CANZUK: A Political Pipe Dream?

Where does a post-Brexit Britain fit into the new multi-polar world and what are the implications for trade?

In the years since Russia's invasion of Ukraine and the return of Mr Trump to the White House, it has become clear that the Brexit ideal of a freewheeling, free-trading, mid-ranking island power is outdated. In fact, it is dead.

The US has given up its pretence to be the global hegemon and instead supports a return to 19th century style Great Power politics and Spheres of Influence. In this bad, mad new world, you have to be in a gang. With perfect tragicomic timing, Brexit Britain has become an isolated island nation with insufficient naval power to defend its supply chains. The arch Brexiteer Nigel Farage is so enamoured of Mr Trump and MAGA politics that one might conclude that he wants the UK to be absorbed into the new American Empire, along with Greenland, Panama, Canada, Gaza, and bits of Ukraine.

Britain's own gang, the British Empire, is long gone. No country outside the UK mourns it. Several prominent UK politicians think that Britain should pay reparations to its former colonies. With the benefit of hindsight, the UK made perhaps a strategic error in turning its back on the Commonwealth to join the EEC in the 1970s (joining and leaving for all the wrong reasons. D'oh.) Think of what a global power a Commonwealth-sized free trade area would be. It is not only nostaligic Brexiteer Britons who lament the lost opportunity to build the Commonwealth into an economic superpower.

Perhaps US-EU tension will drive Westminster back into a marriage of convenience with Brussels. Increased cooperation in defence and in space (The UK is still a member of the European Space Agency, which aims to use a spaceport on the Shetland Islands) might drag the UK back into Europe's orbit.

Several prominent geopolitical analysts such as the admirable Peter Zeihan (look him up on YouTube) think it is only a matter of time before the UK realises its destiny is to be subsumed into the US sphere of interest. Grandma goes to live with the kids....

There is however a small but growing group of politicians promoting the idea of CANZUK: a Union of Canada, Australia, New Zealand and the UK.

In fact the idea goes back decades. R101 airship designer and novelist Nevil Shute mused on it in his 1953 novel In the Wet, published on 1 January that year, 11 months after Queen Elisabeth II ascended the throne. In his novel, he describes a future dystopian, depopulating, war-damaged Britain from which royal family members and Britons evacuate to their former colonies who build up their power together. (Let's not dwell on the unfortunately outdated language Shute uses. I just want to make the point that variations on the CANZUK concept are decades old.)

The 21st Century take is that these four CANZUK nations remain culturally very close. They share a monarch and a Westminster style parliamentary system. Their militaries and intelligence services are closely interoperable. Three are island nations and Canada has the world's longest single-nation coastline, so all are (or should be) significant naval powers. Canada's new Prime Minister was the previous Governor of the Bank of England and thus enjoys a unique insight into the shared economic strengths and weaknesses of the two nations.

CANZUK nations share over USD 3 Tn of annual trade already. In 2024, trade between Canada and the United Kingdom grew by 14%. The UK and New Zealand are negotiating a free trade agreement which could boost bilateral trade by 40%, say its proponents, adding nearly USD 1Bn to their combined GDP. Making CANZUK a free-trade union could provide economic benefits to all members via tariff-free access to commodities, energy, technology, capital and labour. Increasing trade between the CANZUK members would be immediately additive for shipping demand, given the distances between them. That also points to the importance of defending supply chains via a powerful military and sizeable merchant navy. The cost of the Royal Navy, equal to around on third of UK GDP on the outbreak of WW1, can be seen as a key cause for the demise of the British Empire. Sharing that cost might lead to greater shared benefits.

Economically, the combined GDP of the CANZUK nations is about $7 Tn (Canada USD 2.0 Tn, Australia USD 1.4 Tn, New Zealand USD 0.2 Tn and the UK USD 3.4 Tn). By comparison with US GDP (USD 25 Tn), China (USD 18 Tn), or the EU (USD 17 Tn), this is a modest output. CANZUK would be bigger than ASEAN (USD 3.2 Tn), India (3.5 Tn) or MERCOSUR (USD ~3Tn). But the idea behind CANZUK is not solely to combine GDPs but also to leverage mutual trust, similar legal systems, and historical links to boost trade, security, and other forms of cooperation, potentially creating synergies that could further enhance economic performance over time.

There are of course plenty of people who think it could not work. They object that Australia, Canada and New Zealand are Pacific rim nations now, focused on China and the US. The total value of trade conducted exclusively among CANZUK nations is relatively modest compared to their overall trade activities. Australia and New Zealand have extensive trade relationships with countries like China and ASEAN members. Canada and the UK are closely entangled with the US and the EU. Naysayers argue that the UK can't even manage itself any longer, and would contribute only political trouble to its former colonies.

But there's no doubting that, in the new world order, old friends can find strength through cohesion. Cultural affiliations can transcend soft power to become hard power.

Maybe Grandma doesn't go to live with the unruly, noisy family member, but forms a new household with her true favourites, if they will have her. Who would have thought that America First would prompt such discussions? CANZUK would be the very opposite of what Mr Trump wants to see. For that reason alone it will attract followers.