Amy Karam: Huawei quandary highlights Canada's lack of unified economic security strategy
Credit to Author: Hardip Johal| Date: Thu, 19 Dec 2019 05:23:50 +0000
The Huawei-China-Canada debate is complicated and multidimensional. The blurring and intertwined lines between geopolitics and economics are causing much consternation, confusion and pause.
The one-year anniversaries of Huawei CFO Meng Wanzhou’s house arrest in Vancouver and the detainment of Canadians Michael Kovrig and Michael Spavor in China remind us how complicated international trade has become, and how power shifts are changing the way countries like Canada need to adapt for national security and economic security reasons.
The power of geo-economics is a significant consideration in the Canada-China relations discussion, including the debate over whether to ban or allow Huawei 5G networks. Canada’s national security concerns around implementing Huawei 5G networks are largely due to Huawei’s relationship with the Chinese government, and its intelligence law since 2017 stating that Chinese companies must share information with the government if asked.
Huawei recently released a commissioned report to publicly demonstrate the monetary impact of Huawei’s existence on Canada’s economy. Its focus on Canada’s economic security — or insecurity — diverts attention from national security and concerns over values and priorities.
By highlighting the number of jobs Huawei is creating and the economic ripples on supply chains and contributions to Canada’s GDP, the report uses the numbers argument to make it difficult to refute Huawei as an allowable choice. (Not to mention Huawei’s investment in costly and less profitable rural connectivity needs — a smart, low-hanging-fruit strategy to gain favour and longevity in Canada by addressing an economically less attractive initiative that Canada needs.)
The quandary over whether to ban or allow Huawei’s 5G networks in Canada — CSIS (Canadian Security Intelligence Service) and the Canadian Securities Exchange are on opposite sides of the debate — highlight a few factors that Canada needs to address:
1: A lack of unified strategy and priorities across Canada’s departments: economic, employment, safety, innovation and the less addressed aspect of global competitiveness.
2: The lack of a long-term Canadian strategy. China has one, particularly in technology evolution and Made in China 2025. That’s why the world is in this 5G debate. What’s Canada’s 10-year or 20-year plan?
3: The need for a clear, comprehensive foreign direct investment (FDI) policy that takes into account all of the variables so that Canada is not responding to issues on a case-by-case basis or based on short-term monetary opportunities. As Canada continues to diversify trade with emerging nations, similar issues may arise.
Canada’s Foreign Affairs Minister François-Philippe Champagne.
The dilemma is that Canada, like many other countries, was attracted to, and drawn in by, Huawei’s (and China’s) cash infusions. Foreign investments filled the employment and research-funding gaps left behind by the demise of Nortel. Intellectual capital was benched as smart researchers and engineers didn’t have funding or job prospects where they could channel their capabilities. Huawei was a welcomed and obvious answer to address the gap.
The CEO of Huawei wants to expand its research and development activity in Canada. This is no surprise given the low cost of 5G research in Canada; some experts have calculated that Huawei might pay as low as six cents on the dollar after federal and provincial research funding and additional tax credits. This is a great deal for Huawei but Canada is not getting a high enough return as Canadian researchers are fuelling Huawei’s world leading position in 5G.
This is an opportunity for Canada to get a better deal and a higher return from this partnership by taking a more business-centric approach, beyond just job creation.
Irrespective of the decision to ban or not to ban Huawei, if Canada chooses to continue to partner with Huawei on 5G research, Canada should move past its economic insecurities, raise the bar and broker a better deal and economic exchange. This could include implementing an industrial policy to ensure Canada is obtaining licensing revenues from 5G intellectual property.
Taking a business approach — rather than focusing only on the basic economics of job creation — Canada could propose a revenue-sharing model on Huawei 5G revenues in order to get a higher return on its intellectual capital.
From a global competitiveness perspective, Canada, as well as the U.S., missed the mark on obtaining a significant position in the all-too important 5G market.
One other option would be for Canada to create a new company — a new mini-Nortel — or to partner with the U.S. to commercialize its 5G intellectual property into a cybersecurity solution that would monitor all 5G networks. This would also be beneficial to Huawei as it would allow visibility into their 5G networks and perhaps alleviate some of the transparency concerns around national security threats.
There is an opportunity for Canada to step it up on the deal-making and entrepreneurial side and co-ordinate across its departments with a unified strategy. It’s time to figure out how to grow Canada’s economic pie and secure a stronger global competitiveness position.
Hopefully, Foreign Affairs Minister Francois-Philippe Champagne will apply his previous international trade savvy to his new post and bridge the geopolitical and geo-economical gap.
Amy Karam is a global competitive strategist and principal at Karam Consulting, the author of THE CHINA FACTOR: Leveraging Emerging Business Strategies to Compete, Grow and Win in the New Global Economy, a fellow at the Canadian Global Affairs Institute, a TEDx speaker, and teaches for Duke University CE. She is the founder of the Global Business and Innovation Academy and worked in Silicon Valley for 15 years.
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