This is a condensatign of a study entitled: The Economic Benefits from Utiliza-

tion of Funds and conversion of Facilities Intended for Military Use in Canada,

by Dale Martin. Its message is jobs!

Jobs instead of plant closures. Jobs instead of digging up and shipping out resources which could enormously boost Canada’s manufactures. Jobs-in non- military enterprises instead of job scarcity in military industry. Jobs instead of importing millions of dollars worth of military gear because Canada is tied to damaging military agreements with the USA.

The article begins to lay out evidence that converting military production and purchases to the non-military would mean not only expanding Jobs, but providing the incentive for research and the development of new productive capabilities.

The decision by the federal govern- ment to ‘dramatically increase Canada’s level of spending on military hardware over the five-year period, 1977-82, brings the first major reversal of a trend toward relatively less military spending begun immediately following the Korean War.

The level of spending on military hardware as a percentage of total defence spending had reached a level of about 14% in 1975. The new policy is to begin to increase the capital share of the de- fence budget by 12% a year plus that year’s inflation rate, up to at least 20% of Canada’s military spending. This will involve total outlays on new equipment in excess of $4-billion by 1982.

While the nature of Canada’s defence industry means that Canadians will pay rather than benefit from the proposed military spending, it also means that “‘conversion”’ of these funds into peace- ful purposes, when looked at purely on economic grounds, is that much easier.

Military-industrial Complex

In the first place there isn’t a Canadian military-industrial complex that alter-

nate economic activities need be found -

for, and in the second, those industries in Canada currently producing arms and arms related products are concentrated in high technology, easily convertible areas.

While the accompanying list of mili- tary hardware on the federal government shopping list is by no means exhaustive, it does point to the fagt that planning for massive spending on hardware is a long way down the road.

It must be remembered that the plans were based on the probable cost in 1976-77. Thus even in today’s prices the

total proposed cost will be 15 to 20% higher than listed. .

It is important to note that the dramatic increase in Canada’s spending on mili- tary hardware for 1977-82, follows a périod of gradual decline in defence ex- penditures as a whole. From 1953 to 1977 Canadian spending on ‘‘national de- fence’’ had fallen relative to the Gross National Product and Total Federal Spending.

The Financial Post said on Feb. 19, 1977: ‘“‘The new policy (for. defence spending) ... actually adds up to little less than a revolution.”’ :

One of the arguments often used as a rationale for defence spending is that workers will benefit through increased business activity and higher employment levels. The following section examines the economic “‘returns”’ from the current spending intentions.

Since 1959, Canada has been involved in a Defence Production Sharing Pro- gram with the United States ... closely. linked to Canada’s NORAD (North American Air Defence) commitment. The object was to establish a ‘trough ba- lance’’ -of cross-border defence pro- curement.

As can be seen by the data, Canaua, largely as a result of the Vietnam war, ran an accumulated surplus over the 1959-74 period, though a growing deficit has re- cently set in. But more importantly, in economic terms, the sharing agreement,

together with Canada’s relatively low —

spending levels on military hardware has basically eliminated Canadian manufac- turing’s ability to produce major pieces of military hardware on its own. That is, the Canadian defence industry is fully integrated into the U.S. military indust-

hardware. The big items:

Economic returns marginal.

The *‘smaller’’ items:

tomaker, to assemble in Canada.

tection’ is a joke.

not awarded. Some other items:

What’s on the DND shopping list?

On a shopping spree stretching over 15 years, from 1976 to 1991, the federal government is expected to spend in excess of $4-billion on military hardware by 1982. The list is not exhaustive but shows the move to heavy spending on military

Long-range patrol aircraft. Cost $1-billion. Contract awarded to Lockheed for 18 CP-140 Auroras. Delivery May 1980-March 1981. Mostly imported.

New fighter aircraft. Cost $2.3-billion plus. (120-130 planes) Contract not yet awarded. The General Dynamics F-16 and McDonnell Douglas F-18 are favored.

Ship replacement. Cost $3.5-billion for 20 destroyers. Contract not yet awarded. May be built in Canada; not scheduled until 1981.

Tanks. Cost $185- to $200-million. Contract to Kraus Maffei AG of West - Germany for-Leopard tanks. Possibly $30-million spent in Canada. ~ :

Trucks. Cost $12-million a year, totalling $65-million, built by General Motors.

Trucks. Cost $88-million. Early 1980s. Possible arrangement with U.S. au-

Artillery. Cost $65-million a year, up to $325-million. More expensive items like missiles, with foreign patents, will be imported.

Armored Cars. Cost $300-million plus. (600 to 700 cars) Swiss contract. Half the value of contract promised to Canadian business. Feiss

Radar for Pinetree Line. Cost $185-million. Contract not awarded. Such ‘‘pro-

Communication. (Strategic) Cost $51-million. Contract not awarded. ; Terminals. Replacement of radar and landing aids. Cost $80-million. Contract

Short range radar for ground troops. Cost $6-million, from the U.S. Army, Lightweight mortar. Cost $10-million. U.S. Army.Snowmobiles with heavy carry- ing capacity. Cost $15-million. Sweden. Airborne warning and control system. Cost $200-million. Basically a Boeing 707 with special electrical equipment. Prom- ised $60-million to be returned to Canadian businesses.

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PACIFIC TRIBUNE—MAY 4, 1979— Page 8

rial complex and concentrates almost en-

tirely on high technology avionics and .

telecommunications. Thus when Canada decides to embark on major hardware purchases, the normal economic returns associated with military spending are not

- realized.

Money Would Go to U.S.

All military procurement plans that re- quire a direct importing of the items can be said to have a direct economic impact that is totally negative. Money and thus jobs that could be created in Canada,

were the funds to be spent here, will flow «

elsewhere, mainly to the United States. This will only exacerbate our already in- tolerably high balance of payments de- ficit, cause downward pressure on the Canadian dollar, and thereby reduce the ‘standard of living of the Canadian work- ing class. Furthermore, given that the

- federal government is currently running

a deficit of some $12-billion, they will be

forced to borrow to pay for the imports of _

these military goods. The result of bor- rowing on the U.S. or European money markets, will multiply the negative im- pact on our balance of payments without any positive returns.in terms of employ- ment or economic activity.

Spending on imported military —

hardware over the next five years will, in all probability, exceed $3.5-billion. The result can only mean higher inflation and higher unemployment.

In the first place, even if all the produc-

tion were to be done in Canada by foreign .

owned firms, payments on patents and profits going abroad will result in a sub- stantial outflow of capital produced by Canadian workers. In the case of the jet fighter contract, for example, the U.S. Government will receive $1.2-million on each plane in research and development charges. Canadian workers will thus pay through their taxes between $155- and $180-million directly into the U.S. treas- ury.

Besides that, the distortions caused by our branch plant economy are exempli- fied in this quotation from an ad by Lockheed in the Feb. 19, 1977 Financial Post: ‘The tools and fixtures needed to help. build key elements of Aurora’s wings have reached Bristol Aerospace Ltd. in Winnipeg.”

Reached Winnipeg from where? From machinery suppliers and tool and die makers in the USA.

-Currently a major weakness of the ian economy is the fact that we import nearly 70% of our machinery equipment. j Canadian Arms Industry?

It should not be imagined, however, that an all-Canadian arms industry would be the answer! Even if all the military spending were to occur in Canada, a Tre- cent U.S. study shows that jobs would be lost. Since defence industries tend to be very capital intensive, each dollar spent on defence creates less employment than

The F-16, a contender with the defence department.

military contracts that the Canadi

‘people. If we go the route that (Defen}

a dollar spent in almost any other area; the economy. In the United States, ex increase of $1-billion military spendi meant the loss of 11,600 jobs, as coy pared with spending the money in oth ways.

In Canada, our disadvantaged positi would dictate a direct loss of betwee 90,000 and 176,000 jobs on the $4-billiy expenditures on military hardware oy the next five years. re

If we add to this loss the oppo: lost of not spending the $4-billion on cially useful enterprises such as a lan housing program, the massive cost society is evident. If only $1-billion off total were spent to build homes, $30,000 to $50,000, anywhere fp 50,000 to 83,000 new jobs could | created. : etre ; 3

A United Auto Workers brief of Fy 1976 urged the consolidation of # Canadian aerospace industry into oF entity. Noting a highly skilled workfo of 20,000 in that industry, the brief ey mated a potential of more than $1-h in sales and doubling of the workforce, the industry were diversified through a ionics, electronics, computers, industy machinery, telecommunications, ay (with particular emphasis) mass trans)

However, the government will spet $1-billion on an anti-submarine loy range patrol aircraft, and another $1) billion on jet fighters, while failing pravide a sane and balanced trap portation system.

One more example is the ship-buildiy industry. Defence Minister Danson? plumping for the building of 20 ® stroyers in Canada. If they were pr duced from design to manufacturin - either productive capacity in ship buil ing would be hit by unemployment aflt” this contract, or Canada would sti down the road of having a major sé interest in arms production.

Ship-building Industry

Building of a merchant marine, onth other hand would have various spin-ofi\ and could help reduce Canada’s deficit! freight and shipping costs, whit” reached $1-billion between 1968 ai 1976.

The fact of the matter is that Canail

does not have ah arms industry. capal of absorbing the multi-billion doll

Government seems intent on handi out. Thus we do not have a traditigt “‘conversion’’ of military spending pro lem. Instead we can rationally deci where-to spend the billions of dollars funds on projects that will prove of direl economic benefit to the Canadii

Minister) Barney Danson proposes, W soon will have a’ conversion problet similar to that of most-other advanci