By Rick Hillier, Brice Scheschuk and Kevin Reed
The Canadian government can send a compelling message to U.S. President Donald Trump that it is serious about meeting its NATO commitments by adopting two powerful defence measures.
If the political will is there, Canada could almost immediately start accessing billions of dollars of institutional money for security purposes, which would go toward our commitment of spending two per cent of GDP on defence.
Canada should also be an enthusiastic partner to the proposed blueprint of a Defence, Security and Resilience Bank, an institution that would also provide a well of capital for defence purposes.
Adopting these measures would go a long way to lessening the threat of tariffs from Trump and send the message that Canada is fully aligned with the U.S. on defence, border security, containment and control.
The measures would also allow Canada’s leaders to boast to Trump, his cabinet and Congress, as well as to our NATO allies, that we are committed to spending two per cent of our GDP on defence in 2026, 2.5 per cent in 2027 and three per cent in 2028.
Canada has immediate choices to make. As a trading nation, we must step up and become a leader in security, honour commitments to our allies and convince the U.S. to stand down on tariffs.
Continuing to do the “same old” will alienate our strongest and closest allies. The choice is clear. If we do not address our security, our nation will become a “least favoured trading nation,” with devastating economic consequences.
With the Trump administration, you are either with them or against them. There is no half way. We must be with them. And as the world becomes a more dangerous place, trade conditions with our allies must have security conditions. They are 100 per cent linked.
We must shore up our defence capabilities in order to support our allies and protect our ability to be a reliable economic partner. Canada today spends under 1.4 per cent of GDP on defence (approximately $23 billion).
We are well below our 2.0 per cent commitment to NATO with a limited plan to achieve that target let alone the increased targets currently being discussed. European members of NATO are advocating a 3.0 per cent figure.
Serious budget choices lie ahead if the government is serious about meeting its commitment.
The minimum dollars needed using 2023 GDP of $2.14 trillion as a baseline are projected as:
• $32 billion in 2025
• $42.8 billion in 2026 (2.0 per cent of GDP)
• $53.5 billion in 2027 (2.5 per cent of GDP)
• $64.2 billion in 2028 (3.0 per cent of GDP)
However, the U.S., Poland, Latvia and Estonia, along with other nations, are pushing for a 5.0 per cent commitment — which, based on Canada’s 2023 GDP, would see us having to increase spending by $100 billion a year.
And yet Canada has the capacity to fund our forces now.
It is within the government’s capability to immediately access some of the billions held by institutions such as pension and insurance companies.
The institutions could invest in our defence infrastructure’s immediate needs, with the credit security of the federal government under “hell or high water” contract structures.
The arrangement would allow the government to access cash while providing the institutions with an ironclad agreement that the money would be repaid over a period of 10, 20 or 30 years.
One immediate benefit, for instance, of an influx of several billion dollars would be to allow the government to deal with its poor housing situation for Armed Forces personnel on our long-neglected bases.
An estimated 25 per cent of military housing is in such bad condition that it should be condemned. Meanwhile, about 5,000 soldiers are on a housing wait list. And with the forces on a major recruitment drive, it is expected that about 10,000 housing units will be needed in the next five years.
The cost to update our bases, including barracks, hangars, maintenance hangars and training facilities, is on average $500 million per base, and we have about 30 mid- to large-sized bases. The amount Canada needs to spend now is close to $15 billion.
The military could access this type of non-traditional funding immediately and eliminate the unpredictable constraints of the federal budget’s annual capital allocation process. The funding would also count toward our two per cent target.
Canada should also sign on to the concept of a Defence, Security and Resilience Bank (DSR Bank) modelled after the World Bank.
Allies in the NATO and Indo-Pacific member countries would provide capital for the bank and a AAA credit rating would be used to fund into the bond market.
Among the key areas of operation for the bank would be direct lending to member countries for defence needs as well as lease financing for armaments trade between allies.
The bank would raise up to $500 billion to support member nations for their defence needs and unlock private-sector capital for equity and innovation investment.
Robert Murray, a former U.K. army officer who also held a senior staff position at NATO, proposed the “bold solution” of the DSR Bank in an “issue brief” for the Atlantic Institute in December 2024 entitled, “How a new global defence bank — the Defence, Security and Resilience Bank — can solve U.S. and allied funding problems.”
But “political will remains the key challenge,” noted Murray, who created and launched the NATO Innovation Fund in 2022 with $1 billion to invest into tech startups for emerging technologies.
Canada should immediately embrace the DSR Bank and take a leadership position in its founding.
Canada can and must act immediately. Adopting these measures will help fund our defence and security requirements and protect our sovereignty and the well-being of our nation from threats that are real, dangerous and pressing.
Special to National Post
Rick Hillier is a retired Canadian Armed Forces general who served as the chief of defence from February 2005 to July 2008. Brice Scheschuk is the managing partner at Globalive Capital and served in the Canadian Naval Reserve from 1989 to 1994. Kevin Reed is a partner at RF Piper and a retired Canadian Forces Honorary Colonel who served from 2009 to 2018.