Mark Carney arrives in The Hague this week for his first NATO summit as prime minister.
Experts say the summit offers Canada a critical opportunity to strengthen its transatlantic security relationships while reducing its dependence on the United States.
“It’s both a hedge and a high leverage play,” said Jazlyn Melnychuk, foreign policy research manager at the Macdonald-Laurier Institute think tank, about Canada pursuing closer defence industrial ties with Europe.
“It diversifies our procurement away from Washington amidst all the tension, it deepens our European ties, and it also gives our defence industry new opportunities to scale globally.”
Kyle Matthews, executive director for the Montreal Institute of Global Security think tank, says Canada has the potential to be a good security partner to Europe.
“The Europeans see Canada as a reliable partner that shares values, a partner that is trustworthy,” he said.
“We may not have the [military] capacity to respond that we used to have … but they see that we have critical minerals, we have energy security, we have the capacity to help build ships.”
Narrow agenda, tense climate
NATO summits are convened on an ad hoc basis, typically in response to evolving security threats. Since 2021, the alliance has met annually, in large part due to concerns over Russian aggression.
Leaders from all 32 member countries will come together for a 90-minute meeting at the NATO summit, Kerry Buck, Canada’s former ambassador to NATO, told Canadian Affairs in an interview.
“My understanding is that [the meeting] will focus almost entirely on defence spending,” Buck said.
The alliance is expected to approve a new target of five per cent of GDP on defence spending — a target Donald Trump first floated in the weeks leading up to his second inauguration.
As recently as late 2024, many member states indicated it would not be feasible to meet that target. Yet, as of June 22, all NATO members except Spain had reportedly agreed to it. Canada is only set to meet the current spending target for the first time this fiscal year, after Carney announced a $9-billion boost in defence spending.
NATO’s new, elevated target could be met by a country spending at least 3.5 per cent on conventional military expenditures, and at least 1.5 per cent on dual-use civilian spending that enables defence capabilities.
Buck says the new dual-use spending category could be significant.
“That could be things as simple as roads so your troops can get somewhere. For instance, if we’re talking about doing more in our Arctic, we need to have more infrastructure to actually allow that kind of permanent presence that will signal our sovereignty to potential adversaries,” she said.
“But it could also include things like cyber resilience and that kind of stuff that’s more technically in the civilian domain, but is very much about security and defence.”
At last week’s G7 Summit in Kananaskis, Alta., NATO Secretary General Mark Rutte said the new five per cent goal is attainable — even for those NATO members that have historically lagged in their spending.
“I’m fairly confident that Canada and the whole of the alliance can do this,” Rutte said in a June 17 interview with the CBC, which followed an in-person discussion with Carney.
“It is important because we have to protect ourselves against our adversaries … We have to make sure we have what we need to defend ourselves. With the two per cent [spending target] we simply cannot, going forward, defend ourselves.”
In Canada, defence experts have said that meeting just the two per cent target will require significant tradeoffs.
“The trade-off would be between deficit financing, higher taxes and other programs,” Philippe Lagassé, a professor of international affairs at Carleton University, told Canadian Affairs in November. “If the government was willing to incur more debt it could reach two per cent without increasing taxes or cutting other programs.”
Ottawa previously anticipated spending about $35.7 billion on defence this fiscal year, according to the government’s main estimates. Spending would need to rise to $62.7 billion to meet the two per cent target.
The government has released a backgrounder outlining how the $9 billion in additional funds will be allocated. It is not clear how the remaining funds will be spent.
Meeting a five per cent defence spending target would mean Canada would have to spend about $150 billion a year, based on current PBO estimates.
ReArm Europe
The Carney government has made meeting the NATO target part of a broader attempt to redefine Canada’s defence industrial policy.
“Over 75 cents on every dollar of capital spending for defence goes to the United States,” Carney said in a May 27 interview with the CBC. “That’s not smart.”
The Hague summit is expected to involve talks on transatlantic defence industry coordination.
In particular, Canada is seeking to join the ReArm Europe initiative, a European-led plan to spend up to €800 billion on military capabilities by 2030. Its aim is to enhance transatlantic security through joint procurement and technology development.
The Carney government announced Canada’s intention to join ReArm Europe during King Charles’ May 14 throne speech. Ottawa has not released plans of what Canada’s involvement would entail.
“ We just have to do a lot of work to make sure that our defence industry is ready to enter the European market, and ready to supply European buyers,” said Buck.
Melnychuk, of the Macdonald-Laurier Institute, says uncertainty over the U.S.’s trade policies has impacted trade dynamics within the alliance.
“The tariff situation with the U.S. has really caused a lot of industries to want to pivot away from the United States,” she said.
“The business case just isn’t there for some industries. They have no idea how much a product will cost. [Businesses] could say, ‘We’re going to sell it to you for this’, and a week later, all of a sudden the price is exponentially higher.”
In that context, Melnychuk believes Canada is well-positioned to attract European interest in defence-industrial partnerships by positioning itself as a stable, tariff-free supplier of essential products.
“Canada is well-positioned to be that industrial force,” she said.
“We do actually have a lot of manufacturing prowess, and we have industry that’s waiting on the sidelines. Joining and creating that ability for Canadian firms to participate in EU procurement could be really huge for our industry.”
Canada’s GDP in 2024 is estimated to be around $2.14 to $2.24 trillion USD.
5% of $2.2T is $110B
You’re off by over 25%
110B USD = 150B CAD