Inside Canada's EU Courtship

0:05Ryan Knutson: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 is in 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.

0:45What is an associate member? That's our colleague Drew Hinshaw. I think it's a bit deeper than finding 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.

1:12Ryan Knutson: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 geoeconomic structure has revolved around the United States, its market, its military power, its technology. And all of a sudden, our closest allies, our 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.

1:47Joe Parkinson:That'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 seem 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.

2:22I mean, this is like a generational bet that Canada is making on Europe over the U.S. That's right. This is a huge bet on Europe, whose economy is growing at half the rate of the United States. And Carney is trying to say to his country, there are more fish in the sea.

2:42Joe Parkinson:Senior leaders in the West are talking about these issues and sort of trying to think and design almost in real time what the West decoupled from America might look like.

2:54Ryan Knutson:Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Tuesday, September 22nd.

3:07Ryan Knutson:Coming up on the show, why Canada is cozying up to Europe.

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4:58Ryan Knutson:Canadian Prime Minister Mark Carney'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 X. 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.

5:36And 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 U.K. than they did with the United States.

5:45Ryan Knutson: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. Since 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. 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.

6:25and 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 do 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.

6:57Ryan Knutson:And so from an economic and trade standpoint, Canada and the U.S. have been extremely tightly intertwined. And its ties to Europe have 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 and fighting alongside Americans in Afghanistan drew the countries even closer.

7:37Ryan Knutson:Until Donald Trump's second term in office. We have big deficits with Canada, like we do with all countries. 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 state. We give them protection, military protection. We don't need them to build our cars. I'd rather see Detroit or South Carolina or any one of our, Tennessee, any one of our states build the cars. And that's what makes these allies say, wait a second, if this is about renegotiating trade, we can talk about that.

8:20If 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.

8:31Ryan Knutson:When Trump was making these comments about the 51st state, what do you think he was trying to accomplish? One Canadian official who sat down during those months and tried to read every biography he could of Trump came away with the thought that 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 to 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.

9:12And 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 tariffing Canada.

9:23Ryan Knutson:Mark Carney was one of the few politicians running for prime minister who made his pitch to 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.

9:36Joe Parkinson: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 sure fire 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 in the polls to winning.

10:06Ryan Knutson:Since taking office, Carney has kept his promise to fight back against his American counterpart.

10:14Joe Parkinson: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.

10:50Joe Parkinson: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 wanted to continue to placate and accommodate Trump versus those who were saying that people needed to stand up to them a lot more. And that was where, you know, Carney managed to kind of articulate that moment.

11:09Ryan Knutson:The other thing that's happened is that rather than back down when the U.S. hit Canada with tariffs, Carney responded with tariffs of his own. And even after the last round of trade talks fell apart, Carney refused to back down. Here he is responding to a reporter at a press conference. Why does it feel like today Mark Carney is going to war? Trade war. The tone. Because we were attacked.

11:35Joe Parkinson: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, Carney 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.

11:58Joe Parkinson: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.

12:16Ryan Knutson:And now, Carney wants to leave the U.S. behind and embrace Europe. But how can he do that from this side of the Atlantic? That's next.

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13:41Ryan Knutson:For a prime minister of a North American country, Mark Carney 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.

13:53Joe Parkinson:Carney 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 BlackRock. Obviously, he knows the political elite in the UK very well. The Finland's 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 Carney knew him. And so he just happened to have this network that he's been able to use and really move to the forefront of kind of global policymaking.

14:27Ryan Knutson:Carney also has a strong network of advisors he leaned on in Canada. Can you tell me the story of the book club? 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 set them after us, you know?

14:41Joe Parkinson:Yeah, the last thing we need is the book club coming after us, isn't it? No, this was definitely one of the more 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.

15:21Ryan Knutson:Several sources told them that the first rule of book club is that you do not talk about book club as if it were the 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 this lot, this kind of clique.

16:02And there are 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.

16:12Joe Parkinson: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 collapsed next to a cup of tea. It was the book club.

16:32Ryan Knutson: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 no 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 euro as their currency. There is also no such thing as an associate member.

17:08Ryan Knutson:So the details of how this would work out with Canada are still being ironed out. And there's a long road ahead. But Carney 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. Carney 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 icebreakers to clear passages through the Arctic for new shipping lanes for fertilizer.