Canada must stand with Europe against U.S. Big Tech

Keldon Bester is the executive director of the Canadian Anti-Monopoly Project (CAMP) and Giorgos Verdi is the Policy and Advocacy Lead at Open Markets Institute Europe

Last year, Canada did something it was perfectly entitled to do as a sovereign nation: tax certain companies that operate domestically.

U.S. President Donald Trump called the move “egregious” and a “direct and blatant attack on our Country” and said he would be “terminating ALL discussions on Trade.”

Why such fury from Mr. Trump? Ottawa’s Digital Services Tax had targeted U.S. tech giants, a sore spot for the White House.

What happened? Ottawa caved and rescinded the tax, with nothing gained in return.

But this leads to an obvious problem: At a time when digital policy issues are at the forefront, Canada’s attempts to govern the space will continue to earn a place on Washington’s complaints desk.

Concerns are mounting over our dangerous dependence on U.S. Big Tech. How can Canada solve the issue when Washington, like a mother bear, is so fiercely protective of its dear, precious champions?

Steve Verheul, Canada’s former chief trade negotiator for the United States-Mexico-Canada Agreement, recently gave some advice: bring friends.

Across the Atlantic, Europe has good reason to take the call.

In his 2024 competitiveness report, former European Central Bank president Mario Draghi noted that American control of Europe’s cloud computing markets represented not only a siphoning of value from the block, but also a strategic risk going forward.

Canadians can empathize: the same firms control 85 per cent of Canada’s public cloud market.

Supercharged by the threat of disconnection and the antipathy of the Trump administration towards efforts to rein in the crown jewels of the American economy, both economies are looking for alternatives. In the meantime, their computing bills keep arriving from the same suppliers.

Lucky then that the Canada-EU Summit in Montreal on Oct. 29 and 30 offers an opportunity to heed the advice of Mr. Verheul and set a course for a new arrangement. Though it competes with topics ranging from the war in Ukraine to international efforts against forest fires, Canada and the EU should make reducing technology dependence a central goal of their alliance.

The agenda gives them an opening. European Commission President Ursula von der Leyen has promised that the two sides “will create a tech alliance,” with co-operation on “AI, quantum, cyber and economic security.”

The alliance can be seen as a response to Prime Minister Mark Carney’s January speech at the World Economic Forum in Davos, in which he called on middle powers to work together in order to counter “a rupture in the world order.”

While the Canada, EU partnership is pointed in the right direction, the substance, especially as it relates to technology, remains to be seen. In a speech to the European Parliament in September, Mr. Carney mentioned the potential for collaboration on several issues, including AI safety and compute capacity.

But it was Mr. Carney’s reference to the ability of digital platforms to steer efforts to regulate them that holds the greatest potential for collaboration between the two jurisdictions. It is responding to and diversifying away from that power which should be the primary goal of the technology component of Canada and the EU’s burgeoning alliance.

Amazon, Microsoft and Google supply much of both economies’ computing capacity and are extending their reach into AI. Governments themselves are major customers: Microsoft accounted for 66 per cent of Canadian federal cloud-services spending tracked by Shared Services Canada from 2019–20 to 2022–23. Businesses have also had few alternatives: the French economic firm Asterès estimates that 80 per cent of total spending on cloud software and services in Europe goes to U.S. companies.

This constitutes not just a loss of significant economic value, but also a front for economic coercion. Mr. Trump has not hesitated to threaten tariffs and export controls on American technologies for countries that impose digital laws, regulations and taxes on U.S. tech companies. Neither alliance participant has been immune to this phenomenon. Such pressure led Canada to repeal its Digital Services Tax for effectively nothing in return and the EU to materially water down enforcement of laws concerning digital platforms.

We can collaborate all we want, but if that only occurs within the good graces of the world’s largest technology companies, then we are setting ourselves up for misery. The goal of this tech alliance should be to present a united front against attempts at coercion and to begin the work of defusing this persistent dependency. Without these, efforts such as a united front on AI safety will run headfirst into the self-regulatory impulse of American frontier labs.

Building on the foundation laid out in the draft announcement of the alliance, three areas are productive candidates for beginning to unwind the grip of American tech on the Canadian and European economies.

Though the alliance announcement mentions a second-generation competition agreement between the parties, allowing for sharing of confidential information between authorities, a much deeper opportunity exists in enforcement of competition laws. Joint, ratcheted-up efforts to keep markets contestable is the first step to disrupting the dominance of firms who have kept anti-competitive locks on key markets.

This joint enforcement should be matched by co-ordination on the development and scaling of alternatives to American and Chinese technology in critical sectors. While siloed country-by-country responses such as a ‘by Canadians, for Canadians’ computing alternative may not make sense, there is an emerging global market for digital infrastructure further from the reach of American or Chinese governments.

Co-ordination on industrial policy investments, procurement policies, and interoperability obligations for existing providers will create space for alternatives to enter and expand. The recognition of Canada as an associated third country under the EU’s cloud sovereignty framework would be first step towards this direction. This would allow Canadian cloud companies to seek sensitive government contracts in the EU, which will remain out of reach for U.S. hyperscalers.

Finally, the alliance should make use of the flip side of this dependence to defend its interests: its own buying power. Much of the tariff conflict with the U.S. has focused on the flow of physical goods. But both Canada and the EU are major importers of digital services. Bringing Canada under the umbrella of the EU’s anti-coercion regulation would enable both sides to use that as a deterrent against the coercive actions of the Trump administration.

In his speech to the European Parliament, Mr. Carney was right to call out the dominance of technology companies as a risk to the sovereignty of nations. Beginning in October, the EU and Canada can show what a strong response to that risk looks like.

Prosperity’s Path