Canada’s plan to hit NATO’s defence spending target remains unclear and the current forecast for increasing military spending is based on “erroneous” economic projections, according to the federal fiscal watchdog.
The report from the parliamentary budget officer (PBO), Yves Giroux, on Wednesday comes just a week before the U.S. election, the outcome of which could have security implications for Canada.
Republican candidate Donald Trump, who has often complained about other NATO members who don’t spend the agreed-on two per cent of their GDP on defence, has warned that the United States may not defend allies who are not meeting this target.
He has also said he would “encourage” Russia to attack so-called “delinquent” NATO nations.
The military alliance is founded on the principle of collective defence — that an attack against one member is an attack against all and will yield a joint response.
At this year’s NATO Summit in Washington, D.C., Prime Minister Justin Trudeau pledged that Canada will reach the alliance’s target of two per cent of the gross domestic product on defence by 2032, but he gave no specifics on how that benchmark will be achieved.
“The government has not released any figures showing how it plans to meet the 2% target by 2032-33,” the PBO said in its news release.
Canada’s updated defence policy also forecasts spending will rise from 1.37 per cent of GDP currently to 1.76 per cent by 2030.
The PBO said the 1.76 per cent figure is “based on an erroneous GDP forecast” and according to the watchdog’s own analysis, the projected defence spending reaches only 1.58 per cent of GDP by 2029-30.
Canada 'well short of' NATO target: expert
NATO members agreed to the two per cent target in 2014 but Canada has long fallen short.
In order for Canada to meet its pledge, the country will have to increase its annual military spending to $81.9 billion by the 2032-33 fiscal year, the PBO said.
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This means defence spending will have to nearly double the $41 billion that is projected for 2024-25.
According to Giroux, their analysis suggests there is a gap of $20 billion between what the government says it will spend and what will need to be spent in 2032-33.
In an interview with Global News on Wednesday, Giroux said its “very unusual” to get forecast estimates this far off.
“When it comes to the military spending per say, it’s all based on what the government plans on spending and it’s difficult to think of an issue where the gap has been so wide for numbers that are not that hard to calculate,” he said.
David Perry, president of the Canadian Global Affairs Institute, said the PBO report signals that Canada is significantly falling behind on the NATO target by billions of dollars.
“I think they make more clear even than was already understood that Canada is well short of meeting two per cent of GDP NATO investment pledge target,” Perry told Global News in an interview.
“This new analysis by the PBO basically says it’s going to take even more money over and above the huge amount of money already committed to get to that level.”
Retired General Tom Lawson, former chief of the defence staff, said the PBO report does not come as a surprise and it’s not a good look for Canada on the world stage, especially down south.
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“There’s no doubt about it that our key allies will see us as not very serious about defence and not entirely reliable when it comes to meeting stated goals,” Lawson told Global News.
“However, if we speak to what happens with our key and number one closest ally, the U.S., if Trump is elected, there’s going to have to be a reckoning by whoever is in government at that time and it may become far more important externally than it might have otherwise been with our NATO allies.”
However, the new data might not necessarily add to the pressure that Canada is already facing from its allies, Perry said.
“I don’t know how much more pressure there could be from our allies because in my view, there’s an awful lot and I think largely on their part, they don’t really care how the math works out in Canada about exactly how many more dollars it is.”
The PBO report comes a day after economists at Desjardins estimated meeting the NATO target could be enough to add $10 billion to the federal deficit by 2028-29 and violate the Liberals’ fiscal anchors in the years ahead.
Canada’s defence budget has grown by more than 57 per cent since 2014, and it is estimated at $29.9 billion for this year.
In pure dollar value, Canada ranks seventh among NATO allies, according to the alliance. But in share of GDP spent on defence, Canada ranks fifth to last out of 31 member nations.
When pledging Canada’s timeline for meeting the NATO target, Trudeau said in July: “We continually step up and punch above our weight, something that isn’t always reflected in the crass mathematical calculation that certain people turn to very quickly, which is why we’ve always questioned the two per cent as the ‘be all and end all.’”
A leaked Pentagon assessment obtained by the Washington Post last year said Trudeau had told NATO officials Canada would never meet the alliance’s target.
— with files from Global News’ Mercedes Stephenson, Marc-André Cossette, Craig Lord and Sean Boynton
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