Carney Pushes for EU Alliance to Diversify Canadian Trade, But Businesses Face Hurdles
Prime Minister Mark Carney is advocating for a deeper alliance with the European Union, including associate membership, to reduce Canada's heavy reliance on U.S. exports. While officials highlight a $100-billion opportunity in higher-value trade, low utilization of existing agreements and risk-averse banking practices remain significant barriers.
Prime Minister Mark Carney addressed the European Parliament on Thursday, outlining a strategy to diversify Canadian trade away from the United States by forging a deeper alliance with the European Union. Central to this proposal is European Commission President Ursula von der Leyen’s suggestion that Canada become the first associate member of the EU to strengthen economic resilience.
The push for closer ties comes as Carney aims to double non-U.S. exports by 2035. Currently, Canadian businesses rely heavily on their southern neighbor; in 2024, 70 per cent of Canadian exports were shipped to the U.S., compared to only 4 per cent going to markets covered by the Comprehensive Economic and Trade Agreement (CETA) and 8 per cent to countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Despite these figures, officials argue there is substantial room for growth. Export Development Canada (EDC) estimates that Canada has a $100-billion opportunity to capture more value from trade if businesses shift toward creating higher-value products. Alison Nankivell, CEO of EDC, noted that tariffs are now a permanent part of the U.S.-Canada relationship regardless of future U.S. governments, underscoring the need for diversification.
However, structural challenges persist. Canada holds 15 trade agreements covering approximately 51 countries, yet utilization rates remain low. For instance, the CETA preference utilization rate for Canadian exports to the EU was 65.4 per cent in 2021. Additionally, only 15 per cent of Canadian small and medium-sized businesses exported goods and services in 2023.
Financial barriers also hinder progress. Banks have been identified as needing to increase their risk appetite to finance global market opportunities for mid-size companies. In 2025, Canada recorded trade deficits with the EU of $48.8-billion for merchandise and $7.1-billion for services, highlighting the complex nature of the current trading relationship even as both sides advocate for broader collaboration in energy, critical minerals, and defence.