The trade war goes digital
CCPA | 5 January 2026
The trade war goes digital
by Kaylie Tiessen
Digital services represent one of Canada’s fastest growing trade related opportunities. According to the World Trade Organization, Canada’s trade in digital services—both imports and exports—grew by more than 200 per cent between 2005 and 2024. Across industries, removing frictions from trade relationships has been a centrepiece of increasing total trade volumes with real potential to help grow Canada’s economy.
However, this pursuit of seamless digital trade has often come at the cost of digital sovereignty. In our quest to facilitate international trade, Canada agreed to rules that compromise our ability to fully control and regulate our digital landscape. These agreements, while beneficial for trade, limit Canada’s ability to protect our data, enforce privacy standards, and consider local economic interests.
Large tech firms in the U.S. and elsewhere can decide how social media operates, how disinformation spreads, and who can access our data if it is stored in an international data centre. None of that is sovereign.
The path to regaining governance capacity over our digital world is long. We need to impose current and new rules on large digital platforms. We also need to gain the right to hold platforms accountable in the first place.
The United States shields digital platforms from liability for third-party content through Section 230 of the Communications Act (1996). Canada enshrined something similar into CUSMA in 2018. This means that, while Canada could implement its own law that would hold digital platforms liable for hate speech published by a third party on its platform, only companies not subject to cross-border CUSMA rules would be required to follow it.
Canada hasn’t been absent from the digital sovereignty fight. The current moment in Canada’s economic history requires us to become more savvy about our digital trade agenda and rebuild the ability to regulate international digital companies operating inside Canada. A core challenge to reclaiming sovereignty is that we’ve tied our hands through successive trade deals.
The digital chapter in CUSMA (Canada-U.S.-Mexico Agreement) may be the most egregious, but the CETA (EU–Canada Comprehensive Economic and Trade Agreement) and even the new Canada-Indonesia Comprehensive Economic Partnership Agreement restrict the ability of the Canadian government to regulate certain aspects of our digital economy in the public interest.
Under CUSMA’s digital trade chapter, Canada promised not to pass rules that treat American or Mexican digital products—such as apps, e-books, online games, streaming content and connected software—worse than a similar Canadian digital product. That means Canada can’t develop a law or regulation that explicitly boosts made-in-Canada apps through higher rankings, lower fees or taxes foreign digital products more heavily, as these would likely fail the non-discrimination test. One exception to this rule is for defence-related purchases.
We’re also barred from requiring that data collected by foreign companies be processed and stored locally—that means that even if Canada builds a true sovereign cloud, the country will not be able to require digital giants based in the United States to use it.
CUSMA bars us from requiring transparency from any digital provider regarding their source code or algorithms—bye-bye social media and AI safety. We cannot restrict the cross-border transfer of information by electronic means unless it is necessary to achieve a legitimate public policy objective. And once data has crossed the border, it is no longer subject to Canada’s laws, including privacy laws.
Like CUSMA, the CEPA and CETA require that suppliers from their countries are treated no less favourably than Canadian firms—making “buy Canadian” more difficult to achieve.
The CETA agreement also made it more difficult for financial regulators and supervisors to act or react to changing markets by designing laws or regulations to curb undesirable market behaviour or outcomes.
The U.S.’s CLOUD Act (Clarifying Lawful Overseas Use of Data), which is not a trade agreement, allows U.S. authorities to gather American companies to disclose data, including e-mail and other electronic communication, documents stored on a cloud and non-content data.
Canada has spent numerous legislative sessions trying to assert some form of sovereignty over the markets digital conglomerates operate in. The Online Streaming Act, the Online News Act and the Online Harms Act are all recent, high-profile examples of the federal government trying to exert autonomy and control over our digital world, with one hand tied behind their back.
Meta and Google had different approaches to undermining the Online News Act, but undermine they did—Google by negotiating a lower price tag in exchange for its agreement to pay, and Meta by blocking Canadian news from its apps entirely.
TikTok was banned from all federal government devices and the company was forced to close its Canada office. That hasn’t changed the fact that the data TikTok collects from Canadians travels across borders and can be accessed under the rules of whatever country the data is stored in. The move may have given the public the illusion of action but deeper questions about what was achieved remain.
Achieving full digital sovereignty requires multiple infrastructures and rules layered on top of each other.
In September, 70 individuals and national organizations published an open letter listing 14 recommendations that, together, can help build digital sovereignty. They range from introducing a new and improved online harms act and reconsidering the cancellation of the digital services tax to establishing a national observatory for digital governance and building the capacity of the public service to govern the digital marketplace.
Prime Minister Mark Carney has mentioned a sovereign cloud, with a plan to build data centres across the country. In their election platform, the Liberals promised to regulate AI and to unlock its full potential. That’s not possible without digital sovereignty.
All of these efforts will absolutely help us build sovereign digital infrastructure. But without renegotiating trade rules, any company operating in Canada will have the ability to opt out of most regulations the government sets.
If we don’t have control over what digital tech companies are and are not allowed to do with our data or how they are or are not allowed to manipulate us, then they will always be in charge and we will always be subordinate.
Right now they decide what information is delivered to our feeds, how disinformation is allowed to spread and whether or not kids are at risk of being addicted to technology. In the United States, they can be made to share our data with authorities. They decide how e-commerce businesses and large companies are ranked in apps, what books are recommended for us to read and what job advertisements Canadians see.
With the right digital alternatives in place, Canadians could choose to avoid the extractive, manipulative architecture that puts all of our privacy and sovereignty at risk. But those other options will always be available if we’re not allowed to kick them out, or require them to operate by our rules.
Canada needs our sovereignty back. Getting it will require rewriting trade rules.
