Subscribe
Share
Share
Embed
blue-sky (verb)
: to offer ideas that are conceived by unrestrained imagination or optimism.
Hosted by Erin O’Toole, President and Managing Director of ADIT North America. Erin is the former Member of Parliament for Durham and former leader of the Conservative Party of Canada. The Blue Skies political podcast explores issues facing Canada and the world in a format that brings together thought leaders for an informed and engaging conversation.
Erin O'Toole (00:00:01)
Welcome to Blue Skies. This is another podcast talking about Canada's moment. We're in a ⁓ moment for national defense security and Canada's role in NATO, in NORAD. ⁓ We have erosion of traditional alliances ⁓ happening right before our eyes. You know, I'm not far from Lake Ontario. Yes, it's Lake Ontario and not Lake America. So ⁓ our reliance on our neighbor ⁓ and the blanket of security that they help provide.
As us being the junior partner in NORAD, ⁓ all of this is changing. And Canada has some ambitious plans in defense spending. ⁓ Our country, for the first time since the Mulrooney government, hit 2% ⁓ of GDP ⁓ on defense and defense-related spending. ⁓ We have designs by 2035 to hit 5% ⁓ of GDP. That would ⁓ be approximately $160 billion. ⁓ Can we even do it?
If we pledge to do it. ⁓ That's what we're going to talk about ⁓ today on Blue Skies. And we're fortunate to be joined ⁓ by one of Canada's leading policy thinkers and professors ⁓ on defense and security-related issues. ⁓ Professor Philippe Lagacet ⁓ is a professor at the Norman Patterson School of International Affairs at Carlton University. ⁓ He is ⁓ born for this moment. His three areas of expertise are defense policy.
executive power in government like the power of the PMO and and ⁓ new agencies being created ⁓ and our Westminster system itself. That's where I first encountered him ⁓ years ago. ⁓ so all of those things combined, are we having the right executive leadership, ⁓ parliamentary scrutiny and review ⁓ of some of these ambitious plans. He's a fellow at the Canadian Global Affairs Institute, the Royal United Services Institute in the UK. ⁓
He hosts and writes a very engaged substack that I would recommend you check out called Debate in Canadian Defense. ⁓ And the Chief of Defense Staff of the Canadian Armed Forces in 2025 ⁓ awarded him for the Canadian Armed Forces Medallion for Distinguished Service for his defense policy writing and advocacy. ⁓ Welcome to Blue Skies, Philip.
Philippe Lagasse (00:02:20)
Thanks so much, Erin. Pleasure to be here.
Erin O'Toole (00:02:22)
This will ⁓ really be a good discussion, I think, because ⁓ a lot of Canadians don't realize that, you know, we're on track to be spending ⁓ 3.5% ⁓ of defense. We're hearing they're gonna try and say they're hitting that target by 2030. That's 115 roughly billion dollars. I talked about how much 5% is. ⁓ Let's start out with that. Maybe talk about the 2% ⁓ and in your sub stack.
Debating Canadian defense, another plugged for it because it's really, really good. ⁓ You said in May you were skeptical of us being able to hit that 3.5% target. Talk about the pivot we've been under, ⁓ hitting 2% now, what that incorporates, ⁓ and why you think we may have trouble scaling ⁓ up to the ambition of 3.5. ⁓
Philippe Lagasse (00:03:12)
sure. So the the piece I wrote in May ⁓ leveraged the resignation
Secretary for Secretary of State for Defense in the UK. ⁓ And ⁓ he resigned at the time under the Starmer government because the Starmer government wasn't meeting their defense pledge to achieve ⁓ what they had laid out in their strategic defense review. ⁓ And what I did is I compared Canada's fiscal position to the UK's ⁓ and said, look, I mean it is true that Canada has a little bit more flexibility at the federal level in terms of debt to GDP because we're not counting the provinces when we arrive at our number. ⁓
you kind of look at all government debt and everything that we kind of package in when you're looking at Canada, we're pretty close to the UK numbers.
And so when I kind of started looking at this of saying, you know, where is this money going to come from? And I think that's the the big question that people haven't answered yet. ⁓ and the C. D. Howe Institute did a really good study on this that I also linked to in the piece, which says look, you either have to ⁓ to to be able to achieve this and still kind of have a debt to GDP ratio, which is acceptable by Canadian standards and isn't gonna run you into trouble in terms of getting more credit, ⁓ you have to do major cuts to social.
programs you have to raise the GST ⁓ and you know and then you'll maybe break even a little bit. I haven't heard anybody ⁓ say that, right? I haven't heard a politician come out and say, well, you know, that cut to the a GST HST that Prime Minister Harper gave us, well we're gonna have to reverse that. ⁓ Or you know these social programs that you know are core to your identity as Canadians, those are gonna have to be trimmed a bit ⁓ or transfers to provinces or whatever it is.
Philippe Lagasse (00:04:57)
Or worse still, we're just gonna take on so much more debt and we're not really gonna have an idea of how it's gonna be paid for. And then you look at the bond market in the US right now and you go, ooh, this is scary stuff. And I'll just end by saying that 3.5 of core defense spending, 5% of GDP, if you look at what the CD Howe Institute has looked at, that brings us to about a ⁓ the figures that led to the fiscal crisis ⁓ of the 1990s.
So ⁓ where's it where's the money gonna come from? Wha what's the plan to achieve this? Which is why I'm a little skeptical.
Erin O'Toole (00:05:30)
⁓ I share your skepticism ⁓ because there hasn't been
discussion about the other shoe that needs to drop for us to be able to do this from a fiscal level. ⁓ Add on top of that, FIDIP ⁓ the ⁓ the fact that a government will be building the pipeline to the Pacific, the fact that the government's pledging ⁓ up to potentially 10 new nuclear ⁓ reactors in the future with their new strategy on that. ⁓ It seems like there's a lot of massive the major projects ⁓ initiative, ⁓ some of which might be able to be satisfied in the 1.5% ⁓
Of defense-related infrastructure, ⁓ but there's a huge amount of ⁓ pressures on the fiscal capacity for Canada to do this. ⁓ The the GST has been talked about. I have heard ⁓ a lot of groups advancing this as a bit of a sign where Canadians will all ⁓ in a consumption-based approach. So if you're consuming more, you'll ⁓ you'll be contributing more. ⁓ I've also, and I used to ⁓ use this as an example, ⁓
having a re responsible conversation on entitlement programs. ⁓ You know, when the Trudeau government went back ⁓ to the old model for old age security, the Harper government had transitioned from 65 to 67, ⁓ then they went back. ⁓ That two years for everyone, no income ⁓ dependency, ⁓ that would free up quite a bit of fiscal room. ⁓
What do you think is best? A combination of all these things? A a serious approach to try and make sure that we can sustain this? ⁓ you've written and spoken about this. Are you getting any traction in government at all? ⁓
Philippe Lagasse (00:07:12)
in terms of my preferred approach, ⁓ I think what the CDO institute lays out is pretty much correct. It will probably have to be a combination of things.
So we will need to ⁓ likely increase AHST. We likely will have to have some revision of entitlement programs. I think you're correct that things like the high speed rail or many of the other projects that have been proposed already fit or could plausibly fit in that 1.5. So that helps take care of that. ⁓
But where I'm more concerned is it is very easy ⁓ for Canadians ⁓ to ⁓ s voice their support for this level of spending or that target until they encounter it in real life. ⁓ And I think part of the challenge too is as you know, we don't really have a bipartisan approach to this either. ⁓ I think it would be difficult for any government to ⁓ see debt raise and increase and increase without.
Erin O'Toole (00:08:01)
Mm-hmm.
Philippe Lagasse (00:08:15)
some kind of reaction on the part of any opposition party. ⁓ So that's the other piece. We would need to have some buy-in from the opposition parties as well, some kind of plan that everybody agrees on. It can it happen? It can. I'm not saying we can't do it, but I think we need to start having a conversation now about what what what does that look like ⁓ and what are we willing to accept and are Canadians going to vote for it? I think that's the other thing. You almost need to have a a general election on some of these big, big items to say, look, we're pr we're bringing this to the people.
And are you giving us your vote of confidence on this?
Erin O'Toole (00:08:50)
And let's look beyond ⁓ this Trump administration. Clearly, ⁓ there's ⁓ there's the fact that Trump has put the five percent ⁓ out there. ⁓ a lot of us had been advocating for Canada to make its two percent just to keep NATO relevant before the Donald Trump. ⁓
And ⁓ obviously Justin Trudeau was caught in some of the diplomatic wires saying ⁓ Canada had no intention of ever ⁓ meeting its two percent and we weren't sending the right signal ⁓ to to sort of help the alliance, which at that time ⁓ President Macron called brain dead ⁓ that NATO wasn't responding to the to the time. ⁓ but do you see the five percent surviving ⁓ post Trump? Because I think all NATO countries are going to have a ⁓
massive challenge to make this ⁓ because the ⁓ five percent is a twenty thirty-five target. ⁓ Do you think that ⁓ will fade in a few years? Do you think that's actually where people are headed? What's your long-term vision on on the spending issue?
Philippe Lagasse (00:09:55)
You know, Erin, I I don't think it's a a decision that's gonna be made in European, Canadian or American capitals. I think it's a decision that's gonna be made in Moscow and Beijing. What do they do?
Erin O'Toole (00:10:05)
Mm.
Philippe Lagasse (00:10:06)
if Russia does expand the war, ⁓ if the Russian threat does increase significantly, ⁓ then the Europeans, ⁓ you know, they're they're far more serious about this than maybe we we're recognizing. They they see the United States saying, You're responsible for your own defense now, and we're we have other priorities and they're seeing the Russian threat very, very evidently. So I suspect that if that if the Russian threat is either still ever present or even increasing, then that's gonna stay
There. Similarly, if we see ⁓ a major Chinese move on Taiwan or something to else to that effect, those external pressures I think are really going to be the big ones. ⁓ However, ⁓ if that if that diminishes in any way, let's say the war with in Ukraine comes to an end, ⁓ if there's a different president and they have a different relationship with Beijing or whatever it is, and those external pressures start to dial down a little bit, ⁓ then I suspect that there there will be some revision of those targets, given that they were ⁓ as many
defense commentators would note, I mean there's ⁓ it wasn't like a threat assessment was put together and then you arrived at the three point five percent. It was the United States president coming in and telling you that's what you're gonna do. ⁓ So I suspect that's gonna get dialed down in the absence of some external pressures.
Erin O'Toole (00:11:21)
Yeah.
Either way, there's going to be massive spending because two percent, which we're at now, ⁓ is a sixty billion dollar plus amount for defense spending. ⁓ And I remember when I was in the Harper government, ⁓ our defense spending was in the twenty-five billion dollar ⁓ range. So you can see even in the span of the last decade, ⁓ it's more than doubled. ⁓ let's look at the other side of being a bit skeptical, ⁓ because national defense, of course, was ⁓
Famous for lapsing funds and not being able to spend even what was estimated and desired. ⁓ Do you see, and we'll get into the Defense Investment Agency and other things later, ⁓ but do you see us having the capacity to even ⁓ expand at the rate that that the the government's ambition ⁓ seems to suggest we'd need to ⁓ and to spend effectively to make sure that ⁓ apart from the the increase to to ⁓
military members and their pay and benefits. ⁓ I think everyone kind of agrees on that. ⁓ But beyond that, can we do it with the procurement structures and the tradition we have ⁓ in in Ottawa? ⁓
Philippe Lagasse (00:12:34)
I think we can, ⁓ depending on a number of things. The the first thing to note, from what I understand, the two two point five percent is almost already all spent. It's already locked into a framework. ⁓ the CAF, I mean, ⁓ getting back to the Trudeau government and its recapitalization that it began in twenty seventeen.
I was reviewing procurements for the government at the time, ⁓ and even those projects that were coming out were all kind of under budget, right? Or they they none of them had enough funds. ⁓ So if you actually want to achieve the force structure that you say that we want to have already, you're you're already at a two 2.5% ⁓ of GDP defense spend. So it's pretty much all going to be accounted for, to be honest. ⁓ and the minute that you start, you know, looking into the maintenance of like a new fighter jet, ⁓ 15 new war.
ships, submarines, I mean a lot of that money is probably already baked in, to be quite honest. ⁓ secondly, if the government provides clear, unambiguous policy direction to the Canadian Armed Forces about what it wants them to do, then we could go faster.
Where we are right now, I fear, is that the Canadian Armed Forces are in one place mentally, and the government is in another. And until that gets reconciled, ⁓ that could be a blockage point, a very important blockage point. ⁓ And finally, if the government is serious about the reforms that it's bringing, and if we'll talk about this when we get to the Defense Investment Agency, but the legislation for that agency will empower a new minister to have significant authority to move on things if they want to. Now the challenge becomes.
⁓ Are you going to be able to spend that money ⁓ that effectively that quickly ⁓ and spend it all on Canadian firms and Canadian capabilities? ⁓ That becomes a slightly different question, right? So it also becomes where do you want to spend that money? With whom? ⁓ in the short term, you know, you almost have to, if you really want to get that spend out the door, you have to encourage Canadian firms to build up, but you also need to kind of stick with existing ⁓ primes. ⁓ hoping to
Philippe Lagasse (00:14:40)
to long term build a Canadian industry that you can support. ⁓
Erin O'Toole (00:14:45)
Let's zero in on that defense policy question because I think that's what you were alluding to. You know, ⁓ there's ⁓ you talked about ⁓ potential ⁓ Taiwan Strait action, ⁓ a belligerent Russia, ⁓ a very destabilized world. ⁓ What is the force structure we need? ⁓ where ⁓
Are we participating in alliances? What domestic ⁓ capability do we have to ⁓ maintain and what is our force gonna look like? ⁓ We have the defense industrial strategy, but we don't have a defense ⁓ policy defining what our Canadian Armed Forces needs to do. ⁓
Is the government preparing one? ⁓ Has this not even been considered? Because you're right, if we want to build out the forces of the future, we have to ⁓ have the policy ⁓ saying what we we need them to do beyond homeland defense. ⁓
Philippe Lagasse (00:15:38)
I think the government's aware of it. ⁓ right now we're still operating with strong security engaged and or north are north strong and free. So one policy from twenty seven twenty seventeen and the other from twenty twenty four. So these policies predate the Trump era. ⁓ the government has spoken about the fact that there's a national security strategy in the works and one would think that the defense policy would flow from that.
I think there's probably a draft of that defense policy already circulating. But it really comes down to the fundamental question that I think all Canadians should have, namely, what is it that we want the forces to be able to do? Because right now we've built over the past few decades a force that is largely structured to defend North America alongside the United States and to fight and win wars overseas alongside the United States. Now that
Some that does not marry well with the current moment. ⁓ Canadians may not be that enthusiastic about participating in American-led overseas operations, and they may want to build greater autonomous capability to defend Canada on its own, particularly if the United States starts imposing conditions we can't accept on our own defense.
And I think that's going to be a really tough conversation between the government and the Canadian Armed Forces, because the Canadian Armed Forces understandably are saying, look, whatever's happening with Mr. Trump, we have to look long term. Long term Canada, the United States, and our other allies have to confront China and Russia. We can't afford to start breaking off into different camps and to be fighting ourselves. We need to be cohesive as an as allies.
But you'll understand people in government and the Canadian population are likely thinking, well, the United States has changed quite considerably and we need to reduce our dependence on them and we should have more autonomy. So there's some hard questions that need to be answered about what exactly we want the Canadian Armed Forces to be structured to do.
Erin O'Toole (00:17:43)
So stay tuned for that. ⁓ because yeah, right now what
What those other policies stand on is really not what we're seeing in terms of the need to be more ⁓ self-reliant and independent and potentially have new partners ⁓ to do multilateral work with. ⁓ Well, let's look at what did come out. ⁓ We did have ⁓ at the beginning of the year the defense industrial strategy did come out ⁓ talking about building up ⁓ a some core areas of sovereign capability where the government wants to see us ⁓ have this capability from the
domestic defense and security ⁓ industries, ⁓ a number of things listed from munitions to ⁓ autonomy and drones. ⁓ what are your thoughts on the strategy? Was it ⁓
The rumor mill was that it was done before last Christmas. ⁓ The PM and the PMO did not like it, sent it back. ⁓ It then came out. I'm sure you've heard ⁓ talk about the iterations and and how you feel ⁓ the document is successful or not successful in ⁓ building this defense industrial capability. ⁓
Philippe Lagasse (00:18:52)
so let's talk about what's successful about the policy. I think where the policy works well is that it has ⁓
a high degree of ambition ⁓ and it is willing to ⁓ outline significant amount of money to achieve that ambition, namely in ⁓ I want to build ⁓ a far more ⁓ expansive Canadian defense industrial base. I want that defense industrial base to ⁓ support the Canadian Armed Forces more directly. ⁓ and I also want to build partners ⁓ outside of the United States ⁓ in various capabilities. So it's got a lot of money behind that. ⁓
where I think it is ⁓ less successful ⁓ is on the plausibility or ⁓ of pivoting from, as the Prime Minister said, ⁓ 75 cents of every Canadian ⁓ capital expenditure on defense going to an American technology to 70% going to a Canadian company.
⁓ that's gonna be tough because the sovereign capabilities that the strategy outlines are are things that we already do well, ⁓ things that we're building up, but it's you're not gonna be able to to to spend that amount of money just on those sovereign capabilities as they're currently laid out. So you're gonna have to figure out new things, and you've alluded to this, new technologies, new cutting edge things that we need to spend on. But those are more long term, you have to build them up. And right now we're not yet seeing the mechanisms to build up those small and medium enterprises.
Seeing the contracts, we're not seeing the risk taking, ⁓ we're not seeing the the boldness that you would need to do that in in short order. And finally, where I think the f the strategy falls short is the other piece to this, which is if you're going to build up the Canadian defense industry in the way that the strategy describes, you have to be very aggressive about exports. ⁓ And the the policy, the strategy is very kind of muted about that because it likely recognizes that Canadians may not be there yet. But if you want to be France, ⁓
Philippe Lagasse (00:20:49)
In terms of its ataric defense industry, you have to export like France. If you wanna be like Sweden, you gotta export like Sweden. If you wanna build up like South Korea did, well, you gotta be, you know, the arms supplier of the world. So you have to sell a lot. and you have to sell to some people that may not be the most savory regimes in some cases. ⁓ so we haven't quite figured out that export piece yet, which is gonna be the big weakness, I think.
Erin O'Toole (00:21:14)
Yes, although the government did clearly sign on to the Secure Action for Europe program, the SAFE program, ⁓ and ⁓ clearly wants to to export or build an export market into ⁓
NATO in into the EU. ⁓ The issue is all of those domestic industries are also ramping up. Are there ⁓ are there opportunities for the easiest export market, which would be the EU? ⁓ To your point, you have to get into ⁓ some areas where ⁓ allies are more ⁓ more aligned on on security interests but maybe not aligned on values, ⁓ which presents ⁓ presents challenges. We saw that challenge for many years with the LAV contract ⁓ that
was a big proponent of back in the day. ⁓ but that structure, I guess, you you said a ⁓ some good things and and some challenging things, ⁓ the sort of build partner by framework of the DIS, ⁓ the first pillar was ⁓ built. And so it was this domestic sovereignty piece. ⁓ I'm actually gonna c play the clip right now that you referenced the famous Carney line ⁓ about the 70 cents of every dollar. ⁓
So there it is. The Prime Minister ⁓ made that pledge. He also attended ⁓ events at CanSec, the big military show. So there was such elation ⁓ in the Canadian defense and security industries. ⁓ I couldn't even get Harper to go ⁓ to Cansec years ago. ⁓ First time the Prime Minister has ever attended. There was such buzz in the Canadian industry ⁓ following these aggressive, as you said, ambitious commitments. ⁓ But since
Then they've seen a series of ⁓ contracts to ⁓ German, American, ⁓ some of the existing suppliers just receiving large, ⁓ large payments. ⁓ There was ⁓ IMT, and there were some great Canadian companies that were part of it, but ⁓ it seems to be status quo, ⁓ and ⁓ the mood within the Canadian defense and security industry ⁓ is coming from elation ⁓ to a bit of frustration. ⁓ Talk about that for a moment. ⁓
Erin O'Toole (00:23:28)
Is it possible ⁓ to switch to seventy percent being domestically supplied? ⁓ Or if it's possible, is it gonna be a ten year process? ⁓
Philippe Lagasse (00:23:38)
Right, I think that's the key thing is this is ⁓ a decades long process unless you radically shift again what the forces do, right?
⁓ you it you have to almost think of ⁓ of an armed force like an old house. I mean it's and you're you're trying to renovate a very old house. You one strategy is you just bulldoze the whole thing, ⁓ but that leaves you without a house for a while. So you don't wanna do that, right? You don't wanna completely wreck your armed forces and the capabilities that they have. So instead you have to kind of like figure out, okay, I'm gonna do the garage, then I'm gonna do the kitchen, and I have to figure out how to live, how to cook in the basement for a while, and you gotta do all this. And so it's a long
Protracted process, you're taking a very complex machine with very high-end capabilities. And it is that machine the armed forces are are always trying to maintain their ⁓ operational advantage over adversaries. They're trying they're they're status quo conservative organizations, so they're trying to stick with what they do and what they know best, which is again operating with the United States. And you're trying to convince them and compel them.
To look instead to ⁓ Canadian capabilities, Canadian firms, or potentially firms, Canadian firms that are that are working with new allies and new partnerships. ⁓ But that ⁓ shering that ship and changing those habits and those ⁓ requirements and that mindset is a long-term endeavor. At the same time, you have to provide enough financial incentive and enough contracts to actually get investors and firms to invest in building the capabilities that you want to provide.
⁓ So you're speaking to ⁓ the enthusiasm that's that's kind of attenuated a little bit. I think there was a lot of belief that contracts would start flowing. Well, there's not a lot of contracts yet, right? There's there's still notions, ⁓ and a lot of the money that's been spent, understandably, is stuff that's already been in the pipeline, ⁓ or things that big, big projects that you announce negotiations that you're doing. Once you start getting into those ⁓ more complex, harder to to manage small.
Philippe Lagasse (00:25:45)
projects that's where you know it will take time and it's it's not something that's gonna happen overnight. It you're probably looking at a decade long process to be honest.
Erin O'Toole (00:25:55)
And ⁓ so listeners know, defense is one area where ⁓ security allows you to soul source ⁓ and ⁓ to to move quickly if you need to. ⁓ obviously sovereign capability is only built if you're if you're doing everything yourself and don't rely on on anyone else. ⁓ This concept of national champions have come up, and you know, anytime the government is picking winners or losers. ⁓
pundits ⁓ appropriately like and like andrew coyne and others ⁓ lose their mind over the concept of national champions. ⁓ But on some of these ⁓ sovereign capabilities, if we want to build them up ⁓ and we want to move quickly and be self-reliant, ⁓ we are going to have to basically sole source ⁓ and and get the contracts out the door ⁓ because ⁓ private money will flow, but only once they see dollars going out the door in contracts, right? ⁓
Philippe Lagasse (00:26:50)
Well this is it. So ⁓ it's there there's a lot of talk out there that the Defense Industrial Strategy created a demand signal. It's it created a spending signal. Right? It indicated that the government is intending to spend. Demand though only comes when there's an actual project tied to a contract that the government actually intends to sign. And that that is the bottleneck. That hasn't happened yet. Now, to your point.
The legislation for the new Defense Investment Agency that will greatly empower the minister to make some of these calls much more quickly, to sole source. There's ⁓ a vast list of exceptions to competitive processes that that legislation enables. So they can move. So if we're gonna be fair to the government, they probably need that legislation to come in as well to really get things going. But once it does, ⁓ we need to start moving on things. Otherwise, we're just
pushing all these investment decisions to the right. It takes longer to get investors interested. It takes longer to develop the prototypes. ⁓ You have to start somewhere, right? And some of that is gonna be you just have to put projects out. You have to contract with Canadian firms and you to do a
Erin O'Toole (00:28:04)
Quickly contracts get it out. Ministers, PMO, listen. Well let's let's talk about that then. We've talked about the Defense Investment Agency ⁓ that was stood up ⁓ almost a year ago. ⁓
We're recording this, Philip, on September first, ⁓ a day or so after news ⁓ that the first head of the DIA, ⁓ Doug Guzman, ⁓ may be leaving ⁓ before the year even ends. ⁓ there was some talk initially that the Defense Investment Agency would only be there ⁓ over have only s oversight over ⁓ contracts greater than a hundred million dollars. ⁓ Some talk that that needed to come down to fifty. ⁓
You're saying there's enabling legislation that's out there that needs to be actioned. ⁓ Talk a little bit about ⁓ what good Mr. Guzman may have done to orient things, ⁓ where that enabling legislation is, ⁓ and what the DIA really could be as part of this kick start to a Canadian-led ⁓ defense procurement revolution. ⁓
Philippe Lagasse (00:29:11)
Right. So ⁓ getting back ⁓ to to some of the challenges of defense procurement, the r the reality is, ⁓ and and you would know this from your your time in government, I think there is an idea out there that you can just take somebody from the private sector, put them into government of Canada, and they're gonna shake things up. But the the system will will eat private sector thinking alive. ⁓ it is a it is a a tenacious ⁓
Erin O'Toole (00:29:34)
Yeah.
Philippe Lagasse (00:29:41)
beast, ⁓ it lives according to its own rules. ⁓ It ⁓ it is highly process driven. Unless you have a prime minister who is on this ⁓ twenty four hours a day pushing change through, the system will be the system. ⁓ And so I suspect my my gut tells me that Mr. Guzman got in there and he thought he was going to make some real changes and all of a sudden he felt he faced a bureaucracy, like a
Big lumbering beast. ⁓ And ⁓ that must be a very frustrating thing for somebody that is used to the private sector, which is far ner more nimble and whatnot. So that's going to be a challenge for any ⁓ new CEO of this agency, ⁓ wherever they come from, private sector, public sector, or wherever. Because the reality is, yes, there's new legislation, there's new powers that are going to come in, but you you're facing also a culture, right, which is used to doing things a particular way.
And you have to really change some of that culture. So I'll give you an example from the the legislation that'll be an interesting test case. ⁓ So as I read the bill, it looks like the minister of the new agency will be able to contract on behalf of Government of Canada, therefore ⁓ not going through Treasury Board for a lot of these big ticket items. Now that would speed things up. That would be pretty bold. But is Treasury Board and the system
gonna claw its way to make sure that that doesn't happen. And that's kind of like a a good test case of how much ⁓ that vision is going to actually move forward. Is the Prime Minister really going to say, no, we're doing something totally radically different, right? And eventually the culture will change and people will get used to it. But ⁓ you do have to recognize that you you are still dealing with an existing body that has procedures and rules and you can reform those and you can change them. But ⁓
At the end of the day it's also a cultural problem and that takes a long time to to change.
Erin O'Toole (00:31:43)
Yeah, and for listeners that may not be familiar, you know, the Minister of Finance is is well known for delivering the budget and the intentions of the government and ⁓ but it's really Treasury Board that controls the purse and the outlay of of of funding. ⁓ so ⁓ either pre approving ⁓ amounts of money so that they don't have to go back to Treasury Board ⁓ or exempting something from the process are kind of the two ways ⁓ you could ⁓
Bypass the delays that come from Treasury Board oversight. ⁓ The legislation that ⁓ from what I understand should pass this fall, ⁓ that will enable Doug Guzman or whomever, ⁓ and then the minister responsible ⁓ to to set up one or two of those options. Is that correct? ⁓
Philippe Lagasse (00:32:34)
That's my read of it. I again I think it's unclear what the intention of the government is and I we probably will not see as much parliamentary scrutiny of this legislation as one might hope. ⁓ to tease out exactly what it is intending to do. So we'll I I suspect we'll only really know once this new minister and the CEO of this agency start to try to do things.
I think it'll be a very good sign if they are able to to move ⁓ with full authority of contracting and being able to move things because the legislation ⁓ is incredibly bold. ⁓ and it empowers this minister on a level that we probably haven't seen since CD Howe. And that's really I think what the government had in mind. They they wanted a CD Howe like figure to to meet this moment. ⁓ And frankly that's probably what we need. ⁓ but that's gonna ruffle a lot of feathers around town because people aren't used to to moving at that pace.
Erin O'Toole (00:33:31)
Or as I said, they needed Joseph Flavelle, because I actually think people forget poor Joseph Flavelle, ⁓ the guy who had a meat packing business ⁓ and saved British munitions supply after the Shell crisis, ⁓ more than CeeDee Howe, who was a mandarin of government who was very effective. But what I liked about World War One, and I wrote about this in the Walrus, ⁓
That was a ⁓ the Imperial Munitions Board was a hybrid of business leaders, ⁓ some military leaders, including British and Canadian. ⁓
And ⁓ having a direct line, Mackenzie King basically empowering them ⁓ to to deliver. And if people know I ⁓ in the Walrus I wrote about how they built ships ⁓ in Ashbridges Bay here in in Toronto, they also the largest ⁓ electric powered ⁓ steel processing mill and for munitions ⁓ in the Commonwealth, all built within a couple of years. So I do think ⁓ there's a desire to ⁓ sort of kick start that. ⁓
But the two remaining things, will this legislation pass? ⁓ Will those powers be given? ⁓ Will ⁓ Doug Guzman be there? Will ⁓ Stephen Fuhrer be there? Like, do is it anticipated that that's what Stephen Fuhrers knew ⁓ he would then get a full ⁓ ministry as opposed to being a secretary of state? ⁓ is that what you see happening? ⁓
Philippe Lagasse (00:34:55)
Well, we know that ⁓ whoever the new minister is ⁓ will have that full authority, so it is gonna be a full ministerial position. ⁓ one thing I will note, however, is that that ministry does not have control over the technical requirements set by Department of National Defense and Canadian Armed Forces. So ⁓
Erin O'Toole (00:35:15)
Mm-hmm.
Philippe Lagasse (00:35:17)
that's still also a point of tension. So as much as we are amalgamating some authority from various departments into this agency, ⁓ that you've still got this challenge of the requirements setting
being done by the armed forces or D and D in some cases. And then ⁓ DIA is going to have its own agenda and its own priorities. So that's gonna be another area where you want a prime minister to be able to come in and say, Okay, I've got two ministers that may be at loggerheads over some pretty important issues. I'm gonna have to resolve that because I chose and
That that was their their choice not to make the Minister of National Defense the Minister of this new agency. That was their choice. But that does therefore mean that you can end up in a situation where the person, the minister in charge of building the helping build the defense industry and in charge of accelerating procurement is not the same person ⁓ as those saying what we need to buy. And that can still, as we've seen in Australia in the past, that can lead to some real tensions.
Erin O'Toole (00:36:16)
Yeah, and to build in what you already spoke about, the absence of a defense policy. ⁓ It's that defense and security policy that sets the frame ⁓ that allows the military to build the statement of requirements, the SORs ⁓ for the kit ⁓ or the equipment, ⁓ which then is procured, right? So it kind of shows there's a bit of chicken and egg ⁓ issue even going back to to the policy framework. ⁓ okay, let's talk about then what has been done. ⁓
The biggest example is the ⁓
the submarine contract, which was an expedited process shortlisted to ⁓ to two bidders, ⁓ Hanwa and TKMS. We all know TKMS ⁓ one. ⁓ any thoughts on how that procurement, which was ⁓ clearly accelerated by ⁓ Admiral Topshi in the Navy and and really ⁓ drove that through? I do know that there was ⁓ memos to cabinet ⁓ in in the Trudeau days, like it this has been sort of ⁓
kicking there. ⁓ Any thoughts on how that was run and and how you see that ⁓ potentially being a model or ⁓ lessons learned from the the biggest procurement under Carney so far? ⁓
Philippe Lagasse (00:37:31)
Yeah, I I I wrote a little while back that when the Canadian's submarine patrol ⁓ project was was being
set up that this should be a model for how we do procurement in the future. And so full credit to Admiral Topshi and his team having learned the challenge of trying to design the perfect warship, which is why it took so long to get the requirements kind of hammered out for the new river class. They took the complete opposite approach, I would say, when it came to the submarine. Namely they said, we will take whatever submarine meets our basic requirements and ⁓ we'll adapt to that. Right? So you ⁓ instead of having this tradition
approach where you try and build and expect a supplier to meet your particular needs and idiosyncrasies, you first get the the
You find the bidder that is best placed to to ⁓ build the submarine and you kind of are willing to accommodate what you have to accommodate, knowing that eventually over the life of the platform, you can make changes, you can adjust, you can get to where you need to be. ⁓ so that really is going to have to be the strategy that we adopt for a number of things going forward, particularly in emerging technologies. You you buy the the basic thing first and then you make changes as you own it over the over its life as opposed to trying to procure the best thing.
⁓ at the beginning. ⁓ As well, the approach that they took of a quick down select and moving on. ⁓
Philippe Lagasse (00:38:55)
Also, I think is far fairer to a lot of competitors. You'll notice Saab didn't complain, the French didn't really complain. They were told early they didn't have to invest a lot of money, they didn't have to invest a lot of time, there was a downselect, and we moved forward. I think that's also a much fairer way of dealing with competition ⁓ is to say that to companies before they put a lot of time and effort into things. I I ⁓ suspect TK.
AMS ultimately carried it because the way they were doing it of trying to build Canada into their supply chains and you know making this kind of a a tripartite agreement with the Norwegians was something that really appealed to the partnership and the building piece in the DIS. So there again we see examples of if this goes well, this will be likely a model of how you do major partnerships with European allies.
Erin O'Toole (00:39:50)
So it seems like Professor Legasse gives ⁓ the sub maybe a B plus, ⁓ maybe maybe an A, so ⁓ that could be a model for the future. I'm not I'm not holding you to it, ⁓ but I do want to ⁓ move on to the other hot topic in defense circles, which is ⁓
actually not technically ⁓ pending right now other than online and in editorials, ⁓ which is the dual fleet fighter discussion. Obviously ⁓ Canada's committed to 16 F-35s. ⁓ The ⁓ the Swedes have made quite a compelling offer with respect to manufacturing the grippin ⁓ in Canada. ⁓ obviously then we'd probably be able to buy ⁓ more grippins. ⁓
There's whole discussions about single engine, dual engine. ⁓ Where do you come down on this ⁓ debate if you do ⁓ and and what challenges are there in having a dual fleet at a time where we have ⁓ personnel shortages in the Canadian Armed Forces? ⁓
Philippe Lagasse (00:40:53)
the biggest challenge is that our CFA teens are ⁓ at the end of their lives. So we delayed these decisions for so long that pardon the pun, but we're out of runway. Right? We d we we we don't have a lot of room and maneuver here. So every day ⁓ that goes by is a day in favor of the F-35. So and why do I say that? Because ⁓ unless Canada is willing to accept that it will not have a full fighter force. ⁓
For a period in the ⁓ early ⁓ 2030s, then ⁓ you have you're you're pushing towards at least acquiring ⁓ a full fleet of F-35s. Maybe not 88, but at the very minimum the 65 that Mr. Harper had in mind, right? ⁓ and why do I say that? Simply because ⁓ just the challenge involved ⁓ in ⁓ maintaining the existing likely 30 F-35s that we're gonna have.
plus a whole other fleet with infrastructure, training regimes, building the things, ⁓ deciding is it the current generation of grippins, the next generation of grippins, I mean a all the complexity. Where if you're gonna build them in Canada, who are you building them with? Because Bombardier has signaled that, well, they don't really want to build the grippin. So just the the sheer complexity of the endeavor suggests that the other alternative that's been proposed, namely think about a mix between the F thirty five and another
sixth generation fighter maybe built in cooperation with a European ally or or the Japanese is probably your better bet. ⁓ Or as others have suggested, really we should be focusing on autonomous systems.
to complement the fighter as opposed to ⁓ sticking with ⁓ piloted aircraft. So my guess is it's really up to the what the government wants to do. If the government really is intent on building a fighter in Canada, it can, but it better do it quick. It better make the decision quickly. Otherwise it's gonna put the Canadian Armed Forces in an extremely precarious position.
Erin O'Toole (00:42:56)
All right. A very good overview of that ⁓ every week or so I get pulled into a grip and debate on social media and whether I want to or not. Great aircraft, Saab's a great company. This isn't about that. It's about ⁓ what can our RCAF ⁓ actually do? You know, what can we service train, as you said, the complexity of it. ⁓ And then you alluded to the autonomy thing. And maybe Philippe, let's wrap up there. ⁓
I'm a Churchillion. There's so many great Churchill quotes, which you much know because of your Westminster tradition, and then, of course, ⁓ defense. ⁓ he and Clemenceau both are attributed to the ⁓ quote: ⁓ It's a joke in Britain to say that the War Office is always planning for the last war. ⁓ he said that ⁓ in ⁓ in one of his books. ⁓ we do see a bit of this happening where Canada ⁓ is a bit of a laggard because we've we've kicked the kid.
And down the road on the fighter jet question, ⁓ on the submarine question. We did that ⁓ before that with the maritime helicopter. My background on ⁓ Seakings, probably the worst ⁓ of all bad procurements in Canadian history was the sea king replacement. ⁓ So we're playing catch up. We're now spending 2%. We're ⁓ we're seeing where the puck is going, ⁓ but are we just ⁓ doing what we have done? So we're ⁓ 12 conventional submarines, the the
fighter jets. ⁓ Are we building in autonomy? ⁓ are we building in the changing nature of warfare? ⁓ Are we learning the lessons ⁓ from Ukraine and their ability to ⁓ hold fast in in ⁓ light of the Putin aggression and the war? ⁓ What are your thoughts about ⁓
This the you know the the the DIS did mention autonomy. ⁓ There's now two drone testing facilities that the Canadian Armed Forces uses. It looks like we are pivoting, ⁓ but are we making the changes at the speed you think we need to be? ⁓
Philippe Lagasse (00:44:56)
⁓ this issue I think brings in a lot of the different threads that we've been talking about. As we said
Part of the reason that the 2% to maybe even 25 2.5% of GDP is probably already locked in and and booked in the fiscal framework is because ⁓ the forces just to afford what they had are originally ⁓ have already been doing, right, will would need that money. So that's part of the explanation as to why why we're not seeing a radical change because they needed that money to afford the force structure that they had originally had in mind.
And then the second piece, which is ⁓ in the absence of a policy that says you need to be able to do this different type of operation, you're not gonna how you ⁓ it's very difficult for the armed forces to start thinking about how they're gonna be using this technology in which way, these new systems, in the absence of direction as to what they should be thinking about. So let's use autonomous systems, let's say, for ⁓ the Arctic Ocean.
Right. There there should be something in the policy that says we clear policy direction, we want ⁓ one hundred ⁓ or a hundred percent
coverage ⁓ of everything that's happening under the Arctic ice through some kind of autonomous sensing capability or whatever it happens to be. Some policy direction and initiative that that tells the Canadian Armed Forces to go out and acquire those capabilities, that autonomous capability. Similarly, when it comes to fighting in the land domain, being able to say we you should be able to stay at at the the fine point of technology when it comes to drones and that kind of warfare, right? Giving them the impetus to go down
Philippe Lagasse (00:46:37)
Down that road and to acquire. And this is where I do think that we need to have that policy direction indicating to the armed forces: okay, here is what we expect you to do. Otherwise, the status quo bias is, well, I'm so worried already about just getting my trucks. ⁓
then I'm not really thinking about necessarily like a big fleet of drones yet, because I have to worry about my fundamentals. And I think that's going to be the challenge is making sure that once the armed forces has their f have their fundamentals laid out, that they're then able to ⁓ start thinking more innovatively. But that will require a good policy discussion about what exactly we want them to do. Because again I'll end on this, this notion that you should just buy quote unquote what the forces needs is a cop-out.
You first have to tell them what ⁓ what missions they're expected to accomplish. ⁓ Then they can acquire the right stuff that they need to do it. But if you just leave it open-ended, then i ⁓ you're not providing enough direction as to what kind of armed force you want them to build. So it's also up on government to to be able to say, look, we expect you to be able to fight in these very different environments, and you should acquire capabilities based on that.
Erin O'Toole (00:47:53)
Set the defense policy in the orientation, ⁓ keep the ambition you talked about in the defense industrial strategy, ⁓ fix the DIA to empower ⁓ faster procurement and and ⁓ accountability, and then innovate and get contracts out the door so that private capital can join the government. That's that's it in a nutshell. It's not impossible, and so we've got to send ⁓
this discussion around to some of the ministers and ⁓ senior mandarins in Ottawa. ⁓ And I know you're always open ⁓ to speak to them and they better subscribe to debate in Canadian Defense, your Substack. ⁓ anything else you'd like to add for this special moment we're in, Philippe? ⁓
Philippe Lagasse (00:48:35)
One last one, Erin, I can't help myself. Also, we have to start priming people, and I think this is gonna be an even bigger challenge. We're gonna make mistakes. Money will be misspent. Things will be done that shouldn't be done. You you will have money going to nefarious contractors who are gaming the system. You will spend on systems that ultimately fail. You will spend on companies that aren't gonna make it.
But that's the price you have to pay if you wanna do it fast, if you wanna do it, and you f you wanna do it at the scale that we're proposing. And I think that's where nobody's really ready yet. And it helps explain some of the reticence of the public service. W who's priming the Canadian public for, you know what, folks, we're gonna screw up sometimes. And you gotta be ready to forgive us because we're trying to do something big.
Erin O'Toole (00:49:25)
One hundred percent. And I do think there's a lot of groups now trying to do this. Discussions in ⁓ in forums like the Icebreaker and Build Canada. There's ⁓ this fear of failure we have is held us back from the ⁓ startup culture and the scale up culture that the US have. ⁓ you almost need ⁓ a badge of a failure or a misstep ⁓ to to learn to be better the next time. And ⁓ think of all those old clips before the Wright brothers of the P.
People flying their gliders off and all these crazy contraptions, ⁓ and the New York Times saying it would take thousands of years for man to fly, ⁓ and that innovative spirit is there. ⁓ final thing I'll end on is because I agree with you know, we've got to make sure that we're not just fighting the last war. I wrote in The Walrus about ⁓ bringing this approach, as you said, to the under under ice. ⁓ What Australia is doing with the Go Shark, ⁓ a lot of that technology is Canadian, and the the company.
Philippe Lagasse (00:50:24)
Mm-hmm.
Erin O'Toole (00:50:25)
That came second in the Ghost Shark competition is Canadian. We've got Kraken on the East Coast, ⁓ Cellular Robotics on the West Coast, and a couple of others. ⁓ We've got the innovation. We just have to change the culture. ⁓ So part of it is people will have to listen to Blue Skies and people will have to subscribe to Debating Canadian Defense. ⁓ Professor Lagasse, thank you so much for ⁓ blue skying this moment with us today.
Philippe Lagasse (00:50:51)
Thanks sir.