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Canada’s Defence Industrial Strategy: A Detailed Summary

Key Concepts:

• Defence Industrial Strategy (DIS): A comprehensive plan to strengthen Canada’s defence capabilities through domestic production, strategic partnerships, and increased investment.
• Build, Partner, Buy: The core framework of the DIS, prioritizing domestic production, collaboration with allies, and procurement from abroad only as a last resort.
• Defence Investment Agency (DIA): A new agency designed to streamline procurement, reduce red tape, and expand domestic defence production.
• Strategic Autonomy: Canada’s ability to act independently in a changing global landscape, secured through a robust domestic defence industrial base.
• Sovereign Capabilities: Critical areas of defence expertise and production within Canada, such as aerospace, naval vessels, and munitions.
• Industrial and Technological Benefits (ITB) Regime: Mechanisms to ensure that defence procurements deliver economic benefits to Canada.
• Borealis: New Bureau of Research, Engineering, and Advanced Leadership focused on defence-related R&D.
• NORAD: North American Aerospace Defence Command, a joint US-Canada command for aerospace and maritime defence.
• Golden Dome: A proposed North American early warning system, potentially involving radar and other technologies.

I. Context and Rationale for the Strategy

The announcement of Canada’s first Defence Industrial Strategy (DIS) stems from a recognition that Canada has historically underinvested in both its defence spending and its domestic defence industries. Reliance on geography and allies for protection has created vulnerabilities and dependencies that are no longer sustainable in a rapidly changing and increasingly dangerous world. The government, elected with a mandate to strengthen Canada, aims to achieve greater resilience and independence. This strategy is presented as being for all Canadians, particularly workers affected by global tariffs, and is intended to equip the Canadian Armed Forces and build a stronger Canada. The current geopolitical climate necessitates a shift in approach, acknowledging that the world has changed and Canada must adapt.

II. Financial Commitments and Targets

The government is committing significant financial resources to defence over the next decade:

• Doubling Defence Expenditures: An additional $80 billion over the next 5 years, and a commitment to meet the 2% NATO target by this spring – a decade ahead of the previous schedule.
• Domestic Resilience Investment: An additional $45 billion per year for domestic resilience, yielding both security and economic benefits.
• Total Defence Procurement Investment: $180 billion over the next decade.
• Defence & Security Infrastructure Investment: $290 billion over the next decade.
• Downstream Economic Benefits: Over $125 billion in additional economic benefits.
• R&D Boost: An 85% increase in government investment in defence-related research and development.
• Export Increase: A target to increase defence exports by 50% over the next 10 years.

III. The “Build, Partner, Buy” Framework

The DIS is built around a simple, yet ambitious, framework:

1. Build: Prioritize Canadian companies for military procurement in areas where Canada has sovereign capabilities. As a matter of policy, contracts will be directed to Canadian firms first.
2. Partner: Collaborate with like-minded allies to attract investment, transfer intellectual property, and integrate supply chains, ensuring that public funds benefit the Canadian economy. The recent Safe Agreement with the European Union is highlighted as a landmark example.
3. Buy: Only after exhausting the “build” and “partner” options will Canada procure from abroad. Even then, the government will seek to maximize benefits for Canada throughout the value chain through a modernized Industrial and Technological Benefits (ITB) regime.

IV. The Defence Investment Agency (DIA)

The DIA is the central mechanism for implementing the DIS. Its three fundamental objectives are:

1. Protecting Sovereignty: Ensuring the Canadian Armed Forces have the tools needed to defend Canada, particularly in the Arctic.
2. Building Prosperity: Creating jobs and economic growth through increased domestic defence production.
3. Strengthening Strategic Autonomy: Enhancing Canada’s ability to act independently in a more dangerous world.

The DIA will focus on streamlining procurement processes, cutting red tape, and expanding domestic production capacity.

V. Focus on Sovereign Capabilities and Key Sectors

The strategy will initially concentrate on strengthening Canada’s existing sovereign capabilities, including:

• Aerospace: Particularly in Quebec, with strengths in aircraft, aircraft engines, parts, and simulation (Canada is a world leader in training and simulation).
• Combat Vehicles: Production of world-class combat vehicles across Canada.
• Munitions: Domestic production of munitions.
• Naval Vessels: Building and maintaining naval vessels within Canada.
• Security Technology & Medical: Canadian leadership in these areas.

VI. Five Pillars of the Strategy

The DIS rests on five key pillars:

1. Renewing Industry Relationships: Providing clear, long-term demand signals to industry.
2. Strategic Procurement: Implementing the “build, partner, buy” strategy for greater efficiency.
3. Investing in Innovation & Workforce Development: Supporting research and development and training a skilled workforce.
4. Securing Supply Chains: Ensuring reliable access to critical materials and components.
5. Domestic Partnerships: Collaborating with partners across Canada, including in the North.

VII. Research and Development (R&D) and Borealis

Recognizing the research-intensive nature of the defence sector (three times more R&D intensive than Canadian manufacturing overall), the government will boost investment in defence-related R&D by 85%. This investment will focus on developing next-generation capabilities in areas like:

• Artificial Intelligence (AI)
• Quantum Technologies
• Robotics and Autonomous Systems

To coordinate and accelerate these efforts, a new Bureau of Research, Engineering, and Advanced Leadership (Borealis) is being created.

VIII. Strategic Autonomy and International Partnerships

The ultimate goal of the DIS is to enhance Canada’s strategic autonomy – its ability to act independently. This does not equate to isolation, but rather to becoming a partner of choice, not a dependent. Diversifying partnerships is crucial, reducing reliance on any single alliance or decision. Key partnerships are being developed with:

• The European Union (through the Safe Agreement)
• The United Kingdom
• Countries in the Indo-Pacific region
• Korea (highlighted as a historically strong ally with potential for growth).

IX. Addressing US Dependency and Procurement Shift

Currently, approximately 75% of Canada’s defence capital spending goes to the United States. The DIS aims to shift this balance, with a goal of having 70% of defence procurement spending directed to domestic sources over the next decade. This will be achieved through the “build, partner, buy” framework and increased investment in Canadian industries.

X. Export Promotion and Addressing Export Barriers

The government aims to increase defence exports by 50% over the next 10 years. Acknowledging past difficulties in obtaining export permits, particularly for non-liberal democracies, the government indicated a willingness to address this issue and streamline the export permitting process at Global Affairs Canada, while maintaining appropriate guardrails.

XI. NORAD and the “Golden Dome”

The government is actively exploring the next phase of NORAD modernization, including the potential implementation of a North American early warning system, referred to as the “Golden Dome.” Discussions with the United States are ongoing, and Canada will participate if it is in the country’s best interests.

XII. Conclusion

Canada’s Defence Industrial Strategy represents a significant shift in approach to defence and economic policy. By prioritizing domestic production, strategic partnerships, and increased investment, the government aims to strengthen Canada’s security, build a resilient economy, and enhance its strategic autonomy. The strategy is framed as a long-term investment in Canada’s future, recognizing that defending Canada is inextricably linked to building a stronger, more prosperous nation. The success of the DIS will depend on effective implementation, collaboration with industry, and a sustained commitment to long-term investment.