Carney's rupture: Rethinking the rules-based order

Canadian Prime Minister Mark Carney delivered a frank and impassioned speech at this year's World Economic Forum at Davos. He argued that in an era of great power competition, middle powers can no longer afford to maintain the fiction of a rules-based order. While never calling out President Trump by name, Carney highlighted the broader “rupture" in the global order.

Speaking with the Lowy Institute's Sam Roggeveen, Lydia Khalil discusses the value of rhetoric and dissects how Carney's remarks are being viewed in Canberra and other world capitals. While it has been much talked about, will Carney's speech shift how middle powers coordinate globally?

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Canadian Prime Minister Mark Carney: Let me be direct. We are in the midst of a rupture, not a transition. Stop invoking rules based international order as though it still functions as advertised. Call it what it is: a system of intensifying great power rivalry, where the most powerful pursue their interests, using economic integration as coercion.

Lydia Khalil: That was Canadian Prime Minister Mark Carney at this year's World Economic Forum Davos gathering, delivering what has become one of the most talked-about foreign policy speeches in some time. And today at Lowy Institute Conversations, we're going to keep talking about it. My name is Lydia Khalil, Program Director of Transnational Challenges, and I'm joined by my colleague Sam Roggeveen, Director of the International Security Program. Hey Sam.

Sam Roggeveen: Hi Lydia.

Lydia Khalil: Sam, you highlighted Carney's speech in a recent Interpreter piece. In your article, you called Carney's speech a cri de coeur. What makes this speech so significant to you?

Sam Roggeveen: Well, first of all, just to allude to your introduction about the popularity of the speech and the fact that it's all everyone could talk about for some time—that in itself is significant. It's a victory for rhetoric in politics and in public conversation, and that's notable. I can't recall the last time that a speech by a leading politician was so prominent.

Lydia Khalil: We're so used to dissecting tweets, right?

Sam Roggeveen: Yeah, indeed. So for that reason alone, it's a hopeful moment, and it raises the status of political rhetoric in our national conversation here in Australia, but also globally. We know, for instance, that our Prime Minister read the speech, and our Treasurer—they've both commented favourably on the speech. And so I can imagine politicians like them and around the world, aspiring politicians, saying to themselves, "Okay, this is how I make my mark. I write a speech, I do the work, and then I deliver it somewhere and I make an impact." That alone, I think, is a hopeful moment in political affairs, when political rhetoric can reach that status. That, I think, is a good thing.

Lydia Khalil: So rewarding being articulate.

Sam Roggeveen: Yes, indeed. And I think it's also pretty well known on that subject that Carney himself had a big hand in writing this speech. I doubt he wrote the whole thing. There's a long section of the speech which is basically a recitation of the government's achievements that could only have been written by a bureaucrat—the kind of bloodless, stale way in which it's written. I can't imagine Carney himself was responsible for it. But the key section of the speech, the Václav Havel section of the speech about putting the sign in the shop window—that stuff, I imagine, was written by Carney himself.

Look, I think the other prominent, important aspect of the speech—and perhaps somewhat overlooked in the discussion afterwards—was that he was talking about the role of great powers. I think the obvious and clear interpretation is that Carney was responding to the US and was responding to Trump. And of course, that's a reasonable interpretation, given the kind of pressure the Canadians have been under, including just last week Trump on his social media account displaying a map of North America in which Canada is depicted as American territory. Really outrageous behaviour.

Lydia Khalil: I thought we were the 51st state!

Sam Roggeveen: Maybe we'll be the 52nd now. So he's been subject to a lot of provocations, so you can easily read Carney's remarks that way. But he was careful, I think, and quite precise and quite deliberate about referring to the great powers, and that this was a world of walls and of fortresses that the great powers were setting up. I mean, he'd just come back from a trip to China, which I think was a very productive one, and he announced some trade agreements that came out of that. But I think Carney was also sending a message that this is how great powers now behave. So we have to look after ourselves in an increasingly chaotic, less rule-bound world.

Lydia Khalil: I have to admit, one of the things that I first thought about after Carney's speech—and I don't disagree that it was significant, it obviously was—but it just struck me. I remember thinking that this is not anything that has not been said before by many non-aligned nations for decades. In fact, many of our Asian neighbours have repeatedly pointed this out. And so do you think the significance is just the fact that it was a Western leader that was saying this?

Sam Roggeveen: I'm sure it helps, certainly in the Western press, and certainly in the European press, that it was a Western leader saying this. You're quite right that this is not new for Asian leaders. And in fact, if I can give a quick shout-out to a recent Lowy Institute paper written by Bilahari Kausikan, he points out that Singapore has been saying stuff like this for some time. Singaporean leaders have been saying things like this for some time. So this is not new in the Asian security discourse.

I'm sure it helps that this comes from a major G7 leader, and also from a country that is directly in the sights of America's president right now. And in turn, as I said, that leads to, I think, a slight misreading of the speech as being purely about America, but it's also about how great powers behave. And Carney spoke at length about this being a world of growing fortresses.

I would point out, though, that even though the speech is incredibly articulate and impressive in the way it diagnoses the problems of modern geopolitics, it's not that persuasive in the way it talks about the solutions. We can get on to the question of how middle powers coalesce together, which is something he recommends. But I'd also say when he talks about the fact that all nations are building fortresses, I don't actually think that's true. In fact, the American economist Tyler Cowen has argued recently in a Bloomberg op-ed—and I think he's right about this—it's really just America that is putting up the walls, that is putting up the fortresses. The rest of the world is still very much engaged in the globalisation project that marked the neoliberal era. It's often said that that era is in retreat, but I still think we're living through that, and globalisation is not in retreat in the way that observing American politics alone might suggest.

In fact, the fact that Carney went to China to ink a trade agreement is itself evidence of the fact that one rational and smart response to what America's been doing under Trump is to double down on globalisation and to seek reinforcement of your international trading links outside of the United States. I mean, that's evidently what Canada is doing, and it's something that Australia has done as well in the past.

Lydia Khalil: Let me press you on this point a little bit, because you said, okay, he talks about in his speech the need for middle powers to come together. And I want to ask you about that a little bit later. You say also that his speech not just focused on the United States, but also the actions of great powers in general. So here we're talking about US and China, right?

Sam Roggeveen: Well, Russia too, of course, and its behaviour in Ukraine.

Lydia Khalil: Well, is Russia arguably a great power or not?

Sam Roggeveen: Yeah, that's a separate question.

Lydia Khalil: But then, do you think the fact—the very fact of what you pointed to, that he went to China to ink a trade agreement—doesn't undercut his argument, but also says that dealing with great powers is unavoidable, and that it's still incredibly important? If it's not going to be the United States, it's going to be China, or it's going to be someone, right? That it's not enough, really, for just the middle powers to come together.

Sam Roggeveen: Yes, dealing with great powers is unavoidable, and that question is particularly stark for Canada. And the point I tried to make in the Interpreter piece that you referred to is that the Canadians are actually in a very tough position here. To my mind, a speech like this and the sentiments that it embodied would have been more persuasive coming from an Australian Prime Minister than they do from a Canadian, because Canada shares this massive border with the United States. Its security is dependent on the United States. The trade dependency on the United States, for instance, is roughly double what Australia's trade dependency on China is.

So there is a massive imbalance here between the United States and Canada, and Canada simply cannot avoid that. I mean, no number of trade agreements with China or with any other country are going to change the fundamentals of Canada's geography, its strategic geography. It simply has to deal with the United States. It cannot—given its population and its economic size—sustain an antagonistic and hostile relationship with the United States over the long term.

Australia's position, in that sense, is actually much better. Geography helps us, because we are physically further away from the United States. We don't share a massive land border. The United States is in Asia and in Australia by choice, not by necessity. And so if we're ever to have a Canada moment with the United States, then we could deal with the fallout from that much more easily than Canada could.

Lydia Khalil: So Sam, Carney in his speech obviously painted a relatively bleak picture, right? And I think he was doing that to emphasise and bring home the point that we have a breakdown of the system. And I think he did that to again drive home the point that US leadership is unstable at this moment. But in this emphasis around breakdown, is there something that you felt like he didn't quite adequately acknowledge about some of the advantages that we had and still have? I mean, in his speech, he talked a lot about how great powers circumvented the rules anyway, that they exempt themselves, that there was a discrepancy between values and action. Granted, that was certainly the case, but there were still advantages of the pretence of this values-based, rules-based order.

Sam Roggeveen: Yeah, I think part of the damage that the Trump administration has done is that it has undermined what you might refer to as the value of hypocrisy. So Carney is absolutely right in saying that great powers reserve for themselves the right to put aside the rules-based order and even act outside of it when they needed to. They've always done that, and they continue to do that, but they have always tipped the hat to the rules-based order, if you like.

An outstanding example is the 2003 invasion of Iraq. At least the Americans went through the pretence of going to the United Nations. When they didn't get the answer that they wanted from the UN, they went anyway. So there was damage done. But there is some value in maintaining this hypocrisy, if nothing else, because it sets a standard against which others can be judged, and the United States itself can be judged, but also other great powers.

Under the Trump administration, of course, the United States is saying, "Well, that was all a lie anyway, and we're no longer prepared to live by the lie." And Carney is, I think, making the same point: let's not live by the lie anymore, particularly if the United States is not prepared to.

But looking beyond that, I'm a bit more optimistic than Carney, because what we refer to as the rules-based order is in large part maintained by self-interest and maintained by the logic of economics. So globalisation, for instance—of course the World Trade Organisation and free trade agreements, that whole network, that spaghetti bowl of international trade liberalisation agreements that we're all familiar with, of course they play an important role—but ultimately, what makes countries want to engage in that kind of trade is because it works for them. It makes them wealthier. And that's not going to change. Those kind of economic motivations are not going to change.

And that's why I say, even though the United States is really in a phase of really quite irrational self-harm at the moment when it comes to economics—I mean, you had the US Commerce Secretary, for instance, at the Davos meeting saying that globalisation had been incredibly harmful to the United States. Now, on any kind of reading of the stark facts in the globalisation era, that simply isn't true. The United States has become immensely wealthier in that period, and globalisation has played a huge role in that. They're now, for their own ideological reasons, wanting to reverse that. But that doesn't mean the rest of the world has to go along. And in fact, on present evidence, it seems as if they're not.

Lydia Khalil: So let me press you about where you think Carney's speech will ultimately lead. All right, it's served as this wake-up call: old order gone, nostalgia is not a way forward. Will it serve its purpose, ultimately, of galvanising middle powers to kind of reshape the system, coming together over certain issues in a cooperative manner to withstand the pressure of great powers and great power competition? As you said, do you think that's even possible without the security umbrella of the United States, which allowed the previous order to maintain itself?

Sam Roggeveen: On the first point about middle powers coming together, no, I don't think Carney's prescription there is persuasive, particularly when it comes to security. On economics, certainly, because to return to the previous point, the economic logic stacks up there. And there is a clear interest for these middle powers to trade with each other in the freest way possible.

On security issues, unfortunately, the story is somewhat less optimistic, simply because most of these countries that we're talking about—whether it's Canada, the European middle powers, Australia, Japan, South Korea, India (India is a great power, of course)—these countries are geographically too disparate to form any kind of coherent security entity. I can't see them coming together, because their vital security interests are not engaged with each other. So for instance, when India gets involved in a security dispute with China, there's no obvious reason why Canada or Australia ought to muck in beside them, right? So I don't see that going anywhere, unfortunately.

We're all much more alone than we were a couple of weeks ago, before the events around Greenland and the Davos conference and so on. We should all be feeling more alone, and we should all be responding to that. If Carney's speech has a long-term impact, it is in galvanising other middle powers—not so much to seek reassurance among themselves, but to think to themselves, "Well, okay, we're on our own here. We're much more on our own than we thought we would be, and we will need to start thinking much more seriously about a post-American security posture."

The Europeans are clearly doing that. I would recommend a long read that appeared in the Financial Times about conversations that European leaders are now having about a post-American NATO. It's notable to me that Australia is nowhere near ready to have that conversation, but I hope, personally, that we can advance that conversation over the coming year.

Lydia Khalil: Well, that was exactly what I was going to ask you. Do you think that this speech is actually finally going to serve as a wake-up call for Australia to actually properly interrogate its relationship with the United States, particularly the security relationship? You know, this message that we've been getting from various governments through both iterations of the Trump administration, that everything's largely fine, nothing to see here. We had the White House meeting. We've inked the critical minerals deal. We're managing this relationship. It's all good. Do you think this speech—and you mentioned that Australian leaders have read it and referenced it—will it be their impetus now to do the very thing that you're saying we should do?

Sam Roggeveen: I certainly think it has allowed them to—given them permission to think about it more privately, not yet to talk about it publicly, but to think about it more privately. So it's important in opening what policy wonks refer to as the Overton window, at least in their own minds, if not in public rhetoric.

The reason I think I would stop short of saying that it allows for a public conversation on this issue is because, even though there are urgent strategic and foreign policy issues at play here, we have to always remember that these are politicians we're talking about, and they have to consider the politics of this situation. And when I look at Mark Carney, for instance, I can see there is an urgent political imperative and political incentive to talk in the way that he talked. After all, when Trump was inaugurated in January of last year, on that date Carney was rock bottom in the polls, and the opposition was on a clear track to win that election in Canada. Then, of course, Trump starts talking about Canada as the 51st state, and you see this surge in the polls for Carney, because his opponents were actually quite pro-American and pro-MAGA at that point, and that suddenly became incredibly unpopular.

The Europeans too have been on the end of some really withering rhetoric from the Trump administration since just after Trump was inaugurated. Remember JD Vance was at the forefront of this when he went to the Munich Security Conference just after the inauguration. Australia has been exempted from all of that, so there is no urgent political imperative for any political leader in Australia, whether Labor or Liberal or anyone else, to break ranks and say, "Look, we need to reconsider this relationship." So we haven't had that Carney moment.

So I think if I was an Australian political leader, then I think my political judgement would be, "Well, we could just try to sail through this. We could just cross our fingers and say, 'Maybe we'll get through this.'" And given the kind of meeting that Albanese had with Trump last year in the Oval Office, which was incredibly successful, I think Albanese would regard that as being more successful than he could have hoped for. Because Trump even said—even took the pressure off Australia on defence spending. He even said, "Well, not too worried about you spending three and a half per cent," and got even more than that. So from the government's point of view, I would say, "Listen, let's leave well enough alone. There is no need for us to go there."

So we do need a moment for that to happen. And given the unpredictability of this administration, that may yet come. Some people have argued it could have happened over social media, the Australian social media ban. Others have said it could have something to do with the Pharmaceutical Benefits Scheme, with some in the Trump administration regarding that as an anti-trade measure. Who knows what it could be? Maybe we will get through the next three years with no incident of that sort, but it's impossible to predict.

Lydia Khalil: Yeah, that's a good point about the particular political salience for Canada and the lack thereof here in Australia. But it also goes to our earlier point that we were saying: just as Carney had to go to China to ink a trade deal, there is no escaping from dealing with great powers, and so Australia has to maintain this very important relationship with the United States.

Sam Roggeveen: The other factor here is that this isn't for Australia purely a question about Trump. The argument that I've been making in my writing for years now is that the trends are clear for Australia. China is becoming a much bigger security actor. The United States for 30 years now has been observing this massive military build-up—not just an economic rise of China, but a massive military build-up—and its security posture hasn't changed very much in that period, and it's not likely to under Trump, and it's not likely to under his successors.

So to me, when we centre this conversation purely on Trump, then there is a temptation to say, "Well, after Trump, things may return to normal." But actually, I think the real normal here is not that the United States can somehow regain its leadership in Asia. The real normal is that China is going to inevitably take its place as the leading power in Asia. What's still within our power to affect, and what is still in dispute, is whether China becomes the dominant nation in Asia. That's the thing we should be trying to avoid, and that's what Australian policy should be working towards. Increasingly, it looks like we'll have to do that independently, with far less help from the United States.

Lydia Khalil: Lastly, I want to circle back to a point that you've already made. Mark Carney had this to say in his speech.

Mark Carnery: Hegemons cannot continually monetise their relationships. Allies will diversify to hedge against uncertainty. They'll buy insurance, increase options in order to rebuild sovereignty—sovereignty that was once grounded in rules, but will increasingly be anchored in the ability to withstand pressure.

Lydia Khalil: You made the point earlier saying that Australia is well placed to survive and thrive in this world that Carney depicts, and you made the point about our geography. But what else is going in Australia's favour in your estimation?

Sam Roggeveen: Well, it really revolves around some strengths that are, I guess, slightly unpopular at the moment. So we are, globally—at least in the Western world—living through a moment of real questioning about the neoliberal consensus that emerged in the 1980s and '90s, which Australia was very much part of, and which included economic openness, first of all: an open trading economy that is much more centred on Asia, rather than our previous traditional trading partners in the Western world. But also for Australia, an incredibly open and incredibly aggressive immigration program, which continues to this day.

Both of those things are increasingly being questioned around the Western world. I would say Australia's strength is that we haven't questioned those things as much. We're still committed to them, and there is still enough of a political consensus to keep them going. So Australia's commitment to multiculturalism, to very high levels of immigration, remains reasonably resolute. It's been questioned on the fringes, but still remains very resolute. And in an environment where everybody else is cutting back on immigration, questioning immigration, that's even better for us. It allows us to find much more talent from overseas to maintain our economic strength and our economic growth.

And equally, I think our commitment to economic liberalisation, and particularly to a free and open trading economy, is another strength, particularly when the United States is moving in the opposite direction. And really the test case here was a few years ago when China started placing economic pressure on Australia. There was a concerted campaign to hit Australia's exports to China, and we withstood that campaign so well. In terms of our overall economic figures, it was barely a rounding error, because our exporters, our economy was so resilient and so quickly capable of finding alternative markets for those goods that we barely noticed the difference in the Chinese coercion campaign.

So you know, to go back to where we started on great powers and a less rule-bound and more coercive world, Australia's commitment to globalisation is actually a source of strength in that world.

Lydia Khalil: Well, it's always good to end on a note of optimism. Sam, it's been great to talk to you about this.

Sam Roggeveen: Thanks, Lydia.

Lydia Khalil: You've been listening to Lowy Institute Conversations. This episode was produced by Andrew Griffits. You can find past episodes on lowyinstitute.org, our YouTube channel, or wherever you stream your podcasts. Be sure to also hit the subscribe or follow button. Thank you for listening.