Critics slammed the Liberal government on Thursday for giving what they called a serious lack of scrutiny to a Chinese investor's takeover of a Vancouver high-tech firm even though Canada and its allies depend on the company's communications technology.
A senior U.S. government official who did not want to be identified told The Globe and Mail on Thursday the foreign takeover of Norsat International was "fairly sensitive" and, as a result, the United States would not comment. The official declined to say whether the Trudeau government had consulted Washington about the transfer of the satellite communications technology to a Chinese company.
The Trudeau government has made closer relations with China a significant foreign policy objective and is discussing launching free-trade talks with Beijing. When the Liberals came into office, briefing books prepared by the department of Global Affairs warned that China believes it has been "unfairly targeted" by national-security reviews. China's ambassador to Canada, Lu Shaye, told The Globe earlier this year he considers national-security reviews tantamount to trade protectionism.
Innovation, Science and Economic Development Minister Navdeep Bains was asked repeatedly in the Commons on Thursday to justify his handling of the Norsat deal after The Globe reported that the Trudeau Liberals allowed Shenzhen-based Hytera Communications to buy the company without subjecting the deal to a formal national-security review. Ottawa screened it for national-security concerns, but did not proceed with a full-fledged review.
"Hytera Communications has previously been accused of large-scale theft of intellectual property and the UK raised major red flags when Hytera tried to acquire a similar British company," Conservative House Leader Candice Bergen asked. "Why is the Prime Minister so eager to sell our military technology to Beijing?"
David Mulroney, a former Canadian ambassador to China, called The Globe story "worrying" via his Twitter account on Thursday. In a statement to The Globe later, he referred to the major defence expenditure package the Liberals unveiled this week, asking: "What is the point of elaborating an expensive defence procurement plan if you're not doing the basics to counter other threats to national security?"
Former Canadian spymaster Richard Fadden, who also once served as national-security adviser to Prime Minister Justin Trudeau, told The Globe on Wednesday he would probably have recommended a full-fledged national-security review.
When Hytera made a bid for Sepura, a mobile digital radio equipment maker in Cambridge earlier this year, Britain – which has intervened in foreign takeovers for national security reasons only seven times in the past 15 years – imposed strict stipulations on its conduct after the acquisition to safeguard national security.
Mr. Bains defended the government's actions on Thursday in the Commons, at first talking up the robustness of the preliminary screening process. As the opposition continued its attack – asking nine questions on the matter – he switched to saying a full-scale national-security review had in fact taken place.
"The member opposite is saying that this transaction was not subject to a national-security review," he said. "That is not the case. All transactions under the Investment Canada Act are subject to a national-security review. We have followed the process."
The minister said the Liberal government would "never compromise our national security" and said Canada needs to be open to foreign capital. "When it comes to our economic agenda and our overall Investment Canada Act regime, we are being very clear that in order to grow the economy and create jobs, we must be open to investments, open to trade, open to people."
Customers listed on Norsat's website include NATO, the U.S. Department of Defence, the U.S. Marine Corps, the U.S. Army, the Irish Department of Defence, the Taiwanese army, the aircraft manufacturing company Boeing and major journalism outfits including CBS News and Reuters.
The Conservatives and NDP asked the Commons Speaker to rule that Mr. Bains was not telling the truth when he said a national-security review had taken place. They accused Mr. Bains of conflating the initial screening process and a formal review – which did not take place – to confuse Canadians.
NDP Leader Tom Mulcair said Mr. Bains must correct himself, saying the facts on public record show an official, full-fledged national-security review was not ordered.
"Mr. Bains definitely misled the House [on Thursday]. There's no question about that. He's either completely ignorant of the law that he's supposed to be applying or he's lying to Canadians and to the House about the issue of national security. And I take it very seriously either way," Mr. Mulcair said.
All foreign takeovers of Canadian companies undergo a preliminary security screening analysis for their potential to harm national security, but a formal national-security review is far more extensive. It is undertaken when Ottawa decides a deal could be injurious to national security. A far-reaching probe such as this would analyze the potential impact on Canada's defence capabilities and interests and investigate how the transfer of this proprietary technology outside Canada as well as the possibility the transaction could enable foreign espionage or injure Canada's international interests, including foreign relationships. It would also consider the potential of the investment to hinder intelligence or law enforcement operations.
Mr. Bains' own department told The Globe earlier this week it had advised Norsat this month that, after a security screening "no order for review would be made." A department spokesman explained, "this was because, following the extended screening process, there are no outstanding security national-security concerns."
Norsat published the same information on June 2 in a news release, saying "the minister responsible for the Investment Canada Act … has served notice that there will be no order for review of the transaction under subsection 25.3(1) of the Act." That subsection of act explains when a formal national-security review is warranted.