Spat with Saudis hits home for armoured vehicle plant in Ontario

CTV National News: Canada stands firm Canada stood its ground, but seems to stand alone, as the diplomatic dispute with Saudi Arabia continues. Glen McGregor reports.

OTTAWA -- The sudden deterioration in the Saudi-Canadian relationship is likely grabbing the attention of people in the city of London, Ont., more than anywhere else in the country.

The city's General Dynamics Land Systems plant has been supplying light armoured vehicles to Saudi security forces, thanks to a huge, $15-billion contract signed by the federal government in 2014.

The 14-year arms deal, which directly employs 2,000 people, was described at the time by the previous federal Conservative government as the largest advanced manufacturing export contract in Canadian history.

Many are now wondering if Canada's contract with Saudi Arabia -- which is also highly controversial -- could be at risk.

Over the weekend, a diplomatic dispute prompted Saudi Arabia to freeze new trade and investment deals with Canada, expel Ottawa's ambassador and recall its own envoy. It's also cancelling scholarships for more than 15,000 Saudi students attending Canadian universities, which will yank away big economic benefits Canada reaps from international tuition fees.

The moves came in retaliation to a Canadian government tweet that said it was "gravely concerned" about the arrests of civil society and women's activists in the Saudi kingdom.

In London, there are worries about the potential economic fallout from the conflict.

"It's definitely concerning," said Jim Reid, a union leader who represents nearly 500 workers at the General Dynamics facility in London -- an area that's seen major factory closures over the years.

"It is now the largest employer in the London region.... It's basically the last big show we've got."

Reid, president of Unifor's Local 27, said the operation supports up to 7,000 spin-off jobs and he hopes the Saudi government will continue to live up to its existing contract.

Reid said there are several factors playing in the agreement's favour: the Saudis would have to pay penalties if they walk away from the deal, a pullout could hurt the country's reputation with other international trading partners and, perhaps most importantly, Riyadh wants the model of armoured vehicle that's produced in London.

"Hopefully, this thing blows over," said Reid, who noted his union fully supports Ottawa's decision to call out human rights abuses and abuses against women in Saudi Arabia.

Canada's arms trade to Saudi Arabia, which is led by what is widely viewed as a deeply repressive regime, has raised numerous complaints from human rights and arms-control groups.

Since the diplomatic feud erupted on Sunday, the federal Liberal government has said it stands by its decision to communicate its human-rights concerns with Saudi Arabia.

"We're going to stand with the values that we know are important for Canadians, and Saudi Arabia will take the decisions that they will take," Finance Minister Bill Morneau said Tuesday when asked whether the spat could imperil the General Dynamics agreement.

Doug Wilson-Hodge, manager of corporate affairs for General Dynamics, said Tuesday that the company won't comment because the matter is between Ottawa and Saudi Arabia.

Many folks in London were searching for answers Tuesday.

"Local people are understandably very upset -- I've had lots of calls," said Irene Mathyssen, the New Democrat MP in whose riding the General Dynamics plant is located.

"In light of the jobs and the families that are depending on the jobs ... we hope that indeed this current deal continues to hold up."

Mathyssen said it's unclear whether the existing agreement, as well as an additional maintenance contract, will be fulfilled.

While the General Dynamics jobs are critical for her community, she also questioned why Canada now exports military equipment to non-NATO countries like Saudi Arabia, which she said has a "spotty human rights record." Ottawa should stop doing business with unreliable partners and stick to conducting trade with its allies, Mathyssen said.

Last year, Canadian exports to Saudi Arabia were almost $1.5 billion, while imports from the Middle Eastern country were about $2.6 billion.

Rex Brynen, a political science professor at McGill University, said the armoured vehicles contract was a big deal for Canada, which is why the Liberals -- who inherited it from their Tory predecessors -- agreed to uphold it despite clear human rights concerns.

Brynen, an expert in Middle East politics, said at first he didn't think the Saudis would abandon the deal, but is reconsidering that position after they took the major step of cancelling thousands of scholarships to Canada.

"The Saudis have seriously inconvenienced 15,000 of their citizens in order to make a point and, given the unpredictability of Saudi foreign policy, I think it's anyone's guess what might happen to that deal."