The Canadianist
Yesterday, The Canadianist looked at an opportunity hiding inside Canada’s own borders: an economy that could become considerably stronger if we finally made it easier for Canadians to trade with Canadians.
The argument was largely domestic. Reduce Canada’s dependence on a single customer by strengthening the country at home and expanding the number of places Canadian businesses can sell abroad.
There may be a much larger strategy developing around the same idea.
What if Canada is helping build the alternative?
Not an alternative to the United States. An alternative to a world in which countries such as Canada are left negotiating individually with economic powers large enough to dictate the terms.
Mark Carney described something remarkably close to that at the World Economic Forum in Davos in January.
“We are in the midst of a rupture, not a transition,” he told the audience.
Carney argued that the international system built after the Second World War was no longer functioning as countries such as Canada had come to expect. Economic integration itself was increasingly being used as leverage. Tariffs could become weapons. Financial infrastructure could become coercive. Supply chains could become vulnerabilities.
His response wasn’t isolation.
It was organization.
“When we only negotiate bilaterally with a hegemon, we negotiate from weakness,” Carney said.
His alternative was for middle powers to stop competing with one another for favourable treatment from the world’s largest countries and begin combining their weight instead.
“In a world of great power rivalry, the countries in between have a choice: to compete with each other for favour or to combine to create a third path with impact.”
That sounded ambitious in January.
Eight months later, Canada appears to be trying to do it.
In March, speaking in Australia, Carney put some names around the idea: Europe, Australia, Canada, Japan and South Korea. Together, he said, those economies have a larger GDP than the United States, three times the trade flows of China, the world’s largest combined research and development spending and 62 of the world’s top 100 universities.
No one of those countries can match American economic power individually.
Collectively, the arithmetic starts looking very different.
The proposal isn’t for another European Union, NATO or giant international organization. Carney calls his approach “variable geometry.”
Different coalitions for different problems.
Canada might work with Australia and India on artificial intelligence, G7 countries on critical minerals, South Africa on nuclear energy and Europe on defence. Countries wouldn’t have to agree on everything before they could cooperate on something.
The result, Carney argues, would be a “dense web” of relationships that makes each participating country harder to pressure individually.
Parts of that web already exist.
Canada became the first non-European country to participate in the European Union’s Security Action for Europe defence procurement program this year. Canadian companies can now participate in procurement under an initiative designed to expand European defence production.
Canada has signed more than 20 economic and security agreements across five continents over the past year.
The government says it has also signed 56 critical-minerals agreements with more than 10 countries, attracting more than $18 billion in capital.
Then there’s the proposal that could be considerably larger than any of them.
Canada is advocating closer integration between the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union. Carney says connecting the two could create a trading bloc encompassing approximately 1.5 billion people.
This isn’t simply Canada looking for somewhere else to sell lumber or oil.
It’s an attempt to change the negotiating weight of countries that individually can’t compete with the economic gravity of the United States or China.
Carney returned to the idea during a speech at Trinity College in Dublin in June. He described coalitions that could deter aggression, protect supply chains and advance the economic interests of participating countries.
Canada is also preparing to begin discussions with the European Union this fall on what Carney has described as a much stronger and deeper economic and security partnership.
The United States doesn’t disappear from any of this.
Nor should it.
The Canada-U.S. economic relationship remains one of the largest and most integrated in the world. American customers remain enormously valuable to Canadian businesses. American companies benefit from Canadian energy, resources, manufacturing and consumers.
Building alternatives doesn’t require dismantling any of that.
It changes what happens when one relationship becomes unpredictable.
For most of Canada’s modern history, our geography gave us an extraordinary economic advantage. The world’s richest consumer market was sitting immediately beside us. We built around it.
Yesterday’s Canadianist examined what that dependence has meant inside Canada and why strengthening east-west trade has become increasingly urgent.
Carney appears to be applying similar thinking internationally.
Canada doesn’t have to replace its largest customer to reduce that customer’s leverage. It needs enough other relationships that losing access to any one of them no longer represents an existential economic threat.
Other middle powers face versions of the same problem.
Japan doesn’t want to choose permanently between Washington and Beijing.
Europe doesn’t want its economic security determined entirely by either.
Australia and South Korea have enormous relationships with China while maintaining deep security relationships with the United States.
India has spent decades preserving strategic independence from competing blocs.
Their interests aren’t identical, which is precisely why Carney isn’t proposing that they become one bloc.
Work together where interests overlap. Go elsewhere when they don’t.
One strategic sector. One agreement. One coalition at a time.
There is no guarantee it works.
Countries will continue protecting their own interests. American access will remain extraordinarily attractive. China will continue using the enormous scale of its market and manufacturing base to build relationships of its own. Middle powers aren’t suddenly going to discover that cooperation is easy simply because cooperation would benefit them.
Canada’s own attempt to eliminate trade barriers between 10 provinces and three territories demonstrates how difficult economic coordination can be even within a single country.
But something has changed.
For decades, middle powers could operate on the assumption that the larger international system provided enough stability that they didn’t need to build an alternative architecture themselves.
Carney’s argument is that assumption no longer holds.
And Canada isn’t waiting to see whether it comes back.
At Davos, he described countries such as Canada as having two choices when dealing with great powers: compete with one another for favour or combine their weight.
Canada appears to have made its choice.
The question now is how many other countries make the same one.