By Chris Sallie
AIMS on Campus Fellow
This past week, the Government of Canada released its budget for the upcoming fiscal year. Not containing much in the way of surprises, the Minister of Finance has continued his promise to run fiscal deficits over the short term in the hopes of growing the economy. For those more inclined to delve deeper into government spending priorities, the substantive document is the Government Estimates for 2017-18.
Within Government Estimates, itemized spending forecasts outline in greater detail the departments which will be affected by the budget and on page II-23 an entry for the Canadian Commercial Corporation (CCC) has been defunded. What is the CCC, what purpose do they serve and why is this relevant in 2017? In answering these questions, the only question remaining is why defund them.
Created in 1946, the CCC was established as an arms-length crown corporation to assist with the rebuilding of Europe after WWII. Under the authority of the Minister of Trade, this agency was established to promote defence procurements and other government-to-government infrastructure deals, sometimes sensitive and other times controversial. Within The Canadian Corporations Act, the scope of the agency is outlined as to facilitate all types of sensitive trade deals between Canadian exporters and foreign buyers, providing the framework needed to negotiate these types of deals which can range from medical isotopes to military hardware.
In visiting their website, the CCC states its involvement with not just defense contracts, but a myriad of other large-scale infrastructure services such as: Health and Innovation, Cleantech, IT and Cybersecurity – all areas where the government intends to increase spending towards. If we are looking to promote these sectors abroad and reach out to other governments to sell our services, why defund the agency tasked with securing these high-level contracts? The answer is perhaps, as always, more political than practical.
In recent months, the CCC has been a component of the broader issues relating to the sale of LAVs to Saudi Arabia; a $15B dollar deal that employs close to 3,000 high skilled Canadians in southern Ontario. Negotiated under the previous government, the newly elected Liberals were under immense pressure to cancel the deal; correctly deciding to honour this agreement. Facilitated in part by the CCC this deal was intended to be a crowning achievement which put Canada on the map for other states to consider when it comes to defence contracts, but the Law of Unintended Consequences would manifest itself by the way of public outcry towards a deal with a state who goes against our values.
Is it possible that these events led to the decision to defund the CCC and if so, were the motivations to limit these types of sales or was it to prevent the type of political backlash future governments may be subject to which would scare governments away from the hard decisions?
It is very likely that the latter is the case as the CCC can operate semi-autonomously, providing political cover for sitting governments should other LAV deals come to light. In removing government funding, tax payers may be less inclined to care about what the CCC does; ‘out of sight, out of mind’ as they say. The political benefits; however, are not without consequences and Atlantic Canada may bear the brunt of this decision. Under current legislation, the CCC has a 50/50 funding arrangement where revenues from services rendered would cover half the operating costs of the agency; as of this budget the operating costs are 100% financed by the private sector. Many small government persons (such as myself) may herald this announcement as being a success, but I am less than convinced that this is something to be celebrated. In fact, this may create more problems further down the road.
No longer funded by taxpayers the CCC maintains the statutory authority to operate on behalf of Canadians, under the Minister of Trade, while employing the principles of commerce within their official mandate. Despite recent rhetoric over populism and protectionist ideas around the world, globalization continues as states become far more economically independent than ever. This decision by the Government of Canada could potentially have negative impacts on Atlantic Canadian businesses and enterprise by removing their ability to access sensitive international markets in favour of larger contractors such as SNC-Lavalin or Bombardier who can pay for these services. This type of Pay to Play scenario does not serve the best interests of all Canadians, least of all the small and medium sized businesses of Atlantic Canada.
The decision to defund the CCC while not stripping its status as a crown corporation signals a policy directive intended to provide the Government of Canada political cover from the complex and difficult matters relating towards state-to-state defence procurements. In removing public funding to the CCC, larger players will gain a competitive advantage in securing lucrative contracts in areas of defense spending, disadvantaging Atlantic business in the process. Crown corporations are intended to work for all Canadians, but this decision leaves Atlantic Canada without a champion in Ottawa to promote their world-class products and services.