Just a few months ago, on February 17th, the Government of Canada released its Defence Industrial Strategy, its first formal attempt to align defence procurement with broader industrial policy. The strategy aims to shift a large portion of Canada’s defence spending to domestic companies to build a more reliable and self-sustaining defence industrial base. Its launch followed recent increases in defence spending and Canada’s commitment to meet NATO’s 2 per cent of GDP defence spending target, which it achieved in late March.
Historically, Canada’s defence spending has been highly cyclical. While this pattern is typical among NATO and other advanced economies, the expansions and prolonged contractions of Canada’s cycle have been especially pronounced, with a long period of underinvestment following brief surges. Over time, this has been accompanied by a general decline in penditure as a share of GDP and the erosion of key industrial capabilities. Increases in government expenditure on defence have typically correlated with international crises and conflict, rather than with a sustained effort to develop a robust defence industrial capacity.
This begs the question, what makes the Defence Industrial Strategy so significant, and does it represent a genuine strategic shift in Canada’s approach to defence spending, or is it just another temporary response in a time of crisis?