Industry Committee on June 18th, 2020

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Viau and Ms. Berman. This was very interesting. We will certainly have cause to think about these things in the near future.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Masse, you have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Ms. Travis, with regard to Anbang, it really brings to light the real results of this. People often think of foreign investment in Canada as something that's basically product-driven, or it's the oil sands, or manufacturing, where they might see some product at the end of the day. However, here, our product is our own citizens and our people, who, at the end of the day, needed help and British Columbia had to step in.

Maybe you can highlight a little bit the work that's been going on there, because this is not an unknown factor, the problem that came about. There were a series of warning signs along the way.

Lastly, what are your thoughts with regard to divestment of some of these facilities? It seems odd that we'd have the Chinese government owning and controlling, at the end of the day, the future of our seniors, and the facilities that it operates, and it can't even do that within the law.

[Michelle Travis]

I think, when looking at the Anbang deal—and again, we don't represent the workers at those facilities but have been watching Anbang for some time because of their involvement in the hotel industry—what's striking to us is that there were questions raised about Anbang prior to the review under the ICA and during the review, and it was surprising that the deal went through.

Given what's happened since the approval, the takeover and the dismemberment, basically, of the company by the Chinese government, it's not clear what happens next. Seeing what's happened in terms of the conditions at the long-term care homes.... The unions representing those workers raised issues about staffing problems and quality of care, and that prompted the B.C. government to take over several of those homes. I don't know what happens next; it's temporary.

In terms of divestment, that's something that Ottawa really should be taking a closer look at.

I also want to comment on a comment that was raised by a couple of the witnesses about the tools that are available under the ICA right now. It does sound like the government currently has at its disposal the tools to really scrutinize these investments. I think the question is, what happened in 2017 during that review process that allowed that deal to move forward? How rigorous was the due diligence?

To us, that's reflected in the approval of these other deals that involve the hotel sector, where we still don't know who owns these hotels. That's problematic. It's strange to be in a situation where you have hotel workers who don't know who owns the hotels they work in, and when we ask questions, we don't get a firm response.

I think it does call into question the nature of the review process. How do we make those processes more rigorous? I think it's good that the government wants to heighten scrutiny, particularly with regard to investments in those sectors, but that should have been the case all along.

[Brian Masse, NDP, Windsor West, ON]

With regard to this situation, I'm glad you mentioned the hotel ownership, because that's also personal data, information and a whole series of exposures that are very important.

Even when you look at where I come from, the auto sector, one of the biggest things that are changing is not necessarily.... You see innovation taking place, but also data collection on the way the vehicle is used.

Can you highlight a little bit the exposure of people's private data and information? Starwood was one of the ones I was even affected by as a customer. Can you detail a little bit about that exposure, because that's pretty serious?

[Michelle Travis]

Sure. The Marriott cyber-attack was probably one of the biggest cyber-attacks in recent memory. I'm sure there will be a larger one that comes soon, but the hotel sector really does have a reputation for being notoriously sensitive to hacks and cyber-attacks. Hotels have access to large amounts of information. When you go into a hotel, you use their Wi-Fi system and you use your credit cards. There's a large amount of information collected on customers because you want to understand their preferences and target certain services to them.

While hotels have not been considered a strategic industry, I would put them in the category of sensitive, given the amount of information that's at their disposal.

[Brian Masse, NDP, Windsor West, ON]

It's not only domestic, but the hotel chains are international, so there are questions about the security of data and information not only domestically but also internationally.

[Michelle Travis]

That's right. Hotel chains cross borders. Marriott is in just about every country around the globe, and they're not the only hotel operator you can find operating across borders

[Brian Masse, NDP, Windsor West, ON]

Thank you. I see the yellow card up.

Thank you, Madam Chair.

Thank you to the witnesses.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We now move to round two. The first round of questions goes to MP Patzer.

You have the floor for five minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Madam Chair.

I'll start with Professor Houlden. You said earlier, before you ran out of time, that it's hard to tell what's a state-owned enterprise and what's not. Would you mind finishing that point, especially as it relates to authoritarian countries investing in Canada?

[Prof. Gordon Houlden]

The majority of said enterprises we can determine, and we have 20 people strong in our think tank. In the majority of those cases, it can be fish or fowl. We sort that out.

However, there's a minority, about 5% of the Chinese investment in Canada, where some of the senior executives appear to come from SOE and the capital appears to come from a state bank or maybe from an SOE that existed before. Some SOEs are privatized, but it's not really clear in what way they've changed, other than that they're issuing shares.

It's a minority, but it's still a significant minority of investment that we've decided, on my instruction, to keep uncertain rather than divide in half, as one of our researchers suggested, because it makes clear the fuzziness of some of the data regarding state enterprise.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Does any of that make it more difficult to distinguish them, or make it easier for them to escape screening and review? Is there any issue with that?

[Prof. Gordon Houlden]

Conceivably, I suppose. For that 5%, let's imagine that the Canadian review authorities look at that and determine that it's not an SOE, but in reality it may be. So yes, it would be a small minority, but potentially, yes.

An SOE is not necessarily masquerading. In some of these cases, managers—as has happened in the former Soviet Union—have migrated with capital and then may appear as a private enterprise. Or they may have left their former SOE, but somehow, oops, they got funding that came from the SOE, the same people. There would be some cases like that. I would like to think that, again, with really capable analysts in our agencies of various sorts, we'd be able to sort that out.

We can do so quite well. When we see investments that appear to have Chinese dimensions coming in from Barbados or Cayman Islands, heavens. If you look at the amount of money coming from Cayman Islands, every man, woman and child would have to be investing $5 million in Canada. We sort that out. The Chinese data...they go for the first destination. It's all Hong Kong; 80% of the investment appears to go to Hong Kong, but then it diversifies into other places where there are tax advantages, and it's coming in from some of those other destinations. It's not always nefarious, but you need to push back that screen to find out where it actually originated.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

My colleague was asking an earlier panel about the difference of process and threshold between a security screening and a security review, without really a clear answer. Do you have any insight on how well either of these is working to meaningfully protect our national security? Could they be improved?

[Prof. Gordon Houlden]

There's always room for improvement. I spent 32 years in government, and I can assure you of that. At my university, for that matter, that's a given.

Staffing levels are important. Expertise is absolutely critical. It's not easy to get. If you ask Public Safety whether it has enough fluent Chinese speakers who can get a security clearance, the answer I'm sure would be no.

The other thing that was hinted at by one of the panellists, I believe.... One of the other speakers mentioned follow-up. I wonder sometimes if the conditions that are imposed are being adequately examined. I'm not just thinking of Chinese firms. I think of Alcan, which vanished and is now in foreign hands. I can think of other examples. I'm not always sure if the initial undertakings have enough legs or duration, and whether they are being sufficiently investigated.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

We've heard from other witnesses about a variety of indirect methods for foreign influence, specifically how the Chinese government has plans for many social and economic targets in different countries. Based on your ongoing study, do you think there is or could be Chinese influence among Canada's legal and public policy experts, because of their business or other professional connections?

[Prof. Gordon Houlden]

This is such a difficult question. I wish you would pose easier questions.

The truth is, yes, China does misbehave. It does look at targets of influence. It's the job of our security agencies to detect and deal with that. Quite frankly, I'm of the school that naming and shaming helps. Americans do a better job. At any given time, there are usually about 30 different cases before the courts in the United States. We often request the person to quietly leave.

It would be painful in the bilateral relationship, but it's better sometimes. We've done it on a few occasions, where there was actually a court proceeding or it was clear, even if the persons had fled, what they had done.

The principal targets tend to be—and here they need our help—Canadians of Chinese ethnic origin. They are the primary targets. The Chinese, for a bunch of historical reasons, are afraid of that group.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to Mr. Ehsassi.

You have the floor for five minutes.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you very much, Madam Chair.

Ms. Travis, as you are well aware, the mandate of our industry committee is to look into the Investment Canada Act and to determine whether it's robust enough. On several occasions today, you brought up the Marriott cyber-attack.

Would you agree with me that it has nothing to do with the Investment Canada Act?

[Michelle Travis]

It's an example of how the hotel industry can be ripe for cyber-attacks, and it's used in the context of information and how that—

[Ali Ehsassi, Liberal, Willowdale, ON]

But cyber-attacks happen all the time. There's no way the Investment Canada Act has been [Technical difficulty—Editor] with those types of scenarios. Is that correct?

[Michelle Travis]

Well, if we're going to talk about security, and the sort of review of security in terms of deals under the ICA review, it was used as an example to illustrate why we should take a closer look at hotels in particular.

[Ali Ehsassi, Liberal, Willowdale, ON]

But you would agree with me that the Investment Canada Act [Technical difficulty—Editor]. Is that correct?