CHECK AGAINST DELIVERY 

When Vladimir Putin ordered his tanks across the Ukrainian border in the early hours of February 24th, he brought a brutal end to a three-decade-long era in geopolitics. That period had begun at midnight, in joyous optimism, on November 9, 1989, with the very different breaching of a frontier 750 miles away – with the fall of the Berlin Wall.

The 33 years between the euphoric dismantling of a barrier that had torn a society apart and the barbaric violation of a border that had kept a country sovereign were a sunny season in human history.

But that time has now come to an end – and one of our most urgent tasks is determining what will replace it. This is a moment of extreme economic upheaval, and today, I want to speak about the new economic path that the world’s democracies can chart together.

The past 33 years were guided by an idealism that was both high-minded and – for the countries of the transatlantic alliance – supremely comfortable. We were fat and happy, assured in our belief that we could do good by doing well.

With hindsight, it is easy to mock the hubris and the naiveté which animated that era. But as we set about building its successor, it is important to start by remembering how generous and humane our intentions were.

The effort that followed the fall of the Berlin Wall was not punitive or vengeful or colonial. The objective was not conquest – it was fellowship. It was more Marshall Plan than Treaty of Versailles.

The past three decades were framed by two complimentary convictions.

The first was that we had come to what Francis Fukuyama vividly termed the End of History^[1]: That the contest between competing forms of human, social, and political organization was over, and that capitalist democracy had emerged as the single best way for people to live.

Our core belief was that the rights and opportunities enjoyed by the citizens of Western countries could and should be universal; that people around the world wanted and merited – and could achieve – the freedom and prosperity we already enjoyed.

Now, it is impossible to utter these words without a shame-faced grimace; without an acknowledgement of how inconsistent and ineffective we have been at putting this moral commitment to universal rights and values into practice.

But just consider how radical and how progressive this universalism was.

For most of human history, even democracies had built their relations with other states on the naked and unabashed assumption that the liberty and prosperity we cherish were somehow undesirable or unnecessary or unsuitable for other people – for Slavs, for Asians, for Africans, for Arabs.

The End of History was founded on the profoundly liberal and egalitarian conviction that everyone in the world had the right and the ability to live as well as we do. That is why it was such a powerful and promising idea.

The End of History had an economic corollary. Not only did we believe that the capacity for liberal democracy was universal, we also thought it was inevitable – provided a society got rich enough.

The struggle between transatlantic democratic capitalism and Soviet communism seemed to have ended on November 9, 1989.

History would end in other parts of the world as they, too, became more prosperous. And we believed, or, perhaps, hoped, that as countries became richer – and as they built their increasing prosperity on trade with one another – war would become an anachronism.

This conviction was most colourfully captured by Thomas Friedman with his Golden Arches Theory of Conflict Prevention^[2]: the view that no two countries that both have a McDonald’s would fight a war against each other.

These two broad ideas – that all human societies were heading towards democracy, and that growing rich together would make the world both more democratic and more peaceful – have been the guiding principles of Western statecraft for the past 33 years.

They inspired hopes for a peace dividend and visions of a Europe free and united from the Atlantic to the Urals. They were the intellectual foundations for Moscow’s admission to the International Monetary Fund in 1992, and Beijing’s accession to the World Trade Organization in 2001.

They were why Germany worked with Russia to build Nord Stream 2 and why Australia and New Zealand negotiated free trade agreements with China.

As we look back on the past three decades – and move beyond them – we should remember that a world in which we all grew freer and richer together was a laudable objective and one worth taking some risk to construct.

But we also need to be clear-eyed about the results of that effort. Liberal democracy worldwide has today declined back to 1989^[3] levels, and autocracies have been making a comeback. Many, including China – the second-most powerful country in the world – have grown both wealthier and more coercive. And, as Putin is murderously proving, economic interdependence does not always prevent war.

All of this means that we, the countries of the non-geographic West, need to build a new paradigm. The Cold War is still over, but so is the End of History. It is up to us to design what replaces it.

Let me begin by suggesting how we should think about this new era.

First, the world’s democracies must be realistic about the world we inhabit. History hasn’t ended. We share the planet with authoritarian regimes and there is no inevitability to their decline, just as there is no inevitability to our continued existence.

Democracies account for a minority of the world’s population, and while we account for comfortably more than half of its wealth, our portion is shrinking^[4] [5]. We need to assume that in the decades to come we will be sharing the planet with rich and powerful countries who do not share our values – who, in fact, often see our values as both hostile and inferior to theirs.

We need to find ways to coexist.

And secondly, we must not be naïve about that coexistence. Because we believed that prosperity was the midwife of liberal democracy, and that economic interdependence was the best shield against war, we opened our economies to our former adversaries and committed ourselves to building a rules-based system of global free trade.

The problem is that many of the world’s dictators have been guided by entirely different principles from our own. The economic ties we thought would constrain Russian bellicosity are instead being used to try to blunt our response to the Kremlin’s war crimes.

With hindsight, it is clear that appointing Gerhard Schroeder to the Rosneft board was as essential an element in Putin’s war planning as any military exercise.

And it is not just Russia. China is likewise adept and intentional in using its economic ties with us as leverage to achieve its geopolitical objectives. That is what Norway learned in 2010 when the Nobel Prize was awarded to Liu Xiaobo, and Norwegian exports of fish to China were halted as punishment.

Much of Australia’s trade with China was frozen in 2020 when Canberra called for an independent inquiry into the origins of COVID-19.

And Canadian exports of pork and canola were banned – as two Canadian citizens were wrongly imprisoned – when Canada honoured its extradition treaty with the U.S. and detained the CFO of Huawei.

And so, nearly eight months after the invasion of Ukraine, we find ourselves in a world where bloody history is back, and where muscular dictatorships show little sign of mellowing into liberal democracies – and yet also where, in conscious contrast with the age of the Iron Curtain, we have spent three decades building an interconnected global economy.

This is the reality of the 21st century. Now is the time for the world’s democracies to craft a policy to respond to it – and to shape it.

Today I would like to propose three pillars of what that new policy should be.

The first and most fundamental pillar is that we, the world’s democracies, must strengthen our connections with each other. The immediate and necessary reaction to Putin’s invasion of Ukraine has been to deepen and expand our core military alliance – NATO.

Sweden and Finland have joined, ending generations of neutrality. The transatlantic alliance is cooperating more closely than ever with other democratic partners around the world, most notably in the Indo-Pacific.

But we must now expand that closer cooperation to the economy. As fall turns to winter, Europe is bracing for a cold and bitter lesson in the strategic folly of economic reliance on countries whose political and moral values are inimical to our own. China’s increasingly aggressive wolf diplomacy has already given many smaller democracies a foretaste of that experience.

For some democracies, especially the largest among us, a tempting response to these vulnerabilities will be autarky. But for most democracies that just isn’t feasible. And for all of us, the economic costs would be very high.

A better alternative is what U.S. Secretary of the Treasury Janet Yellen has described as friendshoring – that democracies must make a conscious effort to build our supply chains through each other’s economies^[6].

Where democracies must be strategically vulnerable, we should be vulnerable to each other.

One way to do this, of course, is through trade agreements. Canada is proud to be the only G7 country with trade deals with every other G7 partner. But we would be happier still to give up our bragging rights and to have our feat replicated by each of our allies. And trade deals aren’t enough.

Going forward, we should design our government procurement and incentive programs with friendshoring in mind. The US Inflation Reduction Act is a forward-thinking example of this approach: The $7,500 tax credit to buy a new electric vehicle requires that its battery be built using critical minerals and metals produced in countries with which the US has a trade agreement^[7].

Trade deals are one way to define who our friends are. A complimentary approach, exemplified by the European Union (EU)’s proposed ban on imports produced with forced labour, is to identify shared values^[8].

Replicated across the world’s democracies, friendshoring is an historic opportunity for our workers and our communities.

For Canada and Canadian workers – and for those of our democratic allies around the world – it is an economic opportunity to attract new investment, create more good-paying jobs, and thrive in a changed global economy.

It can make our economies more resilient, our supply chains true to our most deeply held principles, and protect our workers and the social safety net they depend on from unfair competition created by coercive societies and race-to-the-bottom business practices.

Workers in our democracies have long understood that global trade without values-based rules to govern it made our people poorer and our countries more vulnerable. They have long known that it enriched the plutocrats, but not the people. Friendshoring is an answer to these longstanding and legitimate concerns.

But if we are to tie our economies even more closely together, we must be confident that we will all follow the rules in our trade with each other, even and especially when it would be easier not to. We will friendshore more quickly and effectively if we work together to develop shared approaches, and if we make an explicit commitment to each other to implement them.

And crucially, we must then be prepared to spend some domestic political capital in the name of economic security for our democratic partners.

The EU set a powerful example during the COVID pandemic, when European vaccine makers honoured their contracts with non-European allies. Canada must – and will – show similar generosity in fast-tracking, for example, the energy and mining projects our allies need to heat their homes and to manufacture electric vehicles.

I cite these examples because, critically, friendshoring must be green. The curse of oil is real, and so is the dependence of many of the world’s democracies on the world’s petro-tyrants.

Friendshoring can both defend liberal democracy and help to preserve the planet if one of our primary objectives is to speed up the green transition – together. The Canada-Germany Hydrogen Alliance, announced in Newfoundland in August by Prime Minister Trudeau and Chancellor Scholz, is one example of this green friendshoring in action.

Friendshoring should also mean standing up for each other in the face of economic bullying from the world’s dictators – an approach Anders Fogh Rasmussen and Ivo Daalder have described as an economic version of NATO’s Article 5^[9].

We cannot allow Lithuania to be coerced over its policy towards Taiwan, or South Korean companies to be harassed and boycotted in retaliation against legitimate national security decisions taken by Seoul. A commitment to support each other in the face of such economic strong-arming is the best way to ensure it doesn’t happen again.

The second pillar, and the hardest question that a friendshoring approach must grapple with, is our attitude towards the in-between countries.

It is easy enough to make the case for deepened economic ties between the countries of the non-geographic West, bound as we already are by close political, and often military, alliances: NATO allies and the rich, industrialized democracies of the Indo-Pacific.

But what about the other countries of Asia, Africa, the Middle East, and Latin America? Their experience of the End of History era was different from ours, and the reaction of some to the invasion of Ukraine has accordingly been more ambivalent.

Where should they fit into a world in which some of the battle lines that were erased 33 years ago have been re-drawn?

Our alliance of democracies must be open. Friendshoring can’t be for a closed club – be it the G7 or NATO or the Five Eyes. It cannot be only for rich countries or only for historic partners.

It should be open to the democracies of the Caribbean, of Latin America, of Africa, of the Middle East, and of Asia – open to any country that shares our values and is willing to play by collectively agreed upon rules.

Yet we should also not be surprised if many of those countries that share our values are reluctant – at least at first – to choose our side.

Since 1989, and before then as well, our defence of the rules-based international order and of democracy and human rights has been tempered by self-interest. We have at times been hypocritical, most glaringly and damagingly in Iraq.

It is not unreasonable for countries of the Global South to doubt our commitment to a values-based partnership. They cannot be blamed for believing that, as in the 19th and 20th centuries, their most prudent path might be to seek to play the great powers off each other, and to chart a careful course between them.

History shows that the West is not innocent of imperialism or transactional deals. But neither are the world’s dictators today. We must keep the door wide open and not doubt the long-term appeal of our principles.

And, remember, the rules-based order we are seeking to strengthen is most valuable to the smaller, poorer countries who are most susceptible to coercion by larger and more hostile economies.

One of our most convincing arguments will be our own success. Winning matters – and winning works. Victory creates its own momentum. Ukraine is proving that with its battlefield progress.

We will all show it by delivering widespread prosperity for our own people.

The third pillar is our relationship with the world’s autocrats. This is where our break with the assumptions and approaches of the past 33 years must necessarily be the sharpest.

We should all still hope that Martin Luther King’s assertion about the arc of the moral universe is true, and that it applies to all of humanity. But we also need to recognize that it does not accurately describe much of the world right now. We must govern our relationships with the world’s authoritarian rulers accordingly.

Those relationships should be predicated on the imperative that the world’s democracies intuitively recognized on February 24th: that in the 21st century, some actions are utterly unacceptable and require an unequivocal response.

The End of History has not been a Garden of Eden, and the Golden Arches Theory of Conflict Prevention has not held perfectly true.

But, over the past 33 years, and, indeed, in the entire post-war era, the world has largely been free of the wars of conquest which were a principal means of conducting foreign policy in all the time before 1945.

As Tanisha Fazal has calculated, between 1816 and 1945, a state disappeared, on average, every three years^[10]. Before February 24th, 2022, it had been more than 30 years – with the Iraqi invasion of Kuwait – since one country had tried to conquer another internationally recognized country outright^[11]. This was perhaps the greatest achievement of the post-war era – we agreed to refrain from eating each other.

Allowing the Kremlin’s anachronistic invasion of Ukraine to stand would plunge us all back into the 19th century. That is why Narendra Modi told Putin last month that the era of war was over.

It is why Putin must be defeated.

But after Ukraine triumphs – and we must do everything in our power to ensure that victory comes and comes quickly – we will quite likely continue to face a tyrannical Russia on Europe’s border, and powerful authoritarian regimes elsewhere.

Our approach to them must be different from what it has been over the past three decades. Rather than imagining that their political systems will gradually, peacefully, and enthusiastically come to resemble our own as we all grow richer together, we need to understand that authoritarian regimes are fundamentally hostile to us.

Our success is an existential threat to them. That is why they have tried to subvert our democracies from within, and why we should expect them to continue to do so. We must likewise recognize that authoritarian regimes have as little respect for a rules-based order among states as they do for the rule of law within their own countries.

That means we need to be cautious about our economic relations with the world’s dictators and their elites. We need to make clear that it will no longer be possible to rule like Stalin but live like Abramovich.

We should continue to trade, but we should avoid strategic vulnerabilities in our supply chains and our economies more broadly.

But we all need to learn the lesson Putin taught Europe on February 24th.

It is wishful thinking for Western governments and Western companies to believe we can do business with dictatorships on the same terms we do business with democracies.

In 1989, we cashed in the peace dividend. Today, it is time to buy some war insurance. As Robert Habeck, the German Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action said last month: we must ensure we cannot again be “blackmailed^[12].”

Yet even as we are more cautious and more limited in our economic ties with authoritarian regimes, we need to work with them to preserve the global commons. That means, first and foremost, continuing to work together on tackling the preeminent threat of climate change.

It also includes arms security, pandemic preparedness, and the stability of the international financial system. During the Cold War, we learned to contain and engage at the same time.

Washington understood that it could not prevent nuclear armageddon without talking to Moscow. We cannot save the planet today without working with Beijing.

A more overtly suspicious attitude towards the world’s dictators need not preclude, or even imperil, cooperating on common goals.

In fact, being frank with ourselves and our adversaries about our grave differences may make it easier to identify and pursue areas of mutual interest.

Dropping the pretense, or the self-delusion, that most of our relationships with authoritarian regimes can have a win-win outcome may make it easier to negotiate in those narrow areas where they can.

We democracies may have been sincerely convinced that we were all converging towards global peace and prosperity. But the world’s dictators never believed that and they never believed us – they thought we must be either liars or fools.

They are cynical and craven and they think we are, too.

Paradoxically, we may find that the world’s authoritarian regimes understand us better and respect us more when we are brutally frank about all of our profound disagreements.

I recognize that the broad thrust of what I have just discussed was intuitively obvious to most of the citizens of the world’s democracies on February 24th.

Our people immediately understood that Putin’s invasion of Ukraine was among the greatest threats to our security in a generation, that Russia and its leadership must henceforth be pariahs, and that the world’s democracies needed to work more closely together than we had since the Second World War.

We have all known from the very outset that this war matters so much because Putin’s invasion will be either an inspiration or a cautionary tale for the world’s tyrants.

Yet I also know that following the path forward I have outlined will be hard – and controversial. The world’s democracies may understand that this is the right and prudent path to follow, but it is by no means certain that we will summon the collective will to do so.

One reason that consciously breaking with the End of History era and building a new paradigm will be so difficult is that it means giving up on an uplifting and self-validating vision of the future.

After the sacrifice of the Greatest Generation and the nuclear standoff of the Cold War, it was a relief and a vindication to imagine the entire world peacefully marching together towards global liberal democracy.

It is dispiriting and frightening to accept that it is not so.

A second cause for hesitation is economic. One reason the End of History was so beguiling is that it promised us we could do good by doing well. I am now proposing that the only way for us to do well is if we do good.

The turbocharged globalization of the past 30 years made many Western fortunes and brought down the cost of consumer goods and commodities for us all.

Friendshoring may come with an initial price tag – though, as Europe is discovering this autumn, the cost of economic dependence on a dictator can be much, much higher.

But I think the biggest reason to question our collective ability to move beyond the End of History is our own self-doubt.

Democracies are strong because we are self-critical. The jeers I face in Question Period, the fact-checking of skeptical journalists, the hard verdict of the ballot box – all of these make me a better minister than I would be if we governed in splendid authoritarian isolation.

But we must always balance that essential capacity for self-criticism with the equally important power of self-confidence.

Our democracies are flawed, to be sure. As a Canadian, I am always conscious of my country’s original sin against Indigenous Peoples. As Finance Minister, I worry every day about our ability to build an economy that works for everyone, even as we act to preserve our planet.

But an awareness of unredeemed historical crimes, and of our serious fresh challenges, in no way contradicts my equally profound conviction that the liberal democracy we are so lucky to enjoy in Canada is the best way humans have found, so far, to organize a society.

Self-criticism is a feature of democracies – not a bug. But it is a pitiless mirror that can rattle our self-confidence when we measure ourselves against tyrants and their armour of oblivion.

We should not doubt our own strength – moral, social, political, and, indeed, economic. We have achieved greater freedom and prosperity – for more of our people – than any civilization in human history.

Yet I also know liberal democracy faces threats – as it always has.

You may not be interested in war, Trotsky reputedly said, but war is interested in you. War is interested in us, and it has shattered the End of History hopes of the past 33 years.

And so we find ourselves at another crossroads.

The End of History is over, and now is the time to replace it. Putin’s world – where might makes right and where oil means impunity – is one option.

We cannot – we will not – go down that path. Instead, let’s build a world where we can save the planet and ensure that working people have good jobs and lead comfortable lives.

A world where we look after our friends.

A world where democracies depend on democracies, rather than despots.

A world where the door is open and a helping hand is extended to all people everywhere who are choosing to do the hard work of building their own democracies.

Putin’s invasion of Ukraine could have been – indeed, it was intended to be – a broader defeat for liberal democracy. He sought to create a world – indeed, to bring back a world – where greater powers dominated lesser ones, and where liberal values and human rights were universally viewed with the contempt with which they are seen by the Kremlin.

Instead, the brave people of Ukraine have reminded us that democracy is both important enough to die for and strong enough to win.

As we set out to build a new world together, let that inspire us to build one in which all liberal democracies can not just survive, but thrive.

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Footnotes

[1] Fukuyama, Francis. End of History and the Last Man. United Kingdom: Free Press, 2006.

[2] Friedman, Thomas L. The Lexus and the Olive Tree. United Kingdom: Farrar, Straus and Giroux, 1999.

[3] Varieties of Democracy Institute (V-Dem). Democracy Report 2022: Autocratization Changing Nature?

[4] Freedom House. Freedom in the World 2022: The Global Expansion of Authoritarian Rule.

[5] Varieties of Democracy Institute (V-Dem). Democracy Report 2022: Autocratization Changing Nature?

[6] Atlantic Council. Transcript: US Treasury Secretary Janet Yellen on the next steps for Russia sanctions and ‘friend-shoring’ supply chains. April 13, 2022.

[7] U.S. Department of Energy. Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit.

[8] Reuters. EU proposes banning products made with forced labour. September 14, 2022.

[9] Rasmussen, Anders Fogh, and Ivo Daalder. Memo on an ‘Economic Article 5’ to Counter Authoritarian Coercion. The Chicago Council of Global Affairs, June 9, 2022.

[10] Fazal, Tanisha M. State Death: The Politics and Geography of Conquest, Occupation, and Annexation. Princeton University Press, 2011.

[11] Fazal, Tanisha M. The Return of Conquest? Foreign Affairs, April 6, 2022.

[12] Reuters/CNBC. Germany drawing up new China trade policy, vows ‘no more naivety’. September 13, 2022.