Hudson on the Hill

Will ­legislative changes ­affect military exports?
HUDSON ON THE HILL  |  May 20, 2019

Global defence spending last year increased to some $1.82 trillion USD, up 2.6% from 2017, according to the respected Stockholm International Peace Research Institute (SIPRI). The five biggest spenders – the United States, China, Saudi Arabia, India and France – a combined 60% of the total. Where is Canada in all this?

Canada is a relatively minor player, with last year’s $26.12 billion USD, as reported by SIPRI – a 1.26% increase from 2017. Yet this country has a well-established defence industry (though much of it subsidiaries of multinational conglomerates) that competes aggressively on world markets, often with the Canadian Commercial Corporation (CCC), a government agency, acting as broker, financier and prime contractor.
Sometimes, however, the CCC’s entirely legitimate role can be undermined by developments beyond is control, as evidenced by two high-profile contracts.

First, a $15-billion deal with General Dynamics Land Systems–Canada (GDLS-C) out of London Ontario to build light armoured vehicles (LAVs) for Saudi Arabia was signed off by the CCC in early 2015.

It was a significant follow-on contract to an earlier (2011) U.S. sale of some 70 LAVs in various configurations by the Canadian company’s Michigan-based parent, a subsidiary of Virginia-based General Dynamics Corporation. At that time, the U.S. Defense Security Cooper­a­tion Agency noted to Congress that the contract, worth $263 million, would “contribute to the foreign policy and national security of the U.S. by helping to improve the security of a friendly country which has been and continues to be an important force for political stability and economic progress in the Middle East.”

All seemed to be going well until human rights questions led to public pleas, political hand wringing about penalties, but no real action taken to block the sale.

The second contract of note here, was to the Philippines. Signed off in late 2017, and worth some $234 million, it was a sale of 16 Bell 412 helicopters by Bell Helicopter Textron Canada Ltd. of Mirabel, Quebec, a subsidiary of the Rhode Island-based Textron conglomerate. Canada had previously sold eight 412s to the Philippines in 2015, so the additional buy was generally seen as proof of the viability of Canadian suppliers in that highly-competitive international market. Delivery of the second batch was to have begun early this year.

When the Bell deal was announced, Philippines Defence Under­secretary Fernando Manalo described the second batch (the same basic platform as the CH-146 Griffons flown as general transports and gunships by the Royal Canadian Air Force) as “combat utility” aircraft. The Griffons were to be a key element of a modernization program in the Philippines, to include new light combat jets manufactured in South Korea, to “give our armed forces the minimum capability to demonstrate their ability to perform their responsibilities” in the face of an increased Chinese presence in the region.

However, both the Saudi LAVs and the second Philippines sale were seized upon by human rights activists because of concerns that the new platforms would be used against dissidents. Duterte certainly didn’t help his case – or Bell’s, for that matter – by saying that using the helicopters simply to ferry troops around was “a crazy proposition.” Instead, referring to rebels and Islamic militants in the southern Philippines, he said he was “buying helicopters because I want to finish them off.”

Prime Minister Justin Trudeau had expressed concerns in a private meeting with Duterte during a November 2017 summit in Manila, and Canada imposed restriction for the use of the helicopters. “As I mentioned to President Duterte, we’re concerned with human rights, with the extrajudicial killings,” Trudeau told reporters shortly afterward, adding that Canada has “a reputation for being able to have strong and frank, sometimes firm, discussions around the rule of law and human rights with its partners.” He characterized his conversation with Duterte as “cordial and positive.”

That wasn’t how the Filipino leader saw it. Trudeau was barely back in Ottawa when Duterte, who has openly bragged about aggressive crackdowns on dissidents, considered any foreign questioning of his administration “a personal and official insult.” He cancelled the Bell deal three months later.

It could be argued that hands were forced on both sides of the Pacific: Duterte because he doesn’t like to be backed into a corner, and Trudeau because he was taking heat from arms control lobbies, some of which have considerable influence on party politics and, as a consequence, the government.

“Once again, Canadian equipment is going to the military of a known human rights violator,” said Cesar Jaramillo, executive director of Project Ploughshares. “As with arms sales to Saudi Arabia, in which red flags are widely acknowledged, Ottawa cannot claim ignorance about the well-documented pattern of human rights abuses in the Philippines.”

There has been speculation that any cancellation could leave Canada liable for a huge financial penalty (as with the Saudi LAV deal), but the non-disclosure aspect of the contract has frustrated attempts to confirm that. (The CCC did respond to FrontLine questions on whether Duterte’s cancellation of the second helicopter sale obliged the CCC to compensate Bell.)

“The contract signed by the previous government, by Stephen Harper, makes it very difficult to suspend or leave,” Trudeau said in a broadcast interview. “I actually can’t go into it, because part of the deal on this contract is not talking about this contract, and it’s one of the binds that we are left in because of the way that the contract was negotiated.”

Meanwhile, GDLS-C has continued to fulfill its LAV contractual obligations even as the Canadian government and others considered diplomatic and economic pressures on Saudi Arabia. Those pressures increased after the murder of dissident journalist Jamal Khashoggi inside the Saudi consulate in Turkey last year.

Among the few concrete responses among NATO countries to Khashoggi’s death was Germany’s cancellation of arms exports to Saudi Arabia. An unintended consequence of that decision is that a highly-publicized 2017 agreement with France to develop a new European fighter evidently is in jeopardy.

In the past, Canada has sold the Saudis equipment for defence against possible attacks by either Daesh or Shia-ruled Iran. But the Sunni-ruled desert kingdom has long faced criticism from western governments and human-rights activists for crackdowns on dissidents within its own Shia minority, and some critics fear that the Canadian-built LAVs could be drawn into that campaign. In fact, videos from 2012 and 2015 did show Saudi Forces using older LAVs against Shia dissidents in the kingdom’s eastern province.

Consistency Lacking
So why has Canada handled Saudi Arabia so much more gingerly than the Philippine contract? One obvious answer is that the LAV contract is more than 50 times the value of the helicopter contract and preserves many more jobs over the long term. Also, the new Canadian LAVs could raise red flags under Canada's Export and Import Permits Act (EIPA), which blocks arms shipments “unless it can be demonstrated there is no reasonable risk that the goods might be used against the civilian population.”

Foreign Affairs Minister Chrystia Freeland certainly raised the Saudi ire by linking arms sales to Khashoggi’s murder saying that no new export permits would be issued. “I also want to be clear that in the past, we have suspended already-issued export permits,” she pointed out. “And, as the prime minister has said, that is action that we have taken in the past and we stand prepared to take in the future.”

Then there’s the United Nations Arms Trade Treaty to consider. First negotiated at a conference in New York in July 2012 and designed to impose some form of enforceable order into a global business worth at least $90 billion a year, it wasn’t adopted by the UN General Assembly until the following April due to challenges with the wording of a final text. But it did enter into force in December 2014, and more than 100 states have since ratified it, and 34 more have signed but not ratified.

There was a significant international outcry recently when U.S. President Trump used a National Rifle Association meeting in Indiana to announce that he was “taking […] back” his country’s September 2013 signature on the UN Treaty. “We will never surrender American sovereignty to anyone,” he said, drawing a tenuous link to the U.S. Constitution’s second-amendment right to bear arms.

On this side of the border, Freeland did introduce the requisite draft legislation (Bill C-47) in April 2017 whereby Canada could accede to the treaty. It finally received Royal Assent last December. Among other things, it is designed to “enhance” Canada’s current regulations by amending the EIPA and part of the Criminal Code of Canada. Global Affairs Canada (GAC) explains, in a legislative background document, that the government must now “consider certain assessment criteria before authorizing permits.” The legislation also increases the maximum fine under the EIPA to $250,000 from $25,000 on summary convictions.

The Saudi deal was an issue going into the October 2015 general election that saw Trudeau and the Liberals unseat the 10-year-old Conservative administration. There’s little doubt that these issues will be resurrected in the campaign for next October’s election, particularly as the government’s handling of the Arms Trade Treaty is expected to be part of the Liberals’ campaign platform.

The government has just finished the pre-publication period for its planned regulatory update flowing from passage of C-47, and is now in the throes of reviewing the comments it has received with a view to finalizing the regulations and setting the stage for accession to the Treaty sometime this summer.

How those legislative and regulatory changes will affect future military exports obviously is unclear at this stage, but begs a fundamental question: is the government being naive, disingenuous or cynical when it comes to the arms trade? Or all of the above? The answers are debatable, depending on where you dial into the decision-making process. GAC and the Justice department have some extremely knowledgeable people to deal with the legal and other issues of the business.

It’s when issues are handed to the politicians that things can get tricky.

– Hudson on the Hill
The role of Hudson is being filled by contributing editor Ken Pole.