Canada’s leading business lobby group is recommending deep government spending cuts to help pay for a massive boost in Canada’s military budget.
In a report published last week and titled “Security & Prosperity: The Economic Case for a Defence Industrial Base Strategy,” the Business Council of Canada (BCC) called on the federal government to invest “in a strong and sovereign defence industrial base,” and to increase military spending toward three per cent of Canada’s GDP after 2034/2035.
The three per cent GDP target exceeds the two per cent minimum required by members of NATO, the 32-member military alliance that Canada has been a member of since 1949. The two per cent target was first set in 2006, and today Canada is among eight NATO members that spend below that threshold.
The BCC wants Canada to hit the two per cent target by 2030, two years ahead of the Trudeau government’s currently promised schedule. “By doing so strategically, it can also supercharge Canada’s broader economic security and prosperity,” the report argues.
The report also warns that “Canada’s military rivals are investing heavily in their armed forces,” and refers to a “new, more tumultuous geopolitical reality,” fuelled by conflicts such as the war in Ukraine.
As previously noted by The Maple, BCC’s members include executives from defence aircraft manufacturer Bombardier, CAE Canada, which develops training services for the Canadian Forces, and BlackRock, a multinational investment company with hundreds of millions of dollars invested in arms companies that have Canadian operations, such as L3 Harris and RTX (formerly Raytheon).
The Trudeau government has drastically increased military spending since it took office, but its pledge to hit the NATO two per cent target by 2032 has been called into question due to the government’s allegedly inaccurate economic forecasts.
The 2024 federal budget stated that Canada’s total defence budget had increased from $18.5 billion in 2015 to a forecasted $33.8 billion per year in 2024-25. The Trudeau government plans to hit $49.5 billion of defence spending by 2030.
In July, the Parliamentary Budget Officer (PBO) estimated that by 2030, Canadian military expenditures falling under NATO’s definition would be even higher, at $52.2 billion.
In October, the PBO said that Canada would need to spend $81.9 billion annually to achieve the Trudeau government’s two per cent GDP spending goal by 2032 — nearly double what the Department of National Defence (DND) currently spends.
Achieving the BCC’s recommendation of hitting the two per cent target two years earlier would require $75 billion of annual military spending by 2030. The BCC report said that amount is “$15 billion more that year than currently planned.”
However, the July PBO report indicates the difference would actually be at least $17 billion.
Buried further down in the BCC report, the group recommends some ways to help pay for that massive spending increase. In one suggestion, the BCC states:
“The Government of Canada can immediately commit to a comprehensive review of its current programming, like the one initiated by the Chrétien government in 1995 or the one launched by the Harper government in 2011. This program review would ensure that the lion’s share of new investments in Canada’s defence industrial base are offset by a decrease in government spending elsewhere.”
It continues:
“For context, the 1995 program review generated $29 billion in savings over a three-year period. If that program review were to occur today, at a time when federal spending is 70% greater than 1995 levels, it could generate nearly $90 billion in savings over three years.”
The 1995 federal budget was infamous for its deep spending cuts. The budget document’s introductory remarks stated: “The budget will fundamentally reform what the government does and how it does it. It will bring a permanent change in the way government operates.”
The austerity measures included major spending cuts to social programs. In particular, the budget created a new provincial transfer system that pledged to cut transfers for provincial social programs by $2.5 billion over two years, forcing the provinces to make up shortfalls with their own cuts.
Ironically, the 1995 budget also included sharp cuts in military spending, with a pledge to slash the defence ministry’s budget by “$1.6 billion between 1994-95 and 1997-98.” Veterans Affairs was also cut by $232 million over three years.
Those cuts were accompanied by promises to terminate 45,000 public service jobs, widespread privatization of government operations and cuts to business subsidies.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, noted that the additional $15 billion that the BCC claimed is needed to meet NATO’s target by 2030 would be a major expenditure.
In an interview with The Maple, Macdonald pointed out that figure is double the amount currently earmarked for the national childcare plan for that year, half of all employment insurance payments and half of all Canada Child Benefit payments.
Macdonald said it would not be feasible to find $15 billion in savings simply by cutting government personnel.
“It’s not a feasible plan; It’s not a reasonable plan. The impacts on services would be severe,” he explained, stressing that if the savings were found exclusively through personnel cuts, “it wouldn’t just be some Coast Guard offices which closed under the Harper cuts; it would be a severe change.”
Expenditures of government personnel are likely to reach between $60-65 billion by the end of the decade, Macdonald said. Cutting $15 billion out of that “would have tremendous and dire consequences for service levels.”
The BCC also recommends more strategic investments “with the aim of generating outsized returns” in tax revenues, and retargeting some of the federal government’s current investments — such as its holdings in research and development, and infrastructure — to help cover military spending hikes.
Rachel Small, an organizer with World Beyond War, told The Maple that the proposed military spending figures are almost unfathomably large.
“We’re actually talking about doubling Canada’s already inflated, bloated military budget,” she explained.
The BCC report noted that aiming for three per cent GDP of military expenditure would align Canada “with key allies – like the U.S. – who have committed to a similar benchmark.” But emulating the Americans, Small said, would drastically alter both Canada’s domestic policy and its role in the world, given that the U.S. is one of the world’s largest military superpowers.
She noted that the Trudeau government’s planned spending for DND is already nearly 15 times more than its planned spending for Environment and Climate Change Canada’s “core responsibilities” and “internal services.”
“If we’re looking at real and concrete threats to the safety and security of people in this country, beyond even talking about the price of groceries or the lack of housing, I think we have to be looking at the climate crisis,” said Small.
She added that defence industry lobbyists are “constantly” pressuring government officials to shape Canadian policy in ways that necessitate the procurement of costly military equipment, such as the F-35 fighter jet.
“It comes back to a very strong interest by these multinational weapons companies, and largely American weapons companies, to drive spending,” Small explained.
“It requires just an obscene amount of propaganda and really fear mongering to even begin to try to convince people that to keep them safe we need to starve society of resources for far more pressing social needs, and instead spend them on the military.”
Emma Paling
Besides calling for major increases in military spending and investing in Canada’s “defence industrial base,” the BCC report calls for the Canadian government to “meaningfully enhance the defence industrial base’s ‘voice’ in government policymaking.”
“Industry can be given an enhanced ‘voice’ by the Government of Canada expanding, or creating new, fora for proactive and ongoing public-private dialogue,” the report continues.
The BCC did not respond to an emailed request from The Maple, which included a question about whether the above recommendation amounted to a call for defence and related industry lobbyists to have more contact with federal policymakers.
Critical Minerals
The report also calls for the government to give a “special focus” on critical minerals, “recognizing they are a vital resource, contributing to both the economic and national security of Canada, the U.S., and other important allies.”
“Canada is in the fortunate position of possessing significant amounts of many of the world’s most critical minerals,” the report notes. “The Government of Canada will [...] need to reform project approval and permitting processes, including to allow for streamlined approvals where a project is deemed essential to Canada and its allies’ national security interests.”
Last year, a report published by the U.S.-based Center for Strategic and International Studies stated that “mining and the processing of minerals are [...] crucial in maintaining the [U.S.] military’s technological edge.”
BCC members include executives of major Canadian mining companies, such as Cameco, Stantec, Rio Tinto and Teck, all of which have interests in critical mineral extraction and processing.
At least one of those companies has struck a major deal amid the new “tumultuous geopolitical reality” referenced in the BCC report.
Cameco signed a 12-year deal last year to supply the Ukrainian government with uranium to power all of its nuclear reactors, which ran on Russian fuel prior to Russia’s 2022 invasion.
Currently, Ukraine controls nine of its nuclear reactors. If Ukraine were to break the current military stalemate with Russia and recapture the six reactors in territory that is held by the Russian military, Cameco would be given the opportunity to supply those reactors too.
In a Cameco press release announcing the deal in February 2023, the Saskatchewan-based company acknowledged several “material risks” that could affect the contract, including the fact that “the continuation or outcome of the conflict between the Ukraine and Russia may prevent Cameco from satisfying the terms of this supply contract, or realizing the expected benefits to Cameco, or have other adverse consequences to Cameco.”
According to a report by Reuters last year, the war in Ukraine helped ease a “more than decade-long slump” in the uranium sector.
The Maple contacted Cameco for comment via its online contact form, but did not receive any response.
Ukraine ‘An Unprecedented Opportunity’
The federal government has viewed the war in Ukraine as an important opportunity for Canadian businesses.
In briefing documents obtained by The Maple through an access to information request, former international development minister Harjit Sajjan was instructed to offer Cameco’s CEO Tim Gitzel congratulations for securing the uranium deal during a “Ukraine Recovery Conference” held last year.
Other briefing notes for the event included a “top-line message” stating that the destruction of Ukraine and its rebuilding efforts represented an “unprecedented commercial opportunity for Canadian business in the infrastructure, energy and resource sectors, among others.”
However, the briefing documents acknowledged that “corruption” and “excessive bureaucracy and regulations” created the perception of a “poor business climate” in Ukraine.
The briefing notes also name-checked BlackRock, which the documents noted acted “as an advisor to Ukraine’s Ministry of Economy, [and] are also putting forward ideas aimed at mobilizing capital into Ukraine’s reconstruction.”
More recently, the Trudeau government has shown little interest in pushing for peace talks with Russia in its deadlocked war with Ukraine, with the Canadian prime minister declaring that he opposes Ukraine conceding “an inch” of territory to Russia in order to end the war.
Since Russia began its invasion of Ukraine in February 2022, Canada has committed more than $19.5 billion in aid to Ukraine, including $4.5 billion in military assistance.
The BCC report, meanwhile, lamented:
“Despite NATO countries pouring billions of dollars over the last three years into increased production capacity, decades of policymakers failing to take serious warnings about the sorry condition of the alliance’s munitions industry has meant that NATO countries are still unable to adequately supply Ukraine with the thousands of shells they need daily to shift the war in their favour.”
Despite determined calls from Canada and its leaders for the war in Ukraine to continue, an increasing number of Ukrainians appear to see things differently.
A recent poll published by Gallup found that 52 per cent of Ukrainians “would like to see their country negotiate an end to the war as soon as possible.” Support for continuing the war has dropped to as low as 27 per cent in regions where the fighting is most intense.
A majority, 52 per cent, of Ukrainians who favour a rapidly negotiated end to the conflict also agree that Ukraine “should be open to making some territorial concessions as a part of a peace deal to end the war.”
Alex Cosh is the news editor of The Maple.
ATIP documents:
Member discussion