Transcript
Transcript: Trade, Technology, and Canadian Sovereignty: Governing in the New Strategic Economy
[00:00:00 The video opens with Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Taki Sarantakis: This is Professor Barry Appleton.
[00:00:05 Text overlaid on screen: Taki Sarantakis, President, Canada School of Public Service.]
Taki Sarantakis: He is one of the world's foremost authorities on international trade. He is one of North America's foremost authorities on CUSMA, NAFTA, the FTA. He is also the largest private collector of Inuit art in Canada, which we're not going to talk about too much during this session.
Barry Appleton: We could do an entire discussion on that one, especially here in Ottawa.
Taki Sarantakis: Yes, and he also has been repatriating a lot of Inuit art and sending it back to the communities from which it originated. One thing, just so you know what a good life this gentleman has led, he worked with Pierre Trudeau, not Justin Trudeau, Pierre Trudeau in the early '80s. He looks younger than most of us here. And the last thing I will say before we get going is he's also the Energizer Bunny. So you'll feel his energy, you'll feel what he has to say because this is, and we've been saying this for a couple years at the Canada School, this is a moment for Canada. Our Prime Minister calls it a hinge moment. This is a moment for Canada. And some of the things that we're going to talk about over the next hour or so are things that are critically important not only to us, but more importantly to our children because if we don't get more things right than wrong over the next little while...
So with that, Barry, I'll turn it over to you. You have the clicker. You wrestled it out of my hand. So we'll go through a presentation, then we'll have a conversation, and then we'll start pulling in people from the audience. Over to you, Professor.
Barry Appleton: Great. Well, first of all, I want to say what a delight it is for me to be here today.
[00:02:11 Text overlaid on screen: Barry Appleton, International Trade, Investment & Digital Economy Expert, Lawyer & Policy Strategist.]
Barry Appleton: And as I go through the discussion, I think you can understand why it was so important for me to come and share this with you, because I am convinced that when we want to look at the answers, because I'm going to look at the issue about trade, we're going to look at the impact about the CUSMA, and by the way, do not take President Trump's word on what the CUSMA means, including his words last night. I will correct them and help you to understand. We're going to look about trade and the impact that trade has had to focus on new issues that are really important for us.
So I've spent the last 5 years really focusing in on the impact of digital innovation and how that kicks in to trade. Now, I wrote my first book about the NAFTA in 1994. I spent 3 years in public service, and I finished up being an advisor to the Cabinet Committee in Ontario on the NAFTA negotiations. And so I wrote a book when I finished with that, and there were a whole pile of issues that were unresolved. And guess what? When I go back to that chapter, they're still unresolved. I also helped negotiate the agreement on internal trade and brought the first successful internal trade challenge in Canada. And guess what? They're still not quite resolved either. I'm not known for being engaged in areas that move quickly, and then all of a sudden, wham! We have been hit with an unbelievable moment, an unbelievable discussion, but the answer, I'm just going to tell you, by the end of the day, the answer to all this is going to be about capacity. And the capacity that we're going to talk about is not only about the type of capacity about what can we produce, but it's actually the quality of the ideas and the ability of government to retain sovereignty. And I will explain that because it's in your hands.
So yesterday I was testifying to the Americans on the USMCA review. And there were very few Canadians, will talk about that along in the slides, and it looked for a while like I might not be able to come here. And I literally wanted to do everything I could to move heaven and earth to be here with you because I believe that you are the answers. You are the closest thing that I'm ever going to get to a whole of government exercise and this requires a whole of government amount of thinking. And it's granular. And you have it. You just haven't connected to make it work. And so I'm going to try to stimulate that today.
So even though the first part of the conversation is going to be a little depressing— I feel like I'm the weatherman in Winnipeg. I don't bring the weather. I bring the coat. Trust me. I don't bring the weather, I describe it, and I'm going to describe it and it isn't going to be the best. I was told that I should level with you. I'm going to call it like it is. And we need to do that because we're in a moment when Canadians are prepared to work with the government, to work with everyone together to try to build what we need to do. And we recognize that this is not a usual moment. This is like a once-in-a-century storm. Let's hope it's once in a century, that's all I can say. But at the end of the day, we need to think about how we're going to use that, how we're going to use that good esprit de corps to make things work for us. And so I'll go through the presentation a little bit and then we'll come back, but I want to be as interactive and focused as we can.
Now, I'm a Canadian, I'm a Canadian lawyer. I am an American lawyer. I am the co-director of the Center for International Law at the New York Law School. So I'm a nice Canadian. I go down all, you know, down there to visit. I'm polite. I apologize for everything and I clean up after everybody. I spend a lot of my time on TV in the United States explaining Canada to Americans, and then I do the same thing, including early this morning on CTV, explaining the United States to Canadians. So I'm kind of betwixt and between, people ask me where I live, I explain Air Canada, that's where I live. Some of you will know what that is, it's a little bit tough. But I also am a scholar and a fellow at the Balsillie School of International Affairs in Waterloo. And for the last, oh, I guess since May, so what are we in, we're 6, 7 months, I stopped my teaching in New York to work entirely on capacity building in Canada, finding ways to give tools and knowledge and opportunities to all levels of government and other groups in Canada to be able to deal with the storm that's already here. It's not approaching. It's here. And we're going to talk a little bit about that too. So I just wanted to give you a sense of where that is.
I've kept a law firm in Toronto that I've run for the last 34 years, but my focus has been not to do all the heavy teaching, though I have to go back to some of that in January, but to see what we can do to help public debate, public policy, governmental capacity-building across the board. And we'll come back to that, and I'll talk to you about some of the things that I've been working on to be able to deal with that. But this is a special moment that needs special attention.
Let's go to some slides.
[00:07:55 Slide appears on screen, as described.]
Barry Appleton: OK, so we have, as I was trying to say, a constitutional moment. And by that— now, I was involved in negotiating the Charlottetown round of constitutional talks. I don't mean constitution as in the Constitution Act. I mean a moment that is more than just economics or more than just law.
[00:08:15 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: It's something that's special. It deals with values and approaches. We all see this right now. Canadians understand because this is not anything that we've ever seen.
We'll talk about the relationships in a minute. But we have another convergence, not just the trade convergence. We have a convergence of technology, and trade and national security. On my way in, I had a chance to meet with somebody from DND and somebody else from NRC, and I told them we're going to be talking a fair bit along the way because of the convergence and what requires thinking of what used to be in our individualized departments much more on a whole-of-government basis. And the reason is that if we are going to survive through the trade maelstrom, which is coming, we need to be thinking about those things that preserve capacity and what we have to actually utilize capacities that we have reserved in international trade but haven't used ever. And that requires us all to share a little bit of info and share some thinking. It's a little bit different, and we'll talk about that.
[00:09:27 Slide appears on screen, as described.]
Barry Appleton: Now let's talk for a minute about the CUSMA. I think we circulated a brief that I had given to the House of Commons about a month and a half ago. And the reason why I want to circulate the brief is not because of the brief itself, but because I had given you some information about an interview. And the interview was done by Jared Kushner.
[00:09:51 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: At the time Jared Kushner, when he gave this interview, it was February of 2020. And it was just at the tail end of Trump administration 45. And I don't think Jared thought there would be a 47. And as a result, he explained the architecture of what he calls the USMCA, what we call the CUSMA. And I had a beautiful document where I had his statements in English and I had translated them into French because I was going before a parliamentary committee so everybody could read it in whatever language they like. And what you need to understand, and I'm going to take you through a little bit of what he said, but the CUSMA was designed differently than the NAFTA. It was designed differently from the Canada-US Free Trade Agreement. Those were agreements, the older ones, that assumed mutual benefit. It was like a mutual long-term marriage. We didn't have expiry dates. It wasn't like the milk with a best before date. We assumed that because it was good for everybody, we would continue along. Canadian business assumed that too. So Canadian business basically, rather than working on innovation and productivity, worked on proximity in terms of territoriality, so how close we were, and a lower dollar. That gave us a lot of opportunity to basically be lazy. It gave us a lot of opportunity to have access to a huge market, but we didn't actually have to be better than everybody else. We just had to be there, and we could be there because we had market access that we got for free. Okay, those days are over. That's the first message. The old arrangements that we had are done. We are not going back there. So I got to just level, there's no way that we're going to have a deal even as good as what we had in the CUSMA. And I didn't like the CUSMA personally. I liked the NAFTA, I thought that was much better. Remember, the CUSMA was also under pressure to us. But we are going to have to pay for our market access. And paying for our market access is not just going to be regular. It's going to be like going to a Taylor Swift concert. It's going to be like an Uber on a really snowy day. It's surge pricing. And let me tell you, if there's one thing I can tell you about Donald Trump and his administration, they know how to charge. They know how to surge-price. And that's underway. So we need to think about that, because we have to design policies that, A, allow us to function, and B, that we have to explain to Canadians why that's going to happen. And it's not easy. But that's where we're— so that's the first step on this.
Taki Sarantakis: So I'm going to let you catch your breath for a moment. We will circulate the documents that Barry talks about. We'll circulate them both online for people to download and also anybody in the room. There was also another person who wrote something interesting. I think it was Peter Navarro wrote in Foreign Affairs. If you're interested in kind of the philosophy behind CUSMA and some of the things that Barry's talking about, there's this notion that the agreement is like most agreements, kind of about A, B, and C. That's what most agreements are. But the understanding on the American side from the people who negotiated it are much more— I don't want to say sophisticated, but much more geopolitical in nature before we discovered in Canada what geopolitical means.
Barry Appleton: I'm going to say they're more sophisticated. And one of the reasons is, and we'll talk about this, is that they have structural committees integrated, what we call a force multiplier in terms of defence, where they can take one idea and automatically share it out to people who already have security clearances that will be able to work with them. They call them ITACs in the United States. We call them SAGITs in Canada. But in Canada, we got rid of our SAGITs for budgetary reasons about 20 years ago. And the Americans kept them. The French have them. The Brits have them. The EU has them. The Australians have them. Why don't we? This is exactly the type of issue about where we're not quite ready and we need to be ready. So, well, I'll take you through it though. But I will show you why we've known for a long time about the architecture of the CUSMA. The problem is that we didn't believe it. Our biggest problem has not been that we don't have information and intel, it's that we have been disbelieving the intel. I teach game theory, and in game theory we have a process called Bayesian analysis where we can be able to deal with that and do an analysis to be able to give it a weighting for various options. We never did that because we're Canadian. We always think good of everybody else, and we thought we would be good. And in fact, we were good, but the other side wasn't. So I try to explain this as sort of like a very bad marriage. We had trade monogamy for the longest time, but we had a partner that wasn't monogamous. And the transaction became the issue. Whatever last night was the most important thing and nothing else. You can have as much marital therapy as you like. If both partners don't want to participate, you don't get anywhere. That's where we're at. Our problem is that we keep coming back to that idea, that relationship, that 60 years of trade, but 100 years of relationship on this plus. It's over. OK, everybody? It's over.
We now need to think about how we as a government govern. That is about sovereignty. And one of the key issues we're going to talk about as well is when we get to digital sovereignty. And when I appeared yesterday before the committee, I gave a discussion, I talked primarily about why strong rules and the rule of law was good for America. It wasn't just good for Canada, it was very good for America. It's good for brand America, it's good for the markets. Markets like predictability, they don't like this. This is really a very good thing. What did they want to talk to me about? Assistant USTR for the Western Hemisphere, focused one key question to me, talk to me about digital sovereignty. And I explained, and I'll get there, but I explained foundationally that digital sovereignty was actually good for America. Canadian digital sovereignty is good for America, and I'll come back to that.
Taki Sarantakis: Now as you go to your next slide, there might be some people online, there might be some people in the room that are kind of going, well, you know, this is Donald Trump. This will go away. I think what people need to understand is this is structural. Somebody the complete opposite of Donald Trump, probably Joe Biden, the complete opposite of President Trump. The very first thing that Joe Biden did when he became president, on the very first day, he signed an executive order that ripped up the Presidential permit for Keystone XL. President Biden declared baby food a national security issue. President Biden spent the vast majority of his presidency on Buy America. So, if people are of the belief that the current U.S. administration is in operation...
Barry Appleton: Well, let me just riff on that for a moment. For 17 years, I had an office in Washington, D.C. And so, I know a little bit about how Washington goes. Here's one of the key things you need to understand. There are interests that are different from friendships. But the best interests in Washington are those that can give you money and can give you votes. And Canada can do neither. When Canada can do neither, we're very low on the pecking order or nowhere on the pecking order. When you can bring in a coalition with people that have both, all of a sudden, you get higher on the pecking order. And the other thing is the neoliberal agenda, which was about the rule of law and these treaties and keep building the treaties and the structures, and the WTO where we're going to look at "trade right" rather than "trade might" and all of those things, that's over. It's not coming back. I spent my life living that, negotiating those types of agreements. It's finished. But we need to get our heads around as policymakers to understand now we have a new reality, we have to think about how we implement and deal with that. There's no point running outside today in Ottawa in your bathing suit, like you wear a coat because you have to be prepared for what's happening now. It's not a nostalgic thing. I remember the summer, it was warm. No! You are going to be unhappy, trust me. Instead, we have to be ready for that moment. And we need to come up with public policy that can meet that moment. And it's not beyond us, but we need to think about this differently. And so I'm going to walk through that.
[00:19:16 Slide appears on screen, as described.]
Barry Appleton: Let me just tell you what I saw in Washington was a deeply organized process. We think that the public policy in Washington is not organized because we see a lot of it by Truth Social tweets, and they do not look organized. And they're often not correct. Last evening, the President said that the USMCA will run out in a year. It does not. What there is is a review process. That review process has to be indicated by the end of June of this year, and if it's indicated, then every year there's a review. If everybody said it was fine, there would be no more reviews.
[00:19:55 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: That's not going to happen. We know that. So foundationally, that is not really the problem. There's going to be another problem, I'm going to talk to you about that in a second. Now, in these hearings, 150 people were giving testimony. I believe there are about 3 from Canada. I was the only one yesterday for sure. And 2, I believe, are on today. We're not getting our voice heard. Now, it's not for the government of Canada to show up. That's not what governments do. But everybody else should have been there. And they had members of Congress. We could have had members of Parliament. We could have had Provincial governments. We could have had all types of Canadian organizations. And I was told that one of the reasons why we didn't have people there was because we thought our American friends would speak for us. That's a big mistake. They're not speaking for us, they're speaking for them. We need to speak for us. They needed to see a Canadian there to be able to tell my lived experience and tell them why this treaty would be good for them and good for us.
Taki Sarantakis: I want to pause you there because the way I really try to hammer this home to people when we talk about special relationships, when we talk about— and we do have a relationship that's different from most of the world with the United States, but that does not mean that we have carte blanche. That does not mean— the way that I say this that I think seems to resonate is there is not a single member of the US House of Representatives or a single U.S. Senator that represents something called Canada. They all represent various parts of the United States. And I think sometimes as Canadians, with a little bit of naivete, we forget that sometimes. We kind of go, well, Michigan this, Maine that, you know, half of Florida is Quebecers and the other half of Florida is people from Calgary. There are no US representatives that are elected by people called Canada.
Barry Appleton: That's very true. At the end of the day, we have some issues. The key thing here is that the review is a structural process and the risk to us is existential. That's the difference. And that's because we have spent so long having so much of our trade balances with the United States and we are unable to pivot quickly. The Prime Minister is doing everything he can to be able to pivot. But, you know, it's like planting a tree. The best time to plant a tree is 20 years ago. The next best time is today, I understand. But if you want shade, you're not going to get it. We need trade shade. We don't have it. We can't have it. So we need to think about how we work that through, and it's not easy because it's very aggressive what we're seeing.
[00:23:00 Slide appears on screen, as described.]
Barry Appleton: Okay, let's talk a little bit about termination of the CUSMA. I think this is really important. We've been talking a lot about the review, but what we haven't talked about is Article 34.6. A party may withdraw and you can withdraw on 6 months written notice. That does not mean a tweet by the president, but it could be an executive order from the president. And President Trump has withdrawn from other treaties by executive order. Now, constitutionally, as an American lawyer, I could tell you that there are some questions whether that should be lawful or whatever. Ask the Indians. He withdrew from their treaty in 2019. They still don't have it. Nobody went to the Supreme Court to fight about it. Nobody did anything with it. They still don't have a treaty. So what I read into the comments from the president last night is that he is ready, if he thinks it's in his interest, to invoke the 6 month rule and end the treaty. And for sure what we know is that he does not want a trilateral treaty, because he feels that the Canadians can gang up with the Mexicans. He wants 2 bilateral treaties. So that means an end to the treaty anyways. But at the end of the day, what's the value of a treaty if nobody's following it? That's really the question. And so we need to think about that. But this Section 34.6 is quite key for us because if we don't have a treaty or it's going to come through, markets will be rough. Capital investment has pretty well dried up. It's going to be over. It's over. And we need to deal with it. It puts a 6-month window. No government can afford to not have a treaty, so we're going to have to put all our resources, all of our focus, all of our efforts into figuring out what that treaty is going to look like. We need to know about that. We need to get capacity ready for that. This is not that there's 16 years to go. You have the ability that it could be pulled out, the rug being pulled out from us. And I think that's a very real risk.
[00:25:04 Previous slide appears on screen, as described – additional text: Interpretation: Uncertainty is baked in.]
Barry Appleton: So what we've been talked about a lot is this review. That's 34.7. That's fine. That just doesn't mean very much. It's the fact that it could be terminated. So rather than having a 16-year treaty, we have a 6-month lease. That's what we've got.
[00:25:21 Slide changes on screen, as described.]
Barry Appleton: And that was done by Jared Kushner. Kushner, who you see has come back now, did the deal out in Gaza, has got the deal he's working on right now with Russia, who's clearly back. He likened all of this to a real estate transaction. He said, when you own a great property, the preference is always to lease for a shorter duration.
[00:25:45 Slide changes on screen, as described.]
Barry Appleton: He said that by having a shorter duration, we'd have the opportunity to give leverage to the stronger party. And the part I didn't quote in here, but he says is, I assume that the stronger party is going to be able to get an extractive price.
[00:26:00 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: He built the architecture of this to make us have to pay more if things were working well. So, for Canada, they were working well. Canada's going to have to pay more. My suspicion is a lot more, and that's very, very difficult for the Prime Minister, who basically promised he would negotiate as good a deal as he could. I don't think there are a lot of very good options on the table. And when the extra leverage is put in by the termination clause, then we're really in a bad spot. And the termination doesn't have to actually be invoked. If the president just starts to hint on it, which is what I think he's already doing, we already have a problem. And that is a significant issue for us. So I need to get the trade part up there first, because after the word tariffs, we start looking at digital.
The Americans— so the deal they did with the EU, it's public now, a quarter of the provisions are about negotiation goals of the Americans with the Europeans on digital. It's not like it's only about tariffs, it's heavily focused to the new economy. And that's an economy, by the way, where the Americans have a surplus with Canada, and so they have a lot to lose if they don't actually get this to work. But they are driving a very tough agenda, and we need to know about that, okay?
[00:27:32 Slide appears on screen, as described.]
Barry Appleton: So I'm going to talk briefly about some of these implications. But the key thing I want to say is our defence has to be structural and not sentimental. I grew up believing in a sentimental attachment. This is what we were talking about. Sentimental sense of where our place was. That's over. We just have to get over it. It's tough. We need to think in a slightly different way. We need to be there. And we have to do it without anger.
[00:27:51 Slide changes on screen, as described.]
Barry Appleton: So I want to talk briefly about digital sovereignty. I'm going to give you 3 pillars of digital sovereignty just so we can start with a conversation. The first is data sovereignty.
So data sovereignty is basically, you'll see on the next slide, I call it about controlling the keys to the filing cabinet, control over the raw material of the digital economy. That's the first piece.
[00:28:17 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Taki Sarantakis: Pause right there.
Barry Appleton: Sure.
Taki Sarantakis: People need to really internalize that sentence. Data is the raw material of the modern economy. It is not trees. It is not cows. It is not pigs. Data is the modern equivalent of all of that.
Barry Appleton: And in that data, we need to think about it. So we need to think about not just our privacy legislation, PIPEDA, which is now out of date. We need to think about where we use the data and how we start to classify data. Is the data national security? Is the data core to the national foundations of government? I had some meetings with a fascinating technologist, AI person, who helped the Ukrainian government be able to take all of its data, put it into the cloud, because they were worried that they were going to be destabilized by having that whole facility gone. They wouldn't be able to pay pensions. They wouldn't be able to control the borders. They wouldn't be able to deal with taxes. They wouldn't be able to do those foundational parts of government. How would you function if your department couldn't do that? How much of that? Those are the types of things that you need to think about. So that is the lockbox. That's the first piece.
[00:29:41 Slide appears on screen, as described.]
Barry Appleton: The second piece is what I call algorithmic sovereignty. Algorithmic sovereignty is about the governance of the code. I'm going to give you another slide about that in a minute. We can talk a little bit more about it. But the key thing here is it's the plumbing. It's the pipes. It's the way we make this work. If the pipes are in your building and you control it and you've got guards outside, you've got control. If the pipes are running somewhere else, you no longer have control. This is an area that in government we get wrong a lot because we go to somebody and they have an address here, so we say, "oh, that's Canadian."
[00:30:18 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: And thinking is a little bit different when we deal with an intangibles economy, and so I'll unpack that.
Taki Sarantakis: Now, I'll pause you here again for a moment for the benefit of some people that aren't as fluent, and nobody in this room is as fluent as you are on these issues. Algorithmic sovereignty means, going back to number 1, the data sovereignty, the algorithm tells you what data you see, what data you don't see, when you see the data, when you don't see the data.
Barry Appleton: Let me unpack that a little bit. Because let's say that you want to use AI, because everybody's using AI whether you realize it or not. It's the system that does a "recommender." It recommends what you're going to see next. It pulls that next option up for you. And in Canada, it's a black box. In Europe, they have to do a transparency report so you know what's going on. We don't regulate that. And as you're going to see in a minute, the lack of regulation here is actually giving up the sovereignty. If you don't regulate it, you don't control it. You have to control it if you want to be able to be sovereign. Sovereignty is about capacity here too. If you don't use it, you aren't sovereign. Somebody else is doing it. That's the definition of being colonized. So you need it. We need to have these laws because we don't have any other way to regulate right now, and we don't know what's there. So governance of the rules becomes very important.
[00:32:04 Slide appears on screen, as described.]
Barry Appleton: Then the third part is compute sovereignty, ownership of the infrastructure. And I'm going to give you an example of another country, Switzerland, and where they're actually doing it, I think, in a better way than we're doing it, and what that looks like and how the choices that you make.
Taki Sarantakis: I'm going to pause here.
[00:32:26 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Taki Sarantakis: Compute sovereignty, think of compute sovereignty as who has the capacity to make use of the data in a highly sophisticated way. The compute is basically— the world has moved to big data. We all know this. There are only some systems that are large enough to actually work in the world of big data.
Barry Appleton: Or who could cut you off. Remember during COVID that we decided that we were no longer going to have labs here because it didn't make sense economically. So we put all of our production over to Wisconsin and we paid for it and everything was going to happen and we were waiting for the vaccines and all of a sudden the Americans said, "No, we need them for ourselves. We're not giving them to you." We said, "we paid for them. We had this deal." No. So if you can be cut off, that's in compute as well. We need to think about that because we're in a world of export controls and sanctions and the use of those types of coercive tools. They're every day now. We need to think about that and how we engage in public policy around that.
Taki Sarantakis: And COVID wasn't that long ago. If you go back in your memories 3, 4, 5 years, there are many quotes from US politicians that say something to the effect of we will export the COVID vaccine to Canada only if and when every single American who wants a vaccine has received the vaccine. Only then will we allow Canadians to have access.
Barry Appleton: So we decided that we would build a facility out by Quebec City to make vaccines. Still not open, because it takes time. So, our problem is that we're dealing with public policy choices from a long time and legacy issues that we now need to be able to deal with. And we see the effects. All right, so now we will be able to make vaccines starting this year. Great. But we need to think about it in the world now of data and how that works. So again, for each of these pillars, I just added a little line to this set of slides.
[00:34:38 Slide appears on screen, as described.]
Barry Appleton: Who has the keys to your filing cabinet? Can others access your data? That's the first one, data sovereignty. Two, operational rules embedded in the code, in the plumbing. That's algorithmic. And the third, the blueprints. That's really what compute sovereignty is going to be and how that comes together. And then we'll see, do you need to have all the blueprints or can you live with a little bit? And we can talk about that.
[00:35:04 Slide changes on screen. Text on slide: Why These Matter Under CUSMA / Limits on Data Localization: Restricts ability to keep sensitive data domestic. Protected Cross-Border Flows: Mandates open transfer of information. Restricted Access: Limits access to source code and proprietary algorithms. These provisions collectively narrow Canada's parliamentary policy space.]
Barry Appleton: So why does this matter? Well, because that CUSMA already, we started to put limits last time. They basically gave us Chapter 19 on digital stuff, and we just said, yeah, okay, this sounds good, and we just signed it. We didn't have a policy in Canada, but we signed it anyways. I wrote a paper for the Balsillie School called Code Before Clause,
[00:35:25 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: and where now, because the GAC has asked everybody, should we be signing on to the EU code right off the bat, and the answer that I wrote back to them was, no, you need to have a policy in Canada first. First, you need to decide what your domestic needs are, what you need to do. Then you decide what you limit, because the trade agreements are about limitations. They're not about fulfilling the types of things for new policy. That's the difference with the intangible economy. When you deal with IP regulation and trade agreements, and when you deal foundationally with digital, you're dealing with limitations on your national capacity rather than the opposite.
Taki Sarantakis: So this is called, in the world, this is called Freedom to Operate. If you could maybe talk, give us a little kind of definition of Freedom to Operate.
Barry Appleton: Well, the real issue here, rather than the definition there, is you want to know what your core capacities are that you need before you engage in the limitations. Now here's the good part. I'll get to what you're going to get to at the end. There are exceptions and reservations built into the treaty. And those exceptions and reservations were put by the Americans, not by us. But they could be used by us to be able to carry out these foundational elements. When we talk a lot about dual-use spending right now, and we want to be able to do that so we can run some spending into our NATO commitment. Well, dual-use policy gets us through that door. And so the ability, the Freedom to Operate, the ability there is because we can get ourselves through the exceptions. The problem's been, just like with Buy Canada, I wrote an excellent paper on that for CIGI in May, talking about all the options and the trade holes that we had to be able to get around on procurement so we could actually buy Canadian. The limitations were mostly on us saying we weren't going to do it, the sentimentality I call it, rather than our limits on being able to do it. Yes, it said we couldn't do it, but yet if you looked at the limitations, you looked at the exceptions, we could, but we didn't because we didn't think that was nice. That world is over. We need to think about it.
[00:37:56 Slide appears on screen, as described.]
Barry Appleton: So let me just flip over to sovereign compute for a bit. I want to walk through this so we can have a broader discussion. Sovereign compute is about what can you have in your country, how do you make sure that you have it. And I say that this is foundationally now a geopolitical power. Now everyone's going to say, well, why does Canada need a geopolitical power? Because we can be cut off. It's not because we want to deploy our power. It's that we don't want to be cut off from being able to do our core functions. You know, last week ChatGPT went down for half a day and all types of services failed and people were going crazy.
[00:38:38 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: Airlines couldn't function. All types of things couldn't happen. Our world is interconnected on these issues now. What happens if it's cut off not by an issue of a mistake or even by a threat actor, but on purpose? That's the problem. That's why. Could we not operate our borders? In fact, actually, we've been having problems with our borders. Different problem, though, that was a technological one. How do we operate if we could no longer deal with pensions? If we couldn't deal with our taxes, we couldn't deal with the government payroll. I know these all sound familiar. I know. The fact of the matter is you need to have a sovereign system to make sure that the problems are our own, not caused by somebody else. So the infrastructure is the strategic battlefield for this next decade. We need to be able to think about that.
Here I want to just bring to your attention Apertus.
[00:37:56 Slide appears on screen. Text on slide: Switzerland's Apertus Initiative / National Architecture: A comprehensive sovereign-compute architecture where compute is treated as critical national infrastructure. Legal Insulation: Immune to foreign extraterritorial claims, featuring national HPC clusters and sovereign cloud formations. ]
Barry Appleton: Apertus is Switzerland. Switzerland has a totally national sovereign compute strategy. For us, we've been going to the market. They, in Switzerland, didn't trust anybody. They built it all themselves. They used national infrastructure, they used national lines, they used national universities. They did it all. I spent time in Switzerland. They don't trust anybody. In fact, they don't trust each other. But for sure, they don't trust me, probably for good reason.
[00:40:09 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: And so they built it all. Now, is that more expensive? Yes. But is reliability more expensive? Yes. And you need it. Israel does it. There are other countries that have reasons why they do it. But once you have that, you can't be cut off. And that is really critical. Now, this takes us to the impact of the CLOUD Act. I don't know if I've got the CLOUD Act yet. No. So let me just go back for a second. The CLOUD Act is a piece of American legislation that regulates what's in the cloud. The CLOUD Act has deep extraterritorial impacts. The deep impacts are, and that's why we talked about one of these issues about the plumbing, where the lines are. If your data crosses into the United States, if it crosses into a server or a node that's in the United States, even though it's not US data, it's Canadian data going to Canada, but it crosses through the US in some way, the CLOUD Act applies. And Microsoft had one of their VPs at a hearing in France in June. And the French said— because they have very careful legislation about this— and they said, well, what are you going to do, Microsoft, if you have a conflict between the CLOUD Act and our French national legislation? And the VP for France said, we're going to follow the CLOUD Act. They did it in French because they figured no one in Washington would pay attention. OK, well, we speak French in this country, so we know. We know what they said. So you basically had, to the Senate of France, one of the 3 largest companies in the world dealing with us saying, we're going to ignore you. We don't want to, but we're prepared to ignore you.
So what's important here is you need to have data that is mission critical— health data, personal privacy data, core data to run defence, you need to ensure that that is running entirely and solely in Canada. And that requires different type of thinking. And that requires different type of money because our market's smaller. And what you can't do is you can't go to a Canadian company and go to them and say, can you do it? And then have them subcontract it to an American. That's the easiest way to do it, hyperscale, right? Can't do that. We can deal with that by contractual provisions. We can deal with that with legal provisions. We can deal with regulatory provisions. But for sure, that's what you have to do. And yes, it's going to cost more, but then you can actually have it.
Taki Sarantakis: And the wrapper around all this in current nomenclature, and we're starting to use this in the Government of Canada, we're starting to use this in the broader Canadian economy, is the Sovereign Stack. That the key parts of the system, whether they're compute, whether they're algorithmic, whether they're data storage, that we have to get some of those things to be sovereign, if not all of those things, quickly to be sovereign. If you think about it, I don't know if any of you own Teslas or any of you have friends that own Teslas, if you've ever been in an airplane, if you've ever been in a train, if you've ever been— everything today that's material that matters is just software. Cars are software on four wheels. Airplanes are software on two wings and two engines. If you control the software, if you control the instructions for the software, it is the modern equivalent of controlling the Suez Canal. It is the modern equivalent of all the kind of the choke points throughout history in economies. It's the modern equivalent of having the greatest navy in the world when nobody has a navy. It is the modern equivalent of....
And this is one of the things as a teaching organization that we've been trying to instill into people, that these are the things that matter today. These are the consequential things. And the world shifted over the last 20, 30 years, and we didn't pay as much attention to these things as we should have.
Barry Appleton: Well, I'm trying to keep this at a high level, but let me give you another granular specific thing. So, one of the things we talk a lot about is about AI and when we want to use AI. And so, we have data that we ring-fence, that we keep in to, you know, in a governmental way. But unless you have specific provisions that also covers your searches, your use of it, we call this correlated data, how it comes together. That's going to be used, and that is unbelievably valuable as well. And you don't want that to be seen by anybody else. How you use your data, what questions you ask, where you go, how long you deal with it, that is all the type of stuff you need to protect as well. And you need to have transparency. You need to know how that goes through. And to be honest, we need a governmental piece of legislation to deal with that, which we still don't have. Now, we've tried. It's not that we didn't try to get some stuff through Parliament, though I'd like to think that I could have helped by doing some things that would have been better earlier on that.
But everything's changed. So we have another opportunity. That's good. But we need it because, again, if you're not in there, if you're not in that game, somebody else is. And on that side, we have a huge issue because we have 3 different models that are going on in this world between an EU model which is based on rights and principles, an American model that's sort of like the gunfight at the OK Corral, anything goes until finally someone pulls out a big gun at the end, and then you have a corporatist model in China which everything goes to the state and is used for that purpose. By the way, they have the best big data in the world. Because they don't have to worry about human rights and privacy and any of the issues that go with it. If you don't have to worry about freedom and due process, it's a lot easier to govern sometimes. But that's not our route. That's not what we're about. So we need to figure it out.
And I wrote a paper on this in August called The Algorithmic Empire. And it was about creating a constitutional focus on how to deal with this. And then I looked at middle powers around the world. It was the most comprehensive review of what different countries were doing to be able to deal with that. I posted it up on SSRN. It'll be out in a law journal in 2026, but it's been one of the most downloaded papers in the world since I posted it in August because no one had actually done the work to focus on that. I'm not going to try to focus on that right now. I want to focus on the big, big ideas as we go through. All I want to tell you about the purpose is, it's possible. They did it. We can do it. It costs a little bit more money. I think it's money that's well spent because you can't go back. That's our problem.
[00:47:35 Slide appears on screen. Text on slide: What Switzerland's Shows / Small and mid-sized states can be sovereign in the digital age. But only if they build: Physical Infrastructure; Legal Insulation; National Strategy]
Barry Appleton: And so they built physical infrastructure, legal insulation, and a national strategy. We should be thinking about those types of things. Those are the types of capacities in the digital age.
[00:47:35 Slide changes on screen. Text on slide: Canada's Current Posture / Fragmented: No integrated compute strategy or digital-sovereignty legislation. Dependent: Reliance on foreign cloud hyperscalers for government, health and critical infrastructure. Restricted: CUSMA limits our room to maneuver.]
Barry Appleton: Right now we're kind of fragmented. We're highly dependent on hyperscalers. Hyperscalers are like Amazon Web Services or Azure. And we have to be really particularly focused for government use, healthcare use, and critical infrastructure.
[00:48:09 Screen changes to show Professor Barry Appleton and Taki Sarantakis seated in armchairs on a stage.]
Barry Appleton: When the Americans asked me the question yesterday about digital, I told them that digital sovereignty for Canada was unbelievably important for the United States because having robust and reliable critical infrastructure in Canada would protect America. They get their energy from us. If our grids go down, they lose. If they want critical minerals from us and our logistics systems go down, they lose. I gave them 3. I can't remember what the other one was, but it was good.
Taki Sarantakis: If the border goes down, airline traffic control—
Barry Appleton: They didn't care about the border.
Taki Sarantakis: We care about the border.
Barry Appleton: But they did care about not having critical minerals. Let's just talk for a minute about critical minerals. When we— I'll talk briefly about the need for patents and innovation and the focus that goes with having that, because that gives us a moat in Canada for jobs and focus. And one of the things I would suggest to all of you is if you give money to the private sector, you should be forcing them to have to put patents in, and by the way, I also would like the government to own a piece of that, because I think that will help repay the money that's going out. The patents are what gives us the cushioning to keep jobs in Canada, to keep a future in Canada, and that's really key in this economy that's based about knowledge and understanding.
But foundationally, I just want to talk I want to talk for a moment about the Ring of Fire and critical minerals, because that's a very good example of something that is here where we have something the Americans want desperately that they need to power this whole area. Just the ability to have the titanium and chromite and the platinum group minerals, those are the ones that we see in the Ring of Fire, particularly in the Juno Claim, there's two, widely owned by the Australians, and Juno, which is Canadian. They can create tremendous opportunity for Canada, and I've been watching the news, how terrible the situation is with Algoma Steel, but actually, they could take the mineralized ore from the Ring of Fire and actually process it in Sault Ste. Marie. It's the natural spot, and we would be able to now have something to do with all those people who are losing their jobs and provide significant value-added. In other words, value-added types of things are so much better for Canadians, because we take the raw materials and sell them out, and then they're processed and we buy them back at a huge price. Here, we could actually have a say in where that's going, and it's available for us. So we need to think a little bit differently than what we've done. And that's an immediate thing because I feel really terribly about what's going on there.
[00:50:55 Slide appears on screen. Text on slide: The consequences for Canada / Without Sovereign Compute data sovereignty collapses, algorithmic sovereignty becomes symbolic, national security becomes contingent. Sovereignty becomes performative.]
Barry Appleton: I don't need to talk about the consequences in terms of, I think sovereign compute is probably important. So I won't tell you why, I won't go through that.
[00:51:09 Slide changes on screen, as described]
Barry Appleton: And the lessons from Switzerland are treat sovereign computer as national infrastructure. Pay for it. Build Canadian capacity. Require sovereign cloud contracts, especially if you have critical public sector issues. Integrate computer into your trade, into your AI. We've even talked a lot about AI. I didn't have time to do that for this, and cybersecurity. And ensure that the CUSMA doesn't preempt this. And because of the provisions that are in there for national interest and national policy and national defence, we can do that, but you have to get it justified along the way. And that's been our problem. Our problem hasn't been that these aren't national defence concepts. It's that we haven't had one side of the government speak to the other side of the government and say, hey, do you agree? And if they do agree, have a memo to file so we can go for it.
Taki Sarantakis: It's not an accident that the Americans thought about this stuff a lot earlier than we did, and the reason why is because they were home to the hyperscalers: Amazon, Google, Facebook, Microsoft. This is their business, and they informed their political elites that this is kind of where the world is going and these are why the things are important, which gives you a sense of understanding why it's important to have some sectors of your own economy be owned domestically, because it's not just about lobbying, it's about intelligence as to where things are going. So please join me in thanking Professor Appleton.
Barry Appleton: Thank you very much. Thank you. It was really interesting.
Taki Sarantakis: Thank you so much.
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