Chinese firm's Canadian contracts raise security fears

Barred by the U.S. and Australia, tech giant Huawei makes inroads in Canada

By Greg Weston , CBC News Posted: May 15, 2012




The former head of U.S. counter-espionage says the Harper government is putting North American security at risk by allowing a giant Chinese technology company to participate in major Canadian telecommunications projects. 

In an exclusive interview in Washington, Michelle K. Van Cleave told CBC News the involvement of Huawei Technologies in Canadian telecom networks risks turning the information highway into a freeway for Chinese espionage against both the U.S. and Canada.

Huawei has long argued there is no evidence linking the company to the growing tidal wave of international computer hacking and other forms of espionage originating in China.

Nonetheless, the U.S. and Australia have already blocked Huawei from major telecom projects in those countries, and otherwise made it clear they regard China's largest telecommunications company as a potential security threat.

Van Cleave, who served as top spy-catcher for the Bush administration until 2006, describes Huawei as a potential "stalking horse" for Chinese military and intelligence objectives.

Sean Young, president of Huawei Technologies Canada, right, shows then-industry minister Tony Clement a piece of wireless equipment during a tour of Huawei's Canadian headquarters in Markham, Ont., in March 2011. (Stephanie Lake/Canadian Press)

Even Canada's own intelligence agencies have warned the Harper government of the risks of throwing open the door to Chinese telecom companies.

Despite all the warnings, the federal and Ontario governments have rolled out the red carpet to Huawei, officially praising the Chinese company's partnerships in Canadian telecom projects with Telus, Bell, SaskTel and WIND Mobile.

During a recent visit to China, for instance, Prime Minister Stephen Harper said he was "honoured" to have witnessed the signing of large contracts for Huawei to provide Telus and Bell with the latest LTE high-speed wireless networks across Canada.

Among its many large customers, Telus has just signed a $250-million contract to provide the Canadian military with secure voice and data services worldwide.

The Ontario government has been equally enthusiastic toward Huawei, giving the telecom giant $6.5 million of taxpayers' money to locate its Canadian office and a "research facility" in the province.

Huawei last year had worldwide revenues of more than $32 billion.

For its part, Huawei has long confronted its critics with claims to be just another multinational corporation owned by its employees, free of Chinese government control, adding it would be commercially suicidal to engage in espionage.

Huawei declined to be interviewed by the CBC. Instead, the company issued a written statement late Tuesday saying, in part, that the company ensures "all our stakeholders, including governments, have a clear understanding of the tools we use to protect the integrity of our customers' networks to the highest standards.

"Over the past four years, we've worked openly and transparently in consultation with our customers and government to meet these requirements."

Van Cleave sees things differently.

"China is a totalitarian government, and Huawei operates at the sufferance of the government, and those relationships are there. Even if Huawei management wished them away, they would still be there."

Van Cleave says the intelligence community fears digital "back doors" could be hidden in the telecommunications networks, allowing spies to steal American and Canadian secrets and ultimately disrupt everything from public utilities to military operations in the event of international conflict.

She says the U.S. government's actions to prevent Huawei from taking over U.S. telecom companies, or participating in major infrastructure projects, "is the right thing to be doing."

'Considerable risk' to Canadians

The Harper government's own Department of Public Safety warned more than a year ago that Canada's telecommunications network is too important to be left to foreign companies.

In a secret memo written in 2011 and obtained under the Access to Information Act, a senior public safety official says "the security and intelligence community" believes that throwing open the Canadian telecom market to foreign companies "would pose a considerable risk to public safety and national security."

Prime Minister Stephen Harper addressed a business group in Beijing during a highly touted visit to China in February. After years of chilly relations, Canada and China are quickly forging stronger trade ties. (Adrian Wyld/Canadian Press)

While large sections of the secret memo were withheld from release, intelligence sources say the biggest concern was the Chinese.

Van Cleave says China indeed remains the No. 1 espionage threat to the United States, mainly through computer hacking aimed at stealing everything from proprietary technologies to defence secrets.

And it's only getting worse.

The former counter-intelligence boss says frankly: "I would be hard-pressed to say we are winning."

The U.S. International Trade Commission estimates that in 2009 alone, Chinese theft of U.S. intellectual property cost almost a million American jobs, and $48 billion in economic losses.

Van Cleave wonders why Canada hasn't intervened with Huawei.

"Isn't there a process for… the [Canadian] government to step in?"

Canada targeted by hackers

Last year, the Canadian government itself was hit with its worst-ever hacking attack from China, penetrating the highly classified computer systems in at least three federal departments: Finance, Treasury Board and Defence Research.

Documents obtained by CBC show the hackers managed to steal large amounts of classified data before the computer systems could be shut down.

Eighteen months later, those computer systems remain corrupted and unable to connect directly to most of the internet without losing more data to the as-yet-unidentified Chinese spies.

More recently, a former executive of now bankrupt Nortel has blamed Chinese technology theft for hastening the demise of the former Canadian telecom giant.

So, why is the Canadian government greeting Huawei with open arms?

From a business perspective, Huawei is apparently hard to resist.

The upstart WIND Mobile, for instance, used Huawei to build a whole new wireless network in Canada, and has publicly gushed about the Chinese company's high-quality products, reliable service and lower prices than the competition.

China's exploding marketplace of over a billion consumers is also an offer most multinational companies and Western governments — Canada's included — find hard to refuse.

The Harper government, for one, has done a complete about-face with respect to China over the past six years, from a prime ministerial cold shoulder to an all-out trade love-in.

Huawei is bending over backward to show it is a good corporate citizen. For instance, it has put up $1.4 million along with Telus to fund a new centre for cutting-edge research into so-called cloud computing at Ottawa's Carleton University.

Michel Juneau-Katsuya, a security expert and former member of Canada's spy service, says the Harper government is "absolutely" taking a big risk with Huawei, and appears to be ignoring warnings from the U.S., Australia and other allies.

He says there's little doubt CSIS "did its homework" on Huawei, and passed along the information and resulting security recommendations to the Prime Minister's Office.

"Unfortunately, the PMO is very nonchalant when it comes to security," said the intelligence expert. "They have an agenda, a political agenda … and they disregard some of the warnings coming from the official agencies."

Juneau-Katsuya said one of the dangers in Huawei's having access to the Canadian telecommunications network is that it could damage intelligence sharing with the Americans.

He says Canada remains one of China's most important espionage targets precisely because of our close intelligence relationship with the U.S. and other allies.

"If we have not taken certain responsibilities and certain steps to protect ourselves, then our allies will have to assume we have been compromised, and cut communication from their end."

U.S., Australia wary

One thing the Canadian government could not possibly have missed is all the controversy about Huawei in the U.S. and Australia.

In the past five years, there has not been a time when at least one U.S. government agency involved in security hasn't been holding hearings, writing reports and otherwise investigating the possible threats posed by Chinese telecommunications companies such as Huawei.

The CIA, the FBI, the Department of Homeland Security, the Pentagon, the White House, Congress, the list goes on — all of them have tried to dissect Huawei's activities and intentions in the U.S. and beyond.

The latest of these is an investigation by the powerful House intelligence committee into "the threat posed by Chinese-owned telecommunications companies."

In announcing the probe, committee chairman Mike Rogers said: "We are looking at the overall infrastructure threat and Huawei happens to be the 800-pound gorilla in the room.

"As the formal investigation begins, I stand by my caution to the American business community about engaging Huawei technology until we can fully determine their motives."

The U.S.-China Economic and Security Review Commission, an independent agency created by Congress, has produced two thick reports on the role of Chinese telecoms in the growing problem of cyber-espionage against the West.

Both reports conclude there is reason to be wary of Huawei.

Mike Wessel is a sitting member of the commission, and suggests Huawei is a clear and present danger to both the U.S. and Canada.

"Our [telecommunications] systems are not only seamless, they are completely intertwined," Wessel said in an interview with CBC News.

"If it's a security concern for us … why aren't we concerned about what may be happening across the border?"

Australia has taken an even tougher stand than the U.S., telling Huawei there was no point even bidding on that country's largest ever telecommunications expansion.

The Chinese government has dismissed the allegations, accusing Australia of trade protectionism.

But Australia's foreign affairs minister, Bob Carr, later told reporters that the decision on Huawei was purely "on security grounds, reflecting a focus by Australia on the resilience and security of core infrastructure."

Bell and Telus declined interview requests for this story but issued prepared statements.

Bell states in part: "For a company like Bell, security is of primary importance. We work with government and the Canadian and international telecom industry to ensure Bell always offers the highest possible levels of security to our customers.

"We are confident in our network suppliers, including of course Huawei [which]

partners with most of the world's carriers."

Telus never mentions Huawei in its statement: "Like all telecommunications companies, we implement the best security safeguards into our network leveraging our own extensive expertise, and the expertise of federal security agencies."

Finally, Public Safety Minister Vic Toews issued a written statement late Tuesday saying that while the government has taken "strong steps" to open the mobile phone sector to competition, it will "continue to ensure that Canadians can rely on telecommunications infrastructure that's safe and secure."

One of the most vocal and colourful critics of Huawei in Washington is congressman Frank R. Wolf.

"The Chinese are the most aggressive spying in this town, and my sense is in Canada and many other places," Wolf said in a recent interview on Capitol Hill.

The congressman comes by his concern about Chinese cyber-espionage through personal experience.

In 2007, hackers traced to China hit his congressional office computers, "and got to everything."