Canada’s defence spending: the free ride is over

“You’re riding a first-class carriage with a third-class ticket,” France’s Ambassador to Canada Michel Miraillet once said of this country’s approach to defence spending. That ride is about to come to a screeching halt. If Washington’s patience with vague commitments from Canada to spend two per cent of its GDP on defence annually hadn’t already worn paper-thin, recent events on both sides of the border are likely to reduce it to zero. One week before a majority of Americans opted to return Donald Trump to the White House, Canada’s parliamentary budget officer (PBO) concluded that our government had relied on an economic forecast of unknown origin to project that defence spending as a percentage of GDP would rise to 1.76 per cent over the next five years. That projection was made public in April’s defence policy update. Even at the time, some questioned how it could add up. We now know the answer: It doesn’t. Not even close. According to the PBO, the economic growth projections used by the Department of National Defence (DND) assumed the economy would be in recession for the next four years. That hasn’t happened in Canada since the Great Depression. For Canadians paying attention, it must have come as a shock since they are being told by the government that our economy is doing well and poised for solid growth. The projections must have caused an earthquake in the Finance Department, as they are completely at odds with their own forecasts. They also fly in the face of private sector forecasts, and those of both the Organisation for Economic Co-operation and Development, and the International Monetary Fund. Christyn Cianfarani is the president and CEO of the Canadian Association of Defence and Security Industries. Photograph courtesy of Christyn Cianfarani PBO Yves Giroux acknowledged that “we couldn’t find anything even remotely that resembled the numbers for nominal GDP that DND was using.” So, the PBO corrected DND’s “erroneous” assumptions, which led to the conclusion that Canada’s defence spending will reach a peak of 1.58 per cent in five years. The difference between 1.76 per cent and 1.58 per cent of GDP might sound trivial, but in fact it is enormous. It equals about $6.5-billion per year of defence funding. One has to wonder if this was a case of misdirection, so that instead of focusing on Canada’s dwindling credibility as a nation, those of us paying attention would hone in on an obscure forecasting dispute. Let’s not do that. Let’s talk about what’s really going on. Relying on dubious—or worse—devious economic growth assumptions reconfirms the views of many of our closest allies who think Canada doesn’t understand that having a credible plan to rapidly increase spending isn’t optional anymore, it is imperative. It may even suggest to them that Ottawa is playing games with numbers at the expense of our own national security and that of our allies. By all accounts, the second Trump administration won’t hesitate to call our bluff. When he takes office in January, the former and incoming president has pledged to shame NATO laggards, and to move swiftly to jolt them out of their complacency. That could start with his much-touted tariffs, and quickly escalate into highly unpalatable demands of Canada at the Canada-United States-Mexico Agreement renegotiation table, withholding U.S. funding for NATO, or—in Trump’s own chilling words—“I would encourage to do whatever the hell they want.” Even assuming a best-case scenario in which we don’t face immediate economic and national security consequences, it’s time for the Canadian government to come clean. The world is more dangerous, and defence and deterrence are expensive. The PBO estimates Canada would need to increase current annual defence investment by $15- to $20-billion to reach two per cent of GDP by 2032-33. In the meantime, the mind boggles at ongoing and planned cuts to DND’s budgets which amount to $800- to $900-million per year. Beyond a “commitment” to meeting NATO’s target, we need a transparent, year-over-year fiscal track that sets out how we get there—starting in 2025’s federal budget. In tandem, building defence industrial capacity at home, and supporting Canadian firms to export that expertise to the world must become a strategic priority rather than an afterthought. This is how every one of our allies operates in the defence market: defending themselves, contributing to collective deterrence, and boosting their own defence industries, which is now an official NATO priority. Canada’s free ride is over. Maybe it’s time to extinguish the gaslight. Christyn Cianfarani is the president and CEO of the Canadian Association of Defence and Security Industries, which represents more than 700 defence, security, and emerging technology companies across Canada. The Hill Times

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Canada’s defence spending: the free ride is over

Building defence industrial capacity at home, and supporting Canadian firms to export that expertise to the world must become a strategic priority rather than an afterthought.

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