The Canadian government, under Prime Minister Mark Carney, unveiled a defence policy bombshell. It has been pledged that the Canadian government will reach its 2% commitment of GDP to defence spending by March 2026. This will be five years ahead of the previous Trudeau government’s pledge. It is an ambitious pledge of more than $9 billion. Canada’s 2% problem has been an issue for decades. By adding $9 billion, it will move the projected 1.71% of GDP within the 2025-2026 budget to 2%.
Canada last reached its 2% commitment back in 1990. During the 1990s, a series of defence cutbacks followed the end of the Cold War, accompanied by controversy over the Canadian Armed Forces’ (CAF) conduct in Somalia. Cutbacks also came with wider fiscal restraints and reductions as the Chretien government in the early 1990s attempted to rein in government spending and pay down the national debt. Canada did not meet its 2% GDP commitment, even during the Harper government, despite new ambitious shipbuilding projects and some modernization efforts during Canada’s deployment in Afghanistan.
Carney’s new “Rebuilding, Rearming and Reinvesting” (3Rs) plan includes:
- Better pay for Canadian Armed Forces, improved recruitment and retention, and investments to support operational readiness, fleet maintenance, security, and infrastructure requirements.
- New aircraft, armed vehicles, and ammunition, as well as support for projects currently underway.
- Developing new drones and sensors to monitor the seafloor and the Arctic.
- Repairing and maintaining existing ships, aircraft, and other assets.
- More health care funding and staff for Armed Forces personnel.
- Expanding the reach, security mandate, and abilities of the Canadian Coast Guard and integrating it into our NATO defence capabilities – to better secure our sovereignty and expand maritime surveillance.
- Bolstering Canada’s defence industrial capacity.
- Building capacity in artificial intelligence, cyber, quantum, and space.
- Modern and secure digital infrastructure.
The first takeaway from the 3Rs plan is that much of it involves existing expenditures that do not require approval through parliament or the tedious multi-ministry procurement process. The transfer of the Canadian Coast Guard from the Department of Fisheries to the Department of National Defence is an administrative change. It will be interesting, though, to see if Canadian icebreakers are armed shortly – and not just with the high-calibre rifles that they have on board for aggressive polar bears, but with new deck guns.
The increase in pay and healthcare for the CAF can be implemented without parliamentary approval. The integration of the Canadian Coast Guard into the Department of National Defence is a similar matter. The repair and maintenance of existing ships, aircraft, and other assets also does not require new contracts that require parliamentary approval, nor a prolonged procurement process.
The maintenance and repair of existing armoured vehicle fleets will bolster General Dynamics Land Systems in the short term. In recent news, General Dynamics Land Systems laid off dozens of salaried staff last week in London, Ontario. There are rumours that further job losses are imminent without government contracts. The replacement of armoured vehicles, which are beyond repair, is also part of the plan for support capabilities.
There is a plan for support capabilities, which includes:
- Arctic Over-the-Horizon Radar
- Joint Counter-Drone Program
- Joint Support Ships
- Long-range precision strike capability
- Increased domestic ammunition production
- Additional logistics utility vehicles, light utility vehicles, and armoured vehicles
Increased domestic ammunition production can also be under the purview of Canada’s Ministry of Industry. Building cyber defence and artificial intelligence through the new BOREALIS (Bureau of Research, Engineering, and Advanced Leadership in Innovation and Science) appears to be under the mandate of the Communications Security Establishment of Canada (CSEC). Still, until additional details are released – it is unknown whether the money will be allocated 100% through DND. Civilian-military joint ventures can be counted as defence expenditures, such as “airfields, meteorological services, aids to navigation, joint procurement services, research and development.” Therefore, digital goals can also be seen as a form of defence expenditure, even though they are critical for government infrastructure.
Goalpost Moving: NATO 3.5-5%
The new proposal, tabled by NATO’s Secretary General Mark Rutte, is that NATO members should commit to 3.5% of their defence budget and 1.5% on broader security issues. The broader security issues would be considered those that are civilian-military in nature.
Even if Canada were to meet its 2% commitment, it is very possible that the goal line will have moved further away, and again, Canada would not meet this new commitment. There is potential for Canada to make a 2% commitment through the procurement of new submarines, self-propelled artillery, and other systems.
There are barriers that Canada’s defence procurement system faces, which include three ministries: Defence, Public Services and Procurement Canada, and Industry. There are also policy challenges imposed by previous governments, such as Mulroney’s Industrial and Regional Benefits Policy (IRB Policy) and Harper’s Industrial and Technological Benefits Policy (ITB Policy). Policies that leverage defence procurement to benefit the Canadian economy and further Canadian industry.
For instance, Canada’s shipbuilding industry is not capable of building a pressurized submarine hull, and it would be beneficial to have it built abroad. Furthermore, Canada’s shipbuilding industry is at capacity with the Joint Support Ship, Icebreaker and River-class destroyer contracts. So, the IRB/ITB policies would need to be waived. However, these companies can argue that economic or industrial technological benefits will be passed on to the Canadian economy or industry as a whole. It would likely gain consideration in the procurement process across various departments, excluding the Department of National Defence.
The Carney government’s 2% fix is a patchwork of what it can do without a clear defence roadmap. The CAF do need a multitude of projects to rearm itself. The “Rebuilding, Rearming and Reinvesting” plan will attempt to plug the holes of a sinking ship. However, it is worth noting that there is still much more that needs to be done.
It’s not just flashy F-35s, submarines, or tanks. The Ombudsman’s office for the CAF has outlined many policies that the government needs to adopt or address. When it comes to procurement, many less ostentatious items need to be acquired, such as uniforms, ballistic plate carriers, and fire suppression systems. These items need as much attention as the flashy, multi-billion-dollar ones, and by that, the government’s media releases and attention.
Feature Photo: “G15 Sentinel drone owned by the Advanced Naval Capabilities Unit based in Victoria, BC” ,Master Corporal Alana Morin, Combat Camera, 2025