In Canada-U.S. defence trade, the status quo is a losing proposition

Canada has enjoyed a unique bilateral defence trade relationship with the United States for 75 years, spelled out in various agreements. However, this relationship is at risk today without concerted efforts by Ottawa to revive it in light of the current continental and international security environment. In October, Deputy Prime Minister Chrystia Freeland delivered a speech in Washington, D.C., that set out the concept of “friend-shoring.” The idea is simple: democratic countries sharing Canada’s values would buy exclusively from each other, particularly goods and technologies vital to each nation’s national security and resiliency. While this might be a new “doctrine” for some, to Canada’s defence industry it’s old hat. Canada and the U.S. have practiced friend-shoring since the Ogdensburg Agreement of 1940 establishing the joint defence of the continent, if not earlier. It’s also a foundational element of NORAD—and it is indivisible from the integrated continental defence industrial base that supports it. What is new is Washington’s assessment of the current global threat environment—particularly the threats posed by China and Russia—as set out most recently in the U.S. National Security Strategy and National Defense Strategy. The Americans see the threat as larger in scale, more immediate, and leaving them with less and less time to deter, defend, and respond. The U.S. also has a growing expectation, rooted deeply across political parties, that its allies will play a more active role in collective defence and deterrence, be it in the Indo-Pacific (for Australia), Europe (for NATO nations), or continentally (for Canada). Turns out, alliance burden-sharing is not a new concept, either. Continuing a binational defence trade agenda with the U.S., anchored in the status quo, is not going to cut it with our closest security partner. We will continue to lose influence, prompting the U.S. to turn to allies that agree with the magnitude and urgency of the threat landscape and have the political will to act—particularly our Five Eyes partners, Australia and the United Kingdom. Congress added both countries to the U.S. National Technology and Industrial Base (NTIB) in 2017, which allows their resident companies to be treated as U.S. firms for defence acquisition purposes. Previously, only Canada enjoyed this privileged access. We have also seen the U.S., Australia, and the U.K. launch AUKUS, which is much more than a submarine deal and will facilitate the collaborative development of Emerging and Disruptive Technologies (EDTs). These countries are turning this new approach to defence trade from words to government policy. It's time Canada did likewise. Unless we take the initiative, Canada’s decreasing relevance in Washington will result in growing headwinds for binational Canada-U.S. defence trade. So far, rampant American protectionism under both the Trump and Biden administrations has spared Canada’s defence industry. Yet, over the next decade, or sooner, we may be approaching an inflection point driven by AUKUS, and the U.S. will begin spending its time and energy on key allies willing to co-develop technologies and align regulatory frameworks to transfer them. Canada must therefore push to revitalize the NTIB framework, ensuring we are at the table instead of passively allowing allies to create new fora under the AUKUS umbrella without us. Practically, this means working through the NTIB to adopt common standards and approaches to industrial security—particularly when it comes to cybersecurity standards, export controls for EDTs, critical minerals, and sharing information on questionable sources of foreign investment. It also means using the NTIB to create high-trust communities of interest for the collaborative R&D and production of EDTs like quantum, cyber, and artificial intelligence. But perhaps the most immediate opportunity for Canada to capitalize on—if not the litmus test for Canada’s relevance—is NORAD modernization and continental defence. This remains the most significant chance to engage, re-energize, and modernize continental defence industrial co-operation and demonstrate the value Canada brings to U.S. security. Ottawa’s much-hyped NORAD pronouncements have not garnered much attention in Washington. There was no industry engagement before the Canadian government’s summer NORAD announcement, and none since. The Canadian government and the Canadian Armed Forces continue to treat this as a series of individual procurement projects, missing the bigger picture and opportunity, as detailed in a May 30 op-ed in The Hill Times. Beyond the strategic, Canada struggles with the basics. NORAD recently hosted a briefing session and Dragon’s Den-style “pitch day” for companies at a classified level. Some Canadian firms couldn’t get the needed security clearances from the Canadian government in time to attend, and there was no co-ordinated government or CAF support or participation. American officials reportedly took notice. Clearly, much work remains to shore up Team Canada, co-ordinate our limited resources across government, and begin meaningful dialogue between government and industry. Only then can we turn friend-shoring from words into action. Nicolas Todd is vice-president of policy, communications, and government relations with the Canadian Association of Defence and Security Industries, which represents the interests of more than 650 defence, security, and cyber companies across Canada. The Hill Times