The following piece was written by ICBA Chief Economist Jock Finlayson and first published by The Fraser Institute on September 21, 2026.
It was an arresting and well-timed suggestion. In mid-September, Prime Minister Mark Carney mentioned his government’s desire to forge a “unique alliance” with the 27-member European Union (EU). Days later, European Commission President Ursula von der Leyen went further, signalling that she hoped to find a way to enable Canada to become the EU’s first-ever “associate member.”
As the Trump administration continues to sow global chaos and undermine trade agreements and treaties with longtime U.S. commercial and security partners, Canada wants to improve political, economic and security relations with like-minded democracies including those in Europe. Carney has spent much of his first 20-odd months in office travelling abroad to engage with foreign leaders in aid of his stated goals to double non-U.S. exports by 2035 and reduce Canada’s outsized dependence on the giant American market. Home to 450 million relatively affluent consumers, the EU is an obvious focus of his government’s strategy to diversify Canada’s trade and deepen economic and security ties with other countries.
However, there’s less than meets the eye to the idea of Canada becoming “associated” with the EU. At its core, this is more diplomatic positioning and political theatre than economic substance.
For one thing, Canada already has a “free trade” arrangement with the EU—the Comprehensive Economic and Trade Agreement (CETA). Canada ratified it in 2017. The EU parliament approved it the same year. But as of 2026, only 17 EU members had adopted and implemented CETA through their domestic legislative and legal processes. And one EU member, Cyprus, saw its parliament vote down CETA.
The protracted saga of CETA reveals much about the EU’s sclerotic and glacial decision-making and the complexity of reaching agreements with the bloc. Canadian and EU officials launched exploratory free trade talks in 2007. Two years later negotiations officially commenced. An agreement in principle was reached in 2013, with three more years needed to flesh out the detailed legal text. Both parties signed CETA in October 2016. A decade later, it has yet to be fully enshrined into law by all EU members.
Perhaps Canada gaining “associate” status would prompt European political leaders and legislators to accelerate efforts to implement CETA. Even so, lowering barriers to two-way Canada-EU commerce won’t transform the patterns of Canadian trade. As of 2025, less than 6 per cent of Canada’s exports of goods and services combined was sold to customers in the EU-27. A slightly larger share of Canadian imports—around 10 per cent—was sourced in the EU. In contrast, the United States, even amid Trump’s tariff barrage, takes more than 70 per cent of our exports and supplies almost three-fifths of Canada’s imports.
In truth, the factors behind Canada’s unusually deep and extensive trade and business linkages with the U.S. are structural. The sheer economic size of the U.S., its geographic proximity to Canada, the fact that most Canadians live within 150 miles of the border, a common language and similar business practices in both countries, and the evolution of dense cross-border business networks and supply chains mean that most trade-focused Canadian industries (and Canadian investors) are destined to remain oriented toward the American market and the opportunities it presents. This is doubly so since the U.S. has been posting stronger economic growth than Canada and other developed countries over the last decade or more.
In any case, the EU is about much more than encouraging trade within the bloc. At the core of the EU is the ideal and partial reality of the “Single Market,” resting on “four freedoms” spelled out in the Treaty on European Union: free movement of goods, services, capital and people. The EU also operates a common commercial policy vis-à-vis the outside world. Other important components of the EU’s evolving legal and administrative architecture include restrictions on “state aid” to industry, common environmental and product standards, bloc-wide competition and anti-trust rules, costly agricultural support programs, a substantial annual EU budget financed via mandatory contributions from member states, and an elected EU parliament. It’s hard to imagine Canada embracing much of this—or all 27 EU members welcoming Canada into the fold as an “associate.”
In truth, the prime minister’s interest in Europe reflects an understandable quest to strengthen economic and political ties with non-U.S. partners at a time when relations with the Trump administration have deteriorated. Similar motivations exist among EU leaders rattled by Trump’s peculiar hostility toward longtime American allies and his destabilizing trade policy. None of this should or likely will lead to Canada joining the EU. But it could pave the way for closer Canada-EU cooperation in areas such as military and defence procurement, intelligence sharing, the regulation of AI, energy development, academic research, and science and technology.