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The ink isn’t even dry on Canada’s new defence industrial strategy, and there are already uneasy rumblings from Washington. The objections are not aimed at Canada — at least not yet — but they could eventually spill across an already strained border.
A week ago, both the U.S. State Department and the Department of Defence quietly fired a shot across the bow of the European Union over its rearmament plans.
The Trump administration warned European allies against defence policies that favour domestic producers — commonly known as the “buy European” clauses in a security directive recently revised by the EU.
“Protectionist and exclusionary policies that strong-arm American companies out of the market when Europe’s largest defence firms continue to greatly benefit from market access in the United States are the wrong course of action,” said the U.S. response, filed on Feb. 13.
Politico-EU first reported on the statement, but a copy of the submission was subsequently obtained by CBC News.
The warning came a little more than a week after U.S. President Donald Trump signed an executive order aimed at reinforcing the United States as the arms-maker of choice for allies and speeding up Washington decision-making so weapons and equipment could reach foreign militaries faster.
Washington appears to view Europe’s defence-industrial ramp-up as an economic threat — and one it is not prepared to ignore.
The U.S. submission also linked EU procurement restrictions to broader concerns, including the risk of weakening NATO capability targets and violating commitments under a recent U.S.–EU trade framework that included an EU pledge to buy more American weapons.
“U.S. companies are deeply integrated into the European economy and supply chain, employ thousands of European citizens in highly skilled jobs, and help Europe deliver credible capabilities,” it said.
The submission stated that cutting out U.S. producers ultimately “inhibits European countries from procuring capabilities that they need for their own defence” and would weaken ties between the United States and NATO allies.
The EU has also put in place an “Anti-Coercion Instrument” meant to protect member states from economic pressure — a signal that Brussels is taking such threats seriously.
For its part, the U.S. threatened retaliation if EU states, or the EU itself, adopted policies that exclude or disadvantage American defence companies in favour of European producers.
Prime Minister Mark Carney says there are areas where U.S. technologies and ‘capabilities’ suit Canada’s defence needs — but he added the government is ‘very confident’ in Canada’s ability to grow its own defence ‘capabilities’, suggesting potential initiatives with a ‘diversified range’ of partners.
Canada’s new defence strategy
Canada’s new defence industrial policy rests on what is being described as a “build, partner, buy” philosophy.
That means prioritizing Canadian defence manufacturers. If that is not possible, the next step is to partner with allied nations to acquire equipment while attracting investment and intellectual property to Canada.
“Only after exhausting these options will we buy from abroad,” Prime Minister Mark Carney said on Tuesday.
The strategy sets the goal of awarding 70 per cent of federal defence contracts to Canadian firms within a decade.
Asked whether Trump’s executive order pits Canada’s defence industry against the U.S. defence-industrial complex, Carney downplayed the concern.
“We are very confident in our ability to grow our defence capabilities,” he said. The prime minister added that Canadian industry can grow alongside the United States, rather than in competition.
“I’m going to use the term complementary as opposed to competition, but complementary to American supply.”
The U.S. Embassy in Ottawa declined comment Friday on how the Trump administration’s approach to Canadian rearmament might differ from the warning delivered to the EU.
Canada’s defence industrial base is fundamentally different from Europe’s and from many other allies.
There are only 12 companies classified as Original Equipment Manufacturers (OEMs, in procurement lingo) in Canada that produce major pieces of equipment from raw materials to finished products. Many of those firms, however, are subsidiaries of U.S.-based defence contractors. Others manufacture components that feed into larger American-built products.
“There’s nothing in this strategy that says that we’re not going to continue to be a branch plant economy for military capabilities,” Wendy Gilmour, a Canadian and former assistant secretary general for defence investment at NATO, told CBC News following the strategy’s release.
Carney’s government wants to turn defence production into an economic engine for the country. Whether that is possible under the current “branch plant” model is up for debate.
As Ottawa rethinks U.S. weapons contracts, South Korean arms manufacturers want to resupply Canada’s depleted military with everything from howitzers to submarines. CBC’s Murray Brewster got exclusive access to one company angling to become Canada’s new high tech arsenal.
Allies offer models for defence growth
South Korea offers one of the clearest examples of a country that treats defence procurement as an industrial engine.
At the centre is the Defence Acquisition Program Administration (DAPA), a centralized authority that goes beyond contracting equipment. It defines requirements, manages major development programs, oversees exports and, crucially, treats industrial growth as part of its mandate.
Stephen Fuhr, secretary of state for defence procurement, recently acknowledged that South Korea’s system — and perhaps its ambition — exceeds what Canada is aiming for.
“We just came back from South Korea…. They have an organization called DAPA. It’s a little bit more sophisticated than what we’re doing,” Fuhr told the House of Commons government operations committee recently.
South Korea’s major prime contractors — Hanwha, Korea Aerospace Industries, Hyundai’s defence units and others — are commercially structured firms operating within a policy framework that gives the state unusual leverage over timing, scale and direction of military purchases.
“When the military decides to acquire it, we do it,” Seok Jong-gun, South Korea’s minister of defence procurement, said in an interview with CBC News last year. “The decision-making process is very fast.”
The result is a model in which domestic procurement for the South Korean military acts as a proving ground for the export market. Sustained national programs in artillery, armoured vehicles, aerospace and naval construction have allowed Seoul to scale production quickly when overseas demand surged.
The model allowed the South Koreans to develop a submarine-manufacturing industry over two decades, taking German designs and improving on them enough to compete with TKMS — one of Germany’s leading naval shipbuilders — in Canada’s bid to buy new submarines.
While the South Korean government does not own defence contractors, it plays a central role by co-ordinating requirements, R&D investment and export promotion in a single, centralized system.
Sweden also uses defence production as an economic driver but through a leaner hybrid model. Saab, its defence champion, is publicly traded rather than state-owned, and Stockholm does not routinely own controlling stakes across its defence sector.
Instead, it exerts influence through two powerful tools: procurement expertise and strict export governance.
Sweden’s procurement arm, the Swedish Defence Materiel Administration (FMV), is a technically sophisticated buyer that works closely with industry on long-term capability planning.
At the same time, Sweden’s export control regime — administered by the Inspectorate of Strategic Products — is among the most structured in Europe, with statutory authority over arms exports and certain ownership questions.
Source: cbc
