Government Operations Committee on Dec. 7th, 2020

[David Mulroney]

I think the first thing to remember is that China is extremely dynamic, and so it's changing. The China of Hu Jintao which was becoming more aggressive and assertive, has been replaced by the China of Xi Jinping, which is extremely aggressive and assertive. To that extent, no, we have not kept up with the changes.

A wise person in Australia once said that while Australia didn't have a China policy, China very definitely has an Australia policy. It very definitely has a Canada policy.

Let me say two things about this issue. One, I don't think it's a procurement issue. I think the real issue is a China issue. Two, we shouldn't underestimate the challenge of galvanizing and bringing the government together.

I'm not as optimistic as Professor Carvin about the ability at the grassroots of people to come together. This takes real leadership. It requires everybody in government to take note and to pause when China comes up anywhere and consult.

It requires a much higher level, a raising of the bar, when it comes to the security standards that we expect of China. This isn't just like buying a computer that may be made in China. This is a long-term relationship with a company, Nuctech, that would be across the board for all of our embassies, whereby China can find the weakest link in that chain of embassies.

By the way, they will find a weak link somewhere. This is larger.

Finally, this isn't just a Canadian problem. We have allies who are in exactly the same boat. This is where our diplomacy should be directed, to be sitting down with the Australians and the New Zealanders, with the Danes and the Swedes and the Brits, to talk about how they're dealing with this issue. I think we would find that there's common cause.

We're a long way behind. I have great faith in our ability to catch up, but it takes high-level will.

Thank you.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Speaking specifically to a bilateral investment treaty that we signed back in 2012 with China, the foreign investment promotion and protection agreement, or FIPA, allowing for non-discrimination and equitable treatment of Chinese foreign investors, in general, do you think we should reconsider it, that we should re-evaluate it or amend it?

What are your thoughts on that?

[David Mulroney]

The thing about the foreign investment agreement that we should remember is that it applies to existing foreign investment and is about equitable treatment of existing Chinese investments in Canada and Canadian investments in China.

The government always retained the ability to block any investment in Canada that runs counter to any perception of Canadian interests and Canadian security interests in general. I don't see that as central to this issue. We've always retained that ability, and in fact we've shown the willingness to do that over time. This isn't really an investment issue; it's a procurement issue, but it's part of a larger web of concerns about China's encroachment.

[Majid Jowhari, Liberal, Richmond Hill, ON]

On one hand, I hear that it's not a technology issue but a procurement issue. On the other hand, I hear it's not really a procurement issue but a much bigger, fundamental issue.

Help me reconcile, any of you. Probably we can go to Mr. Burton. I know you were asked more about the security aspect, but how would you reconcile this as not being a procurement issue or as being a procurement issue, not a technology issue, and its being a policy issue?

Can you give us your insight into that?

[Dr. Charles Burton]

Well, I think that certainly it is an issue of the process of procurement in the sense that, as was pointed out, the civil servants who spoke to you last time are good people who are behaving in accordance with the regulations and practices as set down.

Clearly those regulations and practices are not effective in preventing the Chinese state from putting in a low bid with all 63 of those boxes ticked off and potentially getting their equipment into embassies, thereby allowing for all sorts of possibilities for access into our diplomatic facilities by Chinese agents. I think we need a general policy on understanding the nature of procurement from the Chinese state and a very careful process of assessment of these bids by people who have the expertise to assess the security risk in the relevant government agencies. I think for the most part we won't be getting any Chinese procurement.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Burton.

We will now go to Ms. Vignola for six minutes.

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

Thank you very much.

My first question is for Dr. Burton.

Dr. Burton, I've had the pleasure of reading a few of your articles, including the one in The Globe and Mail on December 4. It was about the situation between China and Australia. In retaliation, China has imposed huge taxes on barley and wine that have cost Australia billions of dollars.

There are similar situations here, in Canada, such as with Huawei. In addition, Nuctech's contracts with China run until 2023, if I remember correctly.

If Canada puts its foot down, and we stop working in isolation, what could be the consequences—positive or negative—from an economic and national security perspective?

[Dr. Charles Burton]

Thank you. I think in that regard there is no question the Chinese regime will attempt to pressure us through diplomatic and economic coercion if they feel that will achieve their purposes. We now have the situation of the hostage diplomacy of Michael Kovrig and Michael Spavor, for example. I suspect that when Ms. Meng Wanzhou was given authority by the Chinese Communist Party to transit through Canada, the assumption was that Canada would simply ignore our obligations to the United States under the extradition treaty because there was sufficient knowledge in Ottawa that one should not be detaining Ms. Meng. Now Chinese diplomats say, “Well, the fact that you held her means that you must be punished.” So, even if Ms. Meng is eventually able to return to China under some means, a deferred prosecution agreement or withdrawal of the extradition request or determination by Justice Holmes that the extradition doesn't stand up, we're still going to be punished. The question is whether we respond.

Australia does, I think, over one-third of its external trade with China, so the $20 billion in sanctions that China has imposed on Australia, directly connected to 14 different conditions, damages them much more. They want Australia to seek funding for the Australian Strategic Policy Institute, for example—it has found out a lot of things about Chinese espionage and influence operations—and to agree to Huawei and to stop their press from reporting negatively, and any number of things that the Chinese regime believe that we can achieve.

I think from that point of view we have to be prepared for retaliation, and the only reason this will not happen will be that the Chinese recognize that we will not be bowing to this kind of pressure and making concessions to them because they are pressuring us. Right now, by holding Kovrig and Spavor, they have managed to stop us from getting any response to Huawei 5G. We're not enacting the Magnitsky Act against Chinese officials complicit in genocide in Xinjiang, and we're not upholding our obligation to sign the British joint declaration with regard to people in Hong Kong who will be subject to persecution under what we would regard as the illegal national security law, so from the Chinese point of view, Canada's response is the one that they want.

I think it's the wrong response. I think it's time for us to make it clear to the Chinese regime that we will not be bullied and intimidated. Australia is certainly setting a very good example for us of the right way to go.

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

Thank you, Dr. Burton.

I'll now go to Mr. Mulroney.

Mr. Mulroney, you said earlier that we need to stop working in isolation and that the departments need to talk to each other. We were quite surprised a few weeks ago to learn that there was no security specification on the Nuctech order form. Now we know that Nuctech has contracts that go up to 2030.

Is it now time to review our processes to make them more efficient and transparent across departments to ensure Canada's national security?

[David Mulroney]

Yes, absolutely, but I come back to my skepticism about the ability of the federal bureaucracy—and I'm a former federal bureaucrat—to do this on its own even with the best will in the world. The government is capable of that kind of smart connected operation for only a limited period of time on an issue as complex as China.

I mentioned the Manley panel on Afghanistan because it was the recommendation of people like John Manley, Derek Burney and Paul Tellier that government reorganize itself for special challenges and that these challenges needed to be led by the Prime Minister. I think we would need at least that level of organization around China so that every senior official in the federal government would be aware of the fact that if China is involved in whatever issue they're dealing with, they need to stop. They need to think and they need to consult. Until that happens, I'm afraid that we won't get there. We won't get there by working from the bottom up. This has to come from the top down, because it's a significant change in how government operates. You saw the results of that at your last meeting, that we didn't need Deloitte, an expensive consulting company, to tell us that the government needs to co-operate, but it won't happen without high-level leadership.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Mulroney.

Thank you, Ms. Vignola.

Mr. Green, you have six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

That's actually a great segue, because I tend to agree that we don't always have to go to Deloitte to tell us things that we ought to know already.

This question, through you, Mr. Chair, is for Mr. Manley. I certainly would agree with my members on this committee that this is a fascinating opportunity here, with people with significant past experience both on the government side and on the China-Canada relations and policy side.

On November 18, Public Services and Procurement Canada confirmed that the department intended to stop doing business with Nuctech, but that “based on the standards, rules and approaches we use or the legislation, I cannot guarantee or tell you that will be the case.”

Mr. Manley, in your experience, what Canadian standards or legislation poses barriers to ending Canada's relationship with Nuctech or other companies it deems to be a security risk?

[David Mulroney]

I'm guessing you mean me.

It's Mulroney. Manley is the other guy. There's another Mulroney, too, but I'm the guy you have today.

[Matthew Green, NDP, Hamilton Centre, ON]

My apologies, Mr. Mulroney. It is definitely you.

[David Mulroney]

No problem.

I think there are things that come up. We see officials, with justification, talking about government procurement and regulations within the WTO, and there may be other contracting issues. With respect, this is sometimes the last refuge of the bureaucracy when it doesn't want to do something important.

As important as the government procurement regulations are in the WTO, regulations which, as Professor Burton has pointed out, China largely ignores, and as important as they are for us—and I get that—our national security is more important. We need to have an understanding within the government that China and dealing with the rise of China is a priority that requires fresh thinking, and that we won't accept as the final word, “Well, there's this government procurement regulation, so we can't do it.” We need to think this through and take more time to think it through.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Mulroney, on that particular point, Mr. Jowhari raised what I think were some important questions. You perhaps disagreed.

Could it not be the case that FIPA as ratified by Canada and the ensuing 31-year term locking in seven Canadian governments might be some of these regulations or legislation that the Chinese government could use to say, under one of their clauses, that we are not in fair dealing with the country? With the way particularly the rhetoric and the red-baiting that we hear about are used, with the—quote/unquote—values compatibility and all of these things that really raise, I think, problematic analyses, quite frankly, could FIPA not be used in this regard to launch a complaint against Canada's procurement against a Chinese company?

[David Mulroney]

Maybe you'll explain later what you mean by “red-baiting”, because I certainly didn't engage in that—

[Matthew Green, NDP, Hamilton Centre, ON]

Not you, but the rhetoric.... I'll share with you, Mr. Mulroney, that the rhetoric we've heard even here today, and in fact what has been the rhetoric of the House of Commons as of late, could be considered by many a marked departure from the Chinese government that the Conservatives under Stephen Harper walked in hand in hand to for a 31-year FIPA.

As you talk about the long-term policy implications of China, in your professional opinion, what is the material change in terms of a threat? I believe that in your testimony, Mr. Mulroney, you had identified that even at that time they ought to have been considered a threat, yet the Harper government locked us in for 31 years.

[David Mulroney]

As I said, I think that if you look at the foreign investment promotion and protection agreement, it has to do with existing investment and the guarantee that they will be treated according to international law and the laws of the country. Even if we wanted to try to get out of the foreign investment promotion and protection agreement, I don't think it would affect our national security the way that addressing things like government procurement, which means new relationships and new technologies that are coming in, would. I'm kind of agnostic on that.

What I'm saying is that we should be setting aside excuses that don't really stand up to the importance of our national security, and I'm not seeing any willingness to do that. That willingness would have to come from higher levels, and the silence of the government on issues related to China yields exactly the kind of passivity that you saw from officials last week. That will continue until the government finds the courage to speak to Canadians the way they should.

[Matthew Green, NDP, Hamilton Centre, ON]

In your opinion, in terms of the ascendent power of China as a global actor, how long has it been known that they would potentially take this type of aggressive position? You used, I think, the language about foreign aggression or aggressive policies. While you were a public servant, was it your opinion at that time that they were also an aggressive actor on the global scale?

[David Mulroney]

I wrote a book about this back in 2015, and I talked about my darkening view of China. I said that I thought that up until about 2009 China was still using the rhetoric of international co-operation and collaboration. With the economic crisis and its success in getting through it, we saw a more assertive China, but that was stepped up radically with the arrival of Xi Jinping. We have seen China in places around the world, in the South China Sea and in India, and interfering in most western countries in a way that is unprecedented. This has ramped up in the last five years.

[Matthew Green, NDP, Hamilton Centre, ON]

For my last question, in your opinion, are there any other foreign state actors quite like China positioned to have the same type of aggressive policy that would potentially be a threat to Canadian national security?

[David Mulroney]

There are other threats to our national security, but in my view—and you might want to ask Mr. Elcock about this—China is far and away the greatest threat.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you so much for your time.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to the second round, starting with Mr. McCauley for five minutes.