Canadian officials will likely face a “challenging” NATO leaders summit amid new data suggesting a defence spending dip, and growing public confusion about where the cash is coming from for major promised NORAD upgrades, experts warn.
New numbers from the military alliance suggest Canada is slipping behind on its pledge to hit a prominent spending target as the size of the economy grows in comparison to promised new spending.
At the same time, there is growing frustration among the defence industry at the government’s handling of an announcement of $4.9 billion in upgrades to NORAD radar and surveillance systems.
“If the idea was to instill confidence that this is all buttoned down, I think they’ve done about the opposite that,” said David Perry, vice-president of the Canadian Global Affairs Institute and a defence policy expert.
“That basically is going to make the summit a little bit more challenging, especially in the middle of a fairly convoluted week and a bit, over what we are doing about continental defence and the budget.”
Perry said the government has trying to emphasize that spending on defence is on the upswing.
Now, he says the confusion is about whether the government is actually adding new defence spending, or “reshuffling things.”
Ranked by percentage of GDP spending, Canada now sits 24th out of 29 members in the NATO alliance. That marked a slight slip from spending 1.36 per cent of GDP on defence last year to 1.27 per cent now.
Canada is also in the midst of what the government frequently describes as a 70 per cent increase in defence spending, first outlined in the 2017 defence policy reset.
Earlier this year, the federal budget also promised $8 billion in additional spending on defence.
So, why is the NATO ranking going down?
The metric of spending as a percentage of GDP measures the total value spent against the size of a country’s economy — and the Canadian economy is growing.
Statistics Canada pegged 2021 GDP growth at a “strong” 4.6 per cent, up from a decline of 5.2 per cent due to the COVID-19 pandemic in 2020.
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That growth is forecast to continue to rise by 3.8 per cent in 2022, then 2.6 per cent in 2023, according to the Organisation for Economic Co-operation and Development.
When economic growth is stable, that offers a relatively steady metric to compare spending against. But when the economic growth is stronger than usual, it means a promised chunk of change is suddenly being held up to a much larger yardstick for comparison.
But at a time when allies like Germany and Denmark are rapidly boosting spending to hit that two-per-cent target, Canada is likely to face sharper questions about its own plans — and there has been a lack of answers from the government over recent days when pressed by journalists for details.
The source of the promised $4.9 billion in NORAD upgrades isn’t clear, and Defence Minister Anita Anand’s office has not responded to multiple questions from Global News.
Anand originally said in a press conference last week that the promised $4.9 billion was new money on top of the $8 billion defence budget boost laid out in the most recent federal budget.
Her office corrected that shortly after and said the $4.9 billion was coming from the $8 billion.
“It just makes it look like all that event was was a staged event,” said Rob Huebert, an associate professor at the University of Calgary specializing in Canadian defence policy.
Huebert said if the money has to be re-distributed from within the existing defence budget, “that alone is disturbing.”
“But the fact that the only real meaning of why that was done was in anticipation of a NATO meeting that she then had to go to and at least pretend that Canada’s taking defence as serious, that is equally scary.”
Gen. Wayne Eyre, chief of the defence staff, told Global’s The West Block on Friday that he doesn’t know where the promised $4.9 billion is coming from.
Sources have told Global News the military is uncertain about where the funds are coming from, and that there are meetings happening at the department trying to determine how much of the money is new.
Those sources say there are significant concerns that the money may not be new, and may need to be re-capitalized from within the existing defence budget.
“I haven’t completely figured out myself the source of funds for this,” Eyre said.
“So I can’t say definitively where it’s coming from. I will say, though, the announcement was welcome.”
Eyre was also asked whether the military is planning any departmental cuts in order to be able to allocate $4.9 billion to the NORAD upgrades.
“We haven’t looked at cutting. But as always, we have to look at rebalancing,” he said.
“The force that we have today is not the force that we need to support tomorrow. So we need to look at force structure. Do we have it in the right place? Do we need to look at rerolling of units so that they undertake roles that are more relevant for the future security environment? That is all important.”
Perry described it as “pretty unusual” to have someone in Eyre’s role saying he doesn’t know where the money is coming from.
He added: “I can’t think of a time when a chief of defence staff has come out for a major announcement with a minister and then a week later is basically expressing that he’s not actually certain about the funding and where the source of funds is going to come from.”
The lack of clarity speaks to a bigger problem for the government, Huebert suggested.
He pointed specifically to the need for the government to provide clear answers on the details of its spending in light of both rising inflation and concerns about the economy, and also the broader threat posed by Russia.
“It deals with the inability to be honest with Canadians about security,” he said. “How can we have confidence in a government that doesn’t seem to be able to get its numbers together?”
The NATO summit is expected to see the alliance discuss a major strategic shift in order to better deter and counter Russia, following its bloody and unprovoked invasion of Ukraine in February.