Estonia's Economy Minister Erkki Keldo arrives for an EU Foreign Affairs Council of trade ministers in Brussels on May 15.SIMON WOHLFAHRT/AFP/Getty Images
Estonia’s Minister of Economy and Industry made his first visit to Canada last week as the small Baltic country that’s years ahead of Canada in terms of defence spending and procurement goals looks to strengthen ties with its North American ally.
Minister Erkki Keldo’s three-day trip to Canada included visits to Montreal and Toronto, where he spoke at the Conference of Montreal, and visited Mila, Quebec’s artificial intelligence institute, the Estonian Canadian Business Chamber and the Toronto Region Board of Trade. He also met with Canadian technology companies Neo Performance Materials Inc. and Vosker Inc., which both have business ties to Estonia.
Just before his flight home on Thursday, Mr. Keldo also met with his Canadian counterpart, Industry Minister Mélanie Joly, to discuss collaboration between the two countries.
This year, Estonia will spend 5.4 per cent of its gross domestic product on core military spending alone. That’s roughly two percentage points more and nine years earlier than what Canada is aiming to achieve with its own military expenditures.
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It’s difficult to draw a direct comparison between the two countries, which differ greatly both economically and geographically. But at a policy level, Estonia’s procurement and industrial benefits strategies are working examples of concepts Canada has mostly only talked about, and could serve as a model for Ottawa as it embarks on its own defence buildup.
Estonia’s defence industry has grown 20 times in size over the past five years and its national industry association is constantly accruing new members, Mr. Keldo said. This is, in part, because the Estonian government sees industry as a critical part of its response to the Russian threat at its border.
“If we invest so heavily into our defence, it means that part of our national defence has to be our defence industry. If things are manufactured locally, is it ammunition, new technology, autonomous vehicles, drones, you name it. It’s part of our national defence,” Mr. Keldo said.
Estonian reservists conduct a defense readiness exercise with CAESAR 155mm self- propelled howitzers in Voru, Estonia in October, 2025.Carl Court/Getty Images
The industry in Estonia can be characterized by its technological proficiency, and research and development prowess. Local companies specialize in areas such as autonomous vehicles and cybersecurity, often benefitting from R&D investments made through the country’s industrial benefits policy.
That policy, which aims to ensure defence spending results in tangible benefits to the economy, has been changing a lot over the past year or so as the country invests more into security, Mr. Keldo said. “If you put so much money into defence, the public wants to see how it comes back, because it’s taxpayers’ money.”
Estonia may not manufacture many large defence systems, such as tanks or submarines, but Mr. Keldo said many foreign companies that the country buys from will establish R&D facilities there to take advantage of the work force and expertise, before exporting their resulting products globally.
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To ensure the country’s armed forces are equipped with the latest technologies and taking full advantage of the talent at home, Mr. Keldo said Estonia also employs a procurement by innovation policy.
In 2025, the country committed to having innovation procurements account for at least 2 per cent of the volume of all public procurements and 5 per cent of all procurement costs. By 2035, the country aims to have those numbers increase to 5 and 10 per cent, respectively.
Innovation procurement is a way for the government to buy goods by defining a problem, rather than asking for a specific product or service. In defence, this allows companies to offer unique solutions that the government or the country’s armed forces may not even know exists when writing the procurement, owing to how rapidly technology is changing.
A member of the Estonian armed forces in an infantry fighting vehicle during the NATO Spring Storm exercises in Tapa, Estonia in May, 2023.JAAP ARRIENS/AFP/Getty Images
Estonia, alongside Finland, Ireland, Britain and Denmark, is among the countries leading on investments into innovation procurement, according to a ranking by the European Commission in 2024.
Spending more on defence isn’t always an easy or popular choice for a government to make, Mr. Keldo said. “If you put so much money into one sector, it means that unfortunately you have to cut back everywhere else.”
But when it’s done in tandem with allies and fellow NATO members, he said it shows strength in numbers, and that’s why he’s grateful to see the changes being made by Canada in terms of defence.
“This is what we have to show when the world is crazy. You have to rely on your good friends, neighbors, and allies.”