Canada’s bet on European trade faces plenty of hurdles

Canadian trade with the European Union has increased significantly over the past decade, but Prime Minister Mark Carney’s push for deeper trans-Atlantic integration could run into long-standing problems with regulatory alignment, a lack of infrastructure and the gravitational pull of the U.S. market.

Since the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) came into force in 2017, bilateral goods and services trade has grown 80 per cent. In 2025, Canada shipped $42.8-billion worth of goods to EU countries – led by oil, industrial metals, aircraft, uranium and canola – up from $22.9-billion in 2016.

Opinion: Canada wants closer EU ties. But we already have close EU ties – and they’re a mess

Canada-EU trade has had a number of tailwinds. Russia’s invasion of Ukraine sent European countries scrambling for alternative suppliers of energy, while U.S. tariffs have forced some Canadian companies – most notably in the aluminum sector – to shift products across the Atlantic.

Still, even after a 23-per-cent increase in merchandise exports to Europe from 2024 to 2025, the continent accounts for less than 6 per cent of Canadian exports. The United States, meanwhile, accounts for nearly 70 per cent.

And trade experts are skeptical that the term “associate member” of the EU, which European Commission president Ursula von der Leyen floated last week as a potential future status for Canada, would mean much in practice.

“I think the biggest challenge to trade with the European Union, as with many other regional countries and partners, has been that it’s been so lucrative and easy to trade with the United States,” said Ross Prusakowski, deputy chief economist at Export Development Canada.

“The ease of putting something on a truck or a train down for the United States has been something that’s just been really hard to pull away from for Canadian companies.”

CETA is seen by trade experts as a qualified success. The majority of trade between Canada and Europe was already effectively tariff-free before 2017, but the agreement removed most remaining tariffs while introducing quotas that have enabled more agriculture trade. Canada has shipped more seafood, canola and grain, while the EU has sent more wine and cheese to Canada.

Konrad Yakabuski: Closer ties with Canada will not save Europe from a ‘slow agony’ of decline

However, some agriculture industries have been unable to take advantage of the agreement because of regulatory constraints – most notably the Canadian beef industry. While Europe has agreed to accept 35,000 tonnes of beef and veal and 80,0000 tonnes of pork, European restrictions on hormone-treated meat mean the quota has largely gone unused.

According to a European Commission analysis, Canadian farmers filled only 3 per cent of the beef and veal quota between 2021 and 2023 and 1 per cent of the pork quota in 2023.

Soon Canadian exporters across all industries will be subject to Europe’s new carbon border adjustment mechanism, which forces companies to pay for emissions produced in making their products.

Likewise, the agreement’s promise to boost trade by increasing bilateral investment and regulatory alignment remains a work in progress, according to Crina Viju-Miljusevic, an associate professor at the Institute of European, Russian and Eurasian Studies (EURUS) at Carleton University.

Ten EU members have not fully implemented the trade agreement because of concerns about its chapter on investor-state dispute settlement. And many attempts to align regulations for things such as automobile safety, animal welfare and pharmaceuticals have gone nowhere, while only one profession, architecture, has managed to gain mutual recognition of credentials.

Part of the challenge is getting all EU members onside, Prof. Viju-Miljusevic said.

“I think there is high support [for Canada] from EU institutions, so I would think they will try to move on these issues, like increasing sectoral trade in critical minerals or energy, without needing the ratification of the member states,” she said.

The most immediate export opportunities are in energy. High oil prices have made it economical for some European companies to buy oil from Newfoundland’s offshore platforms or from the Irving refinery in New Brunswick, said Mr. Prusakowski of EDC.

Likewise, there’s huge European demand for liquefied natural gas imports to replace gas that was previously piped in from Russia. Europe increased its LNG import capacity by almost a third between 2021 and 2025 according to the Institute for Energy Economics and Financial Analysis, with new import terminals opening in Germany and Italy last year. Several others are under development across the continent.

Canada isn’t currently equipped to meet this surging demand. Its only operating LNG export terminal is in Kitimat, B.C. – though several more are under development on the West Coast, including the Ksi Lisims facility, which has secured commitments from European buyers.

Two German companies, Securing Energy for Europe GmbH – which was an arm of Russia’s Gazprom until Germany nationalized it in 2022 – and Uniper SE have committed to buy 3 million tonnes of LNG annually for 20 years from Ksi Lisims.

Actually shipping LNG from British Columbia to Europe is a long and expensive prospect, and it will likely involve swap contracts that would involve Canadian energy being sent to Asian markets while other gas suppliers reroute their gas to Europe.

However, with the Middle East war disrupting gas exports from Qatar, “there’s a realistic chance we could see Canadian LNG float through some major trade routes or go through the Panama Canal and end up in Germany without being a financialized trade,” Mr. Prusakowski said.

Carney’s beautiful Euro vision must meet harsh reality

There are other types of Canadian companies that could benefit from a broader geopolitical realignment that is happening as a result of U.S. protectionism and concerns about China’s chokehold on key industrial supply chains, said Nicolas Lamp, an associate professor of law and co-director of the international law program at Queen’s University. These include critical minerals miners, defence firms and tech companies developing artificial intelligence.

There’s another potential benefit to focusing on emerging industries, Prof. Lamp said.

In many other sectors, Canadian and European regulation has ossified, and neither side wants to budge. He pointed to EU regulations on beef and Canada’s automobile standards, which mirror U.S. rules and restrict certain European cars from the Canadian market.

In developing industries, there’s the potential for Canada and Europe to set standards jointly to the benefit of each other’s companies, he said.

“I was in the Canadian mission in Brussels earlier this year, and the area where they really have hope and where they think there could be payoff is the stuff that’s not yet regulated,” Prof. Lamp said.