By: Anton Sestritsyn, VOSAVIS Principal, Ted Opitz, Lt. Colonel (Ret.), former MP, Dr. Yaroslav Samoylov
This analysis examines Canada’s Defence Industrial Strategy from the perspective of firms expected to execute it and the policy makers responsible for delivering it.
The Strategy must be read against a deteriorating geopolitical backdrop. It assumes that supply chains are fragile and emphasizes that “in this uncertain world, it is more important than ever that Canada possess the capacity to sustain its own defence and safeguard its own sovereignty.” Canada’s Defence Industrial Strategy is the first formal attempt to align defence procurement with national industrial policy. It uses long term defence spending as a demand signal to increase domestic production, scale selected sovereign capabilities, and expand exports. It establishes measurable targets for Canadian content, research and development intensity, and employment
At the same time, the document reveals structural tension. Canada wants to produce as much as possible domestically while maintaining access to advanced allied systems. The Strategy therefore balances sovereign ambition with continued reliance on trusted partners. That compromise is politically realistic. Whether it is operationally coherent will depend on execution.
The creation of the Defence Investment Agency is intended to anchor implementation. However, departmental authorities remain distributed across DND, ISED, PSPC, Finance, and Treasury Board. Unless the new Agency receives binding authority and procurement processes are restructured, institutional fragmentation will persist.
The feasibility of the ten year targets is the central test. Sovereign capability is capital intensive. Onshoring production in areas such as advanced munitions, sensors, cyber, and aerospace subsystems requires long lead times and predictable demand. Many SMEs in these sectors will need five to ten years before reaching scale. Few will have immediate export markets.
During that maturation period, firms require risk sharing mechanisms. Long term offtake agreements, loan guarantees, equity participation, and structured public private partnerships are not optional tools. They are prerequisites. Without them, private capital will not absorb the scale of risk required to rebuild supply chains.
For instance, titanium illustrates the problem. Canada relies on foreign supply for critical aerospace inputs. Rebuilding domestic capacity involves upstream mining investment, refining facilities, regulatory approvals, workforce development, and anchor buyers. The Canadian Armed Forces alone cannot sustain full industrial throughput. If dependency is to be reduced, the federal government must clarify which financial instruments it will deploy to bridge the gap between capital expenditure and commercial viability.
Export growth presents a parallel challenge. The Strategy signals intent to expand defence exports but does not clearly define priority partner markets or reciprocal procurement frameworks. Major defence exports are enabled through government to government agreements, co development programs, and interoperability commitments. Trade promotion alone will not deliver scale. SMEs require clarity on where Canada will invest political capital to open markets. In this context, threat assessment also requires sharper alignment with industrial planning. The Strategy references Arctic security and Russia but gives limited attention to coordinated activity among Russia, Iran, North Korea, and China. Industrial priorities must be grounded in a clear National Security Strategy. Firms need confidence that designated capability areas will remain strategically relevant over time.
The relationship with the United States presents another unresolved tension. The Strategy emphasizes sovereign control over intellectual property while Canada’s defence industrial base remains deeply integrated with the U.S. In fact, many companies in Canada, including primes, are headquartered in the United States. Clear guidance is needed on technology transfer expectations, co development boundaries, and circumstances under which Canada will pursue independent capability. Ambiguity in this area complicates SME partnership strategies.
Procurement also remains the decisive variable. Canada’s defence acquisition system is sequential and fragmented. Requirements, costing, industrial benefits, and contracting proceed in stages across multiple departments. The result is delay and risk aversion. For SMEs, delay is not an inconvenience. It is an existential threat.
If the Strategy is to succeed, procurement must shift from sequential to parallel processing with significantly compressed decision making period. Treasury Board engagement must begin at project inception to avoid delays at later stages. Security clearance and facility accreditation must be standardized and accelerated. Most importantly, the Defence Investment Agency must have authority to issue binding commitments.
Recent conflicts, particularly the ongoing war between Russia and Ukraine, have demonstrated how rapidly battlefield innovation can outpace traditional procurement cycles. Low cost aerial drones, autonomous marine systems, loitering munitions, and battlefield robotics have shifted from tactical supplements to core capabilities. Commercial technology adaptation, rapid prototyping, and short iteration cycles have proven decisive. For Canada, the lesson is clear. Future relevance will depend on the ability to absorb, adapt, and scale emerging technologies quickly. If Canada positions its industrial base to accelerate licensed production, joint development, and domestic adaptation of drones, autonomous maritime systems, and robotics, it can compress capability gaps while building export ready capacity. The states that integrate operational lessons into industrial policy fastest will define the next generation of defence competitiveness.
Political volatility compounds operational risk. Industrial scaling requires capital planning over a decade or more. If funding levels, content rules, or procurement models shift with electoral cycles, firms will discount government commitments. Absent cross party durability, the demand signal weakens. SMEs should therefore diversify export exposure and structure financing conservatively. Policy makers should entrench core elements of the Strategy in durable legislative and funding frameworks.
Industrial expansion also increases exposure to espionage and foreign interference. Canada lacks a dedicated foreign human intelligence service. Domestic and signals intelligence capabilities are strong but do not substitute for outward facing HUMINT collection. As defence and dual use firms scale advanced production and research, they become targets. Industrial policy without corresponding security modernization creates vulnerability.
Workforce development is another necessary condition. The Strategy recognizes the need to expand skills in AI, cyber, advanced manufacturing, shipbuilding, aerospace, and critical minerals. However, coordination between federal departments, provinces, universities, and industry requires clearer structure. Existing federal institutions such as the Canadian Defence Academy and the Canadian Forces College could be leveraged more deliberately to integrate civilian industry leaders into strategic education and planning. International models demonstrate the benefit of integrating military and civilian professional education within a unified governance framework.
For defence and dual use SMEs, the implications are direct. Credible demand outweighs policy language. Multi year purchase orders, enforceable Canadian content rules, and predictable program timelines determine whether capital is deployed. Procurement speed determines survivability. Extended bid cycles and sequential approvals strain working capital and deter investment. Firms must plan for resilience while pressing for parallel processing, earlier Treasury Board engagement, and binding authority within the Defence Investment Agency.
The Defence Industrial Strategy sets direction. Its outcome will depend less on headline targets and more on institutional discipline. Consolidated procurement authority, defined risk sharing instruments, and durable multi year funding commitments will unlock private capital. Continued fragmentation will dilute impact. For SMEs, this is a conditional opportunity. Alignment with sovereign capability priorities, integration into trusted supply chains, export readiness, and strong security compliance will separate firms that scale from those that stall. For policy makers, the test is execution. Strategy must convert into contracts, speed, and certainty.
The Defence Industrial Strategy represents a serious acknowledgement that sovereignty, security, and industrial capacity are now inseparable. It is the first attempt to connect procurement, capital, technology, workforce, and national security within a single framework. That ambition is warranted. The question is not whether the vision is correct. It is whether Canada will align institutions, funding, political consensus, and decision making speed to match it. If discipline, durability, and execution follow, the Strategy can reshape Canada’s defence industrial base for a generation. If they do not, it will remain a well drafted statement of intent in a security environment that is moving far faster than policy cycles allow.