Huawei is moving its R&D centre from the U.S. to Canada, but does Canada want it?

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Huawei is moving its R&D centre from the U.S. to Canada, but does Canada want it?


VANCOUVER—The news earlier this week that Chinese tech giant Huawei is planning to move its research and development centre from the United States to Canada begs the question of whether Canada should welcome the expansion, experts say.

Tuesday, the Globe and Mail ran an interview with Huawei founder Ren Zhengfei, in which he said it’s too problematic for the cellphone and communications manufacturer to maintain a presence in the U.S. due to sanctions imposed by Washington over espionage and sanction breaking concerns.

“As the situation in the United States has deteriorated at the global level, the company has made a decision to move those investments into Canada,” confirmed Alykhan Velshi, vice-president of corporate affairs at Huawei Canada.

Ren said his staff in China cannot even communicate with those stateside due to the sanctions. The news came a day after the one-year anniversary of his daughter Meng Wanzhou’s arrest in Vancouver at the request of U.S. authorities, who accuse her of fraud and other charges. Meng is now awaiting the extradition process.

Velshi said the relocation of the company’s Silicon Valley-based research centre, which employs about 600 people, is happening slowly and will bring benefits to Canada. He pointed to a study by Oxford Economics and released last month showing Huawei’s positive economic impact in Canada, including $670 million in procurement spending with Canadian companies since 2008.

Huawei is currently waiting to hear if the federal government will approve its participation in the development of Canada’s 5G network. Other nations in the so-called five-eyes intelligence sharing community of Canada, Australia, New Zealand, the U.K. and the U.S., have banned Huawei from such participation or warned Canada against allowing it.

China’s government has the power to order companies based in the country to hand over information to the government if asked, experts have cautioned.

Velshi said the company has spent almost $200 million in Canada in 2019, and noted that next year, that amount will be higher. As well, Huawei will recruit talent locally.

But some security and political experts say that though there are already about 1,200 Huawei employees at the company’s offices across Canada, further expansion by Huawei brings tough questions.

Would Canadian-designed technology assist oppressive governments?

Velshi said the work done in Canada is for civilian use, but others say that doesn’t mean the technology won’t be used by oppressive regimes.

Christian Leuprecht, a political science professor at Royal Military College of Canada and Queen’s University in Kingston, told Star Vancouver in an interview that a main concern is technology developed in Canada being used in Xinjiang. More than one million members of China’s Uighur minority have been interned in “re-education” camps in the region in the China’s far west.

A report by the think tank, the Australian Strategic Policy Institute released weeks ago says Huawei equipment is being used for surveillance purposes in the province. Tech developed in Canada could also end up being used there, Leuprecht said.

“It wouldn’t just be potential, it would be almost assured,” he said. “Huawei denies this, but the reports are pretty unequivocal.”

It’s not just concerns about Xinjiang, Leuprecht said, Huawei technology is being used by a number of repressive regimes to monitor their citizens. Zimbabwe and Venezuela both have contracts with Huawei. China’s military could also be the beneficiary of such technology, Leuprecht said.

Are Canadians comfortable giving Huawei financial incentives?

A lot of tech research in Canada is funded by grants or given help with tax breaks from governments, Leuprecht said. He fears the Canadian public could end up “underwriting” the research Huawei conducts.

“The federal government has just announced these five superclusters, of which one is focused also on developing high-end artificial intelligence,” he said. Ottawa announced about $950 million for the superclusters. If Huawei ends up working with any companies awarded funding, they could also benefit.

Huawei chief financial officer Meng Wanzhou, who is out on bail and remains under partial house arrest in Vancouver after she was detained last year at the behest of American authorities, leaves her home to attend an October court hearing. Huawei is reportedly moving its U.S.-based research and development centre to Canada, blaming American sanctions for making it too hard to operate there

Velshi said Huawei’s current operations in Canada have used available tax credits, “like all companies do.” Since 2008, it has used about $103 million worth of Scientific Research and Experimental Development tax credits, according to the Oxford Economics report, but Velshi said Huawei does not generally look to governments for direct financial support.

However Leuprecht said it raises concerns about the Canadian public supporting Huawei’s work, especially when combined with concerns about helping authoritarian regimes around the world.

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Would relations with the United States suffer?

The Canadian government is currently “offside” with the Americans when it comes to policy on Huawei, says Christopher Parsons, a senior research associate with the Citizen Lab at the Munk School of Global Affairs.

The Canadian government has not “clearly communicated” where it stands on the U.S. approach to exporting technology to countries like mainland China, Parsons said.

He said there are risks to Canada embracing the company, considering the U.S. policies on Huawei.

“It’s potentially problematic in terms of maintaining our close relations with our largest trading partner, largest intelligence partner, largest military partner, etc.”

Canada needs to conduct an evaluation on how expanding its engagement with Huawei could affect its relations with Washington, he said.

Leuprecht said that as long as Huawei only works on cellphones, as opposed to components for cellphone towers, the affect on Canada’s relations with the U.S. would likely be minimal.

Could Huawei’s expanded presence in Canada be used as leverage by the Communist government of China?

A greater influx of jobs and money could give Beijing more leverage in Canada with a looming threat they could force Huawei to pull out of the country, Parsons said.

Since Meng was arrested in Vancouver in December, 2018 Beijing has arrested two Canadians — diplomat-on-leave Michael Kovrig, and businessman Michael Spavor — in apparent retaliation for the Meng arrest.

China has also imposed sanctions on Canadian meat, though they are now lifted, and on Canadian canola products. Huawei having a major investment in the Canadian economy could provide even more leverage for Beijing, Parson said, but there’s an advantage for Canada, too.

“It could be used as leverage for the Chinese government, or the Canadian government for that matter,” Parsons said. Canada has a desirable talent pool of engineers, and Canada could “establish conditions that would make it challenging to employ those people” if Ottawa wanted to pressure Beijing via Huawei, he said.

Given the current climate for Ottawa-Beijing relations, Velshi said he wagers there will be a mixed reaction from Canadians at news of the expansion.

Meanwhile, for Leuprecht, the pros and cons of Huawei’s expansion into Canada comes down to a simple question;

“Do we want to be in bed with a company that systematically enables and uses and facilities technology to enable authoritarian regimes?”

Jeremy Nuttall





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