Canada and the National Technology and Industrial Base

Executive summary

• The Canadian-US defence-industrial relationship — rooted in World War II-era agreements and solidified during the Cold War — is foundational for Canada’s national security and access to advanced military technology. That relationship culminated in the introduction of the National Technology and Industrial Base (NTIB) into US legislation, and Canada into that construct, in the early 1990s.
• Although the NTIB has streamlined some US-Canada cooperation, its actual impact remains limited and unclear to many stakeholders. Canada’s defence-industrial ties with the United States would likely endure even without NTIB, but modernising and elevating the NTIB could further strengthen defence-industrial coordination and, ultimately, Canada’s contributions to its alliance with the United States.
• Several challenges must be overcome if this is to happen. Canadian firms have faced delays and uncertainty from evolving US export controls and growing protectionist rhetoric and policy. The COVID-19 pandemic, the AUKUS announcement, and recent high turnover among key defence officials have diluted and weakened the interpersonal connections that have historically sustained bilateral cooperation. Canada also faces several internal challenges, including an outdated procurement system plagued by long delays.
• The second Trump administration has strained Canada-US relations through President Trump’s nationalist rhetoric downplaying defence alliances, a transactional diplomacy, dramatic tariffs and tighter export controls. As such, Canadian defence firms face uncertainty over tariff exemptions, which complicates their long-term planning. Canadian leaders have responded with pledges to increase defence spending while seeking to reduce dependence on the US industrial base by expanding cooperation with Europe.
• Despite Ottawa’s pro-diversification rhetoric, Canada’s deep supply chain ties make continued US alignment the most likely outcome. The Canada-US dimension of the NTIB therefore requires modernisation and higher-level intergovernmental oversight, with new flagship initiatives like the high-profile ‘Golden Dome’ potentially serving as practical platforms for reform. To sustain close defence-industrial ties, Canada should also better align its defence investments with US priorities where these are mutually beneficial. Canada and other NTIB partners should pursue new multilateral research and development agreements to diversify capabilities. Finally, Canada should modernise its defence industrial ecosystem to overcome various internal constraints. Overall, if successful, Canada’s experience could offer Australia and the United Kingdom a valuable set of lessons on how to modernise their own engagement within the NTIB.

US, UK, Australian and Canadian forces operate as a combined force in exercise VIRTUAL FLAG: Coalition. Source: US Air Force

Recommendations

• Elevate NTIB oversight
  • Increase political and intergovernmental attention, with regular senior-level meetings, ongoing industry consultation, and dedicated liaison offices to improve coordination and responsiveness.
• Anchor reform in flagship projects
  • Use high-profile initiatives like the Golden Dome to drive joint capability development, technology sharing and sustained stakeholder engagement.
• Focus on mutually beneficial investments with the United States
  • Prioritise projects aligned with US strategic priorities, leveraging integrated supply chains and Canada’s strengths in sustainment, surge capacity and capability development.
• Expand multilateral research and development collaborations
  • Canada should prioritise partnerships with other NTIB members to diversify its industrial base, accelerate technology integration, and share research and development costs, while broadening export opportunities.

Introduction

The Canadian-United States defence industrial relationship has evolved over the past century, through formal agreements and various political, economic, bureaucratic and interpersonal dynamics. This relationship has given Canada and the United States access to one another’s supply chains and advanced technologies, while strengthening national industrial and strategic positions. Canada’s inclusion in the US National Technology and Industrial Base (NTIB) since the early 1990s reflects the depth of this integration. However, recent challenges, particularly under the Trump administration, including rising protectionist rhetoric, scepticism toward traditional alliances like the North Atlantic Treaty Organization (NATO), accusations that Canada is freeriding on defence commitments and even provocative suggestions that Canada be annexed as the ‘51st state’, have strained bilateral cooperation, including on industrial and technology issues. As the international security environment continues to deteriorate, with lessons from the Russia-Ukraine War underscoring the importance of the strategic depth of munitions stockpiles, and growing tensions in the Indo-Pacific highlighting the necessity for conventional deterrence, maintaining and strengthening Canada’s defence relationship with the United States will be essential for Canada’s defence and industrial competitiveness. Revamping the NTIB offers one means for doing so.

Canadian Prime Minister Mark Carney is flanked by Chief of the Defence Staff General Jennie Carignan and Minister of National Defence David McGuinty as they attend a tour of the Fort York Armoury in Toronto, June 2025. Source: Getty

Historical context

During the First World War, Canada, cautiously but steadily, began reorientating its defence relationship away from the British Empire towards closer ties with the United States. This was driven by practical strategic considerations as the United States was the only partner able to help provide armaments. In November 1917, the Canadian Imperial Munitions Board and the US Department of War reached an agreement to streamline munitions ordering and delivery for Canada. This agreement unfolded due to a mix of close interpersonal relationships among officials, and was shaped by urgent wartime demands, while allowing US assistance to bolster the domestic Canadian munitions industry.¹

However, lacking a unifying external threat during the interwar era, progress on deepening Canada-US defence integration stalled. This lapse was ended by the Second World War, which served as the shock moment that restarted joint industrial relations. Canadian Prime Minister Mackenzie King and US President Franklin D. Roosevelt met on 18 August 1940 and produced the Ogdensburg Declaration. This agreement pledged mutual defence between the two countries and established the Permanent Joint Board on Defence (PJBD) to help manage policy-level consultation on bilateral defence issues.²

During the First World War, Canada, cautiously but steadily, began reorientating its defence relationship away from the British Empire towards closer ties with the United States. This was driven by practical strategic considerations as the United States was the only partner able to help provide armaments.

Canada and the United States then signed the Hyde Park Declaration in April 1941.³ As the Second World War intensified, Canada’s trade with the United Kingdom collapsed, leaving it with a growing trade deficit with the United States, paired with other financial pressures, while funding the war effort. This created strong incentives to expand exports, especially by broadening the Canada-US defence industrial relationship. Prime Minister King proposed a new arrangement that would allow for reciprocal procurement of munitions, which in turn laid the foundation for deepening defence production cooperation. The agreement allowed for bypassing previous legislative barriers that had constrained defence industrial trade; this unfolded due to the mutual trust between officials from both sides and allowed for prioritising industrial efficiency over protectionism. Via bureaucratic inertia, the agreement embedded itself in the Canadian-US defence relationship and helped provide a policy framework for ongoing cooperation between both countries well into the Cold War.⁴

During the early Cold War, common threat perceptions and the need for cross-border cooperation shaped much of the Canada-US defence relationship during this period. The Soviet Union’s 1953 nuclear test and the persistent threat of long-range bombers reinforced the imperative for continued cooperation, which was further enabled by longstanding bureaucratic and industrial connections of the two countries. However, protectionist economic policies from both sides continued to hamper full integrative efforts.⁵ The two countries continued to rely on the existing institutions like the PJBD as well as new ones like the Joint Industrial Mobilization Committee (1949) to serve as mechanisms to manage the relationship, as well as their participation in NATO (1949) and the North American Aerospace Defense Command (NORAD) (1958).⁶

The Korean War had a significant influence on the Canada-US defence relationship. The surprise of the war caught Canada off guard, showing that defence industrial reforms were required to meet the munitions and equipment demands of the Canadian military during wartime while also sustaining NATO’s conventional deterrence posture in Western Europe. In response, a domestic industrial ecosystem gradually emerged in Canada, which was shaped by the realities of Cold War defence priorities and the imperative to align more closely with US procurement and production networks. This ecosystem was built not only to meet Canada’s military-technological and industrial needs but also to position Canadian firms to compete for select US contracts by aligning with US industrial standards and qualification procedures, thus extending and entrenching the principles of the Hyde Park Agreement into the Cold War era. However, by the late 1950s, recession-driven pressures and post-Korean War spending cuts pushed Canadian defence toward more protectionist procurement policies that prioritised domestic industry and reinforced deeper interest in national self-sufficiency.⁷ The failure of the CF-105 Arrow fighter-interceptor program, because the Canadian Government simply could not order enough to sustain the production line at a profitable level, revealed that the domestic industry could not survive without foreign markets or fully meet national military requirements on its own.⁸

This all culminated with the signing of the Defence Production Sharing Agreement (DPSA) in 1959. This agreement established a limited free-trade ecosystem for defence production materials and goods and facilitated reciprocal procurement between Canada and the United States. Essentially, the DPSA mitigated protectionist tendencies and deepened binational defence industry ties. While the United States was largely motivated by strategic and military concerns, Canada saw the DPSA as a way to secure economic access to US defence contracts. Despite periodic tensions, such as over the Vietnam War or renewed protectionist pressures, the DPSA helped foster trust and laid the foundation for decades of bureaucratic and industrial integration in continental defence for decades to come.⁹

Over the course of the Cold War, the Canada-US defence industrial relationship evolved due to a series of additional agreements and policy decisions. The 1963 Defense Development Sharing Agreement (DDSA) aimed to integrate Canadian industry into US research and development efforts. The 1965 Auto Pact, which removed tariffs on automobile-related manufacturing and enhanced continental industrial cooperation, also saw Canadian exports to the United States increase.¹⁰ This pushed Canadian industry to focus on parts and supplies, recognising it could not compete with the United States in developing major strategic platforms.¹¹

In 1970, a Canada-US memorandum of understanding (MOU) granted Canadian firms a unique status in the US domestic defence marketplace, by allowing them to bid on restricted US mobilisation contracts. The agreement formalised Canada’s existing role in US mobilisation planning and aimed to stabilise and strengthen defence production sharing.¹² However, renewed US protectionism strained the relationship, as the defence trade became entangled in broader trade disputes, but tensions eased by the end of the decade.¹³ The introduction of the International Traffic in Arms Regulations (ITAR) in 1976 complicated Canada-US industrial cooperation due to its stricter licensing and security rules. The constraints introduced by ITAR forced Canadian firms to develop internal compliance systems to meet US requirements, slowing the pace of business. However, Canada’s exemption status, provided it complies with the rules, has enabled its firms to remain integrated within the US defence-industrial ecosystem.¹⁴ Despite its challenges, a Canadian stakeholder called ITAR and Canada’s exemption one of the most important mechanisms in the relationship, describing it as the “rules that allow things to happen.”¹⁵ Essentially, by providing a clear legal pathway for joint projects and the secure exchange of technical data, Canada’s exemption facilitates collaboration instead of impeding it.¹⁶

In the 1980s, Canadian Prime Minister Brian Mulroney and US President Ronald Reagan developed a strong interpersonal bond, which led to the 1985 Quebec Summit where both leaders publicly committed to deeper market integration and reduced defence trade barriers. This would lead to the establishment of the bilateral North American Defense Industrial Base Organization, which was tasked to oversee joint defence-industrial efforts.¹⁷ However, some constraints on the relationship remained, such as Canada’s industrial benefits policy that was viewed as protectionist by US officials, and the US decision to open its defence market to other NATO allies and Japan, which further diluted Canada’s relative access.¹⁸ NORAD modernisation efforts during the 1980s resulted in a series of US Department of Defense (DOD) and Canadian Department of National Defence (DND) agreements and MOUs, which then formalised cost-sharing arrangements and joint research and development efforts by groups of Canadian and US firms into various emerging technological areas related to North American air defence.¹⁹

US officials, along with their Canadian counterparts, viewed the establishment of the NTIB as the next step in a defence-industrial partnership that had evolved since the 1940s and matched the growing interest in North American free trade.

Following the Cold War, the Canada-US defence industrial relationship continued to evolve based on additional agreements and new investments. The NTIB was formalised in US legislation in 1993 and predominantly operated in an ad hoc approach at the bureaucratic level. The effort was driven largely by the United States, as their defence community wanted to modernise and formalise their access to Canadian contractors, motivated by a strategic need for Canadian materials and technology.²⁰ US officials, along with their Canadian counterparts, viewed the establishment of the NTIB as the next step in a defence-industrial partnership that had evolved since the 1940s and matched the growing interest in North American free trade, as evident by the 1994 formation of the North America Free Trade Agreement between the United States, Canada and Mexico. Both sides recognised the mutual benefits of simplified contracting and moved quickly to implement it; this was easy to accelerate as it occurred during a period of exceptionally close Ottawa–Washington relations.²¹ By the 1990s, North American defence firms were themselves becoming multinational entities, and the NTIB further streamlined this transformation.²² In short, industry on both sides wanted it, and the political climate enthusiastically supported the NITB’s establishment.

Interpersonal connections between relevant civil servants on both sides of the border, such as informal phone calls or conversations at professional conferences, remained crucial to the stability of the broader bilateral defence relationship.²³ Some formal mechanisms were established involving periodic committee meetings, although some officials felt this had waned over time.²⁴ In an era of heightened security after the 11 September 2001 terrorist attacks, Canada introduced its Controlled Goods Program to better align with US regulations such as ITAR and safeguard sensitive dual-use technologies.²⁵ NORAD modernisation also resumed, with joint efforts to integrate emerging technologies for continental defence.²⁶

Evaluating Canada’s NTIB participation

The NTIB should be viewed as just one component of the broader Canada-US defence relationship, which encompasses a range of formal agreements, program areas and interpersonal ties. Some Canadian stakeholders observed that other governments interpret the NTIB as an exclusive club, though in tangible terms, it is less defined.²⁷ In practice, the NTIB operates quietly in the background of the bilateral relationship. Its enactment added formality and structure to existing bilateral industrial cooperation, but stakeholders have not identified it as a decisive mechanism in furthering that agenda.²⁸ Rather, it was layered onto a defence-industrial partnership with decades of history, never emerging as a focal point of relations, and many stakeholders have struggled to gauge its significance.²⁹ This is a telling indication that it was unlikely to have been a decisive instrument in the context of bilateral defence industrial cooperation, notwithstanding its role in formalising certain authorities and forms of such cooperation.

While the NTIB helps streamline aspects of the industrial and trade dimensions of the relationship, its actual impact remains uncertain, even among key stakeholders.³⁰ As one Canadian official noted, “it was never clear if the NTIB was ever used on its own to make a decision.”³¹ It exists entirely because the United States wanted Canada to participate in its joint industrial base and wanted access to the Canadian market, which is reflected in that the NTIB is rooted in US legislation. This creates an asymmetrical relationship structure where Canada participates largely at the discretion of the more powerful United States.³²

Royal Canadian Navy Halifax Class frigate HMCS Ville de Québec conducts a replenishment at sea with USNS Rappahannock. Source: Australian Department of Defence

This asymmetry of power is a core feature of Canada-US defence industrial relations. As the United States holds significantly more influence, the US defence industry does not depend on Canada for its survival, but it nonetheless benefits from Canadian ties. For Washington, Canada’s participation provided a secure and reliable source of supplies, manufacturing, and high-quality research and development that could be seamlessly integrated into the US industrial base. This role built on Canada’s existing ITAR exemptions and its long history of cooperation with US firms. For example, during the peak of the Global War on Terror campaigns in Iraq and Afghanistan, the United States contracted Canadian firms for urgently needed munitions.³³ Overall the relationship’s growth can be attributed to the particularly strong interpersonal connections among key players, especially at the senior leadership level, built on a foundation of mutual trust that is exceptional in cross-national contexts.³⁴

Emerging in response to external threats, the bilateral relationship has strengthened when policymakers prioritised security over protectionism. The geographic proximity of each country helped accelerate this relationship to a large degree, as industries from either side have relatively direct access to one another. Once established, the relationship continued due to bureaucratic inertia. However, it also survived due to the deep mutual trust that each side was able to place in the other, which was further facilitated by the mutual benefits of the relationship, which include strategic utility for the United States and economic benefits for Canada. Importantly, the relationship has also been successfully managed over time by professional bureaucrats and, until recently, remained insulated from external political pressures.

This relationship has provided Canada with benefits by directly linking its defence industrial base to that of the globe’s military superpower. Its formal mechanisms, such as the NTIB, provide Canada direct access to US supply chains, allowing for larger production runs and the realisation of economies of scale otherwise unattainable in the domestic market. It also grants Canada privileged access to advanced US military systems, along with opportunities for its companies to bid on US defence contracts. For example, Montreal-based CAE Inc has been awarded several high-value aviation simulator and support contracts for the US military.³⁵ Not only has this benefited national prestige but has ensured the Canadian military maintains consistent access to highly valuable and capable equipment. At the political and strategic level, Canada has leveraged the relationship to help meet various strategic objectives such as supporting continental defence and NATO commitments.³⁶

Further, this relationship has connected Canadian defence contractors to advanced research and development data from US sources, which has helped Canada build industrial capacity while diffusing the costs among both partners. A leading example of joint industrial collaboration is General Dynamics Land Systems Canada’s work on the Light Armored Vehicle (LAV) family of systems. The Canadian Army and US Marine Corps have been the primary customers of the LAVs, and its development has included significant research into new foundational digital architecture systems.³⁷

Recent events have started to challenge and dilute Canada’s historically privileged position with its close relationship as political elites in the United States have grown increasingly critical of Canada’s low defence spending levels.

However, recent events have started to challenge and dilute Canada’s historically privileged position with its close relationship as political elites in the United States have grown increasingly critical of Canada’s low defence spending levels, which continue to fall short of NATO’s 2% of GDP benchmark. This spending shortfall led to a large bipartisan group of US Senators drafting a letter in 2024 for Prime Minister Justin Trudeau, criticising Canada’s defence spending.³⁸ One of the most notable repercussions of Canada’s perceived lack of defence investment was its snub from the AUKUS defence agreement by the United States, the United Kingdom and Australia.³⁹ It was likely not the United States’ intention to slight Canada by expanding the NTIB to include other countries. However, many Canadian stakeholders perceived that de facto parity with other states diminished Canada’s unique relationship with its southern neighbour, and Canadian industry resented the increased competition for US contracts.⁴⁰ As other countries move closer in the US defence orbit, Canada’s previously exclusively privileged position has been diluted. Canada now finds itself on the outside looking in, seeking ways to regain its favourable status with its closest allies.

Overall, the NTIB is best understood as a component of the Canada-US defence-industrial relationship that has operated largely unnoticed in bilateral relations since its inception in the 1990s. Built into US legislation, it has provided some formality and structure to the relationship, yet many Canadian defence stakeholders view it as a curious addition to pre-existing arrangements rather than a central component.⁴¹ For Canada, the NTIB has never been treated as a focal point of the bilateral relationship, and in practice, it has never been fully realised, making it difficult to assess its actual or potential significance. Nor does Canada seem to treat the NTIB as an important multilateral mechanism involving the non-US members. Canada still maintains strong working relationships with other NTIB members, with recent examples including the purchase of Australia’s Jindalee Operational Radar Network (JORN) defence radar and the adoption of the UK-designed Type 26 Global Combat Ship for the Canadian Surface Combatant (CSC) program. However, it is not clear that the existence of the NTIB in any way influenced the JORN and CSC decisions. Further, Canadian stakeholders seldom consider non-US members when discussing or thinking about the NTIB framework.⁴²

Canada-US defence-industrial cooperation does not depend on the NTIB, as other mechanisms, such as the DPSA have long facilitated and sustained bilateral relations. However, the NTIB could be reformed or even replaced to provide greater structure, transparency and formal mechanisms for engagement, which would make it a more useful and strategic tool. In its current form, it remains underutilised and peripheral to Canada’s core defence-industrial activities. Targeted modernisation could help make it a more effective platform for coordination, capability development and technology sharing. Such an effort requires more structured engagement, including regular formal meetings of decision-makers such as Cabinet members or Secretaries in the United States, to elevate the relationship’s visibility and profile and make it more actionable. To support this, Canada and the US should create dedicated liaison offices to streamline project coordination and facilitate timely information exchange. Further, input from private sector firms on both sides of the border should be more systematically considered to allow for more evidence-based guidance for policy adjustments and investment priorities.

Constraints and the Canadian NTIB experience

Although mechanisms like the NTIB and DPSA aim to streamline trade, US export control laws continue to create delays and raise concerns among Canadian firms about potential future restrictions that could threaten their contracting viability.⁴³ While existing bilateral agreements are designed to allow direct access, US disclosure and classification policies can still limit Canadian participation, prompting some firms to establish US subsidiaries, often at the cost of disrupted communication with their Canadian parent companies.⁴⁴

The spectre of protectionism has at times threatened to disrupt the relationship. Both Canada and the United States have sometimes embraced protectionist trade policies and procurement practices, particularly during periods of economic downturns in peacetime.⁴⁵ However, some Canadian stakeholders have felt protectionist sentiments are often largely confined to public-facing rhetorical statements rather than directly affecting industrial relations, pointing out that so far, the defence trade is tariff exempt.⁴⁶

The COVID-19 outbreak disrupted elements of Canada-US defence relations, such as the operation of the NITB, by interrupting regular meetings and diverting the attention of key stakeholders to other priorities. This was paired with unprecedented sudden turnover of defence bureaucratic personnel, which introduced new personalities who lacked an appreciation of the longstanding bilateral relationship.⁴⁷ As a result, the interpersonal ties that had long underpinned Canada-US defence industrial cooperation weakened. Following this, the 2021 AUKUS announcement further diverted defence officials’ attention from the NTIB, disrupting the regular pattern of US-Canada meetings, which then declined considerably.⁴⁸ In that respect, there is a growing recognition among defence stakeholders that Canada needs to pay greater attention to US priorities to better manage the relationship.⁴⁹

A Royal Australian Navy MH-60R Sea Hawk departs from the Royal Canadian Navy ship HMCS Ville de Québec during Exercise Alon 2025. Source: Australian Department of Defence

Canada has struggled to articulate its unique value in the US defence supply chain, a challenge that has gradually diluted the relationship. This problem is compounded by DND’s weak grasp of domestic industrial policy, which undermines its ability to engage meaningfully in the integrated North American defence market. For example, the Canadian Government has difficulty defining what is a Canadian company, as many defence contractors in North America were formed in the United States but have evolved over time into multilateral conglomerates with a substantial Canadian presence.⁵⁰ As a result, DND is often unable to make fully informed procurement and partnership decisions, leaving it ill-equipped to prioritise domestic industry effectively. Without a clear definition or conceptual understanding of what counts as a Canadian company, the department cannot reliably distinguish domestic capabilities from foreign-owned entities.

Finally, the Canadian procurement system is also in dire need of modernisation, as significant funds intended to purchase new equipment go unused each year due to inefficiencies in the system. For example, between 2007 and 2016, roughly one-fifth of allocated defence funds for capital projects remained unspent each year, as the procurement system struggled to deliver equipment on schedule.⁵¹ The Canadian procurement system also involves nationalist preferences, such as the Industrial and Technological Benefits (ITB) policy, which mandates that procurement choices provide economic and other benefits to the country beyond providing new defence capabilities.⁵²

Underpinning the majority of these constraints lies the asymmetrical structure of the Canada-US defence-industrial relationship, which constrains Canada’s ability to shape and drive its own future. The United States retains de facto decision-making authority and monopoly over the strategic direction of North American defence choices. In practice, Washington will always be the headquarters of Canada-US defence relations.

Strategic uncertainty and the Trump administration

The second Trump administration has posed one of the greatest challenges in Canada-US relations since the end of the Second World War. President Trump’s rhetorical style, paired with unilateralist policy preferences, has been very antagonistic towards Canada. At the heart of President Trump’s political philosophy is nationalistic populism and a deep suspicion of international trade agreements and military alliances. This has heavily influenced his policies, which include his new “America First Trade Policy,” which calls for the renegotiation of previous US trade agreements and export control systems.⁵³

The first Trump administration, in particular, was a very vulnerable period for US civil servants, as a pervasive fear of termination spread throughout their ranks. This pressured bureaucrats, even those sympathetic to Canada, to intensely enforce their perception of Trump’s policy positions.⁵⁴ Under President Trump, the United States is felt to be acting in a highly transactional manner, more so than in previous historical periods. Canadian stakeholders generally believe that while the United States remains open to doing business with Canada, it expects concrete proposals with clear value, as there is little appetite in Washington for informal discussions about the overall state of the relationship. Moreover, Trump’s current administration appears to place limited value on longstanding alliances and historical legacy relationships. As one Canadian stakeholder noted, there is a prevailing attitude of “what have you done for me lately.”⁵⁵ Trump’s aggressive rhetoric has also challenged the long-standing norm of populist politics not influencing the Canada-US defence relationship; instead, Trump has brought it to the forefront of national debates.

The Trump administration launched a series of global tariffs targeting most countries, including Canada. These tariffs were implemented in layers, beginning with a universal tariff on all imported goods, followed by additional rounds of more targeted measures and confusion persists regarding which firms may qualify for national security exemptions.⁵⁶ Canadian goods that the United States identifies as not meeting the Canada-United States-Mexico Agreement rules of origin⁵⁷ may face additional tariffs of up to 35%, although roughly 90% of bilateral trade qualifies under the agreement.⁵⁸ Canadian defence firms have voiced their displeasure at having to account for these tariffs, especially their unpredictability in application, as their looming threat has disrupted their short- and medium-term business development and strategic planning.⁵⁹

Overall, the highly speculative nature of a new European partnership, coupled with Canada’s historically risk-averse strategic culture and its longstanding North American supply chain integration, suggests that Canada will likely continue aligning closely with the United States on defence-industrial mat

The Canadian Government’s reaction to President Trump has been a mix of engagement and accommodation. Canada has implemented its own set of retaliatory tariffs, although they do not include goods tied to national defence. As part of this reconciliation, Prime Minister Carney has pledged that Canada will join other NATO members in meeting Trump’s demands that allies raise defence spending levels to 5% of GDP.⁶⁰ Prime Minister Carney has also discussed diversifying Canada’s defence industrial relationships internationally to decrease Canadian dependency on the United States, though it remains unclear how committed Canada is to this effort. A core part of this has been pledging to join the ReArm Europe initiative,⁶¹ and the signing in June 2025 of a Security and Defence Partnership, which could enhance Canadian defence industrial ties with the European Union. Carney has been publicly vocal about his dissatisfaction with how dependent Canada is on the United States for military supplies.⁶²

Some Canadian defence stakeholders have expressed scepticism of this European focus. Noting that while Carney talks of diversification, he is also directly seeking a renewed economic and security deal with President Trump, which is a contradictory position to take. Further, these stakeholders have outlined other issues, such as European partners cannot replicate the depth and function of the Canada-US bilateral defence relationship. Historically, the European Union has been more protectionist than the United States, which suggests hurdles in any future attempt to build closer defence ties; the European Union is likely looking more for new customers more so than new partners.⁶³ Overall, the highly speculative nature of a new European partnership, coupled with Canada’s historically risk-averse strategic culture and its longstanding North American supply chain integration, suggests that Canada will likely continue aligning closely with the United States on defence-industrial matters.

Conclusion and recommendations

NTIB modernisation would require its elevation to a higher level of intergovernmental management and political profile to enhance its visibility, profile and effectiveness. This means ensuring that key political elites fully recognise its strategic importance and commit to its sustained oversight. Regular, structured meetings among senior governmental stakeholders are essential to actively manage and shape a reinvigorated NTIB, while ongoing consultations with industry representatives on both sides of the border would help ensure that the NTIB remains responsive to evolving industrial needs and capabilities. Both Canada and the United States should consider establishing dedicated NTIB liaison offices in both countries to coordinate projects and allow for real-time information sharing.

For Canada, new investment opportunities such as the Golden Dome may be the ideal framing mechanism for such an effort.⁶⁴ The Golden Dome is a very high profile, multilateral defence investment initiative with clear deliverables and political visibility. By anchoring NTIB reform around such a tangible, flagship project, it would serve as a practical platform for collaborative capability development, technology sharing and joint procurement. This approach would not only demonstrate the NTIB’s relevance but also create a structured forum for regular high-level engagement among key stakeholders, ensuring sustained political commitment and industry participation.

This approach would not only demonstrate the NTIB’s relevance but also create a structured forum for regular high-level engagement among key stakeholders, ensuring sustained political commitment and industry participation.

If Canada and the other NTIB members wish to maintain close defence industrial ties with the United States, particularly under a transactionally oriented Trump administration, they should clearly demonstrate their value to the US defence community. This approach advances Canada’s interests by leveraging the integrated North American defence supply chain, which grants access to US research and development while enabling the fulfilment of manufacturing needs that domestic firms cannot meet on their own. Canada should prioritise mutually beneficial investments that also align with US strategic priorities, particularly in areas such as supply chain resiliency, surge capacity and secondary sustainment, where Canada has historical strengths. For Canada, the F-35 represents a critical investment opportunity, exemplifying successful joint industrial cooperation and offering potential economic gains through increased involvement in maintenance and sustainment contracts with the United States.⁶⁵

Canada and other NTIB partners, exclusive of the United States, should explore forming new research and development agreements, like what the United Kingdom, Japan and Italy are doing with the Global Combat Air Programme, a sixth-generation fighter aircraft initiative.⁶⁶ These initiatives would help diversify and strengthen the defence industrial base of all countries involved, help accelerate the integration of emerging technologies into their armed forces and potentially expand the export market opportunities for certain sovereign defence products. Although establishing new relationships and mechanisms will require significant time and effort, the long-term benefits are substantial: broader multilateral collaborations not only increase potential customer and supplier bases but also distribute the costs and risks of research and development, fostering innovation in a multilateral setting while also strengthening the defence-diplomatic relationships of all involved.