The new Carney government should develop cloud-agnostic services; embrace open-source software; and support the development of a domestic digital industry.
by Guillaume Beaumier. Originally published on Policy Options
May 9, 2025
Sign up for A Stronger Canada for The Trump Era. A temporary newsletter with the latest Canada-U.S. analyses from Policy Options.
(Version française disponible ici)
Following Edward Snowden’s revelations in 2013, many governments worldwide woke to the reality that the infrastructure fueling the rise of the digital economy also posed serious security vulnerabilities. The concentration of digital activities in a handful of American companies effectively granted the United States the power to surveil the world.
While countries such as China actively pursued greater digital sovereignty, notably by restricting the use of American digital services, Canada remained reluctant to take similar measures and sometimes even pushed for greater integration with the United States.
As a long-time American ally, the economic benefits of using digital services developed by U.S. companies outweighed the risks of coercion. Canada even benefited from the global reach of American power by collaborating with American surveillance.
However, as the second Trump administration increasingly appears more like an adversary – threatening to cut off Canada from intelligence sharing and even raising the spectre of annexation – this calculus is rapidly shifting.
Online platforms challenge personal data protection and Canada’s cultural sovereignty
U.S. social media platforms are a national security threat
Dependence on digital infrastructure owned and operated by American companies now seems to put Canadian sovereignty at risk, prompting the need to reduce reliance on the United States for digital services.
There are several steps the new Carney government should take to accomplish that goal: develop cloud-agnostic services, embrace open-source software and support the development of a domestic digital industry as part of a vast national investment strategy.
Calls to achieve digital sovereignty are not entirely new. In recent years, governments around the world have invoked the concept in different contexts. In practice, however, digital sovereignty can be associated with three interrelated policies.
First, digital sovereignty generally involves safeguarding the autonomy and security of a country’s digital infrastructure. Next to protecting critical physical infrastructure and computer networks, it entails guaranteeing a country’s access to data collected on its territory. Law-enforcement authorities can sometimes struggle to access data held by companies located in other countries.
Second, digital sovereignty rests on maintaining a country’s economic autonomy. Today, most countries rely on a few large American technological companies for their digital services.
The absence of national providers can pose a threat to their economic development in case of any external disruption and leave them at risk of unfair practices, such as price hikes.
For example, Ukraine’s dependence on SpaceX’s Starlink services for internet connectivity leaves it in a weaker position as it negotiates with the Trump administration for support against Russia’s invasion.
Third, digital sovereignty includes a country’s ability to promote and enforce its regulatory preferences in this area. As digital technologies connect economic actors across national borders, this creates a risk of regulatory arbitrage where companies selectively choose which regulations they want to apply.
Over the last 30 years, the European Union and the United States have clashed over the protection of privacy rights as the EU attempts to ensure its regulations are respected regardless of where their citizens’ data are processed.
While some countries strategically presented policies associated with one of these three goals, each can be seen as an essential component of achieving digital sovereignty in full.
In practice, the realization of one goal often shapes or depends on the others. A country’s autonomy in the digital sphere is closely tied to the presence of national companies able to offer digital services. Assessing a country’s digital sovereignty therefore requires an integrated approach that considers all three dimensions in relation to one another.
Where does Canada stand?
As a G7 country, Canada benefits from a well-developed telecommunication sector – 95.8 per cent of Canadians now have access to high-speed internet and the former Trudeau government’s goal was to attain 100 per cent by 2030.
Canada had 10 computer systems in the Top500 ranking last June of the world’s most powerful supercomputers. Although none of these systems ranked among the first 100 and while Canada lags behind other G7 countries such as France, Germany and the United Kingdom, it still outperforms most countries around the world in this domain.
Information communication technologies are considered a critical infrastructure covered by several strategies to avoid any disruption and protect them against foreign influence.
At the same time, in its revised trade agreement with the United States and Mexico negotiated under the first Trump administration, the Canadian government agreed to prohibit the adoption of data-localization policies that would compel companies to store data collected in Canada on Canadian soil, thereby limiting its regulatory autonomy.
Where Canada’s digital sovereignty appears particularly at risk, however, is in its dependence on American companies. As in many other countries, the majority of cloud services in Canada are provided by American companies.
As of January, 60 per cent of Canada’s cloud market was owned by five American companies. The situation is even more pronounced in office software, with 93 per cent of this market owned by two companies – Microsoft (65 per cent) and Google (28 per cent) – as of last September.
Moreover, with the exception of TikTok, Meta and Google dominate the social media landscape and digital advertising.
This dependence on American companies means Canada might be at risk of being cut off from these critical services.
We have already seen Meta block access to news content in response to the federal Online News Act, which establishes a revenue-sharing obligation with Canadian media for Meta and other U.S. companies.
While the United States government might never ban the use of specific digital services in Canada as Microsoft did because of EU sanctions against Russia following its invasion of Ukraine, there are already clear indications that the Trump administration is ready to take steps to impede Canada from enacting its regulations.
Trump has said the U.S. would impose tariffs on countries such as Canada that impose a tax on digital services on American companies.
A strategy to become digitally sovereign
Promoting greater sovereignty would not be without costs. Canada and other countries rely chiefly on American companies for digital services because they offer significant economic benefits. For example, governments and businesses rely on Microsoft Office for the quality of its services.
At the same time, Canada can defend its sovereignty by taking a set of simple actions.
First, it can reduce the risks associated with its dependence on the United States by focusing on developing cloud-agnostic services.
Cloud companies offer a vast array of tools to help users build their own digital services. While valuable, these can create lock-in effects. Digital services built using these tools can work only on these companies’ cloud services.
Cloud-agnostic services avoid this by using only tools that can work on any cloud platform. By building digital services in this way, public and private organizations can ensure that if there is any disruption in American cloud services, they can easily move their activities to Canadian or other clouds.
Canada can also reduce its dependence on American companies by embracing open-source software. This can help avoid vendor lock-in situations because anyone can access and build on the source code.
That means that if one provider raises its prices or simply stops offering its services, governments or businesses can hire another company or develop the expertise in-house.
While open-source software may not offer the advantages of integrated solutions such as those developed by Microsoft, it may foster more innovation by forcing more investment in technology development and helping grow a national expertise.
Industry leaders emphasize how open-source technologies can help achieve greater competition, notably in the development of artificial intelligence.
Lastly, Canada should actively support the development of a domestic digital industry as part of a vast national investment strategy.
Faced with what increasingly appears like an existential threat, it is time for Canada to be bold and invest in its digital capacities.
As the Trump trade war goes on, Ottawa could simultaneously impose a 25-per-cent levy on all U.S. digital companies bidding on public procurement contracts or even exclude them entirely.
Such measures would give Canadian firms a competitive advantage and help them gain market share in critical digital sectors.
While World Trade Organization rules would technically prohibit this, Canada could justify its actions on security grounds, considering the repeated threat of annexation by the United States.
One thing is clear: When faced with a U.S. administration acting in bad faith and openly undermining international norms, Canada should not hesitate to decisively defend its sovereignty in both the physical and digital world.
Subscribe to our newsletter.
This article first appeared on Policy Options and is republished here under a Creative Commons license.