Canada-China Relations Committee on Dec. 6th, 2022

[Carl Breau]

My main recommendation would be this: If, for example, we decide to move in the direction of putting in place a new law, reinforcing more compliance or getting more visibility or traceability on things happening in China in terms of business or purchasing, don't be afraid that those laws or things cannot be implemented in China. They can be.

I think that's the main thing I would like to recommend: Don't be under the impression that in doing business in China, the legal systems or the way things are happening here won't allow these things to be implemented efficiently.

That would be my 30-second comment on your pertinent question.

[The Chair, Liberal, Ken Hardie]

Thank you very much, Mr. Fragiskatos.

We'll now go to Mr. Bergeron for six minutes or less.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Chair.

Good evening to all the witnesses. Thank you for being here so late in the day to share your insights with us.

Mr. Breau, although you have every right to use the official language of your choice, I must tell you how disappointed I was not to hear you speak the language of Molière, especially since you told us that you were proficient in French.

The few French-speaking members on the committee turn into excited little puppies when we have witnesses who speak French. We were eager to hear someone finally use the language of Molière, which doesn't happen very often.

Be that as it may, I have a very simple question for you. We just heard that Parliament is toying with the idea of bringing in legislation that would hold Canadian companies that do business in China accountable for their supply chains, investments and so forth. The idea is to make sure they are engaging in ethical activities, and not supporting forced labour or environmental exploitation.

How do you make sure that your business activities and investments don't support forced labour, social rights abuses, environmental violations or what have you?

Is that something you're concerned about?

If so, how do you control those things?

[Carl Breau]

Let me begin by saying thank you for the opportunity to speak French today. I do indeed always have the option, and it's a dilemma I face more when I speak in various forums.

The first thing I would say is that it's important to put those mechanisms in place. To answer your question, I would say that we have established rules to ensure respect for human rights, supply chain integrity and product traceability.

I think it really comes down to establishing good business practices, which we've already done. We don't hesitate to follow them, just as we would in a different context or another country.

We map our supply chain, so we know where the products we buy are coming from. We do site visits, we carry out virtual audits of our suppliers and we do the necessary checks. You have to do online research, meet with people and request—demand, even—the information.

Basically, that is what's missing. Generally speaking, a lot of the companies I see doing business in China don't apply the same rules they normally would in other countries. That may be due to the fact that China is different: the language is different, it's far away, and the way the Chinese do business is also a bit different.

To answer your question, I would say it's important to follow sound business practices and to see the process through.

If you're going to map your supply chain, you have to scrutinize every layer. You start by looking at the suppliers of the Chinese business you're dealing with. Second, you look at the suppliers of those suppliers. You do the same with the third- and fourth-tier suppliers.

You have to dig for the information you're looking for. You have to visit suppliers' and partners' facilities, and ask questions. If you're not able to get the answers you're looking for or you're not satisfied with the answers you get, you simply pull back and you don't go through with the purchase or investment.

Problems can arise, but when they become widespread, that's where you can fall into a trap. For example, when an entire province is designated as being problematic and, all of a sudden, you are told to stop purchasing things from a particular province or region, the problem is too big. You end up losing what you were trying to achieve—the protection of certain individuals. Sometimes an attempt to protect certain groups ends up hurting many others.

I think sticking to business principles that are widely recognized is the best way to do business in China.

You have to find the people, go out and meet them, and ask them questions.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you very much.

Mr. Burton, you wrote an article for the Toronto Star recently, and in it, you say, and I quote:

The propaganda campaign, which includes conspiracy theories promulgated by pro-Beijing Chinese language media in Canada, threatens our democracy. It already cost Canadian MPs of Chinese heritage their seats in the last election, and because we do nothing about it, we can expect more in the next election.

I gather you’re referring to the Chinese-Canadian MPs who lost their seats in the 2021 election. As you know, there is already a whole debate around the 2019 election. The Prime Minister raised the matter with President Xi Jinping, but as it turns out, it wasn’t all that serious.

What is your statement based on? What prompted you to put a fly in the ointment, so to speak? We are already talking about what may have gone on in 2019, and you’re adding to that allegations related to the 2021 election.

[The Chair, Liberal, Ken Hardie]

I have to intercede, Mr. Bergeron. You're over your time.

Mr. Burton, if you have some reflections on this, perhaps we could ask you to submit them in writing to our clerk. It would be useful to have that testimony.

We'll now go to Ms. McPherson for six minutes or less.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much, Mr. Chair.

I would also like to express my gratitude to the witnesses for bringing this testimony to us today. It's very interesting.

I'm not an investment specialist, so I need to understand this a bit better.

Ms. McCuaig-Johnston, you spoke about how Germany was the gold standard of the legislation that has been brought forward. We know Canada has not yet brought forward that legislation. I think during your testimony, you also talked a bit about the possibility of it being policy or legislation.

Could you talk a bit about why Germany is considered the gold standard? Should this be a policy change leading toward legislation, or is it a solid legislation change?

Maybe talk a bit about whether the legislation should be focusing on public dollars, or if it should also be including funds such as university and pension funds.

[Margaret McCuaig-Johnston]

Thank you very much, Mr. Chair, for the question.

What we're seeing in Germany's approach is putting human rights and ethics at the core of their policy, so there's a policy dimension as well as a legislative dimension.

For Canada, I indicated that I think we need something like the entity list in the U.S. That would be a guideline for university trust funds as well as for pension funds as to what they are not permitted to invest in, which is the obvious genocide companies. It's not a very long list. There are many other companies in China that they could invest in.

Having said that, there's a broader question here about the extent to which public pension plans are investing in China. In the situation with Russia, Canada, along with other countries, chose to sanction Russia, and we found that investments in Russia were frozen. I would be very concerned to see a situation of a blockade against Taiwan.

One of the things on the table among western countries was whether to have a sanction list for China and find organizations like CPPIB and university trust funds coming to the government saying, “Please, please don't touch all of our important investments in China. We don't want to put them at risk.”

I think that's one thing behind proposals such as the one Charles Burton expressed, which is, “Take another look at all of your investments in China to see whether this is a stable country going forward.”

We've seen with the COVID numbers that we could find even more severe problems going forward with the supply chains. I think this situation merits broader thinking than just the narrow selection of one investment or another.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much.

Mr. Burton, I'll move to you next.

You talk about the risks to investments. We're talking right now about doing our due diligence to ensure there is not forced child labour or slave labour within our supply chains. However, what are those risks—I think Ms. McCuaig-Johnston brought that forward—to Canadian entities if they're invested in China and the world's geopolitical situation changes? What does that look like?

[Dr. Charles Burton]

I'm not as confident as Mr. Breau in the trustworthiness of the Chinese Communist regime to enforce our laws as we would hope they would. The concern, of course, is that China is an unstable environment, and that should factor into any investment decisions.

Picking up on what Margaret said, I'm currently in Berlin attending a conference of 82 countries with 240 delegates—including members of the Canadian public service—to try to come up with a coordinated response to Chinese interference activities. I think we really need to be working in concert with other nations, sharing best practices and experiences, and ensuring that we are all on the same page with regard to Chinese investment and many other aspects of our concerns about China's flouting of the international rules-based order in diplomacy and trade.

There are a lot of implications here. Obviously, if there is a war over Taiwan, that will be devastating to the global economy and to the geostrategic future, including our participation in the Indo-Pacific region. However, those questions are pretty broad, and we'll see what happens.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Of course, we like to give you six minutes to talk about those questions, but they're a little deep for that.

I have 10 seconds left, so I will just pass that back to you, Mr. Chair.

Thank you very much.

[The Chair, Liberal, Ken Hardie]

Thank you.

You're on the mend. We missed you last week.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

I'm working on it.

[The Chair, Liberal, Ken Hardie]

Are you getting there? Good for you.

Nancy, our clerk, is sequestered away after having been exposed to COVID. She has decided to do us all a favour and not share, which is very nice.

We will now go to our second round of questioning.

Mr. Seeback, the floor is yours for five minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you very much, Mr. Chair.

In an article from Hong Kong Watch, “Passively Funding Crimes Against Humanity”, they have a number of recommendations.

Ms. McCuaig-Johnston and Mr. Burton, I think you'll agree with this, but I'm going to ask anyway.

One of the recommendations, and you've touched on it, is the following: “Draw up a list of banned entities that are known to be involved in state-imposed forced labor in the Uyghur region, applying this to public procurement, pension and government investment, and imports.”

This question is for both of you: Do you agree with that recommendation, and if so, why?

[Margaret McCuaig-Johnston]

Mr. Chair, I will certainly volunteer that I agree with that.

I have a broader concern as well. We've talked about the groups of funds that CPPIB and others are using that meld a lot of different companies. CPPIB also invests in Alibaba Group, not just Alibaba technology. Alibaba Group is a big umbrella for many, many other companies in China. We don't know what the human rights situation is in all of those.

That's another group that I think should be taken off the table.

[Dr. Charles Burton]

I agree with everything in the Hong Kong Watch report. I think the evidence given last week by Mr. Tohti and Ms. Calverley was golden. I hope you'll take it into consideration in your report.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I guess my question really is this: Why is it taking so long for Canada to do this? Does either of you have any insight? You know, if you really wanted to, you could just copy the American list. I know that's not ideal, but at least then we would have something.

Does either of you understand why this is moving forward at a glacial pace in Canada?

[Dr. Charles Burton]

I think it's very hard for our government to make such a dramatic change. We could also....

We could be doing something similar to the Foreign Agents Registration Act in the United States or the Foreign Influence Transparency Scheme Act in Australia. As you say, it would be easy to do, because the language is there. I would like to see stronger language in Canadian law with regard to the transfer of classified dual-use military technologies to agents of a foreign state. Our language is not as good as the American or British language, and therefore we have a great deal of difficulty bringing to justice the people who have done this sort of appalling activity.

We have a new Indo-Pacific policy out. It's not as strategic as I'd like it to have been, but it's something that we're going to work with. I'm confident that your committee will be holding our government to account to make it serve Canadian interests.

[Margaret McCuaig-Johnston]

Thank you, Mr. Chair.

A lot has changed since the Michaels were taken hostage. Canada has learned a lot about China in that time. The government has come a long way. They walked on eggshells for a very long time. It was frustrating for people like Mr. Burton and me, because we were pushing for stronger action to stand up to China. In my view, the strategy is a game-changer for this government. I think we'll see a lot of changes coming in on the heels of it. It was only about a week ago that it was brought in.

The strategy, in my view, is visionary. It's a U-turn. I think it's a leadership role that we can take in Canada with other countries. In my view, and I've said this in an international publication, this is now the model that other countries should be looking towards to take on the new aggressive China that we're seeing and to implement really targeted initiatives that are well funded.

It's comprehensive and it's well funded. I'm really pleased. With that, I think we'll start to see other changes on the part of the government in this area of pensions as well as other areas.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Switching quickly to trade, and imports in particular—that's my portfolio outside this area—how hard would it to be to draw up a list with respect to imports of banned companies whose goods and products we should not be importing? We haven't done this, as far as I'm aware.

[Margaret McCuaig-Johnston]

I think it's pretty straightforward. We have really excellent trade officers at Global Affairs Canada. They can get some help from the Uighur community in Canada. I know that there are a lot of conversations between Global Affairs and the Uighur community. That community can highlight particular products that come from an area that is known to have forced labour.

Remember, this is forced labour across China. The Uighurs are often sent in groups of tens of thousands to factories in other parts of China. That raises the whole question of what's happening to their children. There are more than a million children in indoctrination schools with the same kind of surveillance technology that is used on their parents. There are also 800,000 Tibetan children. That's another whole layer of human rights abuse that we see in China.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Seeback.

We'll now go to Mr. Oliphant for five minutes or less.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Chair.

I’m going to continue with Mr. Bergeron’s line of questioning. This is for Mr. Burton.

What exactly do you have in terms of proof that any candidate lost their seat in the last election because of Chinese interference?

[Dr. Charles Burton]

I have no proof that a single candidate lost their seat because of the last election. I was—