Canada eyes Europe as it seeks to diversify

Canada is seeking to build a broader economic and strategic partnership with Europe as its increasingly difficult relationship with the United States accelerates efforts to diversify trade, investment and supply chains, experts said.

European Commission President Ursula von der Leyen proposed on Wednesday that Canada become the EU's first "associate member", a concept that currently has no established legal status within the bloc.

Canadian Prime Minister Mark Carney welcomed the proposal and called for a deeper alliance with Europe in areas ranging from energy and critical minerals to defense, artificial intelligence and digital trade.

Experts say the potential relationship with Europe could also reflect longer-term economic and strategic interests on both sides of the Atlantic.

"There is no such membership category," said Robert Wolfe, professor emeritus at Queen's University in Canada. "So it's simply a way to stress how much the EU welcomes a closer relationship with Canada."

Wolfe told China Daily the initiative should not be understood as replacing existing trade arrangements between Canada and the EU.

"CETA is just a trade agreement," he said, referring to the Canada-European Union Comprehensive Economic and Trade Agreement. "There are many other areas in which closer ties are possible, including security, defense procurement, cyber, digital trade, etc."

Kurt Huebner, professor of European integration and global political economy at the University of British Columbia in Canada, also said the proposed status currently carries more political symbolism than concrete institutional meaning.

"Associate membership has no legal basis. It's not existing. It's nowhere in the Treaty of the European Union," Huebner said. "More political symbolic value than any practical value."

But he said the political message reflects a longer history of cooperation between Canada and Europe.

"Both entities have a long history of cooperation. They share values, democratic values, they share the acceptance of international law," Huebner said. "This is the basis for all the kind of cooperation in the past."

He said the EU also has practical reasons to deepen the relationship, particularly as Europe seeks greater access to energy and other strategic resources.

"The reason why they are now trying to move even closer is Canada has to offer quite a lot of stuff the EU would need for their own," he said.

"Canada could now also offer those things for Europe when it comes to energy," Huebner said, citing key cooperation including security.

For Canada, the push toward Europe is closely linked to the changing relationship with its neighbor in the south.

"That is why the Prime Minister (Carney) has been pushing so hard to diversify Canadian trade, and not just with the EU," Wolfe said.

Julian Karaguesian, an economics professor at McGill University in Canada, said the diversification effort could eventually extend far beyond conventional trade in goods and services.

"Associate membership, I think, from Canada's perspective, goes beyond trade in merchandise, goods and services to potentially having some kind of financial market integration," Karaguesian told China Daily.

One possibility, he said, would be closer regulatory coordination between Canadian and European financial markets.

"If we had a financial market agreement, it would be even easier because we would recognize each other's regulatory authorities and so each company would have only one regulator to deal with," he said.

Potential match

Karaguesian also sees a potential match between Canada's energy resources and Europe's capital.

"The Europeans are particularly interested in our energy because they are cut off from Russian gas by sanctions," Karaguesian said. "And that's really driven up costs for people and businesses in Europe."

The opportunity, he said, goes beyond simply selling Canadian products to European consumers.

"You could think beyond free trade agreements, getting Europeans to invest in our energy infrastructure," he said.

"So not just shipping goods and importing goods, but much more than that."

Karaguesian said the current tensions with Washington have given Ottawa a powerful incentive to accelerate a diversification strategy that had already been necessary.

"I think that diversifying our trade investments, supply chains, procurement, I think that was long overdue.

"But now we have this powerful catalyst, this powerful incentive to do so because we've seen the last 18 or 20 months have been very rough" with Washington, he said.

In his view, Europe has become a more natural fit because it is relatively familiar to Canadian businesses and institutions.

"Europe is low-hanging fruit because it's familiar — familiar systems, familiar institutions, everything is familiar," he said.

Still, he said Europe should not be viewed as a replacement for the United States.

"Europe's only part of the solution," Karaguesian said, arguing that Canada should also engage more broadly with other major economies.

Karaguesian said reducing dependence on the United States could also have implications for Canada's economic sovereignty.

"I think it's good for our sovereignty to reduce our reliance on the United States," he said.

Wolfe said the current push should be seen as both a response to immediate pressures and part of a longer-term adjustment.

"Both," he said when asked whether the initiative was primarily a response to tensions with Washington or a broader restructuring of Canada's international economic relations.

"Yes, we have a current problem, but as the PM always says, the world has changed and the old world is not coming back," he said.

gaoyang@chinadailyusa.com