We may look back on this as the week Canada began to take its fate into its own hands

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There are, as Lenin apparently did not say, decades when nothing happens, and weeks when decades happen. This was one of those weeks: a remarkable series of policy and diplomatic moves that give unmistakable form to what until lately had been mostly rhetorical flourish. The Carney doctrine remains only partly visible, and may only be partly developed, but there’s no denying any more that there is a doctrine.

We were tipped into the cataract nearly a month ago, by the government’s decision to formally abandon its attempts to appease the Trump administration on tariffs and trade. The timing may suggest it was only ever a stalling tactic, a means of buying time while the government prepared its exit strategy. Or it might be explained as a belated realization that there was no negotiating with a regime whose demands are non-negotiable.

Either way, the pace of events has been quick since then, and will likely be even quicker from here. If the government’s approach until now has been largely taken up with the first two in the taxonomy of strategies for dealing with Donald Trump I sketched out last month – negotiation and retaliation – we seem now to be well and truly embarked upon the last two: diversification and fortification.

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Fortification was the theme of the first half of the week, starting with the Canada Investment Summit and following with a sheaf of important policy announcements: the “Productivity Mega Deduction,” extending immediate expensing of investment to most asset categories; opening Canada’s four major airports to private investment; and funding a sovereign “broadband backbone” that would ensure internet traffic in Canada need not be routed through the United States.

There’s room, as I’ve suggested previously, for some skepticism about the usefulness of the investment summit, gusting to worries about the coziness between business and government it seemed to suggest. But there’s no denying the signal it sent to the world: that Canada is actively courting foreign investment, with an urgency that was not previously present, and with an eye to removing the barriers that have hitherto impeded capital formation in this country.

But whatever impressive-sounding deals might emerge from the summit, they are likely to be dwarfed in their impact on the economy by that one, seemingly arcane tax announcement. Last year’s budget had allowed immediate expensing, but only for a comparatively limited range of assets, about 15 per cent of the total. Now it will apply to more than two-thirds.

At a stroke, the move has cut the marginal effective tax rate (METR) on investment in half, from 13 per cent to 6.4 per cent. That’s less than half the rate in the United States, and a third of the OECD average – and not as some temporary gimmick, something to juice up investment in time for the next election, but permanently.

This is not by any means enough. Applying immediate expensing for two-thirds of assets still means one-third of them will continue to fall under the current capital cost allowance regime and its complex web of depreciation schedules, which vary across industries and may bear no relationship to actual economic rates of depreciation (particularly when inflation is taken into account).

At the same time, allowing immediate expensing of investment without eliminating the deduction for interest expenses means the tax system may end up subsidizing certain types of investment – the METR falls below zero.

More broadly, marginal tax rates are critical for decisions about whether or not to make an investment, but average rates are what decide whether a company locates a plant here or not. So reducing the statutory corporate tax rate remains an important objective, as does closing the many exemptions, deductions and preferences that currently distort investment decisions.

True reform, indeed, would stop trying to tax income, which is notoriously hard to measure (never mind inflation or depreciation: think of the accounting nightmare known as capital gains), and tax cash flow instead: All money received in a given year is taxable, all money paid is deductible.

But never mind: This is still huge – the biggest policy boost to investment in Canada in decades, and one that will apply, not just to this or that megaproject the government happens to favour, but to thousands of decisions across the economy, every day.

The airports decision will amplify that signal. Again, ideally it will be followed by further measures to open public assets to private investment, if not outright privatization. The government likes to talk about the capital this will “unlock” or “free up,” to be reinvested in other public assets, which is fair enough.

But it’s beneficial in its own right – because people who own assets, or the right to use assets, have a stake in preserving their value, and therefore an incentive to take better care of them; and because the value of those assets is often best realized by charging people to use them. That means the service has to be good enough to persuade people to part with their money, which means periodic reinvestment.

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Governments, for all their boasts about their roles as stewards of the future, have a well-known tendency to “starve the capital account to feed the current account,” on the grounds, as it has been said, that in the long run we are all out of office. Businesses that depend on attracting willing customers tend to be considerably less myopic.

The diversification half of the week’s events is harder to assess. No one really knows quite what “associate membership” in the European Union means – there is no such status at present – though that did not stop a number of commentators from reacting as if they did, instantaneously and without a scrap of evidence.

The one thing it almost certainly does not mean is what those same commentators seemed universally to assume it did: membership in the European Union, the same as France or Italy, with all of its rights and all of its obligations, including submission to tens of thousands of pages of EU legislation and acceptance of the supremacy of the parliament of Europe across wide swaths of public policy.

Nobody wants that. Canada doesn’t want it. The Europeans don’t want it. It’s not what is being talked about, and it’s not going to happen.

What does it mean, then? The point has been made that Canada already has a free-trade agreement with Europe, the Comprehensive Economic and Trade Agreement (CETA), signed in 2016. It is largely in effect, as a practical matter, notwithstanding the failure of 10 EU countries to formally ratify it.

That doesn’t mean there is no room for further integration. CETA, broad as it is, contains several reservations, exclusions and exemptions, notably in the fields of culture, transportation, telecommunications, financial services, and agriculture. It makes no attempt to harmonize regulations between the two, and does not provide for the free movement of labour.

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But try to press further and you run into a major roadblock: the EU is not keen to provide to non-members the kind of access to its market that members enjoy. Otherwise what’s the incentive to be a member? The three small non-EU countries in the European Economic Area (Norway, Iceland and Liechtenstein) have that kind of access, but at the price of having to adopt most of the EU legislation that underpins it – without any say in framing it. Again, there is zero chance of Canada proposing or accepting such an arrangement.

So does “associate membership” amount to the status quo, with window dressing – a cluster of sectoral agreements like, say, Switzerland’s? Unlikely. It’s hard to imagine either the Prime Minister or the President of the European Commission, Ursula von der Leyen, would be investing so much political capital in an idea with so little substance. It’s true that all past experience would suggest the chances of something emerging from pending Canada-EU talks that would meaningfully increase integration without significant loss of sovereignty are slight.

But these are not normal times. Reading between the lines of the statements from various European leaders, there is plainly a readiness to think more creatively, to consider novel forms of co-operation. This is not, after all, merely about trade between the EU’s member countries and Canada, but about their place in the world, as democracies, at a time when the non-democracies are every much on the offensive: Russia, China, and, dismayingly, the United States.

So whatever this involves it is certain to extend beyond trade or the economy, to include defence and security matters – security, in the sense it now has of protecting essential infrastructure, not just from overt sabotage, but from being used as a point of leverage by one hegemon or another. It is noteworthy, for example, to see payments systems listed as one possible area of co-operation.

Canada is already part of the SAFE (Security Action for Europe) procurement arrangement, the first non-European country to join. Ms. von der Leyen, in the same State of the Union speech in which she welcomed Canada as a potential “associate member,” also proposed the creation of a European Security Council that would include, in addition to the EU, Ukraine, Norway, Britain, Canada “and others” – but not the United States.

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Who might those others be? In recent days, Australia has said that it would like to pursue an arrangement with Europe similar to what Canada is proposing. Perhaps other democracies may follow. A Canada-European agreement might serve as the template, the test case, for a broader alliance of the democracies – political, economic, military – each sovereign in its own realm but with the reciprocal obligations that go with it, including the obligation to come to each other’s aid if attacked: again, militarily or economically.

We shall see. It is early days. But something enormous is under way. Even as the old world order cracks, a new one is forming. And Canada is at the centre of it.

There is much peril in it, to be sure – Mr. Trump has already warned that he might view a Canada-Europe deal as a “hostile act,” depending on what it contained. Whatever the benefits of diversification, and however speedily we pursue them, we will remain heavily dependent on American trade and American co-operation for some time to come. It is entirely possible that Mr. Trump will ramp up his attacks on us, especially after the midterm elections.

But whatever befalls us, at least let it be said that we did not simply let history wash over us, as helpless spectators to our fate – that we acted to shape events: to build our defences, to expand our options, to improve our odds. This week, it felt as if something in the country had been unleashed, as if that surge in unity and patriotism we have all been feeling over the last few months had finally been channelled into something purposeful.

There is much more to do. But it’s a start.