Ottawa is betting that buying into Europe’s rearmament drive could open new export pathways for Canadian defence firms — and help diversify away from the United States.
In December, Prime Minister Mark Carney announced Canada would participate in the EU’s Security Action for Europe (SAFE) initiative. Carney described it as “unlocking billions of dollars in potential defence opportunities for Canadian businesses.”
SAFE is not a grant program. It is a €150-billion loan initiative through which the European Commission raises funds and lends them to participating members to support joint defence procurement.
The loans are intended to finance large-scale purchases of ammunition, missiles, drones, air defence systems and other defence capabilities.
But participation alone does not guarantee contracts for Canadian firms.
“At the moment, it’s probably symbolic,” said Craig Stone, a defence procurement expert at the Canadian Global Affairs Institute think tank.
“It’s a bit early to say whether or not anything’s going to happen.”
Loan engine
In 2025, the EU unveiled its Readiness 2030 plan, a comprehensive strategy to overhaul the union’s defence readiness and credibly deter major security threats by 2030.
A key part of the plan is strengthening Europe’s industrial base by encouraging member states to buy equipment together, primarily from European suppliers.
SAFE exists to help fund this growth.
Under SAFE, EU member states can apply for financing to support joint procurement and industrial defence expansion. Canada is not eligible to receive loans, but it can partner with EU states to participate in the procurement process that follows. Aside from Ukraine, Canada is the only non-EU country that is party to the agreement.
Once the European Commission approves SAFE financing, participating EU governments run competitive procurement processes among eligible suppliers to meet specific capability needs. Canadian firms may compete in those tenders.
To participate in SAFE, Ottawa will pay €10 million upfront, plus additional fees that depend on the size and structure of Canadian firms’ participation in any procurements.
In exchange, Canadian content will be permitted to comprise up to 80 per cent of the total value of any procurement project, according to Global Affairs. This compares to a 35-per-cent cap applicable to countries not party to the agreement.
Buy-in and benefits
Within Canada, industry is ready to seize the opportunity.
“Our members of course welcome the ability to boost exports to Europe, and to work more closely with EU countries and companies,” said Nicolas Todd, vice-president of government relations and communications for the Canadian Association of Defence and Security Industries (CADSI), an advocacy organization.
In an emailed statement, Todd told Canadian Affairs that about 11 per cent of Canadian defence exports already go to Europe, with tens of millions of dollars in military goods shipped to countries including France, Germany, Italy and Romania.
“Joining SAFE can be a milestone for Canada’s defence industry,” he said, “but we must be organized and aligned to make the most of our participation.”
Canada will need a clear and coordinated approach to ensure companies can participate effectively, says Todd. Success will depend on alignment between politicians, civil servants, industry and the military.
Stone echoes that sentiment. He notes that Canadian firms will be competing head-to-head with Europe’s “national champions.” Dominant defence contractors, particularly in Germany and France, are likely to have a competitive edge, he says.
In Stone’s view, Canadian firms are most likely to be “part of the supply chain” for major European procurement projects, particularly in multinational programs where complex components and subsystems are sourced across borders.
Stone identifies several areas where Canadian firms may be especially well positioned: aerospace simulation and training technologies, as well as capabilities in command-and-control, intelligence systems, and dual-use technologies such as quantum computing, machine learning and AI.
The push to decouple
Even if SAFE funds do flow to Canada, the program may do little to decouple Canada from the United States.
Many of Canada’s largest defence contractors are Canadian subsidiaries of U.S.-based primes, which means corporate control, intellectual property and certain supply-chain decisions frequently sit with the American parent.
That integration has historically provided Canadian firms with strong access to the U.S. market — and also limits how fully Canada can disentangle its defence industry from the U.S. ecosystem.
As Canadian Affairs recently reported, Canadian defence firms exported over $7 billion in goods and services in 2022, with nearly two-thirds destined for the U.S.
Stone describes SAFE participation as “useful” in Canada’s diversification effort. But it is unclear whether it will put Canada on a path toward industry integration comparable to what Canada already enjoys with the U.S.
“It’s not a straightforward comparison,” he said.
Stone also notes that it will take years for industry to see any benefits from the SAFE agreement — and the agreement only runs until the end of 2030.
“This is going to take a while,” said Stone. “It is not going to happen in 2026 … We won’t see results for a couple of years at least.”
