National defence budgets, capabilities and policies have received considerable attention in recent months. With the swearing-in of a new govern- ment last December 12, there was a clear opportunity for a new beginning on questions of defence policy and spend- ing. At his news conference on his first day in office, Prime Minister Paul Martin said he would not send Canadian forces abroad without the equipment to do the job. As his first public event, on his first full working day in office on the Monday of the following week, he went out of his way to visit National Defence headquarters, a building his pred- ecessor had not set foot in during a decade in office. He was accompanied by the new defence minister, David Pratt, for- mer chair of the Commons Standing Committee on Defence, by all accounts the most qualified person in many years to assume that office.

Hopes were high that the Canadian forces ”” understrength, under-equipped and under-funded ”” would emerge from decades of neglect under successive governments. Would defence become a priority for the new government? How would it fit in amidst its other priorities ”” health care, social policy, education, cities and paying down debt?

The 2004 budget has clearly answered this political question. Except for an allowance over two years of $300 million to allow the progress of current operational com- mitments in Afghanistan and Haiti, the budget for defence will not increase. Defence spending of $13.2 billion a year represents only 1.2 percent of GDP, and has for years, which represents the lowest level of defence spending as a percentage of output of any NATO country.

The budget implies that the sus- tainable level of operations envisioned is less than that envisioned in the 1994 White Paper. Evidently, current defence policy is consistent with the alternative budget proposed by the Canadian Centre for Policy Alternatives. The cur- rent scale of the CF is sufficient for our national interests. The defence budget effectively declares this to be policy. Accordingly, the so-called demise of the Canadian Forces is merely an ongoing ”œtransformational” process ”” albeit with an undefined end point.

Representative of much of the received analytical wis- dom is the set of papers in Canada without Armed Forces, edited by Douglas Bland and published in 2003, where it is argued that the demise of the Canadian Forces is imminent without an immediate $5 bil- lion increase in budgets. These conclusions are also given voice by Senator Colin Kenny whose recommended budget increases are larger still. Denis Stairs and his colleagues writing for the Canadian Defence and Foreign Affairs Institute recommend enlarging the Canadian forces to 80,000 from less than 60,000; Kenny, to 75,000; and Christopher Ankerson (in Canada without Armed Forces), to 85,000, still short of the nearly 90,000 strength levels as recently as the first Gulf War. This article argues that these recommendations so roundly support- ed by the Canadian security communi- ty are a considerable overstatement if the capabilities sought are to be con- sistent with those required to meet national defence objectives as dictated by national interests and as interpreted by national leaders. It is argued that a budgetary increase on the order of $1 billion per year would allow a level of defence services approximately consis- tent with those outlined in the 1994 White Paper. On the other hand, the March budget is interpreted as evi- dence that the explicit defence policy envisages a reduced role for Canadian forces in international affairs rather than maintenance of the existing role, let alone an expanded one.

Much of the force of the argu- ment for the ”œcrisis” in defence stems from consideration of the so-called Revolution in Military Affairs. The concept of the RMA lacks precise defi- nition, and may still be an idea since many of the technology driven changes to military affairs have yet to occur. The US military (and the

Canadian military, and recently David Pratt) has adopted the term ”œtransfor- mational” to denote the changes in doctrines, strategies, managerial struc- tures, and processes that will have to be made as new technologies are exploited in military applications. Prominent among the desired capabil- ities for the new force structure is enhanced information and communi- cations systems in the broadest sense (intelligence, tactical target acquisi- tion, fire-control capabilities, knowl- edge bases, and decision support systems) that gives rise to the ”œnet- work centric” force. From this flows the requirement that all personnel, equipment and kit be able to partici- pate to the fullest in the network. In this scenario commanders in Ottawa would be able to see through the scope of a rifle in Kabul (or watch the real-time capture of Saddam Hussein!). ”œNetwork-centric” implies a Command and Control system that serves as an intelligent server for all nodes. It envisions joint operations; the integrated use of land, sea, air, logistics and intelligence assets; and, for the defence community in Canada, this implies a war-fighting capability in all of those domains as well as a suite of cutting-edge equipment.

The question of concern to Canada and Canadians is whether such a view must be supported by Canada to satisfy our national interests. The role of the Canadian forces in inter- national affairs differs from the larger powers. Canada is not expected to lead in the interna- tional projection of power. Canada is not expected to pro- vide the major proportion of total military capabilities in international conflict. Canada is highly unlikely to enter into any conflict without the coop- eration of allies or the interna- tional community. Canada’s military role in international affairs is one of support. International support can be in the form of political or economic aid in conjunction with some measure of direct military support. Much of the lamenting about Canada’s refusal to join the US in the war on Iraq was based on a perceived cost in terms of Canada-US relations not on the possi- ble value of the Canadian military assets to the war effort. Canada’s con- tinued participation in NORAD hinges at least as much on acceptance of some concept of a national missile defence system as it does on the contribution of military assets to the program. Political decisions define Canada’s leadership in international affairs. The defence budget is but one element of these decisions.

The central capability required of any military contribution to allies or international forces is the capacity to plug into the theatre network. There is no need to replicate on a smaller scale the breadth or depth of a US joint oper- ation with an all-encompassing com- mand and control system. Indeed economies of scale in the design of net- works mean the smaller the scale, the greater the average cost per node in the network. Sophisticated command and control systems designed for joint oper- ations (combining air, land and sea resources) for war-fighting need not be as comprehensive for smaller scale combat roles, peacemaking and other less dangerous activities such as peacekeep- ing, the delivery of humanitarian aid or logistical, management and training support to international missions.

The experience of the past two decades suggests that Canada need not possess a capability to mount a significant war-making force to fur- ther the national interest. Canada’s contribution to the first Gulf War included land, sea, air and logistics support that involved 2700 members of the Forces at its peak. The sea capa- bilities were primarily used in com- mand and control of, and support to, a naval combat logistics area; the land capabilities were primarily concen- trated in the establishment of a field hospital near the end of hostilities; the air capabilities were more broad- ranging ”” refuelling, combat air patrols, bombing missions (56), and bombing escorts. The Balkan cam- paigns saw brief use of air power and only brief war-making on the ground before peacekeeping activities took over. The war on terrorism in Afghanistan saw limited war-making activity in which a small contingent gained international recognition for their expertise. The current Afghan contribution of 2000 soldiers is engaged as counter-terrorist war-mak- ers and peacekeepers along with other UN forces. The Canadian forces have been able to act as forcefully as other non-major military powers in sup- porting international goals and national interests. It is not evident that greater contributions of military resources will significantly enhance Canada’s national interests. (The choice not to join the ”œcoalition of the willing” in the recent Iraqi cam- paign was not due to lack of capabili- ty, as was demonstrated by the increase in manpower made available to Afghanistan at that time.)

The level of activity of the Canadian forces has been relatively high since the collapse of the Soviet Union, but there have been virtually no air or sea battles and no serious challenge to logistical supply lines. All war-making activity has been in opposition to minor military powers and internation- al terrorism. Canada’s need for a super- power-style network-centric command and control system, and the need for greatly enhanced military capabilities are thus highly debatable. The Revolution in Military Affairs refers to the adaptation of information technologies to military requirements just as the service and manufacturing sectors have adapted. The revolution in Canada’s military contribution to international affairs in response to the collapse of the Soviet Union has yet to be completed, but there is no evidence that national interest requires that the size of the forces be increased by one-third.

There are other reasons advanced for suggesting that the Canadian forces face dire crises: capital equipment is deteriorating, manning is in crisis and the procurement system is inadequate. We consider each in turn.

First, the equipment crisis. Brian McDonald (in Canada without Armed Forces) sets out the case for the capital equipment crisis: a $20 billion projected shortfall in capital budgets required over the next fifteen years for a phased-in replacement of current capital. These estimates are based on off-the-shelf costs with an additional allowance of 63 percent of capital cost for spares and major planned mainte- nance. The gap is $10 billion over a horizon of ten years, and $14 billion over the immediate five-year horizon. Thus a different view of the impend- ing crisis is that there is a cyclic pat- tern to capital renewal and over the next ten years replacement of all equipment at the end of its expected life (plus a new but required com- mand-and-control information sys- tem) would cost $30.8 billion. Current budgets would only allow for $20.8 billion. While the average shortfall is $1 billion per year, its real-time sequencing is packed into the first five years. The average budget is not in cri- sis, but the timing may be serious.

But it is also arguable that the desired equipment purchases overstate the current and future requirements since the current equipment capability (through longer periods in mainte- nance per unit of use and higher fail- ure rates) is far less than the capacity of new replacement equipment. McDonald notes that the fleet of Hercules aircraft provides 46 percent of the capability in 2003 that it did in 1990. The identified capital require- ments represent a rebuilding of the capacity that existed before the col- lapse of the Soviet Union.

Finally, equipment capabilities need only be as technologically capable as those in the current round of use by allies. There is no need for govern- ment subsidization to out- innovate our major defence ally via new equipment research and development. Indeed, the required Canadi- an equipment capabilities could be substantially differ- ent than our larger allies. Desired equipment capabilities ought to be determined by their anticipated role rather than technological possibilities.

Past actions can be used as evidence of current requirements and medium- term future requirements. The evidence suggests that fighter aircraft may be use- ful, but a bombing or missile capability might be most useful. Ships that can clear channels of mines and interdict non-naval shipping are also most useful. Bombardment and naval battles do not seem to be relevant roles. Land force capabilities are characterized by smaller, more flexible and rapidly deployable units. There is little evidence of a need for heavy artillery. Some discussion of equipment requirements for limited war-making and other less combat- oriented military capabilities must be provided if only to give an alternative to the general multipurpose force at the forefront of current discussions. The real rationalization of projected capital requirement requires a review of nation- al interests and security objectives more generally, as Scot Robertson has recently argued in Policy Options.

The second point to cconsider is the personnel crisis.  

Ankersen develops four well con- sidered critical issues which form the basis of the current perceived crisis. The first issue concerns the manpow- er shortage relative to the stated poli- cy of some 4,000 persons. The use of reserves and extending time in service (or operations) of some members reduces the shortfall to approximately 2,400 but these practices may not be sustainable in the long run. The sec- ond problem is that the Canadian Forces are not well distributed in terms of age and experience; there are relative shortages of those with inter- mediate service length and surpluses with longer lengths of service. As the older group leaves, the number of intermediates is insufficient to fill the resulting gap. The problems are more acute in some specializations than others. A third identified issue is that the level of current deployments has driven the recruitment and training organization to approximately double their intake from 1997 levels without adequate resources and without the ability to select recruits according to specific trade requirements. Finally, the personnel costs of the identified problems compound each other and result in conditions of service, partic- ularly for operational personnel, which are leading to relatively high exit rates.

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It is clear that there has been a peak demand for the operational capabil- ities of the Canadian Forces, particu- larly with the sizable contribution being made to the War on Terror and that this peak demand cannot be sus- tained. Ankersen estimates that the training system requires $1.5 billion annually (allowing recruitment of 5200 per year rather than 2600 per year) to ensure an appropriate capacity and an increase in the paid strength of the CF from 60,000 to 62,500 persons for ten years. This we can estimate as an additional $200 million annually. The personnel crisis is therefore tagged at $1.7 billion per year.

An alternative view would assume that the peak demand will soon pass and ask how one might overcome the cyclical personnel problem in the short run. One can then ask about personnel requirements in the longer run. In the short run, targeted pay incentives (bonuses or retention supplements) can reduce the exit rates as well as pro- vide stiffer competition relative to civil- ian prospects. Moreover, if the 1997 training establishment level is the appropriate level (2,600 per year), then the current recruiting ”œblitz” (about 5,000 ) can be somewhat reduced. The most recent Report on Plans and Priorities 2003-04 calls for approxi- mately 4300 new recruits per year.

As operational demands return to some consistency with the planned 60,000 members, the large number of non-effectives (unavailable for duty) can fall from the current 10,000 to the historical figure of 4000. With the expansion of the European Union and the desire of the Union to be more involved in European defence, Canada’s Balkan contribution could be reduced from 1400 to 400 in short order. The Canadian commitment to Afghanistan is relatively large: 2000 troops of a total of 12,000. This will be reduced to approximately 500 in July 2004. As noted, personnel problems compound and costs rise quickly. The benefits of the resolution of the prob- lem will be symmetrically compound- ed and hence quicker and less expensive to resolve than some would suggest. These considerations suggest that the estimated training cost could be eliminated over a period less than ten years and hence at most an average cost at $750 million.

Together the capital and person- nel crises amount to a budget incre- ment of $1.15 billion per year. While it may be the case that a significant por- tion of the long-term increase is required in the first five years rather than the second period of five years, this remains largely a problem of matching cyclical expenditures to non-cyclical revenues (a trivial prob- lem) rather than a critical problem in the level of revenues. Equipment pur- chases typically extend over a longer horizon so that ”œa $10 billion replace- ment program over the next five years” can be spread out as $1 billion per year over ten years.

The third issue is the logistic and procurement crisis.

The procurement crisis comes in a number of shades: a management system that is too slow; a bureaucratic system that is too onerous; a supply system that is too demanding; or an unwieldy, slow, politically cumbersome, unbusinesslike enterprise. Some of these issues have been recently identified and addressed by the Advisory Committee on Administrative Efficiency. The procure- ment problems stem mainly from two components of the management and acquisition process, namely, the require- ment that industrial and regional bene- fits (IRB) be explicitly considered in the initial contracts as well as for every sub- sequent contract change, and the per- ceived need to customize or modernize existing modern vintages of equipment for Canadian uses.

Conforming to the IRB require- ments lengthens the contract process, adds cost to the capital projects, and often has perverse implications for deci- sions among competing projects. Economists have been making the argu- ment for free trade for three centuries. IRB’s are simply trade restrictions. Most recently, Stefan Markowski, in Arms Trade and Economic Development Theory, Policy and Cases in Arms Trade Offsets, argues forcefully that offsets (IRB) in any form when applied to defence procure- ment hurt the offset demanding coun- try. Howie Marsh, in Canada without Armed Forces, lists a number of perverse outcomes that are in large part attributed to IRB. The IRB policy simply must be eliminated. Policy per- spectives can change quickly: before the general elections of 1993, Liberal policy was to eliminate the GST and re-open the Free Trade Agreement. Policy changed after the election. Budgetary policies changed from large deficit to large surpluses in a mere six years. Policies promoting the notion of industrial and regional benefits have been eliminated in Great Britain and Australia and could and should be eliminated in Canada. If foreign governments want to pursue industrial offsets, the buyer gains by the implicit subsidy, this includes Canadian taxpayers.

While the requirements to customize or otherwise ”œupgrade” off-the-shelf systems have often been linked with IRB policies, they also reflect a desire to be at the cutting edge of technology. Not far from the cut- ting edge is the latest vintage of equip- ment in current production. These can be purchased as off-the-shelf systems, typi- cally from allies, can be relatively quickly acquired, can provide capabilities on a par with the best that allies possess, ensures equipment compatibility with allies and eliminates most product development risks. A certain degree of standardization also allows access to a larger source of spare parts and additional sources of maintenance and repair experience, information and expertise.

DND and Public Works and Government Services Canada (PWGSC) are efficient at this type of contract. Indeed, the PWGSC operates a just-in- time inventory system for thousands of everyday items. An increased propor- tion of procurements of large items of equipment purchased off the shelf without IRB constraints or uncertainty would eliminate many serious prob- lems typically associated with the acquisition process.

The logistic support system has come under scrutiny for obvious shortcomings in airlift, sealift and in- theatre provisioning. Surely this is a good news story. With the collapse of the Soviet Union, immediate responses to a potential large-scale conflict are no longer required. Most deployments have sufficient lead- time to engage the private sector in meeting airlift and sealift require- ments. On-site provisioning is typi- cally for a relatively short period while an area is safely secured. Once this is accomplished, much of the support requirement can be privately provided. While there will always be a requirement for in-theatre lift, an inventory of general airlift and sealift capabilities to meet peak demands is not warranted.

The inevitable demise of the Canadian forces has been predict- ed for some time. Micheal O’Brien in The Wednesday Report attributed the term ”œrust-out” to Perrin Beatty in comments made while he was minister of national defence in 1988. Those comments referred to the period 1968- 88 so that the demise is now 35 years old. The current round of admonish- ments is well deserved but overstates the issues. First, there is a strong ten- dency to use the resource implications of peak demands to discuss per- sonnel and capital problems rather than the level of planned demand. Second, it uses the replacement of old equipment on a one for one basis as a cost estimate for capital require- ments. The critical effects on personnel through heightened operational use are well articu- lated, but defence advocates use the current level of peak demand and concomitant burn-out as the benchmark.

Policy requires more. What should be the capabilities of the Canadian forces? The 1994 White Paper is often used as the quoted policy document (but equally often dismissed as irrel- evant) and includes the senti- ment: ”œwith the best against the best.” Is this sensible? The CF can operate with the US, the UK, NATO, and UN-sponsored coalitions. It is not clear that the CF should con- template military actions against the best, which is generally accepted to be the US. The collapse of the Soviet Union was, at least in some part, due to this type of competition.

The evidence of the past ten years suggests a need to deploy relatively small numbers of highly trained and well equipped combat personnel quick- ly for short periods, or larger contin- gents with some lead time allowed and always in conjunction with interna- tional allies. These assets will be used in a combat role; this role typically turns to peacekeeping, infrastructure build- ing, monitoring and the like in short order but often under adverse condi- tions. Similarly, our naval and air assets provide support typically within the context of complete air and sea domi- nance. What type and quantity of equipment does this imply? What rationalization should occur in the new equipment suite? The answers to these questions require policy guidance.

Defence budget recommendations also have to fit political reality; another dollar on national defence means anoth- er dollar less on other social programs or a dollar of new taxes. A benefit of a multi-billion-dollar increase in DND budgets must be weighed against the loss of these billions to health care and education. The following policy suggestions may be more realistic than those calling for $5 billion annual increases in the DND budget. Eliminate the industrial and regional benefits requirements from DND procurement and direct new major purchases towards off-the-shelf, unmod- ified and proven equipment. Rein in the operational deployments to something less than the planned sustainable level (with a total force of 60,000) for some period in order to rest and recuperate the forces in general. While budget alloca- tions to new capital equipment, person- nel selection and training should follow a clear policy on the role and expected tasking of the CF, an annual increase on the order of only $1 billion per year would be sufficient to begin to rejuve- nate the personnel, capital and equip- ment of the Forces. The proposed budget would be $14.3 billion in 2004-05.

Implicit in this budget policy is an efficient and planned stream of opera- tional output that can be sustained with a $14.3 billion annual budget. The evidence of the past decade sug- gests that the sustainable stream of services may be less than that pre- viewed in the 1994 White Paper. A smaller budget would reduce the stream of services even further. The political question is whether the $14.3 billion stream of services is either required or sufficient for the desired furtherance of national interests.

Lawrence McDonough is a professor in the Department of Politics and Economics at Royal Military College in Kingston. The views in this article are entirely his own and in no way reflect those of RMC or the Department of National Defence. mcdonough-l@rmc.ca