Postcards from Cambridge, MA: Canada’s European Turn Is About More Than Trade

As part of my fellowship at Harvard University’s Weatherhead Centre this year, I am starting a series of blogs reflecting on current developments in international politics and economics, viewed from the other side of the Atlantic.

One of the pleasures of being at the Weatherhead Centre, and Harvard more broadly, is the opportunity to exchange ideas with colleagues from around the world and across different disciplines. With Canada exploring closer association with the European Union, I asked two Canadian colleagues, a political scientist and a sociologist, for their perspectives to complement my own economic viewpoint. Here is what emerged from our conversation.

Canada has spent decades building one of the world’s closest economic relationships with the United States. The North American Free Trade Agreement (NAFTA), replaced by the USMCA in 2020 during Trump’s first presidency, further deepened the integration of production networks across the border. Cars cross the border several times before leaving the assembly line. Energy flows south through pipelines, while goods move between factories connected by roads and railways.

Geography has made the United States Canada’s natural economic partner. Now, that same proximity is increasingly seen as a source of vulnerability.

President Donald Trump’s trade policies have exposed the risks of depending so heavily on a single partner. Canadian Prime Minister Mark Carney has responded by looking further afield, particularly toward Europe. The European Union offers an attractive alternative: a large market, shared democratic values, and a political partner increasingly concerned about its own dependence on Washington.

The Canadian journalist Paul Wells is known for his three rules of Canadian politics. His first states that Canadian politics tends toward the least exciting possible outcome. If Canada were to become the EU’s first associate member, that rule might need some revision. Then again, whether this ambition produces anything more than an upgrade of the EU-Canada trade agreement, CETA, may ultimately prove his point.

Yet the case for closer Canada–EU integration goes well beyond export diversification. It raises more fundamental questions about political sovereignty, national identity, and the changing nature of economic integration. Above all, it may become a test of whether countries caught between the United States and China can develop a credible alternative to depending too much on either of them.

The First Challenge Is Political.

Canadian identity has long been shaped by its distinction from the United States. Although Canadians share a continent, language, and deeply integrated supply chains with their southern neighbour, they do not necessarily share its political outlook. Trump’s threats have reinforced that distinction, turning economic dependence into a question of national sovereignty.

Closer ties with Europe appear to offer an escape. But this creates a paradox. Canada seeks greater independence from Washington by considering deeper integration with Brussels. Yet economic cooperation with the EU often requires accepting common rules and regulatory obligations. The question is therefore whether Canada can accept some constraints on its sovereignty in exchange for greater autonomy from the United States.

This distinction is important because the EU itself has spent decades navigating the tension between national sovereignty and collective influence. Canada would have to decide how much regulatory alignment it is prepared to accept. Europe, meanwhile, would have to determine what benefits it could offer without encouraging existing EU members to question their own obligations. Striking that balance may prove difficult.

The Second Challenge Is Societal.

Economic relationships are sustained not only by commercial interests but also by trust. For generations, Canadians viewed the United States as more than a trading partner. It was a reliable ally with whom they built industries, institutions, and a shared understanding of North American prosperity.

That confidence has been shaken. The sense of betrayal expressed by many Canadians may prove more significant than the immediate economic costs of tariffs. Trade disputes can be settled, but lost trust is much harder to restore. Even if Washington changes course tomorrow, Canadian businesses and policymakers may hesitate to rebuild the same degree of dependence, despite the geographical proximity that has made North American supply chains so deeply integrated.

History suggests that such moments can create lasting changes. Economic relationships develop through decisions that reinforce one another over time. Canada’s automobile industry, for instance, initially expanded partly because of trade barriers before evolving into a deeply integrated North American production network. What begins as a response to political circumstances can eventually reshape the geography of economic activity.

But public enthusiasm for Europe should not be confused with an unlimited appetite for European integration. Canadians may welcome another partner without wanting to become part of another political project. Whether closer ties endure will depend partly on whether they go beyond government declarations and turn it into more lasting relationships among universities, researchers, businesses, and citizens.

The Third Challenge Is Economic.

Here, the possibilities may be greater than commonly assumed. Traditional trade theory explains why Canada is so closely integrated with the United States. Distance matters. Moving automobile parts by truck across the border is considerably easier than shipping them across the Atlantic. Geography has therefore favoured North American production networks, regardless of differences in political preferences.

Yet the global economy is changing. An increasing share of international economic activity involves services, knowledge, intellectual property, research, and data. Unlike automobiles or machinery, these activities do not always require physical transportation. A Canadian researcher can collaborate with a European laboratory, while a technology company can deliver services to customers across the Atlantic without shipping a single container.

This changes the economics of integration. Physical distance becomes less of an obstacle and therefore creates opportunities for Canada and Europe to cooperate in activities where geographical proximity previously gave the United States a natural advantage.

But this will not necessarily be easy. While intangible activities are less constrained by geography, they are often more dependent on regulatory institutions. Cross-border data transfers require compatible regulations. Research partnerships depend on intellectual property rules and trusted institutions. Professional services require recognition of qualifications and predictable market access, which can be difficult even between like-minded partners. The EU itself continues to struggle with completing its single market for services.

Yet this also creates an opportunity. As geographical distance becomes less important, regulations and other policy choices becomes more decisive. Policymakers therefore have greater scope to shape lasting economic relationships through institutional cooperation. Canada and Europe may have more opportunities for integration than traditional trade patterns suggest, but realising them requires more than reducing traditional trade barriers like tariffs.

The Larger Question.

Can Canada and Europe help build a credible coalition of middle powers?

Both have reasons to seek greater autonomy in a world increasingly shaped by rivalry between the United States and China. But shared concerns do not automatically translate into collective influence. Middle powers may agree on the need for cooperation while disagreeing over market access, industrial policy, security commitments, or the distribution of economic benefits. Even Canada and the EU will not always have aligned interests.

Nor should Europe be mistaken for a benevolent alternative free of its own economic interests and power asymmetries, as its past relationships with other countries have demonstrated. A partnership built to reduce dependence on dominant powers must avoid reproducing similar dependencies among its members.

What is missing is an institutional framework capable of turning common interests into sustained cooperation. That does not necessarily mean replicating the EU or establishing another cumbersome international organisation. It could begin with practical arrangements governing research, data, professional mobility, technological cooperation, and defence production, designed to accommodate countries with different political institutions.

Europe’s own history offers a lesson. Integration began with cooperation in a handful of strategic industries before gradually extending into other areas. Canada and Europe need not follow the same path, but closer cooperation in specific fields could create incentives for broader institutional and regulatory ties.

For Canada, it would be wrong to suggest that the choice is between remaining dependent on the United States and becoming dependent on Europe. Instead, the question is whether closer European ties can become part of a wider network of relationships that strengthens its ability to act independently.

The real test of Canada’s European turn goes well beyond how much additional trade it generates. It is about more than economics. It will be whether political trust, societal connections, and economic cooperation can be translated into lasting institutional relationships that give both partners greater influence in a world dominated by larger powers.