Government Operations Committee on Dec. 7th, 2020

[Dr. Christian Leuprecht]

That's a good question.

Data is the most valuable commodity in the world.

It has more value than oil, gas or other natural resources.

China's geostrategic approach is to dominate in terms of networks and software, everything from data flow to data analysis. They want to have the capacity to receive and control this data. China knows that the country that will dominate this field in the 21st century will be able to dominate the geostrategy of the 21st century. It's an integrated strategy.

Because the relationship between the Chinese government and Chinese companies is very close, the Chinese government is able to execute this geostrategic approach in a way that is incomparable to democratic countries.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you very much for your answer, Dr. Leuprecht.

Mr. Mulroney, through various testimonies at this committee, you've often alluded to how we should be cultivating a culture, I guess, of “let's be worried about China right now”. You've often evoked that it should start at the leadership, but the fact that China has been stealing IP and the fact that China has been somewhat acting in bad faith in some of our obviously ally countries is not new news.

Then, bringing it back to Nuctech and procurement practices and thinking of recommendations that our committee needs to make, how would you share that China knowledge within all the bureaucracies knowing that—you've served in the federal government—we often act in silos and it's hard to break those silos? How do you cultivate that leadership inside our federal bureaucracy?

[David Mulroney]

It has to come clearly and unequivocally from the top, and that is the Prime Minister. It's not even just the foreign ministry, because the fact that we have this.... If you listen to the testimony about the procurement, you'll see that even Global Affairs doesn't have the voice and, for a variety of reasons, isn't always listened to. It has to start from the top.

People will say that we can't speak about China because of all the things they've done to us, including holding Michael Kovrig and Michael Spavor. There's a lot of truth to that, but it's also China's objective. By silencing the government, largely, and by keeping the government passive, China.... I've often said that the people who are affected by this aren't the Chinese. The Chinese are very skilled operators. The people who are affected by the silence of the government are Canadian public servants, who continue to pump missions and visits into China and continue to treat procurement as business as usual.

Let me, if I may, just add one observation as someone who has spent a lot of time in Canadian embassies. The reassurance you got that vendors are supervised inside the embassy is something that you should be very skeptical about. I've made it my business to travel around and to see what was happening when service was being done. This is seen as a very boring joe job and it's often given to—and I mean no offence—family members and to kids who are returning from university. When I went through, I saw people looking at their phones and reading magazines.

All China has to do in this relationship that it would establish through Nuctech is find a few weak links, and believe me, they'll find some.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Would you recommend that all—

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Drouin.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I've run out of time. Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Yes. Unfortunately, time is very tight today. We've just finished our first hour and we actually have about 12 minutes left before we have to go in camera.

What we will do is go to the Bloc for two minutes, the NDP for two minutes, the Conservatives for four minutes and the Liberals for four minutes.

Ms. Vignola, you have two minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I'll come back to my previous question, Dr. Burton.

Suppose a Canadian port does business with a Hong Kong company to ensure its development. This company will be responsible for automating the port and its operations. In return, for the investments, the company receives a 60-year lease.

Is this the kind of event that Canada should be very wary of, especially on its doorstep? How should Canada respond to this type of economic proposal?

[Dr. Charles Burton]

I'm not aware of the contract that you're talking about, but on the face of it, it strikes me as completely nuts to give a company subservient to the Chinese Communist Party control over critical infrastructure like port facilities. If we've agreed to such a thing, I think we should review it pronto and stop it.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much. We agree, especially since it's a port that leads to the heart of the continent.

X-rays seem very harmless. We've talked about what can be dangerous, such as having a machine made by the Chinese that is then installed and updated by the Chinese.

If the updates aren't done by a Chinese company, is the security risk less or the same?

[Prof. Stephanie Carvin]

I'm not saying that it's harmless. What we're dealing with is a spectrum of risks here, and how we manage those risks can have a huge impact on the overall security. Even if we aren't going through Chinese companies, there still are a lot of risks that are put in place. That's effectively what I'm saying.

The other thing is that I'm more worried about the janitor than I am about the X-ray machine because, frankly, the janitor is going to have a lot more access than the X-ray machine. That's what I'm trying to say.

Look, I think the issue here is not necessarily that this is harmless or that even if it's a non-Chinese company servicing the X-ray machine there isn't an insider threat there. There is, absolutely, an insider threat, and this is why this kind of overall layered security approach that's looking at these things in steps and trying to.... Sometimes in critical infrastructure protection we talk about the Swiss cheese model, which is where you're trying to layer security so that you can't shoot through all the holes all the way through and then eventually hit some kind of vulnerability.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Carvin.

Mr. Green, you have two minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Mulroney, in your view, should companies be excluded from open competitions based on their country of origin?

[David Mulroney]

Yes. In the security sector, we should not allow Chinese companies, for example, to compete, and I wouldn't let Russian companies compete. We need to think seriously about where the risk is coming from. I think Professor Burton said earlier that this country-agnostic view is unrealistic and detrimental to our national security.

[Matthew Green, NDP, Hamilton Centre, ON]

To what extent can the federal government assess these security risks associated with a company by virtue of its country of origin?

[David Mulroney]

It could do so by cross-referencing the technology related. Also, any technology coming from a country like China that could make us vulnerable and that could harvest information about Canadians or about our foreign guests would be off the list. That's certainly not impossible.

[Matthew Green, NDP, Hamilton Centre, ON]

Would this relate to our emergency exemptions, like our security exemptions?

[David Mulroney]

That's why I talked about creating new structures. We might have to look at this in a new way, but we've had two years of daily focus on the risks posed by China, and we haven't done it yet. I think we should get down to figuring out just what that would look like. The result would be that in many sectors we would not be procuring Chinese equipment or services for the Canadian government.

[Matthew Green, NDP, Hamilton Centre, ON]

In your mind, while obviously trying to honour our obligations under international trade, is this approach something that is manageable and something that we could do based on our current international trade agreements?

[David Mulroney]

That's why I said you have to weigh our obligations to the WTO against our obligations to the national security of Canada. That's the first point.

The second point is that you're going to find that a lot of other countries are in the same boat, and we could be spurring some creative thinking about how we do this collectively. I could tell you that others are already doing it and that we are laggards in thinking about this.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Mulroney and Mr. Green. Two minutes go by very quickly.

Mr. McCauley, you have four minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Professor Carvin, before we can set up an overall rejigging of our procurement process, who do you think should be doing a last-person review of any procurement? Would it be CSE or someone else like CSIS?

[Prof. Stephanie Carvin]

It depends on the issue. On the technical expertise it would certainly be CSE. I do believe they have that expertise now and have provided it in certain select cases but they have to be consulted first.

Then on the geo-economic aspects, I think you wouldn't want to involve an agency like CSIS, which could provide perhaps the broader context and would have knowledge of.... The other thing about these companies too is even when it looks like it's a private company, that just may be a shell company that's owned by layers and layers of different Chinese companies that ultimately end up at an SOE as well. CSIS does have that capability to understand that larger context.

It's not just one, unfortunately, as I think we've all agreed on this panel, but in the meantime, I would definitely, at a bare minimum, be talking to CSE and CSIS.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's something we could do immediately. Obviously we have a lot of changes we have to address. To me it would seem pretty straightforward. We could have saved a quarter of a million dollars. Of course, Deloitte would have been out of pocket a quarter of a million dollars for a four-page report, but it could have bought someone from CSE a coffee and asked them over coffee if we should buy sensitive security equipment from China. Obviously, the answer is no.

Thanks very much.

Mr. Mulroney and Mr. Burton, I have to assume you're familiar with Anne-Marie Brady's paper, “Magic weapons”. I'm wondering whether we are facing a similar threat in Canada.

[David Mulroney]

We most definitely are, and we've been slower to recognize it but we're facing the same techniques: elite capture, penetration of universities, diaspora communities, media that's happening in Australia.