Fragmentation at Risk of Disadvantaging Canadian Organizations and AI
Canada stands at a critical junction in the realm of artificial intelligence governance. As both national and international regulatory frameworks become more prominent—such as the European Union’s AI Act and emerging regulations in China and the United States—the threat of regulatory fragmentation looms large. This fragmentation poses significant risks to national innovation, constrains competition, and ultimately disadvantages Canadian organizations operating across borders.
A recent workshop in Ottawa brought together government officials, industry representatives, academics, and civil society organizations to discuss this urgent challenge. The focus was on a concept known as “AI interoperability,” which refers to the alignment of regulatory frameworks across different jurisdictions and the technical compatibility of AI systems across various platforms.
The Impact of Global AI Governance Fragmentation
The landscape of global AI governance is increasingly divided along jurisdictional, sectoral, and technical lines. This fragmentation creates mounting compliance burdens for organizations aiming to operate on an international scale. Small and medium enterprises (SMEs), which form the backbone of Canada’s economy, face substantial challenges as they navigate this complex environment. Often, these resource-constrained firms lack the expertise and capital to manage diverging regulatory requirements across regions such as the EU, North America, and Asia-Pacific.
In contrast, larger firms are better equipped to absorb these compliance costs, allowing them to build custom infrastructures that reinforce their competitive advantages in each diverging region. This regulatory landscape tends to favor large enterprises over SMEs, which is detrimental to Canada’s economic prosperity and its AI and digital sovereignty.
The Urgency for Interoperability
The workshop underscored the core challenge of interoperability: without coordinated efforts to establish common definitional standards, shared measurement protocols, and mutual recognition agreements, fragmentation may become irreversible. Regulatory interoperability does not necessitate identical rules across jurisdictions; rather, it calls for baseline consistencies that allow local implementations to reflect specific values and priorities.
Strategic Steps for Achieving Interoperability
To foster AI interoperability, Canada should undertake the following strategic steps:
- Accelerate Development of Crosswalks
Canada must expedite the creation of “crosswalks” that connect national and international standards. This will shorten development cycles for emerging technical standards while advocating for the incorporation of international frameworks within Canadian AI regulations. A strategy employed by the EU in harmonized standards enables regulatory adaptation without the need for complete rewrites each time technology advances.
- Inclusive and Adaptive Standard-Setting
Standard-setting must remain both inclusive and adaptive. A significant tension arose during discussions regarding the risk of premature standardization, which could convert innovation risk into compliance risk that deters experimentation. However, complete abstention from standardization is equally problematic, especially in high-risk sectors like medical devices and financial systems, where failures can have serious implications beyond the innovating organization.
- Establish Definitional Standards with International Partnership
The Canadian government should convene expert groups to define standards, measurement protocols, and mutual recognition frameworks in collaboration with international partners, particularly the EU and within North America. It is essential for civil society and non-profit organizations to take part in these processes, ensuring that standards consider privacy, security, and equity alongside technical compatibility.
- Design Iterative Regulatory Frameworks
Regulatory frameworks should enable iterative updates through incorporation by reference, facilitating seamless adoption of evolving international standards without cumbersome legislative processes. Additionally, Canada should create permanent coordination bodies modeled after multistakeholder structures like the Internet Engineering Task Force, bridging federal and provincial divides and ensuring cross-border partnerships in critical sectors such as health, finance, transportation, and defense.
A Coherent Strategy for Canadian Organizations
There is a consensus in Canada regarding a balanced approach: neither the EU’s prescriptive regulation nor the US’s market-driven light touch is preferred. Instead, a coherent strategy that combines early standardization, adaptive governance, comprehensive verification mechanisms, and multisectoral collaboration is essential for the success of Canadian organizations.
Failure to tackle fragmentation consolidates incumbent advantages, erodes competitive dynamism, and squanders Canada’s opportunity to shape globally interoperable AI governance that reflects its values and interests. Strategic leadership on interoperability is not just a technical necessity; it is vital for Canada’s economic future and the alignment of AI systems with the diverse values of Canadian society.
