Sir Humphrey explains in detail the problems facing the Canadian Forces:
The biggest question arguably facing Canada today is how to address what is a three pronged axis of interest. As an Atlantic and Pacific power, with substantial economic interests in both areas, Canada has an inevitable interest in both regions, which have extremely different challenges. At the same time, the emerging interest in the Arctic, where global warming and climate change is seemingly allowing an opening of trade routes, means a previously neglected region suddenly takes on far more strategic role. Beyond this home position, Canada continues to play a major role overseas, providing troops, aircraft and ships to participate in operations across the globe from the Gulf to Afghanistan.
The problem which looms is that Canada has deferred expenditure for so long on so many fronts that it is rapidly reaching the point where barring a major change of budget; something is going to have to give. As a nation Canada is a superb example of the many mid-tier powers, other examples being the Netherlands, Spain, Italy, Australia to name but a few, who have historically been able to afford and operate armed forces capable of working across a wide range of areas, but where future budgets may constrain this over time. All of these nations are typified by having a lot of legacy equipment in service, and a willingness to employ their militaries overseas on operations. These nations all face a similar challenge — the cost of military equipment is so great that all face a problem — what has to be sacrificed in order to keep some form of capability, and what are they no longer willing to do militarily?
Considering the Navy alone, one sees a fleet which has been hard worked for many years, and which has not seen new surface ships enter service for nearly twenty years. The destroyers are so old that it is nearly fifty years since the design was approved, and forty years since they entered service. The decision to continually defer replacements means that no military shipbuilding capability exists in Canada any more. This means any replacement will be built at far greater cost on a shipbuilding industry which will be created from scratch. This issue alone highlights the real challenge for many medium powers — the inability for domestic political reasons to consider purchasing certain from overseas. Despite there being several designs (such as the Royal Navy’s Type 26 / Global Combat Ship) entering service in the time-frame for replacement, the desire by Canada to retain a ‘made in Canada’ label on its surface warships means that the Canadian taxpayer will not get the best value for money. One only has to consider that most warship replacement programmes these days will only replace half to two thirds of the hulls in the preceding class due to cost, and it quickly becomes clear that Canada is going to be forced to establish a military shipbuilding capability for just 8-10 hulls.
Domestically there are many good reasons to build at home — creation of jobs in vulnerable constituencies, a sense of national control over a hugely visible symbol of national prestige, and an ability to support domestic industries (e.g. having far greater sovereignty over the weapons and equipment than may otherwise be the case with a foreign purchase). Additionally even with offsets, it is difficult to justify to taxpayers spending huge sums of money abroad, particularly for a capability traditionally built at home. There are several nations who have traditionally built their large warships at home, and who face a need to build replacement hulls in the next 10-15 years. It becomes increasingly difficult to see how they can afford to do this without making major cuts elsewhere to their procurement plans, or buying overseas.