Prime Minister Mark Carney admitted that Canada has underinvested in defence and relied “too heavily” on the United States for protection over the past few decades—a situation he said has become untenable amid economic threats and challenges to Canadian sovereignty.
“This has created vulnerabilities that we can no longer afford and dependencies that we can no longer sustain.”
Prime Minister Mark Carney
“This has created vulnerabilities that we can no longer afford and dependencies that we can no longer sustain,” Carney argued on Tuesday at defence simulation tech company CAE’s headquarters in Montréal. He was there to officially unveil a key pillar of the federal government’s plan to reduce its military dependency on the US, with an ambitious target of nearly doubling the number of defence contracts awarded to domestic firms.
Canada’s $6.6-billion CAD Defence Industrial Strategy (DIS), which BetaKit first reported on earlier this week, offers a roadmap for ensuring that Canadian industry reaps the rewards of the nearly $82 billion that the feds plan to pour into defence over the next five years.
Among other priorities, the DIS indicates Canada will focus on buying Canadian, investing in areas where the country has existing strength or potential to lead (like in AI and quantum), and helping scale some of the country’s small and medium-sized defence businesses into “national champions.”
“It’s a bold plan to get our armed forces what they need when they need it,” Carney said. “It’s a bold plan to scale Canadian defence companies and to put hundreds of billions of dollars into strategic sectors of our economy while creating over 125,000 high-paying jobs across Canada.”
Canada is now on pace to invest two percent of its GDP into defence this fiscal year. The country is targeting five percent by 2035, a figure that would mean spending a total of $180 billion on defence procurement and another $290 billion on defence-related infrastructure. Carney said these commitments reflect “the magnitude of the threats that we have to confront.”
Carney previously indicated that three-quarters of Canadian defence spending has in the past flowed south of the border. On Tuesday, he said that while there are “many strengths” associated with Canada’s defence relationship with the US, it is in Canada’s best interest to reduce its US dependency by building up both the country’s domestic defence capabilities and partnering with other nations.
The DIS introduces a “build-partner-buy” framework for defence procurement in which the country and its DIA will focus first on local companies as the feds look to increase the share of defence contracts awarded to domestic businesses to 70 percent. Carney emphasized this would represent “a big, big shift” compared to the status quo of just 43 percent.
If buying purely homegrown solutions is not feasible, Canada intends to explore co-development partnerships with trusted allies. “Only after exhausting those first two options will we buy from abroad,” Carney said.
Federal government representatives indicated that this framework will be forward-looking and will not be retroactively applied to existing partnerships or contracts with foreign suppliers. Some of the feds’ recent defence deals with US suppliers include agreements to purchase fighter jets, rocket and combat management tech, and data analytics software.
When buying from abroad, the feds intend to negotiate to ensure that domestic industry benefits and Canada retains control over key sovereign capabilities and intellectual property.
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As the country looks to boost defence exports by 50 percent, Carney said it will work with other countries, both within and beyond NATO membership. “We’re keeping [partnerships] with our closest allies; there will be some broadening, [and] there will be guardrails,” Carney said.
Carney stressed that the DIS is not about isolation: “It means being strong enough to be a partner of choice, rather than a dependent. It means building a domestic defense industrial base so we are never hostage to the decisions of others when it comes to our security.”
Some industry leaders BetaKit has spoken with have hailed the DIS’ focus on buying Canadian, faster procurement, and deliberately cultivating champions as a positive. Matt Lombardi, co-founder of Canadian defence innovation network The Icebreaker, called it “a welcome shift.” Dominion Dynamics founder and CEO described its targets as “daunting—but doable,” while also noting that executing on these plans will require sustained political attention over the next decade.
In a statement on Tuesday, Council of Canadian Innovators chief strategy officer Dana O’Born said the DIS identifies “the right instruments,” including investment, financing, Industrial and Technological Benefits Policy reform, and more details about the Defence Investment Agency (DIA), but could use some more “binding requirements, transparent milestones, and real accountability” to ensure it becomes operational.
Feature image courtesy Mark Carney on X.