Will Canada attend NATO’s Vilnius summit offering cuts or cash?

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David Perry is the president of the Canadian Global Affairs Institute and the host of the weekly podcast Defence Deconstructed.

Next week, the heads of state of the 31 NATO allies will meet in Vilnius, Lithuania. On the agenda are the alliance’s partnerships in the Indo-Pacific region and continued support for Ukraine, but among the most important topics of discussion is a new defence investment pledge.

The latter item, which was agreed to at the Wales Summit in 2014, was twofold, committing allies to spend 2 per cent of their Gross Domestic Product on defence by 2024, and to spend 20 per cent of their total defence investment on equipment purchases and related research and development.

In advance of Vilnius, NATO’s Secretary-General Jens Stoltenberg has stated that the leaders will discuss changing the 2 per cent of GDP commitment from a spending target to a spending floor. If enacted, this would presumably transform the NATO alliance from an organization constantly cajoling its members to meet that spending target, to one in which spending 2 per cent of GDP on defence is an agreed-upon requirement for membership.

This discussion is, of course, occurring against the backdrop of Russia’s ongoing illegal war in Ukraine, which has prompted a fundamental rethink of many allies’ security, and moves by Finland and Sweden to join the alliance. Not all allies have met the Wales pledge, but since NATO’s Brussels summit in February, 2022, many have made public commitments to do so. In its new national security strategy, Germany has committed to reaching the 2-per-cent target, and Denmark and Norway have agreed to do so as well.

For Canada, a new spending pledge will put us in a very uncomfortable position. As The Washington Post reported, Prime Minister Justin Trudeau has made it known behind closed doors that Canada will not meet our Wales commitment. With our defence spending sitting below 1.3 per cent of GDP with only a year left until the 2024 Wales deadline, that was surely not a shock to other NATO leaders.

However, beyond the 2-per-cent target, Canada is one of only four allies failing to meet either of the spending pledges made by NATO allies, as we have also failed to allocate 20 per cent of our defence spending to equipment purchases and related research and development. Worse, the Trudeau government’s most recent budget in 2023 announced that it will actually be cutting defence spending, rather than increasing it.

The combination of an overall reduction in federal spending on departmental operations and a 15-per-cent reduction in spending on travel and service contracting could see the Department of National Defence’s spending slashed by up to $1-billion a year, at a time when other allies are pledging big increases.

To be fair, the federal government did promise a $38.6-billion budget boost over the next 20 years to modernize NORAD last summer, and Mr. Trudeau told U.S. President Joe Biden that some of that spending would be accelerated when the President visited Ottawa in March. But on an annual basis, that investment increase will be relatively modest, and our track record of implementing defence budget cuts is much better than our ability to achieve planned spending increases on schedule.

Against this backdrop sits the as-yet unfulfilled commitment by the government to review Canada’s defence policy, originally promised in the 2022 budget. The defence policy update, as it is known in defence circles, had at one time been expected last fall. After that target slipped, it was expected that the update would come in time for an anticipated cash infusion in the March, 2023, federal budget. With no significant update presented in that budget, the expectation shifted to the new policy appearing before the Vilnius summit.

Presumably, Canada would like to meet with its core allies with more to talk about than how much it is cutting defence spending. But with only a week to go, time is running out.