Defence Spending: Knowing What You're Doing Is Half The Battle
Prime Minister Mark Carney called it a geopolitical “rupture” in his speech at the World Economic Forum, and our friends at the Gloves Off podcast have been mulling over what Canada’s strategy should be in the volatile world we are now all navigating together.
Faced with a mercurial and declining superpower in the United States, Canada has moved to ramp up our defence capabilities.
As we’ve discussed in recent weeks, Prime Minister Mark Carney’s strategic approach is “variable geometry” — making alliances and deals case by case to serve Canadian interests rather than along historical or values-based lines.
In the context of defence, this has meant recommitting to NATO and partnerships like Five Eyes, major procurement deals (ground vehicles, submarines, icebreakers, F-35s), and deeper ties with allies like Türkiye and Germany.
Variable geometry responds to the world we have, not the one we want. But this responsive strategy often relies on vibes — what looks right or serves immediate needs — without clarity on the long-term effects.
The vibes-based foreign policy has the benefit of flexibility when it comes to things like trade, but in defence, vibes won’t cut it. We are investing hundreds of billions of dollars in submarines, jets, and scientific research that will drive future defence and dual use capabilities.
This week Matthew da Mota, Canadian Shield Institute Research Director for National Security and Emerging Technology, wrote a deep dive into Canada’s history with dual use technology. There are some lessons we can learn from that history to ensure that today’s unprecedented investments deliver real bang for our buck. But we also need to be planning these investments based on what our partners offer, and what our adversaries are capable of.
One thing that makes this tricky is that there are emerging fields like quantum computing and artificial intelligence where the state-of-the-art is moving very fast, and we can’t assess capabilities just by looking at physical infrastructure.
The most decisive weapons in cyber and information operations could be a few 20-year-olds on a shoestring budget going against the most advanced government agencies. A weapon’s impact isn’t always proportional to its cost or size.
But even setting aside those bleeding-edge domains, the problem of defence investment strategy lands hardest in traditional domains — land, sea and air. In Ukraine, drones have transformed warfare: a few hundred dollars worth could hold up an entire column of soldiers for days. But the real shift isn’t “drones,” it’s the innovation and fabrication cycle. It used to take years to develop and deploy new kit, but in Ukraine, new drone innovations make it to the front line in a matter of days. Adaptation and innovation are the decisive advantages.
So how do you decide which investments build that capacity, and where you’ll need to deploy it?
Much of the current defence budget, rightly, will go to long-needed capabilities: rifles, fighter jets, submarines, icebreakers, medical countermeasures. But the real strategic edge is shifting toward speed of iteration and innovation.
Which points to the capability we are underinvesting in.
Our Defence Industrial Strategy suggests a “Build, Partner, or Buy” framework, but before we can figure out what to build and what to buy, we have to assess what’s needed — measuring our own capabilities, those of our partners, and estimating our adversaries’ where it’s hardest to quantify.
Experts in DND and the CAF know this, but we still lack the capacity and knowledge to leverage emerging technology to win future conflicts.
This is where we need to look next. We can’t partner or buy these answers; we have to build the capacity ourselves — enhancing foreign intelligence, developing assessment methods with experts, and creating an environment where strategic, military, and innovative thinking happen in the same place.
The decisive factor in whether Canada’s defence ambitions succeed will be our capacity to collect, assess, and act on knowledge over time. This is the true battlespace that will define all others.
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.
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