The Decibel - Carney’s plan to expand Canada’s defence industry

Episode Date: February 19, 2026

As part of its plan to remake the Canadian Armed Forces, the federal government earmarked $6.6-billion over five years in the fall budget for its Defence Industrial Strategy. The document was finally released this week, and it details the blueprint for bolstering Canada’s defence industry.Pippa Norman is The Globe’s innovation reporter, and she covers the business side of defence. She’ll explain why this document is important, the key takeaways, and what the plan means for broader conversations about protecting Canada’s sovereignty.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The federal government is planning to remake the armed forces. Part of that is through something called the Defense Industrial Strategy. The government promised more than $6 billion over five years for this plan. We didn't know exactly what that was or where the money would go until now. The long-awaited document was finally released on Tuesday. It outlines the government's plan to boost the country's defense industry and reduce reliance on foreign partners like the U.S. Defending Canada means more than just increasing the size of our military.

It also means the strength of our industries, the resilience of our economy, and our capacity to act independently when it matters the most. Our national security and our economic security go hand in hand. Today I'm talking to Pippa Norman. she covers the business side of defense for the globe. She'll explain what we learned from this document and what this strategy means for Canada's national security and sovereignty.

I'm Cheryl Sutherland, and this is the Decibel from the Globe and Mail. Hi, Pippa, thanks for joining us from Berlin today. Thanks for having me. So to start, Pippa, can you tell me what the defense industrial strategy is and why it's a big deal? The defense industrial strategy, I would describe it as a blueprint for how the government will build out the Canadian defense industry and kind of safeguard its sovereignty over the next decade. So it's a blueprint, a plan, a framework. And the reason that it's so important is because it's a signal to industry and also investors where the government's focus is going to lie over the next decade when we are, supposed to be seeing this major increase in defense spending. So this is a strategy, not a policy.

A policy is legislation, whereas a strategy is more of a plan or a framework. There is a defense policy coming. The federal government has told me that that will be landing this year, and it's something that they've been working on throughout the fall. But that will be the new defense policy, whereas this is a defense strategy. Got it. Okay. What is the government said about why Canada needs the strategy. Like, what is it trying to accomplish? Yeah, it's trying to build up a defense industry that has kind of been operating almost quietly

or kind of in the shadows for a little while. We have defense in Canada. We have a defense industry, but it's not been a priority for government. It's not been a priority for investors. It's often been ignored by investors and institutions such as banks in Canada So this is kind of its plan for how it's going to change all of that.

So some of kind of the high level goals that it wants to accomplish through the strategy are building capacity and capability in the Canadian defense industry, making its defense procurement more efficient and prioritizing domestic procurement through that system, being in control of more of its defense supply chain for products that are critical to national security. And then also through all of it. of that creating some downstream economic benefits and even in a few ways helping some industries that we've seen struggle from other economic wins such as U.S. tariffs.

Okay. So as you mentioned, this is a strategy, a plan. But what exactly is in this plan? Like, let's get into some numbers and some dollar figures. What do we learn from this strategy? There's a lot of percentages that the government has thrown at us. We got some dollar figures, not as many as maybe we would have liked, but that's not necessarily what the point of the strategy was. That's, you know, more for something like the budget. But in terms of some of the key stats that we're hoping to see from the strategy, right now, about 40% of our defense procurement contracts go to Canadian companies. The government is promising to increase that number from 40% to 70%. For reference, that's the number right now for how much we procure.

from the U.S., so that would be a huge change. The government is promising to increase defense industry revenues by more than 240%. That sounds really big. Which is an insane number. They're also promising to increase defense revenues for small to medium-sized businesses in Canada by more than $5.1 billion. That's important to note because the majority of Canada's defense industry is small to medium-sized businesses. They're promising to increase Canada's defense exports by 50%. So they want to

export more defense products out of Canada. And they're also promising to create 125,000 jobs out of this. So that could be in things like engineering, welding, or trades. 125,000 new jobs sounds like a huge number, especially, you know, when we're talking about Canada's economy and Carney's kind of focus on boosting Canada's economy. Yeah, it is. We are past numbers, which come from around 2022 or 2024 have counted about 80,000 jobs in the Canadian defense industry. So creating 125,000, that's massive. What areas of the government focusing on to build out the country's defense industry? Yeah.

So one of the main takeaways that we have from this defense strategy is that the government has identified 10, what it's calling sovereign capabilities, or you could think of them as sectors or areas where the government wants to invest and it wants to see built at home. So those are aerospace, ammunition, digital systems, in-service support, personnel protection, sensors, space, specialized manufacturing, training, and simulation, and then uncrued and autonomous systems, which bring to mind drones or something like that. Okay. A bit of a long list there. Anything stand out to you in that list? I think that uncrewd and autonomous systems is important to note, because that's something that is very much a part of what people are calling,

like modern day warfare, the warfare that we're seeing happen with the war in Ukraine. It's important that that's on Canada's list because that's where warfare is headed and or already is. Also, ammunition stands out to me. I'm not surprised and I think that it makes sense that it's on the list because just generally among NATO allies, there's a lot of talk about how having control over your ammunition. is really important. If you are preparing for any sort of conflict or war, you need to be able to have access to your own ammunition and you need to be able to control that supply chain. So in order to do that, you need to produce that at home. It has to be kind of a sovereign thing,

a sovereign capability. And there was something mentioned in the document called Nutracellulose. What is that? Yeah. So that is a compound that is used to make explosives. And the Canadian has explicitly stated in the document that production of that will start by 2029. I still have questions out to the government about where that production will happen and who is doing that production because that's something I'm really curious about. But again, that's an explicit kind of part of that ammunition umbrella where that's something that we want to have sovereign control over. Okay. So some of these are, you know, for clearly military uses. But there's also a focus on

something called dual use. What's that? So dual use in this context means a product that has an application in both defense and civilian or commercial market. So for example, a drone can very easily be dual use. A drone can be used to carry medicine, for example, from a hospital or to a community, but it can also be used as a weapon. I mean, it sounds like something that's dual use would be an easier sell for Canadians, right? Because you can use it for defense, for military, but also for uses and other parts of the country. Yeah, 100%. And especially, you know, obviously a lot of people in the defense sector are really happy to see this spending and this commitment, but not everybody in Canada is pleased about how much the government is spending on defense. And so if dual use helps other

Canadians see ways that they might benefit from this defense spending, which if it's done right, there should be other benefits from this spending, then yeah, it's definitely a way that I feel like we're talking about defense in Canada in order to make it a little bit more digestible. How does the government actually spur innovation and development in these areas? I think it's through this strategy. It's through creating kind of a long-term demand signal for industry and showing industry that it's committing to buying products or it's interested in buying products that sometimes take a long time to make think of a submarine or an icebreaker. Those are not quick procurements necessarily.

Those are big investments on the part of a company. But even for a smaller manufacturer, if you make a part or a drone, the government needs to show that your investment into a new line in your factory or a major procurement is going to be worth it. and they're going to be there at the end of it to buy it. And then they're going to continue to want to buy it. So a sense that the government is reassuring companies that they will buy these products. Yes.

And that they will have access to other markets where they can also sell those products. Because ideally the Canadian government is their first customer or their best customer, but they need more than one customer. And they need to be able to, you know, when that customer asks for however many of that product, be able to have the scale and the capability. to produce that for that customer as well. And within this strategy, the government has said it's going to pick

what it's calling champions or a few firms within the Canadian defense sector that it will give extra support to, whether that's through more direct procurement pathways or access to other funding streams. This is a long-term plan, and I think it's important to remember that. there's things within the strategy such as investing in defense-related research and development.

It also notes developing a skilled workforce and working with universities within Canada to make sure that people coming out of schools in Canada have the skills that we need. So there's definitely, yeah, there's investments in research and development. There's investments in our National Research Council. And all of those things will hopefully feed into spurring. this kind of innovation. We'll be right back. So, of course, this involves Canadian companies being able to also make a lot of these items, right?

So what happens if Canadian companies can't make the products the military needs? So I'm thinking of things like submarines or fighter jets. What's the plan for items like that? Yeah. So if we can't build it at home, the government's plan is to, they say, partner, which is partnering with allies such as Europe, Britain, and India, Indo-Pacific countries. Those were the ones that the government named in its strategy. Partnering basically means looking at a procurement and figuring out if we need to buy from somebody

else, how can Canada still see industrial benefits from that procurement? So I often think of South Korea when I think of partnering and what that might look like because that country has done a really good job of when they have another country that wants to buy something from them, they're very open to things like knowledge transfer and the sharing of intellectual property so that when a country buys from South Korea, they can then learn things about how to make that product, how to manufacture, and eventually maybe have some sort of industry in their own country that's related to that product that then brings them industrial benefits from that. So it's about sharing knowledge.

It's about sharing intellectual property. and it's about training workers in both countries to kind of work together on major procurements such as a submarine. Okay, interesting. So what you're saying here is that, you know, with the South Korea example, it would be that, you know, this is a place that I would build something, but in the same time, Canadian workers would be able to gain some knowledge about how to make these types of items. Yeah, exactly.

Our icebreakers that we're currently building are also a really good example of this. Davey, for example, is a shipyard in Canada. there's a shipyard in Quebec, but they also own a shipyard in Helsinki, which has built the majority of the icebreakers in the world, which are, you know, big ships used to break ice in the north. And right now we currently have Canadian workers who are in Helsinki learning from the Finnish shipyard about icebreakers and how to build those. And so that's kind of a good example. Obviously, it's all within Davy, which is the same company, but it's still Finland and Canada working together. And that's part of a pact that we have to work together on icebreakers. Very interesting. So the strategy has a list of ideal partners for Canada to get equipment from. And someone's missing here. It's the U.S. They're notably absent from this list. What should we make of that? The U.S. is mentioned a couple times in the strategy, but only briefly. It's mostly mentioned to acknowledge the fact that we're not discounting it and we're not going to stop buying from the U.S. necessarily.

but I think my interpretation of it is that the U.S. is more seen under what they're saying is the next step after partner, which is buy. So if we can't build at home, we can't find a partner that we can work together well on we're going to move into buy, which is basically just we need something. Maybe we need it soon or in a rapid manner. So we're just going to buy and we're going to go to whoever maybe has the best product for that. This is clearly an effort to reduce our dependence on the U.S., but it's not blatantly stating that we can move forward without them necessarily. So Pippa, this strategy, it has a lot of buzzwords. There's a lot of lofty goals in it. But what do we know about timelines? Like, do we have a sense of when the government wants to accomplish some of these goals? Yeah. Timelines is a bit of a sense.

sticky issue with the strategy. Most of the timelines that we have seen are fairly vague, as in we got a lot of spring of 2026, for example, or summer of 2026. And that's when we did get a timeline. We don't have a timeline for everything necessarily that's within the strategy. So, yeah, in terms of like when contracts will roll out, which is something that everybody in industry is wondering about, the government would say that contracts are. are already rolling out. And they're not wrong. There are procurements underway. There are contracts coming out. But that number of contracts needs to increase and will increase in order to meet these goals. And that's still something that we're a little unclear on.

What have you heard from businesses and people in the industry on that? Are there concerns about maybe a lack of specifics? Yeah, I think it's an underlying concern. I think yesterday when we spoke to industry kind of right after the strategy was announced. The overwhelming sentiment is happiness and they're, you know, they're satisfied with the, with the strategy. It's, I think the thing is, it's just a huge step forward from where we were. But yeah, the main criticisms are just a few, lacking a few specifics, such as timelines or dates that are more specific than summer 2026.

basically things that can hold the government to account of actually executing on this strategy because this is all great. But if it doesn't actually happen, then, you know, what are we talking about? Yeah. What about, are there any concerns around what is considered perhaps a Canadian company? Like, did the government make any specifics about that part of it? Yeah. That's been one of the other key points that people in the industry have flagged about the strategy.

there is no definition of what constitutes a Canadian company within the strategy itself. So I spoke to Minister, industry minister, Melanie Jolie yesterday, and I asked her this question. And she said that they would consider a Canadian company to be something that has 70% of the value of their products is Canadian. That does not disqualify foreign-owned subsidiaries. That's very interesting. Okay. So right now, Canada is very focused on defense, right? But this isn't always the case in Canada. So what happens if, you know, there's a change in office here in Canada or in the U.S. and perhaps a focus changes? Could there be a risk here for these plans? Yeah, 100%. I think a lot of people are thinking about that. I think right now within the industry and other stakeholders, it's mostly excitement. It's mostly momentum. But who's to say what would happen in? if all of a sudden the things that were pushing us to make these decisions

and make these commitments and these investments was less of a threat or we felt differently about the state of the geopolitical state of the world. Countries that have Russia on their border are in a very different situation instead of circumstances than Canada is. And so the threat that Canada is feeling now, if that doesn't sustain or if that changes, who knows how that could affect Canadian policy in terms of defense. As we mentioned, the bigger picture goal of this strategy is to protect our national security and sovereignty. How does this plan fit into conversations around Canada sovereignty? I think this plan is, it's basically key to Canadian sovereignty.

if you can't control and produce the products that you need in order to respond in a time of crises or conflict or war. And if you have to rely on others when your allies are asking for help, then that's not very sovereign. So this is definitely key to Canada sovereignty if it can be executed. Pippa, thank you so much for coming on the show. I really appreciate it. Thanks for having me. That was Pippa Norman, the Globe's Innovation Reporter. That's it for today. I'm Cheryl Sutherland.

Our producers are Madeline White, Mikhail Stein, and Rachel Levy McLaughlin. Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening.