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In just two decades, Huawei has grown to rival Ericsson as the largest maker of telecommunications equipment in the world.

The Associated Press

Citing a rarely used national-security protocol, Ottawa has sent a signal to Chinese telecom equipment giant Huawei Technologies that it would block the firm from bidding to build the Canadian government's latest telecommunications and e-mail network.

Shenzen-based Huawei is riding a storm of suspicion. On Monday, a powerful U.S. congressional committee called the company a threat to U.S. security and recommended that its products be excluded from government computer systems. Canada's national surveillance and cryptology agency, the Communications Security Establishment, has warned the military of potential security risks in installing Huawei's equipment.

The chill in relations with one Chinese company comes as the Harper government works to define an evolving relationship. The Conservatives are contemplating allowing a state-owned Chinese firm to buy a piece of the oil sands and are being encouraged by Beijing to enter into free-trade talks.

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A spokesman for Prime Minister Stephen Harper fielding questions about Huawei on Tuesday said Ottawa recently invoked an infrequently used national-security exception that allows it to override trade agreement obligations and restrict bidders on contracts to supply parts of what's been called Ottawa's super network: a secure, centralized pipe for e-mail, phone calls and data.

Ottawa is being coy about which countries or suppliers will be locked out. But Mr. Harper's director of communications hinted strongly that Huawei would be left in the cold.

"The government is going to be choosing carefully in the construction of this network and it has invoked the national security exception for the building of this network," Andrew MacDougall told reporters during an unrelated briefing.

"I'll leave it to you if you think that Huawei should be a part of [the] Canadian government security system," Mr. MacDougall said.

Also Tuesday, one of Canada's former top spies spoke out against granting Huawei a foothold in Ottawa's sensitive phone and e-mail system.

"They pose enough of a threat perspective that I wouldn't let them into any government networks," Ray Boisvert, who was assistant director of intelligence for the Canadian Security Intelligence Service until he retired six months ago.

"They're linked and tied to the Chinese state, and in my view they would, when asked, facilitate the interests of the Chinese military or the security intelligence apparatus," he said of the privately owned Huawei.

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Mr. Boisvert said damage from economic espionage is now on par with the threat posed by al-Qaeda. "It has become equal to the threat of terrorism. Why? It has such long-term repercussions. The future prosperity of Canadians."

Huawei, which in just two decades has grown big enough to rival Sweden's Ericsson as the No. 1 maker of telecommunications equipment in the world, is making inroads into Canada's private sector. It's now supplying major wireless firms, including Bell and Telus, as well as SaskTel and Wind Mobile.

It racked up more than $32-billion in sales in 2011, and has more than 140,000 employees worldwide, including more than 450 in Canada.

Huawei, founded by a former People's Liberation Army member, has on numerous occasions rejected claims its equipment could be used to enable spying.

A spokesman for Huawei's Canadian unit said it has received no signal that it would be barred from bidding for any federal government computer or telecom contract.

"We've had no indication either way – as would be expected," Scott Bradley said on Tuesday.

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Mr. Boisvert said he couldn't imagine China allowing foreign companies deep into its national infrastructure.

"I don't think Cisco or Alcatel-Lucent would be allowed to bid on the Beijing telephone network, let alone the government of China's," he said.

Australia recently banned Huawei's Australian unit from bidding for its $38-billion broadband network project, citing the need to protect "national interests."

Top-secret Canadian government documents written as recently as May 17 and obtained by The Globe and Mail under the access-to-information law show that the CSE has cast a wary eye on Huawei.

One presentation, which discusses the damage foreign adversaries can inflict on computer systems, mentions the "Farewell dossier" incident. That was a Cold War episode in which the Central Intelligence Agency was reported to have deliberately transferred faulty technology to the Soviets – including a computer virus that triggered a major pipeline explosion.

In 2010, Huawei announced it was investing $67-million in its research and development centre in Ottawa, including a $6.5-million grant from the Ontario government.

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The national security exception Ottawa is using can be employed to exclude the use of equipment produced or certified in certain countries.

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