Is ‘digital trade alignment’ the Trojan horse of sovereignty?

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In the lead-up to the scuppered trade talks between the Canadian and American governments, the term “digital trade alignment” was being floated by the U.S. trade representative as part of the discussions.

As Canada had previously made digital governance concessions as part of the Canada-US-Mexico Agreement (CUSMA) and Prime Minister Mark Carney had rescinded Canada's digital services tax amid trade pressure from the Americans and eliminated financial contribution requirements for foreign streaming services under the Online Streaming Act, there were concerns among Canadian groups about just what this “trade alignment” could signal.

Vass Bednar, managing director of the Canadian Shield Institute, an independent policy institute advancing Canada's economic resilience, sovereignty, innovation, and global competitiveness, says that for all of the positive connotations of alignment, what the Americans have been seeking is alignment with their expectations. They expect Canada to fall in line with their standards of little to no regulation, allowing the web giants to operate with little oversight. They are treating the digital chapter of CUSMA as a floor, when we should treat it as a ceiling.

“We should be beating back that chapter and trying to gain ground so that we have a better ability to regulate the digital economy.”

'Gaslighting by thesaurus'

Bednar says the government often treats digital as an afterthought and as a discrete sector of the economy, such as agriculture, when, in reality, it’s a layer of the economy.

“We don’t really seem to be realizing that in our trade conversations.”While people claimed to be surprised when issues of Quebec’s language laws, or discoverability requirements for streaming services were raised as part of the last-minute demands by American negotiators, she says those were previously listed as “trade irritants” by the U.S trade representative’s office in its annual report. 

“The surprise would be that they are surprised, and that digital trade alignment is kind of a gaslighting by thesaurus,” Bednar says.

Natasha Tusikov is the criminology program director at York University and writes on tech governance issues. She says the United States advocates extremely aggressively for its sectors, and the tech sector specifically, regardless of whether there’s a Republican or a Democrat in the White House.

“Even if we had a President Harris, there would still be a push to get rid of the digital services tax, online streaming, and online news. It would occur through back-door arm-twisting, but it would be in the normal pressure from the United States.”

That said, Tusikov says things are much different under Trump, befitting a more authoritarian regime. The tech sector has also pledged fealty to the current president, which it wouldn’t have under a Democrat.

This intense allegiance is constraining what Canadian leaders can do with American tech companies. 

Speaking on his own behalf, Brent Arnold, a partner at INQ Law in Toronto and chair of the Canadian Internet Society, says that what the Americans are really seeking is a veto over Canadian digital policy.

“They want to control what we decide to regulate.”

That’s being driven by American hyperscalers and social media platforms that are essentially lobbying against being regulated by foreign entities. 

“They don’t want to have to comply with different rules in different countries. I’m sure this is what’s informing the trade positions that are being taken,” he says.

These positions are not “passionately held” by Trump or his negotiators, but Arnold suspects they’re asserting them in this round of talks because of the deadline for CUSMA renewal. It would be the same for any other country or trading partner that is a significant consumer of American digital products.

“The position is no good to them unless they get the same deal for the rest of the world,” he says.

‘The latest whim of a tyrant’

As for the decision by Google Maps and other tech giants to comply with the Trump administration’s renaming of Lake Ontario, that’s a warning sign that “trade alignment” is becoming a digital sovereignty issue, Bednar says.

The fact that Google can render reality —resulting in three competing realities: Lake Ontario for people in Canada, Lake America for people in the U.S., and both names for everyone else —is “amazing.”

“The executive order directs federal U.S. agencies to make the name change. Last time I checked, Google isn’t a federal agency,” she says.

Bednar thinks that Google was eager to comply because Trump had promised a trade investigation into the European Union for its major fine of Google. If his administration is going to bat for Google, then Google will go to bat for his administration. This becomes digital imperialism, especially when it’s mediated through the algorithms these tech giants control.

“They’re not neutral technologies. Algorithmic curation is not neutral,” she says. 

“These curatorial tools are not transparent or accountable, and yet we treat them as if they’re something that we have influenced or trained, or that they’re truly personal, and that is such an amazing scam.”

Tusikov says the Lake Ontario incident has highlighted just how reliant Canadians are on American tech companies. It’s similar to when WikiLeaks released a massive trove of classified U.S. diplomatic cables, prompting U.S. officials to lobby companies to drop the organization. In response, Visa and Mastercard blocked payments to starve WikiLeaks financially, and Amazon stopped hosting it on its cloud.

"The Americans have done this for years,” she says.

“Lake Ontario is just the latest example of the whim of a tyrant.”

Another example was sanctioning judges of the International Criminal Court, including Canadian Kimberly Prost, who couldn’t use payment systems or other apps or services as a result.

The kinds of concessions already made as part of the digital chapter of CUSMA limit how Canada can regulate digital trade, particularly in response to actions by web giants. That’s why Bednar says that digital governance is the key to digital sovereignty, and why this discussion of “trade alignment” is so important. 

“People need to pay attention to asserting and protecting our basic right to govern our digital economy, which the U.S. seems to want to erode,” she says.

Enormous potential for disruption 

One particular area is around digital privacy. While Canada is moving toward a more robust privacy regime, there is resistance from American players. Arnold also points to attempts by the federal government to legislate a lawful access regime to better coordinate access requests from U.S.-based tech giants for law-enforcement purposes. Companies have pushed back, unwilling to build backdoors into encryption.

“What any lawyer in this space needs to worry about is that there is a danger here that we are going to be handing over control in a way that could prejudice our clients or essentially every business or organization in Canada,” he says, as most businesses are dependent on these services, whether it’s cloud storage or tools like Zoom and Microsoft Teams.

Citing the Trump administration’s decision to briefly limit access to frontier AI models outside of the U.S., Arnold says the potential for disruption is enormous. Canadians need to prepare for these kinds of situations, and he says that’s best done by building redundancy and working toward sovereign solutions to ensure there are Canadian providers to rely on.

Bednar agrees that Canadians should look to build sovereign, secure alternatives and support private Canadian firms that could provide better tech and social media options.

“Sovereignty isn’t just the state doing everything. But sometimes there is a strong role for the state where there is a market failure.”

The reality is, some American platforms aren’t very secure. She points out that while it’s a federal offence in Canada to tamper with physical mail, nothing prevents Microsoft and Google from scanning the content of every email sent and received on their platforms.

France has already begun moving its government officials off Microsoft platforms, and Bednar says people should be calling for Canada to follow suit and create more alternatives to U.S.-based services such as cloud computing.

“The prime minister mentioned (a public cloud) once last fall. When are we building? Why isn’t this a major project? Is that something that Canadians can be investing in through the sovereign wealth fund?” she asks. 

“Why don’t we have a sovereign, privacy-preserving email client based on our telecommunications infrastructure with data residency here? It’s not just saving money; it’s investing in your security and resiliency.”

Building digital sovereignty is an extension of buying Canadian, Bednar says, and the power in aggregate has been evident in the everyday choices Canadians make when it comes to changing the booze they buy or where they go on vacation. 

Of course, building alternatives at scale takes time and massive investment.

“It’s something we can work toward, but it’s not something we can flip a switch and do quickly,” Arnold says.

What’s more, he warns that building sovereign hardware and technology can only take Canadians so far. Running American-based software or storing U.S. data on those servers can still leave them vulnerable to disclosure requests by the American government under U.S. laws.

“The hardware is part of the solution, but the rest of the question is all of the platforms and the software that they are going to be running,” Arnold says. 

“Unless you have all of that in place, you don’t really have a sovereign solution.”

That said, if we treat Chinese or Russian platforms with suspicion because of surveillance, Tusikov thinks we should treat American platforms with the same suspicion.

“It is a bit of a mind shift, because we’re not seeing the Canadian government explaining the true threat that the United States poses,” she says. 

“And it isn’t being made clear to Canadians and Canadian businesses how precarious their data storage is.”