Biden and Trudeau: Geopolitical stakes have quietly become urgent
President Biden is headed to Ottawa to conduct his first presidential visit with America’s closest ally. As he sits down with Canadian Prime Minister Justin Trudeau, both leaders must recognize that the geopolitical stakes have quietly and steadily become urgently high. U.S.-Canada trade relations are critical for both countries, and in this moment of global uncertainty they’ve never been more important.
In 2021 alone, the U.S. and Canada had more than $800 billion USD in bilateral trade, more than triple the volume the U.S. had in its special relationship with the United Kingdom, with Canada serving as the single largest global customer for American goods and services. Sharing the world’s longest undefended border, our continental security is tightly integrated through NATO, the Five Eyes and North American Aerospace Defense Command (NORAD), which is the world’s only binational military command. Canada is America’s most important energy supplier, and the more than 35 cross-border transmission lines help keep the lights on for much of the Northeast United States. The U.S. maintains more consulates in Canada than in China or India, and more than 400,000 Canadians cross the border for business or leisure every single day.
This partnership is made more important, on both sides of the border, by ongoing changes in the global economy. Recent events, including the pandemic, the Ukraine crisis, and the ratcheting up of friction in both countries’ relationships with China, underscore the importance of a strong U.S.-Canada partnership.
The world is not deglobalizing. Interdependence is fact, and that is true for countries that have far less in common than Canada and America. But the “hyper-globalization” of an earlier era has begun to recede, revealing some awkward economic vulnerabilities and leaving globalization adrift. In short, we can’t rely on long-held assumptions about the future trajectory of global trade.
To manage the various crises now warping global growth, governments globally have turned to successive rounds of industrial policy, pressing ahead to re-shore strategic sectors. The urgency of the green transition has also started to force policy action, as we saw in Biden’s landmark Inflation Reduction Act (IRA) last year. With the IRA dangling $369 billion USD in incentives, not only has the United States vaulted into pole position on the green transition of the West, but the White House has made it clear that market access now comes with strings attached. The Biden administration will use export controls, national security frameworks and other policy mechanisms to stay ahead of China in key technology areas, particularly on advanced computing, biotechnology and cleantech.
These geopolitical riptides have immediate and unavoidable consequences for the U.S.-Canada relationship. Bipartisan political will in Washington and the architects of China’s much more assertive foreign policy are pushing toward economic decoupling in certain strategic areas. But decoupling is not an option in the U.S.-Canada relationship; neither country can afford the economic consequences of splitting from the other. While the U.S.-Canada relationship has at times been a rocky marriage, we believe that weakening hyper-globalization will only compel Biden and Trudeau to find new ways to further deepen an already-close bilateral relationship.
If any sector symbolizes the underlying strength and resilience of the U.S.-Canada relationship, it’s the auto sector. Today, that industry is undergoing the most radical transformation in its history, with automakers globally committing an estimated $1.2 trillion to electrification by 2030. Global gas-powered vehicle sales peaked in 2017, while in the second half of 2022, electric vehicle sales rose 38 percent over the same time period in 2021.
The industry’s footprint is undergoing a major geographic reconfiguration, with gigafactories and new assembly plants being planned across the new U.S. battery belt and northern Mexico. And just last week, Europe’s largest automaker, Volkswagen, chose southwestern Ontario for its first North American battery plant — the largest single investment in the Canadian auto sector’s history.
One area where Canada has a major role to play is in the critical minerals supply chain. Today, China overwhelmingly dominates global minerals processing, all of which are essential for the green transition; relocating our vulnerabilities upstream to critical minerals is not a path to North American supply chain resilience. In more extreme U.S.-China decoupling scenarios, a familiar frontline might well be access to critical minerals.
However, as the CEO of the Canadian Vehicle Manufacturers’ Association recently noted, “Canada is the only nation in the Western Hemisphere with deposits of the complete suite of minerals required to make next-generation electric batteries.” To take advantage of proximity, Biden and Trudeau must find ways to expedite development and processing of essential critical minerals, at scale and at home, in North America.
China’s President Xi Jinping visited Moscow this week for lunch with Russian President Vladimir Putin. And earlier this month, Xi’s new foreign minister Qin Gang made clear that China expects its relationship with the United States to continue to deteriorate. Canada is similarly grappling with its relationship with China. Regardless of how American and Canadian relationships with China unfold, deepening existing trade networks is both smart and strategic. The United States and Canada have already announced complementary Indo-Pacific strategies. Working together to present a coordinated North American front will only amplify the benefits for our Indo-Pacific peers.
So, during his visit, Biden must take with him the understanding that our two countries need each other in more ways than many Americans and Canadians fully understand. We simply cannot take each other for granted. The stakes are too high. As President Reagan said at the Shamrock Summit, “We’re more than friends and neighbors and allies; we are kin.” Four decades later, that political rhetoric is starting to reflect our economic realities and geopolitical necessities. We need it to stay that way, for all of our sakes.
Darryl White is CEO of North American bank BMO Financial Group, based in Toronto, Ontario.
Ian Bremmer is president and founder of the political risk analysis and consulting firm Eurasia Group and GZERO Media, a digital-first media Eurasia Group company.
Next month, their organizations will host an inaugural U.S.-Canada Summit in Toronto, bringing together corporate and political leaders from both sides of the border to discuss the long-term prospects of our bilateral relationship.
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