Year in review: Could Meng Wanzhou arrest cause permanent Canada-China rift?

The repercussions and implications of the Huawei CFO’s arrest could be far-reaching

Glacier Media has selected 10 top themes, events and issues for the year in our coverage. This story is one in a series of those.

Original online publication date: December 17, 2019

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One year after the arrest of Huawei Technologies Co. Ltd. CFO Meng Wanzhou at Vancouver International Airport on a U.S. extradition request, the only aspect of the saga as startlingly clear as the almost-instant implosion of Canada-China relations might be the inevitability of the crisis, experts say.

As Meng’s extradition process enters its second year with no court dates slated until next month, key Canada-China relations analysts agree that, given Canada-U.S. extradition treaty obligations and the United States’ growing criticism of Chinese business practices in the West, there is little Canada could have done to avoid the arrest that has resulted in multiple Canadians being detained in China and top export commodities like canola and red meat being frozen out of the Chinese market.

“Could it have been handled in different ways?” said Hugh Stephens, distinguished fellow at the Asia Pacific Foundation of Canada and vice-chairman of the Canadian committee on the Pacific Economic Cooperation Council (PECC). “It’s so easy to second-guess … but it almost seems inevitable that it was going to happen with the fact that we do have this bilateral agreement with the Americans, which we have used for years and will continue to use. If you had to do it all over again, it’s hard to imagine scenarios other than not following our own rules.”

Margaret McCuaig-Johnston, senior fellow with the Institute for Science, Society and Policy at the University of Ottawa and a former assistant deputy minister, said the possibility of Chinese citizens running afoul of the agreement was likely not lost on China even before Meng’s arrest, because Beijing was “negotiating an extradition agreement with Canada when this happened. They knew the terms of the agreement; they wanted to sign an agreement so that they can do what the U.S. just did with us … demand the return of people.”

Repercussions

In a report published on November 29, Asia Pacific Foundation researcher Kai Valdez Bettcher detailed the economic fallout for  Canada since Meng’s arrest last December.

He noted that Canadian exports to China fell by $1.5 billion, or 8.2%, in 2019’s first three quarters compared with the same period last year, sliding to $16.8 billion from $18.3 billion. This, Valdez Bettcher said, contrasted with an average annual growth rate of 10% from 2014 to 2018, before Meng’s arrest.

Investment appeared to take an even harder hit. The foundation’s investment monitor report shows Chinese investment in Canada for 2019’s first three quarters falling to $351 million from $3.6 billion during the same period in 2018 – although Valdez Bettcher said Meng’s arrest wasn’t the only factor in the decline.

“Much of that $3.25 billion difference between 2018 and 2019 was due to two megadeals in 2018: Chinese CITIC Ltd. agreed to acquire a stake in Ivanhoe Mines Ltd. [TSX:IVN] for $723 million in June, while Canadian mining firm Nevsun [TSX:NSU] agreed to a $1.86 billion takeover by China’s Zijin Mining Group in September of that same year,” he said in the report, adding that CITIC and Zijin plan to increase their stakes in Canada.

“Drilling down within the past year, and into specific sectors and deals, it becomes apparent that most, and perhaps all, of the drop in investment is more a matter of deal-specific timing than anything else.”

Airport turbulence

A more nebulous effect that is not directly visible in current data but may be more worrisome, observers say, is the impact on air travel.

Carlo Dade, director of the Trade and Investment Centre at the Canada West Foundation, said that Vancouver International Airport (YVR), where Meng was arrested, has been positioning itself as an Asia-Pacific gateway linking Asia and the Americas.

“A big part of that positioning is that we are not the U.S.,” Dade said, noting that Canada has less stringent visa requirements than the United States for travellers connecting onto a flight to a third country at a Canadian airport, and Canada’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership means that visitors from countries like Vietnam can move through Canadian airports more easily than they can at a U.S. counterpart.

Dade added that Meng’s arrest could “inform people’s thinking” about YVR and other Canadian airports. But he is unsure what effect there may be for Vancouver as a travel hub.

“It’s a reminder that we have an extradition treaty with the U.S. and, as opposed to Mexico, we’re going to act on it a lot more often.”

Dade noted that Meng’s itinerary was to take her from YVR to Mexico City, and that U.S. officials asked Canada to make the arrest for a reason.

“The Mexicans were clear that they weren’t going to take one for the Americans, especially for this [U.S.] administration. Now, in the past, Mexico has extradited people that the [Federal Bureau of Investigation] wanted who were travelling through Mexico City … but they drew the line here, and we didn’t. That’s a huge difference.”

Public opinion

The biggest rift, however, may be the one that the Meng arrest, and China’s response, has created in the court of Canada’s public opinion.

A recent University of British Columbia poll showed that fewer than one-third of Canadians now have a positive view of Canada’s second-largest trading partner, something that “has never happened before,” said McCuaig-Johnston.

That’s because it has now become a question of trust between the West and Beijing, she said.

“We’ve had our eyes opened as to how malevolent China can be to another nation if it wants to be,” McCuaig-Johnston said. “It has come as a big surprise to Canada, because we’ve always considered ourselves a friend of China’s. But this one incident has led to a real rupture of relations.… We still want to be open to trade, but there’s a new understanding that the values of this Chinese government are different than the values of Canada.”

Stephens agreed, adding that the impact of the Meng case on Canada-China relations could be permanent.

“Let’s assume that, for some reason, Ms. Meng is sent back to China. Is this suddenly going to rewind the clock to November 30, 2018, where things were the way it was? It won’t be. The Chinese have burnt up huge amounts of goodwill [in Canada], and I think there’s a residual distrust of Canada [from China], as well…. So while anyone working with the Chinese market would like to resume co-operation, it won’t be like flipping a switch.”

Dade said the Meng case may signal that it’s time for Canadians to ask themselves “fundamental” questions about doing business in China – the same questions people in U.S. farming communities have been asking themselves over the past year.

But Dade noted that while the U.S. agricultural sector is taking the brunt of the Washington-Beijing tariff war instigated by President Donald Trump, support among farmers for the tariffs remains stable.

“The Americans have had some discussions about what they are doing with China and how much pain they are willing to take,” Dade said.

“These are questions that we’ve shied away from.… It requires real fundamental, and I mean really fundamental, questions about what we do in terms of values versus economics. And it’s not just to make money; if you are a farmer and you can’t have canola in your rotation, how do you keep your farm growing?” •

Key dates in Meng Wanzhou saga

•August 22, 2018: The U.S. District Court for the Eastern District of New York issues an arrest warrant for Meng on charges of using banks in the United States to handle funds from Skycom, a suspected Huawei front company operating in Iran. The existence of the warrant was not widely known until after Meng’s arrest.


•December 1, 2018: Meng arrives at Vancouver International Airport on a Cathay Pacific flight from Hong Kong en route to Mexico for a series of appearances in Latin America. Instead, Meng was detained immediately upon arrival by Canada Border Services Agency (CBSA) officials and questioned for three hours, then arrested by RCMP officers at the airport on a provisional U.S. extradition request. Meng’s defence alleges evidence such as laptops, electronic devices and access codes were improperly collected during CBSA questioning without her being officially arrested.


•December 7–11, 2018: Meng appears in court for her bail hearing, and is released on $10 million bail. Meng is also forced to turn over her passports and travel documents, submit to electronic surveillance and be followed by a security detail while remaining in the Lower Mainland during the extradition process.


•December 9, 2018: Beijing condemns the arrest in a conversation with then Canadian ambassador John McCallum, calling the detention “extremely vicious.” Canadians Michael Kovrig and Michael Spavor are arrested in China days later under Chinese national security laws in a move widely thought to be retaliation to the Meng arrest.


•December 12, 2018: U.S. President Donald Trump says he would intervene in the Meng case if he believes “it’s good for the country.” The statement has since become a focal point of Meng’s defence as evidence the arrest was potentially politically motivated as a trade chip in U.S.-China trade negotiations.


•January 9, 2019: An op-ed in Canadian media written by then Chinese ambassador to Canada Lu Shaye accuses Ottawa of “Western egotism and white supremacy”; it warns of repercussions if Huawei is excluded from Canda’s 5G network projects.


•January 26, 2019: McCallum resigns after commenting in the media that it “would be great for Canada” if the United States drops its extradition request while listing a number of arguments that Meng could use in fighting the case.


•January 28, 2019: The United States officially requests Meng’s extradition, as confirmed by Department of Justice Canada. Meanwhile, U.S. Homeland Security Secretary Kirstjen Nielsen releases a version of the indictment against Meng, alleging bank fraud, wire fraud and conspiracy. Huawei was indicted on theft of trade secrets from U.S. companies such as T-Mobile USA.


•March 1, 2019: Department of Justice Canada issues the official authority to proceed, launching the extradition process. Beijing cancels the licence for Richardson International, one of Canada’s biggest canola producers, to ship the product to China, citing dangerous pests as the reason. Other Canadian companies like Viterra Inc. also report that contracts in China are drying up as Chinese importers stop buying Canada’s canola seeds within weeks of the Richardson International news.


•March 3, 2019: Meng’s defence announces the launch of a civil suit against Ottawa, the CBSA and the RCMP, alleging she was detained, searched and interrogated without being formally arrested.


•March 6–8, 2019: Meng appears in court for the first time since her bail hearing; her lawyers allege Canadian authorities abused the border clearance process to secure evidence that may be used against Meng in criminal legal proceedings. They also characterize Washington’s intention to arrest Meng as politically motivated. Crown prosecutors, the judge rules, must defend the amount of evidence made available in court up to this point. Meng is allowed to move from her home in Dunbar to a second home in Shaughnessy.


•May 1, 2019: China suspends pork imports from two Canadian companies as Canadian soybean numbers show a precipitous drop in exports to China in 2019’s first four months.


•June 10, 2019: Court management hearing sets a series of appearances and submission deadlines. Chinese ambassador to Canada Lu leaves his post.


•June 14, 2019: Chinese customs officials say they found residue of ractopamine – an additive illegal in China – in a shipment of Canadian pork products, prompting the shutdown of all beef and pork exports from Canada to China.


•August 20, 2019: Documents and video footage of Meng’s arrest at YVR are released. Meng’s defence questioned inconsistencies in Canadian authorities’ note-taking during the arrest as signs that information that should be available for the extradition hearing has been omitted. Crown counsel says the procedure was routine, adding that a border entry questioning was necessary because Meng was not guaranteed entry into Canada at the time of her arrival.


•October 1–3, 2019: Crown counsel says in court that the CBSA erroneously handed over Meng’s pass code for electronic devices to the RCMP, but took steps to correct the issue. Prosecutors say there is no evidence that the devices were searched by the RCMP, while Meng’s defence says that an RCMP officer’s notes indicated the devices’ key information may have been sent to the Federal Bureau of Investigation improperly. The defence demands more information from the Crown on any interactions between U.S. and Canadian authorities on the arrest, a move that Crown counsel calls “a fishing exercise.”


•January 20, 2020: Extradition hearing is scheduled to officially start.

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