Derisking vs. Decoupling: A Critical Choice for Canada in a Time of Global Realignment and China’s Increasing Threat

A container ship sails past gantry cranes in Tsawwassen, B.C., in a file photo. The Canadian Press/Darryl Dyck

Commentary

As Canada navigates a shifting geopolitical landscape shaped by trade tensions, great power rivalry, and mounting hybrid threats, a pressing question looms: Should Canada decouple from authoritarian regimes, particularly China, or pursue a policy of strategic derisking? The answer will define our national security, economic sovereignty, and credibility among democratic allies.

The terms “decoupling” and “derisking” have become increasingly prominent in Western political discourse, especially since the European Commission’s 2023 articulation of “de-risking” as the preferred alternative to U.S.-style decoupling. At first glance, they may appear similar, but their implications for Canada—economically, diplomatically, and strategically—are vastly different.

Understanding the Concepts

Decoupling refers to a deliberate severing of economic ties, particularly in sectors with national security relevance such as telecommunications, critical minerals, defence, artificial intelligence, and finance. It is a policy of clear disengagement aimed at reducing strategic dependency and exposure to hostile influence.

Derisking, on the other hand, is more selective. It entails identifying vulnerabilities and minimizing strategic dependencies without necessarily severing economic relations altogether. This policy favours resilience-building, diversification of supply chains, and investment screening, while maintaining some level of engagement.

What’s at Stake for Canada

Canada finds itself wedged between two powerful currents. On one side is its largest trading partner, the United States, which is increasingly pushing for more aggressive decoupling from China in sensitive sectors. On the other is a globalized economy still enmeshed with Chinese manufacturing, capital, and technology—especially in areas like green energy, rare earths, and pharmaceuticals.

Decoupling would entail significant short-term pain. For Canada, this might include disruptions in supply chains, increased costs for manufacturers, and the need for a rapid reorientation of foreign investment and trade flows. However, decoupling also offers long-term clarity. It sends a strong message about where Canada stands in the ideological contest between democracies and autocracies.

In contrast, derisking offers flexibility—but potentially at the cost of strategic ambiguity. While it may preserve economic benefits in the short run, it risks failing to adequately address foreign interference, elite capture, and the leverage authoritarian regimes hold over key sectors of Canada’s economy.

Implications for the US and Our Allies

Canada’s credibility with its Five Eyes partners, NATO allies, and Indo-Pacific democracies depends in part on our ability to align strategic priorities. Washington is increasingly skeptical of ambiguous middle-ground policies. So are Australia and the UK, who have already moved to limit Chinese investment in infrastructure, tech, and real estate. Even the EU, where derisking originated, is beginning to confront the hard limits of economic engagement with adversarial states.

Failure to clearly choose could isolate Canada. If Ottawa continues to allow foreign state-linked firms access to critical infrastructure or strategic sectors under the banner of “openness,” we risk becoming a weak link in the Western security architecture. This could mean exclusion from advanced intelligence sharing or economic cooperation frameworks designed to secure democratic supply chains.

Canada’s Unique Vulnerabilities

Canada is particularly vulnerable to hybrid threats—economic subversion, IP theft, elite co-option, and disinformation campaigns—largely due to regulatory complacency, underenforced laws on foreign interference, and a historically passive approach to strategic trade relations.

Consider the People Republic of China’s deep penetration into Canadian real estate, universities, energy, and advanced technology sectors. Or the long-standing failure to enact and enforce robust beneficial ownership and foreign influence transparency laws. A derisking-lite approach may not be sufficient in this context.

The Way Forward

Canada must not view decoupling and derisking as mutually exclusive. Rather, we need a tiered strategic framework:

1. Full decoupling in national security and critical infrastructure sectors, including defence, advanced tech, data storage, and critical minerals.
2. Tight derisking in supply chains and manufacturing, including diversification from Chinese manufacturing dependencies in pharma, EV batteries, and rare earth processing.
3. Selective engagement in non-sensitive sectors, under robust screening and transparency regimes.

To support this strategy, Canada must implement:

A modernized Investment Canada Act with teeth.

A national registry of foreign agents.

Coordinated sanctions and investment controls with the U.S. and likeminded allies.

Resilient trade pacts and innovation partnerships with democratic countries in the Indo-Pacific, EU, and Global South.

Conclusion

Canada’s window for choosing its strategic path is narrowing. In a world where authoritarian regimes weaponize interdependence, we must ask ourselves not just what level of risk we can tolerate, but what kind of nation we want to be. The United States and our democratic allies are watching. So are our adversaries.

If Canada wishes to be seen as a trusted, capable, and sovereign partner, the time for ambiguity is over. The choice between derisking and decoupling isn’t just about economics—it’s about values, alliances, and national survival in an age of strategic competition.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.