Scale working models of one of nine Avro Arrow free flight models launched over Lake Ontario in series of tests during 1954 – 1957. (Credit: Canada Aviation and Space Museum, Ottawa/Toronto Sun/Postmedia Network)
Canada is entering one of the highest-stakes economic negotiations in its history. Sitting across the table from the world’s largest economy, the instinct will be to protect market share, preserve access and maintain stability. Those instincts are right, but it’s only half the equation. The other half is diversification, and that can’t be negotiated; it has to be built.
The best way to create leverage in any negotiation is to invest in your capabilities. Prime Minister Mark Carney has done that and continues to do so by building new trade alliances, creating new agencies, such as the Defence Investment Agency and the Major Projects Office, and launching new initiatives, including the sovereign wealth fund.
Canada can, and should, maintain deep integration with the United States in traditional industries, such as automobiles, energy, lumber and agriculture, while building the industries that will define the future. That last part requires intention.
Canada has done this before. In our history, we have had moments of real conviction when we invested in talent, engineering and national capability. But we also have had moments when we step back too early, withdraw support or fail to scale what we have started. The result is a recurring pattern in which we create the frontier and watch others industrialize it.
The story of Avro Canada is a case in point.
The cancellation of the CF-105 Avro Arrow program not only ended an aircraft, but also dismantled a world-class aerospace ecosystem. Engineers moved south and became foundational contributors to the National Aeronautics and Space Administration‘s Apollo program, helping build the early U.S. space program.
Bob Gilruth, the first director of NASA’s Manned Spacecraft Center, said Canadian engineers were a “godsend” to the Apollo mission. He was right: 12 of NASA’s engineers were Canadian at the time, leaving Avro to work on Project Mercury. Canada invested in that, and then exited.
The same pattern has emerged in artificial intelligence half a century later. Researchers such as Geoffrey Hinton at the University of Toronto helped define modern deep learning, but Canada once again led the science while the companies, computing and commercial scale accrued elsewhere.
What makes this episode in Canada’s history more striking is the context. During the AI winters of the 1970s and 1990s, when AI research contracted and neural networks were dismissed as fringe, institutions like the Canadian Institute for Advanced Research continued its funding even as others had moved on.
Hinton moved from Carnegie Mellon to the University of Toronto to pursue research on neural networks. Richard Sutton left AT&T Labs for the University of Alberta to develop reinforcement learning. In hindsight, the two dominant paradigms of modern AI emerged from that bet, reinforcing a familiar pattern. Canada sees the future early, but too often fails to capture it at scale.
From Nortel Networks Corp. to Atomic Energy of Canada Ltd., the lesson is consistent: if we do not sustain and scale what we start, we lose the economic upside and the strategic agency.
The lessons are particularly bitter for those operating in the aerospace and defence sectors. After abandoning the Arrow, we abandoned the first passenger jet (Avro Canada C102 Jetliner), the first operational drones (CL-89), the fastest warship (HMCS Bras d’Or) and the first autonomous submarine (ISE’s Theseus).
That is the real risk as Canada-U.S.-Mexico Agreement negotiations take shape. If we over-index on defending existing industries, important as they are, we risk crowding out the investment, policy focus and ambition required to build the next generation of AI, quantum, advanced energy, biotech and defence technologies. We end up optimizing for continuity in the present while underinvesting in the future.
But this moment is also an opportunity. The U.S. is actively reorienting around long-term competition with China, creating space for deeper alignment in exactly these emerging sectors.
Canada can meet this moment as a builder, not as a junior partner. The country brings real capability, companies and leverage to the table. Integration works best when it is grounded in strength.
Avoiding the Avro-Arrow-to-AI problem does not require choosing between partnership and independence. It requires doing both — deliberately.
Canada can maintain and deepen its relationship with the U.S. while investing in itself by backing entrepreneurs, scaling companies and building industries that endure.
We’ve done this before and we can do it again, but this time, let’s finish the job.
Eliot Pence is a member if the Advisory Council for Canada-U.S. Economic Relations and the founder and chief executive of Dominion Dynamics Inc.