A Washington-based expert is questioning Canada's approval of a Chinese company's bid to acquire a Montreal firm engaged in weapons technology, which could trigger U.S. concern.
An article by TheTyee.ca said that the move came after the Trudeau government reversed the 2015 decision to block the Chinese takeover of ITF Technologies over national security concerns.
China's offer to buy the Montreal firm was made by O-Net Communications, a Chinese communication firm where the Chinese government has 25 percent stake, the report said.
The Harper administration blocked the sale for fear the takeover would allow the Chinese government and its military to gain access to ITF's laser technology and could be harmful to the interest of Canada and its allies.
The sale was initially approved by Conservation but the decision was later reversed following security evaluation by the Department of National Defense and the Canadian Security and Intelligence Service.
In recent years, deals involving Chinese firms received tighter scrutiny in the U.S. and Europe. According to James Lewis of the Washington-based Center for Strategic and International Studies, Europe wants China to meet some requirements before they approve the deals.
"Allowing this transaction to go forward is a mistake and goes against the trend we see in Europe and the U.S. to apply greater scrutiny to deals with China," Lewis said.
Lewis added that China acquires Western technology to modernize its own but sometimes this is done by stealing intellectual property or going into a joint venture with companies doing business in China.
Chinese deal implications
The expert said that there is a growing concern in Europe and the U.S. about the implications of the Chinese acquisitions and the have put restrictions and oversight function over deals and technology that the Chinese firms can own.
Lewis said that in the ITF's case, the U.S. is concerned that its laser systems could be used by the Chinese military against Canada's Asian allies such as Japan and Taiwan during extreme situations.
The U.S. expert asked what steps Canada has taken to ensure against the said possibility, He said that the risk could not be managed sufficiently by its own intelligence report.
NDP innovation critic Brian Masse said that the reversal of the decision "isn't very helpful" to the tension between China and the U.S. He said that the U.S. is wary of Chinese access to technology that can be used for military purposes.
"It's absolute arrogance on their part or it's a willful snub to the United States," Masse said. "That will be acknowledged. The United States is not unknowing of a large corporate sale in the defense industry in North America that has technology that is rather unique."
Masse also warned that the Chinese deal with the Canadian firm could become an issue during coming NAFTA negotiations. He added that the lack of transparency is the deal is also a concern since Trudeau's government had kept the conditions of the sale confidential.