The good (and lots of bad) in Canada’s new defence industrial strategy

The second component is the demand-signal from the CAF. This often comes down to fairly straightforward questions—what are the requirements for the military or our close allies for the missions that are assigned to them? This is further broken down into the individual use and attrition rates of munitions and platforms. For example, what are the anticipated Royal Canadian Air Force’s air-to-air missile usage rates or the number of small drones the Army expects to lose over the course of a high-intensity military activity? Canada has historically been fairly neglectful of this process of stockpiling supplies. This has been a deliberate choice made by successive governments after the 1960s to decrease the focus on war-preparedness in an effort to reduce military expenditures. This became substantially worse after the Cold War ended, as Canada simply stopped serious industrial planning. The new defence industrial strategy is basically the Canadian Government’s first attempt to rectify this deficiency in over 30 years. However, it reflects the competing mandates between extracting maximum economic benefits and the more immediate and, arguably, more critical military concerns. One would assume that, after Prime Minister Carney’s Davos speech outlining how Canada now faces a dramatically different international system, there would be greater alacrity towards actually modernizing the CAF. Unfortunately, the recently released strategy does not provide the critical foundations to shape the defence industry to meet this effort. The two key determinants—a clear demand signal for defence, and achieving supply chain resilience and capacity for wartime requirements—are not addressed. If there was anything that better illustrated its lack of focus on the needs of the CAF, is that the words “war” or “warfighting” are conspicuously few and far between in the strategy. Certainly, it identifies areas of sovereign capabilities, and a new mechanism for communicating the government’s priorities to industry—the latter through a multi-departmental Defence Advisory Forum. However, that body is co-chaired by the ministers of national defence and industry, as well as the secretary of state for the Defence Investment Agency. This unnecessarily crowded structure reflects the muddled approach towards the priorities for defence spending.1Part of this is the longstanding issue of the inconsistent production of defence and foreign policy papers. In an ideal world, they would set the military priorities that would inform the strategy. Yet the current white paper, “Our North Strong and Free,” is already viewed as obsolete and requires an update, which leaves the industrial strategy unmoored from a broader strategy. The concept of “sovereign capabilities” is equally problematic. As discussed several weeks ago regarding the aerospace sector, the idea that Canada (or any country other than the United States and China) can maintain domestic production capability for many sectors is patently unachievable. Canada will need to partner heavily with allies to effectively meet its peacetime military modernization goals, to speak nothing of potentially scaling for wartime production. That is why stating that it is the government’s intention to have 70 percent of the goods the CAF acquires come from domestic sources is arbitrary and potentially counterproductive. It will encourage the country to invest in small, inefficient domestic suppliers, which will not be able to scale up easily if the demand arises from a major conflict. Furthermore, it will potentially squander resources that could have been put to more productive endeavours. While the effort to vastly increase R&D spending and better harness Canadian industry is welcome and desperately necessary, more can be done to focus it on specific areas that meet the CAF requirements.2There are many easy examples Canada could follow: the U.S. Department of Defense’s National Defense Industry Strategy or the U.K. Ministry of Defence Industrial Strategy. They clearly identify the governments’ overall strategic situation, the role of their respective armed forces to meet challenges, tying industrial policies to specific requirements, and then dedicate resources to ensure they can meet the challenge. To be sure, Carney is operating in a constrained environment, given the political landscape, where public support for defence spending is hard to come by. This has been a longstanding issue governments of all stripes have had to vie with. Positioning this new defence spending as a domestic investment effort might just be the transaction cost an “Elbows Up” population requires to swallow the increase. But that does not mean that, ultimately, it is the most economic or strategic approach. Will Canada’s industrial strategy help improve the output of the defence sector? Yes, but it’s a missed opportunity to get the focus and policy right. As seeds spread over a wide terrain, many will not find fertile ground, whereas a targeted approach would provide a better yield. Given the immense resources Ottawa is prepared to invest in the area, building a foundation on solid first principles should have been the focus of the strategy, not an afterthought. Editor’s note: An earlier version of this article misstated that the word “war” does not appear in the defence industrial strategy document. The Hub regrets the error.