Thank you, Chair and committee members, for the opportunity to speak to you today. I join you from Washington, D.C., where my think tank was co-organizing an event focused on the G7 energy and minerals summit.
We've all noticed how energy and minerals have been, as Minister Hodgson put it in Berlin in August, recentred in Canadian foreign and domestic policy in this past year. Canada is blessed with a tremendous resource endowment, but we have rarely thought of using it in any strategic way. As our adversaries lever their market dominance in energy and minerals in ways that harm our interests and those of our allies, it is essential that we consider ways that Canada can contribute to the security of supply.
With regard to critical minerals and the defence supply chain, the NATO alliance has only recently emphasized the issue, putting out a list of defence-critical materials last December. The United States has acted with more urgency since the Russian invasion of Ukraine in 2022. It has made numerous grants, loans and equity purchases, including through its Defense Production Act, DPA, under which Canada is considered a domestic supplier. The U.S. has made seven awards in critical mineral mining and processing in the last two and a half years in Canada, six under the Biden administration and one under Trump.
The main concern that is focusing everyone's attention is this: In the event of a protracted conflict—for example, with China over Taiwan—the adversary would have an unacceptable ability to restrict key materials and components needed for the defence supply chain. In a war of attrition, China would surely have the upper hand with its vertically integrated supply chain and ability to simply produce more tanks, more ships, more planes, more munitions and more drones. We are already seeing in Ukraine how important an adequate supply of defence equipment and supplies is and how a country such as Russia, with a GDP just the size of Spain's, can leverage its significant defence manufacturing base.
Canada's defence industrial base has unfortunately been allowed to atrophy for many years, and it will take time to build it back up. However, we can play a very important role in the alliance in the short and medium term by providing our allies with the raw materials they need to enhance their defence equipment production. Which materials would those be? The list should likely be derived from a cross-reference of minerals and mineral products that China has a monopoly on or has put export restrictions on, and the NATO critical raw materials list; there is considerable overlap between those two. In particular, Canada can play a role in bolstering the availability of gallium, germanium, tungsten, titanium, bismuth, graphite and some rare earths, and Canada is already a fairly significant producer of cobalt and aluminum.
Although it takes a very long time to develop greenfield or new mines in Canada, most of the commodities I just mentioned are things we already produce and refine, are by-products of things we already produce or refine, or are commodities for which we have old mines where we could restart production. We can do quite a bit in a few years, not a decade, and this is where an industrial strategy comes in. For most of these niche minerals, China has manipulated the market, and there's not a solid business case for private actors to produce these things. I am normally a laissez-faire conservative, but in the case of defence materials, the market is not free. It's incumbent on the government to step in to secure supply.
Canada has committed to dramatically increasing its defence spending. While procurement takes time, Canada can make some strategic investments in critical mineral production and processing in the short term and, if it were for defence purposes, could count it as defence spending.
I'll just note that the DPA funding awarded by the United States was matched in Canada through Natural Resources Canada, not through our Department of National Defence. I think it would be very advantageous to fund and prioritize these projects through the Department of National Defence, to significantly ramp up the funding, to act with urgency and to count it as defence spending.
The whole Chinese critical minerals dependency challenge will likely take a decade or more to untangle, but the defence supply chain itself is a relatively small market, and Canada could go some ways towards displacing China. This is an issue that Canada should own, take leadership on and help solve for our allies. We don't want to detract from acquiring the assets and systems that we actually need for defence, but we can do a lot with critical minerals in the short term as we ramp up those medium-term pieces.
Thank you for your attention, and I look forward to questions.