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The aerospace sector is one of Canada’s “traditional economic pillars” highlighted in the federal government’s 2021 budget, which is essentially a post-pandemic recovery package as tabled in the House of Commons on April 19 by Finance Minister Chrystia Freeland.
While aerospace was essentially a passing reference in her budget speech, Freeland said that when coupled with natural resources, green energy, and other sectors, the export-heavy aerospace sector would be critical to “our new, resilient, and sustainable economy.”
Details buried on page 135 of the 724-page main budget document show that aerospace, as “one of the most research-intensive manufacturing industries,” contributed more than $28 billion to Canada’s GDP directly and indirectly in 2019, supporting 234,500 jobs.
But as it is “highly dependent on purchases from airlines hit hard by the pandemic, the sector is facing reduced demand and a longer path to recovery, relative to other sectors,” the document says.
“To help position Canada’s aerospace sector once restrictions on travel are lifted and the industry begins to recover, Budget 2021 proposes to provide $250 million over three years, on a cash basis, starting in 2021-22, for the regional development agencies to deliver an Aerospace Regional Recovery Initiative.” This would support productivity improvements, strengthened commercialization, and continued “greening” of operations and products.
Further in, on page 488, the government highlights gender imbalance in the aerospace sector, pointing out that women account for only 21 percent of the manufacturing workforce and 24 percent in maintenance, repair, and overhaul. “Higher paying engineering and assembly jobs are largely held by men (90 percent),” the document adds. “As aerospace wages are considerably higher than the economy-wide average, increasing women’s employment in the sector could contribute to higher income jobs for women.”
Accordingly, its Aerospace Regional Recovery Initiative would prioritize support for “inclusive businesses that are operated by and employ underrepresented groups, including women, Indigenous people, Black, and other racialized people and youth.”
The budget also proposes $9.1 million over the next five years for maintenance of the government’s Safer Skies Initiative (SSI), which was announced after Ukraine International Airlines Flight 752 was shot down by Iranian missiles over Tehran in January 2020 — killing all 176 people aboard, including 138 people with ties to Canada.
“The initiative will bring together like-minded countries, international associations, industry, and the International Civil Aviation Organization to develop a warning system that can keep civilian aircraft out of dangerous conflict zones when the countries responsible for those conflict zones fail to act responsibly to close their dangerous airspace,” the government says. “Safe and secure air travel will be more important than ever when the world emerges from the global pandemic.” The budget proposes to give Transport Canada an additional $9.1 million over the next five years for continued development of the SSI.
Military aerospace also will get a boost. Starting on page 289 of the budget document is a commitment of $163.4 million over the next five years — including $111.1 million in remaining amortized payments — to support modernization of the North American Aerospace Defence Command (NORAD). This affords contract opportunities for Canadian companies.
“The threats facing the continent have evolved significantly,” the document states. This includes the already evident impact of climate change on defense planning and strategies. “This investment would lay the groundwork for NORAD’s future, including through research and development of cutting-edge technologies that can detect and defend against threats.”
Coupled with $88.8 million over the next five years to sustain existing continental and Arctic defense capabilities, “these early measures will position Canada to move forward hand-in-hand with the United States on modernizing NORAD and to maintain continental defense and deterrence capabilities. It will also support jobs and businesses in Canada’s North.”
On a broader front, having committed in 2019 to increase its contribution to the North Atlantic Treaty Organization (NATO), the government now plans to provide $541.2 million over the next five years to have the Department of National Defence maintain an additional six Royal Canadian Air Force fighters and a Royal Canadian Navy frigate to NATO’s readiness capability. As well, up to $305.9 million is promised over the same period “to cover higher Canadian contributions to NATO’s common budget and military activities.”
The budget document indicates that the ratio of debt to GDP should slide to 49.2 percent by 2025-2026 as the deficit slips to 1.1 percent of GDP; that would be lower than forecast at the end of 2019 as COVID-19 was beginning to have an impact.
Even so, Freeland conceded that there are limits to the government’s borrowing capacity. “The world will not write Canada any blank cheques,” she said. “We don’t expect any.”
The Finance Department said in a statement that when the COVID-19 pandemic began erupting, Canada was fiscally strong. That facilitated Freeland’s announcement in last November‘s Fall Economic Statement that the government would invest up to $100 billion over three years to support an economic rebound.
At the time, a 2020-2021 deficit of $381.6 billion was forecast. “We’ve spent less than we provisioned for,” Freeland said minutes after arriving in the Commons with Prime Minister Justin Trudeau. “Our deficit for 2020-2021 is $354.2 billion, significantly below our forecast.”
The government’s top priority is beating COVID-19 as the virus continues to emerge in waves across the country, but it also plans to give individuals and industries “the support they need . . . to come roaring back when the economy fully reopens” — after what the Finance Department said has been “the steepest and fastest economic contraction since the Great Depression” nearly a century ago.
“Our government is prepared to extend support measures as long as the fight against this virus requires,” Freeland told the Commons, where the number of sitting MPs was limited by COVID-19 restrictions, forcing them to watch from home or their offices.
The support measures include a new $595-million Canada Recovery Hiring Program which she said would make it easier for industry to rehire laid-off workers or hire new ones. This will run from June to November.
The budget targets small and and medium-sized businesses with a new Canada Digital Adoption Program designed to support more than 160,000 companies’ technology upgrades. Moreover, smaller companies could fully expense up to $1.5 million in capital investments in assets such as digital technology and intellectual property. The projected five-year cost of this support is $2.2 billion.
On the environmental front, where aviation and aerospace have been developing cleaner and increasingly efficient technologies for some years, the budget is described by the Finance Department as “a plan for a green recovery that fights climate change” — as the government moves toward “net zero” emissions by 2050.
A key element of this program is what Freeland called an “historic investment” of an additional $5 billion in a Net Zero Accelerator over the next seven years. “This added support . . . will help even more companies invest to reduce their greenhouse gas emissions while growing their businesses,” she said. “We will propel the green transition through new tax measures, including for zero emissions technology, carbon capture and storage, and green hydrogen.”
The projected costs of the government’s ambitious agenda are huge, but Freeland told Parliament that the investments are critical to “healing the wounds left by the COVID-19 recession. . . . It’s about creating more jobs and prosperity for Canadians in the days — and decades — to come.”