Mark Carney wants you to believe that a unified transatlantic front is the only thing standing between the global economy and total collapse. Ahead of the G7 summit, the former central banker has been beating the drum for a tight knit Canada-EU alliance, framing it as a vital defense mechanism against global fragmentation. It is a comforting narrative for the Davos crowd.
It is also dangerously wrong.
The call for Canada and Europe to lock arms in economic solidarity is not a strategy. It is a nostalgic reflex. By tethering Canada’s economic wagon to a stagnant, over-regulated European Union, policymakers are doubling down on a bloc that has spent the last two decades slipping into economic irrelevance. We are told this partnership protects the rules-based order. In reality, it protects a status quo that is actively draining productivity and stifling growth.
The Stagnation Pact
Let us look at the actual math, not the diplomatic press releases.
When the Canada-Europe Comprehensive Economic and Trade Agreement (CETA) was being negotiated, it was billed as a transformative engine for growth. What did Canada actually get? A front-row seat to Europe's regulatory paralysis.
The European Union has spent the last decade pioneering regulations while the rest of the world pioneered technology. Between GDP growth metrics and innovation indexes, the trajectory is clear. In 2008, the EU’s economy was larger than that of the United States. Today, the US economy is nearly one-third larger than the EU and the UK combined.
Economic Output Shift (GDP in Trillions USD, Approximate)
Year Eurozone + UK United States
2008 $16.2 $14.7
2024 $19.5 $27.4
I have sat in boardrooms where Canadian companies tried to navigate the bureaucratic labyrinth of European compliance. Millions of dollars are spent on legal fees and carbon-accounting audits before a single product ever hits a shelf. Alignment with Europe does not open markets; it imports handcuffs.
Carney talks about a "global rupture" as if the danger is a lack of cooperation. The real danger is cooperating with the wrong partners. Doubling down on the EU means tying Canada’s resource-rich economy to a market that is structurally allergic to resource extraction and heavy industry.
The Fallacy of Friendshoring
The modern buzzword dominating these G7 pre-meetings is "friendshoring"—the idea that democracies should only trade critical goods with other democracies. It sounds noble on paper. On a balance sheet, it falls apart.
Western nations cannot simply wish new supply chains into existence through sheer political will. Imagine a scenario where Canada attempts to redirect its critical mineral exports exclusively to European automakers, ignoring the massive processing monopolies established in Asia. To replicate those processing ecosystems within the Canada-EU orbit would require hundreds of billions of dollars in subsidies and decades of environmental permitting.
Europe does not have the capital or the political stomach for that. Canada does not have the scale.
By prioritizing ideological alignment over market realities, a Canada-EU alliance creates an artificial scarcity that drives up costs for consumers and lowers competitiveness. True economic resilience does not come from locking yourself in a room with your oldest, slowest friends. It comes from supply chain redundancy and raw cost efficiency.
Dismantling the Global Rupture Narrative
Mainstream economists love to ask: How can the West unite to counter the rise of non-market economies?
This is entirely the wrong question. The premise assumes that the West can still dictate terms to the rest of the globe through consensus statements and communiqués. It cannot. The rise of multi-alignment means that mid-sized powers in Asia, Africa, and Latin America are no longer choosing sides. They are playing everyone against everyone else.
When the G7 attempts to form an exclusive economic bloc, it does not isolate adversaries. It isolates itself.
Why European Economic Models Don't Work for Canada
- Deindustrialization by Decree: Europe’s aggressive energy transition policies have resulted in skyrocketing electricity costs and the flight of heavy industry from Germany. Canada, a nation built on resource abundance, cannot afford to adopt a playbook that treats energy generation as a liability rather than an asset.
- The Venture Capital Chasm: The EU suffers from a chronic lack of late-stage venture capital. Brilliant ideas are born there, but they move to the United States to scale. If Canada aligns its regulatory frameworks with Europe's precautionary principles, it will kill its own domestic tech sector before it can reach critical mass.
- Demographic Drag: Europe is aging faster than almost any other region on earth. Relying on a shrinking, pension-dependent consumer base as your primary growth partner is a fundamental strategic error.
The Cost of Compliance
The downside to breaking away from this consensus is obvious: you lose the warm feeling of international validation. You get uninvited from the right cocktail parties. You face criticism from the legacy institutional elite who believe that any deviation from multilateralism is a step toward chaos.
But the upside is survival.
Look at the nations that are actually winning the productivity race. They are not the ones signing sweeping, omnibus trade pacts that require five years of ratification votes across dozens of regional parliaments. They are the agile economies that negotiate bilateral, transaction-specific deals based on hard national interest, not shared values.
Canada’s competitive advantage lies in its geography and its resources. Its natural partner is not a continent thousands of miles away that is obsessed with regulating the shape of bananas and the minutiae of data privacy. Canada’s natural partner remains its immediate neighbor to the south, alongside the high-growth markets of the Indo-Pacific.
Stop Singing the Chorus
The G7 summit will undoubtedly produce another declaration of unity. There will be photos of leaders smiling, talking about shared destiny and democratic resilience.
Do not buy the hype.
Every hour Canadian policymakers spend trying to harmonize standards with Brussels is an hour wasted. Europe is an economic museum. It is a fantastic place to visit, a wonderful place to retire, and a terrible place to invest capital.
If Canada wants to avoid stagnation, it must reject the siren song of transatlantic unity. Stop trying to save a twentieth-century alliance that has outlived its economic utility. Build domestic capacity, cut the regulatory red tape that makes building infrastructure impossible, and sell to the markets that are actually growing. Everything else is just expensive sentimentality.
