Earlier this month, Canada resumed stalled trade talks with the Trump administration.DARRYL DYCK/The Canadian Press
Barry Appleton is a Distinguished Senior Fellow and co-director at the Center for International Law at New York Law School and a Fellow at the Balsillie School of International Affairs.
As Canada enters trade and security negotiations with the United States, we face a stark choice: assert our digital sovereignty now, or risk becoming a permanent branch plant in America’s tech empire.
Global powers are weaponizing AI algorithms and data to reshape economic dominance – and so the timing of the talks could not be more critical. They will determine whether Canada controls its digital economy or cedes it to foreign platforms.
The evidence suggests we’re already dangerously behind.
In early July, Canada resumed stalled talks with the Trump administration with a humiliating cave-in on the Digital Services Tax – just one in a series of strategic misplays in our intangible economy over the years. When Meta blocked Canadian news content in 2023, our government had to negotiate like a junior partner. Though TikTok‘s Canadian offices have been ordered closed, the app continues to be accessible in Canada, operating under Beijing’s data rules. Amazon Web Services hosts sensitive government data under U.S. surveillance laws. Our AI companies train on U.S.-controlled datasets, then struggle to compete globally.
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Today’s economy increasingly runs on algorithms we don’t control, through platforms we don’t regulate, and under rules we didn’t write. Digital governance now determines economic competitiveness, democratic legitimacy, and national security simultaneously. Countries that control their digital infrastructure control their economic destiny; those that don’t, become digital colonies.
Our competitors understand this reality. The U.S. sets global norms through aggressive antitrust litigation, export controls on AI chips, and new trade demands. The European Union has codified its digital world view in comprehensive legislation, forcing global compliance. China controls domestic platforms and exports its governance models.
Canada, meanwhile, uses trade tools from a predigital economy. Our copyright laws are silent on AI training data. Our competition framework cannot handle platform monopolies. Having testified before U.S. executive agencies twice this year on trade, I know that our trade negotiators, who are trained to regulate energy and wheat exports, will face digital-economy lawyers fluent in APIs and algorithms.
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The upcoming trade and security framework with the U.S. presents both opportunity and peril. Done right, it could establish Canada as an equal partner in North American digital governance. Done wrong, we risk permanent technological dependence.
I have been involved in advising governments and businesses on trade policy since the NAFTA negotiations, but these new challenges are perhaps the most significant we’ve ever had to face. Key issues on the table include data localization requirements, algorithmic transparency standards, and cross-border data flows, and they expand into tax policy, broadcasting and financial decisions. These are not technical details. How we negotiate these provisions will determine whether Canadian companies can compete, whether our citizens’ data stays protected, and whether our democracy remains insulated from foreign manipulation.
What’s more, the cost of getting this wrong compounds daily. Canadian startups get acquired before they scale because we lack regulatory frameworks to nurture digital champions. Our citizens’ data flows freely across borders while our government struggles to audit the foreign-owned algorithms that shape everything from mortgage approvals to election outcomes.
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Our window is closing fast. The U.S.-China AI competition is accelerating. New trade agreements are being negotiated that will lock in data governance standards for decades. The EU’s regulatory model is spreading globally through the “Brussels Effect.” If we do not act decisively, Canada will miss this generation’s defining wave of digital rule-making.
Sovereignty doesn’t mean building walls. It means writing rules that preserve our ability to act. Data localization, algorithmic transparency, and intellectual property control are no longer niche concerns. They require new skills and new jobs: legal technologists, algorithm auditors, treaty lawyers versed in the digital economy. To encourage such thinking, Ottawa should immediately establish a Digital Sovereignty Commission with a mandate over cross-border data, algorithmic governance, and strategic technology policy, to bring legal, economic, and rights-based expertise to the negotiating table.
But the challenge extends beyond government. We need to embed digital governance expertise throughout our institutions: in universities, regulatory agencies, and the private sector. Recent investments in digital governance research represent important steps, but they’re just a down payment on what’s required.
Canada has the democratic traditions, academic excellence, and innovative capacity to lead global digital rule-making. But we must match that potential with the scale of investment and institutional change required to realize it.
These negotiations are a crucial test that will decide whether Canada owns its digital future. The future of prosperity is digital. The question is whether Canada will seize control of that future while we still can.