Vanguard Magazine

(DPSA), Defence Development Sharing Agreement (DDSA) and the North Amer- ican Free Trade Agreement (NAFTA). Due to these arrangements defence ma- teriel that is produced in Canada can be regarded by the Pentagon as "American" and in many cases Canadian companies can compete on the same terms as Ameri- can companies for DOD programs, sub- contracts, or access to the supply chains of major prime contractors. This unique po- sition is born out of the fact that Canada is considered an integral part of the North American Defence Industrial Base. Proposed changes to nDAA While the U.K. and Australia already have defence trade agreements with the U.S., they are not as comprehensive as Canada's. However, a proposed amendment intro- duced into the NDAA this past spring may change all of that. The Senate version of the NDAA con- tains an amendment in section 872 that will expand the definition of national technology and industrial base to include the United Kingdom of Great Britain and Northern Ireland and Australia. We are unlikely to know whether this amendment will go through until the fall; but if the amendment succeeds, the land- scape will undoubtedly shift. While the U.K. and Australia already have defence trade agreements with the U.S., they are not as comprehensive as Canada's. By bringing the allies closer, the decision to proceed with the amendment may have some positive benefits and enhance security cooperation, but there will likely be nega- tive consequences for Canadian industry. First, competition in some industries will be fierce. In 2014 the UK exported US$13.2B of defence materiel and their industrial base employs more than 165K employees. Canadian firms will want to pay particu- lar attention to defence electronics and cy- ber security as the UK has excellent and well-respected capabilities in these areas. While Australia may have less defence in- dustrial capacity, they have a growing in- dustry that employs around 25K people and boasts over 3000 SMEs that will be contending for access to the supply chains of major prime contractors. In addition, Australia has already demonstrated sig- nificant capabilities. For example, Austal is one of the primes on the U.S. Littoral Combat Ship (LCS) despite the Byrnes- Tollefson amendment which usually re- stricts sources of supply for naval vessels to U.S. sources only. Staying competitive Whether or not these legislative changes occur, Canadian industry should be con- tinuously improving its access and sale into the world's largest defence market. While Canadian firms do have particular institu- tions that provide unique sales channels, these institutions and organizations can only help so much. That's why it's necessary for Canadian companies to make additional efforts to stay competitive. Canadian firms that are currently exporting or are seeking to ex- port to the U.S. must continue to innovate, and explore ways to enhance their produc- tivity and competitiveness. They must also invest time and effort into understanding the broader marketplace, supply chains and industry trends in their target markets. While Canada has a history of integration with the U.S. defence industrial base and has an excellent reputation there, it is not easy to enter a new market or remain an incum- bent. That's why Canadian firms shouldn't hesitate to reach out to the experts. Michael Petric is an associate at Avascent, a global management consulting firm that specializes in government-driven market. Michael has extensive experience in the defence and security sector as a civilian political advisor to two Canadian Ministers of National Defence and as a uniformed member of the Canadian Armed Forces. T TecHnOLOGy WATCh www.vanguardcanada.com AUGUST/SEPTEMBER 2016 45 for example, Austal is one of the primes on the U.S. Littoral combat Ship (LcS) despite the Byrnes- Tollefson amendment which usually restricts sources of supply for naval vessels to U.S. sources only. canadian industry should be continuously improving its access and sale into the world's largest defence market.

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