Bloc rallies for greater federal support of aerospace R&D, more funding for TPC

By Debbie Lawes

Quebec and the rest of Canada risk losing aerospace jobs to other countries unless the federal government moves quickly on a national aerospace policy that includes more money for R&D, export sales and small- and medium-sized enterprises (SMEs), warns the Bloc Québecois. Such a policy, it says, must include stable and predictable funding from Technology Partnerships Canada (TPC).

In a policy paper released November 17, the Bloc also recommends moving the National Research Council’s Institute for Aerospace Research from Ottawa to Montreal, possibly onto the Mirabel airport site. The Institute has already expanded its presence in Quebec, with the recent opening of the Aerospace Manufacturing Technology Centre at the Univ of Montréal campus.

The white paper is the part of an aggressive campaign by the Bloc to press for increased federal support of Quebec’s aerospace industry, on par with Ontario’s auto industry. More money for R&D should be a key component of that support, it argues.

“Support for research and development is anaemic,” Bloc MP Caroline St-Hilaire told Parliament October 18. “Technology Partnerships Canada is under-funded. Export contracts supported by Export Development Canada are far too few.”

The party says TPC’s annual budget of about $320 million is not sufficient to meet demand. It wants the budget increased, and a designated aerospace program established that would contribute up to 30% for all R&D projects.

The Bloc also contends that TPC funding for the aerospace/defence sector has dropped from a high of 64% in previous years, to 36% and 29% in FY01-02 and FY02-03 respectively. However, TPC’s director of public affairs counters that while aerospace may not receive a two-thirds share every year, it has overall since 1996, which is the goal of the program.

“There are year-to-year fluctuations in the support and that’s a reflection of the cyclical nature of the industry,” says Bruce Stuart. “In the last few years the demand hasn’t been great but it’s beginning to pick up again quite substantially, so we’re going to see over the next few years that 60 per cent figure actually begin to rise.”

Increased support for SMEs and suppliers is another key Bloc recommendation. It wants more funding for the TPC-Industrial Research Assistance Program, targeted funding for the aerospace sector within this program and a guaranteed loan program to help smaller companies participate in product development and bid on larger contracts.

TIGHT DEADLINE FOR BOMBARDIER

The debate over Quebec’s aerospace sector has become a hot topic within the House of Commons in recent weeks, with Bloc MPs chastising the Liberals for dragging their feet on developing a national policy for the job-rich aerospace sector.

Fuelling the political firestorm is the fear that Montreal-based Bombardier will develop and assemble its next generation regional jets in the US or Europe. Even the Conservative Party, which in the past has described TPC as a form of “corporate welfare” that should be axed, has muted its criticism of late as it attempts to build political support within Quebec.

Business and labour groups in Quebec have joined the Bloc in pushing the government to announce an immediate support package that will convince Bombardier to base its CSeries 100-seater jet program in Montreal. The company’s board is to decide by early next year which jurisdiction offers the best bottom line. Bombardier is looking to governments to fund one-third — or about US$700 million — in development costs (excluding the engine). The request comes as the company continues to cut jobs at both its aerospace and rail transportation divisions, affecting operations in Canada, Germany, Britain and other countries.

“It’s embarrassing that the federal government isn’t giving a clear signal that they want to assure Bombardier that it can develop its new plane in Quebec and Canada,” Bloc Industry critic Paul Crête told RE$EARCH MONEY. “Bombardier needs an answer quickly.”

Industry minister David Emerson has said a proposal for a new aerospace strategy will be presented to cabinet in mid-December, along with a deal for Bombardier. It’s likely that TPC will form a key component of any financial package for the company, and for the aerospace sector as a whole.

“All of what the Bloc is suggesting makes sense,” says a senior government official who asked not to be identified. “There are huge amounts of R&D involved in a new airplane platform. TPC certainly can’t provide all the support Bombardier is seeking, but it can be part of it.”

TPC COMPLIES WITH WTO RULES

One major advantage to using TPC is that it complies with World Trade Organization rules, reducing the risk of triggering a trade dispute with competing countries such as Brazil.

“There is a huge advantage in having an instrument that has been found compliant with the WTO,” says the official. “If you got rid of TPC, what would you do? The answer would probably be to create another program that is very similar to TPC because it has proven itself to be very effective in taking on those pre-competitive kinds of R&D which are typically uncertain and very high risk.”

The Bloc isn’t alone in calling for a federal aerospace policy and a beefed up role for TPC. The Aerospace Industries Association of Canada (AIAC) says part of the government’s $9-billion budget surplus, as well as savings from its $12-billion expenditure review process (R$, November 9/04), should be shifted to TPC.

AIAC president Peter Boag told the House Finance committee November 16 that the “much-maligned TPC program is in fact the least costly and most effective means to encourage the commercialization of R&D in Canada… it levers one public dollar into four or five private dollars, which compares very favourably with 100 cents on the dollar used to finance research grants.”

The AIAC wants government to partner with the aerospace and automotive industries to invest in new next generation production platforms “that act as anchor tenants in the Canadian economy and as magnets for suppliers.” Those platforms include Bombardier’s CSeries program, along with other international programs, such as the new Boeing 7E7.

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