If Canada wants economic security, it must tolerate a bigger government hand in business

Eugene Lang is an assistant professor at the School of Policy Studies at Queen’s University, former chief of staff to the Minister of National Defence and a former Finance Canada official.

“Our Plan for a Stronger Canada begins, deliberately, with economic security.”

So states the national security policy of Prime Minister Mark Carney’s government, released last week.

Though national security is the No. 1 responsibility of the federal government, this marks the first time in 22 years Ottawa has bothered to publish a policy on the subject. The last and only government to do so was former prime minister Paul Martin’s in 2004.

That policy – titled Securing an Open Society – was motivated by the 9/11 terrorist attacks and the new world (dis)order that event portended, along with a need to reassure the Americans that Canada was with them through thick and thin and was not a security risk.

The motivation for Mr. Carney’s policy could not be more different. Implicit in The Plan for a Stronger Canada is the goal of becoming less dependent – both economically and in security terms – on a hostile ally to the south, with whom we are currently engaged in what the Prime Minister has described as economic warfare.

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One could go further and see the policy as a direct response to U.S. President Donald Trump’s national security strategy, published last year, which is founded on the premise that the United States has a legitimate right to control any “strategic points” in the Western Hemisphere – the so-called “Donroe Doctrine.”

But the big difference between Mr. Martin’s Securing an Open Society and Mr. Carney’s plan is the heavy emphasis in the latter on economic security as a core feature of Canadian national security. This is a new concept for Canada, though it has been central to national security thinking in the United States and elsewhere for generations.

“Economic security is a primary factor in decisions on industrial support, innovation, and foreign investment,” according to The Plan for a Stronger Canada.

The plan identifies eight critical sectors of the Canadian economy: emerging technologies, critical minerals, defence, energy, transportation, pharmaceuticals and biotech, food security, and a financial category made up of payments, settlement and investment. It states that “protecting and building these capabilities will drive our decision making at home and abroad. Where we can, we build these strengths at home. Where capabilities are complementary, partnering with reliable allies will bring us strength.”

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Implicit in all of this is that Canada’s new national security strategy requires a degree of government intervention in select sectors of the economy, the likes of which we have not seen in at least a generation. To the free-market purists, this is dirigisme – heavy state planning – in disguise, if not economically illiterate. To those who know free markets have never governed strategic sectors in the economies of our allies – especially the United States – much less our adversaries, this is long overdue.

But what could it mean in practice for the role of the federal government vis-à-vis the Canadian economy and business?

It could mean big research and development subsidies for favoured sectors and firms.

It will likely mean directing federal procurements to Canadian companies through invoking national security and other exceptions to competitive procurement rules, especially in defence for “sovereign capability” areas, 10 of which are identified in the government’s Defence Industrial Strategy. Federal stockpiling of some goods and commodities could also become more common.

It could mean Ottawa provides new types of financing to companies, including taking equity positions in firms. The establishment of the Defence Investment Agency and amendments to the Defence Production Act, now before Parliament, give the government new tools and financial resources to do just that.

It could also mean more Crown corporations. The Carney government is enamoured with Crowns, having created three – the Defence Investment Agency, the Canada Strong Fund and Build Canada Homes – in the first year of its mandate. Expect more of these.

It will probably require more aggressive use of the Investment Canada Act’s national security test to block foreign takeovers of Canadian companies in sectors judged to be strategic or sensitive, including acquisitions by American firms.

And it could even mean, in rare instances, nationalizations of companies.

In his introduction to The Plan for a Stronger Canada, Prime Minister Carney states: “This is the plan for a sovereign, resilient, and prosperous Canada.” Implicit in the plan is that increasing economic sovereignty and resiliency comes with a price. And part of that price is more federal government involvement in business and in the economy than we have seen in many decades.