NDP pledges support for aerospace industry if elected, accusing Tories of inaction

Industrial policy has taken a back seat so far in an election campaign dominated by news of the Duffy expenses scandal, ‘peegate’, the refugee crisis and the Conservatives’ overall handling of the economy.

So NDP Leader Tom Mulcair’s announcement Tuesday that a New Democrat government would expand support for the aerospace sector puts a key industry in the spotlight. It is likely the first of a number of industry-specific announcements from the party.

The party’s promises include a $160-million fund to help small- and medium-sized companies and the earmarking of some existing federal money to foster the aerospace supply chain’s development.

The NDP is also promising a $40-million injection into the Canadian Space Agency technology development program to help companies commercialize new technologies and reforms to military procurement aimed at benefiting Canadian firms.

Mulcair also pledged to personally lead trade delegations to trade events like the Paris Air Show to promote the Canadian aerospace companies, something he says Prime Minister Stephen Harper has been unwilling to do.

“When Boeing wants to sell jets to China, President Obama goes to China to help Boeing sell jets,” Mulcair said, perhaps referring to White House support for a US$19-billion deal for 200 jets in 2011. “What a difference that makes – it provides leadership and confidence.”

In his announcement at Montreal’s Dorval airport, Mulcair accused the Conservatives under Harper of letting aerospace stagnate and doing nothing to bolster the industry as major players such as Bombardier, CAE and Bell Helicopter struggle.

“Canadian aerospace innovators and manufacturers need a prime minister in Ottawa who will be a champion for them on the world stage,” he said. “I will be that champion.”

The political calculus aside – aerospace manufacturing is centred mostly in Quebec, where the NDP holds most of its seats and needs to hold off the Liberals if it’s to win power – Mulcair’s announcement reflects the ideological divide between the Tories and the NDP on industrial policy.

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“I think that what the NDP’s proposing is quite encouraging, really,” Tyler Chamberlin, an associate professor at the University of Ottawa’s Telfer School of Management, told Yahoo Canada.

“Despite the campaign talk that you’re seeing out of the Conservatives right now, the record has been that they have taken, true to their conservative roots, a very hands-off approach to industrial development and industrial support.”

The 2015 report on the state of the sector, prepared jointly by the Aerospace Industries Association of Canada (AIAC) and Industry Canada sketch a picture of a robust, growing industry that generated $27.7 billion in revenues last year, contributed $13.1 billion to the gross domestic product and directly employed 76,000 people.

Canadian aerospace firms supply parts worldwide

Beyond big players like Bombardier, there are dozens of companies specializing in developing and building components for the global aerospace supply chain, things such as avionics and landing gear, for planes assembled elsewhere.

Aerospace manufacturing, which makes up 73 per cent of the industry, is clustered mainly around Montreal, Toronto and Winnipeg, but not limited to those areas.

The maintenance, repair and overhaul segment of the business, based mainly in Western Canada, contributed to just over a quarter of aerospace economic activity, and was growing at a faster rate than manufacturing, the report said.

But the industry’s performance has been uneven, at least on the manufacturing side. The latest Statistics Canada data suggest aerospace sales figures were up in June but down earlier this year.

In its background material, the NDP argues employment growth in the sector has been largely flat since 2001 at around one per cent, compared with 17 per cent for the overall Canadian labour market.

Several companies, including crown jewel Bombardier Inc., have had to lay off employees. The Montreal aircraft builder has seen its stock fall and its debt downgraded amid problems in delivering its CSeries commuter jet.

It’s unclear how the NDP announcement might help the alleviate Bombardier’s woes, but Chamberlin said aerospace worldwide relies on government backing in its competitive and capital-intensive business.

Embraer, Bombardier’s chief rival in the short-haul airliner business, gets support from the Brazilian government, he said, and the U.S. government supports Boeing to ensure its continued survival.

“It requires government involvement,” said Chamberlin. “The Conservatives can point to some targeted initiatives but by and large if you ask the industry they’ll tell you that it’s not been sufficient and not comparable to the sort of support that’s been made in other places.”

No one from the AIAC was available to comment on the NDP plan.

The Liberals, not expected to release their aerospace policy until later in the campaign, offered only a news release from Montreal MP Marc Garneau. The former astronaut cast doubt on whether Mulcair would follow through on his promises to the industry.

“Today Mulcair pretends he’ll support the aviation sector, but his job-killing corporate tax hikes will hurt the manufacturers, hurt the parts-makers, and damage the Canadian economy,” Garneau said in a news release.

The New Democrats’ commitment to balance the budget also makes it unlikely the promised money will flow, he said.

“The aviation sector won’t see a penny from Mulcair,” said Garneau, the Liberals’ former industry, science and technology critic.

A spokesperson from the Conservative party also declined to comment but pointed to elements of the Harper government’s 2015 Economic Action Plan that specifically target aerospace.

They include creating a National Aerospace Supplier Development Initiative to improve the sector’s performance and competitiveness, investing almost $1 billion via the existing Strategic Aerospace and Defence Initiative and supporting large-scale technology projects that have strong commercial potential through the Aerospace Technology Demonstration Program via a $110-million investment over five years and $55 million annual after that.

The NDP contend these comparatively recent measures are too little, too late, that the Conservatives should have been bolstering the sector long before this.

Conservatives rely mostly on tax cuts, says professor

These measures aside, the Tories’ track record remains laissez-faire, relying mainly on tax cuts to encourage businesses to invest in their own growth, said Chamberlin.

“And yet I think it’s become quite clear through many studies that these sort of indirect routes to supporting industry tend to have a very marginal, if any, impact on any industry,” he said.

Recent history has shown that when corporations are presented with a lower tax bill, they most often use the cash to finance share buy-backs or pay out the money in dividends.

“It’s just going to be transferring more money into the owners of the businesses,” said Chamberlin. “If that’s what you want to accomplish, it’s great. But if you want to accomplish something different, like supporting jobs and development, then it’s not a good idea.”

It’s hard to know what the Liberals will do when they finally announce their policy, he said. Past Liberal governments have been willing to support industrial development in sectors they deemed important with taxpayer dollars. But the 10-year stint in opposition has meant most veterans of former Liberal governments are no longer in place.

Leader Justin Trudeau has also made some serious financial commitments already, Chamberlin noted.

“They’ve already put some major spending initiatives on the table in terms of investing in infrastructure and those sorts of areas, so one does wonder just how much is going to be left over for industrial policy?” he said.