Sweden offers Canada a chance to revive its near-dead defence aerospace industry

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Every so often, the economic stars align to allow a country to create a new industry, or put an ambitious new spin on an old one, that tilts the jobs, innovation and wealth curves in an upward direction.

For a brief, shining moment about 20 years ago, for instance, Finland’s Nokia and Canada’s BlackBerry came to own the mobile phone market. AI is now propelling the U.S. economy.

Today, the stars are aligning for Canada, which has been offered a rare opportunity to relaunch its once-vast, now virtually moribund, defence aerospace industry by an unlikely agent of change, Sweden.

Will Canada take it? The fear and loathing relationship between Ottawa and Washington certainly makes any decision fraught. It’s entirely possible that, to avoid triggering another tantrum from U.S. President Donald Trump, Prime Minister Mark Carney will take a pass.

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Sweden’s population is one-quarter that of Canada’s, but the Scandinavian country excels in some advanced products, especially military flying machines. The Gripen fighter jet and the GlobalEye early-warning surveillance aircraft, both made by Saab, are considered globally competitive.

Sweden has pitched the idea of making both planes in Canada, since Saab’s own factories lack the capacity to pump out either product in significant numbers as the order books fill up. Saab says that building the Gripen in Canada would create 10,000 jobs and that building the entire GlobalEye, which is based on the Canadian-made Bombardier 6500-series business jet, in Canada would create 3,000 jobs (the GlobalEye’s radar, sensors and other military gear are currently installed in Sweden).

Even if the jobs generated are half of what the company claims, the tally would be significant at a time when Mr. Trump’s tariffs are draining the Canadian auto, steel and aluminum industries of jobs.

Sweden ramped up its offer this week, when King Carl XVI Gustaf and Queen Silvia visited Canada and signed a strategic partnership between the two countries that includes “bi-lateral co-operation” on defence. At the same time, Saab executives met with Bombardier to discuss forming a joint venture to build the Gripen at a new Bombardier factory. Saab’s offer to transfer the technology to Canada for both jets is contingent on Ottawa buying the planes for the Royal Canadian Air Force.

For its evident hesitation to hit the “Saab” button, Ottawa can blame its fear of Mr. Trump. He wants Canada to buy American defence goodies, not Swedish.

Since the start of the Cold War, Canada has relied exclusively on U.S. fighter jets, with the exception of the 1950s-era Avro Canada CF-100 Canuck, the last domestically developed and produced fighter to enter full service with the RCAF. Canada kept the trend intact in 2023, when it agreed to buy 88 Lockheed Martin F-35s for $19-billion.

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In March, about the time Mr. Trump began pummelling Canada with tariffs, Mr. Carney had second thoughts about the F-35s and – elbows up – put the purchase under review, though by then the Department of National Defence had committed to buy 16 of them.

It’s well known that the DND’s generals and procurement officers prefer the F-35 over the Gripen. Unlike the Gripen, the F-35 is a stealth aircraft and is said to have better “networked warfare” capabilities – the latest IT and AI systems to communicate with scattered air, ground and sea forces to provide an accurate picture of the combat theatre.

The Gripen’s big weakness is that it’s not a stealth aircraft. But the plane does have advantages. The latest version is reputed to have fine electronic warfare capabilities. It’s designed for harsh weather conditions, can operate from roads, has a quick “turnaround time” – the time it takes to rearm and refuel the plane in a war – is far cheaper to buy and operate than the F-35 and, crucially, offers sovereign control over its mission-system software updates. Canada’s F-35s would rely on U.S.-controlled software and data flows, raising the question: Could the Pentagon turn them into hangar queens by denying them software upgrades?

The Gripen’s main selling point is not the Gripen itself, however; it’s the opportunity to rebuild Canada’s defence aerospace industry and strengthen the country’s sovereignty by running a fleet of made-in-Canada aircraft that do not rely on the U.S. for software upgrades. If Bombardier doesn’t botch its transformation from a civil aerospace company into a defence player, the industrial benefits could extend well beyond manufacturing into research and development. Canada could play a key role in designing the next version of the Gripen or an entirely new aircraft, one with or without pilots.

With potential U.S. retaliation in mind, Canada could try to hedge its political risks by buying, say, 44 of the 88-plane order of F-35s and 50 to 70 Gripens. Canada’s military chiefs would hate the expense of running a dual-aircraft fleet, and buying only half the F-35 order might still be enough to enrage Mr. Trump.

But military chiefs are not in charge of industrial policy, and the U.S. President, in theory at least, will be gone by 2029. The Gripens and the GlobalEyes and the Canadian industry that would nurture them would be around for decades, not a few years.