Michael Taube: Carney’s EU mistake is nearly complete

Prime Minister Mark Carney described Canada as the “most European of non-European countries” at a joint summit in Brussels last summer. This eye-raising remark led some political pundits and columnists (including me) to speculate that his personal mission wasn’t to improve relations with the U.S., but to jump into the “waiting arms” of the European Union.

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If that was his ultimate goal, it seemed rather unrealistic from the very beginning.

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The EU has the world’s second-largest economy (behind the U.S.) and third-largest GDP (behind China and the U.S.), whereas Canada is a middle power at the best of times. Our country’s water, energy and natural resources may have real value in the free market economy, but the EU’s 27 member states wouldn’t want to pay hefty premiums to purchase them when many options exist in a closer (and cheaper) location.

Meanwhile, Canada and the EU already had a trade deal in place, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which was signed in 2017. CETA removes 99 per cent of all tariff lines on products from the two trade partners.  What more did Canada have to offer? You can only lower the price of back bacon and maple syrup by so much, after all.

And yet, it appears that a full-fledged Canada-EU alliance may be in the works.

Bloomberg published an exclusive story this week that revealed Canada and the EU are “working toward a new, all-encompassing relationship that will range from trade to security.” European Commission President Ursula von der Leyen will reportedly address this matter at her state of the union address in Strasbourg, France on Sept. 16. Carney will attend this speech and he’ll then “address European lawmakers the following day.” While the final details haven’t been unveiled, the arrangements will reportedly “aim to cover all areas of the relationship, including trade, security, supply chains and critical raw materials.”

Bloomberg reporters Andrea Palasciano, Alberto Nardelli and Brian Platt pointed out that “It’s not clear whether new legal tools would be needed to formalize the partnership.” This will largely depend on what’s covered in the arrangement, of course.

This announcement coincided with the very same day Canada placed counter-tariffs on various U.S. products in the midst of the ongoing trade war. Which obviously means it was no coincidence! It may also help explain why Ottawa didn’t place the counter-tariffs for more than two weeks after negotiations fell apart to prevent the implementation of U.S. President Donald Trump’s 50 per cent tariffs. This made no logistical sense at the time, but the EU and Canada were evidently putting some finishing touches on the current round of discussions.

To be clear, building or increasing trade with other countries, trading blocs and economic unions is a perfectly acceptable strategy. Canada certainly needs to look at Europe, along with Asia, Africa and other regions in the world, to diversify our trade interests and build additional economic growth. It’s a strategic decision that many previous prime ministers, including Stephen Harper, firmly believed in.

But it can’t be done at the expense of Canada-U.S. trade. That would be a poor political strategy — and a costly one, at that.

“The United States is Canada’s largest trading partner in goods and services,” the Government of Canada directly acknowledges on a webpage related to Canada-U.S. relations, and “Canada is the U.S.’ second-largest trading partner.” Moreover, the Canada-U.S. economic relationship resulted in “nearly $3.6 billion (US$2.6 billion) worth of goods and services (that) crossed the border each day in 2024.”

Trade between Canada and the U.S. has always been the most logical and financially beneficial for both countries. Our close political and geographic ties have always worked to our advantage and to their advantage, truth be told. It’s a huge source of income that can’t be replicated with the EU, trade with China or anything else, for that matter.

Meanwhile, a recent Canadian Federation of Independent Business survey noted that Canadian exporters could potentially lose half their revenue due to Trump’s tariffs. An Oxford Economics report for the Canadian American Business Council mentioned the possibility of hundreds of thousands of jobs lost in both countries due to the tariffs as well as a potential decline in GDP. If you think that a new Canada-EU relationship is going to soften this devastating economic blow in either instance, you’ve got another thing coming.

We all know that Trump has been difficult to deal with on matters related to tariffs and trade. This has been going on not for weeks, months — but years and over two presidential terms. No one is even suggesting that Carney must give in to every whim, demand and desire from Washington. Negotiations on trade, like all matters, is a process of give and take. The Americans may be much larger and more powerful than we are, but Canada has a voice and the ability to speak up.

At the same time, Carney can’t throw his hands in the air and give up because there have been roadblocks and last-minute interventions by the Americans. His obsession with the EU and Europe can’t be the guiding light for Canada’s economic future and destiny, either. It will make us weaker, poorer and less desirable to trade with.

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