Canada Consistently Underfunds Its Defense

 

Canada has consistently underfunded its defence while benefiting from U.S. military protection, and it’s fair to argue that it should pay its fair share, both going forward and retroactively. 

Canada should pay its fair share—both retroactively and moving forward. The U.S. taxpayer shouldn’t be subsidizing a wealthy country like Canada when it can afford to defend itself.

Canada's Chronic Underfunding of Defense

• NATO requires members to spend at least 2% of GDP on defence, but Canada has never met this target in modern history.
• Canada currently spends around 1.38% of GDP on defence (2023)—well below what’s expected.
• The U.S. often makes up the shortfall, ensuring North America’s security at great financial cost.

The U.S. Bears the Burden

• The U.S. spent 3.49% of GDP on defence in 2023, well above NATO’s 2% target.
• The NORAD alliance (which protects Canadian airspace) is overwhelmingly funded by the U.S.
• The U.S. has military bases, personnel, and missile defence systems that indirectly protect Canada at no direct cost to Canadian taxpayers.

 Decades of Free-Riding – Should Canada Pay Retroactively?

Canada should have met NATO's 2% target for the past 50 years, here’s a rough estimate of what it “owes” in back defence spending:

• Since 1973, Canada has spent an average of 1.2% of GDP on defence, far below NATO’s 2% guideline.
• If Canada had met the 2% target, it would have spent hundreds of billions more over the years.
• Some estimates suggest that Canada has “underpaid” by $250 billion to $300 billion in military spending compared to its NATO commitments.

What Could Canada Do to Pay Its Fair Share?

• Increase defence spending immediately to at least 2% of GDP (about $20-30 billion more per year).
• Compensate the U.S. for past shortfalls—even a one-time repayment (e.g., $50-$100 billion) would acknowledge the U.S. burden.
• Take on more responsibility in NORAD and NATO, including Arctic security and missile defence.

The Political Reality

• Trudeau has refused to commit to 2% GDP defence spending, despite repeated U.S. pressure.
• Canada’s military is underfunded and aging, with outdated ships, aircraft, and limited troop numbers.
• The U.S. is growing impatient—Trump openly criticized Canada’s defence spending, and Biden has pushed for stronger NATO commitments.

Instead of outright demanding a lump-sum repayment, the U.S. should strategically adjust trade agreements to recover the costs while keeping relations smooth. Here’s how that could work:

1. "Trade Corrections" as Repayment

Since Canada has benefited from U.S. defence spending, the U.S. could:

• Impose higher tariffs on Canadian exports until the defence debt is balanced.
• Adjust USMCA (NAFTA 2.0) terms to favor U.S. industries, reducing Canadian economic advantages.
• Require mandatory U.S. defence contracts—forcing Canada to purchase more military equipment from American manufacturers (benefiting the U.S. economy).

2. Specific Trade Adjustments That Make Sense

A. Tariffs on Key Canadian Exports

• The U.S. buys 75% of Canada’s total exports, giving it major leverage.
• The U.S. could impose a defence surcharge on high-value Canadian goods like:
  • Oil & Gas (Canada’s biggest export)
  • Lumber & Forestry Products
  • Automobiles & Parts
  • Agricultural Products (wheat, beef, dairy)

B. Exclusive Defense Contracts

• Require all Canadian military purchases to be U.S.-made (fighter jets, warships, defence systems).
• Make Canada fund more NORAD operations directly by paying for U.S. military infrastructure in the Arctic.

C. Adjustments to USMCA (NAFTA 2.0)

• Canada gets trade advantages in USMCA, which could be revised to favour U.S. businesses until Canada offsets its defence debt.
• For example:
  • Reduce Canadian dairy protections (which currently hurt U.S. farmers).
  • Increase U.S. energy exports to Canada while restricting some Canadian energy sales to the U.S.
  • Strengthen “Buy American” provisions for U.S. infrastructure projects.

3. Why This Approach Works

✔ Avoids direct confrontation—Canada wouldn’t see it as a military “bill,” just a trade adjustment.
✔ Benefits the U.S. economy while recovering costs.
✔ Encourages Canada to increase defence spending voluntarily to avoid further trade penalties.

Bottom Line

If Canada won’t pay back directly, the U.S. should recoup the money through trade corrections—a fair, strategic, and diplomatic way to ensure Canada stops freeloading on defence.