Canada and its military spending quagmire

Prime Minister Mark Carney said in early June that Canada would finally meet NATO’s military spending target of two per cent of GDP. Weeks later, that pledge was obsolete. At its recent summit in Brussels, the Western alliance agreed to raise the benchmark to five per cent by 2035.

Canada pulling its weight among allies now means spending $150 billion annually on defence within a decade. Certain “defence adjacent” projects — port upgrades, critical minerals development and cybersecurity initiatives — will count toward the sum. Still, today’s defence budget will need to rise by at least $45 billion in under 10 years.

It’s a gigantic leap. And finding the money is just the beginning. Modernizing Canada’s anemic military will involve navigating a maze of complex decisions and actions.

For one, it requires courting a variety of imperfect suppliers.

An America First administration in Washington has Ottawa cosying up to Europe as the new vanguard of liberal democratic values. The defence and security partnership signed between Canada and the EU last month thus grants Canada access to the $1.25-trillion “ReArm Europe” plan to resurrect the continent’s military industrial base. The scheme may also generate reciprocal buzz for Canadian arms manufacturers.

Yet jump-starting Europe’s dormant production lines could take many years. And that’s if it happens at all. Experts say it could also alienate American companies — whose parts are vital inputs for Canada’s defence sector — if Canadian firms increasingly prioritize European buyers.

Another option is to purchase off-the-shelf gear from South Korea, which has shot up the ranks of global arms exporters. A trio of South Korean companies in March submitted a secret proposal to federal bureaucrats for Canada to purchase at least $20-billion worth of new submarines and armoured vehicles. But using equipment from a non-traditional supplier often comes with novel training burdens and maintenance issues Canada’s Armed Forces can ill-afford.

Plus, geography still matters. Continental defence of North America will always be Canada’s top national security priority, especially as the Arctic thaws. Close alignment between Canada and the U.S. on weapons systems and military supply chains must endure even amid political animosity.

Another dimension of Canada’s rearmament is technological.

States and militant extremists are both harnessing digital platforms and expendable machines, mainly drones, to gain strategic advantages in modern warfare. And this technology is iterating at breakneck speed, almost entirely within the private sector.

By contrast, Canada’s broken procurement system prioritizes costly items from legacy providers (think of frigates, fighter jets and submarines) on decadeslong timelines. A serious pivot is overdue.

“The opportunity is here,” writes venture capitalist Eliot Pence, the former head of growth for Anduril, an American company that builds battlefield intelligence software and unmanned systems. “The technology exists. Canada’s tech ecosystem — startups, researchers and defence primes — can deliver if the government provides clear demand and stable funding.”

Indeed, the Carney government has already doubled the budget for a DND program that supports Canadian startups to develop military technologies. Incentives to bring in institutional private investment could be another catalyst. Surging conflict worldwide has lowered the reputational risk for mainstream funders to invest in defence companies.

Canada also has all the attributes to lead in cyber defence and operations — sophisticated public research facilities, huge data centre potential, enviable software engineering talent and a mature AI sector. Membership in the Five Eyes intelligence sharing alliance with Australia, Britain, New Zealand and the U.S. is another asset.

But the biggest obstacle to renewing Canada’s military will be sustaining political resolve. For better and worse, Canada is a federation of 13 diverse provinces and territories, each with competing interests. Meanwhile, an affordability crisis rages on.

As one headline in The Globe and Mail put it: “To up defence spending, Canada must cut deeper, tax harder and borrow more — all at once.” Public support, strong for now, may vaporize once the actual trade-offs become apparent. Similar dynamics have stalled adequate climate change actions.

Few countries benefited as much from the Pax Americana years as Canada. The post-Cold War peace dividend allowed the country to become one of the richest, healthiest, most educated and freest societies on Earth. It also enabled voters and policymakers to ignore the necessity of hard power.

Those favourable conditions are now gone. The world has entered a perilous and violent new era featuring a breakdown in multilateralism and withering norms around the use of force.

The Carney government’s imminent moves to rearm Canada will be just the start of what’s necessary. That effort must continue with future Liberal and Conservative governments alike.

Kyle Hiebert is a Montreal-based political risk analyst, and former deputy editor of the Africa Conflict Monitor.