As Canada increases defence spending and boosts domestic production, manufacturing is becoming a key strategic advantage. That was the backdrop for the panel titled “Shaping Global Manufacturing for Defence Leadership” at the 20th annual Toronto Global Forum, organized by the International Economic Forum of the Americas (IEFA).
The discussion focused on investment in defence manufacturing, changing capability requirements and how countries can strengthen domestic production while maintaining parterships with allies.
The conversation, moderated by Camilla Sutton, Managing Director, Head of Equity Research, Canada & UK, BMO Capital Markets, brought together the following panellists:
Josh Clarke, Lead Scientist, Destiny Copper
Brian Gallant, CEO, Space Canada and 33rd Premier of New Brunswick
Wes Rhiger, Director of Engineering, General Dynamics Land Systems--Canada.
Ephraim Rudman, Partner, Financial Institutions Group, and Co-Head of Platform Strategy, Apollo
George Spezza, Director of Economic Development, Niagara Economic Development
Here are some highlights from the discussion.
Turning ambition into capacity
Canada has committed to investing 5% of GDP annually by 2035 under NATO’s new benchmark for defence and security-related priorities. This underscores the need to match investment with clear military requirements. Josh Clarke said defence customers need to engage suppliers early and provide clear specifications, so companies know what is being asked of them.
Investors are looking for that same clarity to know that demand will last long enough to justify their investment, said Ephraim Rudman. “It’s very difficult to deploy significant amounts of capital to build out the infrastructure without having that visibility,” he said.
If Canada is to meet its defence goals, it also needs to keep improving procurement processes, Wes Rhiger said. After being in the defence business for approximately 25 years, he is encouraged by the establishment of the Defence Industrial Strategy and the launch of the Defence Investment Agency. The strategy is intended to strengthen Canada’s domestic defence industry, while the agency is intended to modernize and streamline defence procurement.
Helping companies scale
Camilla Sutton said that while many small Canadian companies are seeking to capitalize on the new defence spending, the message she heard from the panel is that the real challenge is scaling.
Some panellists said establishing relationships with government early is one way to give startups legitimacy. That can help them scale faster. Rhiger said that this had been the experience of General Dynamics Land Systems–Canada, which designs and manufactures military vehicles. “We’re very proud of our relationship with the Canadian Armed Forces, and really, it was the launch of our product with them that legitimized our capabilities,” Rhiger explained.
That legitimacy, he added, is what allowed his company to compete internationally. Rhiger said exports now account for a significant share of the company’s revenue.
Brian Gallant agreed that having the government as an early customer can strengthen a company, especially for a startup. “It is a vote of confidence and gives a boost to the company. But it also gives a lot of credibility internationally,” he said.
Making a defence investment attractive to capital
On the sidelines of the Forum, Sutton said there are trade-offs over who owns the risk, as investors and companies look for certainty around demand. “Where can we put the risk that will make it easier to finance and invest and truly build?” she said.
Rudman contrasted capital-light startup models with manufacturing businesses, which typically require greater investment in physical capacity. The challenge is bridging the gap between early-stage development and the next phase of growth, when companies need significant investment.
Government support and venture capital can help companies reach that stage, he said. Rudman said collaboration with major defence contractors can provide more mature companies with access to established supply chains and clearer demand signals.
Longer-term contracts are one way to instill greater investor confidence, Rudman said. Beyond firm commitments about when purchases will be made, companies need a framework that gives them confidence their investments will remain viable over time.
Building at home while partnering with allies
The discussion also explored how Canada should balance domestic production with international partnerships.
Gallant argued that the question is not simply whether Canada should build at home or buy from allied countries, but whether it can maintain control over critical capabilities when circumstances deteriorate. “What’s really crucial in every scenario is if everything goes wrong, can we control those capabilities?” he said.
Canada should focus on balancing self-sufficiency and international collaboration, said Rudman. While domestic control over critical national security capabilities is important, there will always need to be some international collaboration. “Defence, just given the size of investment that has to be made, is an international business,” he said.