Carney Puts His Pivot Away from the U.S. to the Test

Dow Jones
09/17

STRASBOURG, France-Canadian Prime Minister Mark Carney is attempting the most dramatic reorientation of his country's economy and international alliances since Ottawa entered a free-trade agreement with the U.S. almost 40 years ago.

On Thursday, he used an address to the European Parliament to insist that his efforts weren't aimed at creating a third bloc "to become a great-power rival-only with better manners."

Instead, he cast the idea of a bespoke partnership with the European Union as critical for protecting Canada's sovereignty, at a time when it is locked in a trade war with the U.S. and confronting President Trump's threats to make it the 51st state.

Carney, who didn't mention the president in his address, later told a news conference that no one would dictate his country's partnerships. He spoke not long after Trump had derided Canada as a "terrible trade partner" and described the idea of Canada gaining associate membership of the EU as a potentially "hostile act" attracting additional U.S. tariffs on European countries.

In two high-profile forums this week-Canada's inaugural investment summit in Toronto where he played host to the titans of global finance, and a whirlwind trip to Europe-Carney sought to put into practice his plan to insulate the country from Trump's economic aggression. Together they brought into focus the scale of Carney's ambitions and the challenges and risks that accompany them.

Since becoming prime minister, Carney has set a goal of doubling Canada's non-U.S. exports by 2035 and has been on the hunt for export markets outside the U.S., where traditionally three quarters of its exports have gone. He has spent much of his time in office jet setting across the globe to drum up new investment and forge new trade and security partnerships.

For Carney, who was educated at the University of Oxford and served seven years as governor of the Bank of England, Europe has been key to his plans. Unlike several of his predecessors, who made their first international trips to the U.S, Carney's debut on the international stage took in Paris and London, where he touted Canada as "the most European of non-European countries."

Since then, Canada became the first non-European nation to join the EU's defense procurement mechanism. Carney was the first head of government from outside Europe to attend a European Political Community meeting this year, and this week was the first non-European leader to attend the address that opens a new session of the European Parliament.

European and Canadian officials have said the two sides want the closest possible relationship short of full membership in the EU. There are scant details on what associate membership would entail, but in his address, Carney called for greater cooperation in areas such as critical minerals, energy, space and artificial intelligence, and for Canadian participation in the EU's study-exchange program.

"We are not fair-weather allies," he said. "We do not pursue zero-sum deals. Our commitment to the rule of law, and our unyielding defense of human dignity, individual freedom and democracy share the same deep roots, the same unwavering dedication."

Forging deeper ties with Europe has broad support in Canada, but some opposition lawmakers have warned that it could erode, not shore up, sovereignty. Carney said he intends to hold a vote in the Canadian Parliament on the final structure of the new pact. Canada and the EU have had a trade agreement since 2017, but 10 EU members haven't ratified it.

The arrangement could also draw blowback in some European capitals and the U.S.

"If they do that, if I think it's at all a hostile act, I will put very serious tariffs or stop trading with Europe on many things," Trump said on Wednesday, responding to a question about Canada possibly becoming an associate member.

In a news conference, Carney called the new Canada-EU alliance a "positive process" and said no one would dictate his country's partnerships.

"That's my response to the American president," he said.

 

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