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Canada Under Pressure to Meet NATO Defence Spending Target Ahead of Washington Summit
Canada is facing intensifying pressure from its NATO allies, particularly the United States, to present a clear plan for reaching the alliance's defence spending target of 2% of GDP. With the 75th-anniversary summit in Washington approaching, Ottawa's current trajectory, which projects spending to reach 1.76% by 2030, is viewed as insufficient by many partners. The federal government is balancing international commitments against domestic priorities amid a challenging geopolitical landscape, including the ongoing war in Ukraine. The upcoming summit will be a critical test of Canada's standing within the alliance.
Source: NATO Public Diplomacy Division
Mounting Pressure on Ottawa
As leaders of the North Atlantic Treaty Organization (NATO) prepare to gather in Washington, D.C. for the alliance's 75th-anniversary summit, the Canadian government finds itself in a familiar but increasingly uncomfortable spotlight. For years, Canada has faced criticism for failing to meet the alliance's defence spending guideline of 2% of gross domestic product (GDP). Now, with war raging in Europe and global tensions rising, the calls from allies for Ottawa to increase its investment have reached a crescendo.
The pressure is coming from all sides. The United States, Canada's most important ally, has been particularly vocal. U.S. Ambassador to Canada, David Cohen, has publicly stated that Canada is the only NATO member without a plan to reach the 2% target, a sentiment echoed by a bipartisan chorus in the U.S. Congress. Other allies, especially those on NATO's eastern flank like Poland and the Baltic states, which are meeting or significantly exceeding the 2% mark, view Canada's contributions as disproportionately small for a G7 nation.
The 2% Guideline: A Decade-Old Commitment
The 2% target is not a new demand. It was first pledged by NATO members at the 2014 Wales Summit, in the wake of Russia's illegal annexation of Crimea. The goal was to reverse years of declining defence budgets across the alliance. At the 2023 summit in Vilnius, Lithuania, leaders agreed to make 2% of GDP an enduring commitment and a minimum floor for investment, not a ceiling to aspire to.
Despite these agreements, Canada's spending has consistently lagged. According to NATO's own estimates, Canada's defence spending in 2023 was approximately 1.38% of its GDP, placing it near the bottom of the 32-member alliance. While this represents an increase in absolute dollars, it falls well short of the agreed-upon target and puts Canada in a shrinking minority of nations not meeting the commitment.
Ottawa's Defence: "Our North, Strong and Free"
The federal government is not deaf to the criticism. In April 2024, it released a long-awaited Defence Policy Update titled "Our North, Strong and Free." The policy outlines an additional $8.1 billion in spending over the next five years and $73 billion over the next 20. It prioritizes key areas such as Arctic sovereignty, continental defence through NORAD modernization, and acquiring new capabilities, including tactical helicopters and long-range missile systems.
Under this new plan, the government projects that Canada's defence spending will rise to 1.76% of GDP by the 2029-30 fiscal year. While a significant increase, this timeline and ultimate target have failed to satisfy allies who want to see a clear and rapid path to 2%. Officials in Ottawa argue that Canada's contributions should not be measured by spending alone. They point to Canada's qualitative contributions, such as leading the NATO battle group in Latvia, training thousands of Ukrainian soldiers, and its significant role in maritime patrols and NORAD operations. Canada's role in supporting Ukraine, as highlighted by its participation in events like the Global Summit on Ukraine Peace, is often cited by officials, but allies insist this must be matched by budget commitments.
The Domestic Political and Economic Equation
The decision to increase defence spending is not made in a vacuum. The Trudeau government faces a complex domestic landscape with numerous competing priorities. Significant fiscal pressures, including a large national debt, and urgent calls for more funding in areas like healthcare, housing affordability, and green infrastructure, make a sudden multi-billion-dollar injection into the military a politically challenging proposition.
The Conservative opposition, led by Pierre Poilievre, has criticized the government for its slow pace and has pledged to meet the 2% target. The New Democratic Party (NDP), which supports the current Liberal government through a supply-and-confidence agreement, has historically been more skeptical of large increases in military spending, preferring to prioritize social programs. This political dynamic complicates the government's ability to make a firm, long-term commitment that satisfies NATO partners.
Implications for Canadian Industry and Global Standing
Beyond the geopolitical implications, the level of defence spending has a direct impact on the Canadian economy. An accelerated path to 2% would mean billions more for the country's aerospace and defence sector. Major procurement projects, such as the acquisition of 88 F-35 fighter jets and the construction of the new Canadian Surface Combatant fleet, are already multi-decade, multi-billion-dollar undertakings. Reaching the NATO target would require accelerating these projects and launching new ones, providing a significant boost to companies like CAE Inc., Bombardier, General Dynamics Land Systems-Canada, and Irving Shipbuilding.
Ultimately, the issue transcends dollars and cents. It touches upon Canada's reputation on the world stage. The debate is not new, as Canada faces mounting pressure on defence spending annually, but the current global climate has added unprecedented urgency. Being perceived as a 'free-rider' on the security provided by others, particularly the United States, can erode a country's influence and credibility. As the Washington summit approaches, Prime Minister Justin Trudeau will need to present a narrative and a plan that can reassure allies that Canada is prepared to shoulder its share of the burden in an increasingly dangerous world.
Insights
- Why it matters: Canada's credibility as a reliable partner in the Western alliance is at stake. Failure to present a credible path to 2% of GDP in defence spending could strain relations with the U.S. and other key allies, potentially impacting cooperation on other critical files.
- Impact on Canada: A significant increase in defence spending would require a major reallocation of federal funds, impacting domestic programs and the national debt. Concurrently, it would provide a substantial stimulus to Canada's domestic aerospace and defence industries, potentially creating thousands of jobs.
- What to watch: All eyes will be on Prime Minister Trudeau's announcements at the Washington NATO summit. Subsequent federal budgets will reveal the concrete financial commitments and timelines. Also, watch for reactions from U.S. officials and other NATO leaders post-summit, which will indicate whether Canada's plan is deemed sufficient.