//Terence Corcoran: Canada is being lured into a dangerous anti-China trade syndrome

Terence Corcoran: Canada is being lured into a dangerous anti-China trade syndrome

In The China Syndrome, a 1979 Hollywood anti-nuclear-energy disaster thriller, assorted movie stars battle to prevent a nuclear-plant meltdown based on the fictional idea the reactor would melt through the earth “all the way to China.” Forty years later comes The China Syndrome II: The Five Eyes Trade War. In this one, assorted media and political stars warn that if Chinese telecom giant Huawei is allowed to bring its next-generation 5G wireless technology to the West, China’s Communist Party will breach the national security of the U.S. and other nations and seize control of the whole world.

It’s a thrilling piece of fiction. Unfortunately, separating realism from hyperbole has become more and more difficult as the Trump trade war against China draws Canada and others into a conflict threatening further upheaval in global trade and investment.

The headlines and the rhetoric have intensified in recent days. Ottawa should “ban Huawei from Canada’s 5G networks to protect the security of Canadians,” wrote one former national security adviser in an op-ed. Federal Conservative foreign affairs critic Erin O’Toole said that, following the lead of our Five Eyes intelligence allies, “Huawei should not be part of our 5G network.” At the American Enterprise Institute, Huawei has been labeled “the doorway to China’s police state.”

With the Canadian arrest of Huawei executive Meng Wanzhou at the request of the Trump administration, and China’s extreme responses, including the hasty sentencing to death of a Canadian drug trafficker, a new China syndrome is taking hold.

Some Canadians still seem to be keeping their heads, at least so far. Telus Corp. says it is sticking to its plan to deploy 5G technology from Huawei, which it considers a “a viable and reliable participant in the Canadian telecommunications space, bolstered by globally leading innovation, comprehensive security measures, and new software upgrades,” according to a letter it sent to employees reported by The Globe and Mail last week. Bell Canada has maintained productive relations with Huawei for many years and plans to use the Chinese technology as it rolls out its 5G plan — unless it is prohibited from doing so by the government. And Mark Machin, president of the Canada Pension Plan Investment Board told reporters at the World Economic Forum this week that China remains one of the board’s top investment targets, despite the rising diplomatic tensions.

There’s not enough space here to explore the decades-long history of the China-U.S. telecom battles, which began long before U.S. President Donald Trump declared trade imbalances a national crisis requiring the force of tariffs to fix. The absurdity of that balanced-trade fixation was highlighted last week when China was reported to have offered, as part of a possible trade deal, to increase U.S. imports to help achieve balance, reinforcing the idea that trade is driven by governments rather than markets. If Trump accepts, the world trade system will only drift deeper into the morass of government management. The Huawei conflict sets an example of what’s to come.

The core U.S. allegation is that Huawei may be a private company but it has obligations to China’s Communist government and military that could pose a security risk. This red flag has been waved around for some time. In October 2012, the U.S. House of Representatives’ security committee produced an influential report filled with panicky supposition and speculation backed by little evidence. “China has the means, opportunity and motive to use telecommunications companies for malicious purposes,” it said.

The objective for a country like Canada is to make sure telecom firms are able to protect private and national interests against malicious operators of all origins

Six months later, the countries found to be using telecom companies for suspicious purposes were the U.S. and Britain. Both the U.S. National Security Agency and the FBI were said to be “tapping into the central servers of nine leading U.S. Internet companies.” The Washington Post reported that the agencies were “extracting audio and video chats, photographs, e-mails, documents, and connection logs that enable analysts to track foreign targets.” Britain’s security agency also secretly gathered intelligence from the same internet companies.

It’s safe to assume that all governments, not just China, are in a position to abuse telecom systems. (Just ask Saudi Arabia: its embassy in Turkey appears to have been a hotbed of surveillance given all the recordings out there purportedly capturing the murder there of journalist Jamal Khashoggi. And where did the CIA get those recorded phone calls of the Saudi crown prince supposedly ordering the hit?)

The objective for a country like Canada is to make sure that telecom firms are able to protect private and national interests against malicious operators of all origins.

Those risks can be managed without sweeping corporate bans that conflate security with trade and investment issues. So can intellectual property conflicts. Huawei is alleged to be part of China’s routine theft of U.S. and other IP. At the moment, however, it looks suspiciously like the U.S. and others are attempting to block the import of Huawei’s IP products just because they are superior. If China is nothing but a low-rent copyright thief, how come Huawei’s customers consider its 5G and other technologies to be must-have leading technology?

Canada can deal with the national security issues surrounding Huawei without ruling it out of the Canadian market. That decision should rest only with Bell, Telus, Shaw and other Canadian companies, as they pursue the best telecom products to serve their customers in the coming 5G revolution.

It’s doesn’t exactly make for a thrilling movie plot, but it’s better business and better economics.

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