Aecon veto was right — and for right reason
National security was the clincher
The Trudeau government won unusually wide praise for its decision this week to veto the $1.5-billion takeover of Aecon Group Inc. by China Communications Construction Co. Ltd. (CCCC). The three national opposition parties all supported the decision, as did media and academic commentators on the right and left. Why does this leave me feeling uneasy?
Certainly not because it was the wrong decision, or taken for the wrong reasons. A Toronto-based construction firm, Aecon is involved in a number of so-called “critical infrastructure” sectors: transportation, energy, telecommunications, that sort of thing. Current and prospective projects range from the Site C hydroelectric dam in British Columbia to nuclear reactors in Ontario to, until its withdrawal earlier this month, the Gordie Howe International Bridge linking Windsor to Detroit.
CCCC, for its part, besides being the third-largest construction company in the world, is essentially an arm of the Chinese Communist Party: 63 per cent stateowned, riddled with party apparatchiks top to bottom, its chairman a close associate of China’s president-forlife Xi Jinping. And China is, to be blunt, an adversary — as abusive of human rights on its own soil as it is of the sovereignty of other states.
Long known for its aggressive use of espionage outside its borders, industrial and otherwise, China is increasingly prone to more open displays of its growing power, as in its construction of artificial islands in the disputed South China Sea, in brazen defiance of international law — and with the participation of CCCC.
So it is not a stretch to see how granting the government of China unfettered access to, or even control of, critical Canadian infrastructure might not be the soundest idea from a national security perspective. At a minimum, it opens the possibility that strategically useful information might be shared with the Chinese government; at the worst — and national security is all about worst case scenarios — there is the potential for sabotage, or the threat of it. Once embedded in Canada, moreover, the company’s movements would be difficult for the authorities to control or even track. Sensible countries do not leave themselves exposed to an adversary in this way — with their vitals, as it were, in their clutches.
At any rate, such were the conclusions of leading experts on both national security and China, including two former directors of the Canadian Security Intelligence Service, Ward Elcock and Richard Fadden, and former ambassador to China David Mulroney. American intelligence officials have also made their concerns known. So the government was surely right to refer the takeover for national security review earlier this year, and right again, having been advised against it, to nix it.
On national security grounds, that is. Alas, much of the opposition to the sale seems motivated by other, less defensible concerns. If not as nakedly protectionist as that of the 20,000-member Canadian Construction Association, which opposed the deal on grounds that a Chinese-owned Aecon might undercut them on construction bids, they nevertheless rely heavily on the rhetoric and assumptions of economic nationalism to make their case.
Thus we are told vetoing the Aecon deal was essential to “send China a message” on everything from its alleged piracy of intellectual property to dumping of low-priced steel. As was the case during China National Offshore Oil Company (CNOOC)’s bid for Nexen Inc. a half-decade ago, we hear familiar references to “strategic industries” and “Crown jewels,” too precious to allow their actual owners to part with them.
Somewhat less crudely, we are reminded once again that, as a state-owned enterprise (SOE), CCCC does not play by the normal market rules. This is true: they generally overpay for assets. That ought to be a concern for the citizens of China, who are footing the bill for these subsidies. It is less clear why it should be a concern for Canada, or why the target firms’ Canadian shareholders should be deprived of the premium they might otherwise expect to be paid.
The issue here would seem to be less security than pseudo-security. Not opening yourself to espionage is one thing but, to the deal’s more militant opponents, virtually any transactions with China would presumably be ruled out, no matter how beneficial to Canadian interests, so far as they also expanded China’s economic power and influence. What’s good for China is, on this reading, bad for Canada — by definition.
Adherents of this school will presumably be overjoyed to hear of China’s predictable displeasure with the Aecon decision, insofar as it might put into doubt the prospect of a Canada-China free trade deal. The same risk had sections of the business community bleating that the Aecon deal be allowed to proceed, legitimate security concerns or no. Each makes the same mistake, of equating trade with appeasement.
We can still trade with an adversary, even sign a free trade treaty with them, notwithstanding our concerns about national security or human rights. Certainly there is little to be gained by not doing so, especially as other countries will: we will not improve either situation by imposing a one-nation trade embargo upon them.
But neither should we be willing to sacrifice these concerns to get an agreement. Perhaps the Trudeau government’s newfound backbone in dealing with China, after the Norsat debacle — another takeover that raised serious national security alarms, whisked through without conditions or even a proper review — will so irritate China that it refuses to proceed with trade talks. So be it. National security is the proverbial dealbreaker.
Maybe, as I’ve written before, we can’t change China, but we can at least keep China from changing us.