Canada Finds War Expensive

(MoneyWatch)  A recent report by a policy think tank in Canada shows that as a percentage of government spending defense is now at the highest it has been since the height of the Cold War. Almost ten percent of the budget now goes to supporting its troops in Afghanistan, upgrading facilities and buying new equipment.

Canada will spend about $20 billion U.S. on defense this year. This represents an increase of almost ten percent over last year. Much of this is due to the use of Canadian troops supporting the NATO mission in Afghanistan. Canada is also investing in new equipment like CH-47 helicopters and armored vehicles to help those troops carry out their missions. It is estimated that fifty percent of Canada's defense expenditure since 2001 has been for the Afghanistan mission.

This illustrates that without this mission Canada would have been able to invest in significant new equipment and facilities and still spend a lot less money. Like the U.S. and England is finding the cost in personnel, maintenance and operations is eating up the budget. There are some who argue that too much money is being spent on this part of the budget.

At the same time there are those who want more investment in defense. During the Nineties like a number of countries Canada reduced expenditures as the Soviet Union threat went away and the required commitment became much less. This led to a failure to keep some forces current and buy newer equipment. Now Canada is buying new systems and upgrading older ones for their Navy and Air Force.

Some of this is to fill out capability gaps such as Boeing (BA) helicopters and Lockheed Martin (LMT) transports. Other funding is being used to upgrade ships and possibly build more to help patrol Canada's Arctic waters. All of this will help Canada's domestic defense industry. Even when systems are bought from the U.S. or Europe there are offset requirements that add foriegn investment in the economy.

If Canada intends to continue to support the U.S. and NATO in Afghanistan there will be a cost in dollars. The Canadian defense budget may have to grow some more to carry out that mission while also improving the overall capabilities of the Army, Navy and Air Force. If not like Britain there may have to be cuts to the other services and infrastructure to keep the troops in the field. This growth will offer opportunities to U.S. defense contractors as well as Canadian and European.

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