the factors that determine its future are political.

If our economic system were perfect, with the simple laws of supply and demand operating freely, much of the present problem would not exist. But as we know only too well, the system was never perfect and has become even further distorted through political micro-management.

The aim of this paper is twofold: explain how politics has distorted the Canadian shipbuilding market, and offer some ideas on what course the path to recovery might take. Because the topic has so many facets and is driven by so many interrelated factors, a paper of this length can only be an overview of the Canadian problem. In this, the views and conclusions could form the point of departure for a more detailed study. If nothing else, I hope the paper will be food for thought.

The framework for the review is one that will look at how political and economic factors influence the Canadian shipbuilding industry in five areas:

• military requirements;
• other government requirements;
• commercial shipping;
• the foreign market; and
• general engineering.

THE POLITICS OF SHIPBUILDING

Politics is the process that determines who gets what. Because it deals with largely with resources and services that have real value, it is open to manipulation and thus vulnerable to the range of human failings. In Canada, the political process is complicated even further by the peculiarities of geography and history. The result is a socio-economic system rife with regional inequalities and jealousies. The entire political process is made more difficult by the imposition of trade barriers and subsidies leading to protectionism at home and abroad. The activities of special interest groups merely complicate the process even further. Thus, no Canadian political issue can ever be simple.

The politics of Canadian shipbuilding have always been complex and highly partisan, particularly where government shipbuilding contracts are concerned. The present program for 12 frigates is no exception. Many of the past and present problems in the industry have their roots in the approach taken by successive governments in managing their requirements for new ships. Simply, by allowing shipbuilding to become part of the political process, the government forced the industry to play on an uneven field. The result has been a cycle of feast or famine which has had a destabilizing effect on the industry as a whole.

After the war in 1945, the Canadian shipbuilding industry maintained a disproportionately high level of output replacing war losses and restructuring the Navy for its Cold War mission. As a result, the shipyards came to rely on government contracts for stability. Although some commercial contracts were won, private sector work alone was not enough to keep the industry going. When market forces drove ship owners to buy their new vessels off-shore where the prices were lower, government con- tracts became essential to the industry's survival. As a result, the yards looked to the government to provide a reasonable flow of work. This was not an unrealistic expectation because the government had a substantial fleet of naval ships, patrol vessels, ice breakers and other craft. Theoretically, there should have been enough work for every one, but government procedures prevented a comprehensive or even logical approach to fleet management. Rather than recognize that government had a role to play in keeping the industry stable, successive administrations chose to use shipbuilding contracts as political incentives.

Having largely created the post-war shipbuilding industry, the government should have regarded it, in economic terms, as an infant industry and applied the necessary subsidies and incentives. Much of this process could have been accomplished by using the various government fleets to provide a stable basis for work. Although there would still have been cycles of higher and lower activity, the extremes of feast and famine could have been avoided. The problem was that such action would have required a commitment of funds on a steady basis, which in turn would have reduced the government's options for managing a deficit economy and addressing regional disparity through incremental policy adjustments.

The other factor was that the government's overall concept of management was reactive rather than planned. This led to delays in announcing programs in order to get the maximum political benefit from the cash infusion. In taking this approach, the government was not able to measure the longer- term or the broader implications of their actions.

Military Shipbuilding

The end of the Cold War presented all industrialized countries, including Canada, with a dilemma: disarm in the belief that we finally have peace in our time or continue to maintain a military capability as a contingency against the unexpected? Unfortunately, the question comes at a time when national economies are under pressure to make significant cuts in government expenditure. Because defence spending is invariably seen as the largest item of discretionary spending and thus believed to have the greatest potential for creating funds for other programs, the military budget is subject to the partisan political process. Thus, rhetoric, especially as the means of gaining popular support, tends to outweigh logic in the public debate. Even though the uncertainty of the present international situation calls for caution and the maintenance of some military capability, public opinion demands that the problems of society be addressed first. The traditional "guns or butter" debate that once merely sought a compromise, has now polarized. Without a direct threat to the homeland, reductions in defence spending seem inevitable, particularly where public opinion has become such a huge factor in policy- making.

The issues facing defence planners, to a far greater degree in smaller countries such as Canada than in the United States, is how to retain an effective force structure that allows government a reasonable range of options in crisis management situations. In what can only be seen as a hostile economic climate, the military has to adopt the policy of doing more with less. The problem is made far more difficult by the fact that foreign and security policy have become almost entirely reactive. Essentially, national interests are now determined at the moment of crisis rather than as a result of a carefully developed view of both the world and the state.

Defence shipbuilding is a classic example of policy determined by economic factors rather than as a reflection of long-term national interests. From the government's point of view, standing fiscal commitments eat into discretionary funding and reduce the political value of money. Moreover, shipbuilding contracts have too much leverage potential to be immune to partisan politics. Here, the frigate program has shown that excessive political intervention can be counterproductive.

Today, there are two interrelated problems. On the one hand, the government is trying to ratio- nalize the shipbuilding industry as a means of making it less dependent on federal work and more competitive in the open market. On the other hand, it wants to modernize the rest of the Navy by building submarines, corvettes and minewarfare vessels. The basis and process of rationalization have not yet been made public, but there has been some concern that the process is, in fact, regionalization whereby the focal point of the shipbuilding industry will be shifted to the Atlantic provinces at the expense of the Quebec and Ontario yards. On the basis of the last two naval contracts, which went to Atlantic rather than Quebec yards, there may be grounds for this concern. Another view is that rationalization may foster specialization within the industry.

Trying to rationalize the shipbuilding industry without providing some guarantee of continued work has inherent risks. Promises made by one government run the risk of cancelation later if they no longer have political significance or are seen by another government as political incentives. The 1963 cancellation of the eight general purpose frigates, which Paul Hellyer saw as a Tory pre-election incentive, is a good example of the vulnerability of poorly defined programs. The twelve minewarfare vessels could be equally vulnerable after an election. Also, the poorly defined Corvette and submarine programs could run a similar political gauntlet in the near future.

One solution, which would place national requirements ahead of political objectives, would be to stabilize rather than rationalize the Canadian shipbuilding industry. Although this might lead to some specialization within the industry, it could be beneficial provided government contracts did not impose counterproductive political provisions. With a potential of about 1000 vessels and barges in the various government fleets, it would not be too difficult to develop a concept for the routine replacement of most of those vessels that reflected their normal hull life yet still contained a provision to review the require- ment for those capabilities. By taking a comprehensive approach to fleet management, the government could support a healthy shipbuilding industry without giving up the right to review key policies. The main advantage is that rather than perpetuate the cycle of feast and famine that has evolved, the replacement of ships can be managed in a way that creates a steady state building program. Such a policy would stabilize almost every facet of the industry while providing a climate to develop new design, training, production and quality control techniques. This would also keep the industry efficient and competitive. A good way of explaining this concept is to use the naval task groups as an example.

Canadian naval planning is presently based on a concept that requires the Navy to be able to deploy multi-purpose task groups into both the Atlantic and the Pacific oceans. The basic requirement for naval forces in the modern world is for flexibility so they can be deployed quickly to undertake whatever task the government determines. To meet this requirement, maritime forces are organized into task groups, designed to give a balance of capabilities. The mix of capabilities is always a function of the work to be done. Tasks groups are formed for local operations as well as to operate in more distant waters.

Maritime Command defines a task group as: "a group of naval and air units optimally suited to the full range of expected tasks associated with their mission. It is capable of self-sustained operations for a fixed period of time in any accessible maritime region of the world." There is no "standard" task force; however, the planning model is:

• 1-2 Tribal Class destroyers, each with two helicopters, with one as the flag ship;
• 3 to 4 City Class frigates each with one helicopter; and
• a support ship (AOR) to provide logistic and medical support, also carrying three helicopters.

Under some circumstances a task group can be augmented by a submarine or long-range maritime patrol aircraft to provide better surveillance coverage. Additional logistic or sea lift vessels can be added to the task group if necessary. This would happen if there was a need to move and support a land force. Smaller task groups can be formed for coastal defence operations or to conduct law enforcement tasks such as preventing smuggling or the illegal landing of people on the Canadian coastline. It is also possible for ships and aircraft of other government departments to be integrated into a naval task group for a specific operation. Because naval units have modern communications and data processing equipment, they are ideally suited to coordinate the activities of units of other agencies in a common task. In this, a warship provides an excellent on-scene command post.

Assuming the Navy will continue to be called upon to deploy surface task groups from both Halifax and Esquimalt, B.C. on short notice, the requirement for combat ready ships is about eight destroyers or frigates and two support ships. To guarantee those ships are always available, additional ships are needed to allow for maintenance, training and crew rotation. The traditional rule of thumb is that it takes three ships to keep one on station or available at short notice continually. Today, through improved management and maintenance procedures, it probably fair to reduce that ratio. However, the lower the ratio, the more complex the management problem.

Using a two-to-one ratio, which would impose some management constraints and might restrict other operational requirements when the task groups were deployed, the minimum fleet strength to maintain two task groups is sixteen destroyers or frigates and four support ships. Because those twenty ships need a high degree of technical and system compatibility, they can be thought of in engineering terms as a single operational capability. Although maintaining that capability requires a cycle of overhaul, modernization and replacement, the driving force is, in fact, the need to replace the hulls. Assuming that each ship has a life-span of 25-30 years, a new ship would have to be acquired every 15 to 18 months to sustain the operational capability. This would meet the technical criteria for a steady state building program and allow one shipyard to retain all the associated skills. Such a planned fleet would also sustain the support industries that provide systems and shipboard equipment.

Other Government Requirements

Canada has a very much larger investment in the world's oceans than many people either recognize or acknowledge.

• Over 300 million tonnes of cargo pass through Canadian ports each year, two-thirds of which is in trade with many parts of the world.
• Much of our industry now depends upon a sustained flow of raw materials and refined products, a large amount of which move by sea.
• The value of this trade to the Canadian economy is considerable, and it is usually estimated that between 30 and 35 percent of Canadian GNP is directly or indirectly derived from the use of the sea.

But Canadian dependence on the sea is more widespread than just trade. Eastern Canada is completely dependent on imported oil, with the distribution of refined product still being mainly done by sea. Many of the isolated communities on the east and the west coasts as well as in the north rely on coastal shipping as their primary means of supply. The fishery, although under siege at the moment, and the offshore oil and gas industry are also important aspects of Canadian maritime life, and could become even more so when their full potential is exploited. Although there is no precise figure that shows just how many Canadians depend on some aspect of ocean use for their livelihoods or sub- sistence, most homes and individuals frequently use something that either has a maritime origin or has been transported by sea. This situation demands the involvement of the federal and some provincial governments in the maritime sector. The list of related tasks is almost daunting:

• the regulatory function carried out by Coast Guard and Department of Fisheries;
• maintenance of waterways and aids to navigation;
• ice breaking;
• Arctic resupply and management;
• ferry services, particularly to support tourism;
• marine research and other scientific work;
• hydrography; and
• search and rescue.

The political dimensions of these many tasks are as complex as those for the military requirement for ships. For instance, the Arctic is a policy nightmare. While it holds the promise of enormous wealth through oil and natural gas, concern for the fragile environment often overrules economic consider ations. Yet there is still a need for marine transportation in those waters. Again, Arctic politics tend to more reactive than the result of sound planning. Even though only about half of the waters over which Canada has jurisdiction are usable, the extent of navigable ocean is still huge. Moreover, the coastline contains many good ports, with Halifax, the St. Lawrence River port system, and Vancouver, being the economic arteries of the country.

The fleets maintained by the various governments contain over 1000 vessels of all types. With some exceptions, those vessels require similar modernization, repair, and replacement as military vessels. Savings in government spending would accrue from adopting a similar "steady state" approach to fleet management. This would require a new approach to the management of the government fleets but this has already been under review. ² Switching to steady state production would not only result in financial savings but would also lead to greater economic stability in the shipyard cities and regions where the support industries were located.

For the shipyards, this would require a degree of specialization which some might see as a threat to their ability to compete at large. Concern that such an approach to government shipbuilding would lead to discriminatory "centres of excellence" is largely unfounded and based on short rather than long- term visions of the industry. Essentially, the time has come to have a cooperative approach to shipbuilding rather than the present confrontational tendency which is clearly not in the national interest.

The price the government would have to pay to achieve these savings has two dimensions. First, they would have to surrender their ability to use major capital programs for regional political leverage. Second, they would have to give up a measure of control over government maritime operations. This would effectively remove those operations from the realm of partisan politics and require that the provision of maritime services and security be accepted as a national obligation. This need not unduly restrict the ability of government to control major expenditures, but would require a more dynamic government role in collectively managing its various fleets.

Commercial Shipping

Canada ranks about seventh in the world in terms of the volume of international trade. But not all of that goes by sea, as there is a substantial volume of cross-border trade by road and rail. In terms of vulnerability to trade disruption, Canada ranks even higher with over 30% of GDP being a function of international trade. Unfortunately Canadian industry is not sufficiently diversified to withstand a major trade disruption. In essence, Canada's international trade can be best described as "bulk commodities out, finished products in". This is an unhealthy situation that one would associate more with a develop- ing country than with a country that claims to be fully industrialized. The movement of cargo within Canada tells its own story.

The imperfections of geography complicate the situation even further. For instance, eastern Canada (east of Montreal, where the pipeline ends) is totally dependent on imported oil. In time, the Nova Scotia oil fields and Hibernia will make some difference, but only to about 20-30% of consumption. The impact of a future shift to natural gas has not been calculated, but it could be significant with widespread changes to the infrastructure. There are opportunities for innovation and the creation of local market niches in the oil and gas sector that could benefit the shipbuilding industry.

Another imperfection is the fact that most of the limited Canadian industrial output (including packaged food) comes from the Quebec City-Windsor corridor and thus finished Canadian products have to be transported to other markets in Canada. Several regions of Canada are thus dependent on the transportation of essential commodities. Because industrial sectors have been created by geography and choice, domestic shipping tends to have a high degree of specialization. And it here that another opportunity exists for the shipbuilding industry. There is abundant room for innovation, as evidence the west coast forrest industry. But at the moment some of those marine transport requirements are being met from off-shore suppliers. Why?

The overseas trade markets are reasonably diverse. The major export regions are: Asia (39%); Europe (23.4%); and the United States (21.9%). Imports follow a slightly different pattern: United States (45.9%); Europe (15.7%); Middle East (12.4%); Latin America (11.2%); and Asia (6%). These figures reflect the dominant role of a very small group of commodities:

• coal to Japan and Korea;
• iron ore to Europe;
• wheat and forrest products around the world;
• oil into and around eastern Canada; and
• a complex interchange of bulk commodities across the Great Lakes.

Despite the dependence on international trade, less than 3% of the international cargo (by volume) is carried in Canadian registered or owned hulls. This is one of the reasons the shipbuilding industry has become dependent on government contracts. On the other hand, the extensive network of domestic shipping is protected from foreign intrusions by the Coasting Trade legislation of 1992. The 1991 Canadian registry of ships engaged in marine transport consisted of 2607 vessels of over 15 tonnes (GRT), an increase of 141 from 1989. Of these, 57.0% were "for hire" carriers, 12.2% private carriers, and 30.8% government (federal, provincial and crown corporations). The fleet is di verse:

Marine transportation already employs about 24,000 people, 57% of whom work for the government, and there is obviously a considerable related workforce even though transport is an indirect employer in the overall export sector.

In terms of shipbuilding potential, a market for hulls in the domestic market clearly exists. But the international slice of the Canadian shipping industry went years ago. Despite several attempts to get successive governments to stimulate Canadian international shipping, the necessary policy never emerged. Simply, the government preferred to allow the international market to determine who moved the goods in the belief that it would keep shipping costs low. There were even proposals to create Canadian niches in select markets, such as that with Brazil where their law requires that imports and exports be carried in Brazilian ships or ships of the other trade partner. But to no avail, the government could not see a need to support Canadian shipowners or Canadian professional seamen. In making this narrow decision, the opportunity to support related industries and training facilities was completely missed.

The other aspect of the Canadian shipping industry that hurts shipbuilding is the lack of either legislation or incentive to ensure that ships in domestic trade are built in Canada. Again, government failed to recognize that shipbuilding subsidies in many other countries, particularly Japan and Korea, worked against the Canadian industry in forcing shipowners to buy their ships offshore. This is yet another instance of short-sighted policy-making that failed to look at the overall impact of the decision.

Even though the fishery is in trouble at the moment, there is still a requirement for new ships. In time, the numbers will increase. However, the potential benefit to the shipbuilding industry is quite small other than in terms of local economies.

The question the shipbuilding industry and government should be asking is: Why are we not getting work from the private sector? With about 1800 privately owned Canadian vessels engaged in marine transportation, there has to be a potential for shipyard work. Even assuming a 30-year life-cycle for those vessels, some 60 ships should be replaced each year. Also, one has to ask where the 141 vessels that joined the Canadian registry in 1989-1991 came from. It would seem that the shipyards and the shipowners are not talking to each other. The reason, I suspect, is that Canadian shipyards cannot compete with the foreign yards.

Perhaps, a case can be made for some form of subsidy for the Canadian shipbuilding industry, particularly in view of unfair trade practices in several Asian countries. A level playing field is not an unrealistic expectation.

The Foreign Market

There is little to prevent Canadian shipyards seeking offshore contracts. However, there are problems in doing this. For instance, the efforts of Saint John Shipbuilding to market the highly successful design of the new frigate is meeting opposition from the disarmament lobby who only see the sale in terms of its apparent contribution to the arms race and not as a function of either regional stability or employment in Canada. Taking the moral high ground may be logical from the perspective of a special interest group and as a function of party politics, but that stand fails to consider the broader implications of the sale.

This issue is a good example of how well-funded special interest groups can develop an effective voice to meet their own narrow aims without consideration of other issues. As we are beginning to realize, industry and those who still see the need for caution in international affairs can also become special interest groups and conduct the same type of campaign as those with narrow perspectives. Political opportunism can work in any direction.

The other dimension of the offshore market is the need to be competitive. It is not easy to compete in the world market when so many countries openly subsidize their shipbuilding industries. However, it may be asking a little much to expect any Canadian government to follow suit and directly subsidize the shipbuilding industry in Canada to the same extent. Yet it is possible for the government to stimulate the industry through contracts particularly where technology transfers and yard modernization are involved, as happened as a part of the frigate contract awarded to Saint John Ship- building. Another means of improving competitiveness lies in promoting a better approach to meeting manpower requirements. Of late, Canadian union-management relations have become confrontational, particularly where demands for wage and benefit increases have failed to take the overall health of the industry into account. There was a recent case in Canada, not in the shipbuilding industry, where union demands were such that they could not be met at reasonable levels of production. Rather than compromise, the union preferred to see the plant closed down. In the long-run, everybody lost. There was absolutely no need for that to have happened. There must be a willingness to compromise on both sides. The government role is this aspect should be to prevent the so-called "social safety net" from being abused or from becoming a function in contract negotiation. Simply, the playing field has to be levelled in every direction.

General Engineering

Most of the issues within the general engineering category have already been covered in discussing other themes. The key is the ability of the shipbuilding industry to be flexible in what it is prepared to fabricate. The government can help by requiring that Canadian contractors for large engineering projects be given preference. A good example is the development of the oil resources off Nova Scotia. Although the project is being managed by a British company, the product is Canadian. It would not have been unreasonable for the government to require that Canadian companies be involved to the maximum extent. This project is not expected to give a particularly high yield in oil, but it has considerable potential for natural gas. Therefore, an opportunity exists for Canadian engineering expertise. As I mentioned before, with eastern Canada's present dependence on imported oil, a long- term shift to natural gas would make infinite sense. For that to happen, government and industry must cooperate. This can only happen when both parties are prepared to take a long look ahead and are prepared to invest a little "sweat equity".

WHAT DOES THE FUTURE HOLD?

Looking ahead, especially to the Canadian naval program presented in the most recent defence statement, the important point seems to be that the new naval policy has the potential to provide some stability in the shipbuilding industry. However, for this to happen, some long-term decisions need to be made. The minimum objectives for a new approach to managing the various government fleets should be along the following lines:

• Replace the 3 support ships and the four Tribal class destroyers in the 2005-10 timeframe and allow that contract to form the basis of a steady-state replacement program for the navy's task groups. This would stabilize one shipyard and provide for a collocated naval design office.
• Design and build a class of off-shore patrol vessels to meet the combined requirements of the three departments with responsibilities in those waters. By adopting a "build-to-blueprint" approach to for these ships, several other yards can be given enough work to stabilize them and allow them to compete for further contracts.
• Embark on a icebreaker program as a start in developing a Canadian specialization in ice- strengthened vessel design and construction. This would stabilize another yard and foster a unique support industry.
• Industry and government should also work collectively to develop a "steady-state" replacement program for the rest of the government fleet.
• Examine the options presented by the 1991 Osbaldson Study for improving the way in which the government manages its three fleets.

From there, requirements for more specialized ships such as submarines and research vessels could be integrated into what would become the mainstream of government work. Together, these initiatives should provide a critical mass around which an efficient Canadian shipbuilding industry can survive.

The government has to be convinced that it must become a more efficient manager. It is in this respect that the shipbuilding industry can offer some logical options in the form of contract maintenance and in working towards better linkages between design and new construction. Simply, the yards should work together in making the government an offer they cannot refuse. In government today there are more problems than solutions, financial as well as policy issues, and the time has come for industry to take the initiative in proposing ways to help government. Waiting for Royal Commissions and government-sponsored task forces will only exacerbate existing problems.

One cannot discuss the future of the Canadian shipbuilding industry without looking at the worst- case situation. The option of building all Canadian government ships off-shore is often touted. Those that support this option tend to do so for the narrowest of economic reasons rather than from a clear understanding of the many factors involved.

Although this option may seem logical from a fiscal perspective, there are several reasons why it should not be adopted. First, it denies us the opportunity to be innovative and thus stimulate a number of other industries, particularly in optics, electronics, and control systems. High-tech warships provide exceptional opportunities to marry research and development with an end-product. Buying ships off- shore greatly reduces those opportunities. Second, it would not be cheaper. Canada, in fact, compares quite favourably with most other industrialized countries in the cost of producing warships. Cost estimates of the frigates were invariably distorted because they included the full cost of developing the prototype. Third, buying off-shore restricts the ability to "customize" vessels to meet our own standards and requirements. Fourth, buying an off-shore design would deny us one of the more visible symbols of nationalism. Someone else's ship does not instill the same sense of pride as your own design. The price of a little nationalism need not be that high, particularly if a better shipbuilding policy can be developed in the process.

The Canadian shipbuilding industry is still quite large and directly employs about 10,000 people. The figure may even be a little bigger. In addition, an equally large number of jobs exist in the various support industries. When a big government shipbuilding contract is awarded, it provides "new" money in the economy which is then subject to the multiplier effect. Thus, active government support of the industry can be a stimulus to the economy as a whole. But to achieve the greatest benefit from that stimulus, it has to be applied fairly and rationally. This requires a sound government shipbuilding policy. The frigate program stands as an example of what can be accomplished and also of how political intervention can be counterproductive.

Any thought of trying to close down the Canadian shipbuilding industry in the interests of efficiency because it cannot compete internationally is foolish. Before such drastic action is taken, there has to be concrete proof that Canada no longer needs a shipbuilding industry. The economic stimulus given to the economy, technologically as well as financially, by the frigate program will be considerable in the long run. More importantly, Canada is a maritime state with widespread interests at sea. A shipbuilding and repair industry is an essential part of the infrastructure that supports those interests.

CONCLUSION

A lack of understanding of maritime matters in central Canada, where most major national decisions are made, is traditional. Quebec and the Atlantic provinces have long had to struggle against this myopia. The present state of the Canadian shipbuilding industry is a testament of the consequences of neglecting our maritime interests and related industries. It is in our national interest to maintain a shipbuilding capability. But to survive, the industry needs government support. In this respect, the gov- ernment has an obligation to conduct its business with the industry in a responsible manner and without prejudice to the rights of the industry to seek external contracts. The competitive edge should be a function of the private rather than the public sector. On the other hand, the industry has to be prepared to take the initiative occasionally an apply pressure on government to ensure that its interests are not overlooked. By dealing directly with all levels and sectors of government, it should be possible for the Canadian shipbuilding industry to propose concepts that will benefit both the government and the industry. Rationalization of the various Canadian government fleets would seem to be the most logical and realistic approach to take. But above all, the industry must acknowledge that it is now part of the political process and that its future health is a function of Canada's whole maritime dimension.

Notes

1. A Paper prepared for the Centennial Meeting and 1993 International Maritime Exposition of the Society of Naval Architects and Marine Engineers New York, 15 September, 1993. Back to Text

2. In October 1990, a study group under the leadership of Mr. Gordon Osbaldson, submitted their report All the Ships That Sail: A Study of Canada's Fleets, to the government. It examined the way in which the federal government operated and maintained its three fleets (Defence, Coast Guard, and Fisheries) comprising about 120 large vessels, 415 smaller vessels, and 800-1000 small craft of various types. The recommendations were far reaching, but to date nothing has happened. Back to Text