Ottawa has recently put forth major initiatives to protect against national security threats from China, including the Indo-Pacific and critical minerals strategies along with significant updates to legislation surrounding foreign investment.
Carleton University business professor Ian Lee says the updates to the Investment Canada Act (ICA) are part of a “restructuring of globalization” toward “friendshoring,” aiming to increase coordination among like-minded allies. Canada is thus aligning itself more closely with the U.S. sphere of influence and distancing itself from China, he added.
The Dec. 7 announcement of modernizing the ICA is said to be country-agnostic; however, the feds described China as an “increasingly disruptive global power” in its Indo-Pacific Strategy released Nov. 27.
China has not respected Western democratic norms since its admission to the World Trade Organization about 20 years ago, Lee said, giving as examples the rule of law, respect for human rights, and adherence to intellectual property (IP) norms.
The ICA’s top priorities to protect that were mentioned by François-Philippe Champagne, minister of innovation, science and industry, include critical minerals, sensitive technologies like quantum and artificial intelligence, and personal data.
While the proposed amendments to the ICA will bring greater scrutiny to investments from foreign sources, concerns have been raised that the act should not deter much-needed investment from allies and that it must protect IP.
Protecting IP
The problem is that IP could get transferred before completion of the national security review.
In response, one of the ICA amendments is to give the minister authority to impose interim conditions during the review—to reduce the risk to national security during the review itself, like preventing possible transfer of trade secrets, for example.
“Sometimes we can’t necessarily block a transaction, but we want to make sure that there are conditions respected. That’s what our neighbours to the south do,” Champagne told reporters on Dec. 7.
“The measures are somewhat useful,” Richard C. Owens, a lawyer (retired) specializing in IP, technology, and business, told The Epoch Times.
He said IP can be very easily misappropriated depending on the form it takes and the complexity of the sector in which it originates, and the ministries involved “can’t know how IP works in every sector.”
“Moreover, pre-investment due diligence and discussions are notorious sources of IP leakage and will continue to depend on the vigilance and sophistication of the private enterprise involved,” Owens added.
In a 2021 analysis, retired U.S. Navy captain Stu Cvrk said the Chinese regime uses foreign direct investment to acquire Western companies for the purpose of acquiring cutting-edge technologies and IP.
“The Chinese regime invests in foreign S&T [science & technology] development as a mechanism to fill technology holes in Chinese technical sectors,” he wrote.
Canada’s oilsands had in the past been singled out as being of particular interest to the Chinese regime, as it would get access to the advanced technology and expertise of oilsands development such as extraction and fracking. Now, the battleground is critical minerals given their usefulness in the energy transition.
