Photo by Burmarrad (Mark) Camenzuli
April 2026
Table of Contents
- Introduction
- The Pros and Cons of the Strategy
- Broader issues beyond the Industrial Strategy
- About the Author
- Canadian Global Affairs Institute
Introduction
The Government of Canada raised the issue of publishing a defence industrial strategy in the fall 2025 budget when it noted to that end, the government is launching a new Defence Industrial Strategy. This strategy will ensure Canada’s defence investments are now guided by a whole-of-government approach to building sovereign defence capacity— creating high-paying careers, opportunities for businesses, and sourcing Canadian resources in the process.
Security, Sovereignty and Prosperity: Canada’s Defence Industrial Strategy was finally released on 17 February 2026. The need for such a document has been raised by academics and industry in the past including by the author. Previous commentary and writing have indicated the need for a clear articulation of core requirements that allows Canada to maintain operational independence for those areas deemed to be in our national interest. With the release of the Defence Industrial Strategy (DIS), it seems appropriate to examine the document to determine if it meets the primary expectations that have been articulated in the past.
This article will examine the DIS and assess whether it is articulating the correct requirements and plans. The article will identify what could be considered the strengths and weaknesses of the document and provide an indication of some of the early commentary, as well as looking at what our Allies have articulated in their defence industrial strategies and their consistency with Budget 2025 plans. At the outset, it is important to note that the strategy is a positive step forward, building on what was in Budget 2025, and it articulates the requirement for sovereign industrial capabilities, a key recommendation of many observers.
This is Canada’s first official defence industrial strategy which is not to imply Canada has not articulated policies in the past. However, previous strategy and policy documents have generally been for specific issues – the Industrial and Technical Benefits (ITB) Policy or the National Aerospace and Defence Strategic Framework are examples of this. The DIS is much broader in scope and ambition and provides a clear indication of where the government wants to be by 2035. However, there are some mixed messages when examining the document and there is much more work that will need to be done in order to successfully implement the intentions articulated in the strategy.
The Pros and Cons of the Strategy
One of the first issues the reader will come across is with the government indicating it will be guided by:
a robust Canadian defence industry that provides technological and operational advantage to the Canadian Armed Forces and its security partners in their mission to defend Canada, and maximizes growth, job creation and economic benefits for all Canadians.
This comes across as two priorities, which is not unexpected, except that one of the underlying issues dealt with in the DIS is to fix procurement and anyone familiar with the machinery of government knows having multiple priorities is a recipe for bureaucratic inefficiency. Early commentary by Philippe Lagassé supports the vision statement issue when he observes, “There are two sets of priorities here, one military, the other economic, and their differences have been smoothed over.”
In the pros and cons context this is a neutral issue since overcoming bureaucratic drag is possible and the DIS implies the Defence Investment Agency (DIA) will have the authorities required to overcome any resistance when dealing with large capital investments. Readers of the DIS will recognize how ambitious the strategy is when it articulates nine areas where it will advance Canadian sovereignty and strengthen the economy by 2035, while also adding more than half a trillion dollars to overall investment in the Canadian economy and strengthening the industrial base. Informed readers will be somewhat cynical of these same issues. The economic indicators are based on data from Statistics Canada Input-Output model, a valid approach for assessing economic impact, but one that does not actually factor in the opportunity cost for investments not made as a result of spending on defence rather than health care, education and other areas Canadians generally prefer their government to spend money on when asked about spending priorities. There is no guarantee that the Canadian public will support the increased levels of defence spending for the next 10 years and Canada has a history of governments promising large increases in defence spending only to see those increases fail to come to fruition.
In addition, many of the initiatives articulated in the strategy will take a number of years to actually show results or for industry to be able to execute. Most of the initiatives will require long term sustained attention and oversight to ensure success. For example, increasing exports to the European Union as part of the Security Action for Europe (SAFE) and the ReArm Europe / Readiness 2030 initiatives will take a number of years to show an impact. Canadian firms will need to identify where it makes business sense to engage and where they can reduce their dependency on the US. They will need clear signals from the Government of Canada before they proceed down this pathway.
Much like the issue of increased spending, there are few examples of Canadian governments demonstrating this ability since the urgency of the day often overtakes longer term strategic requirements. Being optimistic, the security environment is much different than in the past, and the spending initiatives in the DIS are consistent with what was articulated in Budget 2025. For example, Budget 2025 proposes an $81.8 billion investment in defence over 5 years while the DIS makes reference to $180 billion in direct investment in defence procurement over 10 years.
Returning to the issue of the DIA, the agency will be charged with leading the implementation of the DIS through five integrated pillars. At the macro level, these pillars are: Renewing Our Relationship with Industry, Procuring Strategically Through a New “Build–Partner–Buy” Framework; Investing Purposefully to Strengthen an Innovative Canadian Defence Sector; Securing Supply Chains for Key Inputs and Goods; and Working with Domestic Partners, including in Canada’s North and Arctic. Each of these pillars is discussed in detail, and the strategy provides key actions to be taken by government at the end of each of each section. In addition, there is an annex that articulates which government departments or agencies are connected to each action in the strategy.
As indicated, the DIA is at the centre of implementing the DIS and fixing procurement. Created in October 2025, the DIA is designed to accelerate the timelines of defence procurements, leverage defence procurements to strengthen Canada’s defence industrial base, and contribute to growing Canada’s economy by attracting investment into Canada’s defence industry. Initially created as part of Public Services and Procurement Canada (PSPC), the government’s intention is to establish the DIA as a stand-alone entity through the introduction of legislation in spring 2026. This is a positive step since there is some concern the present structure could be interpreted as adding a layer of bureaucracy, because the CEO of the DIA reports to the Secretary of State for Defence Procurement inside PSPC, which also has a Minister.
Unfortunately, the DIS also indicates, “Even with more efficient defence procurement, Canadian companies will still need to engage with multiple agencies.” This issue highlights one of the possible inconsistencies in the DIS. While large capital investments will be managed by the DIA, investments under $100 million will still be managed by the departments, and unless changes are also made to this process, a good portion of the procurements will remain overly bureaucratic. Planned legislative changes for the DIA should also include changes for the lower value projects. For those not familiar with Canada’s procurement system it is generally conducted in five stages, with a number of primary departments involved. Procurements begin with the military identifying a need, conducting some options analysis, which includes several activities and decisions points to get to the final definition of the requirement. Throughout the process discussions occur with the other major players, Public Services and Procurement Canada (PSPC), Innovation, Science and Economic Development (ISED), and the Treasury Board (TB), on the procurement approach (sole source or competitive, for example), how the required industrial benefits will be assessed and how proposals from industry will be evaluated. Depending on the complexity of the procurement, the Treasury Board may need to be engaged at the beginning and end of the process.[1]
More specific to the DIA, it is hoped that the new legislation discussed in the DIS will allow the CEO to make decisions without having to obtain ministerial approval from three different departments and Treasury Board once the initial decision is made to move ahead with a procurement. This would be a welcome improvement. Ideally, the CEO would report to the Prime Minister, since in Canada’s system of government it is the Prime Minister that ultimately makes decisions about large expensive military projects. However, this is not likely to happen, as there is no indication that the Secretary of State for Procurement position will be eliminated with the new legislation. Consequently, the individual occupying that position will need to be part of the decision-making process.
Importantly, the DIA is to play a central role in pursuing the government’s new “Build–Partner–Buy” framework. The DIA will work closely with the lead ministers (DND, ISED, PSPC) in order to reach decisions rapidly. It is in this Build-Partner-Buy section where some of the more important inconsistencies or contradictions come to light in the DIS. The DIA is to focus on the needs of the military, while making appropriate trade offs for the economic and industrial benefits. As indicated earlier, this is a recipe for bureaucratic inefficiency unless monitored closely.
The DIS does not provide the DIA with concrete targets for how long procurements should take under the new system. This is not to imply that the DIA will not work towards shorter timelines, but the lack of articulated timelines is at odds with what some of our Allies have done. For example, the United Kingdom’s Defence Industrial Strategy specifically identifies procurement targets for major platforms, spiral and modular upgrades and rapid commercial exploitation. Related to the issue of moving toward shorter timelines, the DIA will need to do more than just move people from existing departments involved in procurement to the DIA and expect changes in the overall procurement process. As David Perry notes in the Conference of Defence Associations Institute (CDAI) podcast, the entire force development system will need to be adjusted to meet the intentions of the government and the DIS. In addition to the announced changes to make the DIA a stand-alone agency and changes to the Treasury Board procurement policies, the culture of risk aversion and adherence to inefficient processes will need to change, as will Treasury Board processes themselves. Hiring outsiders from industry and academia with expertise in contracting, costing and the state of Canadian industry into the organization to bring different perspectives and approaches into the organization will be essential to change the current processes.
The DIS makes reference to growing small and medium size enterprises with language at the beginning of the document, but also indicates later that it will prioritize existing strengths and key sovereign capabilities. Philippe Lagassé noted that, of the ten sovereign capabilities identified in the strategy, established primes dominate eight of them. If the government really intends to grow small and medium size business and integrate them into the wider defence industrial ecosystem, this is another area that will need to be monitored over the long term, with decisions actually reflecting this priority rather than defaulting to larger primes. Under what circumstances will favouring small and medium enterprises take priority over larger, established firms, and what changes need to be made to the process to move research and development trials into procurement are just a couple of issues that will require additional details.
Nevertheless, the articulation of sovereign capabilities is a positive outcome for the DIS. The strategy indicates:
sovereign capabilities are those without which Canada cannot defend its sovereignty or meet its allied commitments. To qualify, a capability must be critical to the ability to defend Canada; an area of strength in Canada or have the potential to be one; and in demand by our allies and partners to support collective defence and enable exports.
The discussion of sovereign capabilities is a positive outcome and does provide an indication to industry of what the government’s priorities will be. Further detail on those capabilities will need to be provided for industry to move forward responsibly. For example, what does the government mean by an aerospace platform? It is highly unlikely that Canada will return to the business of producing fighter jets. The same question can be asked about Battle-Decisive Munitions. Canada is not likely going to get into the business of making Tomahawk missiles. These two examples are not intended to imply that the sovereign capabilities are wrong but rather that industry will need more clarity if the long-term intentions of the strategy are to be achieved.
The discussion of sovereign industrial capabilities in the DIS also connects to the stated intention of spending 70 percent of the budget with Canadian firms, but the strategy does not actually define how it will assess what constitutes a Canadian firm. For example, is GDLS-C in London, Ontario, a Canadian firm, or is it American because the parent is General Dynamics, an American Prime? This is an extreme example, but the government will need to be clear about what it considers to be a Canadian industry in order for industry to make appropriate investments. Sustaining and protecting these sovereign capabilities in Canada will require a variety of tools but will be a welcome addition by industry if the tools are easy to understand and remain consistent over time.
The articulation of sovereign industrial capabilities will also force a review of the Industrial and Technical Benefits (ITB) Policy, an issue identified in the DIS. While indicating the government will continue to apply ITBs the DIS indicates reforms will be made in five key areas: the existing Key Industrial Capabilities will be aligned with the new sovereign industrial capabilities; mechanisms will be introduced to strengthen Canadian innovation and industrial capacity; exports and deeper integration into allied supply chains will be supported; re-examining rewards for skills development; and simplifying administration. What is not indicated is any intention to move away from the procurement-by-procurement approach to applying Key Industrial Capabilities towards a more strategic approach that allows the government to leverage technology and investments over multiple projects. Improvements to the ITB policy are to be developed and released in early 2026, and there is annex that provides industry with a list of proposed changes.
One issue that may be problematic to implement depending on how government approaches the issue deals with intellectual property. In the context of the “Buy” aspect of the Build-Partner-Buy framework, the DIS indicates a desire to have the DIA make procurement decisions that mitigate foreign governments and suppliers asserting control over intellectual property that then restricts end-user operations. The challenge in this area of advanced technologies is that, for many companies, the ownership of intellectual property is why they are in business and able to sell and export their products. Giving up their intellectual property will be a nonstarter. This also will apply to Canadian companies so a review of the intellectual property laws will need to be conducted to be consistent with the DIS intentions. The government needs to get access to the information required for operational success while also allowing companies, Canadian and foreign, to maintain required intellectual property. This will be particularly important for small and medium size companies in the advanced technology sectors, including space, cyber, AI and Quantum computing.
[1] Note that this is a straightforward procurement. Depending on the nature of acquisition, other government departments may become involved in order to deal with issues like export import regulations, government-to-government purchases, regional development issues or technology transfer to name just a few.
Broader issues beyond the Industrial Strategy
The reader should not interpret all these issues as evidence of a failed first attempt at a DIS. The DIS is, overall, a positive articulation of government intentions and priorities. There are obvious areas where the critics can make observations about what they do not like, but this circumstance exists for any government policy document. Most of Canada’s Allies that have published multiple industrial strategies over the years have improved with each iteration and there is no expectation that Canada will not do the same.
The more strategic issue for implementing the intentions articulated in the DIS is managing expectations and remaining focused over time. For example, it will not be easy to reduce the amount of trade with the US. Canadian companies have a unique relationship with the US that allows them to compete on an equal footing with US companies, based on US Federal Acquisition Regulations and the Defense Production Sharing Agreement. Supply chains for major equipment are linked to and integrated with US supply chains. As well, trade in the defence market is predominantly duty free. Efforts to reduce this integration will need to be undertaken carefully and be economically sound for industry.
More problematic with Canada’s desire to expand trading relationships with others is that its major allies are also implementing strategies that favour their own industries. More specifically, with respect to Canada’s participation in the European SAFE and the Readiness 2030 plan, Canada should expect a desire for European companies to participate in Canadian procurement if Canada hopes to gain access to European markets. This will be another issue to be managed over time and balanced against the easier more likely North - South trading relationship with US companies. Similar issues will arise for the initiatives being developed by the Prime Minister with Canada’s Indo-Pacific allies. For example, the recent 5 March 2026 joint statement by Prime Ministers Carney and Albanese in Canberra indicated “their intent for Australia and Canada to jointly develop advanced technology and intellectual property under our deepening strategic relationship, with long-term benefits for both of our defence industrial bases.” It is clear that initiatives to broaden our trading relationships and reduce dependency on the US will require acceptance of foreign participation in Canadian procurement if Canada expects to be able to participate in the procurements of its partners.
There will always be friction with multiple priorities, the urgency of the day, and changing security issues. The challenge moving forward will be getting the actual implementation right, making amendments as necessary, and sustaining the focus over time in order to ensure security needs and economic needs are met. That will require trust amongst all major players, a willingness to take risks, and accept there will be failures, particularly as Canada tries to increase production in the high technology and innovation areas of the defence industrial and dual use technology areas.
The DIS is a very positive step forward and it does say all of the right things. The real work must now begin to ensure the implementation is done correctly to achieve the government’s desired end state, and it must be consistent over time regardless of which political party is in power. Otherwise, industry will not be prepared to make the long-term investments required to meet the increased demands.
About the Author
Dr. Craig Stone is an Emeritus Associate Professor of Defence Studies, Department of Defence Studies, at the Canadian Forces College (CFC). Dr. Stone joined the academic staff at CFC in the summer of 2005 after 29 years in the Canadian Armed Forces. While at CFC he was the Director of Academics from December 2008 until June 2015, was the Head of the Department from December 2008 until June 2013 and was the Associate Dean of Arts of the Royal Military College of Canada (RMC) from July 2013 to June 2015. He holds a B.A. in Economics from the University of Manitoba, and an M.A. and PhD in War Studies (Defence Economics) from RMC. He retired from full time employment in September 2021.
More generally, he has taught graduate-level courses in defence economics, defence decision-making, strategy formulation, strategic resource management, and institutional policy development. He served as a member of the DND Defence Industrial Advisory Committee; was appointed to the Interim Board of Directors for the new Defence Analysis Institute in February 2014; served on the College of Management and Economics Leadership Advisory Board, University of Guelph; served as a member of the Canadian International Council Strategic Studies Working Group; served as a member of the Research and Professional Practices Committee, The Institute of Public Administration of Canada; and continues to be a member of the Editorial Board for the Canadian Army Journal.
Canadian Global Affairs Institute
The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including (in partnership with the University of Calgary’s School of Public Policy), trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.
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