Best case of course is you create an economic climate (good infrastructure, reasonable taxes, well educated work force, reasonable energy rates, permissive export policies, elimination of unnecessary red tape, logical levels of CAF demand, etc.) to encourage both Canadian defence companies to develop and grow as well as foreign manufacturers to open facilities here. This of course would benefit Canadian industry in general, not just defence industries.
As far as procurement policy goes I think it depends somewhat on the type of item and the type of wartime need for that item when looking at foreign vs domestic procurement. For things like subs, ships, tanks, fighters, etc. that have long production lead times that mean you're not realistically going to be able to replace your losses during a conflict (regardless of whether they are produced in Canada or not) then I think you simply focus on getting the most suitable product available from wherever it is produced. If it is something that is more a consumable item like ammo, small UAVs, light vehicles, etc. then I think there is a major benefit to domestic production (including licensed foreign production facilities in Canada) to ensure sufficient supply (and surge capability for wartime) even if some level of subsidization may be required to ensure sufficient supply in a crisis.
The major proviso in this is that I think we should also leverage our political, economic and physical proximity to the USA in our procurement strategy. The US is the one allied nation that stocks and has the capability to produce equipment and military supplies at scale. It is also the nation we are most likely to fight side by side with in any major military conflict. Equipment commonality with the US combined with a very conscious effort toward tight interoperability with their forces (including habitual links between our formations and specific US formations to practice interoperability) should in my mind be a priority. This would open up the US supply system to Canada in wartime and cover those supply issues where domestic production does not make economic sense.
