Half a century after Canada’s “Third Option” sought – unsuccessfully – to reduce economic dependence on the United States, Prime Minister Mark Carney is calling on middle powers to chart a new “third path” in a fractured global order. Revisiting the lessons of the 1970s, Paul Meyer asks whether today’s vision of collective middle-power action can overcome the structural forces that undermined earlier efforts – or whether it risks repeating history unless matched with concrete strategy and institutional innovation.
In trying to make sense of the current chaotic global events, older readers may recall a past period in Canadian history when our economy was threatened by damaging policies adopted by the United States. This was in 1971 with the so-called “Nixon shocks” when President Richard Nixon unilaterally decided to take several measures impacting the global economy including terminating the “gold standard” for its currency and imposing a 10% tariff on foreign imports.
This jolt led the Canadian Government of the day to adopt what was referred to as the “Third Option” policy. As outlined in a 1972 white paper by then Secretary of State for External Affairs Mitchell Sharp, the Third Option was the alternative to two other possible postures – maintaining the status quo or seeking “closer integration” with the United States. The preferred path was a Third Option which would entail diversification of our trade away from the US and the pursuit of a national industrial strategy that would strengthen domestic capacity and expand Canadian ownership.
It seemed like a good plan at the time, but the powerful pull of geography and the inertia of established trading patterns meant that the “Third Option” was in relatively short order declared a failure. The share of Canadian exports going to the US never dipped below 65%, and by the end of the decade was back up in the 70% range where they have remained ever since. The incoming Mulroney government reverted to the “Second Option” and embarked on a path of greater integration with the US resulting eventually in the Canada-US Free Trade Agreement and the North American Free Trade Agreement (NAFTA).
Half a century later, Canada is again grappling with the need to end its disproportionate dependence on the United States and diversify its global trade, which still accounts for roughly two-thirds of its GDP. In a remarkable speech at Davos, Prime Minister Carney has challenged middle powers to terminate their subordination to hegemonic powers and band together to follow a “third path” in their foreign policies. In his words: “In a world of great power rivalry, the countries in between have a choice to compete with each other for favour or to combine to create a third path with impact”. In a memorable phrase which he had employed in his UN General Assembly speech last fall he declared that “Middle powers must act together because if you are not at the table, you are on the menu”.
While this appeal to middle power solidarity to ward off great power predation resonates far and wide (and explains in part the rapturous reception the speech has enjoyed internationally), it leaves unanswered where this proverbial table is to be found and who will preside over it. There is a certain tension internal to Carney’s address in which he asserts a rupture in world affairs and the failure of the international rules-based order, but claims that for middle powers “the power of legitimacy, integrity and rules will remain strong- if we choose to wield it together”. Are middle powers to abandon the existing institutions that embody the international rules-based order in favour of some new construction of global governance?
Should this take the form of a NATO minus one, a UN minus permanent members of the Security Council, a revamped World Trade Organization (WTO)? If rules and legitimacy are still powerful attributes to have for international security and well-being how are they to be developed and safeguarded in a world dominated by great power rivalry? If the institutions that currently comprise the international rules-based order are fading in their influence, can middle powers revive them in the face of great power antipathy or indifference? Or is the Prime Minister calling for supplementing these institutions with new plurilateral agreements and arrangements that circumvent hegemonic controls and reduce the vulnerability to the type of economic integration that can too readily be weaponized against the less powerful?
If the Prime Minister’s speech is to be more than a rhetorical tour de force, the impact of which will fade away as the global elite decamp from Davos, the Canadian government will need to develop a strategy that can address some of these key questions. The Prime Minister’s clarion call certainly raises expectations that Canada will assume a leadership role in developing this new world order of middle power unity and purpose. It would be a pity if the declared “third path” suffers the same fate of the “Third Option”.
This blog was first published in Open Canada on February 2nd, 2026.
