Artificial Intelligence and the Global Trade Environment

This scenario presents many opportunities for Canadian businesses. Most importantly, industries in Canada will have the opportunity to become global leaders in the development and implementation of AI technologies, which would bolster growth in productivity and Canadian GDP across sectors. For example, thanks to AI, transportation and health care are likely to benefit from increased efficiencies in their management systems.

This scenario is associated with several potential challenges. Ethical concerns may emerge over the development and use of AI. For example, benefits associated with AI and global trade may not be shared equally across the international community and could be allocated to only a few large multinational corporations or countries with the means and data to develop AI.

There may also be concerns over data security and privacy. Canadian businesses might be adversely affected by data fraud and infiltration if not sufficiently protected. The adoption of new AI technologies and 3D printing may disrupt the Canadian labour market across different sectors including financial services, manufacturing, and the shipping sector.

Canada should design its regulations on global trade and AI technologies based on international standards and ensure continued cooperation with the international community. Meanwhile, regulations on data and information flow must be designed to strike a balance between privacy, security considerations, and information flows. The government should also introduce measures to encourage private firms to innovate so that they can effectively compete with global competitors.

In Canada, firms operating in basic-needs sectors have the best potential growth. There is less international demand for Canada’s natural resources—production and consumption become increasingly localized, with the economy tilting toward firms providing shelter, food, clothing, and some low-value-added manufacturing products. Another opportunity for Canadian businesses is to reconfigure regional value chains, swapping north–south trade for east–west trade (i.e., developing internal Canadian markets).

Socio-political instability rises due to the higher costs and disinvestment that are stymieing economic growth. This causes additional fragmentation within Canada. Some provinces raise barriers to trade and investment, making a shift to east–west trade less likely. There is fear that some provinces could decide to leave the confederation to maintain access to markets south of the border.

Policy responses in this scenario could include different actions. Policy-makers must first integrate the ethical application of AI into education and training programs. This will help to ethically integrate AI in the economy and rebuild trust in AI. This would also increase Canada’s labour force skills in the technology, and, over time, allow Canada to develop a comparative advantage in AI.

At the same time, Canada should work with its trading partners to rebuild global trust in the technology. Policy-makers should also conduct sectoral roundtables to identify sector-specific threats and opportunities deriving from AI adoption. Canadian firms in some industries, such as manufacturing, might have to adopt and implement AI quickly if they do not want to fall behind their competitors.

On the other hand, industries such as health care might require more caution and public support when implementing AI due to their use of sensitive information. Sectoral roundtables could alleviate the struggle between the government’s need to protect the public and the private sector’s need to stay globally competitive by integrating innovative technologies in their operations.

Canadian businesses may still see opportunities emerging from this scenario. For example, the Canadian government may provide financial support to companies that have the potential to integrate vertically. Large resource extraction firms continue to export, thanks to Canada’s significant endowment in natural resources relative to other countries. The industries producing goods that are typically imported will expand as Canadian businesses and consumers shift from buying imported goods to purchasing domestically produced ones (as a result of the protectionist environment).

In the face of rising global protectionism, Canadian policy-makers could mobilize their efforts to eliminate barriers to interprovincial trade and movement of people to encourage more trade within Canada.

Since Canada is a small economy that is highly dependent on trade, the rise of global protectionism causes a real threat to domestic economic growth. Limited access to international markets will lead to a contraction in Canada’s economy, causing civil unrest in parts of the population. Workers will exert more pressure on the government to reinforce employee protections against market forces.

In this context, the federal government develops policies to support a “Made in Canada” strategy to address workers’ concerns. Yet, there is also a push from the business community to lower wages so that firms can more easily compete in foreign markets where they are likely to face high tariffs.

Large corporations based in the most populous countries are the main winners in this scenario as the size of the population allows them to access enough data to develop deep learning (AI) technologies. Governments of populous countries encourage corporations to invest in their domestic market rather than abroad, and to focus on vertical, rather than horizontal, integration. Global value chains slowly dissipate in favour of more localized value-added supply chains. Smaller economies, such as Canada’s, struggle in this scenario, as barriers to trade and to cross-border data flow prevent them from accessing sufficient data to fully develop AI technologies and reap the benefits that they offer.

Policy responses in this scenario could include several tools. For example, educational programs in applied sciences could include courses on approaches to integrate AI technologies in our economy in an effective, safe, and ethical manner.

At the same time, Canada should work with its trading partners to rebuild global trust in the technology. Policy-makers should also conduct sectoral roundtables to identify sector-specific threats and opportunities deriving from AI adoption. Canadian firms in some industries, such as manufacturing, might have to adopt and implement AI quickly if they do not want to fall behind their competitors.

Although Canada already has advanced university research centres in AI (in Montréal, Toronto, and Edmonton), we also need to focus on strategies to transfer research outcomes into business opportunities so that Canadian firms can use the newly created technologies. Policy-makers could also implement a framework that supports workers when confronted with quick labour market displacements resulting from technological innovations.