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Trudeau says national security not jeopardized in China takeover of Norsat

Prime Minister Justin Trudeau arrives for a media availability at the National Press Theatre in Ottawa on Tuesday, June 27, 2017.

Justin Tang/THE CANADIAN PRESS

Prime Minister Justin Trudeau says Ottawa did not compromise national security when it approved a Chinese investor's takeover of a Vancouver high-tech company even though the U.S. Department of Defence has begun reviewing all its business dealings with Norsat International Inc.

Mr. Trudeau told a news conference on Tuesday he saw no need to further scrutinize the purchase of Norsat by China's Hytera Communications Corp. by subjecting the takeover to a comprehensive national-security review. The Liberal government has faced widespread criticism for skipping a full-fledged review.

"We would not move forward with approving investments under the Investment Canada Act if we were not assured and comfortable that there is no risk to national security. Period," Mr. Trudeau said.

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Related: Pentagon to review contracts with Norsat after Chinese takeover

The U.S. Defence Department announced on Monday that it will review all its contracts with Norsat, which closed a deal last week that will allow it to be swallowed up by Hytera Communications.

Mr. Trudeau was asked whether he could assure the Pentagon there was no security risk for the Americans in the transfer of Norsat's satellite communications technology to China. The U.S. military is a significant customer of Norsat.

"It doesn't matter what country it's from or what deal it is. If there is a risk to national security, we won't move forward," Mr. Trudeau said.

"In this case, our very effective national-security agencies made a professional determination that there were no significant national-security concerns about this particular transaction and it didn't need to go through further reviews."

U.S. critics have raised significant concerns about the deal, including a member of a U.S. watchdog agency that reports to Congress.

Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, which reports to Congress, called for a Pentagon review, saying "the sale of Norsat to a Chinese entity raises significant national-security concerns for the United States as the company is a supplier to our military."

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Congressman Walter Jones, who sits on the House of Representatives armed forces committee, also called on the Pentagon to review all its contracts with Norsat.

The takeover went through a routine national-security screening that all foreign takeovers of Canadian firms undergo. The government did not ask its security officials to conduct an official national-security review. A more far-reaching probe such as this would analyze the potential impact on Canada's defence capabilities and investigate how the transfer of this proprietary technology outside Canada might affect this country's interests or those of its allies. It would also consider how the transaction could enable foreign espionage or injure Canada's foreign relationships.

And it would consider the potential of the investment to hinder intelligence or law-enforcement operations.

"The review they did was adequate to give them confidence that there was no risk to national security. Therefore their recommendation to the minister was to allow it to proceed so we did," Mr. Trudeau added.

Conservative foreign affairs critic Peter Kent said Canadians should not accept the Prime Minister's assurances that he accepted the advice of government officials who examined the Norsat deal.

"The reference to taking the advice and respecting the advice of Canadian security agencies is disingenuous given the caution from two former directors of CSIS and David Mulroney, a well-respected former Canadian ambassador to China that in fact, a full national-security review would have been the proper course to follow," Mr. Kent said.

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The Liberal government has made closer ties to China – including a potential free-trade deal – a cornerstone of its foreign policy.

But Mr. Kent said Trump administration officials are concerned that free trade with China will "only open the door wider for potential Chinese dumping of products in North America." He said the security concerns are even more worrying because "China – if not a potential enemy – is not a democratic ally."

Mr. Trudeau has said Ottawa consulted Washington before concluding Hytera's takeover does not pose any national-security risks. He has refused to say who was consulted in the Trump administration or whether the United States had objected to the sale.

Norsat's customers include the U.S. Department of Defence, the U.S. Marine Corps, the U.S. Army, the giant aircraft manufacturer Boeing, NATO and Nav Canada, operator of the country's civil air navigation service.

Concerns about the deal include the transfer of sensitive technology to China's military-industrial complex as well as the fact that the company was sued by Motorola Solutions over allegations it stole patents and trade secrets.

In a statement provided to The Globe and Mail, Hytera said it "strictly obeys local laws and regulations."

The company did not respond to questions about the national-security concerns its Norsat acquisition bid has provoked. Nor did it address how it intends to maintain contracts with clients, including the U.S. military.

Instead, it said that by expanding its footprint through international mergers and acquisitions, the company can gain "clearer insights into local markets, and offer service to local communities." Hytera wants to "become a trustworthy cooperation partner with the local community and clients," the statement said.

Mac Thornberry, chairman of U.S. House of Representatives armed services committee, urged Ottawa last week to be "more vigilant" in approving Chinese investor takeovers of Canadian high-tech firms that specialize in military hardware.

Shareholders of Norsat on June 22 voted in favour of the Hytera takeover after the company turned down a competing bid from a U.S. hedge fund. Norsat said in a statement last week that it expects the sale will close by the third quarter of 2017.

With a report from Nathan VanderKlippe

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Ottawa Bureau Chief

Robert Fife is The Globe and Mail's Ottawa Bureau Chief and the host of CTV's "Question Period with The Globe and Mail's Robert Fife." He uncovered the Senate expense scandal, setting the course for an RCMP investigation, audits and reform of Senate expense rules. In 2012, he exposed the E. More

Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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