What's the DIPP in Canada's Military Production?

The arms trade is a nasty business. A generation ago, it was considered shameful to make a living by exporting munitions or arms. But no longer: Nowadays all kinds of societies are vying for contracts, supplying almost any group that wants weapons. This lucrative, respectable racket is so widespread that, if you own a little stock, you may be in the arms business yourself without even knowing it. And if you are a Canadian taxpayer, you are definitely subsidizing the manufacture of war materials for export.
Not many people know that fact. On the world's stage, Canada may have a bit-part, but the role we play seems helpjul and peaceable. People respect us. If they only knew!
One important Canadian organization, Project Ploughshares, has been collecting the sordid evidence for years, and putting it out for the public to see. Peace-loving Canadians who read their research can help inform other citizens. We at PEACE want to do so too.
As its name implies, Project Ploughshares is devoted to work on the joint issues, disarmament and development. The organization is sponsored by the Canadian Council of Churches, and is supported by Canadian churches, development agencies, and other concerned groups and individuals. This article is our edited version of the newest of the many research documents meticulously compiled by Ploughshares, especially by its Research Director, Ernie Regehr. Read it, and please do share it with your neighbors. For the full Working Paper (No.86.1, at $2.5O each), write to Project Ploughshares, Conrad Grebel College, Waterloo, Ontario N2L 3G6. Phone 519/888-6541. [Ed.]

By Project Ploughshares | 1986-10-01 12:00:00

The Canadian government offers loans and outright grants to certain business firms to stimulate their growth. One such program of subsidies is called the "Defence Industry Productivity Programme" (DIPP), which specifically supports companies that produce military goods. The original idea behind this was to support Canada's military preparedness. DIPP was developed as part of a larger scheme for cooperating with the United States in military research, development, and production.

Today the main motive is otherwise: not for defence, but for economic gain. The Canadian government flagrantly encourages commercial firms to develop a stake in military production, with the result that Canadian military exports now approach $2 billion per year. How did a nice society like Canada get involved in the military hardware traffic?


The DIPP was created in 1959, along with the Canada/U.S. Defence Production Sharing Agreement. This latter agreement set up a common market in military production between the two countries. It has meant that Canada buys most. of its major military equipment from the United States particularly aerospace equipment) and, in turn, Canadian industry produces components and subsystems for the U.S. industry. Since 1963 the two countries have also agreed that this trade must be kept roughly in balance over the long term.

Moreover, Canadian component suppliers must compete with the U.S. suppliers-which brings us to the DIPP. The DIPP is intended to improve the competitiveness of Canadian firms. As the program directive tactfully puts it: "The Program provides added opportunities for Canada's industry to compete in foreign defence markets by partially offsetting the financial assistance granted to foreign companies by their. governments." [Translation: The U.S. subsidizes its arms industry, so if we want to sell abroad, we have to do. likewise,]

By this point, Canada... is avidly trying to develop and sell fancy military technology, a pursuit that resulted from its participation in a continental defence policy with the United States. However, defence considerations are no longer the main objective of DIPP; what counts now are the dollars. The DIPP directives openly state that the primary objective of DIPP is "to enhance economic growth through the promotion of viable defence or defence-related exports."

The commercial aspects are apparent also in the way the government assesses proposals for DIPP grants or loans: A major consideration is the review of the candidate companies' "marketing" .arrangements. Are their hoped-for sales risky? Who's going to buy these products? Do they have a hot commodity?

The program has funded some useful civilian projects, such as the development of STOL aircraft and civilian airplane engines. However the current government has stated< its intention of redirecting DIPP funding to its "original purpose." Does that mean making defence (and not economic) policy decisive again? Or does it mean funding only military production for export? That remains unclear.

Criteria for DIPP Funding

To be eligible for DIPP funding, a company must be Canadian and its project must be a realistic one that is directed toward defence-related export markets. There must be evidence of demand for the product in these markets. The company must show a prospect of earning 10 to 20 times the DIPP contribution in the first five years of production A high profitability must also be probable.

What can a company pay for with DIPP money? Four types of expenses: Research and development; establishing a company as a military supplier; capital for modernization of military production; and marketing feasibility studies.

Conditions of Funding

The DIPP is supposed to be a "cost sharing" arrangement, but in 1981 such sharing was negotiated, with no fixed ceiling in the government's share. Small companies are eligible for contributions of more than 50 percent. The terms of repayment, when any is required at all, depend on the profitability of the business. DIPP's Capital assistance contributions do not normally have to be repaid, if the equipment is to be kept in defence production for at least five years.


The program is administered by a committee, including representatives of the Departments of Regional Industrial Expansion, External Affairs, National Defence, Supply and Services, and the National Research Council. This committee approves project requests in principle and sends them to the Treasury Board for its approval, at least in cases involving over $5 million of those which are more than 50 percent government-funded. Approval of smaller projects is delegated to the Assistant Deputy Minister and the DIPP Committee. Reports of projects are submitted at least every six months.

What is Canada Up To, Anyhow?

Military production is, in moral and political terms. unlike any other production. Military hardware is used for security and political control. All military production should, therefore, be based on sound military-security considerations. Whoever supplies such equipment must take responsibility for the ultimate destination and use to which it will be put. This is a principle accepted by everyone, including the Canadian government. By its regulations, any permit for export of military products must be issued only after it is shown that certain guidelines will not be violated.

In other words, military production is a special political activity that requires government control. The promotion of military production as a purely commercial venture is unacceptable.

Yet the DIPP promotes it exactly on those grounds. Its basic premise is that government should help sell war goods on the basis of the economic benefits that can be gained. The DIPP tries to transform military production

from a limited national requirement into a general economic enterprise. The public money devoted to this could be far better spent.

The international arms race is driven by many factors, including the perception that there are economic benefits to be gained from a growing military industry. This belief prevents the development of an international political will to demand reductions in military spending.

Canada, to be sure, is not the worst international arms trader. But its annual military exports total nearly $2 billion, mainly in aerospace and electronics industries.

Some Canadians celebrate this, and view it as a legitimate antidote to unemployment. By accepting it at all, we leave unchallenged the very principles that make the global arms race continue.

For these reasons, the Defence Industry Productivity Programme should be abolished. Some of its payments do support useful civilian production. This suggests that the resources should be directed specifically to civilian purposes. In particular, the funding could support firms that are seeking to convert from military to civilian production. It's time to begin economic conversion, and the conversion of DIPP is the perfect starting point.

The accompanying chart the total DIPP expenditures for the years 1969 through 1985, for the major recipient companies-all those that received funding that totaled in excess of $1 million during that period. There are 78 such companies, but the list is, nevertheless, very selective; the whole list of recipient companies would be three times as long The total DIPP expenditures for the 17-year period exceeds $1 billion. To be precise, it comes to $1,242,326,262. Quite a bottom line.

companyDollar total
ALBERTAAloe Ltd.1,230.739
BRITISH COLUMBIACanadian Aircraft Products Ltd.2.556,951
Lister, Boil & Chain Ltd.1,706.507
MacDonald Dettweiler & ASSOC.4,554,597
Microtel Pacific Research Ltd.2,675,104
Haley Industries Ltd.3,676,953
MANITOBABristol Aerospace Ltd.5,599.957
NEW BRUNSWICKSaint John Shipbuilding & Dry2,453,010
NOVA SCOTIAHermes Electronics4,157,539
ONTARIODevtek Corp.1,000,951
Diemaster Tool Inc.1,296,910
Gabriel of Canada Ltd.1,633,127
Hawker Siddeley Canada1,329,462
John T. Hepburn Ltd.2,650,099
Spar Aerospace Ltd.14,675,742
Aircraft Appliances & Equipment1,912,956
O A F Indal Ltd.11.459,312
de Havilland Aircraft of Canada124,802,247
Dowty Equipment of Canada Ltd.12,431,904
Exco Engineering1.693,553
Firan-Glendale Corp.1,156.361
Garrett Manufacturing Ltd.14,625,094
Hawker Siddeley Canada Inc.1,413,702
Leigh Instruments Ltd.1,255,977
Litton Systems Canada Ltd.70,736,442
Magna International Inc.3.054,666
McDonnell Douglas Canada Ltd.66,242,203
Northern Telecom Ltd.5.021.551
Sneigrove C.R. Co1,194,539
Walbar Machine Products Of Canada6,105.251
Bowmar Canada Ltd.1.605.141
Computing Devices Company17,130,501
MOIR Systems Ltd.25,526,442
Optotek Ltd.1,009,119
Algoma Steel Corporation Ltd.1,799,995
Bata Industries Ltd.2,541,623
Chicopee Manufacturing Ltd.1,794,569
EBCO Industries Ltd.1,614,577
Erie Technological Products1,055,469
Ernst Leitz Canada Ltd.1,059,469
Fag Bearings Ltd.1,354.369
Fleet Industries1,251,252
General Motors of Canada29,170,169
Irvin Industries Canada Ltd.1,172,634
Leigh Instruments Ltd1,150,562.
Leigh Instruments Ltd.1,032,230
Linamar Machines Ltd.5,625,716
M B B Helicopter, Canada Ltd.1,670,291
Ronya Corp. Ltd.5,023,237
Steel Cylinder Manufacturing1,146,925
L. Strite Industries Ltd.1,375,654
Westinghouse Canada Inc.3,379,143
QUÉBECAviation Electric Limited5.390,492
Bendix Avelex1,259,643
Bell Helicopter Div of Textron56,636,566
C A E Electronics Ltd.27.321,351
Canadair Limited123,101,256
Canadian Marconi2,959,045
Davie Shipbuilding Limited1,947,964
Heroux Inc.1,490,559
Joly Engineering Ltd.1,953,042
Lee Industries2,706,243
Valcartier Marine Industries Ltd.3,253,457
Menasco Canada Ltd.3,195,079
Pratt & Whitney Canada275,125,425
R C A Inc.7,195,343
R J Stempings Co. Ltd.2,291,796
Rolls-Royce CanadaLtd.2,291,796
Space Research Corp2,093,155
Spar Aerospace Ltd.10.772,191
U D T Industries1,505,745
United Aircraft of Canada Ltd.55,116,669
Valleyfield Chemical Products5,092,500
Velan Engineering Ltd.1,042,219
Versatile Vickers2.079,445
Peace Magazine Oct-Nov 1986

Peace Magazine Oct-Nov 1986, page 37. Some rights reserved.

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