U.S. was consulted over proposed Chinese takeover of tech firm: Trudeau

OTTAWA—Canada consulted with the United States before it decided the takeover of a Vancouver tech firm by a Chinese communications company did not pose any national security concerns, Prime Minister Justin Trudeau said Tuesday.

But warning flags about the deal are still popping up in the United States, whose military is one of the biggest customers of Norsat International, maker of satellite receivers for security and military use.

Hytera, a privately-owned Chinese communications company which manufactures radio transceivers and radio systems, made a bid to take over Norsat in 2016.

The move triggered a requirement under the Investment Canada Act that the government must examine takeover bids of Canadian companies by foreign-owned firms to determine if it raises national security concerns.

But earlier this month, Norsat said they were told a preliminary review determined there was no need to proceed to a full national security review, paving the way for the takeover to proceed.

The Opposition Conservatives argue that was a mistake.

Conservative MP Peter Kent accused the Liberals of jeopardizing Canada-U.S. relations.

“While the Liberals may be willing to jeopardize our security interests, selling Norsat for a trade deal with China, they have clumsily put at risk relations with our best friend, trade partner, and protector,” Kent said.

He cited comments made by Michael Wessel, commissioner of the U.S.-China Economic and Security Review Commission, who said this week the U.S. military should review its dealings with Norsat, and the U.S. Congressional Committee on Foreign Investment should look at this particular deal.

A spokesperson for the U.S. Department of Defense told The Canadian Press Tuesday the Pentagon couldn’t comment on the matter specifically.

“However the Department of Defense emphasizes that transfers of sensitive technologies and capabilities should be carefully vetted to mitigate potential risks to U.S. and allied security interests,” said Lt. Col. Roger Cabiness.

In question period Tuesday, Trudeau said Canada’s national security experts assessed both the takeover and the technology involved and determined there were not national security concerns. The review process included consultations with allies, he said.

“I can say that we consulted the United States on this particular case and as a government we respect and follow the recommendations of our allies and our national security agencies,” said Trudeau in French.

Concerns about the Hytera takeover include fears that even privately-owned Chinese enterprises are subject to influence from the Chinese government. In March, Hytera was sued by Motorola Solutions over allegations three engineers who left Motorola to work for Hytera stole patents and trade secrets.

When a foreign bid is raised, the first step is a preliminary consultation with security experts from a number of agencies and departments including the Canadian Security Intelligence Service, the Department of National Defence and Communications Security Establishment Canada, Malcolm Brown, the deputy minister for Public Safety, had explained to MPs on Monday,.

Brown said a “full blown review” is the final step in a specific process but that all steps have their own significance.

“There is quite substantial review that is taken at every step,” he said.

Michael Byers, Canada Research Chair in Global Politics and International Law at the University of British Columbia said every transaction like this should proceed to a full review.

He said the former Conservative government of Prime Minister Stephen Harper added the national security review process to the Investment Canada Act “precisely to avoid ad hoc approaches of the kind the minister took here.”