Prime Minister Mark Carney, with National Defence David McGuinty and Chief of the Defence Staff General Jennie Carignan in Toronto, June 9,2025/PMO photo

Policy’s Emerging Voices section spotlights policy-oriented writing by graduate students.

By Michael Black

June 11, 2025

Prime Minister Mark Carney has now committed Canada to spending 2% of GDP on defence by 2026, meeting the NATO target first articulated at the Riga summit 20 years ago. But when Carney heads to The Hague for the annual NATO Summit June 24-26, leaders will discuss a proposal for ambitious new defence spending targets, raising the benchmark to 5%.

That proposed new target comprises 3.5% on core defence spending, as well as 1.5% of GDP per year on defence and security-related investment, including in infrastructure and resilience.

For Canada and many other allies, this represents a significant increase, one which could strain already stretched public finances. But beyond the fiscal issue, a critical question looms: Are NATO members ready for the expansion in industrial capacity that such spending targets require?

Recent experience underscores that NATO’s defence industrial bases are already stretched thin. A key lesson from the war in Ukraine is that in a high-intensity conflict, mass matters; a reality that many NATO allies are currently ill-equipped to meet.

Military assistance to Ukraine has significantly depleted NATO stockpiles, exposing severe production bottlenecks. Canada has struggled to replenish its stockpiles of artillery shells sent to Ukraine, with current domestic production unable to meet even modest replenishment goals. Many other allies face similar issues, notably Denmark, which donated its entire artillery inventory to Ukraine.

NATO’s ambitious goals risk colliding head-on with the realities of strained industrial capabilities unless decisive steps are taken now to scale up production across the alliance.

As Canada seeks to build up its military capabilities, buying American and taking proven systems “off the shelf” may be obvious thing to do. After all, this has been Canada’s (and many other allies’) default posture for decades.

The United States commands the world’s largest defence industrial base and remains the sole ally able to surge production at scale across the full spectrum of defence capabilities. Yet even the U.S. doesn’t have infinite industrial capacity and has been under strain. Some U.S. production lines hit their ceilings as early as the first months of the Ukraine war, and the strain is especially heavy for complex systems like HIMARS and Patriot interceptors.

Beyond capacity limits, recent months have highlighted the political risks of excessive reliance on a single partner, as President Donald Trump has singled out Canada in his trade war, calling for it to become the “51st state”. He has also showed his willingness to more generally condition or even restrict military support to allies.

The emphasis on joint procurement and collaborative R&D provides a framework through which Canada could contribute to allied rearmament while securing industrial returns at home.

As Prime Minister Carney said referring to Trump’s tariff war during his defence spending announcement, “The United States is beginning to monetize its hegemony”, while emphasizing that Canada needs to reduce its imports of U.S. military equipment.

Self-reliance, following the example of France, has obvious attractions: critical technologies stay at home, domestic jobs are protected, and supply chains remain free of foreign vetoes. Yet the price is steep. To sustain a complete defence industrial base, France pursues an aggressive exports strategy, and if orders don’t flow, keeps production lines running at volumes far below commercial break-even, absorbing a “sovereignty surcharge.”

The result is a “bonsai army“, which fields every major capability, but in numbers too small for prolonged combat: a recent report from Institut français des relations internationales estimates that, in a high-intensity conflict like Ukraine, the French Air Force could exhaust its air-to-air missile stocks in just three days.

A more durable answer lies in structured co-development and co-procurement with partners. This strategy allows the countries involved to achieve economies of scale unattainable individually, sharing both costs and economic benefits, while preserving strategic autonomy and deepening their relationship.

European success stories highlight this potential. The Eurofighter consortium, built around Airbus, BAE Systems, and Leonardo (for Germany, the UK and Italy respectively), demonstrates how multinational partnerships can deliver complex defence systems while distributing industrial and technological benefits across participant nations. Closer to home, the Bombardier-Saab collaboration on the GlobalEye airborne early warning aircraft reveals Canada’s potential as an attractive partner with a range of high-tech areas of excellence.

However, this collaboration emerged from private sector initiative, rather than a Canadian strategy. This suggests untapped potential and highlights the opportunities Canada may miss by not taking a more strategic approach to co-development.

Mark Carney’s pledge to join the EU’s ReArm Europe initiative offers a timely opportunity to reposition Canada within a reconfigured transatlantic defence ecosystem.

ReArm Europe is a significant shift in the EU’s role in security; until very recently many of its member states preferred to center all defence efforts around NATO and their relationship to the US But as America’s reliability is increasingly questioned on both sides of the Atlantic, the EU is taking on a greater security role to develop European defence industrial bases while reducing reliance on the U.S.

The emphasis on joint procurement and collaborative R&D provides a framework through which Canada could contribute to allied rearmament while securing industrial returns at home. But to seize this opportunity, Ottawa must stop treating defence industrial collaboration as a matter of opportunistic contracting and start treating it as a core component of national defence policy.

Canada’s deepening ties with South Korea point to another promising partner. Seoul has rapidly become a key defence supplier to Europe, most notably through its sales to Poland, which include substantial technology transfer and local production of K2 tanks and K9 howitzers.

With recent Canada-Korea R&D agreements and procurement frameworks already in place, alongside Korean interest in supplying submarines to replace Canada’s aging fleet, the two countries have the basis for more integrated and long-term cooperation.

This could support the emergence of a defence industrial relationship that stretches across both Europe and the Indo-Pacific, positioning Canada as a critical bridge in an increasingly global allied defence network. Realizing this potential will require a coherent national strategy that treats co-development not as a side-effect of foreign procurement, but as a central pillar of defence industrial policy.

Michael Black is a graduate student at the Max Bell School of Public Policy at McGill University, focusing on defence industrial policy.