LIVE: Joly on the Liberals’ new defence industry strategy

Key Concepts

• Industrial Defence Strategy: A new Canadian strategy focused on bolstering the domestic defence industry, aiming for increased investment, job creation, and reduced reliance on foreign suppliers, particularly the US.
• Sovereign Capability: A list defining critical capabilities (aerospace, digital services, specialized manufacturing, etc.) that Canada prioritizes building domestically.
• ITB Policy (Innovation and Investment Canada Benefits Plan): A policy focused on maximizing economic benefits from government procurement, requiring companies to invest a portion of contract value back into the Canadian economy.
• Team Canada Approach: A collaborative effort involving government, industry, and research institutions to promote Canadian interests internationally and attract investment.
• Geopolitical Context: The increasingly unstable global landscape, including the war in Ukraine, US protectionism, and the rise of economic nationalism, driving the need for a stronger Canadian defence industry.
• Leverage: Utilizing government procurement, particularly in defence, to negotiate favourable investment terms and attract foreign capital.

Canada’s New Industrial Defence Strategy & Economic Priorities

This transcript details a presentation by Canadian Minister of Industry, Mélanie Joly, outlining the government’s economic plan and, specifically, its new industrial defence strategy. The presentation, delivered to a business audience, emphasizes a shift towards proactive economic management in a challenging geopolitical environment.

1. The Evolving Geopolitical Landscape & Economic Context

Joly acknowledges a worsening geopolitical situation, citing events like US policy decisions and the ongoing war in Ukraine. She highlights a speech by the Prime Minister at Davos, calling for middle powers to collaborate against US protectionism and the influence of tech giants. While 2025 was characterized by reactive measures, 2026 marks the implementation of a proactive plan built on three pillars: protect, create, and attract. Despite global uncertainties, Canada created 199,000 jobs in the past year, exceeding the US (181,000) despite having a significantly smaller economy. This success is presented as evidence of the plan’s effectiveness.

2. The Three Pillars: Protect, Create, and Attract

• Protect: This pillar focuses on safeguarding Canadian jobs in sectors affected by tariffs, specifically steel, aluminum, automobiles, and forestry. A key initiative is the recently unveiled automotive strategy, aimed at protecting 500,000 Canadian automotive jobs and attracting investment from Korean, German, and Chinese companies.
• Attract: Launched in December, the talent attraction strategy aims to draw skilled workers from abroad, particularly from the US, to contribute to Canadian research and development. Thousands of applications have already been received.
• Create: Job creation will be driven by major projects, supporting Canadian “flagship” companies, and, crucially, the new industrial defence strategy.

3. The Industrial Defence Strategy: A Core Component

Joly frames national and economic security as inextricably linked. She draws a historical parallel to Canada’s rapid industrial mobilization during World War II (producing 900,000 weapons, vehicles, and munitions per week by 1943), citing the establishment of companies like Vickers (later Canadair) in Montreal. The strategy aims to replicate this success, recognizing that Canada previously possessed a robust defence industrial base.

Key Objectives (by 2035):

• Investment: $500 billion in defence-related investment and infrastructure.
• Employment: 125,000 well-paying jobs.
• Exports: A 50% increase in defence-related exports.
• Domestic Procurement: Increasing the proportion of defence purchases from Canadian companies from 43% to 70%.
• Revenue Growth: A 240% increase in revenue for the Canadian defence sector.

4. Strategic Partnerships & Procurement

The strategy emphasizes a multi-pronged approach to procurement: build, collaborate, and buy.

• Build: Prioritizing domestic construction based on the “Sovereign Capability” list.
• Collaborate: Seeking partnerships with international companies, exemplified by participation in a new European defence procurement initiative (Canada is the only non-European participant) and a $500 million investment to enable Canadian companies to work with the European Space Agency.
• Buy: As a last resort, procuring from foreign suppliers.

Specific examples include: purchasing six Bombardier aircraft, working with the Business Development Bank of Canada (BDC) to provide $4 billion in capital to defence companies, and supporting companies like Alpha Casting, Anion Systems, and Simative. The ongoing submarine procurement process (involving TKMS, Norway, and Korea) is presented as an opportunity to secure investments in Canadian steel (Algoma) and other industries.

5. Addressing Bureaucratic Hurdles & Establishing the Defence Investment Agency

Joly acknowledges the frustration with the slow and cumbersome government procurement process. To address this, a Defence Investment Agency has been created, modeled after a successful UK agency, to streamline approvals, coordinate efforts between the military and industry, and build trust. The agency is led by a newly appointed president and overseen by the Secretary of State for Military Procurement. The goal is to make the process faster, more predictable, and more coordinated.

6. Defining a “Canadian Company” & Prioritizing Domestic Benefits

A key aspect of the strategy is defining what constitutes a “Canadian company” for procurement purposes. The proposed criterion is that at least 70% of the company’s creation and components must be Canadian. This aims to prevent Canada from becoming an “economy of shell companies” and ensure that investments lead to job creation, development, and intellectual property ownership within Canada. The government also intends to encourage existing multinational companies (like Bombardier and CAE) to increase their Canadian investments.

7. International Engagement & Economic Diplomacy

Joly emphasizes the importance of economic diplomacy and actively promoting Canadian interests abroad. She highlights recent trips to Sweden, Finland, Qatar, Japan, and other countries to attract investment and forge partnerships. The strategy leverages defence procurement as a negotiating tool, offering potential contracts in exchange for foreign investment in Canada. She stresses the need for Canada to be proactive in a world increasingly characterized by economic nationalism.

8. Call to Action & Collaboration

Joly concludes with a call to action, urging Canadian entrepreneurs and businesses to participate in the construction of the new defence industry. She emphasizes the importance of collaboration between government, industry, and research institutions, and the role of the BDC in providing access to capital. She also highlights the need for large Canadian companies to work with SMEs.

Notable Quote:

• “National and economic security go hand in hand.” – Mélanie Joly
• “All about creating leverage.” – Mélanie Joly, describing the strategy of using defence procurement to attract investment.
• “Not at the table, you are on the menu.” – A frequently repeated phrase emphasizing the need for Canada to be a strong player on the international stage.

This presentation outlines a significant shift in Canadian economic policy, prioritizing strategic industrial development, particularly in the defence sector, to enhance national security and economic resilience in a volatile global environment. The success of the strategy hinges on effective implementation, streamlined procurement processes, and strong collaboration between government and the private sector.