What Spending Two Per Cent of GDP on National Defence Means for Canada

The Math The Annual Two-Per-Cent-of-GDP Defence Spending Pledge and its Management Avoiding the Boom-Bust Cycle Envisioning a Canadian Military Funded at Two Per Cent of GDP Multiple Missions Capability Reserve Force Reform Defending the Arctic A Three-Ocean Navy Emerging Technology and the Unforeseen Large Conflict is Back Positive Impact on Industry and Academia Conclusion: A Better Canadian Armed Forces and a More Secure Canada About the Authors Canadian Global Affairs Institute Executive Summary The latest NATO defence spending data (2023 estimates) show Canada standing alone as the only country in the then-31-member Alliance not meeting both NATO investment pledges: spending at least two per cent of gross domestic product (GDP) on defence and spending at least 20 per cent of the defence budget on equipment and research and development. Still, by spending 1.33 per cent of its GDP on defence, Canada ranks as the seventh largest spender (in actual dollars) on defence in NATO and the 14th largest in the world. Since 2006, though, successive Canadian governments have agreed to the NATO metric of spending two per cent of GDP on defence and since 2023, the Alliance considers this financial obligation to be a minimum level of investment. Canada has not honoured this commitment and has no plan to do so. This situation will feature prominently in military-related public discussion in Canada around the upcoming budget, the “expected soon” defence policy update, and at the 75th NATO anniversary summit this July and beyond. This paper’s purpose is to describe the difference that a minimum two-per-cent-of-GDP annual allocation would make to defence capability, capacity and preparedness aggregated over time for the Department of National Defence (DND) and the Canadian Armed Forces (CAF), and to Canada’s broader national interests and security. Meeting our NATO agreed-upon commitment would force multiple government departments to do more to obtain much better outcomes for the money spent. This will require a change in culture and thinking by our political leaders and within government to meet the range of threats and potential dangers at our doorstep. This certainty in defence budgeting would set conditions for improved partnerships with Canadian industry, help secure Canada’s borders including the Arctic, strengthen our military alliances, and improve our credibility with the U.S. and other NATO members and partners. It would also allow for an armed forces rebuild, including recruiting at least 25,000 Regular Force personnel besides the 71,000 called for under the current (2017) defence policy. Such funding would make the CAF more consistently dependable, relevant, modern and capable. It would set conditions for Canada to once again credibly meet its Alliance obligations and contribute directly to Canadian security and prosperity, as well as to a safer and more prosperous global commons. Such a policy would also have a positive cascading effect on Global Affairs and all other departments and agencies in the Canadian intelligence, policing and national security space. TOP OF PAGE