What Does It Mean When Canada "Meets Its NATO Commitments"?
In political discourse across Canada and allied nations, few phrases carry as much weight—or generate as much heat—as "meeting NATO commitments." The benchmark in question is deceptively simple: spend at least 2% of Gross Domestic Product on defence. But beneath this seemingly straightforward metric lies a complex web of history, economics, geopolitics, and competing interests that deserves closer examination.
This article does not argue for or against the spending target. Instead, it attempts to illuminate what the target actually measures, how it came to exist, where the money flows when countries "meet their commitments," and what questions citizens might reasonably ask when evaluating defence policy.
Part One: The Origins of 2%
A Number In Search of a Rationale
The 2% benchmark did not emerge from a strategic assessment of what NATO actually needs to defend its members. Its origins are more pragmatic—and arguably arbitrary.
The concept first surfaced in the late 1970s, when allies were encouraged to increase annual military expenditure by 3% in real terms. The steps toward formalizing a GDP-based guideline emerged during the 2000s. At the 2002 Summit in Prague, allies pledged to achieve a 2% target, repeating this commitment at the 2006 Summit in Riga.
Why 2%? There are competing explanations. One view holds that NATO selected this figure because roughly half of member states were already spending at approximately that level in the early 1990s and 2000s. Another suggests it was established as a benchmark for countries aspiring to join the alliance, whose spending averaged around 1.7% of GDP—making 2% a reasonable stretch goal.
The 2014 Wales Summit, convened in the shadow of Russia's annexation of Crimea, formalized the target with a deadline: all allies would "aim to move towards the 2% guideline within a decade." This political commitment gave the number its current prominence in public discourse.
By June 2025, at The Hague Summit, NATO allies agreed to more than double this target to 5% of GDP by 2035—with at least 3.5% directed to core defence requirements and up to 1.5% for broader security-related spending such as critical infrastructure protection and cyber defence.
What the Target Measures—and What It Doesn't
The 2% figure is an input metric. It measures how much money a country puts into its defence establishment. It does not measure:
- Capability: What military forces a country can actually deploy
- Readiness: How quickly those forces can respond to a crisis
- Effectiveness: Whether defence spending produces meaningful deterrence
- Interoperability: How well a country's forces work alongside allies
- Domestic benefit: Whether spending strengthens the national economy or industrial base
A country could theoretically meet the 2% target while directing the majority of funds to personnel costs and pensions, acquiring no new equipment, and developing no meaningful combat capability. Indeed, this criticism has been leveled at Greece, which consistently exceeds the 2% threshold but directs much of that spending to personnel rather than modernization.
Conversely, a country could spend 1.5% of GDP while maintaining highly capable, deployable forces with strategic value to the alliance.
The Wales Summit declaration attempted to address this by adding a secondary target: at least 20% of defence expenditure should go toward major equipment and related research and development. This metric aims to ensure spending translates into actual capability. However, even this supplementary measure focuses on inputs rather than outputs.
Part Two: The Arithmetic of Accounting
What Counts as "Defence Spending"?
NATO maintains a standardized definition of defence expenditure, but member nations have significant discretion in what they include. The definition encompasses:
- Armed forces personnel costs (including pensions)
- Operations and maintenance
- Military research and development
- Procurement of equipment
- Military construction
Countries can also count certain expenditures by other government departments if they meet the needs of armed forces. This has led to creative accounting. Canada, for example, recently included the Canadian Coast Guard and veterans' pensions in its defence spending calculations.
In 2023, Canada lobbied NATO allies to expand the definition further to include spending on space, cyber, and artificial intelligence research—a proposal the United States rejected. The Canadian government has been "very active" in trying to expand what can be counted, though these efforts have met resistance.
This flexibility means that two countries reporting identical percentages may be making very different actual investments in military capability.
The GDP Denominator Problem
Because the target is expressed as a percentage of GDP, economic fluctuations can move countries toward or away from the target without any change in actual defence spending.
Greece provides an instructive case. During the country's economic crisis, its economy contracted significantly. Because the GDP denominator shrank faster than defence spending, Greece's percentage rose—even as its military capability remained unchanged or declined.
Similarly, a country experiencing rapid economic growth would need to increase defence spending simply to maintain the same percentage—regardless of whether the strategic environment demanded such increases.
Part Three: Following the Money
Where Does NATO Defence Spending Actually Go?
This is perhaps the most consequential question for citizens evaluating their country's defence policy: when their government increases defence spending to meet NATO commitments, who ultimately receives that money?
According to the Stockholm International Peace Research Institute (SIPRI), the global arms trade is dominated by a handful of countries—and the structure of that market shapes where "NATO commitments" actually flow.
The Numbers:
- The United States accounts for 43% of global arms exports (2020-2024)—more than four times the next largest exporter
- NATO countries collectively control over 80% of global arms exports
- European NATO members more than doubled their arms imports between 2015-19 and 2020-24 (+105%)
- Of those European NATO imports, 64% came from the United States, up from 52% in the previous five-year period
The five largest defence contractors in the world by revenue are all American: Lockheed Martin ($64.7 billion in 2023 defence revenue), RTX Corporation, Northrop Grumman, Boeing, and General Dynamics.
When Canada signed its agreement to purchase 88 F-35 fighter jets, the deal was valued at approximately $19 billion (later revised upward to potentially $28 billion). The primary beneficiaries of this spending are Lockheed Martin (headquartered in Bethesda, Maryland), Pratt & Whitney (East Hartford, Connecticut), and their supply chains—which span multiple countries but are predominantly American.
Canadian Industrial Participation
It would be unfair to suggest that Canadian defence spending produces no domestic benefit. The F-35 program, for instance, includes provisions for Canadian industrial participation.
According to official figures:
- Approximately 30 Canadian companies are currently involved in the F-35 program
- These firms employ roughly 2,000 Canadians
- Canadian companies have secured approximately $2.8 billion USD in contracts to date
- Lockheed Martin projects $15.5 billion CAD in economic benefits for Canada over the program's lifetime (2007-2058)
However, Industry Minister Mélanie Joly stated in late 2025 that Canada "didn't get enough" industrial benefits from the F-35 deal, noting: "The industrial benefits are not enough. There needs to be more jobs created out of the F-35 contract."
The fundamental structure of international defence procurement means that when Canada increases spending to "meet NATO commitments," a substantial portion of that spending flows to American corporations and supports American jobs—while Canadian taxpayers bear the full cost.
The Industrial Benefits Trade-Off
Canada's normal approach to major defence procurement involves Industrial and Regional Benefits (IRB) requirements—contractors must place business activities in Canada equal to the contract value. However, the F-35 Joint Strike Fighter program operates differently.
The JSF program's founding documents explicitly preclude "offset policies" like Canada's IRB requirements. When Canada joined as a partner nation, it accepted a "best value" approach that allows Canadian companies to compete for contracts but doesn't guarantee they'll win them.
This is the trade-off allies face: access to cutting-edge American military technology, or procurement approaches that maximize domestic industrial benefit. These goals often conflict.
Sweden's Saab has offered to manufacture its Gripen fighter jets in Canada, promising 10,000 Canadian jobs. Former assistant deputy minister Alan Williams noted that "what we might lose in the F-35, we would more than gain in terms of industrial and technical events with whoever else we've gone with." Military officials counter that the F-35's capabilities are unmatched and that alternatives would be "so inferior that to force the air force to get them and fly them for the future relegates them to decades of futility."
Part Four: The Strategic Arguments
The Case for Meeting (and Exceeding) the Target
Proponents of robust NATO spending offer several arguments:
Collective Security: NATO's Article 5 guarantee—that an attack on one is an attack on all—only carries weight if members possess credible military capability. Free-riding undermines deterrence.
Burden Sharing: The United States has historically shouldered a disproportionate share of alliance defence costs. In 2024, U.S. defence spending represented approximately two-thirds of all NATO spending. European allies spending more allows for a more equitable distribution of responsibility.
Changed Threat Environment: Russia's 2022 invasion of Ukraine fundamentally altered the European security landscape. Secretary-General Mark Rutte warned in December 2025 that Russia could be ready to use military force against NATO within five years. "Conflict is at our door," he stated. "Russia has brought war back to Europe. And we must be prepared."
Capability Gaps: Decades of underinvestment have left European allies dependent on American capabilities for critical functions including intelligence, surveillance, reconnaissance, air-to-air refuelling, ballistic missile defence, and airborne electromagnetic warfare. Increased spending could address these dependencies.
Political Credibility: Meeting the target demonstrates political commitment to the alliance and to partners. Countries that don't contribute find it harder to have their voices heard in alliance deliberations.
The Case for Skepticism
Critics raise different concerns:
Input vs. Output: As noted above, the target measures spending, not capability. A focus on hitting an arbitrary percentage may distract from questions about whether spending produces meaningful military value.
Economic Trade-offs: Every dollar spent on defence is a dollar not spent on healthcare, education, infrastructure, or other priorities. The opportunity cost is particularly acute for countries facing fiscal constraints.
The Denominator Question: Expressing the target as a percentage of GDP creates perverse incentives and accounting ambiguities that undermine its usefulness as a measure of alliance contribution.
Industrial Dependency: When increased defence spending primarily benefits foreign manufacturers, the economic argument for that spending weakens. Countries may be better served by investments that strengthen domestic industrial capacity, even if those investments don't count toward NATO metrics.
The Arms Trade Structure: With NATO countries controlling 80%+ of global arms exports, sceptics argue the alliance's spending targets function partly as demand generation for member countries' defence industries—particularly American ones.
Part Five: Questions Worth Asking
Citizens evaluating their country's defence policy might consider the following questions:
- What capability does this spending actually produce? Beyond meeting a percentage target, what military forces will Canada be able to deploy? How will those forces contribute to alliance defence?
- Where does the money go? For any proposed defence procurement, what percentage flows to Canadian companies and workers? What percentage flows abroad?
- What are the alternatives? For major equipment purchases, what options exist beyond American suppliers? What are the trade-offs between capability, cost, and domestic benefit?
- Who set the target, and why? The 2% figure emerged from political negotiations, not strategic assessment. Is it the right measure of alliance contribution?
- What would a capability-based metric look like? Instead of measuring inputs, could NATO measure outputs—deployable forces, readiness levels, interoperability? What would Canada's contribution look like under such a metric?
- How do other countries count? Understanding variations in how allies calculate their spending reveals the flexibility (or malleability) of the target.
- What are the opportunity costs? Every dollar spent on defence has alternative uses. What other national priorities compete for the same resources?
Conclusion: Beyond the Bumper Sticker
"Meeting NATO commitments" is a phrase that carries enormous political weight while conveying almost no information about what it actually means in practice. The 2% target (now 5% by 2035) is simultaneously:
- A genuine attempt to ensure alliance members contribute to collective security
- An arbitrary number with a contested rationale
- A political tool used to pressure allies and score domestic points
- An accounting exercise with significant flexibility
- A mechanism that channels significant resources toward specific beneficiaries
None of these descriptions is more "true" than the others. They coexist, and understanding defence policy requires holding all of them in mind simultaneously.
For young Canadians learning about fiscal governance and budget priorities, the NATO spending debate offers a valuable case study in how seemingly simple metrics can obscure complex realities—and how following the money reveals interests and incentives that political rhetoric often obscures.
The question is not whether Canada should contribute to collective security. The question is how to think clearly about what that contribution should look like, who benefits from various approaches, and how to evaluate whether spending produces genuine security value.
That clarity requires moving beyond bumper sticker slogans—whether "meet our commitments" or "no more blank cheques"—toward the harder work of examining assumptions, tracing consequences, and asking whose interests are served by the policies we choose.
This article is intended as educational context for the Ducklings civic engagement platform. It presents multiple perspectives and does not advocate for any particular policy position. All statistics are drawn from official NATO publications, the Stockholm International Peace Research Institute (SIPRI), government sources, and established news organizations.
Appendix: Key Statistics
Canada's Defence Spending (2024)
- Approximately 1.37% of GDP
- Parliamentary Budget Officer estimate to reach 2%: additional $75.3 billion through 2027
NATO Spending Targets
- 2006 Riga Summit: 2% of GDP guideline established
- 2014 Wales Summit: 2% target formalized with 2024 deadline; 20% of defence budget on major equipment
- 2023 Vilnius Summit: Renewed commitment to 2% as "minimum"
- 2025 The Hague Summit: 5% of GDP by 2035 (3.5% core defence + 1.5% security-related)
Global Arms Trade (2020-2024)
- US share of global exports: 43%
- France (second largest): 9.6%
- NATO + allies share: 80%+
- US share of European NATO imports: 64%
F-35 Program
- Total Canadian procurement: 88 aircraft
- Estimated cost: $19-28 billion
- Canadian companies in program: ~30
- Projected Canadian industrial benefit: $15.5 billion CAD (2007-2058)
- Canadian jobs: ~2,000