Why it is in Canada’s Economic Interest to Join the AUKUS Alliance

Commentary, Economy, Alexandre Massaux

In September 2021, the U.S., the United Kingdom and Australia formed an alliance to improve their defence capacities. The goal of this alliance, whose acronym is AUKUS, is to bolster the presence of Western countries in the Indo-Pacific and to counter China’s influence in this region.

The pact is intended to improve military industry co-operation. AUKUS was created when Australia wanted to build its first nuclear-powered submarines using American technology. This choice created tensions with France, which felt that Australia should have bought its nuclear submarines from the French government. 

The alliance could be an asset both politically and economically for Canada, whose main partner and ally is the U.S. And both the U.K. and Australia belong to the Commonwealth, of which Canada is also a member. 

Since AUKUS is based in the Pacific region, Canada, and especially its western provinces, should look closely at it. 

All the members of AUKUS also belong to the Five Eyes, an intelligence alliance between Australia, Canada, New Zealand, the United Kingdom and the United States. It would not be surprising if Canada and New Zealand joined AUKUS in the near future. Intelligence is a sensitive sector. If these countries have agreed to share intelligence, then a more classic alliance is likely to include these same members.

For now, Canada is not a member of AUKUS because it was deemed to have nothing to contribute to a nuclear submarine program. But as Jeffrey F. Collins of the Macdonald-Laurier Institute states: “At the heart of AUKUS is the transfer between the three countries of sophisticated military technology and know-how in cyber warfare, artificial intelligence and undersea naval capabilities.” He adds: “With Canada’s own four 34-year-old Victoria-class submarines set to be retired by 2042, Canadians should take note of our Commonwealth cousin’s moves. Canada’s submarines have a much-maligned public reputation, but in reality, these vessels play a critical role in ensuring that the Royal Canadian Navy (RCN) remains a ‘blue water navy’ capable of defending the rules-based international order at sea, at home, and abroad.”

Ottawa must understand there is a risk that its allies will consider Canada a second-rate country if it doesn’t take military modernization seriously. This could be an opportunity for the Canadian military industry and the Canadian economy.

According to government data, the defence industry contributed close to $6.2 billion in GDP and 60,000 jobs to the Canadian economy in 2016. Moreover, the Canadian aerospace industry contributed over $25 billion in GDP and 213,000 jobs to the Canadian economy in 2018.

Close to 60 per cent of sales were exports and the U.S. represented 20 per cent of those sales. If we consider only the export of major arms (weapons, vehicles, aerospace devices), Australia is the third destination for Canadian weapons. Accordingly, the Canadian military industry has some assets to weigh on the international market, especially among the Anglo-Saxon countries.

The Canadian military industry saw its highest growth in the marine domain (40 per cent between 2014 and 2016). This industry has regional specializations: Western Canada represented 20 per cent of this industry’s employment share and its top three specializations are naval vessel MRO, aircraft MRO and naval shipbuilding and conversions. This strong naval environment (the biggest in Canada) offers an advantage to the Prairies and British Columbia.

Tensions in Asia and China will be mainly related to maritime supremacy, and due to increasing trade in the Pacific, Canada has a major interest in concentrating its efforts in this region. 

For all these reasons, Canada could join the new AUKUS alliance. AUKUS will likely expand, with new members joining. If Ottawa is deft enough diplomatically, Canada will have a chance to join.

 

Alexandre Massaux is a research associate with the Frontier Centre for Public Policy.

Photo by Amar Preciado from Pexels.