Prime Minister Justin Trudeau said Tuesday that Ottawa consulted the United States and other allies before approving the sale of a Canadian satellite technology firm to a Chinese communications giant, but he would not say whether the U.S. raised any objections.
"Every transaction of this type that falls under the Investment Canada Act is carefully assessed by all national security agencies," Mr. Trudeau told the House of Commons. "On top of that, we do consult with our allies, and in this case directly consulted with the United States on this situation."
The government conducted a routine security analysis but did not proceed with a full-fledged national security review.
Ottawa has made closer ties with China, including a potential free-trade deal, a cornerstone of its foreign policy – and China has publicly deplored Canada's national security reviews as protectionism.
Mr. Trudeau told MPs the government had concluded the takeover of Norsat International did not affect national security – despite warnings from a U.S. congressional watchdog that the sale jeopardizes U.S. security interests because the Vancouver firm sells its technology to the American military.
The White House, the U.S. Department of Defence and the U.S. Treasury Department did not respond to requests from The Globe and Mail about whether they were consulted and had raised any concerns with Ottawa.
The U.S. embassy provided a curt statement. "Having checked with Washington, we are not in a position to provide any further information at this time," a spokesperson said.
Opposition party leaders have challenged the sale of Norsat International to Hytera Communications and have demanded a formal and comprehensive national security review.
The issue dominated Tuesday's Question Period after The Globe reported that the U.S.-China Economic and Security Review Commission warned the takeover "raises significant national security concerns" for the U.S. military.
Innovation Minister Navdeep Bains, who approved the takeover, refused to say if Canada's allies had given the thumbs-up to the transaction.
"These are national security conversations, so I am not going to divulge the specifics of the engagement with our allies," Mr. Bains told reporters.
The U.S.-China Economic and Security Review Commission, which reports to Congress, told The Globe on Monday that "the U.S. military and other domestic clients of Norsat should immediately review their purchases as well as the exposure they have to existing products from the company they use to determine what security risks might arise."
Commissioner Michael Wessel said Ottawa appears to be willing to sacrifice the national-security interests of its most important ally in exchange for a bilateral free-trade deal with China.
The Prime Minister said Canadian security agencies "concluded there were no national security concerns" and added, "We always follow the advice of our security experts."
He maintained that every foreign purchase of a Canadian company is subject to a national security review.
"What the Prime Minister said is demonstrably false," NDP Leader Tom Muclair replied. "There has not been a national security review. That has to be ordered by the minister [Mr. Bains], who never ordered it because we know that because the company [Norsat] put it out in an official statement. … That is why the Americans are concerned."
In fact, Mr. Trudeau's assertion was contradicted by the testimony of two top security officials Monday. Jeff Yaworski, the acting director the Canadian Security Intelligence Service, and Malcolm Brown, the deputy minister of Public Safety, told a Commons committee that the Investment Canada Act calls for preliminary security screenings, not national security reviews, of all foreign takeovers. The decision to conduct a national security review – which examines the impact on Canada's economic and defence interests – is made by the federal cabinet, they testified.
Two former CSIS directors, Richard Fadden and Ward Elcock, have told The Globe that they would have recommended an in-depth national security review of the Norsat transaction.
"It's hard to imagine why one would not do a review," Mr. Elcock said, who added the government appears to be "much more open-minded about Chinese acquisitions of sensitive technology."
Since the Liberals came to power, they have been much more open than the previous Conservative government to investment from China in a number of key sectors.
In February, Ottawa approved the sale of one of British Columbia's biggest retirement-home chains to a Beijing-based insurance titan with a murky ownership structure, giving China a foothold in Canada's health-care sector.
In March, the government approved a Chinese takeover of a Montreal high-tech firm, ITF Technologies – the very same transaction that had been blocked by the Conservative government after it became convinced the deal would undermine a technological edge that Western militaries have over China.
At the time, CSIS had recommended against the takeover, saying the ITF technology transfer would give China access to "advanced military laser technology" and would diminish "Canadian and allied military advantages."
Hytera, which is 52 per cent owned by Chinese billionaire Chen Qingzhou, drew international headlines in March when telecom equipment giant Motorola filed a high-profile lawsuit against it, accusing the Chinese company of large-scale theft of its proprietary technology.
When Hytera made a bid this year for Sepura, a mobile digital radio equipment maker in Britain, the British government conducted a national security review and imposed strict stipulations.
Mr. Bains's own department said last week it had advised Norsat that, after a security screening, "no order for review would be made." A department spokesman explained that "this was because, following the extended screening process, there are no outstanding national security concerns." Norsat published the same information on June 2 in a news release.