Canada has said it will buy new strategic-lift aircraft like the Boeing C-17 but regulations in the United States are making it difficult.

Over the past decade or so, the United States has often complained about Canada’s foot dragging on defence matters. The Americans had two chief beefs: first, that Canada was engaging in virtual unilateral disarmament; second, that Canada was failing to bear an appropriate share of what they refer to as the Global War Against Terrorism.

Now that Canadian troops are heavily engaged in the fight to block a Taliban resurgence in Afghanistan–Canada is one of the very few North Atlantic Treaty Organization countries that has imposed virtually no caveats on the use of its forces there–the second of those two charges is no longer heard.

As to the first, the U.S. was openly pleased at the substantial defence budget increases first promised by the Liberals in March 2005. They were practically ecstatic when the government of Stephen Harper piled on even more promises of defence spending increases in the 2006 budget.

So what has Uncle Sam been doing to smooth the way for Canada to acquire billions of dollars of new transport aircraft, helicopters, and other major pieces of kit? It has been making it more difficult for defence contractors based in Canada, whether Canadian, U.S. or off-shore owned, to bid on or to fill contracts for U.S. products. Moreover, it is trying to impose U.S. law and U.S. standards of security on Canadian government employees working in Canada alongside Canadian contractors. It is rather bizarre behaviour for a friend, even stranger when that friend should be out to do everything it can to help ease Canada’s effort to rebuild its military.

The problem is centred on a very important but rather obscure set of rules adopted by the U.S. a long time ago called International Traffic in Arms Regulations or ITAR. These regulations have a laudable purpose. They are designed to ensure that U.S. military technology (or so-called “dual use” technologies that have both civilian and military applications) is not transferred, either deliberately or inadvertently, to parties whose interests run counter to those of the United States. They consist of a strict set of rules applied to exports of U.S. weapons systems, parts, technologies, software, etc., which determine to which countries such exports can be shipped and who may have access to them when they arrive. There is a proscribed list of countries. The U.S. is especially worried about dual citizens whose other nationality is of a proscribed country. Heavy penalties are imposed on anyone who breaks the rules.

Canada was virtually free of any ITAR restrictions until 1999. That meant that for all intents and purposes, defence contractors based in Canada were treated on the same footing as U.S.-based contractors. But in the spring of 1999, the U.S. State Department, which controls exports of U.S. munitions, unilaterally changed the rules for Canadian-based companies. The State Department claimed that Canada had become pretty lax in allowing individuals who were potential security risks to gain access to U.S. military technology.

The U.S. move was a potential disaster for Canadian defence contractors. Although denying the U.S. charges, Canada moved quickly to patch things up by making sure that Canada’s Export Control List was fully consistent with U.S. regulations and that all Canadian citizens who had access to imported U.S. defence products would, effectively, be vouched for by the Canadian government. Some Canadian-based defence contractors simply avoided the problem altogether by ensuring that employees with “sensitive” dual citizenships were switched to other projects. By 2001, the problem seemed resolved.

Then came 9/11.

In the past five years, the State Department has clamped down on its interpretation of the rules to the point that it wants even employees of Canada’s Department of National Defence who are already security cleared to be covered by the regulations. According to a story first published by the Globe and Mail in May, U.S. helicopter contractor Sikorsky (which is building the new maritime or ship-board helicopters due to finally replace the Sea King) asked the Department of National Defence to fill out a form for every DND employee working on the helicopter project. They wanted such information as citizenship, place of birth, passport number and, if applicable, dual passport country. DND refused.

Last fall both the Globe and Mail and U.S. trade publication Defense News reported that the State Department’s new “get tough” approach to the International Traffic in Arms Regulations was proving a significant stumbling block to the intended purchase by the Harper government of CH-47 Chinook medium/heavy lift helicopters and the Boeing C-17 strategic-lift aircraft. The delay in the purchase of the Chinooks is particularly problematic when Canadian troops in Afghanistan are being hit so often while road-bound in supply convoys.

Put simply, both the Canadian and U.S. governments are fully aware that neither the Canadian federal government, nor virtually any of the provinces, has any legal right to discriminate against potential employees on the basis of their dual citizenship. To do so would be an obvious violation of the Canadian Charter of Rights and Freedoms and provincial human rights laws.

What this conundrum now amounts to is that the United States, which has long complained about the deterioration of the Canadian military, is putting a condition that is deeply offensive to Canadians, and probably also illegal, on Canada’s ability to rebuild its military forces with kit that is U.S.-origin. It is as unfair as it is ill-advised.

At some point, a new modus vivendi over the ITAR will have to be worked out between the two governments, but the longer the delay, the greater will be the unintended consequences. And if the compromise is once again upset by a unilateral clamp-down from Washington, the long run damage to Canada-U.S. defence relations could be incalculable.