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                                            SPEAKING EVENT OVERVIEW

                                   The North American Defense Industrial Base:
                                   Competition & Consequences of Globalization

Over the past half century, U.S.-Canada defense cooperation has been close. Both nations have tremendously benefited
from a highly integrated North American defense industrial base. In the face of changing global security environments,
heightened attention to national security issues and recent economic contractions, commitment to a robust defense
industrial base remains high for both governments.

Speech delivered by Mr. Marc Whittingham, President and CEO of the Canadian Commercial Corporation (CCC).

Date: TUESDAY, NOVEMBER 16, 2010
Time: 12:30 - 13:30
Place: EMBASSY OF CANADA – Canada Room, 501 Pennsylvania Avenue NW, Washington, DC




OPENING

1.     Bonjour Madame, Monsieur /Good afternoon ladies and gentlemen and distinguished guests.

2.     My name is Marc Whittingham and I am the President and CEO of the Canadian Commercial Corporation.

3.     Before I begin what promises to be a lively discussion on the future of the integrated North American defense
       industrial base, I want to take a brief moment to thank Christopher Sands for his kind introduction.

4.     I also want to thank the Hudson Institute for partnering with us today.

5.     And, the Canadian Embassy for providing us with such an impressive venue to discuss such an important subject
       here in Washington, D.C.

6.     As you may have seen from the event title on our brochure: The North American Defense Industrial Base:
       Competition & Consequences of Globalization; this particular issue is of great interest to me and may of you here
       today.

7.     I lead an organization that is at the forefront of Canada-U.S. trade in the defense sector, the Canadian
       Commercial Corporation, or CCC.

8.     If I said that this North American defense industrial base is defined as Canada and the U.S. for military equipment
       purchases, what would your reaction be to the fact that the integration of our two defense industrial bases is
       codified in U.S. law, not Canadian law? For Canada, it is simply a fact of life.

9.     I’m sure some of you are new to CCC and wonder what we do.

10.    Created in 1946 to assist with post-WWII reconstruction efforts in Europe, CCC was in essence the Government
       of Canada’s response to the U.S. Marshall Plan.




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11.   As post-war reconstruction efforts tapered off in Europe by the early 1950s, the Korean War reinforced the need
      to ensure the availability of America’s defense industrial base to meet growing national security resource
      requirements of the Cold War era.

12.   By the mid-1950s to ensure the supply of military goods to the U.S. Department of Defense, CCC took on the
      newer responsibilities.

13.   This responsibility was officially enshrined in the 1956 U.S.-Canada Defense Production Sharing Agreement, or
      DPSA.

14.   CCC’s focus for many years has been and continues to be the U.S. Department of Defense. CCC is the prime
      contractor in Canada to the US DoD and through this function we support the North American defense industrial
      base of our two great countries.

15.   This service supports both Canadian industry and the U.S. military in the acquisition of essential and innovative
      equipment in a cost-effective and timely manner.

16.   The Government of Canada through the CCC performs these procurement services free of charge to the United
      States, thus, saving the U.S. government and treasury considerable time and expense.

17.   CCC’s role as the custodian of the DPSA has allowed the Corporation to continuously support Canada’s defense
      industrial sector’s access to U.S. DoD opportunities and requirements.

18.   Indeed, the U.S. derives many benefits from doing business with Canadian defense suppliers.

19.   Let me briefly list five advantages.

       I.       When the U.S. buys goods and services from Canada they are encouraging their own economic trade
                and growth agendas as a result of integrated cross-border trade.

      II.       Canada is a trusted ally and interoperability is a key pre-condition to working together in international
                missions.

      III.      A strong North American defense industrial base is important for continental security and therefore U.S.
                security.

      IV.       Canadian industry provides the U.S. military with essential and innovative equipment in a cost-effective
                and timely manner.

      V.        Contracting with Canada broadens and enhances the U.S. military supply base and provides access to
                Canadian research and development.

20.   Before I continue any further, let me briefly sketch out what I believe are the three main ideas underpinning my
      presentation today.

KEY POINTS

21.   Firstly, in today’s era of integrated global supply chains, we must strongly resist tendencies that call for trade
      protectionism – this must not be allowed to happen within the integrated North American defense industrial base.

22.   Secondly, to help secure America and her allies in the 21st Century, Canada’s defense industry is intimately
      aligned with its U.S. defense companies making the entire North American defense base a truly interdependent
      bi-national strategic asset.




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23.   Finally, I will conclude my talk by arguing that the future of the North American defense industrial base resides in
      a framework of cooperation to realize the potential of global defense market opportunities with NATO and like-
      minded nations.

MAIN DISCUSSION

24.   Let me open my first point by briefly stating that Canada-U.S. defense cooperation over the past half century has
      greatly enhanced America’s international security.
25.   Accordingly, both our great nations have tremendously benefited from a highly integrated global supply chain
      which supplies and makes possible the North American defense industrial base.

26.   Now, despite decades of changing global security environments, and in more recent times heightened attention to
      national security issues post-911 as well as the current economic downturn, commitment to a robust defense
      industrial base remains high for both governments.

27.   For many years, CCC has worked with other government departments, Canadian companies, industry
      associations and our U.S. allies to preserve an effective and efficient integrated North American defense industrial
      base.

28.   Canada and the United States have a common interest in having the ability to act on the world stage in times of
      war such as in Afghanistan today and to work together to resolve some difficult pressing issues underlining
      today’s economic crisis.

CANADA-U.S. INDUSTRIAL BASE COOPERATION

 Let me briefly discuss another area of Canada-US Industrial Base Cooperation

29.   Here more broadly I am referring to the North American auto industry bailout of 2008 to 2010.

30.   You will recall that President Obama in 2009 declared that the U.S. government would not allow General Motors
      to fail became it was too big and too important for the U.S. industrial base and for American jobs.

31.   Let me quote President Obama: “But of course GM is an American company with tens of thousands of employees
      in this country, and responsibility for its future ultimately rests with us. That's why our government will be making
      a significant additional investment of about $30 billion in GM -- an investment that will entitle American taxpayers
      to ownership of about 60 percent of the new GM.”

32.   In another statement made by the President, he said: “The Governments of Canada and Ontario will participate
      alongside the U.S. Treasury by lending $9.5 billion to GM and New GM. The Canadian and Ontario governments
      will receive approximately $1.7 billion in debt and preferred stock, and approximately 12% of the equity of the new
      GM. Based on its substantial financial contribution, the Canadian government will also have the right to select one
      initial director.”

REALITY OF THE CANADA-U.S. DEFENSE INDUSTRIAL BASE

33.   In the case of the 1965 Auto Pact between the United States and Canada, the auto industry agreement lead to
      tens of thousands of manufacturing and service jobs on both sides of border, which in turn created greater levels
      of industrial base integration.

34.   Why you ask is this example relevant to the North American defense industrial base?

35.   The unforeseen economic crisis over the past few years has highlighted one important reality for our two great
      countries – namely that today’s global supply chain is far more integrated and connected than ever before.




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36.   What did dominate the media during this time was President Obama and Prime Minister Harper’s collective
      decision to agree to lend billions of dollars to General Motors because it was deemed vital to the “National
      Interest” of North America.

37.   Thus, I would argue that this clear commitment of support to one of North America’s central industrial pillars was
      also, perhaps in more general terms, an implicit commitment of support for the North American defense industrial
      base.

38.   I used the example of General Motors to illustrate my second point.

39.   Some of you in this room will recall that GM Defense was the military products division of General Motors founded
      in 1950.

GDLS CANADA & LAV III: ‘SHARED ASSEMBLY’

40.   It was acquired by General Dynamics in 2003 and now part of the General Dynamics Land Systems division or
      GDLS Canada.

41.   General Dynamics is now a major supplier of armored vehicles of all types, including the M1 Abrams, LAV-25,
      LAV III / STRYKER, and a wide variety of vehicles based on these chassis.
42.   The LAV III armored vehicle is an excellent example of the latest generation of Light Armored Vehicles.

43.   Designed and built by GDLS Canada in London, Ontario the LAV III is powered by a U.S. built Caterpillar 3126
      diesel engine with up to 350 horsepower, and can reach speeds of 100 kilometers per hour.

44.   Let me also point out that the vehicle’s transmission is also U.S. built.

45.   In fact, if you consider the LAV IIl or any of its variants, the entire production process is what I call ‘shared
      assembly’ – meaning that a certain percentage of preassembly work is done in one country (the U.S. or Canada)
      and the finally assembly is preformed in the other.

46.   Wherever the vehicle is ultimately assembled, I believe, does not determine the nationality of the product given
      the global supply chain.

47.   According to GDLS Canada, since the introduction of the LAV III fleet, to-date over 4,200 vehicles have been
      ordered, with the majority being STRYKER type variants for the United States Army.

48.   The vehicle has been deployed to operations in the Balkans, Africa, Haiti, and is currently the vehicle of choice
      among Canadian and U.S. soldiers in Afghanistan.

49.   GDLS Canada, through the Canadian Commercial Corporation, ensures that the U.S. Army and other DoD
      Services receive their vehicles on time, within budget and on schedule. And today CCC is doing the same thing
      for the LAV III’s that the Kingdom of Saudi Arabia has purchased.

50.   I want to conclude my first point by saying the North American defense industrial base remains an example of
      excellent Canada-U.S. security and defense trade cooperation.

51.   Therefore, as our governments emerge from this era of economic uncertainty, both U.S. and Canadian defense
      firms and defense industry associations need to work for the mutual benefit of reducing future barriers to North
      American defense trade while at the same time curbing protectionism sentiments wherever they may appear.

52.   Both our governments also need to ensure that future defense sector trade and cooperation remains high and at
      the forefront of overall bilateral trade interests.

53.   In today’s economic uncertainty we need to work harder to maintain and create jobs – this also extends to our bi-
      national defense industrial base sectors.


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54.   The second point I want to discuss with you today revolves around North American defense industrial base
      cooperation.

55.   To help secure America and her allies in the 21st Century, Canada’s defense industry is intimately aligned with
      U.S. defense companies.

56.   As I mentioned earlier, this special relationship is unique and historical.

57.   In fact, I would even say that the Northern American defense industrial base can be viewed as an interdependent
      bi-national strategic asset.

58.   What do I mean by this?

GD-OTS CANADA & THE GLOBAL SUPPLY CHAIN

59.   I will use the example of General Dynamics-Ordnance and Tactical Systems Canada, a subsidiary of GD-OTS
      headquartered in St-Petersburg, Florida to illustrate my point.

60.   GD-OTS Canada has three facilities that produce munitions and their components.

61.   The facilities are located in Le Gardeur, Nicolet and Valleyfield in the Province of Québec.

62.   Canada’s munitions manufacturing capability is world renowned and GD-OTS Canada is known for its high quality
      products and exceptional performance.

63.   As such, the U.S. DoD has designated the Valleyfield facility in Québec, which manufactures explosives and
      propellants as well as specific products, both small and large caliber, as a secondary source of supply for U.S.
      Army requirements.

64.   GD-OTS Canada is also an active member of the North American Technology Industrial Base.

65.   This example illustrates the integrated nature of the North American defense industrial base whereas suppliers on
      both sides of the border, owned by the same parent company, maximize their manufacturing capabilities and
      capacities to meet customer requirements.

66.   Our defense industries are symbiotic and collectively contribute to the security of North America and our allies.

67.   It is important for U.S. and Canadians decision-makers to understand that when the United States (government or
      company) buys goods and services from Canada they are encouraging their own economic trade and growth
      agendas as a result of integrated cross-border trade.

68.   By ensuring equal access to each others’ defense markets, technical solutions to complex military requirements
      are ensured; suppliers work collaboratively in providing state-of-the-art military equipment to U.S. and Canadian
      armed forces.
69.   Internationally, GD-OTS Canada provides conventional ammunition, or components, to a large number of NATO
      allies.

70.   These include: Belgium, Denmark, France, Holland, Greece, Italy, and the UK as well like-minded nations in
      Middle East, Far East, Australia and New Zealand.

71.   Let me conclude by saying that the Northern American defense base ought to be understood in terms of an
      interdependent bi-national strategic asset, which has the potential to create new global defense market
      opportunities for both U.S. and Canadian defense firms.




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72.   This leads me into my final point today, namely that the future of the Northern American defense industrial base
      resides in a framework of cooperation whereby Canada and the U.S. can work closely together to create
      additional added valued opportunities for our defense industries through what I call “international collaborative
      contracting”.

73.   I would like to advance the following idea today by asking the following question: How can we (i.e. the Northern
      American defense industrial base) cooperate more effectively and efficiently in a competitive globalized system
      while at the same time participating in global security in more prominent and unified way?

74.   This does not mean we subject each other’s value system to the other, but can strategically think about working
      together to help our allies.

75.   I want to provide you with an example of what we are currently doing with our NATO ally Norway.

NORWEGIAN P3 WING REPLACEMENT PROJECT

76.   CCC is currently undertaking P3-wing installations by IMP Aerospace (Halifax, NS).

77.   The wings were supplied by Lockheed-Martin Aerospace (Marietta, GA, USA) to IMP through a contract with
      CCC for the Royal Norwegian Air Force.

78.   Norway approached CCC on the recommendation of the Canadian Forces to determine whether the Corporation
      could provide the Royal Norwegian Air Force with immediate international procurement services.

79.   CCC understood that the Royal Norwegian Air Force had limited international contracting capacity to execute
      such a procurement solution.

80.   Together with IMP Aerospace and Lockheed Martin, CCC proposed a unique defense cooperation model to assist
      a trusted NATO ally.

81.   In the case of the Royal Norwegian Air Force, CCC negotiated and is now executing a bilateral government-to-
      government procurement arrangement, facilitating export transactions on behalf of a Canadian supplier (IMP
      Aerospace) and a U.S. defense supplier (Lockheed Martin).

82.   Looking ahead to the new Lockheed Martin F-35 advanced fighter aircraft, CCC can envision similar types of work
      in the future to service the F-35 for some of its NATO allies and other like-minded nations.

83.   I use this example to illustrate that Canada’s defense industry is intimately aligned with U.S. defense contractors.

84.   That interdependence is real and effectively serves our collective defense and national security capabilities as
      well as our commitment to a seamless Northern American defense industrial base.

85.   Why is this approach valuable for America and her allies through Canada?

NEW POSITIONING FOR GLOBAL SALES

86.   In my discussion with Vice Admiral Jeff Wieringa, former Director of the Defense Security Cooperation Agency, he
      said U.S. Foreign Military Sales were $35B last year, but the demand placed on him from NATO allies and other
      like-minded nations was more than $50B.

87.   It was clear from our discussion that there was a global demand for North American defense products and
      solutions.

88.   Of course, we need to be ever so mindful of security issues in the defense trade sector and ITARs.




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89.   Canada seeks to create greater “added value” to the North American defense industrial base through international
      collaborative contracting like the example I mentioned between IMP Aerospace, and Lockheed Martin and the
      Government of Norway through the Canadian Commercial Corporation.

90.   While the U.S. is an important market for the Canadian defense industry, I believe that a strong North American
      defense industrial base should create new markets for its products and services and that this should remain a top
      priority for both the U.S. and Canadian governments.

91.   Going forward, the question for me is how do we (U.S. and Canada) cooperate in a competitive global
      environment?

92.   Firstly, the United States and Canada need to work together to ensure that our allies around the world have their
      national defense interests’ met.

93.   Secondly, we need to ensure that our allies receive real value for money in their defense procurements,
      particularly given that various allies are currently experiencing spending restrictions and budgetary
      rationalizations.

94.   Ladies and gentlemen let me challenge you this afternoon by asking this question: are there places in this world
      that we (U.S. and Canada) can strategically work together to satisfy allied demand for defense goods and
      services produced in North America?

95.   I pose these questions to you today to emphasize that forthcoming competition from other nations and regions
      around the world, particularly in the defense trade sector, will place greater and newer demands on the U.S.-
      Canada defense industrial base.

96.   The Canadian Commercial Corporation, as part of the Government of Canada, can assist the FMS system to
      reach a number of its targets through our international collaboration contracting approach.

97.   I believe that through a more strategic approach and new dialogue we can maintain and create jobs while
      collectively working together to preserve and enhance the integrated North American defense industrial base for
      future global defense market opportunities.

THANK YOU




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