Prime Minister Justin Trudeau speaks during a news conference at the NATO Summit in Washington on July 11.Adrian Wyld/The Canadian Press
Eugene Lang is an assistant professor in the school of policy studies at Queen’s University, a senior fellow at the Bill Graham Centre for Contemporary International History at the University of Toronto and a fellow at the Canadian Global Affairs Institute.
It’s well known that Canada has not come close to meeting the minimum level of military spending required by NATO: 2 per cent of our economic output, or gross domestic product.
But comments by NATO leadership have made clear that the 2-per-cent target is yesterday’s news.
“We have changed that language to say that 2 per cent is a minimum. So 2 per cent is no longer some kind of ceiling but 2 per cent is now the floor for our defence spending.” So said Jens Stoltenberg, then secretary-general of the North Atlantic Treaty Organization, last July.
Mr. Stoltenberg was referring to the target that NATO heads of government have signed onto twice in the past decade. Currently, Canada’s defence spending is 1.37 per cent of GDP, ranking us 27th among 31 NATO members.
Not to worry, however. Ottawa’s defence-policy update, “Our North, Strong and Free,” released in April, boasts that Canada will hit 1.76 per cent in five years. Prime Minister Justin Trudeau has since gone further, asserting that Canada will hit 2 per cent by 2032.
Unfortunately, in October, the Parliamentary Budget Officer demolished these forecasts.
The PBO helpfully pointed out that the economic-growth assumptions the Department of National Defence used to make its defence-spending estimates meant the Canadian economy would be mired in recession for the next four years (a level of economic stagnation last experienced in the Great Depression).
In other words, Ottawa estimated that the defence-spending ratio would grow by forecasting the Canadian economy would shrink, rather than by investing the required $13-billion to $18-billion a year in the military. Fortunately for Canadians, there isn’t an economic forecaster on the face of the Earth that has projected anything close to such anemic performance for Canada’s economy.
Such is the nature of the deception and shell game being played in Ottawa today, all in a feeble attempt to convince our allies, and especially the Americans, that Canada is inching toward the 2-per-cent requirement. And in any event, as Mr. Stoltenberg implied, that target is already out of date – very 2015 thinking, if you will.
Since the Russian invasion of Ukraine nearly three years ago, the vast majority of NATO members have woken up and moved beyond 2 per cent, leaving sleepy Canada in the dust. Fully 22 NATO members now exceed that target, such that the alliance’s defence-spending average now stands at 2.2 per cent. In fact, all G7 countries apart from Canada and Italy are exceeding the 2-per-cent target today. And Britain, which is running a budget deficit three times larger than Ottawa’s in proportional terms, is moving to 2.5 per cent.
The state of affairs was summed up well by one senior European official who told me at the recent Halifax International Security Forum that within NATO, “Canada is seen as the freest of the free riders.”
Enter U.S. president-elect Donald Trump, who has vowed to impose a 25-per-cent import tariff on Canada and Mexico, and whose administration will soon begin to renegotiate the U.S.-Mexico-Canada free-trade agreement (USMCA).
The last time Mr. Trump was in office, he used the NAFTA renegotiations to successfully extract a 73-per-cent increase in defence spending from Ottawa – not nearly enough to get to 2 per cent of GDP, but a big increase by Canadian standards. While Mr. Trump’s methods were typically crude – badgering Mr. Trudeau at a NATO meeting, demanding to know, “What are you at? What is your number?” for example – his aim to get more of America’s allies to shoulder a greater share of the collective defence burden, upon which NATO membership is based, was not without merit.
We should expect the president-elect to ramp up the pressure on defence burden-sharing again.
And if Mr. Trump doesn’t already know it, he will soon realize that Canada is spending less today on national defence as a fraction of its economy than during his last year as president. In that context we are naive if we think that Mr. Trump – who believes his pressure on NATO countries is the reason they have increased defence budgets – will be satisfied with Mr. Trudeau’s offer to finally reach the 2-per-cent threshold in 2032.
All of which means the incoming Trump administration will likely up the ante in its defence-spending ask of Canada – probably to at least 2.5 per cent – in the horse trading that will inevitably occur on both the tariff and USMCA negotiations.
If Mr. Trudeau and his government think meeting NATO’s 2-per-cent requirement is a big fiscal and political challenge now, wait until Trump Round 2 comes to office in the new year.