The Hon. Lisa Raitt is joined by the Hon. Perrin Beatty, former federal Defence Minister, to review the impact of Canada joining the new NATO Defence Investment Pledge, its impact on public spending and the state of Canada-US relations.
Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I'm your host Lisa Raitt and in this podcast I'm going to share insights on current hot topics in the areas of public policy, politics and business, with some guests along the way. Welcome back to The Raitt Stuff. One of the topics that Canada has been grappling with for many, many years has to do with defence spending.. What is the percentage of GDP that we spend on our defence? It's been a point of contention for the other NATO countries, and it's been a real point of contention for the United States. Finally, Prime Minister Carney's government, has said it will meet the 2%. In fact, it said it will go higher and will continue to try to meet and stretch for the goal that the NATO has now set of 5%. But getting to that level is going to be painful and it can be difficult. So I thought we'd explore that topic today with somebody that I think is one of the foremost thought leaders in defence and somebody who also comes from a business point of view and a political point of view. And that, of course, is the Honorable Perrin Beatty. Perrin Beatty is the former president and Chief Executive Officer of the Canadian Chamber of Commerce. He held the position from 2007 to 2024, which makes him the longest serving of the Canadian Chamber's presidents. Today, he's a corporate director, he's a senior advisor to Teneo, and he's the co-chair of the expert group on Canada-U.S. relations. Perrin was first elected at a very young age to the Canadian House of Commons as a progressive conservative in 1972. He went on to spend 21 years in parliament and he served as minister in seven different portfolios under three prime ministers. Perrin, I'm delighted that you could join us today. I'm delighted because you're also a very dear friend of mine and I always enjoy speaking with you.
Perrin Beatty: Thanks, and you left the best for last. Great to be your friend. Thank you.
Lisa Raitt: Well, you were very kind to me when I first came to the Hill in 2008 and had had some words of wisdom for me on what it's like to be a young cabinet minister. And I wasn't as young as you were, but I still felt pretty green. Perrin, I think what could be best for our listeners today who are clients and who are employees at CIBC, as well as general public, is to think about what really is being announced when the government says that it's going to increase defence spending? And what are the impacts on Canada when that announcement is made? Just give us an idea of basically what is going on.
Perrin Beatty: Lisa, I think the most important thing for people to know is the government's serious this time. Mark Carney gave a very good speech in Toronto in June where he laid out why it's important in the dangerous world in which we live today to increase our capacity to defend ourselves. Up until now, any time that there was any suggestion that we might increase defence spending, it was always under pressure from the Americans or from somebody else. It was done reluctantly. This is an instance where the Prime Minister of Canada is saying, we're doing this, it's substantial, we're doing it as rapidly as possible and we're doing it because it's in Canada's interest to do so. So that suggests to me a genuine commitment to the defence and sovereignty of Canada. When he gave the speech, it reminded me of when I was defence minister and Admiral Chuck Thomas, who was the head of the Navy, was very plain spoken as many military officers are. And he said to me, minister, you can have as much sovereignty as you're prepared to pay for. It was true then, it's true now.
Lisa Raitt: Let's talk about the content of the announcement first and then we'll get into the how are we going to pay for it part. But in the content, the prime minister seems to be focusing on a couple of things. He's focusing on increasing the take home pay essentially for the Canadian Armed Forces. He's talking about repairing the things that haven't been repaired for a long time. And he's got a bit of a focus on the Arctic. Do you think that these are the right things he should be focusing on?
Perrin Beatty: I think those are the right things. And it's interesting those issues all go back to my day. The defence white paper of 87 was focused particularly on the issue of sovereignty and particularly Northern sovereignty because we knew that the Americans didn't accept our ownership of the territorial waters that we claim, including the Northwest Passage. But beyond that, the issue now today is we don't have the personnel and the Canadian forces that we need to have. We're unsuccessful in terms of attracting and holding them. And the equipment that they're using in many instances is older than the people who are using them. badly out of date, countries have a moral contract with the men and women that they ask to literally lay down their lives to defend them. And that contract is, if you're prepared to give up your life in defence of your country. We'll give you a mandate which is meaningful and we'll give you the tools to do the job. And Canada has consistently for decades violated that moral commitment to the men and women in the Canadian forces.
Lisa Raitt: How tough was it when you were defence minister to get agreement from the prime minister to increase funding in defence? Like, I think people need to understand how difficult it is to stack up defence spending against other things like healthcare funding, like social services funding, like the government itself needing to have revenues to run to provide services to Canadians.
Perrin Beatty: And that's inevitably the debate. The Prime Minister, when he asked me to take on national defence, said, what we need to do is we need to re-equip the forces. Hence the 87 White Paper, which announced major expenditures on defence. But even after that had gone through cabinet, we were fighting a rearguard action with the Department of Finance that was saying, we don't want to spend money on defence. We want to pull back from that budget and we want to spend the money elsewhere or we want to try to bring the deficit under control. So there will be a fierce battle within cabinet itself. In this instance, it's the prime minister giving the marching orders and saying, this is going to be done.
Lisa Raitt: When you were Minister of Defence, you would have to go to the cabinet table and you would have to make the case for increased spending in the armed forces in the Canadian defence system. And that couldn't have been easy because the prime minister would line you up against making more investment in the healthcare system or in social services. This Prime Minister is facing the same situation. Any words of advice?
Perrin Beatty: In my day, I was very fortunate when the Prime Minister asked me to take on national defence, he said one of the commitments is that we want to increase and improve the equipping of our Canadian forces and we want to have a mandate that's workable. But it was a tough battle fighting the 87th White Paper through Cabinet, first of all, against opposition from other members of Cabinet. But even after it went through, the Department of Finance fought a rearguard action. And it was not the peace movement that was very vigorous at that time and said, look, we're seeing glasnost with the Soviet Union and we shouldn't be increasing our defence commitments, we should be cutting it. But it was the Department of Finance, which was the fiercest opponent. This will be a key issue for Prime Minister Carney as well, both from, they're going to have to be very tough trade-offs here. If you look at the commitments that the government has made, both in defence and in terms of industrial and social policy spending, in terms of taxation, you simply can't get there from here. And what you'll find is individual ministers will be fighting to protect their own departments and the Department of Finance to protect the overall fiscal framework. And then the prime minister himself is going to have to show the will to follow through in his commitment.
Lisa Raitt: Yeah. I mean, realistically, a government can borrow or they can tax or they can find savings. I think that's pretty much the three things that they can do. So it'll be a combination of those things.
Perrin Beatty: Four things. Our department, you mentioned borrowing. Yeah, run up the deficit. So I think it will be all of the above. There is no easy decision here whatsoever. And we need to be concerned, obviously, the size of the deficit, the borrowing that you were referring to earlier. The cuts will be difficult because it's a trade off. If you spend it on defence, you're not spending it on pensions or on infrastructure or on medical care or other issues. And then there's taxation. And Mr. Carney has actually announced cuts to taxation, such as dropping the carbon tax. And you can't square that circle in any easy way.
Lisa Raitt: Recently in the newspaper, there have been trial balloons being floated. I don't know who by whom as to whether or not we should add a percentage or two to the GST and have that fund defence spending. What do you think? Will that be something that Canadians will accept or are businesses going to have a problem with that as well?
Perrin Beatty: I think it's got to be on the table. Either we mean it when we say that we're going to increase our commitment and the expense of that is significant or else we don't. And that's an example of the sort of tough trade-off we're going to have to have. Even an increase to the GST of two percentage points, say, wouldn't cover the size of the increase in defence spending that we're talking about. So still beyond that, important questions have to be asked about where are we going to find the other money? Are we simply going to borrow it and send the bills to our kids? Or are we going to look at cutting programs elsewhere and setting different priorities? The important thing is that other countries are spending a considerably higher percentage of their GDP on defence than Canada is. They've made those decisions and they've done so successfully. And they've done so in a world that was less dangerous than the one that we're in today.
Lisa Raitt: Yeah, that's very true. I'm wondering, Perrin, if the cuts that the prime minister has issued a letter or the minister of finance has issued a letter saying that he's looking for seven or seven and a half percent cut in each of their departments. Can we really count on that? I mean, that's pretty complex to get that done.
Perrin Beatty: It's always hard, but now's the time to start. And again, it comes down to political will. I don't believe in across the board cuts, which are just indiscriminate and hit everything the same way. What you need to do is to have an exercise that looks at where can we make savings with the lowest possible impact in terms of vital services that we're providing. And it needs to be strategic as a result. But whether or not we had this defence spending, we would still have needed to have looked at all levels of government spending and asked ourselves, where are our priorities? How do we put the money into areas which actually allow the economy to grow? I did a check after the last federal budget, Lisa, and simply download the document as a PDF, put in the word invest or investment, and then put in the word spend.You'll find a gazillion invest in investments in the speech. The word spend is barely mentioned. The politicians in Ottawa have excised the word spend from their lexicon. Everything is an investment. And we need to focus what money we have on those areas that are actually going to stimulate economic growth or that will meet essential needs that we have in Canada as opposed to simply spending it on whim. We've got to differentiate between the must haves and the nice to haves and that's not going to be easy.
Lisa Raitt: You are, as I mentioned at the top, Perrin, co-chair of the expert group on Canada-US relations. Is this the worst you've ever seen, Canada-US relations? Are we at the bottom?
Perrin Beatty: Certainly in my lifetime. We've never had in my lifetime a president of the United States who says that Canada should not exist. And where that's the express position of the chief executive of the United States. There've been all sorts of stresses and strains over the years. Perhaps one of the most difficult ones was the election in which Mr. Diefenbaker was running where he made the decision not to accept nuclear warheads for the Beaumark missiles. And he and President Kennedy had a falling out. It was a very tough time during the Vietnam War where Lyndon Johnson took Lester Pearson by the lapels in the Oval Office and was shouting obscenities at him. But there hasn't been the sort of overt attack on Canada with an intention of doing the sort of damage to Canada, certainly in my lifetime.
Lisa Raitt: And if just to do a summary of where we're seeing it, it's steel, it's aluminum, it's autos. There was a bit of a sideways attack on the fishing industry. It seems every day we're getting something.
Perrin Beatty: So that's a recent one. But then there's dairy and supply management.
Lisa Raitt: So in terms of your expert group on Canada-U.S. relations, can you give us a little flavor of what you're studying?
Perrin Beatty: The whole of the relationship. When we formed the group, was about a year and a half ago, and it was to really focus on the renewal of COSMA, Trilateral North American Free Trade Agreement. But it became very apparent to us well before the US election that you had to deal with security issues before you could even deal with trade. Those were the issues that were of greatest concern to the Americans. Then after Donald Trump's election in November, what we saw was the whole range of other issues that were complicating the bilateral relationship. So we broadened our mandate to look at the whole of the Canada-US relationship.? How do we manage that relationship without doing damage? How can we develop the resilience that if we are attacked again that we can bounce back. How can we protect our sovereignty as a nation and how do we ensure that we never again are so dependent upon the goodwill of the incumbent and the Oval Office that we're left as vulnerable.
Lisa Raitt: It's a tough thing to answer, I think, Perrin.
Perrin Beatty: What it requires, Lisa, is, you know, I'm reading a book right now about C.D. Howe and the so-called Dollar Year Men during World War II. It's stunning when you see the statistics about how we converted our economy to a wartime economy and boosted production. There were a couple of things at play. First was a degree of patriotism that was without precedent, where people were lining up young people to join the Canadian forces. To go off and fight a war in Europe. They were asking to be allowed into the armed forces. And then secondly, you found at home on the home front that there was a strong national understanding that this was existential for Canada and that all of us had to sacrifice and pitch in. You had business people, CEOs who would get called up and over the course of the afternoon, they would make a commitment to leave their job as CEO of a company. Company would continue to pay them and they would come up to Ottawa for an indeterminate period of time to help to manage the war effort and to make sure that our troops were supplied. And the impact of that was massive. we're being asked today to develop a national will that is unprecedented outside of wartime and sustain it well beyond the life of any government. It will take literally decades for us. To get to where we would like to be in terms of being sovereign and prosperous and resilient. And we will not be able to achieve that unless we are able to maintain that political will.
Lisa Raitt: And you and I both know probably listening today and definitely within the Canadian corporate world, there's a lot of CEOs and high valued business minds who would do that for the country. And if given the opportunity, would go and try to assist and help in this kind of situation.
Perrin Beatty: There are, and we've allowed in recent years an estrangement between the business community and the government where dealings between the government and the business community were reviewed by the politicians as a potential conflict of interest. You have to hold them very much at arm's length. We will not be successful at building our economy unless we move beyond seeing business as a problem to seeing it as being a partner. Without growth in the private sector without a commitment from the private sector to invest, we will not be able to achieve our goals. And that requires a major change in mentality on the part of Ottawa. Fortunately, we're seeing the first signs of that.
Lisa Raitt: I agreewith you on the changes in Ottawa. And I guess the final question will be, is it your impression that Canadians on the whole have an understanding of the seriousness of the nature we're facing regarding our economy and our sovereignty?
Perrin Beatty: There's not an easy answer to that. It's abundantly clear that Canadians reacted very strongly to President Trump's attacks as they should. And we've seen a rebirth of Canadian nationalism, which is extremely encouraging. What's going to be very important now is for our government in Ottawa to level with Canadians about the very difficult trade-offs that have to be made. About the fact that it's not simply a matter of buying a cap that says that Canada isn't for sale or not going to Disney World this year. It's a matter of long-term commitment where we have to make sacrifices to make our country more sovereign and more prosperous, and that this is going to require that commitment on all of our parts.
Lisa Raitt: Well, I'm delighted you were here today. I'm also delighted that you're co-chairing an expert group on Canada-U.S. relations to help us chart our path forward for what you said is very true. The situation will never happen again for us.
Perrin Beatty: Keep our fingers crossed, that's for sure.
Lisa Raitt: Thanks a lot, Perrin. Appreciate you being with us.
Perrin Beatty: Thank you.
Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at lisa.raitt@cibc.com. Your interactions actually will make this better. I'm your host, Lisa Raitt, and this has been The Raitt Stuff.
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