The problem is quite simple. Most nations, correctly or incorrectly, don't see a real need for large conventional forces.
So... the short answer, the Canadians don't need large expensive fleets or armored forces in todays world climate.
The long explanation is something like this:
First, simply... the US can out produce and out buy just about any other nation out there with technology at least as good if not better with a decent sized population to draw on.
Thus in the face of that you can either try unconventional methods to fight them aka terrorism etc... or you can be friends with them. The current approach of many nations. OR a position I totally disagree with but which some are increasingly supporting, you can ally with others to attempt to create a counter force capable of going toe to toe in a conventional and nuclear frame.
The counter force used to be USSR to the USA or Warsaw pact to NATO. That is no more. Some European nations have expressed a desire to unite Europe into a new such counter force. This is IMHO a recipe for disaster.
Now looking at things in that perspective it doesn't make sense for most modern nations, especially those on quite good terms with the USA, to posses extremely large and expensive military forces. It doesn't make sense for enemies to either unless they can at least equal the US force. That is what Saddam tried to do when in the 1990's he had the third largest military force in the world. Unfortunatly the US military force is equiavlent to something like the next 20 all combined into one, at least in the early 90's.
So quite simply... all you need for your military really is enough to ensure your protection against other nations like you or enough to aid your big ally aka the USA and thus ensure their aid in any potential conflict.
To put it in SE4 terms. If you have two MEE's then there isn't a MEE. All the little guys who want to survive either have to play the ballance game between the two or ally with one and hope for its protection if the other moves against it. This would be the Cold War.
If you have one MEE then the little guys ally with the big guy and hope he doesn't turn on them or form up into an alliance of all of them that hopefully can stand upto the big guy.
It is quite complicated but that is the sum of it. As I see it anyways.
If you read this far then YAY! for you.