Ottawa should look at boosting shipbuilding subsidies to help local manufacturers compete for future BC Ferries contracts, says an executive with a transportation consumer advocacy group.

Brendan Read, vice-president of Vancouver Island for Transport 2000 BC, said it’s probably too late for B.C. shipbuilders to win $500 million worth of contracts for two Super C-class vessels that BC Ferries plans to award to German or Finnish firms. But B.C. companies will still have several opportunities to help replace the province’s aging 22-ferry fleet.

Ideally, said Read, Transport 2000 BC would like B.C. ferry passengers to ride on the best-built and most cost-effective ferries, regardless of where they are manufactured.

However, the reality is that the global market is not open – B.C. firms can’t compete against U.S. and European shipbuilders because they are heavily subsidized by government.

Sara McIntyre

“If they’re not playing fair, why should we be the boy scout?” said Read.

BC Ferries has already announced plans to replace the ships over the next two decades. Read said the company should look at both cost savings and benefits to the province’s economy when it is awarding its contracts.

“(The decision to build the two ferries overseas) has deprived an opportunity for B.C. business to benefit directly from those contracts,” said Read. “If they’re not building ships, manufacturing companies and suppliers will lose out.”

The controversial decision to build the boats outside B.C. will likely be an election issue, said Read. B.C. is effectively in the midst of an election campaign because the date when voters will head to the polls – February 17, 2005 – is already set.

BC Ferries president David Hahn has contended that the company, which is wholly owned by the province, decided to build the ferries in Europe because Canadian companies do not have the capacity to build such large vessels. The company cannot afford to award contracts to companies that fail to build the boats on time and on budget, he said.

Although Canadian shipbuilders receive federal subsidies, other countries’ larger government perks put B.C. companies at a disadvantage, said Jock Finlayson, vice-president of policy for the Business Council of B.C. (BCBC).

“It’s an unlevel playing field – put it that way,” said Finlayson. “It’s certainly a concern.”

But Finlayson, whose group favours the elimination of government subsidies, noted that B.C. shipbuilders are also protected by a 25-per-cent federal import tax on ferries, which would amount to $125 million in this case. BC Ferries has asked Ottawa to waive the duty.

Finlayson said the BCBC remains neutral on the decision to build the two boats overseas, including the tax-waiver request, since most of the group’s members are not affected and therefore the BCBC does not have the information necessary to determine which decision is best for the B.C. economy.

“The shipbuilding industry in Vancouver and Victoria does get a lot of work from BC Ferries for upgrades and repairs,” said Finlayson.

If there is a higher cost of building the boats in B.C., then it is going to be passed along to taxpayers. “I mean, the money has to come from somewhere,” said Finlayson.

The controversy shows no signs of dying down before February.

Washington Marine Group, an American company that has a shipyard in North Vancouver, has contended that it was not allowed to bid on the jobs, while BC Ferries president Hahn claimed the company did not have the capacity to build them.

The mayors of North Vancouver, District of North Vancouver and West Vancouver, where most Lower Mainland shipbuilders are located, have called for Hahn, an American who specializes in corporate restructuring, to reconsider the decision.

“These are not entry-level service jobs we are speaking of,” said North Vancouver Mayor Barb Sharp in a news release. “These jobs pay well, and the immediate and long-term benefits of such employment go beyond financial returns.”

Sharp said it is wrong not to allow local players to compete for $500 million in direct taxpayer investment and hundreds of millions more in economic spinoffs.

“We must have a process that contrasts with the lowest-bid-wins approach,” said Sharp. “While the B.C. taxpayer may win with the benefits of the lowest-cost bid, ultimately the B.C. taxpayer will lose the benefits of the direct investment.”

The mayors contend that North Shore shipyards contribute more than $1 million in property taxes to the municipal revenue base and every dollar of capital investment in them provides $3 in economic benefits to the provincial economy.

Alan Nixon, who is serving as the District of North Vancouver’s acting mayor following former mayor Don Bell’s election as a Liberal MP, said it has been clearly demonstrated that local shipbuilders have the technical and human capacity to build C-class ferries. The C-class ships are 80 per cent of the size of Spirit-class ships that they built in the early 1990s.

He said the industry merely wants a chance to participate in “a transparent, competitive bidding process.”

One provincial government backbencher has called the move “blatantly stupid”, but other organizations are split on the issue.

Dr. Keith Martin, Liberal MP for Juan de Fuca, has argued that the province’s shipbuilders simply aren’t equipped to build the large C-class ships, and the decision to build them overseas will lead to more contracts being awarded to B.C. firms for smaller vessels.

But Doug Potentier, CEO for the Greater Victoria Chamber of Commerce, said outsourcing the C-class ships does not make economic sense.