Canada’s pivot to Europe continues to accelerate with Prime Minister Mark Carney’s speech to the European Parliament today, the call for Canada to become the first “associate member” of the EU, negotiations on a Canada-EU Digital Trade Agreement launched earlier this year that could conclude this fall, and an upcoming summit that could bring even further measures. In the wake of the collapse of trade talks between Canada and the U.S., closer relations with the EU are an obvious alternative. While U.S. demands on digital policy (notably the cancellation of the DST and streaming payments) have attracted some criticism in Canada, a European shift is likely to substitute one pressure point for another, with some of the same questions about Canadian digital sovereignty in play. Indeed, the EU has exported its regulatory standards around the world for decades, and trading U.S. “digital trade alignment” for a European digital regulatory model will still raise many of the same “elbows up” questions about whether Canada gets to set its own digital policies.
The methods used by the U.S. and EU differ, as lately the U.S. has relied on the threat of punitive tariffs, while the EU emphasizes market access, treaties and regulatory review. Yet both use the leverage of a much larger market to push smaller partners toward their preferred rules. For example, the U.S. publishes an annual National Trade Estimate report to list foreign measures it considers barriers, a document I have written about because it now includes Canadian data governance as a barrier.
But the EU has its own enforcement apparatus, with a Chief Trade Enforcement Officer who presents an annual enforcement report and maintains a trade barriers database. Both the U.S. and the EU are also challenging on the trade agreement front. Canada changed its laws to implement the Comprehensive Economic and Trade Agreement (CETA) and has provisionally applied the agreement since 2017, yet ten member states, including France, Italy and Poland, have still not ratified it. In fact, the French Senate voted in 2024 to refuse ratification.
Privacy provides the best-known example of how European rules are exported around the world, as they seek to influence foreign laws. The so-called Brussels effect, which refers to the globalization of EU regulation, pressures companies to adopt European standards and governments to rewrite their laws to meet conditions the EU sets for market access. On privacy, the EU has long maintained that it will restrict cross-border data flows unless third countries maintain an “adequate” level of protection, a standard the EU sets itself. Canada received its first adequacy finding in 2001, and the risk of losing it was widely believed to be a key motivation behind private sector privacy reform. If Bill C-36 passes, the EU will ultimately judge whether Canadian policy meets its standards, including the independence of Canada’s new privacy regulatory model.
There are no guarantees for Canada, as evidenced by the 2017 Court of Justice of the European Union decision, which ruled that the EU-Canada passenger name record agreement, signed by both sides in 2014, could not be concluded because the terms on which the Canada Border Services Agency could retain and use airline passenger data were incompatible with the EU Charter. The result was that a signed agreement governing what a Canadian border agency could do with data on Canadian soil could not take effect until it satisfied European constitutional standards.
Further, the pressure points on Canadian policy arose throughout the CETA trade negotiations, where the EU demanded stronger pharmaceutical patent protection (risking higher health care costs for Canadians) and new protections for more than 170 European geographical indications, which led to changes in Canadian law and complaints from various agricultural sectors.
Digital policy is likely to be next. The EU AI Act already implicates Canadian providers whose systems are used in Europe and Canada’s initial AI regulatory approaches mirrored the European model. The Digital Trade Agreement will likely require further Canadian concessions, given that the EU’s negotiating directives state that the agreement “should neither negotiate nor affect the EU’s personal data protection rules.” That makes European law the standard in the negotiations, leaving Canada to find room for its own approach around it. Platform regulation, competition law, and cultural policy (including streaming quotas) could follow, with Canada shifting from dealing with U.S. demands to European ones.
This is not an argument against closer ties with Europe, which offer research funding, procurement access, and a partner that does not threaten tariffs or sabre-rattling with absurd geographic renaming when its leader doesn’t get his way. But if Canada is to make digital policy in Canada, we should not be under any illusions. Rushing to embrace Europe will raise many of the same challenges that will require us to keep our elbows up.
