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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
By common consent it’s the best speech at Davos this year; perhaps the best speech ever at Davos; perhaps the best thing ever to happen at Davos, given that so little of substance traditionally happens there.
Canadian Prime Minister Mark Carney gave a brutal warning that mid-sized countries must create a flexible and multi-layered system to replace a broken-down US-anchored international order.
But we have, at least in trade, heard something like this before, and yet not much change was forthcoming. In 2017, during the first Trump administration, Canada’s then foreign minister Chrystia Freeland argued that “the fact that our friend and ally has come to question the very worth of its mantle of global leadership puts into sharper focus the need for the rest of us to set our own clear and sovereign course”.
Three months later, Canada’s hard-won trade deal with the EU came into force. It contained an innovative mechanism for integrating markets in professional services through mutual recognition deals. But the first of those, between European and Canadian architects, needed nine more years of talks before going live on Monday this week.
Similarly, Canada helped rescue the Asia-Pacific TPP agreement after Trump abandoned it in 2017. An association of mainly mid-sized trading powers, it launched in December 2018 rebranded as the CPTPP and now has 12 members. Yet those deals have not materially diversified Canada’s trade. The US’s share of Canada’s exports, having drifted down from the mid-80s per cent in the mid-2000s to the mid-70s by 2010, then stuck.
True, the US share has dropped below 70 per cent since the spring of 2025, but some of that is probably the pullback from a sharp rise earlier in the year as US importers front-ran Trump’s tariffs. If his tariff campaign continues to level off, the US is likely to continue taking the large bulk of Canadian exports. Worryingly, if you’re a medium-size tenant living above an increasingly unhinged neighbour, it seems geography largely remains destiny.
The search by countries like Canada for reliable partners also meets political constraints on both sides. All global governance, ultimately, is local.
Canada is rich in minerals, including rare earths, but attempts to forge a deal with the EU have been going on for years without achieving much. The CPTPP and the EU have proposed co-operation to forge bonds outside the US orbit of influence, but Brussels’ insistence on regulatory sovereignty has stopped the initiative getting beyond drafting stage. The European parliament voted on Wednesday to postpone ratification of a trade deal with Mercosur, the South American trade bloc, geopolitical signalling be damned.
As for domestic constraints in Canada, Carney recently announced a deal with China, creating an import quota of 49,000 electric vehicles in return for lower tariffs on Canadian canola oil. It was a nifty piece of economic diplomacy. But it’s small compared with the Canadian new car market at nearly 2mn vehicles a year. Carney has to keep in mind the interests of Ontario, where most of Canada’s 125,000 auto jobs are located and which depends on tightly integrated supply chains with the US.
Similarly, Canada remains in a stand-off with the UK. Talks to update their bilateral trade deal have stalled because London wants more access to Canada’s highly protected cheese market than Ottawa is prepared to give, while Canada is fiercely critical of UK food regulations.
The institutions that might facilitate middle-power diplomacy are also weak. Carney correctly said the World Trade Organization was “greatly diminished” — even its foundational most-favoured nation principle is threatened. Some governments are trying to use the institution for “plurilateral” agreements, but India fights to block them. As Carney himself hinted, many lower-income countries think the multilateral system has been run in rich countries’ interests, and they are wary of repeating the experience.
Carney’s analysis is right, and his approach good in principle. But it required the Depression and second world war for countries to overcome their protectionist and isolationist instincts and build a multilateral system. It will take a long time, and probably even more destructiveness from Trump, to prompt the kind of agile system of multi-layered mid-size co-operation that Carney wants to see.