Some baloney in PM’s claim that Chinese firm went through national security review
“Every single transaction of this sort is subject to a national security review. This is a multi-step assessment process, and that process was followed. We take advice and feedback from our national security agencies very seriously, and based on that advice, we proceeded with this transaction. In this particular case, our security agencies consulted with key allies, including the United States, and I can reassure the member and this House that we will never, ever, compromise on national security.” — Prime Minister Justin Trudeau, June 13
Prime Minister Justin Trudeau has been under fire for the way he has been answering questions about a potential takeover of Vancouver technology firm Norsat International by Hytera, a privately owned communications company based in China.
Unease about the acquisition deal stems from concerns that even privately owned businesses in China can still fall under the influence of the Chinese government, as well as the fact that the United States, whose military is a major client of Norsat International, which makes radio systems and transceivers, has been raising its eyebrows over the move.
The Liberals say the deal triggered a requirement in the Investment Canada Act that brought it under security-agency scrutiny, but their political rivals say that’s not the same as ordering a full national security review.
Conservative MP Tony Clement has said the Liberals, in saying all transactions go through a national security review, are conflating that formal process with a preliminary analysis.
NDP Leader Tom Mulcair went so far as to say Trudeau's claim is “demonstrably false.”
Both are accusing the Liberals of putting their desire for closer relations with China above the interests of Canadians. Who’s right?
The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below)
This one earns a rating of “some baloney.” Here's why. THE FACTS On June 2, Norsat said Economic Development Minister Navdeep Bains had served notice that the Liberal government would not be ordering a review of the transaction under the Investment Canada Act, which can happen if the minister decides the move could be a threat to national security.
The Conservative government added the national security test in 2009, but faced severe criticism three years later when they allowed a takeover of Nexen Inc., a Calgary-based oil company, by CNOOC Ltd., a state-controlled Chinese firm, without a formal national security review.
After the backlash, former prime minister Stephen Harper placed strict limits on stateowned enterprises investing in the Canadian oilsands, allowing them only in exceptional circumstances.
Karl Sasseville, a spokesman for Bains, said Trudeau was being accurate, because the deal, as in all cases, was still examined through a national security lens.
Sasseville said that in all cases, security agencies are given at least 45 days to go over the transaction to figure out whether it has the potential to impact national security.
The Liberal government then issued a notice to Hytera that would prevent the deal from closing until those agencies had an additional 45 days to finish going through the application.
Sasseville said those security agencies said there were “no outstanding concerns” that would necessitate triggering the formal review.
“Throughout this process, security agencies have access to all the information and intelligence necessary,” Sasseville said.
“They could also consult with our allies, if appropriate, to determine if an order under the Act is necessary to protect national security, which in this case, they did.’ THE EXPERTS Gus Van Harten, an international investment law professor at York University’s Osgoode Hall Law School, said it was wrong for Trudeau to say that all transactions go through a national security review, as most people would understand that to mean it went through the full process.
“If we understand all transactions to mean all foreign investments that are subject to review under the Investment Canada Act, then the statement is not accurate, or at least highly misleading,” said Van Harten.
Ward Elcock, a former director of the Canadian Security Intelligence Service, said the difference between a preliminary review and a formal review ordered by cabinet is exactly as it sounds.
“The reality is, a full review is more onerous,” he said. “If you are doing a review to decide whether there should be a formal review or not, it's more cursory.”
Peter Glossop, a Toronto lawyer and international trade expert, said there is a way to interpret what Trudeau said as true.
There is a lot of information that a foreign investor like Hytera would have to submit to Bains on its application for review, including whether a foreign state is involved, or whether that foreign state has the authority to direct its operational or strategic decisionmaking.
“That filing contains information that can enable the government to review the transaction on a national security basis,” he said.
Glossop suggested Trudeau could have been clearer.
“All investments by non-Canadians require disclosure of information to enable us to conduct a national security review if we choose to do so,” said Glossop.
“Something like that, technically, I think, is what he meant to say, but he is obviously not choosing his words as selectively as I just did.” THE VERDICT Glossop, who said he found it surprising the Liberal government decided not to launch a formal review, said the fact that the process is so secretive — usually because it has to be —makes it hard to say exactly what went on, or why.
“People are kind of left scratching their heads as to what happened.”
Van Harten said Bains, like any minister, is always free to consult without triggering a formal review, and that doing so was likely a political choice.
“It seems to me to come down to the government seeming to want to have its cake and eat it too,” he said.
“(They can) tell a Chinese company or the Chinese government that there has been no national security review of the takeover, which would be true in a formal sense, while also telling the Canadian public that there has been such a review — avoiding the detailed point that the designated statutory process for national security review has been skirted.”
For this reason, Trudeau's statement contains “some baloney.” METHODOLOGY The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:
No baloney — the statement is completely accurate
A little baloney — the statement is mostly accurate but more information is required
Some baloney — the statement is partly accurate but important details are missing
A lot of baloney — the statement is mostly inaccurate but contains elements of truth
Full of baloney — the statement is completely inaccurate Sources: norsat.com/news-releases/investmentcanada-notice-regardi norsat.com/new laws-lois.justice.gc.ca/eng/acts/I-21.8/ FullText.html
ic.gc.ca/eic/site/ica-lic.nsf/eng/lk81190.html