On the day that Vladimir Putin said NATO members are now directly involved in the war in Ukraine because they have supplied missiles being used to bomb Russia, Justin Trudeau was announcing a yuletide $6.3-billion GST holiday on Christmas trees, beer and popcorn.
Canada, remember, is the country that can’t afford to hit its NATO spending target of two per cent of GDP for another eight years.
The chief of the defence staff, Jennie Carignan, has warned Canadians they may have as little as five years to prepare for emerging threats from Russia and China.
Putin’s rhetoric, which threatened use of hypersonic missiles against NATO facilities, suggests five years might be an optimistic take.
The heightened tensions show how disconnected all Canadian parties are in Parliament from the fateful events taking place in Europe and Asia.
So much of what is going on in Ottawa is petty and puerile; so much of what has preoccupied the federal government on the social justice file in recent years has been a distraction from the need to prepare for the challenges posed by authoritarian governments that have used the time to draw up their plans against us.
We have become complacent because of a post-Cold War peace dividend, as if low military spending was the rule, rather than the exception.
Governments from the Song dynasty in China in the 11th century to Frederick the Great’s Prussia in the 18th century have spent more than three-quarters of their budget on defence.
The early 21st century has seen spending fall to a worldwide average of seven per cent of the budget, allowing more money to be spent on health and education.
But Russia’s illegal invasion of Ukraine has ended a blissful but aberrant period of history.
The public knows this. Support for prioritizing military spending has risen from 12 per cent to 29 per cent of respondents to public opinion polls in the last decade and more than half of voters back increased defence spending.
This is the backdrop to a new report from the Business Council of Canada that calls on the government (presumably an incoming Conservative one) to awaken from its slumber and get serious about military spending. It links national security to the vitality and resilience of the economy by calling for an industrial strategy that identifies capabilities where Canada has an existing private-sector comparative advantage: cyber security, aerospace, and space observation, for example. It calls on government to provide those industries with “clear, certain and consistent demand signals” to allow the long-term investments needed to develop dual-use technologies.
“A foundational element of military capability is a robust industrial base,” it argues.
In its conclusion, the Business Council warns that “execution is a major challenge for the government of Canada.” No kidding. As such, it does not advocate that major purchases like the submarines the government is looking to buy are built from scratch here. We have seen the shortcomings of such wishful thinking in the shipbuilding strategy, which is well over budget and way behind schedule.
But the report is clear that Canada’s rivals are investing heavily, while successive governments in Ottawa have failed to spend on military capabilities.
A decade ago, Canada committed to invest two per cent of GDP on defence and to ensure 20 per cent of that spending was on new equipment and related research and development.
The Liberal government has been shameless about its failure to meet its international obligations, offering only a vague promise to hit two per cent by 2032. We are currently ranked 27th out of 32 NATO members on defence spending.
As the Wall Streeet Journal noted in an editorial this year, G7 nations have an obligation to lead the way and if Canada doesn’t want to play that role, it said the G7 should consider a replacement.
That lack of application has had consequences for Canada’s reputation as a reliable partner and senior policymakers in Washington have been explicit that failure to hit NATO commitments will mean that the renewal of the USMCA trade deal in two years will not go smoothly.
President-elect Donald Trump has said “two per cent is the steal of the century” and made clear he is ill-disposed to defend countries that foist their security on American taxpayers.
The report calls this failure a “dereliction of duty.” It recommends that Canada meet those NATO targets within five years and then continues to increase spending until it hits three per cent of GDP by 2034/35 — levels it last reached during the Cold War.
The report advocates a re-ordering of government priorities to find the money, including focusing the $9 billion a year in innovation subsidies that are currently scattered indiscriminately across the economy, so that they can be included in the defence envelope.
It also suggests a comprehensive program spending review, such as the one conducted by the Chrétien government that generated $29 billion in savings over three years. An equivalent program would find $90 billion today, given the increase in the size of the federal government.
Many of Canada’s major allies — the U.S., U.K. and E.U. — have already published integrated defence industrial strategies that emphasize the importance of a strong, sovereign base that builds capacity in areas like ammunition production.
Canada is falling behind with no serious effort underway to follow suit, the report warns: “Instead, Canada’s political leaders are still trying to cash in on the so-called peace dividend.” In Trudeau’s case, that takes the form of $250 electoral bribes mailed to nearly 20-million Canadians.
Building a sovereign defence industry is not an alien concept for Canada. By the end of the Second World War this country had the fourth-mightiest war production capability on earth, spending 18 per cent of its budget on defence in 1944.
To replicate that performance will require a flexibility that has been long abandoned in areas like defence procurement, with its reliance on competitive tendering that more often than not means buying off-the-shelf solutions from abroad.
The authors are clear that not every procurement should be sole-sourced from Canadian industry but that domestic suppliers should be incentivized by the government de-risking potential homegrown solutions and providing a stable source of demand.
“Many Canadian companies have much to offer the military but do not need the headache of dealing with a culture that takes years to close a sale and even more time to start paying,” the authors said.
In doing so, the government should follow countries like France, Sweden and South Korea, which recognize their domestic markets are too small to justify major investments by industry, and so develop sophisticated export strategies. Canada’s export support for Canadian firms is at best haphazard and, at worst, non-existent, the report said.
The world is at a fragile moment in its history. The pacifist aphorism that if you want peace, prepare for peace no longer holds.
The authoritarian powers view such sentiments as weakness and follow the reasoning of Greek sophist Thrasymachus that “justice is nothing else than the interest of the stronger,” summarized as “might makes right.”
Canada is ill-prepared for this precarious new world.
Its most consequential problems are its decrepit defence capability and its anemic economic growth.
This report is a good starting point in the debate about how to make both more robust.
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