June 27, 2025 • 27 mins
In a huge week of international news, NATO members agreed to lift their defence spending to 5 percent of GDP. Today’s guest, Canadian career defence and intelligence official Raquel Garbers, has some strikingly clear views on the value of the spending increases but also the way they need to be paired with a stronger focus on economic warfare by hostile states, particularly China.
Raquel, who is currently a visiting executive at the Centre for International Governance Innovation, talks about the rationale for more defence investment, Canadian and Australian public opinion about military spending, the two countries’ strategic circumstances and how Donald Trump plays into Canadian thinking.
Raquel shares her deep concerns about Chinese economic warfare against open economies such as Canada’s and Australia’s, the need for democratic nations to work together through industrial policies such as friendshoring, and how Nato members — and anyone else including Australia who might be looking to up their defence spending— need to ensure a defence boost doesn’t ultimately play into China’s economic warfare campaign.
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Episode Transcript
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(00:01):
Stop the world. Spending more money on defence
is not going to make us more secure unless we deal with
China's economic warfare. So to start, we need to
understand that when we opened our economies to China in
particular, it took advantage ofthat opportunity to attack us
(00:22):
from inside our own systems. So what happened is that China
nested itself inside our economic and industrial systems
and then set upon unleashing a really sophisticated campaign of
economic warfare. And that campaign allowed it to
amass the military power that now threatens us.
Welcome to Stop the World, the Aspy Podcast.
(00:42):
I'm David Rowe. And I'm Olivia Nelson.
Today we have Canadian defence and strategic expert Raquel
Garbers reacting to the major news that NATO members will aim
to increase their defence spending to 5% of GDP.
Raquel is a career Canadian defence and intelligence
official who is currently a visiting Executive at the Centre
for International Governance Innovation.
(01:04):
Raquel has some strikingly clearviews on the value of the
spending increases, but also theway they need to be paired with
a stronger focus on economic warfare by hostile states,
particularly China. She talks about the rationale
for more defence investment, Canadian and Australian public
opinion about military spending,the two countries strategic
circumstances and how Donald Trump plays into Canadian
(01:25):
thinking. Raquel shares her deep concerns
about Chinese economic warfare against open economies such as
Canada's and Australia's, the need for democratic nations to
work together through industrialpolicies such as friendshoring,
and how NATO members and anyone else, including Australia, who
might be looking to up their defence spending, need to ensure
(01:45):
a defence boost doesn't ultimately play into China's
economic warfare campaign. Raquel is a force of nature with
a world view that is crystal clear.
Listen carefully and we hope youenjoy this conversation.
I'm here with Raquel. Garbage.
Raquel, thanks for coming on thepodcast.
My pleasure. Thank you.
So we've had the NATO agreement in the last couple of days to
(02:06):
increase defence spending to 5% of GDP, including 3.5% core
military funding. It's been widely hailed as an
important step. What's your overall view of it?
How significant is it? How watertight?
Crucially, how realistic and achievable is it for the
(02:26):
countries? So I think what's important to
know is that the Allies, in agreeing to hit the 5% mark,
have in effect as a group, finally acknowledged the gravity
of the security environment and the reality that they are at
growing possibilities of findingthemselves in a war for which we
are collectively quite ill prepared.
(02:49):
Defence spending is absolutely essential.
As you no doubt know, at the endof the Cold War, the Allies
collectively allowed their militaries to fall into a
relative decline. But in addition to defence
spending, and to ensure that defence spending actually
enhances their security, what the Allies really need to do is
cast aside the mindset that theyadopted at the end of the Cold
(03:11):
War, which as you probably know,was something to the effect of
if we include hostile States andwe embrace them and we bring
them into our systems, we will ensure that we are on the path
to peace and riches. So effectively, the argument
that was championed by the foreign policy and economic
elites of the time to the effectthat interdependence would
(03:34):
pacify hostile States and of course the Allies, when they
embrace that fantasy, made two faithful mistakes.
The first was that they downshifted their defence
spending and the second was thatthey opened their economies to
the hostile states. So they really need to correct
that first and foremost. I definitely want to come back
to that in more detail and, and we'll unpack that in the second
(03:56):
half of the podcast. I, I want to spend some time on
it. First of all, I mean, just the,
the, the achievability, I mean we're talking about
extraordinary sums of money. We in Australia, we're stuck at
around 2% of GDP. We're having a not always
edifying debate about where to take that.
And I'll and I'll come back to that as well, but tell me about
Canadians. Are Canadians behind this
(04:17):
increase? And just for the context for our
listeners, I believe, I mean, from my reading, Canada is
currently at around 1.4% of GDP.So to get to 3.5 core funding,
leaving aside the 1.5 in addition, that can possibly be
done through a bit of creative accounting.
I mean, I don't want to, I don'twant to be too cynical about it,
but really the 3.5 to me is the is the core is the key number.
(04:40):
Canadians will have to find roughly $50 billion a year.
Now that's just a back of the envelope calculation that I did
a few minutes before we jumped on air.
It could be wrong, I'm happy to be corrected on it, but I mean,
even 50 billion a year out of Canada's budget through tax
increases, through cuts elsewhere, I imagine is pretty
significant burden. Are Canadians up for that?
(05:00):
And if So, what is motivating them?
To be frank with you, I think itwas the arrival of Donald Trump,
Trump 2 point O that really, quite frankly, not simply in
Canada but across the alliance made clear that defence spending
was no longer optional. It was an absolute necessity and
I think Canadians understand andhave been proud in the past of
(05:24):
their military history and the contributions that we've made.
And they understand now that theworld is spiralling out of
control and defence spending is essential.
They also understand that it's going to be essential to the
future of our relationship with the United States, as well as
with our other allies. We, as you probably know, the
Prime Minister has committed to getting Canada to 2% of GDP
(05:46):
within this year, which leaves us a 1.5% climb over the course
of a decade. Is Canada able to do that, and
will Canadians do that? The answer is, as seems to
always be the case for us in Canada, we are in a really,
really envious position vis A vis other allies.
(06:06):
And I'll tell you that's for tworeasons.
The 1st is that Canada has the natural resources that the world
needs right now. We have the oil and gas that
will allow the allies to rid themselves of their dependencies
on Russia, for example, for energy.
And of course, this is happeningin the midst of a manufacturing
renaissance, a friend shoring. So not just to power their own
(06:29):
defence industrial base, but to power their broader industrial
base. Canada has the resources that
the allies need. This gives us customers.
So growth is an answer for us and it's custom made.
The second reason why Canada is particularly blessed is that we
can offer the allies something that nobody else can other than
the United States, which is whatI call defence in depth.
(06:53):
And what that means is because we are not sitting in the hot
zone in the first stages of conflict, we are a secure
location in which to manufactureand stockpile munitions and
other weapons and industrial capability for the defence
industrial base. So allies who are looking to
secure their access and ability to produce weapons would be well
(07:15):
advised to make those investments in Canada.
So because we can offer defence in depth by virtue of geography
and because we have the resources that the world needs,
we are in an enviable position where we can get to 3.5 in a
way, quite frankly, where we're helping the allies, but we're
also advancing our own economic growth.
(07:36):
It's growth for us as opposed toa drain.
Fascinating and a fascinating comparison with Australia.
We of course are blessed with natural resources as well, but
who the customer is might be a slightly different question for
us right now. But again, we can, we can come
back to that now. I mean we talk about social
licence a lot in Australia, national security experts and
(07:58):
our own, you know, our own officials talk about it quite a
lot. Our own defence officials, our
military leaders, etcetera, talkabout, you know, the, the Intel
heads talk about the the need for social licence, the value of
social licence, IE making sure that our public understands the
value of these sorts of investments.
Critics of the more complacent position, which we are arguably
(08:22):
still stuck in here in Australiasometimes argue that we don't
have a very frank debate in thiscountry about the nature of the
strategic risks, primarily China, and therefore we don't
have a foundation for a political case for increasing
defence spending. Now that said, and again context
for our listeners, it's quite interesting, the low E poll,
(08:43):
another think tank here in Australia which does annual
polling, it's very reputable, has found just in in recent
weeks, half the population, 51% of Australians say Australia
should increase defence spending.
A minority, which is 37% say Australia should keep defence
spending about the same level asnow and only 10% say that it
should be decreased. Describe the comparable context
(09:05):
in in Canada and your observations generally across
NATO and elsewhere for what makes a nation come alive to
growing strategic threats. I mean, you mentioned Donald
Trump. I assume though that Trump in a
sense, it's sort of the messenger here.
I mean, there are the underlyingstrategic risks in Canada's
(09:28):
case, you know, being in North America, you've you've got
Russia and you're a NATO member as well.
You've got Russia, but as a IndoPacific country, you've also got
China as well. You know, you're in a very
interesting position how, how alive to the strategic to the, I
guess the underlying strategic risks are Canadians irrespective
of the the Trump pressure that has been brought to bear in the
last six months. That's a great question.
(09:50):
I'm actually going to start fromhow you described Australia, and
I would say that Canada in many respects is in precisely the
opposite position of Australia. You are sitting right next to
the greatest military threat we face as allies, and you are also
economically tied to that threatby virtue of geography.
(10:11):
Canada, by contrast, is sitting right next door to the anchor
ally whose military capabilitieshave ensured the defence of all
of us for 80 years. And moreover, as you likely
know, a really, really high percentage of Canada's economic
dependence is tied to the UnitedStates somewhere in the
(10:32):
neighbourhood of 7070 plus percent.
So we are in precisely the opposite position.
And yet I would say for years Canada has lagged behind
Australia in terms of waking up to the reality of the threat
environment because we haven't been sitting next door to it.
Canadians have not had to think seriously about National Defence
(10:54):
since the end of the Cold War. At the end of the Cold War, when
the United States stood alone asthe sole great power in the
international order and Canada was geographically, is
geographically attached to the United States, it allowed us to
fall into, I would say, an even greater complacency than that of
the other allies. And so waking up to that threat
(11:16):
for Canadians, I'm not actually sure that we are fully there.
I think we understand that something has happened.
We are grappling right now, I would say in the public
narrative with the false equivalency that some
commentators are putting out with regard to the United States
and China. And so the debate that you're
having with regard to what to doabout China, given the economic
(11:39):
relationship, what's happening here in Canada, is that you have
some influential commentators suggesting that Canada should
lessen its dependency on the United States by deepening its
economic relationship with China.
And that, to me, suggests A fundamental misunderstanding of
how the world found itself in the position it's in, the
(12:01):
gravity of the threat we face and the reality of the options
available to Canada. So I think that would
strategically, I would say to you that Canadians are beginning
to understand it, but after, youknow, 3 decades of sitting next
door to one of history's more benign hegemons, it's not
something that comes naturally to us.
(12:23):
The, the irony for me is that probably Canada investing is
going to send a stronger signal to the Australian public than
almost any other country. I mean, you, you make a very
good point about the, I guess the geostrategic differences
between us in terms of where we're, where we're physically
located. And it's a very, very important
point. You've got, as Donald Trump
(12:43):
would put it, 2 beautiful oceanson, on either side of you,
although there's an archipelago.I guess that that makes a bit of
a difference. But but you know, but where we
are a very different geostrategic situation.
But Australians look at Canadians I think as probably
closer in character and you know, and political colour than
(13:05):
almost any other country. I mean, we, we're both US
allies, we're both Commonwealth countries.
We are both, both obviously Anglophone countries with
British heritage. And we're both, you know, sort
of fairly mild mannered nations,if I can put it that way as
well. So, you know, ironically for me,
the probably Canada investing inthis way is actually a very,
very strong signal to the Australian public.
Your Prime Minister Mark Carney,I think is probably the sort of
(13:28):
from Australian's point of view as this sort of, you know,
wonderful technocrat who has hasshown his spine against Trump,
who is not popular here. You know, it took to us in some
ways he's a sort of a dream leader.
So I think it'll be really interesting to see how that sort
of plays in in the Australian sort of, I guess public
political discussion. Just talk to me about what your
(13:48):
advice on how governments kind of get ahead of the the long
term strategic risk. What's a what's a good message
in your mind for governments to talk honestly with their publics
about the nature of risk well ahead of when it materialises
sufficiently ahead so that they can make the investments both in
(14:12):
a deterrent for a deterrent effect, but also for a
preparedness effect. You know, these, these big
investments that need to be made, you know, 5-10 years in
advance of the where the real threat kicks in.
I mean, how do you actually sortof make that argument when it
hasn't fully materialised in theeyes of the public?
(14:32):
Well, I think it depends on which threat you're focused on.
I mean, the reality is, as I'm sure you know, we can trace back
at least 15 years to US administrations, Democratic and
Republican alike, starting with Barack Obama, being increasingly
clear with the allies that the threat environment was changing
(14:54):
in a way. And the balance of power was
shifting away from the United States in a way that was leading
to the point where the US could no longer ensure global peace
unless the allies all stepped up.
And of course, what we needed tohappen didn't really happen.
And we've now reached the point where the evidence of the
(15:14):
breakdown of the post Cold War order is very clear.
And it's clear to the average person as well, which, you know,
is unfortunate, but also, I think answers your question in
part. The reality is that, you know,
Russia is waging a war in Ukraine.
China is increasingly aggressivewith its neighbours, both in
terms of its military intimidation and harassment.
(15:36):
But really, more broadly, with its economic warfare, the
prospect of conventional war between major powers has never
been higher. And people are talking about
that. And there's a growing risk, real
risk of nuclear proliferation. And some U.S. officials or
official documents have actuallymade statements to the effect
that the outcome of any war between China and the United
(15:58):
States would be far from certain.
So it's against that backdrop that we see Trump 2.0
accelerating the trend line thatstarted with Barack Obama about
getting the allies ready for theinevitable moment that we are
now in. So I think the evidence of
what's actually going on in the world makes its own case.
(16:20):
The challenge for governments isto explain how we got into that
space in order to better understand what we need to do to
navigate our way out of it in order to restore the ability to
deter war. And it's a very basic one liner
in fact, that I think governments need to adopt, which
is to say if we want to deter war, we need to restore our
(16:44):
ability to win a war. It's that simple.
And it's, you know, peace through strength is the catch
line. But I think we need to dig a
little deeper on that and we need to explain to our publics
in more detail how it is that welost the ability to fight, both
in terms of capabilities and ourpolitical will.
Yeah, I mean, I love that unpacking.
(17:05):
P3 strength seems to be a really, really great starting
point. Let's let's Speaking of
unpacking, let's let's go back to your point about how NATO
allies spend that 5% of GDP. I mean, you've, you touched on
your concern there about I suppose about global supply
chains and the economic, the predatory economic intentions of
(17:29):
most our nations, presumably China in particular.
Just can you talk us through what your concerns are there?
Yeah, and thank you for the opportunity to talk about it,
because I think it's the most critical thing that publics need
to understand. Spending more money on defence
is not going to make us more secure unless we deal with
China's economic warfare. So to start, we need to
(17:52):
understand that when we opened our economies to China in
particular, it took advantage ofthat opportunity to attack us
from inside our own systems. So what happened is that China
nested itself inside our economic and industrial systems
and then set upon unleashing a really sophisticated campaign of
economic warfare. And that campaign allowed it to
(18:14):
amass the military power that now threatens us.
So the two inconvenient truths that all allies need to be
honest about is that in failing to arrest China's economic
warfare, we could be accused of inadvertently subsidising its
war machine. And worse still, if we fail to
(18:34):
confront that economic warfare now, then when we gush hundreds
of billions of dollars into our defence industrial base in order
to meet the NATO 5% or 3.5% spending target, we put
ourselves at risk of making the adversaries even stronger than
they already are. So dealing with economic warfare
(18:55):
is essential. And it's not just about our
broader economic security and insulating ourselves from
economic coercion. It's about educating people
about the military implications in particular that flow from
China's economic warfare. You seem to be talking virtually
about decoupling then. Is that a fair description of
(19:17):
it? I mean, if if not $1.00 of this
additional spending ought to flow through to supply chains
that in which China plays a part.
Is there not a massive disentanglement decoupling that
needs to, I guess precede the spending?
Well, I think on the face of it,it's pretty logical that it is
(19:38):
impossible to secure an economy against economic warfare when
that is an open economy in whichthe, you know, adversary has
nested itself. How do you secure yourself
against an adversary that is inside your own systems?
So full decoupling, I'm not sureabout that, but certainly a very
(20:00):
hard pivot towards full decoupling I think is essential
and that that is the more difficult conversation that will
need to be had with the publics and the allied populations.
Very, very interesting you. I mean Canada joined Rearm
Europe. What does that mean?
(20:22):
So just just talk me through what that means.
I mean, I suppose from the defence industry point of view
and you mentioned the friend shoring and the, the
opportunities, the, the enviableposition that Canada is in.
Just talk me through the, the significance of Canada's
membership of or or joining of Rearm Europe.
The I think it's, is it €800 billion that is being talked
(20:46):
about there and what does it mean for Canada's defence
relations with the United States?
So I actually don't know the exact number off my.
Offhand. It gets translated into U.S.
dollars, but I would, I would say this Canada for the reasons
we talked about earlier, yes, isin an enviable position in terms
of being able to grow to 3.5% through growth rather than
(21:10):
through cuts or reallocations. So that's a really good piece of
news for us from that perspective.
Rearm Europe, if it opens up newmarkets for Canadians to sell
into, then that's all for the good and its growth that will
finance the rise to the 3.5 as well.
The other reason why Canada, of course, is interested in Rearm
(21:32):
Europe is in order to lessen ourdependency on the United States.
There's a practical reason for that, which is that the entire
world is trying to gear up its defence industrial base.
And so the more that we are collectively supporting one
another in that, the better off we all are.
We can't all stand in line with the US supply chains or we won't
(21:53):
have the weapons that we need. More broadly, everybody needs to
be ramping up their defence industrial base.
There's also the issue that Canadians feel that the
Americans could be unreliable and therefore they want to pivot
to Europe. So there's many good reasons to
diversify. The concern I think for the
government will be to ensure that it's managed
(22:16):
diversification and to prepare the population for the reality
that we are not realistically going to decouple from the
United States. It it poses far too many
military and economic risks to make a hard pivot to Europe with
regard to the defence industrialbase.
(22:37):
And I'd like to just talk about the military risks for a moment.
The first concern has to be thatNorth America is 1 geographic
space. That means that we are a single
attack surface. When you are a single attack
surface, you need an integrated defence posture.
(22:59):
Two countries that need to be working together as seamlessly
as an orchestra. So there are limits to mixing
and matching equipment from Europe with the equipment that
the Americans use. Because if you do so and you do
it with the wrong equipment, youintroduce a glitch into North
American defences and you put yourself at risk.
So that's one real military risk.
The second is, to be very frank,the possibility of investing in
(23:23):
lesser quality technologies. theUnited States remains the
world's largest and most technologically advanced
military in the world. Why would we not want the most
advanced technologies defending us in an increasingly dangerous
threat environment? So that's another limitation
that the government will need toconsider.
(23:43):
The third one for me is really more of a geopolitical view and
it's the one that concerns me the most.
Security of supply. We're in a new world order here
and there's a little bit of raw power politics and raw power
realities that come into play inthe event of a crisis.
If we are sitting on a list of potential clients for European
(24:09):
industry, we can be sure that ifEurope is under attack, the
supplies will go to European partners on the list regardless
of where we sit, simply because Europe's first priority will be
to defend Europe. From that perspective, we are
better served to sit on AUS supply list because the US, in
its own self interest and for its own National Defence, will
(24:30):
want to prioritise deliveries toCanada because we are the United
States partner in the defence ofNorth America.
So in terms of preparing for theworst moment, we had best not
over pivot to Europe. Finally, the last thing I would
say, coming back to the threats posed by economic warfare, if
European controls on China's economic warfare are not
(24:55):
sufficiently robust, we risk investing in capabilities that
have Chinese DNA in them and will never be therefore accepted
into the integrated defence of North America.
And that's a reality, quite frankly, that Australia needs to
think about as well. If you are investing in
capabilities that are compromised from the get go,
(25:17):
those capabilities will not comeinto play in a conflict.
I mean, I in my wobblier momentsabout Donald Trump and I have
them almost daily. I do look to Europe as, you
know, as a potential, you know, future ballast of reason in the
world and liberal democracy. But I must say I with the best
(25:37):
will in the world, my attitude for the last six months has been
have a Plan B for the worst. But you know, certainly continue
to hope for the best and do yourbest to try and work as an ally
with the United States irrespective of what concerns
you might have about future reliability.
Because I mean, certainly in Australia's case, you know, the
realistic prospect of self sufficiency or, or moving fully
(26:01):
away from the United States or even substantially away from the
United States is a very, very tentative reality.
I I see your arguments entirely in the case of Canada there
look. I mean, diversification is great
and it's important. It just needs to be very
thoughtfully and carefully done and I'm sure the government
understands that. The reality is we need all of us
(26:23):
producing weapons and we all need to be ensuring that our
defence industrial bases are secured against economic warfare
because we all need to be able to rely on each other's security
and each other's military capability.
We're in it together. I, I couldn't hear here.
I couldn't agree more. OK, Raquel, you've been very
generous with your time. I realise I don't know what time
(26:45):
it is where you are, but I'm sure it's past bedtime.
So look, thank you. And, and at the short notice, we
wanted to get your thoughts because they're so important on
these, on these NATO spending questions.
So thanks for joining us. Thank you very much.
Thanks for listening, folks. We'll be back next week with
more STOP THE World.
Stop the world. Spending more money on defence
is not going to make us more secure unless we deal with
China's economic warfare. So to start, we need to
understand that when we opened our economies to China in
particular, it took advantage ofthat opportunity to attack us
(00:22):
from inside our own systems. So what happened is that China
nested itself inside our economic and industrial systems
and then set upon unleashing a really sophisticated campaign of
economic warfare. And that campaign allowed it to
amass the military power that now threatens us.
Welcome to Stop the World, the Aspy Podcast.
(00:42):
I'm David Rowe. And I'm Olivia Nelson.
Today we have Canadian defence and strategic expert Raquel
Garbers reacting to the major news that NATO members will aim
to increase their defence spending to 5% of GDP.
Raquel is a career Canadian defence and intelligence
official who is currently a visiting Executive at the Centre
for International Governance Innovation.
(01:04):
Raquel has some strikingly clearviews on the value of the
spending increases, but also theway they need to be paired with
a stronger focus on economic warfare by hostile states,
particularly China. She talks about the rationale
for more defence investment, Canadian and Australian public
opinion about military spending,the two countries strategic
circumstances and how Donald Trump plays into Canadian
(01:25):
thinking. Raquel shares her deep concerns
about Chinese economic warfare against open economies such as
Canada's and Australia's, the need for democratic nations to
work together through industrialpolicies such as friendshoring,
and how NATO members and anyone else, including Australia, who
might be looking to up their defence spending, need to ensure
(01:45):
a defence boost doesn't ultimately play into China's
economic warfare campaign. Raquel is a force of nature with
a world view that is crystal clear.
Listen carefully and we hope youenjoy this conversation.
I'm here with Raquel. Garbage.
Raquel, thanks for coming on thepodcast.
My pleasure. Thank you.
So we've had the NATO agreement in the last couple of days to
(02:06):
increase defence spending to 5% of GDP, including 3.5% core
military funding. It's been widely hailed as an
important step. What's your overall view of it?
How significant is it? How watertight?
Crucially, how realistic and achievable is it for the
(02:26):
countries? So I think what's important to
know is that the Allies, in agreeing to hit the 5% mark,
have in effect as a group, finally acknowledged the gravity
of the security environment and the reality that they are at
growing possibilities of findingthemselves in a war for which we
are collectively quite ill prepared.
(02:49):
Defence spending is absolutely essential.
As you no doubt know, at the endof the Cold War, the Allies
collectively allowed their militaries to fall into a
relative decline. But in addition to defence
spending, and to ensure that defence spending actually
enhances their security, what the Allies really need to do is
cast aside the mindset that theyadopted at the end of the Cold
(03:11):
War, which as you probably know,was something to the effect of
if we include hostile States andwe embrace them and we bring
them into our systems, we will ensure that we are on the path
to peace and riches. So effectively, the argument
that was championed by the foreign policy and economic
elites of the time to the effectthat interdependence would
(03:34):
pacify hostile States and of course the Allies, when they
embrace that fantasy, made two faithful mistakes.
The first was that they downshifted their defence
spending and the second was thatthey opened their economies to
the hostile states. So they really need to correct
that first and foremost. I definitely want to come back
to that in more detail and, and we'll unpack that in the second
(03:56):
half of the podcast. I, I want to spend some time on
it. First of all, I mean, just the,
the, the achievability, I mean we're talking about
extraordinary sums of money. We in Australia, we're stuck at
around 2% of GDP. We're having a not always
edifying debate about where to take that.
And I'll and I'll come back to that as well, but tell me about
Canadians. Are Canadians behind this
(04:17):
increase? And just for the context for our
listeners, I believe, I mean, from my reading, Canada is
currently at around 1.4% of GDP.So to get to 3.5 core funding,
leaving aside the 1.5 in addition, that can possibly be
done through a bit of creative accounting.
I mean, I don't want to, I don'twant to be too cynical about it,
but really the 3.5 to me is the is the core is the key number.
(04:40):
Canadians will have to find roughly $50 billion a year.
Now that's just a back of the envelope calculation that I did
a few minutes before we jumped on air.
It could be wrong, I'm happy to be corrected on it, but I mean,
even 50 billion a year out of Canada's budget through tax
increases, through cuts elsewhere, I imagine is pretty
significant burden. Are Canadians up for that?
(05:00):
And if So, what is motivating them?
To be frank with you, I think itwas the arrival of Donald Trump,
Trump 2 point O that really, quite frankly, not simply in
Canada but across the alliance made clear that defence spending
was no longer optional. It was an absolute necessity and
I think Canadians understand andhave been proud in the past of
(05:24):
their military history and the contributions that we've made.
And they understand now that theworld is spiralling out of
control and defence spending is essential.
They also understand that it's going to be essential to the
future of our relationship with the United States, as well as
with our other allies. We, as you probably know, the
Prime Minister has committed to getting Canada to 2% of GDP
(05:46):
within this year, which leaves us a 1.5% climb over the course
of a decade. Is Canada able to do that, and
will Canadians do that? The answer is, as seems to
always be the case for us in Canada, we are in a really,
really envious position vis A vis other allies.
(06:06):
And I'll tell you that's for tworeasons.
The 1st is that Canada has the natural resources that the world
needs right now. We have the oil and gas that
will allow the allies to rid themselves of their dependencies
on Russia, for example, for energy.
And of course, this is happeningin the midst of a manufacturing
renaissance, a friend shoring. So not just to power their own
(06:29):
defence industrial base, but to power their broader industrial
base. Canada has the resources that
the allies need. This gives us customers.
So growth is an answer for us and it's custom made.
The second reason why Canada is particularly blessed is that we
can offer the allies something that nobody else can other than
the United States, which is whatI call defence in depth.
(06:53):
And what that means is because we are not sitting in the hot
zone in the first stages of conflict, we are a secure
location in which to manufactureand stockpile munitions and
other weapons and industrial capability for the defence
industrial base. So allies who are looking to
secure their access and ability to produce weapons would be well
(07:15):
advised to make those investments in Canada.
So because we can offer defence in depth by virtue of geography
and because we have the resources that the world needs,
we are in an enviable position where we can get to 3.5 in a
way, quite frankly, where we're helping the allies, but we're
also advancing our own economic growth.
(07:36):
It's growth for us as opposed toa drain.
Fascinating and a fascinating comparison with Australia.
We of course are blessed with natural resources as well, but
who the customer is might be a slightly different question for
us right now. But again, we can, we can come
back to that now. I mean we talk about social
licence a lot in Australia, national security experts and
(07:58):
our own, you know, our own officials talk about it quite a
lot. Our own defence officials, our
military leaders, etcetera, talkabout, you know, the, the Intel
heads talk about the the need for social licence, the value of
social licence, IE making sure that our public understands the
value of these sorts of investments.
Critics of the more complacent position, which we are arguably
(08:22):
still stuck in here in Australiasometimes argue that we don't
have a very frank debate in thiscountry about the nature of the
strategic risks, primarily China, and therefore we don't
have a foundation for a political case for increasing
defence spending. Now that said, and again context
for our listeners, it's quite interesting, the low E poll,
(08:43):
another think tank here in Australia which does annual
polling, it's very reputable, has found just in in recent
weeks, half the population, 51% of Australians say Australia
should increase defence spending.
A minority, which is 37% say Australia should keep defence
spending about the same level asnow and only 10% say that it
should be decreased. Describe the comparable context
(09:05):
in in Canada and your observations generally across
NATO and elsewhere for what makes a nation come alive to
growing strategic threats. I mean, you mentioned Donald
Trump. I assume though that Trump in a
sense, it's sort of the messenger here.
I mean, there are the underlyingstrategic risks in Canada's
(09:28):
case, you know, being in North America, you've you've got
Russia and you're a NATO member as well.
You've got Russia, but as a IndoPacific country, you've also got
China as well. You know, you're in a very
interesting position how, how alive to the strategic to the, I
guess the underlying strategic risks are Canadians irrespective
of the the Trump pressure that has been brought to bear in the
last six months. That's a great question.
(09:50):
I'm actually going to start fromhow you described Australia, and
I would say that Canada in many respects is in precisely the
opposite position of Australia. You are sitting right next to
the greatest military threat we face as allies, and you are also
economically tied to that threatby virtue of geography.
(10:11):
Canada, by contrast, is sitting right next door to the anchor
ally whose military capabilitieshave ensured the defence of all
of us for 80 years. And moreover, as you likely
know, a really, really high percentage of Canada's economic
dependence is tied to the UnitedStates somewhere in the
(10:32):
neighbourhood of 7070 plus percent.
So we are in precisely the opposite position.
And yet I would say for years Canada has lagged behind
Australia in terms of waking up to the reality of the threat
environment because we haven't been sitting next door to it.
Canadians have not had to think seriously about National Defence
(10:54):
since the end of the Cold War. At the end of the Cold War, when
the United States stood alone asthe sole great power in the
international order and Canada was geographically, is
geographically attached to the United States, it allowed us to
fall into, I would say, an even greater complacency than that of
the other allies. And so waking up to that threat
(11:16):
for Canadians, I'm not actually sure that we are fully there.
I think we understand that something has happened.
We are grappling right now, I would say in the public
narrative with the false equivalency that some
commentators are putting out with regard to the United States
and China. And so the debate that you're
having with regard to what to doabout China, given the economic
(11:39):
relationship, what's happening here in Canada, is that you have
some influential commentators suggesting that Canada should
lessen its dependency on the United States by deepening its
economic relationship with China.
And that, to me, suggests A fundamental misunderstanding of
how the world found itself in the position it's in, the
(12:01):
gravity of the threat we face and the reality of the options
available to Canada. So I think that would
strategically, I would say to you that Canadians are beginning
to understand it, but after, youknow, 3 decades of sitting next
door to one of history's more benign hegemons, it's not
something that comes naturally to us.
(12:23):
The, the irony for me is that probably Canada investing is
going to send a stronger signal to the Australian public than
almost any other country. I mean, you, you make a very
good point about the, I guess the geostrategic differences
between us in terms of where we're, where we're physically
located. And it's a very, very important
point. You've got, as Donald Trump
(12:43):
would put it, 2 beautiful oceanson, on either side of you,
although there's an archipelago.I guess that that makes a bit of
a difference. But but you know, but where we
are a very different geostrategic situation.
But Australians look at Canadians I think as probably
closer in character and you know, and political colour than
(13:05):
almost any other country. I mean, we, we're both US
allies, we're both Commonwealth countries.
We are both, both obviously Anglophone countries with
British heritage. And we're both, you know, sort
of fairly mild mannered nations,if I can put it that way as
well. So, you know, ironically for me,
the probably Canada investing inthis way is actually a very,
very strong signal to the Australian public.
Your Prime Minister Mark Carney,I think is probably the sort of
(13:28):
from Australian's point of view as this sort of, you know,
wonderful technocrat who has hasshown his spine against Trump,
who is not popular here. You know, it took to us in some
ways he's a sort of a dream leader.
So I think it'll be really interesting to see how that sort
of plays in in the Australian sort of, I guess public
political discussion. Just talk to me about what your
(13:48):
advice on how governments kind of get ahead of the the long
term strategic risk. What's a what's a good message
in your mind for governments to talk honestly with their publics
about the nature of risk well ahead of when it materialises
sufficiently ahead so that they can make the investments both in
(14:12):
a deterrent for a deterrent effect, but also for a
preparedness effect. You know, these, these big
investments that need to be made, you know, 5-10 years in
advance of the where the real threat kicks in.
I mean, how do you actually sortof make that argument when it
hasn't fully materialised in theeyes of the public?
(14:32):
Well, I think it depends on which threat you're focused on.
I mean, the reality is, as I'm sure you know, we can trace back
at least 15 years to US administrations, Democratic and
Republican alike, starting with Barack Obama, being increasingly
clear with the allies that the threat environment was changing
(14:54):
in a way. And the balance of power was
shifting away from the United States in a way that was leading
to the point where the US could no longer ensure global peace
unless the allies all stepped up.
And of course, what we needed tohappen didn't really happen.
And we've now reached the point where the evidence of the
(15:14):
breakdown of the post Cold War order is very clear.
And it's clear to the average person as well, which, you know,
is unfortunate, but also, I think answers your question in
part. The reality is that, you know,
Russia is waging a war in Ukraine.
China is increasingly aggressivewith its neighbours, both in
terms of its military intimidation and harassment.
(15:36):
But really, more broadly, with its economic warfare, the
prospect of conventional war between major powers has never
been higher. And people are talking about
that. And there's a growing risk, real
risk of nuclear proliferation. And some U.S. officials or
official documents have actuallymade statements to the effect
that the outcome of any war between China and the United
(15:58):
States would be far from certain.
So it's against that backdrop that we see Trump 2.0
accelerating the trend line thatstarted with Barack Obama about
getting the allies ready for theinevitable moment that we are
now in. So I think the evidence of
what's actually going on in the world makes its own case.
(16:20):
The challenge for governments isto explain how we got into that
space in order to better understand what we need to do to
navigate our way out of it in order to restore the ability to
deter war. And it's a very basic one liner
in fact, that I think governments need to adopt, which
is to say if we want to deter war, we need to restore our
(16:44):
ability to win a war. It's that simple.
And it's, you know, peace through strength is the catch
line. But I think we need to dig a
little deeper on that and we need to explain to our publics
in more detail how it is that welost the ability to fight, both
in terms of capabilities and ourpolitical will.
Yeah, I mean, I love that unpacking.
(17:05):
P3 strength seems to be a really, really great starting
point. Let's let's Speaking of
unpacking, let's let's go back to your point about how NATO
allies spend that 5% of GDP. I mean, you've, you touched on
your concern there about I suppose about global supply
chains and the economic, the predatory economic intentions of
(17:29):
most our nations, presumably China in particular.
Just can you talk us through what your concerns are there?
Yeah, and thank you for the opportunity to talk about it,
because I think it's the most critical thing that publics need
to understand. Spending more money on defence
is not going to make us more secure unless we deal with
China's economic warfare. So to start, we need to
(17:52):
understand that when we opened our economies to China in
particular, it took advantage ofthat opportunity to attack us
from inside our own systems. So what happened is that China
nested itself inside our economic and industrial systems
and then set upon unleashing a really sophisticated campaign of
economic warfare. And that campaign allowed it to
(18:14):
amass the military power that now threatens us.
So the two inconvenient truths that all allies need to be
honest about is that in failing to arrest China's economic
warfare, we could be accused of inadvertently subsidising its
war machine. And worse still, if we fail to
(18:34):
confront that economic warfare now, then when we gush hundreds
of billions of dollars into our defence industrial base in order
to meet the NATO 5% or 3.5% spending target, we put
ourselves at risk of making the adversaries even stronger than
they already are. So dealing with economic warfare
(18:55):
is essential. And it's not just about our
broader economic security and insulating ourselves from
economic coercion. It's about educating people
about the military implications in particular that flow from
China's economic warfare. You seem to be talking virtually
about decoupling then. Is that a fair description of
(19:17):
it? I mean, if if not $1.00 of this
additional spending ought to flow through to supply chains
that in which China plays a part.
Is there not a massive disentanglement decoupling that
needs to, I guess precede the spending?
Well, I think on the face of it,it's pretty logical that it is
(19:38):
impossible to secure an economy against economic warfare when
that is an open economy in whichthe, you know, adversary has
nested itself. How do you secure yourself
against an adversary that is inside your own systems?
So full decoupling, I'm not sureabout that, but certainly a very
(20:00):
hard pivot towards full decoupling I think is essential
and that that is the more difficult conversation that will
need to be had with the publics and the allied populations.
Very, very interesting you. I mean Canada joined Rearm
Europe. What does that mean?
(20:22):
So just just talk me through what that means.
I mean, I suppose from the defence industry point of view
and you mentioned the friend shoring and the, the
opportunities, the, the enviableposition that Canada is in.
Just talk me through the, the significance of Canada's
membership of or or joining of Rearm Europe.
The I think it's, is it €800 billion that is being talked
(20:46):
about there and what does it mean for Canada's defence
relations with the United States?
So I actually don't know the exact number off my.
Offhand. It gets translated into U.S.
dollars, but I would, I would say this Canada for the reasons
we talked about earlier, yes, isin an enviable position in terms
of being able to grow to 3.5% through growth rather than
(21:10):
through cuts or reallocations. So that's a really good piece of
news for us from that perspective.
Rearm Europe, if it opens up newmarkets for Canadians to sell
into, then that's all for the good and its growth that will
finance the rise to the 3.5 as well.
The other reason why Canada, of course, is interested in Rearm
(21:32):
Europe is in order to lessen ourdependency on the United States.
There's a practical reason for that, which is that the entire
world is trying to gear up its defence industrial base.
And so the more that we are collectively supporting one
another in that, the better off we all are.
We can't all stand in line with the US supply chains or we won't
(21:53):
have the weapons that we need. More broadly, everybody needs to
be ramping up their defence industrial base.
There's also the issue that Canadians feel that the
Americans could be unreliable and therefore they want to pivot
to Europe. So there's many good reasons to
diversify. The concern I think for the
government will be to ensure that it's managed
(22:16):
diversification and to prepare the population for the reality
that we are not realistically going to decouple from the
United States. It it poses far too many
military and economic risks to make a hard pivot to Europe with
regard to the defence industrialbase.
(22:37):
And I'd like to just talk about the military risks for a moment.
The first concern has to be thatNorth America is 1 geographic
space. That means that we are a single
attack surface. When you are a single attack
surface, you need an integrated defence posture.
(22:59):
Two countries that need to be working together as seamlessly
as an orchestra. So there are limits to mixing
and matching equipment from Europe with the equipment that
the Americans use. Because if you do so and you do
it with the wrong equipment, youintroduce a glitch into North
American defences and you put yourself at risk.
So that's one real military risk.
The second is, to be very frank,the possibility of investing in
(23:23):
lesser quality technologies. theUnited States remains the
world's largest and most technologically advanced
military in the world. Why would we not want the most
advanced technologies defending us in an increasingly dangerous
threat environment? So that's another limitation
that the government will need toconsider.
(23:43):
The third one for me is really more of a geopolitical view and
it's the one that concerns me the most.
Security of supply. We're in a new world order here
and there's a little bit of raw power politics and raw power
realities that come into play inthe event of a crisis.
If we are sitting on a list of potential clients for European
(24:09):
industry, we can be sure that ifEurope is under attack, the
supplies will go to European partners on the list regardless
of where we sit, simply because Europe's first priority will be
to defend Europe. From that perspective, we are
better served to sit on AUS supply list because the US, in
its own self interest and for its own National Defence, will
(24:30):
want to prioritise deliveries toCanada because we are the United
States partner in the defence ofNorth America.
So in terms of preparing for theworst moment, we had best not
over pivot to Europe. Finally, the last thing I would
say, coming back to the threats posed by economic warfare, if
European controls on China's economic warfare are not
(24:55):
sufficiently robust, we risk investing in capabilities that
have Chinese DNA in them and will never be therefore accepted
into the integrated defence of North America.
And that's a reality, quite frankly, that Australia needs to
think about as well. If you are investing in
capabilities that are compromised from the get go,
(25:17):
those capabilities will not comeinto play in a conflict.
I mean, I in my wobblier momentsabout Donald Trump and I have
them almost daily. I do look to Europe as, you
know, as a potential, you know, future ballast of reason in the
world and liberal democracy. But I must say I with the best
(25:37):
will in the world, my attitude for the last six months has been
have a Plan B for the worst. But you know, certainly continue
to hope for the best and do yourbest to try and work as an ally
with the United States irrespective of what concerns
you might have about future reliability.
Because I mean, certainly in Australia's case, you know, the
realistic prospect of self sufficiency or, or moving fully
(26:01):
away from the United States or even substantially away from the
United States is a very, very tentative reality.
I I see your arguments entirely in the case of Canada there
look. I mean, diversification is great
and it's important. It just needs to be very
thoughtfully and carefully done and I'm sure the government
understands that. The reality is we need all of us
(26:23):
producing weapons and we all need to be ensuring that our
defence industrial bases are secured against economic warfare
because we all need to be able to rely on each other's security
and each other's military capability.
We're in it together. I, I couldn't hear here.
I couldn't agree more. OK, Raquel, you've been very
generous with your time. I realise I don't know what time
(26:45):
it is where you are, but I'm sure it's past bedtime.
So look, thank you. And, and at the short notice, we
wanted to get your thoughts because they're so important on
these, on these NATO spending questions.
So thanks for joining us. Thank you very much.
Thanks for listening, folks. We'll be back next week with
more STOP THE World.
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