Failed Canada talks show how U.S. risks losing its hidden power | Opinion

What does the breakdown of Canada-U.S. trade talks have to do with sanctions against International Criminal Court judges —and the sale of a Canadian payment processor to an American private equity firm?

More than it might seem.

This week, negotiations aimed at resolving the escalating Canada-U.S. trade dispute collapsed. New 50 percent American tariffs took effect on billions of dollars of Canadian goods. Prime Minister Mark Carney suspended negotiations and announced dollar-for-dollar retaliation, saying last-minute American demands were “unfair” and “uneconomic” and called into question the reliability of any agreement.

The dispute is the latest reminder that economic interdependence does not distribute power equally. To understand how far that power can reach, consider Kimberly Prost.

Prost is a Canadian judge on the International Criminal Court. She and fellow judges Solomy Balungi Bossa of Uganda and Reine Alapini-Gansou of Benin sued the Trump administration in federal court in June, challenging sanctions imposed on them for their work. Their complaint describes disruptions to banking, credit cards, travel, insurance and major American technology platforms—consequences they characterize collectively as a “financial death penalty.”

The United States did not arrest Prost or exercise jurisdiction over the territory where she lives. The U.S. does not recognize the authority of the International Criminal Court. Washington placed her on a sanctions list, and the reach of the American financial and technological system did much of the rest.

The campaign has continued. Last week, the administration sanctioned ICC President Tomoko Akane of Japan and senior trial lawyer Abdoulaye Seye of Senegal. Earlier this month, Human Rights Watch, the Open Society Institute, the American Friends Service Committee and the Center for Constitutional Rights also sued the administration, arguing that the sanctions interfere with their work and violate constitutional protections.

Whatever one thinks about the ICC—and there are legitimate arguments about its jurisdiction—the sanctions reveal an underappreciated dimension of American power. Much of the global economy depends on access to the U.S. financial system. Global businesses transact in dollars. Visa and Mastercard are American, as are many of the world’s dominant technology companies. A decision made in Washington can therefore be implemented by private actors thousands of miles away.

Now consider Moneris.

Earlier this month, two of Canada’s largest banks, Royal Bank of Canada (RBC) and the Bank of Montreal (BMO), agreed to sell their jointly owned payment processor to San Francisco-based Francisco Partners for roughly $1.44 billion. Moneris is hardly a household name, but it sits behind a significant part of Canadian commerce.

The sale does not give President Donald Trump an “off switch” over Canadian commerce. Canada’s payment system is already deeply integrated with American and global financial networks. But that is precisely why the sale deserves scrutiny. It raises a question largely ignored during the high-water mark of globalization: How much critical infrastructure should be exposed to the laws and political decisions of another country?

Payment processors, cloud providers, data centers and digital platforms have joined ports, telecommunications and energy as critical infrastructure. Who owns them and whose laws govern them are no longer simply commercial questions.

Canada and the U.S. have spent decades integrating their economies, producing enormous prosperity on both sides of the border. But the relationship is not symmetrical. Canada sends nearly three-quarters of its exports to the United States. Washington simply has more room to maneuver. Carney has accused Washington of using that economic integration “as a weapon.”

Interdependence does not eliminate power. Sometimes interdependence is the source of power.

The ICC sanctions, the Moneris sale and the failed trade talks are obviously different, but they illustrate that reality at different levels. When dependence is asymmetric, it can become leverage.

None of this means Canada should wall itself off from the United States. The economic relationship remains enormously valuable to both countries. But as Canada reassesses its dependence on the U.S. in trade, manufacturing and supply chains, it should also examine vulnerabilities in the financial and digital infrastructure on which its economy depends.

There is a risk for Washington as well. For decades, the United States built something more valuable than an enormous economy: a system much of the world chose to use. Countries held dollars. Businesses relied on American technology. Investors trusted American markets. Allies integrated their economies with the United States.

That gave Washington extraordinary influence, but it also depended on confidence. The more allies believe economic integration can expose them to political coercion, the stronger the incentive to seek alternative markets, payment systems, technology providers and supply chains. None will replace American dominance anytime soon. But strategic advantages can erode long before they disappear.

America’s ability to use its market, financial system and technological infrastructure as leverage is undeniably a source of power. But coercive power and dependable infrastructure ultimately pull in opposite directions. The more Washington demonstrates that dependence on American systems can become political leverage, the more rational it becomes for even close allies to reduce that dependence.

The failed Canada-U.S. talks, the ICC sanctions and the Moneris sale may appear unrelated. They aren’t. Each demonstrates the enormous power that comes from being at the center of systems others depend upon.

But there is a price to reminding the world of that power too often. Eventually, others may decide they need to depend on it less.

Faisal Kutty is Professor of Law at Southwestern Law School.

The views expressed in this article are the writer’s own.