The largest Canadian military suppliers in 2003.

Canada's ten largest military contractors sold almost $2.5-billion in military equipment and services during 2003, according to the latest data compiled by Project Ploughshares. Military sales for the year ranged from an estimated $546-million for the largest contractor, CAE Inc of Montreal, to a reported $86-million by the tenth largest contractor, Heroux-Devtek Inc of Longueuil, Quebec (see Table 1). The combined total is a significant drop from the $3.5-billion sales total estimated for the top 10 contractors of 2002. This is largely due to a reduction in company size of the previous largest military contractor--General Motors Defence of London, Ontario--resulting from its sale to General Dynamics Land Systems of the US.

As in earlier years, the latest table of largest military contractors is virtually identical to that of the previous year, with some changes in relative position on the list and one change in name (from GM Defence to GDLS Canada). Although, like its counterparts in other industrialized nations, the Canadian military industry has undergone restructuring, the upper level has remained extremely stable and a handful of companies continue to obtain the largest military orders. It is possible that some privately owned Canadian companies, such as CMC Electronics of Montreal or IMP Group of Halifax, undertook sufficient military work in 2003 to be included in the ranking. However, the limited transparency of these private companies' financial reports precluded estimation of their military sales for the year.

The top contractors represent the nature and location of military production in Canada. Many companies in the military industry are aerospace companies based in greater Montreal or Toronto, manufacturing equipment for both civilian and military markets. CAE Inc, the largest 2003 military contractor, provides simulation technologies to train pilots to land Airbus passenger aircraft or to operate machine guns from Blackhawk attack helicopters. Bombardier Inc and Bell Helicopter Textron Canada Ltd manufacture aircraft and helicopters respectively, mostly for commercial customers, but also regularly for military end-users. Similarly, Pratt & Whitney Canada Corp produces civil-certified turboshaft and turboprop engines for aircraft that are shipped to commercial and military end-users worldwide. During 2003 customers included the armed forces of Brazil, India, Ireland, Jordan, Poland, South Korea, Spain, and the US.

A ground transportation equipment supplier, GDLS Canada, is one of a very few Canadian military contractors that are almost entirely dependent on sales to military end-users. In 2003 GDLS Canada shipped armoured vehicles to the armies of Australia, Saudi Arabia, and the US, and also manufactured light armoured vehicles for the Canadian Department of National Defence. SNC TEC, a subsidiary of SNC-Lavalin Group, has for many years sold the bulk of its small and large calibre munitions to the Canadian forces. In 2003, for the first time, its international sales surpassed domestic sales.

As part of more than half-a-century of unregulated cross-border military trade and extensive integration with the US industry, most Canadian military contractors are subcontractors to US military prime contractors. For example, Magellan Aerospace and Northstar Aerospace are both prime contractors with the Department of National Defence and the Pentagon, among other military customers, and also manufacture components for larger military aerospace contractors in the US. Table 2 illustrates the extent of subcontracting within Canada's largest military companies--and indeed the extent of the integration of Canadian military production with US industry. It is important to note that the table may not reflect the full subcontracting picture among the 20 companies because not all subcontracts between US military corporations and Canadian companies are made public.

The latest ranking of Canada's largest contractors extends the picture of a stable, concentrated military industry. An analysis of reported and estimated sales figures shows that shipments of Canadian-produced goods and services for military end-use remain a significant component of Canada's industrial and technological landscape.

Table 1: Ten largest Canadian military contractors in 2003

Company head office/main plant          A         B         C

CAE Inc, Montreal                       1         2

General Dynamics Land Systems           2         1         2
Canada, London

Bombardier Inc, Montreal                3         3         1

SNC-Lavalin Group, Montreal             4         4         7

General Dynamics Canada, Nepean         5         5         14

Magellan Aerospace Corp, Mississauga    6         7

Pratt & Whitney Canada Corp, Montreal   7         6

Northstar Aerospace Inc, Toronto        8         9

Bell Helicopter Textron Canada Ltd,     9         8
Mirabel

Heroux-Devtek Inc, Longueuil            10        10

Company head office/main plant          D         E         F

CAE Inc, Montreal                                 [check]   [check]

General Dynamics Land Systems           3         [check]   [check]
Canada, London

Bombardier Inc, Montreal                                    [check]

SNC-Lavalin Group, Montreal             1

General Dynamics Canada, Nepean         4         [check]   [check]

Magellan Aerospace Corp, Mississauga    2         [check]   [check]

Pratt & Whitney Canada Corp, Montreal   11                  [check]

Northstar Aerospace Inc, Toronto                  [check]

Bell Helicopter Textron Canada Ltd,                         [check]
Mirabel

Heroux-Devtek Inc, Longueuil            6         [check]

Company head office/main plant          G         H         I

CAE Inc, Montreal                                 E         546

General Dynamics Land Systems           [check]   T         350
Canada, London

Bombardier Inc, Montreal                          A         341

SNC-Lavalin Group, Montreal                       R         291

General Dynamics Canada, Nepean         [check]   E         275

Magellan Aerospace Corp, Mississauga              A         206

Pratt & Whitney Canada Corp, Montreal   [check]   A         163

Northstar Aerospace Inc, Toronto                  A         114 *

Bell Helicopter Textron Canada Ltd,     [check]   A         111
Mirabel

Heroux-Devtek Inc, Longueuil                      A         86 *

Legend

A Ranking within largest 10 Canadian military contractors
using company financial period closest to calendar year 2003.

B Ranking for financial period closest to calendar year 2002
(see Monitor, Winter 2003).

C Ranking within largest 20 Canadian Department of National
Defence prime contractors for fiscal year 2003-2004.

D Ranking within largest 20 military export prime contractors
for fiscal year 2003-2004 as brokered by the Canadian Commercial
Corporation (1) (CCC).

E Estimated or reported military sales greater than 20 per cent
of total company sales.

F Reported military sales or deliveries from Canada
to one or more Third World countries during 2003.

G Foreign-owned or -controlled.

H Commodity classification of major military products
(A--Aerospace, E--Electronics, T--Transportation,
R--Armaments).

I Estimated total value of military sales in millions of Canadian
dollars for 2003 or closest financial period, compiled from Canadian
Military Industry Database data and files. (2) For Canadian-owned
companies this includes military sales of foreign subsidiaries
(* indicates the company reported a value for its military sales).

(1) The Canadian Commercial Corporation (CCC) is an Ottawa-based
crown corporation that assists Canadian companies with export sales
to foreign governments and international organizations. Typically,
over 60 per cent of CCC-brokered sales are purchased by military
agencies.

(2) It is possible that other Canadian companies have generated
sufficient military sales in 2003 to be included in the table.
However, the lack of public disclosure of financial information
precludes the reporting or estimation of military sales by some
privately owned companies like CMC Electronics or IMP Group that
have appeared in earlier editions of the table.

Table 2: Top Canadian military contractors
as subcontractors to US military producers

US Contractor *        CAE       GDLSC     Bo        SNC       GDC

Lockheed-Martin        [check]             [check]
Boeing Company         [check]
Raytheon Company       [check]
Northrop Grumman       [check]
General Dynamics       [check]   [check]                       [check]
United Technologies
General Electric
Science Applications
Carlyle Group
Newport News           [check]

US Contractor *        MA        PWC       NA        BHTC      HD

Lockheed-Martin        [check]   [check]   [check]             [check]
Boeing Company         [check]             [check]             [check]
Raytheon Company
Northrop Grumman                                               [check]
General Dynamics
United Technologies    [check]   [check]   [check]
General Electric       [check]             [check]
Science Applications
Carlyle Group
Newport News

* The US contractors are the top 10 Pentagon contractors by value
for the five-year period 1998-2003. The contract totals range from
US $94-billion for Lockheed Martin to $9-billion for Newport News
(Source: The Center for Public Integrity--www.public-i.org).

[check]--indicates the Canadian military contractor received one
or more subcontracts from the US prime contractor during the period
1998-2003. Note: because of limited public disclosure of Canada-US
military trade, the table may be incomplete
(Source: Canadian Military Industry Database, Project Ploughshares).

RELATED ARTICLE: Letter to the Prime Minister on military export controls.

March 24, 2005

Dear Prime Minister,

I am writing to draw your attention to several important changes that are needed to make Canada's military export control system more effective and to bring it more fully into line with emerging international standards and agreements. Project Ploughshares, the ecumenical peace centre of the Canadian Council of Churches, has been monitoring Canadian military exports for many years, and while we appreciate that Canada maintains a generally restrictive military export control policy, the following identifies a number of ways in which the system should be improved.

1. The management of the military export control system should be returned to the Department of Foreign Affairs, with final responsibility for decisions on export permits lodged with the Minister of Foreign Affairs.

Arms exports are fundamentally foreign policy transactions that have implications for the national security of recipient countries; for security and stability at the regional level; and for human rights, humanitarian law, development, and disarmament. All of these issues are within the responsibility of Foreign Affairs Canada, and it is FAC, in consultation with other Departments and Agencies, including Defence, Trade, and CIDA, that should have final responsibility for ensuring that Canadian military exports are consistent with Canadian values, objectives, and obligations related to international peace and security, international human rights and humanitarian law, international development, and disarmament.

2. Military exports to the United States should be subject to the same export permit requirements that apply to military exports to any other destination.

As an adherent to the 1993 OSCE "Principles Governing Conventional Arms Transfers," through its declared support for the 1998 "European Union Code of Conduct for Arms Exports," and through its support for the United Nations Programme of Action on small arms and light weapons, Canada has made commitments to regulate all exports of military commodities according to certain internationally agreed criteria and existing obligations under international law. Nevertheless, at least half of all Canadian military exports leave Canada without such regulation or scrutiny because military sales to the United States currently do not require export permits.

The exemption of military exports to the US from the export permit requirement that applies to all other countries also undermines Canada's transparency commitments. The details of Canadian military exports that are reported annually to Parliament are based on reporting and tabulations against export permits, and because exports to the US do not require permits, Government reporting does not include sales to the United States. Furthermore, Canadian reporting to the United Nations Conventional Arms Register frequently excludes exports to the United States for the same reason. Nor is Canada able to fulfill its obligation to report all military exports to the "Inter-American Convention on Transparency in Conventional Weapons Acquisitions."

Both transparency and strict adherence to emerging international military export control standards require that all Canadian military exports to the United States be regulated through the same permit system that governs all other military exports.

3. Export control criteria need to be broadened and more consistently applied.

In addition to prohibiting military exports to states that pose a threat to Canada or are under UN Security Council sanctions, Canada "closely controls" military exports to states with a record of serious human rights violations and to states involved in or under imminent threat of hostilities. These are all important criteria, but Canadian regulations should be expanded to acknowledge emerging international attention to additional criteria.

Therefore, Canadian military export criteria should

a) Prohibit military transfers in violation of UN arms embargoes, regional import moratoria, or conventions prohibiting the transfer of specific weapons;

b) Prohibit the transfer of military commodities to destinations where there is a serious risk that they will be used

* in violation of the UN Charter's prohibitions on the threat or use of force,

* in the commission of serious violations of human rights and international humanitarian law,

* in the commission of genocide or crimes against humanity;

c) Take into account whether such exports are likely to

* adversely affect security in the recipient state or region,

* provoke or prolong armed conflict,

* adversely affect sustainable development;

d) Prohibit military exports to states where there is a serious risk of their diversion and subsequent use in violation of any of the above provisions. Canada's implementation of its current commitment to restrict military exports to human rights violators and countries engaged in armed conflict also requires attention. For 2002, the last year for which official figures are available, Canada reports $600-million in military exports to non-US recipients, of which $8-million went to nine countries involved in armed conflicts, and $64-million went to 19 countries identified by Amnesty International as locations of serious governmental human rights violations.

4. Military export control regulations should apply to all equipment destined for military end-users.

The current Canadian military export control system fails to control exports to military end-users on two counts.

In the first instance, certain Canadian-built equipment that is not "specially designed for military use" but is nevertheless sold specifically for military use is not regulated through the military export control system. One example is Canadian-built helicopters, and in the past such helicopters have been sold into military service in Pakistan and Colombia without any requirement for an export permit. Another example is Canadian-built aircraft engines that are sold under a civilian classification but are used in military aircraft by military end-users.

Secondly, many Canadian military components, including engines, go to military manufacturers in the United States and a number of other countries where they are incorporated into military equipment which is in turn sold to third parties. In the case of sales to the United States, no export permit is required, and in other cases the export permit is only to the point of manufacture, not the point of end-use. Especially in instances when the components are major elements, such as engines, fire-control computers, aircraft landing gears, and so on, Canada should be controlling exports to the final military user of those commodities.

5. Transparency requires full disclosure of all Canadian exports to military end-users, with enough detail to assess possible human rights concerns, as well as full disclosure of export permit decisions.

While Canada has over the past decade made major and welcome improvements to its reporting on military exports, there are several ways in which military export transparency can be enhanced in support of arms transfer restraint.

As noted above, at present Canadian military exports to the United States are not disclosed, even though such exports represent as much as half of total military exports. Full reporting is essential and would be facilitated by applying the military export permit system to the United States.

Reporting on exports to military end-users should be of sufficient detail to allow independent assessment of the likelihood of such equipment being used in the violation of human rights.

As a supporter of the EU Code of Conduct on Arms Transfers, Canada should emulate EU states that report on the total value and number of export permits granted and those refused.

The establishment of "small arms and light weapons" as a category of military commodities would permit specific reporting on this group of weapons that has special implications for human rights, crime, and

the management of social/political conflict. Since Canada has established a special framework for controlling the export of automatic firearms, through the "Automatic Firearms Country Control List," separate reporting on this category would also enhance Canadian transparency and highlight the particular importance of controlling such weapons.

6. Finally, Canada should take a leadership role in promoting effective, legally binding international standards (as outlined in item 3 above) for the control of international military transfers.

Canada is already providing important leadership in advancing a people-centred approach to the control of small arms and light weapons, including the encouragement of an international consensus toward the national control of small arms and light weapons transfers according to common international standards that are consistent with existing responsibilities under international law.

Recently UK Foreign Secretary Jack Straw called for a "legally-binding international treaty on conventional arms exports," explaining that while conventional weapons "are plainly less lethal than a nuclear or chemical bomb, [they] account today for far more misery and destruction across the world." Canada should indicate its full support for this proposal and become actively engaged in the cooperative international work needed to make it a reality.

Canada is in a position to help define and promote effective international standards of restraint and regulation in the international transfer of conventional weapons. We urge your consideration of the above proposals toward that end and look forward to your response.

Sincerely,

Ernie Regehr, O.C.

Director