Mark Carney’s government, in the Defence Industrial Strategy document, sets a goal of “increasing the share of defence acquisitions awarded to Canadian firms” to 70 per cent, from 43 per cent today.Christinne Muschi/The Canadian Press
In his celebrated speech to the World Economic Forum at Davos, warning middle powers of the perils of integration with predatory great powers, the Prime Minister also warned against one “understandable” response: each country retreating within its own borders, supplying critical needs domestically, in the search for “strategic autonomy.”
“A world of fortresses will be poorer, more fragile, and less sustainable,” he told the assembled dignitaries. “Collective investments in resilience are cheaper than everyone building their own fortresses.”
Perhaps the Mark Carney of Davos could have a word with the Mark Carney whose government devised the recent Defence Industrial Strategy. To address the reasonable objective of reducing our dependence on the United States for military hardware, the document proposes the entirely unreasonable solution of building most of it in Canada – the very fortress mentality that Mr. Carney had earlier warned against.
Everyone, or nearly everyone, agrees we need to spend more on our own defence – because the world is a much more dangerous place; because Canada has not been pulling its weight as a NATO ally; because Canada needs allies more than ever.
Everyone, or nearly everyone, likewise agrees that a smaller proportion of that spending should be directed to purchases from the United States – because such dependence makes us vulnerable; because such vulnerability could be exploited; because it can no longer be assumed the United States would not exploit it.
It does not follow that, as we rapidly increase spending on defence but devote a smaller proportion of it to the United States, we should shift the bulk of it to domestic sources. Not if maximizing military capacity is our objective. And not if maximizing economic output is, either.
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The rule should be: Source from whomever can supply the best equipment at the lowest price, and – since the hour is late, the situation is dire, and we are starting from a long way back – in the shortest time. If that happens to be a Canadian supplier, fine. But if it is a foreign (non-U.S.) supplier, also fine. The focus should be on getting the biggest bang for the buck, not the nationality of the source.
There can be exceptions to this rule. In a global emergency, international supply chains can be interrupted, just when they are most needed, as we learned during COVID-19. Where sudden scalability is an imperative, it might be prudent to insist on locating production on Canadian soil, even if the supplier is foreign-owned.
And certainly we should want to avoid being too dependent on any one company, or any one country, for our defence needs, even if they do not represent the sort of potential threat that the United States has lately become. The watchword of statesmen in the current international climate is diversification, risk-management, hedging.
But the default should be to open competition, at least among non-U.S. suppliers. The burden of proof should be on those making the case for exceptions. There may be situations in which it is better to “Buy Canadian,” even in the presence of superior alternatives – to saddle our forces with inferior equipment, at a higher price, on a slower schedule, than they might have had if we had sourced it abroad. But that should have to be demonstrated, case by case.
What, instead, does the government’s Defence Industrial Strategy propose? In three words, the policy is known as “Build-Partner-Buy.” The default will be to build in Canada, using Canadian suppliers – to “buy Canadian whenever possible.” Only if that proves impossible will it consider “partnering” with foreign suppliers (“trusted allies and multinational firms”), through “government to government arrangements” and participation in global supply chains.
And only if that proves impossible – where “Canada cannot build ourselves or in strategic partnership with allies” – will it consider direct acquisitions from foreign suppliers. Even here, the commitment comes with strings: “strong conditions that spur reinvestment into the Canadian defence industrial base.”
In other words, the new policy has the onus completely backward. “Buy Canadian” is the rule (“new defence procurements will typically be directed to Canadian firms as a matter of policy”). Everything else is the exception. Indeed, the document sets a goal of “increasing the share of defence acquisitions awarded to Canadian firms” to 70 per cent, from 43 per cent today.
The government’s chief concern isn’t so much about boosting defence as it is about boosting the defence industry. The Defence Industrial Strategy, accordingly, is a lot more about industrial strategy than defence.
The military argument for this is restricted to some vague hand-waving. (The phrase used is, yes, “strategic autonomy.”) The real argument, it grows clearer with each page, is economic. The government’s chief concern isn’t so much about boosting defence as it is about boosting the defence industry. The Defence Industrial Strategy, accordingly, is a lot more about industrial strategy than defence.
That would explain the presence of not only the Defence Minister at the announcement, but the Industry Minister. The “message from the Ministers,” as the document has it, describes the government’s objective as being to “ensure that Canadian industry plays a central role” in any defence rebuild; to “dramatically expand domestic industrial capacity,” adding “up to 125,000 new jobs” and positioning the Canadian defence sector “as a powerful engine of growth.”
Buy Canadian is only part of it. It’s also about building “world-leading Canadian firms,” increasing Canadian defence-industry revenues (“by more than 240 per cent”) and defence exports (“by 50 per cent”), growing “national champions,” and “creating new commercial opportunities for Canadian firms.” At various points it refers to the need to build on areas “where Canada already has deep strengths.” These are claimed to include aerospace (!) and shipbuilding (!!).
Or in other words, more of the same, minus the heavy U.S. integration: the same elephantine, politicized, regionally divisive, technically blinkered procurement policy that has bungled one project after another, delivering them years behind schedule and billions over budget; the same Industrial and Technological Benefits policy (you can tell it’s the same because the document claims it has been “reformed”) that has ensured foreign acquisitions are just as costly and overspecified as their domestic counterparts; the same confusion of military and economic objectives.
The document is at pains to emphasize how complementary, how synergistic, how not at all at odds these two objectives are. “Our national security and our economic security go hand in hand,” it says at one point, which is true. “A strong Canadian defence and a strong defence industrial base are mutually reinforcing,” it says at another point, which is not as true. Eventually it insists “we cannot think about Canada’s national defence and defence industrial base as separate silos,” which is not true at all.
It’s true that a strong national defence and a strong economy go together. But just as national defence should not be confused with the interests of the defence industry, neither should the economy. Overpaying for inferior equipment – which is what Buy Canadian, as opposed to Buy the Best, means – doesn’t just needlessly constrain our fighting capacity. It’s also bad for the economy.
How’s that? As long as we’re buying the equipment, we might as well buy Canadian, shouldn’t we? Jobs, jobs, jobs, and all that.
A vendor at a trade show hosted by the Canadian Association of Defence and Security Industries in Ottawa in May, 2025.Justin Tang/The Canadian Press
But there isn’t a lot of unused capacity in the Canadian economy. The productive resources that go into fulfilling military procurement aren’t conjured out of thin air. They’re diverted from other industries, and other firms.
The amount by which the price paid for domestic hardware exceeds the price that might have been paid for the most competitive alternative, domestic or foreign, is essentially a subsidy. The subsidy rewards uncompetitive firms, not just at the expense of their direct competitors, actual or notional, but at the expense of competitive firms across the economy.
They pay for it not only with their taxes, but with their livelihoods. The capital and labour that are diverted into producing military hardware ourselves we could have purchased for less from other countries is capital and labour that is not available, or available only at a premium, to other industries. As their costs and prices go up, their output and employment goes down.
The jobs and output created by defence procurement are only the jobs and output destroyed in every other sector. That’s an acceptable trade-off, in principle, given the overriding interest in national security. But the more money we waste on the military, the less acceptable it becomes, until it’s no longer even a trade-off. Buy Canadian doesn’t just make our military weaker. It makes our economy poorer. Which ultimately also weakens our military capacity.
This is all the more critical at a time of rapid increases in defence spending, and rapidly deteriorating international security. Just when it is most urgent that we wring every ounce of extra capacity out of every new dollar, we are promising to dissipate much of it on the government’s industrial-strategy fantasies.
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That we will be spending so much more, faster, doesn’t diminish that concern: it magnifies it. It’s all we can do to get the money out the door now, and then only with massive amounts of waste and misspending. How much worse will it be when we are spending three and four times as much? How many more opportunities will there be for pork-barrelling, cronyism and outright corruption?
Lots of highly regarded militaries – Poland, Australia, Finland, Norway, Denmark, the Netherlands, the Czech Republic – small and medium powers that punch well above their weight, import most of their major weapons platforms and systems. Would they be nearly as well regarded if they were trying to produce them all themselves?
As Canada attempts to join the league of serious nations, does it make sense for us to try to build a full-spectrum, semi-autonomous military, in a great rush and more or less from scratch? Or should we focus on the few areas where domestic capacity is indispensable, and buy the rest from a range of trusted allies?
A wartime economy, it is true, requires that we alter certain basic assumptions. Some of the usual axioms have less relevance. But not when it comes to national defence. Paying more to get less makes even less sense now than it ever did.