Mark Carney was right: if middle powers aren’t at the table, they’re on the menu. A credible ‘Trade NATO’ would make the great powers think twice.

At Davos earlier this year, Mark Carney delivered a stark warning: the rules-based international order no longer works and a new architecture is needed. We are living through a “rupture”, not a transition, in which great powers increasingly use tariffs, supply chains and economic dependence as tools of coercion.

At the Lowy Institute in March, Carney put more flesh on the bones. He called for a “dense web” of middle-power partnerships and “variable geometry”: different coalitions working together on different problems, from AI and critical minerals to trade and supply chains.

But he stopped short of proposing a standing pact committing those countries to defend each other against economic coercion. I think that matters.

In 2023, the US, UK, Canada, Australia, New Zealand and Japan signed a joint declaration pledging to deter and address economic coercion. Three years later, Canada is finding out the limits of political declarations when governments change.

If Carney’s rupture is real, we need something legally binding with teeth.

A Trade NATO – Article 5 for trade?

Fortunately, our fellow European liberals – and sadly now our former European Parliament colleagues – may already have part of the answer.

Renew Europe has called for a “Geoeconomic Deterrence Pact” involving the EU, Canada, Japan and South Korea, with NATO-style mutual response clauses: if one participant faces economic coercion, the others are committed to respond.

Where is Britain in all of this?

Ed Davey has already called on the Labour Government to back Canada by building an “economic coalition of the willing” against punitive trade attacks. Yet Labour’s public response has been disappointingly muted whenever standing up for Canada risks inconveniencing the US. Liberal Democrats should go further and join Renew Europe in calling for a Trade NATO.

Economic coercion against one member would trigger an obligation for the others to assist. That need not mean automatically launching a tariff war; members could decide how best to respond. If the deterrent works, it may never need to be used.

The EU already demonstrates the principle of collective deterrence through its Anti-Coercion Instrument. Deterrence works when potential aggressors know the cost before acting.

Over time, willing members could cooperate more deeply on AI, supply chains, critical minerals and trade strategy – areas where dependence can quickly become a vulnerability.

Start with those ready to move

CANZUK offers one place to start. Britain, Canada, Australia and New Zealand already share exceptional institutional trust through Five Eyes and defence cooperation, while all four are CPTPP members.

Four closely aligned countries could move first rather than wait for every middle power to agree at once. Together they represent around 144 million people and $8.4 trillion in economic output – which, if they acted as one, would put them fourth in scale behind the US, EU and China. CANZUK could pioneer such a guarantee while working from the outset with the EU, Japan, South Korea and other like-minded countries to expand it.

Britain cannot afford to be left behind

Things may already be moving quickly. The EU and Canada are reportedly exploring getting “as close as legally possible” short of Canadian EU membership, including cooperation through CPTPP.

While Britain continues dithering over Europe, Canada could conceivably end up more integrated with the EU than the UK. Worse would be allowing an EU-Canada-Pacific economic-security architecture to develop while Britain watches from the sidelines.

None of this conflicts with the case for EU membership, which would obviously offer Britain far greater economic benefits and collective leverage. But rejoining is not realistic any time soon. In the meantime, we need other ways of rebuilding some of the leverage Britain lost.

That could mean Britain joining a wider EU-Canada Geoeconomic Deterrence Pact, or CANZUK moving first and building outwards. These are not competing options and could be combined.

Carney has called for a new architecture for the middle powers. Liberal Democrats should keep pressing Labour not to leave Canada hanging – and make sure Britain helps build what comes next. If we are serious about deterrence, we need a pact that potential aggressors know in advance will be honoured.

* Dominic Sokalski was a Liberal Democrat councillor 2019-23, and is now resident in Canada