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True North Far East is dedicated to chronicling Canada-China relations and the surprising ways the two countries are influencing each other

Just what exactly is going on with Huawei and Canada?

Just what exactly is going on with Huawei and Canada?

Now that approval for the extradition of Huawei CFO Meng Wanzhou has been given, let’s take stock of the twists and turns in this high-stakes drama.


Just the Basics:

  • Meng’s arrest has triggered a cascade of events, as China-Canada relations hit their lowest point in decades

  • China is angered by the sudden shift in tone from a hitherto welcoming (and passive) Ottawa

  • Huawei’s ties to Canadian telcos, universities and political figures runs deep, calling into question just how effective a response Canada can actually muster


Few Canadians would have been familiar with the name Meng Wanzhou at the start of December 2018, yet the CFO of Huawei has quickly become a household name, as her image is plastered across newspapers and television screens. Following Meng’s arrest, China-Canada relations plummeted to a nadir not seen in almost 50 years, as Beijing engages in a tit-for-tat campaign against Ottawa in an effort to pressure it into releasing Meng. Throw in the plights of detained Canadians in China, Huawei’s influence network in Canada, and the role of Iranian sanctions and many observers are right in wondering just what exactly is going on. In recent months, Huawei has become a byword for nefarious Chinese meddling, yet while Canada was merely acting on a U.S extradition request - Canada, not America - has taken the full brunt of Beijing’s ire.

With the 30 day extradition review period having now elapsed and the go ahead for Meng’s extradition trial to begin given, let us take a look at how we arrived at this juncture and outline just exactly what has transpired, as we enter the next stage of this ongoing saga.

Act I: The apprehension of Meng Wanzhou

On December 1st, Meng was arrested by Canadian authorities - acting on a request from the U.S Department of Justice (DoJ) - while transiting through Vancouver airport. Ottawa and Washington have a long established extradition treaty, with Meng’s case representing just the latest example of this bilateral arrangement at work. The crux of the DoJ’s case against Meng revolves around her alleged involvement in the transfer of American goods to Iran, in contravention of the existing sanctions regime which that country faces.

Since at least 2016, American authorities have suspected Huawei of having illegal dealings with Iran, a relationship orchestrated through the use of a Hong Kong-based company, Skycom. Washington maintains that Skycom is in fact a subsidiary of Huawei, a charge which Huawei denies (although the company does admit it owned Skycom between 2008-2009, but divested prior to the time period which concerns the DoJ). The United States maintains that Huawei still has ties to Skycom, and that statements by Meng in 2013 to the contrary constitute fraud; as such the United States is requesting her extradition.

As Huawei’s CFO, Meng has been the public face of the company and thus her high profile arrest has led to fierce opposition from both Huawei and the Chinese government. A further wrinkle in the story is that despite previous monetary settlements from other companies engaged in sanctions busting, the Meng case could be a rare instance with actual jail time, as the New York district judge who ordered her arrest is located in the same area as the financial institutions she allegedly lied to back in 2013.

 

At the centre of the storm: Huawei CFO Meng Wanzhou | HUAWEI

 

The problem for Canada is that Meng is no ordinary Huawei employee, but rather the daughter of the company’s billionaire founder, Ren Zhengfei. Founded in 1987, Huawei has become a flagship enterprise for Chinat, with over 180,000 employees worldwide. Whereas any government would not be pleased with the arrest of one of its leading business leaders from one of its leading firms, Ren’s connections to the Chinese government have added extra impetus for Beijing to wade into the battle. Ren is a former People’s Liberation Army (PLA) officer with close ties to China’s leading Communist Party bosses, who in turn are rallying behind him and his firm.

That being said, the chief reason for Beijing’s bellicose stance vis-a-vis Canada is that Meng’s arrest comes at a time of growing international backlash against Huawei, which is seen by many Western countries as collaborating with the Chinese government’s espionage efforts. Already on edge, Meng’s arrest is seen by China as an extension of the Western backlash against Huawei, with China claiming that her arrest is politically motivated.

This opinion is only reinforced by statements from President Trump who has publicly argued with his own justice department, stating that he might intervene in the case in order to ease trade war tensions between the two countries. It should; however, be noted that despite a lack of support from the President, the Trump administration has thrown Canada a lifeline of sorts, with top Trump economic advisor Larry Kudlow publicly stating: “is [the Meng case] part of the overall trade landscape, if you will? Yes. But it’s principally a legal matter and not a trade matter. That’s why I’m so proud of Prime Minister Trudeau for staying with the rule of law and assisting the United States. I’m very proud of him.”

Nevertheless, aside from the folly of openly contradicting your own government agencies, Trump’s statements undermine Canada’s claims that it is merely following established extradition protocol. Furthermore, to make matter worse a diplomatic faux pas by former Canadian ambassador to China John McCallum has only added fuel to the fire. After going against Ottawa’s position by stating that there were compelling reasons to not extradite Meng, McCallum was promptly fired by PM Trudeau for his comments.

[...] It is perfectly understandable that Beijing would feel free to take this sort of tone. Among G7 countries, Canada has adopted a uniquely supine posture in its relations with Beijing and its legions of creepy billionaires.
— Terry Glavin, Macleans

Caught between an angry China and erratic Trump, Canada is facing China’s full ire, as it represents a convenient target for Beijing to lash out against without upsetting ongoing trade talks with the U.S. The Chinese ambassador to Canada has warned of repercussions should Ottawa follow through and ban Huawei. Speaking on the issue, ambassador Lu Shaye has mentioned that “[he] always [has] concerns that Canada may make the same decision as the U.S, Australia and New Zealand did. I believe such decisions are not fair because their accusations are groundless.”

China fully aware of how hyperbolic it sounds

It is important to note that the hyperbole flowing from Chinese state media calling Meng’s arrest a “kidnapping” and bail hearing a “show trial” are meant for domestic consumption. Beijing uses such hyperbolic language whenever it feels China and its interests have been insulted overseas, in order to stoke nationalist sentiments and thus divert public attention towards useful ends. The Chinese government is fully aware that Canada is merely acting on an American request from an established extradition treaty.

Beijing’s claims of kidnapping ring hollow, especially in the wake of the detention of several Canadians in what are seen as moves to pressure Ottawa into denying the American extradition request. The arrests of former diplomat Michael Korvig and entrepreneur Michael Spaver leave little doubt that their incarceration has little to do with any alleged actual criminal acts involving the two men. A third Canadian - Robert Schellenberg - is also feeling Beijing’s wrath, as he was recently sentenced to death for drug trafficking. Schellenberg had already been convicted of drug trafficking and sentenced to fifteen years in 2016, yet his case was suddenly re-opened and his sentence changed to death. The timing of this change is most suspicious and despite Chinese claims to the contrary, many in Canada view this as another facet of Beijing’s campaign of intimidation.

Suspicions about Huawei’s growing influence and connections with the Chinese government are not new

That being said, China’s reaction to this whole affair is not totally unfounded. When we are faced with allegations of Canada “backstabbing China” “[Chinese officials] should be told to pound sand,” according to Macleans columnist Terry Glavin, but “it is perfectly understandable that Beijing would feel free to take this sort of tone. Among G7 countries, Canada has adopted a uniquely supine posture in its relations with Beijing and its legions of creepy billionaires. Unlike Canada, our partners in the ‘Five Eyes’ intelligence alliance - the U.S, Australia, New Zealand and the United Kingdom - have not been slobbering on Huawei’s slippers all these years.”

Huawei’s Canadian connections run deep

With concerns about Huawei’s links to the Chinese government growing, three of the ‘Five Eyes’ - the U.S, New Zealand and Australia - have already banned Huawei from their 5G networks, citing security risks. The Canadian government is currently undertaking a security review to determine whether it too will enact a ban, the consensus among experts being that Ottawa will indeed follow through on such a measure: “I think a ban is likely. I think it is important for Canada to remember it’s in, and of, the West,” notes Richard Fadden, ex-CSIS chief and former national security advisor to PM Justin Trudeau.

Banning Huawei from Canada’s 5G network would be a marked departure from the country’s previous cozy relationship with the Chinese tech giant. Huawei entered Canada ten years ago, and for the past decade has been showered with direct subsidies and tax credits, “deftly insinuating itself into the good graces of Canada’s political class,” argues Glavin.

Take the career trajectory of Jake Enwright, who quit as Conservative leader Andrew Scheer’s communications director to take up the position of director of corporate affairs at Huawei Canada. Enwright’s career change is mirrored by that of long time Liberal (and Ottawa Centre candidate during the 2011 election) Scott Bradley. After the election Bradley became Huawei Canada’s VP of corporate affairs and (as of December 2018) is a director of the China-Canada Business Council: he recently quit from the former position in the wake of the Huawei imbroglio.

We would not, will not and cannot share such information. It would be unlawful, unethical and technically impossible. Huawei Canada [...] adheres to Canadian law.
— Huawei Canada president, Eric Li

The extent of Huawei’s insinuation is such that one questions whether Canadian politicians have the fortitude to follow through with a ban. Former deputy prime minister John Manley even went so far as to suggest that Canada should have skipped the whole affairs by employing some “creative incompetence” to ‘accidentally’ miss Meng at Vancouver airport: hardly a vote of confidence in our political leaders.

Alongside its partnerships with around a dozen Canadian universities, Huawei has also become the presenting sponsor of Hockey Night in Canada, appropriately indicative of the company’s presence in the nation’s metaphorical soul. Such is the symbolic travesty of this association in the light of recent developments that the Toronto Sun has called for the removal of the Huawei logo from the program.

Telcos, universities set to lose if Huawei ban goes ahead

Through all this the Big Three telecom firms - Bell, Rogers and Telus - are watching developments closely, as Telus and Bell are heavily invested in Huawei, whereas Rogers uses Ericsson. Consequently, a ban would severely hurt the former two, with Telus voicing its support for Huawei, stating that “clearly Huawei remains a viable and reliable participant in the Canadian telecommunications space,” in an internal memo signed my Telus executives. So far Huawei has also found (at least tacit support) from Canadian universities, who have refused to sever ties with the Chinese company: the University of Oxford recently terminated its cooperation with Huawei, citing security concerns.

The key takeaway from criticism of Huawei’s ties to Canadian universities is the notion of the weaponization of patents. Huawei’s research partnerships with universities such as UBC, Waterloo and the University of Toronto, mean that (like other such partnerships between educational institutions and multinational corporations) when such ties bear fruit, the results often go Huawei. Consequently, not only does Huawei gain access to cutting edge Canadian intellectual property (IP), but it can dominate the patent high ground, underbidding competitors by charging them for access to vital IP.

“Given the national security concerns about the nature of [Huawei’s] devices and the capabilities that one associates with them, that could mean that, for economic reasons companies adopt products that there may be national security issues associated with,” explains Christopher Parsons, managing director of the Telecom Transparency Project at the Munk School in Toronto. The main sticking point for Huawei’s critics are its obligations under Chinese law, which mandates Chinese firms “support, cooperate with and collaborate in national intelligence work,” as requested by Beijing. Reliance on Huawei tech is thus seen as a potential backdoor for the Chinese government into Canadian networks. Add Huawei’s involvement in population control in Xinjiang - China’s restive Western region and home of the Muslim Uyghur minority - facial recognition, the use of AI in policing and digital monitoring, and it is not hard to portray Huawei as an Orwellian entity.

In response those these fears, Huawei has launched a full frontal offensive to assuage the fears of the Canadian public. In late January, the company offered the Globe and Mail a tour of its Shenzhen headquarters, as well as a rare interview with founder Ren Zhengfei. Unsurprisingly, both Ren and chairman Liang Hua firmly rejected American allegations against the company. On February 21st, Huawei announced that it will add 200 new research and development jobs in Canada; a twenty percent increase, add boost R&D spending in the country by fifteen percent; moves designed to improve the opinions of the Canadian public. Prior to this announcement, Huawei took out an article in the National Post to firmly rebuke its critics. Titled “Let's be clear: Huawei is no threat to Canada or Canadians” the article sees Huawei Canada president Eric Li lambast the company’s detractors.

“Many of these individuals [concerned about Huawei] were the same officials who argued unsuccessfully a decade ago to bar Huawei technologies in the rollout of 4G - raising similar concerns, that in the ten years since, have proven to be unfounded. The accumulated weight of these interventions leaves the impression that such objections must be valid. But just because something is said repeatedly or emphatically, does not make it true.

The Bottom Line

Meng Wanzhou’s arrest has become the poster child for the West’s growing suspicion of Chinese telecom giant, Huawei. Existing concerns about Huawei’s connections to the Chinese government and the company’s potential role in espionage have now meshed with the very public arrest of the daughter of Huawei CEO Ren Zhengfei. Meng’s alleged role in Huawei’s efforts at circumventing international sanctions and selling American technology to Iran only add to this growing disquiet.

question

While Canada continues to face the ire of Beijing, it joins a growing number of countries raising concerns about Huawei’s ulterior motives. Already banned by three members of the ‘Five Eyes’ intelligence alliance, Huawei’s presence in Canada is growing increasingly tenuous. In response, China has detained several Canadians in a bid to pressure Ottawa, while closer to home, Huawei Canada has gone on a charm offensive, promising more investment and penning op-eds to exonerate itself.

As all this unfolds, Canada’s telecommunication companies watch nervously from the sidelines, with at least one - Telus - coming out in defence of its beleaguered partner. Rapt are also Canadian universities, none of whom have declared they will end their cooperation with the Chinese mega-corporation. Whether this show of solidarity remains for long, we will have to wait and see.


Title image courtesy of Matti Blume

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