Canada and European Security and Defence Cooperation: A Challenging Road Ahead

By J. Craig Stone

Canada-EU defence cooperation has been progressing from an ad hoc NATO focussed relationship to a more structured strategic interdependence, driven by shared threat perceptions, technological changes, new partnerships, and institutional innovation within the transatlantic security framework. The focus of this think piece is to identify some of the opportunities and challenges that will need to be addressed to meet the Prime Minister’s intention of growing Canada’s economy, meeting the NATO 5 percent of GDP commitment and reducing our trading dependency on the United States.

In June 2025, Canada and the EU signed a landmark Security and Defence Partnership^[i] strengthening Canada’s role within Europe’s evolving defence architecture. The agreement highlights both sides’ recognition of the strategic advantages of closer transatlantic defence industrial cooperation, including Canada’s involvement in Europe’s SAFE joint arms procurement initiative. This builds on earlier agreements related to the Comprehensive Economic and Trade Agreement (CETA) and the Strategic Partnership Agreement (SPA).

More specific to Canada, the government updated its defence policy in April 2024 (Our North Strong and Free) with an intention to “build an innovative defence industrial base”, signalling a major effort to enhance the country’s Defence Technological and Industrial Base (DTIB).  It then issued its first defence industrial strategy in February 2026 (Security, Sovereignty and Prosperity) with a new Build-Partner-Buy framework to acquire military capability. The connection to the EU falls into the Partner and Buy aspects of this framework and will need close coordination with aspects of the SAFE, CETA and SPA agreements.

The agreement with the EU indicates that Canada expects participation will create significant defence procurement and industrial opportunities for Canada and its defence sector. The November 2025 budget allocates $81B over 5 years to defence, including $6.6B to strengthen the defence industry and $6.2B to expand Canada’s partnerships.^[ii] There appear to be many opportunities for cooperation and investment as Canada looks to reduce its dependency on the United States.

For example, Canada’s investment in its ammunition production dovetails with European plans to ramp up ammunition manufacturing, opening avenues for cooperation or mutual support, especially in Europe. There is increasing demand in air and missile defence, counter-Unmanned Aircraft System (UAS), and C4ISR, where Canadian radar, aerospace, Arctic domain awareness, and NORAD modernisation can complement EU strengths in ground-based air defence, secure communications, and electronic warfare. Hence, joint initiatives in space situational awareness, resilient Positioning, Navigation, and Timing (PNT), and maritime security, including undersea surveillance and cables,^[iii]could address shared vulnerabilities. Likewise, the co-production of munitions, energetics, and propulsion, supported by critical minerals partnerships like those with Germany, can reduce supply chain risks and bolster surge capacity

Taken together, EU and Canadian initiatives reveal parallel institutional logics: both seek to reduce strategic dependency, strengthen domestic industrial bases, and integrate commercial technology sectors into defence planning. This convergence suggests that cooperation is not merely politically desirable but structurally incentivised with new instruments and means.  However, there are a number of challenges that will need to be managed in order for any of these activities to achieve intended benefits.

First, the existing relationships that exist between Canadian and US defence industries and the military’s focus on interoperability with the US has traditionally led to a preference for US equipment. Emphasis for military equipment has traditionally been placed on economic benefits for Canada and interoperability with allies, particularly the U.S. Consequently, U.S. platforms are often selected, and this has created an ecosystem with Canadian subsidiaries of U.S. Primes.^[iv] More pragmatic, it is easier to trade with the US than the EU just from a time and space perspective.

Next, Canada and EU still operate under different regulatory regimes and political constraints. The EU’s defence initiatives often have rules that limit third-country (non-EU) participation due to concerns over the security of supply and the protection of the EDTIB. Conversely, Canada’s defence procurement is influenced by its industrial policies, like the Industrial and Technological Benefits policy, and by close integration with U.S. defence supply chains. In addition, issues like the International Traffic in Arms Regulations (ITAR) restrictions will need to be addressed in both Canada and the EU in order to be successful in expanding opportunities for more cooperation.

Third, regulatory divergences can act as a barrier to joint projects, namely, companies might face legal hurdles sharing technology across the EU-Canada border, or funding might not be accessible to a foreign partner. In practice, several layers of EU and national rules limit EU-Canada defence cooperation, even when interests align. Furthermore, dual-use export controls add licensing complexity to cross-border development and production, including for software and technical assistance.^[v]

Fourth, the diversification of trade with Allies and the rules and regulations concerning Intellectual Property (IP) must be consistent across allies to protect and safeguard individual industries and their dependencies for economic viability. Moreover, it is important to establish appropriate mechanisms for sharing IP to facilitate joint production and enhance long-term supply chain resilience. Initiating this process within the framework of NATO could be beneficial. The same issue applies to resolving the U.S. ITAR constraints, as previously mentioned. Nations must develop a common set of standards that meet ITAR requirements when it is prudent to do so but also have standards that meet EU and Canadian requirements when ITAR mechanisms are not suitable or are obstacles to progress.

Fifth, nations need to sort out their processes, but coordination of changes and improvements needs to be done holistically between the EU and Canada to prevent the development of new barriers. Access, and where legally achievable, funding should be conditional on reciprocity, security of supply, protection of classified information, clear intellectual property rules, and compliance with export controls. Within this context, the institutionalisation of dialogue emerges as a key enabling factor.

While it is too early to assess the EU-Canada partnership’s outcome, its trajectory is indicative of how future transatlantic security structures are likely to be organised around cooperative industrial infrastructures and shared innovation ecosystems. Dialogue and cooperation are paramount moving forward to avoid unintended barriers and misinformation.

And as a very pragmatic and final issue, Canadian industries will need to accept that European industries will be given access to Canadian military contracts as part of the Build and Buy framework in the industrial strategy. Otherwise, there will be no incentive for European nations to allow Canadian industry to participate in EU military acquisitions.

Bio: Dr J. Craig Stone is an Emeritus Associate Professor of Defence Studies, Department of Defence Studies, at the Canadian Forces College (CFC) and Adjunct Full Professor at the Bishops University Williams Business School. A defence economist by discipline, Dr Stone joined the academic staff at CFC in the summer of 2005 after 29 years in the Canadian Armed Forces.

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^[i] European External Action Service (EEAS), “Security and Defence: EU and Canada Sign a Security and Defence Partnership,” Press Release, (June 23, 2025,), https://www.eeas.europa.eu/eeas/security-and-defence-eu-and-canada-sign-security-and-defence-partnership_en.

^[ii] Department of Finance, canada Strong Budget 2025 (Ottawa: Department of Finance, November 2025). https://www.budget.canada.ca/2025/home-accueil-en.html.

^[iii] Government of Canada and the United Kingdom, Joint Statement on the Security and Resilience of Undersea Cables in a Globally Digitalised World, Global Affairs Canada Press Release (Ottawa & London, September 2024), https://www.canada.ca/en/global-affairs/news/2024/09/joint-statement-on-the-security-and-resilience-of-undersea-cables-in-a-globally-digitalized-world.html.

^[iv] Examples of this include companies like Lockheed Martin, General Dynamics and L3-Harris to name just three.

^[v] European Parliament and Council, Regulation (EU) 2021/821 Setting Up a Union Regime for the Control of Exports, Brokering, Technical Assistance, Transit and Transfer of Dual-Use Items (recast), OJ L 206 (June 11, 2021), 1-461, https://eur-lex.europa.eu/eli/reg/2021/821/oj/eng.