The federal government risks jeopardizing the economy unless it meets its NATO military alliance spending obligations within the next five years, says the Business Council of Canada.
Prime Minister Justin Trudeau has committed to reaching the two per cent target by 2032. But the business council, which represents the CEOs of Canada’s largest companies, wants to reach it by 2030.
In its new report, the council links prosperity to national security, and says Canada should focus on arctic security. It also attempts to make the case for massive investment to turn military production and research into the backbone of the Canadian economy.
The report calls on the federal government to increase military spending to $75 billion annually by 2029, a figure that is more than $17 billion dollars over what the Department of National Defence has outlined.
The council also wants the government to surpass the target to hit 2.5 per cent GDP spending by 2035 and aim for three per cent of GDP spending beyond that .
The report emphasizes the need for the federal government to boost investment in the private “defence industrial base” while cutting “bloat” in the public sector.
“If we don’t put our national security at the top, not near - but the top of the list, we are playing Russian Roulette with our economy. Economic security comes from national security. Our government has to make those choices” said the Business Council's president Goldy Hyder.
Cutting the 'bloat'
While speaking to an audience of defense industry contractors in Ottawa, Procurement Minister Jean-Yves Duclos said that “looking forward, we have to have better sovereign industrial capabilities to support the needs of the armed forces. It cannot always be that Canada depends on other countries to do that.”
For example, as DND prepares to spend billions in acquiring a dozen submarines to replace its aging fleet, it has to rely on a foreign provider because there is no capacity to build the subs in Canada.
Building the infrastructure would take 40-50 years, Duclos said, which is too long of a wait for equipment that’s needed now.
The council wants to dedicate a third of Canada’s defence budget to purchasing major equipment, and to redirect investments into research and development of military technology.
The strategy also includes streamlining the procurement process to buy and build defence equipment faster.
Hyder says a spending review of all federal departments should be triggered to find resources to pay for the strategy, and to avoid borrowing money or raising taxes.
During the Second World War, Canada built “one of the mightiest defence industrial bases in the world” and can do it again, the report states. It also sees revitalized defence investment as an engine to create private sector jobs.
In a Monday interview with CTV National News, Hyder said a “comprehensive program review” that cuts departments that aren’t critical to Canada’s wellbeing will be necessary.
Hyder acknowledged that the council's recommendations could result in thousands of federal public servants being laid off. But, he says, it will save essential programs.
“Nothing can be more important than defence. … Our message and our paper is very simple: without security, there’s no prosperity,” he said.
“Without prosperity, there's less economic opportunity. And without opportunity, those cherished social programs that are needed for people who aren’t able to get by on their own – that’s what you’re putting at risk.”
Urgency looms with incoming Trump administration
Currently, Canada spends $41 billion annually on defence. That amounts to 1.37 per cent of GDP.
In its policy document - Our North: Strong and Free, the Department of National Defence (DND) outlined a plan to get to 1.76 per cent GDP spending by 2030, by spending $57.8 billion annually.
DND officials have not presented a strategy to get to two per cent.
The Business Council of Canada is the latest group to demand Canada reach its NATO targets faster. The premiers of every province and territory made a plea in July for the government to hit the target in the first term of the next U.S. president.
Less than two months before Donald Trump’s presidential inauguration, the calls are gaining urgency.
Trump has previously threatened to withdraw military support to NATO allies who do
not meet the two per cent target. Dozens of U.S. congressional leaders have also criticized Canada for being a defence laggard.
Most recently, Republican Mike Turner, the chair of the United States House intelligence committee, wrote in an opinion piece for Newsweek that "Trudeau—Not Trump—Is the Greatest Threat to NATO.”
In an interview on CTV’s Question Period, Turner said Canada’s military was in “desperate” need of investment and that the country’s NATO commitments are “past due.”
In an increasingly volatile world, security and trade are intrinsically linked. The president-elect has threatened to impose minimum 10-20 per cent tariffs on all imports, and the trade deal between Canada, the U.S. and Mexico is up for review in 2026.
Hyder says he has spoken directly to bipartisan American leaders, and Canada’s dismal record on national security and defence spending will make negotiating for a better deal much harder.
“I have been in the room with people who have said to me (Canada) is lucky to be in the G7 and you may not make it in the Five Eyes, the way you’re going.”
Canada’s reluctance to meet it’s the collective deterrence obligations of the alliance is expected to come up at the NATO convention in Montreal. Trudeau addressed reporters there on Monday morning.
“We ended up stepping up big time when we took office in 2015. [We] doubled our spending on defence, on our way to tripling the spending in defence by 2030,” said Trudeau. “We are on a clear path to reach two per cent in the coming years, because we know that the world is changing, and Canada, along with our allies, needs to be ready for it.”
The convention has attracted demonstrators who are against increasing support to NATO and pro-Palestinian supporters protesting against Israel’s war in Gaza.
On Friday the demonstrations turned violent as two cars were set on fire and windows of the convention centre were smashed.
