Obviously it's going to feel like Canada got worse because others got more competitive. If we were to remove the Russians and most Europeans along with a lot of Americans... Quebecois players would suddenly be a lot more prevalent in the NHL again.
Coincidentally people say professional boxing got a lot worse after the Cold War once Eastern Europeans (along with other countries generally getting better) started competing because it's not just mainly an American sport anymore.
There's a lot more to it than that. No one says Canada was weak in the early mid 90s, despite the NHL being fully international. The main reasons are:
* Declining birthrate. There are less NHL aged (18-35) Canadian born males now than in 1990, and about the same as in 1960. A smaller pool to pull from will result in a lower talent pool.
* Declining popularity of hockey. As recently as 1990, hockey was the unquestioned king in Canadian sports for youth participation. Throughout the 90s, basketball and soccer exploded in popularity, with football making strong gains too. If you were athletic in the 80s in Canada, you almost certainly played competitive hockey. Now, hockey is fighting with basketball for #2 for youth participation in Canada (soccer is first), with large urban centres like Toronto it is clearly behind basketball for youth participation. A guy like Nate Darling, if he was born 15 years earlier, would be in the NHL. Most of Canada's growth is in new Canadian/children of immigrants. This group overwhelmingly chooses sports other than hockey. Andrew Wiggins would be a start in the NHL if born a generation before.
* Rising cost of hockey. Population growth is exceeding the rate of new rinks being built. Equipment is very expensive, and ice time cost is insane. More and more hockey interested males are pushed out because their families are not wealthy enough.
* Youth organization. Basketball and football are fully integrated into the school system. Costs are lower as many of the inherent costs within the sport are absorbed by the schools. Hockey, at high levels, is fully private so everything from ice team to equipment to travel is wholly born by parents. The avenue to success require either private schooling, some form of billeting for a teenager, and eventually the CHL where you are travelling across 1/3 of the country at 16.
* Urbanization. Many of hockey's greats hail from small towns where ice time is plentiful and the local pond is a training grounds. As more and more Canadians live in large urban centres, the availability of pond hockey will naturally decline
* Declining athleticism. There are more and more entertainment opportunities for children these days. My dad's options were hockey or hockey. I could pick a sport or play video games or play on a computer. My kids have access to the whole entertainment world on YouTube or the internet. As more things compete for time, there will be more and more kids who could have played pro hockey who simply have interests elsewhere.
* Loss of cultural relevance. Hockey is still very popular in Anglo-Canada, but is no longer #1 in Franco-Canada. I have cousins who played high level soccer in Montreal. A generation before, they would have been hockey players. In immigrant groups, hockey struggles for relevance. Hockey went from an integral part of the Canadian identity in the 1980s, to a side affair for half the country in 2020. As more and more of Canada is made up of visible minority groups hockey will continue to fall in popularity. And the hockey community as a whole has done very little to bring these groups into the fold.
We will continue to see hockey decline in popularity in Canada. Basketball is more popular than ever in Canada, with Canada producing more NBA players than anyone besides the USA. Soccer will continue to dominate youth participation.
This isn't a trend that is going to reverse. Hockey will just play a smaller and smaller role in Canada as time goes on.