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Most of the talk so far in Canada about renegotiating NAFTA has been about lumber, dairy, cars and other traditional goods.

That's unfortunate. The economy has undergone a radical transformation in the nearly 25 years since the North American free-trade agreement was signed. It's gone digital.

So much of the economic action these days is in the knowledge economy, rather than in products that move across the border in tractor-trailers.

The majority of the value of the Standard and Poor's 500 is now tied up in intangible things – intellectual property, data, brands and the like. Many of the largest and fastest-growing companies – public and private – are in areas such as social media (Facebook, Twitter and Snap), cloud computing (Amazon and Microsoft), online streaming and content (Netflix, Google, Apple and Spotify), e-commerce (Amazon and eBay), ride sharing (Uber) and online payments (PayPal).

There is a common denominator here. They're all U.S. companies. Donald Trump often laments that the United States doesn't make anything any more. But guess what? The country sure produces – and exports – a whole lot of digital stuff.

And you can bet U.S. negotiators will take care of their own in the looming NAFTA negotiations. When U.S. Trade Representative Robert Lighthizer talks about a "modernization" of the trade agreement, he clearly has digital trade on his mind.

It's not clear if the Trudeau government and its negotiators are ready to do battle on this turf. The risk is that we get distracted by the Old Economy, while the United States quietly rewrites the rules of the game for the knowledge economy, to suit their own interests.

For example, the United States will want to weaken any rules that limit the ability of U.S. companies to store Canadian data on their own U.S.-based servers, creating potential privacy concerns. The Americans will also seek to expand protections for intellectual property, patents and copyright – as they did in the now-stalled Trans Pacific Partnership trade agreement. And they may not look favourably on protections of Canada's cultural industries.

Ottawa must be mindful of the "winner-take-all" dynamic that exists in the digital world, according to a new report by the Conference Board of Canada on the NAFTA renegotiation. Most of the big players have dominant market positions in their patch of the digital economy.

"Canada should aim to maintain a certain level of flexibility with regard to future digital policies at home should Canadian firms and industries need some support to stay competitive in markets dominated by a few digital players," says the report, titled NAFTA 2.0 and Canada.

The Conference Board also warns that Canada's cultural policies could be at risk unless Ottawa pushes to keep the broad cultural exemption that currently exists in NAFTA, rather than the TPP's weaker protections.

"In a digital world characterized by winner-takes-all dynamics, having the freedom to develop our own cultural policies will be essential to our ability to create and distribute a wide variety of Canadian content," the report says.

Cross-border flows of goods, and even services, have slowed in recent years. But data-based trade is exploding. Cross-border data flows already contribute more to the global economy than trade in goods, according to a recent McKinsey Global Institute study, cited in the Conference Board report.

One of Mr. Trump's first acts as U.S. President was to walk away from the TPP deal. But in the months since, Commerce Secretary Wilbur Ross has acknowledged that the TPP will be a "starting point" for NAFTA 2.0.

Some experts worry that the U.S. will seek to replicate much of the gains it made in the TPP in areas such as digital trade and intellectual property. The United States will seek to "back-door" the TPP's governance rules for the knowledge economy in the NAFTA negotiations, with the aim of giving U.S. companies maximum "freedom to operate," argues economist Dan Ciuriak, a former deputy chief economist at the Department of Foreign Affairs.

And this, he suggests, will lock in a "home-ice advantage" for the big U.S. players, who already dominate digital trade.

Canada never wanted to reopen NAFTA. Indeed, it initially wanted no part of the 1988 agreement.

The danger now for Ottawa in reopening NAFTA is that it becomes too preoccupied with saving Old Economy jobs in industries such as dairy and lumber. If that happens, Canadians could wake up one day and find themselves boxed out of emerging opportunities in the New Economy.

Barrie McKenna says Canada's trade fights over lumber and Bombardier's aircraft may score points at home, but at what cost against the rest of trade with the U.S.?

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