The Evolution of the Euro-Canadian Trade Diversification Strategy
In January 2026, negotiations on the Digital Trade Agreement between the European Union and Canada were launched. Earlier, on 24 November 2025, the Council had already authorised the Commission to open negotiations with the Canadian Government with a view to concluding the agreement, with talks beginning operationally in January and the formal launch scheduled for March. These initiatives reflect a clear political intention to strengthen EU-Canada digital cooperation by consolidating regulatory convergence in areas such as AI, cybersecurity, digital identity, and cross-border data flows. At the same time, they mark a concrete step towards deeper economic and technological integration in sectors that are strategic both for European competitiveness and for the cooperative development of the two economies.
Within this broader context, the Comprehensive Economic and Trade Agreement (CETA), provisionally applied since 21 September 2017, has represented a fundamental instrument for strengthening trade relations with the EU, fostering the near-complete elimination of tariffs and regulatory integration in strategic sectors. Although CETA remains a mixed agreement, with provisional application limited to areas falling within the EU’s exclusive competence and with investment protection and the Investment Court System still subject to full ratification, it remains, nearly a decade after its provisional entry into force, a key instrument for the intensification of trade flows. More specifically, between 2016 and 2024 total trade in goods and services increased by approximately 72%, including a 65% rise in goods and a 90% increase in services, pointing to a stable expansionary trajectory. In absolute terms, this translated into total bilateral trade worth 125 billion euros, including 76 billion in goods and 49 billion in services.
In addition, the trade balance remained structurally positive for the EU, generating a stable surplus driven by the gap between exports and imports in favour of the European side. The surplus stood at around 20 billion euros in goods and approximately 8 billion in services. This dynamic highlights the EU’s competitive positioning in medium-high technology segments and high value-added services, reflecting a productive specialisation located in the more profitable tiers of value chains and a stronger capacity for market penetration in terms of quality, regulatory standards, and technological intensity.
Among the factors underpinning this growth were the strong performance of the metals and non-metallic mineral products sectors, supported by rising international and energy prices and favoured by the expansion of the Trans Mountain pipeline in Canada. In addition, the depreciation of the Canadian dollar made imports more expensive while improving export competitiveness. This contributed to a gradual geographical repositioning towards Europe and selected non-Chinese Asian markets, such as Japan and South Korea, thereby confirming a Canadian diversification strategy that remains cautious yet progressive.
This process was further facilitated, from September 2024 onwards, by the removal of 99% of tariff lines, including the complete elimination of duties on industrial products. Indeed, since 2017 Canada has progressively phased out tariffs on EU exports worth around 400 million euros annually, rising to 590 million euros at full implementation, with direct effects on the competitiveness of European firms and on the reduction of input costs. The agreement also grants duty-free treatment to around 92% of EU agri-food products and protects 143 geographical indications, while simultaneously expanding access to federal, provincial, and municipal public procurement markets.
The trade dimension is complemented by significant reciprocal financial exposure. As early as 2023, EU stocks of foreign direct investment in Canada amounted to 242.9 billion euros, compared with 249.5 billion euros of Canadian investment in the EU. An ex post assessment attributes to CETA an annual increase in EU GDP of approximately €3.2 billion, confirming a measurable, albeit not transformative, macroeconomic impact.
Against this backdrop, in terms of relative positioning, the EU remains Canada’s second-largest trading partner after the United States, which continues by far to be Ottawa’s principal counterpart, accounting for 75.9% of exports and nearly 50% of imports, albeit with bilateral growth that was already modest in 2024 (+0.3%) and is likely to weaken further in 2025 in light of tensions with the Trump Administration. Canada, for its part, ranks as the Union’s twelfth-largest trading partner. This points to a relationship that is structurally asymmetric yet complementary, in which the Canadian market performs for the EU an advanced diversification function within the broader North American space.
From this perspective, CETA should be understood not as an isolated measure, but rather as one of the instruments through which the Union may pursue a broader strategy aimed at diversifying its portfolio of destination markets. This trend is also confirmed by the recent FTA signed between Brussels and New Delhi. Conversely, for Ottawa, it serves as a tool for strengthening trade and investment ties with the aim, over the medium to long term, of reducing strategic dependence on the United States. Indeed, already in the post-2022 context, the Canada-EU agreement has acquired a significance that extends beyond mere tariff liberalisation. Cooperation on critical raw materials, the energy transition, digital technologies, and economic security, reinforced by instruments such as the Green Alliance and the Digital Partnership, places the agreement within the broader framework of the EU’s de-risking strategy.