Building Canada's Dual-Use Commons
Canadian Shield Institute Chief Economist Kaylie Tiessen recently did some pretty simple math:
- Start with Canada’s current level of defence spending, which just recently passed 2 per cent of GDP.
- Take the government’s own forecast for future years, from the 2025 federal budget.
- Assume that Prime Minister Mark Carney is serious about Canada’s goal of hitting a defence spending target of 5 per cent of GDP by 2035.
The chart looks like this:
If we actually do it, Canada will be spending a staggering $230 billion annually on defence spending, up from around $80 billion today.
Simply pouring a huge amount of money into defence procurement will not in itself drive the economy, if we don’t fix three essential deficits:
First, there’s Canada’s manufacturing capacity.
Second, there’s Canada’s retention and strategic use of intangible assets produced through defence R&D.
And finally, there’s the governance of emerging dual-use technologies.
Given the amount of taxpayer money involved, and what it means for Canada’s geopolitical stance in the wider world, we really need to get the policy right.
Earlier this year, I co-wrote a paper with Laurent Carbonneau, Vice-President of Policy & Advocacy at the Council of Canadian Innovators. Our two organizations are closely aligned, and we both work on issues at the intersection of defence policy and economic strategy.
It turns out that there’s been a fair bit of scholarship on the idea of knitting together manufacturing and R&D, and the idea has a name: “The Industrial Commons.”
The idea here is that it’s no good if you go all-in on R&D work, without also having local manufacturing capacity to go along with it. The government is already looking to foster innovation hubs tied up with the Defence Industrial Strategy, and there are real benefits in taking steps to ensure that high quality manufacturing is co-located in the same place as the R&D.
Essentially, if you’ve got people designing drones or quantum computing or aerospace technologies, it’s very useful to have the factory right down the road to build things. For one thing, the factories will likely have some excess capacity, which can be used by other innovators in the region, or potentially it can create positive spillovers for other non-defence use cases.
The “Industrial Commons” here is the idea of bringing together researchers (which is already a strength for Canada) alongside manufacturing (less of a strength for Canada, but we have some under-used capacity that we can retool). The whole is greater than the sum of its parts, and the shared industrial capacity for both research and production becomes a public resource — i.e. a “commons.”
You can read a lot more about all of these ideas in the longer paper that we wrote, which is posted online here.
But in a nutshell, we propose three institutional design recommendations to make this idea of a defence dual-use industrial commons happen in Canada:
- Building manufacturing capacity around the new Defence Innovation Secure Hubs, designed for dual-use civilian and defence production;
- A dual-use Innovation Asset Bank to acquire patents, attach IP and data retention requirements to public funding, and stop Canadian-funded research from flowing abroad;
- A Strategic Standards Office to proactively shape defence procurement and interoperability standards, giving Canada more control and modularity over its defence and potentially dual-use systems.
The political will and capital are aligned now to take action on this. Without building a full ecosystem that can produce ideas, make things, govern strategically, and retain value, we risk spending money on immediate needs without building for the future.
This project was developed in collaboration with the Centre for Industrial Policy. Read the whole report here.
Ever since Prime Minister Mark Carney visited the European Parliament in September, we’ve been thinking about what a deeper alliance across the Atlantic Ocean could mean. As we hit send on this email, Carney is meeting with António Costa, President of the European Council, and Ursula von der Leyen, President of the European Commission, in Montreal. At the end of it all, we’re expecting an announcement of … something. There have been a lot of anonymous tips in news reporting, but at the Canadian Shield Institute, we prefer to read the formal communiqué rather than trying to interpret whispers. In the run-up to the summit, we’ve been doing a bit of research, and we published a few articles to set the stage. EU Media Marketplace The Europeans are trying to break the AdTech duopoly. Canadian companies have tried to work together to create an alternative to Google and Meta’s dominance. So far, Canada’s efforts have fallen flat. Will this new EU enterprise fare any better? Read our analysis here. We find this whole situation very interesting for two reasons: First, Canada and Europe have a lot of the same problems right now. We’re all trying to figure out how to reduce vulnerability from the United States, and that vulnerability extends to digital reliance on private-sector technology platforms. It seems like we could benefit by joining forces, but it’s going to take some work figuring out exactly what that looks like in practice. Second, AdTech is just really interesting! Programmatic targeted advertising is the economic engine of the internet, and in turn this kind of advertising is hugely influential on culture and society. AdTech dictates what kinds of businesses thrive and what kinds of content gets posted online. Once you start researching it, AdTech quickly starts to look like one of the most important dimensions of digital sovereignty. If the online economy is entirely dominated by systems controlled by a handful of big American technology companies, realistically both Canada and the EU will always be on the back foot on digital governance. Digital Services Trade Speaking of being on the back foot, did you know that U.S. digital services exports to Canada are worth more than all the autos, steel, aluminum, lumber, potash and electricity put together? Why aren’t we talking about digital trade policy more in the negotiations with the United States? Read our analysis here. And the European Union is in a similar position. The EU has done a lot more to assert digital governance, but their trade deficit on digital services just keeps going up. This is a kind of reliance that creates a meaningful vulnerability if the United States keeps playing hardball. Read our analysis about EU digital trade here. Digital services might be a promising area for Canada and the European Union to work together. When the final communiqué is delivered from the Canada-EU summit, we will be combing through it for specific mentions of digital trade collaboration. Digital Sovereignty Policy Despite the EU’s digital dependence, we see a lot to admire in how the Europeans have been trying to assert their digital sovereignty. To be blunt: They’re trying things! Canada has often been slow to pass meaningful digital regulation, and quick to walk back policies that offend the Americans. The EU has enacted some really interesting regulations. Could Canada use “digital trade alignment” as cover to follow the EU’s lead? Read our analysis here. The Bottom Line Overall, when it comes to digital governance, we have a lot of hard work ahead of us. Digital policy is complicated and opaque, and it’s not enough to just pass a good law. Ongoing enforcement is a real challenge too. But this is one of the most pressing policy issues of our time, and with the accelerating deployment of AI systems, this issue is only going to become more urgent. It’s not as easy as striking a deal to sell soybeans, but digital governance is an area where Canada and the EU are natural partners, and it’s something we should be working on.
Subscribe to