Prime Minister Paul Martin announced Thursday that Canada will not sign on to the controversial U.S. ballistic missile defence program.

"We are announcing today that Canada will not take part in the proposed ballistic missile defence system," Martin told reporters outside the House.

"Let me be clear, we respect the right of the United States to defend itself and its people."

"However, BMD is not where we will concentrate our efforts. Instead, we will act both alone and with our neighbours on defence priorities outlined in yesterday's budget."

Martin's announcement provoked a warning from Washington that Canada had relinquished sovereignty over its airspace.

Paul Cellucci, the U.S. ambassador to Canada, said from now on, the U.S. will decide when to fire at incoming missiles over Canadian territory.

"We will deploy. We will defend North America," Cellucci said. "We simply cannot understand why Canada would in effect give up its sovereignty -- its seat at the table -- to decide what to do about a missile that might be coming towards Canada.''

Martin said that Canada remains steadfast in its support of NORAD which he said is essential to continental security and our national sovereignty.

"That's why we agreed last summer to enhance our long standing agreement to track missiles through NORAD. We stand by that commitment."

He said Canada will continue to work closely with the U.S. and other allies on issues of security and terrorism around the world.

"Canada recognizes the enormous burden that the United States shoulders when it comes to international peace and security. The substantial increases made yesterday to our defence budget are a tangible indication that Canada intends to carry its full share of that responsibility."

Earlier, Foreign Affairs Minister Pierre Pettigrew broke the news to opposition parties in the House of Commons. Pettigrew told the House that "Canada must act in its own interests and must determine where its priorities lie."

While the decision was hailed by the NDP, Conservative MP Kevin Sorenson expressed his disappointment with the announcement, saying the Liberals promised a debate before any decisions were made on the missile-defence program.

Ottawa's decision marks the second time in recent years that Canada has refused to back U.S. military plans. In March, 2003, former prime minister Jean Chretien angered Washington by refusing to join the U.S.-led coalition in Iraq.

CTV's Craig Oliver said Ottawa's decision is of tremendous significance.

"To me it's far more important than our decision not to participate in the war in Iraq because we have broken with the Americans on the issue of continental defence," Oliver said.

"Mr. Martin can say all that he wants about NORAD, but essentially on the issue of who fires at these missiles, who knocked them down, the whole idea of the sharp end of continental defence, Canada is opting out."

Oliver said American taxpayers have essentially subsidized Canada which has for years been spending far less on defence than a country of our size should be.

"We're getting away with that because the Americans give us a nuclear umbrella and then a military umbrella in other ways."

Oliver said he believes that Canada's decision not to join missile defence will cost a lot financially since we will have to dramatically expand our ability to defend ourselves, and our ability to contribute to NATO.

"We can only hope that the U.S. missile defence doesn't begin to absorb NORAD also. If it does then we are right out of continental defence altogether in terms of surveillance.

"It would cost a fortune for Canada to replace what NORAD does in terms of surveillance of our own airspace."

The missile shield program, announced by U.S. President George Bush in 2002, will eventually have the ability to track and destroy incoming ballistic missiles. The goal has been to have a basic ground-based shield in place by the end of last year. But the experimental program has failed a number of tests and is still not operational.