How will Canada reach its new defence spending commitments?

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The NATO summit wrapped up Wednesday with major concessions from alliance countries to U.S. demands to further hike military spending.
Here is a rundown of what happened and what it means.
Canada has signed on to the NATO pledge to increase defence spending to 5 per cent of annual GDP by 2035.
That means that Canadians at that point will be spending $150 billion annually on defence and security.
The NATO plan involves investing 3.5 per cent of GDP into core military needs, which includes armaments and equipment. Another 1.5 per cent will be spent on related infrastructure, cyber defence and security.
The spending hike is a direct result of ongoing pressure from U.S. President Donald Trump who floated the idea in January that alliance countries need to spend 5 per cent of their GDP on defence.
Trump has repeatedly focused his ire on a number of nations, including Canada, claiming they are taking advantage of the U.S. by not spending enough on their militaries.
The spending boost announced by NATO could also prove to be a big winner for the American economy. The U.S. is the world's largest arms manufacturer and such massive increases in spending on defence equipment could mean significantly more business and American jobs.
Prime Minister Mark Carney has said that Canada should have no problem reaching the 1.5 per cent infrastructure portion by concentrating on projects that are already under way or currently being planned. That would include the development of the mining and stockpiling of critical minerals, an initiative that could see Canada becoming a trusted supplier to western nations for such material.
'A little less than a third of that overall number is spending on things that quite frankly we're already doing to build the resilience of our economy,' Carney told CNN. 'So, it would be domestic resilience, it would be defending the areas that are important to defend, but also supporting critical minerals development.'
But Carney has also hinted at cuts coming in other areas to fund the military spending boost.
'If we are moving to the higher and higher levels of defence spending because that's necessary then we will have to make considerations about what less the federal government can do, in certain cases, and how we're going to pay for it,' Carney told journalists at the NATO conference.
Parliamentary Budget Officer Yves Giroux has said he doesn't have enough information to determine how the Carney government will meet its spending commitments. But shortly before the NATO meeting, Giroux told Bloomberg News that for Canada to finance the 5 per cent GDP defence hike it 'would require a major shift of government priorities — away from social spending, for example — to free up some of the resources currently allocated to these types of expenses towards defence.'
The spending hike could also be financed by 'some tax increases, for sure, or much higher deficits,' Giroux added.
Retired senior military officers such as Gen. Wayne Eyre, the former chief of defence staff, and Lt. Gen. Michel Maisonneuve have previously suggested that cuts to social programs might be needed to fund more defence spending.
Critics have repeatedly pointed out that the Department of National Defence and the Canadian Forces have a well deserved reputation of mismanaging funds and bungling various military equipment procurement projects at a cost to taxpayers of billions of dollars. Just before Carney headed to the NATO summit, Canada's auditor general revealed that yet another military procurement project had gone way over budget.
The audit examined the Liberal government's commitment in 2023 to buy 88 F-35 fighter jets at a cost of $19 billion. But now that program has jumped in cost to $27.7 billion.
Carney has ordered a review of the F-35 program because of ongoing threats by Trump to economically harm Canada. Defence insiders, however, are confident Canada will proceed with the purchase of the U.S. jet.
Another major procurement program to buy new warships has also skyrocketed in cost. The Canadian Surface Combatant project, which had an original $26 billion price tag, is now expected to cost more than $80 billion, according to the Parliamentary Budget Officer.
With the NATO spending commitment now at 5 per cent of GDP, the onus will be on DND and military leaders to deliver value for the massive influx of tax dollars they are to receive. Whether they are capable of accomplishing that remains to be seen.
Before the NATO meeting Trump said he didn't believe the U.S. needed to adhere to the 5 per cent agreement.
He stated that since the U.S. has funded NATO for years there was no need for his country to follow the 5 percent figure he pushed for.
'I don't think we should, but I think they should,' he said, referring to the other NATO nations.
Before the NATO meeting, Spain had told the alliance it would not agree to the 5 per cent spending target.
Spain's Prime Minister Pedro Sánchez outlined his concerns that he would have to cut social programs to fund the NATO target and that would create a backlash among the public. Sanchez also warned that such an increase would force his government to increase taxes on the middle class and scale back other key programs.
'It is the legitimate right of every government to decide whether or not they are willing to make those sacrifices,' he wrote to NATO.
Spain wanted to stick to the 2 per cent GDP figure that was originally agreed upon. The country's government believes that the 2 per cent GDP spending level would fulfill its defence needs.
Shortly before the summit, Slovak Prime Minister Robert Fico posted on social media site X that his country 'has other priorities in the coming years than armament,' adding that it doesn't see such an increase in defence spending as necessary.
Belgium also questioned the NATO spending hike.
In the end, the countries did not stand in the way of the 5 per cent spending boost.
Even still, Trump was not happy that Spain raised concerns. As a result, he has threatened to punish Spain.
'I think it's terrible. You know, they (Spain) are doing very well … And that economy could be blown right out of the water when something bad happens,' Trump said. He stated that Spain would face tough trade negotiations with the U.S. as a result of their reluctance to follow the NATO plan.
David Pugliese is an award-winning journalist covering Canadian Forces and military issues in Canada. To support his work, including exclusive content for subscribers only, sign up here: ottawacitizen.com/subscribe
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