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Former CSIS official urges Ottawa to reject China firm’s Aecon takeover

Former CSIS director Ward Elcock says the federal cabinet should reject the $1.5-billion takeover of Canadian infrastructure builder Aecon Group by a Chinese state-owned enterprise but Ottawa should brace for swift economic reprisal from Beijing if it takes this route.

Mr. Elcock said the acquisition of Toronto-based Aecon by China Communications Construction Company, which is owned 63 per cent by Beijing, would represent a serious national-security risk because Aecon is heavily involved in critical Canadian infrastructure.

“It seems to me very difficult for the government to approve the Aecon acquisition without incurring significant risks to national security going forward,” he said in a speech to the Macdonald-Laurier Institute on Wednesday. “It would certainly not be my recommendation to allow it to proceed.”

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The Trudeau government is conducting a full-scale national-security review of the deal before it weighs the Aecon transaction. Last week, China’s envoy to Canada, Lu Shaye, said it would be “immoral” for Canadians to question the takeover.

Mr. Elcock, who also served as deputy minister of National Defence and Security and Security and Intelligence Deputy Clerk of the Privy Council, said he has no doubt that Beijing will react harshly if the Aecon deal is turned down.

“The reality is that there will be a fairly sharp reaction from China but we don’t know what it will look like,” Mr. Ecock later said in a panel discussion on the Aecon purchase. “The Chinese have ways of administering punishment and they don’t have to use cyberattacks to do it.”

One possible form of retaliation is to curb the flow of Chinese tourists to Canada as it did to South Korea in 2017, when Seoul agreed to deploy American-made anti-missile launchers, he said.

Nonetheless, Mr. Elcock said he can see no reason to justify Beijing’s buyout of Canada’s third-largest construction company, which is involved in critical infrastructure projects such as nuclear facilities, electric transmission lines and B.C.’s massive site C dam.

Federal officials have already told The Globe and Mail that a Chinese state-owned Aecon would not be allowed to bid on building and operating the $4.9-billion Gordie Howe bridge that will connect Windsor and Detroit. Officials said the Trudeau government understands that would be unacceptable to any U.S. administration – particularly one led by Donald Trump, who regards China as a security and trade threat – to have one of the most important infrastructure projects connecting both countries to be built and run by a Chinese government-backed firm.

“It is hard not to conclude that a range of infrastructure projects from dams to power plants, transmission grids to communications infrastructure would raise similar national-security concerns as well as some possibility of an adverse American reaction given the interconnected nature of our infrastructure,” Mr. Elcock said.

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Even if Ottawa placed limits on the type of work and makeup of a Chinese-owned Aecon, Mr. Elcock said he could still not imagine how that would work in reality to “reliably protect Canadian national security risks.”

Aecon supporters have mounted a public campaign to defend the buyout. Former Liberal cabinet minister Brian Tobin and Michael Wilson, a former Conservative finance minister, wrote an op-ed in The Globe and Mail on Tuesday, arguing the Aecon sale is a good deal for Canada.

They said the deal guarantees Aecon will still be headquartered in Toronto and would give the company access to capital to enable it to better compete for larger projects. There are no national security concerns because Aecon is a construction company and not involved in high technology, they said.

“Put another way, if either of us thought this was bad for Canada, we would not be on board.”

But former Canadian diplomat Charles Burton, who participated in the discussion with Mr. Elcock and economist Duanjie Chen on transaction, mocked the two former politicians, who stand to financially benefit from the deal.

Mr. Tobin is chairman of Aecon and vice president of BMO Capital, one of Aecon’s financial advisers, while Mr. Wilson, chairman of Barclays Capital Canada, is a financial adviser to China Communications Construction Company.

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“So they are Canadians who are unaffected by the possibility that if Aecon goes through they might generate a lot of income. If Aecon doesn’t go through they will have the sort of income I have,” he joked.

Mr. Elcock characterized some members of the Trudeau government as being “slightly naive” and even “seduced” by China which they see as the “new Rome.” However, Mr. Elcock said he does not believe a free trade deal with the world’s second largest economy is on the horizon in the near term.

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