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USMCA and US-Canada tech: Digital Implications
Cross-border digital trade will continue to explode in coming years. Understanding the implications of sudden trade policy shifts is essential to sustaining growth amid a changing digital landscape.

USMCA and US-Canada tech: Digital Implications

The Canadian and American governments have been negotiating a new trade agreement for months in order to maintain free trade with some key caveats. NAFTA, the 24-year-old predecessor of the new trade deal, was outdated and no longer appropriate for a rapidly evolving tech sector. The new document, the United States-Mexico-Canada (USMCA) trade agreement, will set forth a new North American (and global) standard for digital trade.

While most attention in government and the media has been focused on other industries affected by the deal such as automobiles, dairy, and manufacturing, the USMCA has produced several policy shifts that will impact Canada’s tech sector for years to come.


New Intellectual Property Rules

Certain provisions in the USMCA involve new intellectual property protections. Under these new provisions, Canada has agreed to extend copyright protections from 50 years to 70 years after the life of the creator (to fully go into effect within 2.5 years).

It could be argued that by offering the same copyright protections as in America, technology innovators now have a stronger incentive to develop proprietary technology in Canada than they had previously. Though far from certain, this could potentially lead to more intellectual property in the hands of Canadian companies in the future.

On the other hand, changes to intellectual property rules highlight a principal strength of open source technology - they are nonproprietary and as such cannot be bound by these rules. In fact, many of the creators of open source technologies, such as the original creator of the Drupal platform, are alive and well yet their creations are used and improved upon for free by a worldwide community of coders.

Extending copyright rules will most likely result in wider adoption of open source technology in Canada, particularly since American companies tend to own more intellectual property than Canadian companies.

At OPIN, we have fully embraced this shift. Every day we build solutions on Drupal that are free of any licensing requirements, keeping costs and delivery time low for our clients while maintaining our ability to innovate and stay competitive with American digital services providers.


Data Sovereignty Protections Relieved

One new provision of the USMCA that will benefit both American and Canadian firms is the alleviation of constraints on where data can be stored. Previously, the Canadian government committed to a policy of data sovereignty, where companies wishing to conduct business in Canada were required to store data in Canadian facilities. As a result, many large firms such as Amazon and Microsoft opened large data facilities on Canadian soil, however, this regulation has produced a barrier to entry for others looking to enter the market.

The USMCA has removed these restrictions, freeing Canadian and American firms to store their data wherever they please. In the future, this will likely take place in American facilities where costs are lower. This will free up capital for American companies to expand into the Canadian market, and for Canadian companies to innovate further and stay competitive.

With Canadian tech companies already facing a shortage of venture capital compared to their American counterparts, changes like these that drive costs down will help sustain the growth of Canada’s tech sector.

Of course, a suitable alternative to traditional data storage is taking advantage of cloud storage. While cloud storage is a great way to cut costs and ease disaster recovery, it is not without risk. A reliable and secure hosting service is essential if your organization takes this route.


De Minimis Threshold Raised

Another provision of the USMCA with significant digital implications (and fantastic news for American online sellers) is the raising of the De Minimis threshold. In other words, the maximum value of a good that can be purchased from American online retailers in Canada without paying duty has been raised from $20 to $150.

For American online sellers, already burdened by the USD/CAD exchange rate, reduced duty opens up significant growth potential in the Canadian market. This will produce greater demand for scalable, multi-lingual digital solutions to commit to this new opportunity. At OPIN, we build world-class Drupal solutions in partnership with our translation services provider Lingotek, in order to better connect with Canada’s 7.2 million native French speakers and to satisfy Canadian bilingual requirements.

As a result of American retailers tapping more of the Canadian market, Canadian online retailers may face stiffer competition. Keeping costs low with a robust, open source CMS is indispensable to staying competitive in the digital sapce, particularly with the new copyright rules explained previously. The Drupal CMS offers powerful e-commerce modules that can support projects of any size. Any firm, Canadian or American, that successfully leverages this technology for their business will come out ahead.

As we all know, things change extremely quickly in the digital realm. Although NAFTA was certainly outdated by the time it was renegotiated, it remained somewhat relevant for a number of years until new digital provisions were required to keep up with emerging technologies.

While the USMCA does include several provisions that apply to the digital space, it was clearly conceived with other industries such as automobile manufacturing top-of-mind. It seems likely that in a few years, like NAFTA, the USMCA documentation will struggle to keep up with the dynamism and growth in the digital space.

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Stephen has built a marketing career on his belief that even the most complex problems of the digital age should be resolved by starting from first principles, not chasing trends. This approach helps Stephen provide insights to our readers about the forces that are reshaping the digital landscape.