Slow arms export review process risking jobs, defence industry says

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Significant delays in reviewing applications for arms exports are hurting Canada’s defence industry and could cost this country jobs, business groups and experts say.

“The system has become very opaque, very unpredictable and just not timely at all,” said Christyn Cianfarani, president of the Canadian Association of Defence and Security Industries. Her organization represents more than 400 Canadian defence and security companies.

All exports of military goods heading to countries other than the United States require a permit before they can be shipped. Under changes made to Canadian law in 2018, Ottawa must deny export permits “if there is a substantial risk that the export would result in a serious violation of human rights.”

Lawyer John Boscariol, head of McCarthy Tétrault’s international trade and investment law group, said he believes the federal government has grown far more cautious about greenlighting exports of military goods since the controversy that followed Ottawa’s $15-billion sale of armoured vehicles to Saudi Arabia.

The desert kingdom has among the worst human-rights records in the world and, in 2020, Canada was publicly named by a UN panel as one of the countries helping fuel the war in Yemen, where Saudi Arabia is a major combatant.

“There are people within the government who are now very careful and very concerned about approving exports that might come back to haunt them,” Mr. Boscariol said.

He said there’s been a “real slowdown” in processing permits that started when Chrystia Freeland was foreign affairs minister. “The delays in getting a response to permit applications are now causing major difficulties for Canadian companies seeking to serve and grow their export markets.”

The export controls operations division at Global Affairs is responsible for handling permit applications. Industry officials say the delays are also affecting what are called dual-use goods: technology that can be used for both peaceful or military aims.

The latest figures available, for 2019, show a big drop in Ottawa’s record of meeting service standards for handling export permits. In 2017, the government met the deadlines more than 94 per cent of the time. By 2019, that success rate had fallen to less than 72 per cent of the time.

Ms. Cianfarani said Global Affairs appears to be taking longer to consult with other departments on some permit applications.

She said her industry is not trying to block due diligence and merely wants “timely, predictable clarity” on the rules so it can make business decisions in keeping with the regulations. “We want to know what they are immediately, not six months later when the government decides to become clear on what it’s going to restrict.”

She has already warned the government the delays have cost her association’s members hundreds of millions of dollars in lost contracts and potential business opportunities. “We have definitely heard from companies [which] in their head office conversations are talking about either moving their offices out of Canada, moving their production lines out of Canada or seeking other ways – it could be joint ventures in other nations – to basically allow them do business outside of Canada.”

Mark Agnew, vice-president, policy and international, at the Canadian Chamber of Commerce, said his group has asked Global Affairs to share more information with applicants so companies can “focus resources on where export permits’ applications are likely to be successful.”

Mr. Boscariol said a federal government official told him that far more permits are being sent to the minister’s office for a final decision rather than being resolved at a lower level.

Global Affairs spokesman Jason Kung said the department assesses about 6,000 permit applications a year for military and strategic goods and is taking “concrete steps to improve the efficiency of the permitting process.” Last week’s federal budget allocated $8-million more annually to help administer export controls, which includes monitoring trade in everything from dairy products to steel to arms exports.

Peggy Mason, a former Canadian ambassador for disarmament to the United Nations, and now president of the Rideau Institute, a policy and advocacy group, has little sympathy for defence exporters. “The government is trying to avoid Canada breaking its own law and international law,” she said.

She is also skeptical of the notion that more due diligence is what’s delaying permit decisions. If that were the case, Ms. Mason said, Canada would not have approved the export of air strike targeting gear to Turkey in May, 2020, even while a ban on military exports to that country was in place. Ottawa later acknowledged its error – and cancelled export permits – after it was revealed that Turkey was inserting the Canadian gear into military drones that it gave to Azerbaijan to fight the war in Nagorno-Karabakh last fall.

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