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Canada's Under-the-Radar Trade Opportunity: Digital and AI-Enabled Trade

Danielle Goldfarb, Kati Suominen
July 18, 2025
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Executive Summary

Canada is a small, open economy that depends on trade to grow its living standards. The primary public focus is usually on goods moving across the U.S. border — a focus that has intensified under Trump 2.0 tariff uncertainty. 

This framing overlooks the most dynamic part of global trade and Canada’s trade: exports of digital services. Advances in digitization and artificial intelligence (AI) are changing what can be traded and how. These technologies allow Canadian firms to export services, reach new markets and use digital inputs in traditional sectors. 

This discussion paper assesses the extent to which Canada is maximizing the opportunity opened by digital services trade and ways it could benefit further. Since 2005, Canada’s digital services exports have grown nearly four times faster than its goods exports, reaching US$84 billion in 2024. Computer services alone grew by over 400 per cent. Digital services now make up 62 per cent of Canada’s commercial services exports and account for over one in 10 of Canada’s total exports of goods and services.

Yet Canada is not seizing this opportunity as much as peers with similar levels of AI research expertise or GDP levels. Canada’s share of global digital services exports remains below three per cent and has barely changed in two decades. Digital exports to Indo-Pacific markets remain limited, even though several of these countries are rapidly growing their imports of digital services. Canada also lags in embedding digital services into its traditional exports, with lower levels of digital value added than the OECD average. 

To respond, Canada needs to place digital and AI-enabled trade at the centre of its economic strategy. This includes setting national targets, supporting exporters, aligning trade and technology policy, helping to ramp up digital adoption in traditional industries, and continuing to modernize and expand trade agreements. The paper also proposes a targeted research agenda to guide this shift, including mapping digital-exporter pain points, identifying high-potential sectors, analyzing underused trade agreements, and examining how technologies like AI and blockchain are reshaping trade.

The main findings include:
 

  • Canada’s digital services exports have grown almost four times as rapidly as have Canada’s merchandise and other commercial services exports. Computer services exports, such as software exports, have experienced especially strong growth.
     
  • However, Canada’s digital services exports can still grow much further. They still account for only 12 per cent of total Canadian exports of goods and services. In addition, because the world’s other leading economies have also grown their digital services exports, Canada’s share of these exports has not changed over the past two decades, remaining below three per cent and below the volumes of other economies of similar size.
     
  • Canada’s digital services export markets are only somewhat more diversified than those for its goods exports. The U.S., which accounts for 75 per cent of Canada’s merchandise exports, buys 60 per cent of Canada’s digital services exports. Europe is Canada’s second largest market for digital services. Canada is underexploiting digital services export opportunities in dynamic Asian markets such as Indonesia, Japan, and the Philippines. 
     
  • Canada could more effectively seize the digital trade opportunity with a concerted effort to set goals for digital trade expansion, identify digital traders’ pain points or barriers to expansion, and systematically coordinate efforts between agencies focused on digital transformation and those focused on trade promotion to grow digital services exports. Canada can also lead the development of new trade-related rules in such areas as AI policy and standards.

Danielle Goldfarb

Danielle Goldfarb is an expert on trade, real-time data, economics, and public policy. She has developed leading-edge research programs and written almost 100 policy papers for Canadian and U.S. think-tanks. Danielle is a Distinguished Fellow at the Asia Pacific Foundation of Canada, a Senior Fellow at the Centre for International Governance Innovation and the Munk School of Global Affairs and Public Policy, and a Fellow at the CSA Public Policy Centre. 

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Kati Suominen

Dr. Kati Suominen is Founder and CEO of Nextrade Group and ideates and leads Nextrade Group engagements with the company's more than 50 clients. She has ideated and built dozens of data and analytical products, pilot initiatives, and eight global initiatives and public-private-partnerships to support Nextrade's clients in enabling world trade through technology.

Kati is the author and editor of over 120 papers and 10 peer-reviewed books on trade, globalization and technology and has spoken and keynoted numerous times at such venues as Davos, World Trade Organization, World Trade Symposium, Global Trade Review, ICC Banking Commission, Institute of International Finance, IMF, and World Bank, APEC Senior Officials' Meeting, and commented in such media as Wall Street Journal, Washington Post, Time, Politico, BBC, CSPAN, USA Today, and Los Angeles Times. 

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