Canada's relationships with Britain are, by almost every measure, the most extensive Canada has in Europe. The transatlantic link represents a long tradition of consultation and co-operation based on ties of history and tradition, culture and kinship, a shared institutional heritage and common interests and values. Close relations with Europe have been one of the central pillars of Canada's foreign policy. Yet, as George MacLean points out in a forthcoming book, Between Actor and Presence, in an era of changing relationships and affiliations, Canada's foreign relations have taken a decidedly triangular shape, with strong links to Europe, a continuing commitment to North American continentalism, and burgeoning connections to the Asia-Pacific rim. Although the relationship with Britain has changed markedly, however, it remains an integral part of Canada's foreign, security and economic policy.
Canadian-European relations are undergoing change in response to structural transformations in the European Union which themselves result from deepening European integration. Not only is the EU becoming more integrated, it has expanded, and plans to expand further, from 15 members to 26, with a population of 480 million. Canada now has to work with a regional organization which has developed far beyond a free trade area or tariff union to become an economic union with wider political ambitions. The EU partners are creating the first fully integrated international economic and political entity, allowing for the free movement of people and capital as well as goods and services. These developments necessarily lead the EU beyond the industrial, trade and monetary areas into foreign and defence policy and this in turn is having a direct effect on Canada's political and security relations with Europe.
The EU is already the largest international economic entity and accounts for 16.2 per cent of global exports (US 15.6 per cent) and 15 per cent of imports (US 12 per cent). The EU is Canada's second-largest trading partner after the US, whilst Canada is the EU's 9th destination for exports and 12th source for imports, a trade worth $Cdn 25bn per year. Europe is also the second largest source of direct income in Canada. The Common Commercial Policy, and the trade disputes which arise under it, are the issues which have the greatest and most widespread impact on Canada-EU relations. Britain is Canada's third largest trading partner after the US and Japan, and by far her largest market in Europe. Britain is the second largest foreign direct investor in Canada, with 40 per cent of the European total, amounting to over $Cdn 21bn. British investors also hold $Cdn 23bn of Canadian bonds. Britain's exports to Canada totalled $Cdn 5.91bn in 1996 while imports came to $Cdn 3.87bn. The main exports are petroleum and petroleum products, machinery and equipment, iron and steel, foodstuffs and beverages. Main imports are wood and paper products, metal and minerals, machinery and parts, and food products.
The continuing evolution of the EU and the consequent changes in the nature, power and purpose of its institutions, present a negotiating context of fearsome complexity and some uncertainty for Canadian government and business. The competencies of the institutions often overlap both with each other and with those of the national Parliaments. Furthermore, the ambiguity of the EU's final objective (matrix of intergovernmental co-operation or quasi-superstate), until now a subject of studied neglect, is becoming increasingly exposed.
Integration at EU level has correspondingly affected the nature of political authority within the partner countries, the nature of political decision-making by their leaders and the relations between EU and non-EU countries. In particular, the 'move to commitment to common policies' under the Common Foreign and Security Policy (CFSP) affects the relations of EU countries to the Western …