Inside Canada's EU Courtship

The relationship between Canada and the U.S. has been on the rocks for a while. And now, it seems like Canada is ready to move on. Canada wants to be a part of the European Union Prime Minister Mark Carney says he is interested in making Canada the first associate member of the EU. Last week, the Wall Street Journal broke the story that Canada isn't talks to become an associate member of the European Union. What's been happening since according to the Wall Street Journal is a flurry of diplomacy with Europe. What is an associate member of the European Union? Nobody knows. That is such a great question. What is an associate member? That's our colleague Drew Hinchah. I think it's a bit deeper than finding like someone else to buy Canadian products. I think it's about finding a set of countries that Canada shares values or feels it shares values with, with whom it can create institutions and tech capabilities that are sort of out of the reach of America's wrecking ball. So it's obviously not every day that a country that is not in Europe brings up the European Union and says, "Hey, can we join you? How big of a deal is this moment?" This is a massive rewiring of the economic cabling of what we call the West. For a long time, the West, as a geo-economic structure, has revolved around the United States, its market, its military power, its technology, and all of a sudden our closest allies are northern neighbor, our allies across the ocean, are saying, "We are too dependent on America." It is something that the European Union has never done before. What's our colleague, Joe Parkinson? I mean, there has been talk for years of the idea of some kind of flexible membership, some kind of associate membership, and it's been talked about for Ukraine, it was obviously talked about for the UK, after Brexit, and the fact is that the conditions now are seen to be ripe enough, and Canada seems to be the candidate that's right enough, that they can actually, for the first time, do this. So it is a big deal, it's a historic moment, but there are a lot of things that can go wrong. I mean, this is like a generational bet that Canada is making on Europe or for the US. That's right. This is a huge bet on Europe, whose economy is growing at half the rate of the United States, and Karni is trying to say to his country there are more fish in the sea. Senior leaders in the West are talking about these issues, and sort of trying to think in design almost in real time what the West decoupled from America might look like. Welcome to the journal, our show about money, business, and power. I'm Ryan Knutson. It's Tuesday, September 22nd. Coming up on the show, why Canada is cozying up to Europe. Imagine setting your makeup, then forgetting it's even theirs. New grippy setting mist from Mabelie, New York. Gel to mist technology locks in your look for up to 24 hours, with flexible all-day comfy grip. No tightness, no stickiness, no residue. Just plump, dewy, hydrated skin that still feels like your skin. Try new grippy setting mist from Mabelie, New York. Canadian Prime Minister Mark Karni's bid to pivot Canada away from the U.S. by aligning with the European Union kind of feels like a breakup, but if so, it's sort of like going back to an old axe. Because for the first half of the 20th century, some Canadians actually thought of themselves as Europeans located in North America. This has all kind of been forgotten to historical memory, but the oldest Canadians still alive today were born as British subjects. There wasn't even an embassy, a Canadian embassy in Washington, D.C. until the 1920s. Really up until World War II, Canadians could imagine themselves as Europeans, as British subjects on Monday, Wednesday, and Friday, and the other days of the week, they could be North Americans. They had the best of both worlds. They actually, on the eve of World War II, traded more with the UK than they did with the United States. But after Allied forces won the war, and the U.S. became the center of gravity in the West, things started to change in North America. That's World War II, Canadian businesses and Canadian politics, in a way, have really oriented so closely around the United States. In the 1960s, you had a range of deals to integrate the two countries' automobile industries, that obviously blossomed into NAFTA, then NAFTA completely transformed Canadian society. NAFTA, the North American Free Trade Agreement, which went into effect in 1994, solidified the two countries' relationship by knocking down trade barriers. And it also helped meld U.S. and Canadian culture. You had generations of Canadians whose parents went to British universities, who they themselves went to Harvard and Yale, and they became the new Canadian elite educated in the United States instead of the United Kingdom. And now, this moment, this explosion of tensions between Trump and Canada has kind of reopened this lost historical question of where the Canadians fit into the world. They are part of North America, but right now I think a lot of Canadians look across the border and feel that they don't share the values of their southern neighbor. And so from an economic and trade standpoint, Canada and the U.S. have been extremely tightly intertwined, and it's ties to Europe had sort of waned. Talk about the split. When did the fishers begin? Has it just been Trump? There's always been these points of tension between the U.S. and Canada. You know, there were several elections in a row in the 1980s, where Canadian voters were really skeptical and nervous about the idea of integrating economically into the United States. And then that was just kind of forgotten. 9/11, in fighting alongside Americans in Afghanistan, drew the countries even closer. Until Donald Trump's second term in office. We have big deficits with Canada, like we do with all countries. I mean, I look at something. And he comes back not just wanting to renegotiate trade deals, but questioning the territorial integrity of American allies like Canada and Denmark, and I think that's what throws the switch. Look, what I'd like to see, Canada become our 51st day. We give them protection, military protection. We don't need them to build our cars and rather see Detroit or South Carolina or any one of our Tennessee, any one of our states build the cars. That's what makes these allies say, wait a second, if this is about renegotiating trade, we can talk about that. If this is about our sovereignty, then you've touched something very emotional and sensitive and important, both electorally and maybe even, you know, how a country feels about itself. When Trump was making these comments about the 51st state, what do you think he was trying to accomplish? One Canadian official who had sat down during those months and tried to read every biography he could have Trump came away with the thought that this 50th day, I would say, "This 51st state stuff was price discovery." He was just throwing out a kind of outrageous idea to see people's reaction, throwing something out, just test the waters. Regardless of Trump's intention, his comments had a huge effect on Canada. One result was that it caused an unlikely politician to shoot up in the polls. Mark Carney. I mean, there's a kind of famous joke that the only person who thought Mark Carney could be Prime Minister was Mark Carney and it's not even clear he thought he could be Prime Minister. He was going to lose that election and then comes this joke that becomes increasingly real as Trump starts terrifying Canada. Mark Carney was one of the few politicians running for Prime Minister who made his pitched of voters as being the Prime Minister who could take a strong stance against Trump. President Trump is trying to break us so that America can own us. That will never, that will never ever happen. Some of the polling had him down more than 25 points in the lead-up to the election. It looked like it was just a surefire that the conservatives were going to win and that Trump would have at least a kind of ideological ally across the border. The 51st state comments completely transformed the Canadian political arithmetic and overnight he goes from 25 points down on the polls to winning. Since taking office, Carney has kept his promise to fight back against his American counterpart. I think there have been two sort of marquee moments, like one that had the whole world's attention and maybe one that was a little bit less noticed. The first being, of course, the Davos speech. Davos speech, the timing was it was happening right in the middle of the Greenland crisis. Trump was due to speak the next day and Carney, of course, stood up and ended up giving what is still probably the clearest sort of mission statement of anti-Trumpism. Canadians know that our old comfortable assumptions, that our geography and alliance memberships automatically conferred prosperity and security, that assumption is no longer valid. Which was wildly popular in the West and came at a time where I think there was still a lot of top European and top Western leaders were on the fence a little bit about whether they want to continue to placate in a college. date Trump versus those who were saying that people needed to stand up to them a lot more and that was where, you know, Karnie managed to kind of articulate that moment. The other thing that's happened is that rather than back down when the US had Canada with tariffs, Karnie responded with tariffs of his own. And even after the last round of trade talks fell apart, Karnie refused to back down. Here he is responding to a reporter at a press conference. Why does it feel like today, Mark Karnie is going to war. Trade war. The tone. Because we're attacked. Like you're at war when you get attacked, we got attacked. I wasn't sure whether we were going to see either, you know, a kind of quite a conciliatory statement or a statement that didn't want to add more fuel to the fire. And actually Karnie was the one who came out and he called it a trade war. We need to be on a war footing and we need to deal with this. And it's those moments where he's actually decided to escalate as a technocrat and as a centrist, which maybe you think is maybe a little bit of a different reflex from what you would expect that have kind of marked him out to be seen as a leader for good and for bad of this kind of western allied movement that's standing up to Trump. And now Karnie wants to leave the US behind and embrace Europe. But how can he do that from this side of the Atlantic? That's next. Imagine setting your makeup then forgetting it's even theirs. Meet new grippy setting mist from Mavelie, New York. Gel to mist technology locks in your look for up to 24 hours with flexible all-day comfy grip. Try new grippy setting mist from Mavelie, New York. Maybe it's Maveline. For a prime minister of a North American country, Mark Karnie has a lot of friends in Europe. He did his PhD in economics in Oxford, and he was the first foreigner to run the Bank of England. Karnie knows a lot of these guys from his past. He was a banker, Emmanuel Macron. He was a banker at Rothschild. Friedrich Metz, the German Chancellor, you know, worked for Black Rock. Obviously, he knows the political elite in the UK very well. The Finland president who's become a great friend and a fellow sort of architect of what these new European institutions are going to look like, President Alex Stubb. He also, you know, worked in finance and Karnie knew him. And so he just happened to have this network, but he's been able to use and really move to the forefront of kind of global policymaking. Karnie also has a strong network of advisors. He leaned on in Canada. Can you have a sort of the book club? Ah, the book club. I don't know if we can talk about the book club. These are really powerful people. I don't know if we want to accept them after us, you know? Yeah, the last thing we need is the book club coming after us, isn't it? No, this was one of the, definitely one of the most surprising little nuggets that came out of the reporting of this was that there's a group of kind of political big beasts and captains of industry who are members of this one book club in Ottawa. And some of the individuals who are in the book club are still very close to the prime minister. And although he hasn't had any time, he says to partake in the monthly readings since he became prime minister, he's still very much in touch with these guys and they form a part of this kind of advisory world that he has. Several sources told them that the first rule of book club is that you do not talk about book club as if you were with a movie fight club. So he's like in the group chat being like, sorry, I know that you guys are all talking about pride and prejudice right now, but I actually want to ask you about joining the European Union, can you help? Sure, a lot of these guys were educated at Oxford or Cambridge. It's a group of folks that, you know, know Europe on one degree or another, they're people who are widely traveled. They, you know, obviously well read. And I think he likes, I think he's comfortable in a way, receiving advice from from this lot, this kind of click. And they're informal advisors who are bringing him ideas about, you know, where to, where Canada, how to bring Canada closer to Europe or other kind of geopolitical ideas. To be fair, the people that we were talking to were far more secretive about book club than they were about Canada's plans for joining the European Union. This book club has been the best kept secret in Ottawa and I feel that by breaking it, we've put ourselves in some sort of mortal danger. You know, you find me collapse next to a cup of tea. It was the book club. All right, so I know this associate member thing is a little bit vague, but what do we know about what this connection could mean? There's not such thing in the European Union as an associate member. You are a member, you pay into the budget, you accept European citizens can move to your country and live and work there, you know, trucks from one side can go to your country frictionlessly, or you're not. Right now, there are currently 27 members of the European Union, and they're all in Europe. They share borders, regulations, and most use the Europe as their currency. There is also no such thing as an associate member, so the details of how this would work out with Canada are still being ironed out, and there's a long road ahead. But Karni has a number of ideas for what being an associate member could look like. The two sides are talking about a whole bunch of things. They're talking about laying underwater data cables to link Europe and Canada. They're talking about jointly constructing data centers, cloud storage, and satellite networks that would be beyond the reach of America's tech giants. Karni is looking to lay new pipelines in Canada to ship gas to its east coast for easier transport to Europe. He's moved to have ice breakers to clear passages through the Arctic for new shipping lanes for fertilizer, and he's looking at more than just trade. They're looking to intertwine research institutions Canada and EU, so they can create a network of academic and scientific output that could rival the US system. Canada is even pressing to join the EU study abroad program. This is a program called Erasmus, where people in Poland or Spain or Italy or France can move to another EU country for a year, and learn in that country, and it's been a huge deal in Europe, actually. It's created a lot of marriages and things like that, and I think the Canadians are thinking, well, a generation of Canadians might go to school in Paris or Spain or Italy and a generation of Italians will come to Ottawa or Montreal or Vancouver, for example. So they're talking about something that's beyond economics. I think when you get into these questions of where Canadians move and live and where Europeans study, you're talking about societal links that are maybe more profound than questions of where does Canada's gas or mineral output go? For the EU, adding Canada would come with some potentially big upsides. Canada is the shiny new bubble in the EU right now. I think there are so many reasons to be pessimistic and concerned about the future when you're sat in Europe. You have the worst land war since World War II in Ukraine that's grinding on. You have Russia that seems to be increasingly threatening. You have the Straits of Hormuz closed, which is much more of a problem for European trade than it is for American trade. You have the stagnant, slow growth, economies and the rise of populism. And then all of a sudden, there's Canada kind of winking at you. It's like that meme, you know, when the guy's looking back at the other world. Yes, it is exactly the girlfriend. The gelatin girlfriend. That is exactly what we're talking about here. And Canada, you know, looks incredibly attractive. Not only does it have all of the raw materials and the critical minerals and the energy and the things that Europe really covers and has had problems being so dependent on places like Russia and the Middle East for, but it also has very similar values. And when Kani, you know, stands up and speaks in French and English at a press conference, you know, that really is meaningful to Europeans. And when Kani chooses, you know, not to go to Washington for his first trip as Prime Minister, but to come for a joint trip to Paris and London, it's meaningful. Are there any risks to Europe, though, if they create this designation for Canada? So for a long time, the red line in the European Union, which is still haunted by Brexit, is we have got to make sure that nobody thinks they can leave this club and still enjoy the benefits. That would be fatal for the European Union. If big countries started leaving and demanding a Canada style deal. So that's the square Kani's got to circle here or the circle he's got to square. He's got to find a way to have Canada get a lot of the benefits of trade and interlinkages with Europe without creating this precedent where European governments, voters, and to pick a random country, Italy are going to say, you know, this European regulation, we don't really like it. Let's quit and become a Canada style member where we don't have the regulations, but we get the benefits. How are Canadians feeling about cozying up to Europe instead of the US? Well, I think polls do show a lot of Canadians would like to become closer to Europe and even see themselves as more spiritually, socially, culturally European than American. At the same time, I think there's a lot of voters, a lot of conservative voters, particularly, but maybe not only who think, wait a second, if we join Europe in some associate membership capacity, which is vague and undefined. Is there a level of sovereignty we are going to have to give up. What regulations might we have to accept? Is that what about immigration? This talk of Canadians being able to work in more freely in Europe will the opposite be true? Will we be exposed to Europe's immigration problems? These are preoccupations that are being voiced both by the conservatives in Canada and I think by kind of mainstream newspapers and columnists as well. There is some trepidation around what it would mean for Canada to lock into an economic block like the European Union, which is just much bigger than Canada. And on the flip side of that, there's perhaps even more trepidation of what the costs of delinking with America will actually be. Because at the moment this is more of a rhetorical clash, we haven't seen the real pain coming to hit the Canadian economy, you know, two thirds of exports. That's a lot of people's businesses, that's a lot of people's jobs. No matter what, detangling the US and Canadian economies will cause pain on both sides of the border. And I think the Americans when you speak to the White House, the Trump administration seems to think that the reality that geography is destiny and the Canada is right there and these links, these economic links are decades old and they are real, will ultimately bring Canada back to the table that this, you know, flirtation, if you like, is all very well between Canada and Europe, but the economic realities will always win through. It's a free market country, you can't force Canadian businesses to do more in Europe when there's this attractive market a few miles across the border or a few kilometers across the border I should say, this is what I Canada. For Canada, this feels like a permanent move in response to just one president though. I mean, why not just wait, Trump out. That's such an interesting question. One thing I would just say is when this first 51st state thing first came out, I remember speaking to a Canadian official who was saying, you know, we don't see a lot of voices in Congress defending us. We don't see a lot of Republicans defending us and we don't even really see a lot of Democrats defending us. It's almost like Trump can say something like that and everyone else just shrugs it off, right? It was just one more day of the Trump show. But I think for Canada, these were very serious events that told them their problem is deeper. The way they interpreted it is that their problem is deeper than Trump. It's the United States in general. Now, whether that's a fair interpretation, that's a different question, but that I think is politically how those events were digested. One thing the Canadians pains to do every official that you speak to is that they're not trying to do this in any way to anger or to exact any retribution on the US. They don't want any more tension or any more difficulty than they feel they already have. And I think what they're hoping, if not planning for, is that there will be a new administration and there'll be another day and perhaps a degree of re-alignment. But I think what they feel is that given how much things have changed and how exposed their system now feels that they have to change fundamentally to address it. That's all for today, Tuesday, September 22. The journal is a co-production of Spotify and the Wall Street Journal, additional reporting in this episode by Lawrence Norman. Thanks for listening. See you tomorrow. Plump, dewy, hydrated skin that still feels like your skin. Try new, groupy setting mist from Mavily New York. Maybe it's Mabling.