Can Canada and the EU build a deeper partnership?

At the World Economic Forum in January, Mark Carney said there had been a “rupture in the world order” – Image: Sean Kilpatrick/The Canadian Press/AP Photo/picture alliance

Canadian Prime Minister Carney is known for standing up to US President Donald Trump. Now he wants to forge a “unique alliance” with Europe. But what could such a partnership look like?

Before taking off for Europe, CanadianPrime Minister Mark Carney had set the tone for his visit, saying he was seeking to build a “unique alliance” with the EU. The Wall Street Journal similarly reported that Canada was considering becoming an “associate member” of the EU, while not aiming for full membership.

In her State of the European Union address on Wednesday, European Commission President Ursula von der Leyen indicated that she was indeed open to such an expanded partnership.

“We believe that power does not belong to the strongest, the richest or the loudest, but to all of us,” she said, addressing European lawmakers and Carney in Strasbourg, France. “That democracies have the freedom to choose with whom to work.”

Von der Leyen said a EU-Canada partnership would cover a broad range of areas including advanced manufacturing, technology, defense production, the Arctic, energy, critical minerals, batteries, artificial intelligence, quantum computing, cybersecurity and economic security.

Carney is expected to outline his vision for future relations between the EU and Canada during a speech at the European Parliament on Thursday.

What degree of collaboration could be possible between the EU and Canada?

EU member states are closely integrated economically, sharing a common market, trade and customs policy. When it comes to establishing ties with non-EU countries, a list of different options present themselves. They range from free trade agreements that scrap tariffs and trade barriers, to association agreements which may include political elements, to far-reaching economic arrangements such as participation in the common European market, as is the case for Iceland, Liechtenstein and Norway.

Canadian Prime Minister Mark Carney (center) met with European Commission President Ursula von der Leyen (left) and European Council President Antonio Costa (right) in Brussels in 2025 – Image: Sean Kilpatrick/empics/picture alliance

The EU has already negotiated association agreements with Turkey, Israel and Ukraine. These have different objectives and may or may not mark a preliminary step toward full membership.

Patrick Leblond, an expert on international economic relations at the University of Ottawa, urges a little more caution around the term “association agreement.” He considers it unlikely that Canada would adopt European laws or join the EU single market or customs union, which would mean imposing common external tariffs.

Leblond says Carney is likely more interested in forming a kind of alliance that deepens cooperation on issues of economic security and defense.

Closer defense cooperation?

“We have, in a way, taken the US [security] umbrella for granted on both sides. We have underinvested in our militaries,” Leblond told DW.

He added that the focus was now on joining forces, for example in the production of military equipment and the development of new technologies.

Security analyst Anand Sundar of the European Council on Foreign Relations also sees great potential for European-Canadian cooperation when it comes to defense. Canada spends about 70% of its defense budget on US-made equipment, according to Sundar. Carney wants to change that, the analyst said, as it would pay off for Canadians to be part of European defense projects to get “more bang for their buck.”

Canada has joined the EU’s Security Action for Europe (SAFE) program. It provides EU member states with up to €150 billion ($173 billion, CA$ 241 billion) in loans for the joint procurement of military equipment. To qualify for funding, no more than 35% of the cost of the components can come from countries outside the EU, the European Economic Area (EEA) or Ukraine. Yet because Canada joined the SAFE program by paying a fee, more lenient procurement rules apply to its companies.

Nevertheless, Canadian companies still face significant hurdles for producing and purchasing weapons in partnership with European firms, Sundar told DW. The big question is how far the EU is willing to relax its own rules, the expert says, which could also have implications for non-EU countries, such as the United Kingdom or Norway.

‘Underrated defense power‘

“But the biggest draw for the European Union is really the fact that that Canada is an underrated defense power,” Sundar told DW.

Canada, the expert added, spends more on defense than the 14 smallest EU member states combined.

The North American country invests 2% of its gross domestic product (GDP) on defense, Sundar said, with an increase expected in the coming years. Canada, like other NATO countries, has committed to spending a total of 5% of its GDP on defense by 2035, of which 3.5% will go towards military equipment and the remaining 1.5% towards other defense-related areas.

Protecting critical infrastructure

The EU and Canada also intend to discuss potential cooperation in the field of critical infrastructure expansion, such as the joint operation of space satellites or maintenance of fiber-optic cables in the North Atlantic, Leblond told DW. The goal here, too, is to become less dependent on the US and its companies. Moreover, Canada has oil and gas reserves that could meet some of the bloc‘s energy demands.

Trade relations between both have already been codified through the EU-Canada Comprehensive Economic and Trade Agreement (CETA), which entered into force on a provisional basis in September 2017. The agreement eliminates nearly all tariffs between the EU and Canada, while also ensuring mutual market access for industrial goods, agricultural products and services. It even enables European companies to participate in public tenders in Canada.

Economic analyst Leblond, however, believes that CETA’s potential has not yet been fully realized. He says many Canadian companies still tend to focus on the US and less on Europe. He believes it is the government’s responsibility to provide more information about CETA and the opportunities it offers, saying the level of exchange envisaged in this format could also be intensified.

DW.com/NAN 17-09-26

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