Thank you, Mr. Chair.
Mike MacPherson, the clerk of the committee, has emailed me the five points that comprise the committee's study on critical minerals under Standing Order 108(2).
This afternoon I would like to address points one and three. Point one is how can we best protect Canada's national security by preventing the sale of critical mineral assets to hostile foreign interests? Point three is how can Canada reduce its reliance on and vulnerability to foreign supply chains when it comes to sourcing and processing of critical minerals?
It's pretty clear that the hostile foreign interest, as has been affirmed by several of the people who have given evidence to this committee earlier, is overwhelmingly the People's Republic of China.
I can appreciate the ideal that Canada should be a country agnostic to a national security threat assessment, but the fact is that the People's Republic of China regime is an integrated party-state-military-security-industrial complex unlike any other country in the world today. As China's president, party general secretary, and chairman of the military commission has put it, party, government, military, civilian, academic, east, west, south, north, and centre, the party leads everything.
There are no industrial enterprises in China existing independently from China's party-state. If we impose a distinction between China's state enterprises and ostensibly private enterprises.... For example, Huawei describes itself as a private enterprise. It serves China's strategic interest for us to perceive these enterprises as private, by giving Canada the misimpression that a company like Huawei, for example, as a non-state actor, would not be subject to direction by Chinese military intelligence, as all Chinese enterprises, state or non-state, would be under Chinese law.
China's business enterprises are all state-related. The serving of the overall interests of the Chinese Communist Party at home and China's geostrategic interests abroad takes priority in the business decisions of these business enterprises over maximizing profits to shareholders or whatever.
As earlier witnesses to this study have observed, it's very difficult, well-nigh impossible, to distinguish between commercial and geostrategic factors in Chinese regime acquisitions.
We see evidence of this in Canada. For example, China's acquisition of Nexen, the attempt to purchase Aecon, or Shandong Gold's bid for the Tmac Resources gold mine in Nunavut, all involved bids that are well established to have been well over market value.
Why does China pay more than the market rate for things? It's because these acquisitions would enable the potential for Chinese state agencies to use them for espionage through privileged access to knowledge of Canadian infrastructure and digital databases. These enterprises are heavily subsidized, because they serve both geostrategic and commercial interests.
The Huawei software and hardware is priced well below that of its Scandinavian and South Korean competitors. This makes it attractive to our telecommunications companies, which have a mandate to maximize profit for their shareholders, but Canadian telecommunications companies do not have a defined mandate to protect Canada's national security from a foreign threat.
Insofar as critical minerals go, the same principles apply. China does a lot of these belt and road development projects in resource-rich countries such as Angola, Djibouti, Ethiopia, Kenya and Zambia. The potential for China to attain geostrategic leverage over minerals that are central to high-tech sectors is rightly of very deep concern.
We already have the example, in 2010, of a dispute over Japan's detention of a Chinese fishing trawler captain. To coerce his release, the Chinese government blocked exports to Japan of a critical category of minerals used in products like hybrid cars, wind turbines and guided missiles for a period of two months in 2010. China denied that it had imposed any embargo on Japan, against great evidence to the contrary.
We know only too well, with our experience of hostage diplomacy and the imposition of unjustified tariff barriers on our canola seeds and meat, violating contractual terms for the Chinese import of those Canadian commodities, that China does apply economic coercion, and did so to force our government's hand over an extradition matter.
We cannot rely on China to fulfill its treaty obligations to the WTO. It's important for us to collaborate with our allies to protect foreign supply chains as increasing tensions occur between China and Russia and the western alliance.
Thank you.