Canada is often in a defensive position when frictions arise with China, the U.S. or the E.U. It’s time to revamp the country’s approach.
by Patrick Leblond. Originally published on Policy Options
September 11, 2024
Canada is a middle power caught in the middle of geopolitical battles between China, the European Union and the United States.
Most often, this puts Canada in a defensive or reactive position. The Meng Wanzhou-two-Michaels affair, where Canada got caught in the middle of a spat between China and the United States, is a good example.
Another example is Canadian governments having to dole out tens of billions of dollars in subsidies to support the manufacturing of electrical vehicles and batteries in response to similar policies adopted by the E.U. and the U.S. to compete against imports from China, all to protect Canada’s auto sector.
Unlike Indo-Pacific middle powers such as Australia, Japan or Korea, Canada cannot effectively leverage China’s gravity pull in dealing with the U.S. In other words, Canada cannot get the U.S. to look favourably at it for fear that China will gain greater influence over it.
As a case in point, Canada’s attempt to launch negotiations toward a trade agreement with China in 2016-2017 did not prevent the Trump administration from playing hardball in the renegotiating of the North American Free Trade Agreement.
We are told that this is a new reality that the country must adapt to.
However, Canada’s main economic policy challenge has not changed since the 1970s. Faced with the seemingly inescapable gravitational pull of the U.S., Canada needs to look for ways to mitigate the risk of keeping most of its eggs in one basket.
As such, Canada is in a particular geopolitical position shared by countries such as Mexico and the United Kingdom: a middle power economically dependent on one, much larger economy. Like Canada, Mexico is dependent on the U.S. economy for its trade and investment.
The share of the U.K.’s trade with EU countries reached 53 per cent in 2023, despite the intent behind Brexit to reduce economic links with its former partner.
Global focus shifting
In a world that is more and more geopolitically turned to the Indo-Pacific region, Canada is at risk of seeing its traditional strategic importance to the U.S. erode. When the North Atlantic was the main “game in town,” Canada’s role of trusted partner to the U.S. in dealing with Europe was quite different from 21st century trade across the Pacific.
Canada’s absence from the U.S.-EU Trade and Technology Council, which has a strong China focus, and the US-led Indo-Pacific Economic Framework is evidence of Canada’s shrinking strategic value in the eyes of the U.S.
It is not for lack of Canada trying to join these initiatives.
Add to this the fact that policies harmful to international trade are outnumbering liberalizing ones, Canada’s negotiation leverage vis-à-vis the U.S. will gradually decrease. As a result, the U.S. will find it easier to adopt a take-it-or-leave-it attitude towards Canada.
Solutions at the ready
The good news for Canada is that it is not alone. Maintaining a free and open global economy remains a priority for other middle powers too.
Partners such as the Association of Southeast Asian Nations (ASEAN), Japan and Korea can provide Canada with leverage. But in turn, Canada needs to bring something of value to the table, such as a three-pillar geopolitical strategy that focuses on the power of ideas and information rather than economic and military might.
To get there, Canadians must first develop a clearer understanding of the geopolitical and geoeconomic opportunities and challenges. This can be achieved by:
- Establishing a new “Macdonald Commission” on Canada’s economic prosperity and security to develop a coherent strategy that will guide Canadian governments, businesses and civil society.
- Creating a permanent multi-stakeholder committee to help implement strategy and coordinate policy ideas and actions which includes relevant representatives from government (federal and provincial/territorial), business and civil society.
- Publishing a report on Canada’s short- and long-term international economic security risks annually.
- Providing in-depth workshops on international economic policy and security issues for news media and offering financial support to Canadian news outlets to ensure correspondents are posted abroad to reverse the current trend of closing foreign bureaus.
- Encouraging and support young Canadians to undertake study and work placements abroad by making the Global Skills Opportunity pilot program permanent in 2025 (when it is currently set to end).
Second, as Canada’s economic and military power is dwindling relative to other countries, a potential new source of leverage could be information and ideas. By sharing Canadian perspectives to provide solutions to various issues around the world, especially those faced by “like-minded” middle powers, a “Canada Effect” (to borrow from Columbia University Professor Anu Bradford’s “Brussels Effect”) can be achieved.
Foreign affairs minister Mélanie Joly has characterized Canada as a convening power. To convene effectively, one has to bring something of substance to the table. One such example already in action is the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) for appealing trade disputes at the WTO, which was negotiated through the Ottawa Group.
This requires enhancing Canada’s capacity to generate and implement novel, practical ideas and solutions in government, business, NGOs, think thanks and academia. Global Affairs Canada’s Open Insights Hub can be used to harness this potential along with tasking Canada’s missions abroad with promoting Canadian ideas and solutions.
Finally, Canada’s proximity and economic importance in the U.S. places it well to be a source of what we could call “soft” intelligence and influence (as opposed to intelligence gathered and used for national security purposes). For instance this could mean making the Team Canada approach permanent, not just to inform Americans about Canada’s importance to the U.S. economy but also to collect information about what is happening politically, economically and socially beyond the beltway.
Canada has a highly educated, multicultural and diverse population located between the North Atlantic and the Indo-Pacific. As such, it is perfectly positioned to exercise influence not through economic or military power but through its ideas.
This article is part of the Trade in an Era of Global Insecurity special feature series.
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This article first appeared on Policy Options and is republished here under a Creative Commons license.