Huawei looms large over U.S.-China trade talks – National

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WASHINGTON — A Canadian reader of U.S. news reports about last week’s trade talks with China could be forgiven for wondering: what the heck happened to Huawei?


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After all, the week began with the U.S. Department of Justice unsealing two damning indictments against the Chinese tech giant, including one that names chief financial officer and telecom scion Meng Wanzhou, whose arrest in Vancouver two months ago dragged Canada into an escalating battle of ideologies between the two largest economies in the world.

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And yet two days later, as President Donald Trump and Vice Premier Liu He sat across from each other in the Oval Office after two days of high-level, high-stakes trade talks, the eyebrow-raising U.S. allegations of fraud, conspiracy and obstruction of justice against one of the world’s fastest-growing telecommunications firms elicited barely a mention.


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“We haven’t discussed that yet,” Trump said Thursday when asked if Huawei had come up during the talks. “It will be, but it hasn’t been discussed yet.

“That, actually — as big as it might seem — is very small compared to the overall deal.”

Geopolitical observers and trade analysts alike aren’t buying it.

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When Trump talks trade, America’s transactional, deal-hungry president tends to be less focused on bigger-picture issues than the messages he can sell to his supporters. Thursday’s Oval Office exercise, for instance, was all about radiating mutual goodwill — like when Liu disclosed, seemingly to the surprise of Trump’s aides, that China would buy five million tons of American soybeans.


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“Wow,” said Trump, visibly impressed. “That’s a lot of soybeans.”

Not really; China used to buy six times that every year from the U.S., which produced about 138 million tons of soybeans in 2018. Tariffs changed all that. But the president is in dire need of a political win in short order on trade with China, which he won’t get by talking publicly about what’s really going on — a broader, multi-pronged, long-term American effort to blunt its economic, geopolitical and military might.

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“There’s a lot of tension within the U.S. administration about China policy,” said David Dollar, a senior fellow in foreign policy, global economy and development at the Brookings Institution’s John L. Thornton China Center in Washington.

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“One school of thought is, ‘This is a Communist dictatorship, it’s a potential threat to the U.S., we can’t get along with this country’ — ‘decouple’ is the word they use. To the extent they’re gaining ascendancy, then you don’t want a trade deal. You just want to slap on big tariffs, you want to penalize Chinese companies, Chinese citizens, and reduce the economic relationship.

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“Then there are other members of the administration who — I think correctly — understand there’s a lot of benefit in U.S.-China economic exchange, and they would like to improve the terms of that and in some sense deal with these security issues, but ringfence them so that other economic exchange can go on.”

Canada shares that latter approach, a delicate high-wire act made all the more awkward by the swirling diplomatic updrafts of Meng’s Dec. 1 arrest and former ambassador John McCallum’s public assessments of her chances in court.

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It would be “naive in the extreme” to think that the Huawei controversy can be divorced from the U.S.-China trade discussion, said Wesley Wark, a University of Ottawa professor who specializes in matters of national security and foreign relations.

“Huawei has been made exhibit No. 1 in a China-U.S. trade war and struggle for technological supremacy, and the criminal indictments are just kind of on the ground floor,” he said.

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China is determined to diminish U.S. influence and extend its own economic, political and military reach around the world with “a distinctly Chinese fusion of strongman autocracy and a form of Western-style capitalism,” Dan Coats, the U.S. director of national intelligence, warned last week in a briefing with the Senate intelligence committee.

Trump’s trade and economic emissaries will resume talks in Beijing later this month, and the president himself will sit down with counterpart Xi Jinping before March 1, when U.S. tariffs on some $200-billion worth of Chinese goods are scheduled to jump to 25 per cent. It will be during those presidential talks where Huawei returns to the agenda, observers say.


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Trump used the all-caps word “comprehensive” in a string of tweets last week about his high hopes for a trade deal with China — a sentiment he repeated Sunday in an interview with CBS’s Face the Nation.

“No two leaders of this country and China have ever been closer than I am with President Xi,” the president said. “We have a good chance to make a deal … and if there is a deal, it’s going to be a real deal. It’s not going to be a stopgap.”

That means Huawei and help with North Korea more than it does more soybeans, said Dan Ujczo, a trade lawyer and Canada-U.S. specialist with Dickinson Wright in Columbus, Ohio.

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“Huawei is what it’s all about at the end of the day,” Ujczo said. “That’s what comprehensive means. The meeting between the two leaders — trade will just be one of the three major components, with Huawei being probably at the top of the list and North Korea right after.”

Trade, Huawei and the world’s broader concerns about China’s at-all-costs global ambitions are closely intertwined components of the U.S. strategy, said Wark. Whether that strategy will work is another question.

“I think it’s a very aggressive American policy that has to be rooted in an assumption that it’s possible to change Chinese behaviour through force. That critical assumption — that you can force, in a relatively short time frame, a change in Chinese behaviour through these tactics — that’s the critical thing that we should be speculating about: is this a good policy?

“Many people would argue it doesn’t have a chance in hell. But lots of voices need to weigh in on that one.”

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As cannabis deadline looms, 170 Ontario municipalities still have not decided on opting out of stores

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As the Jan. 22 deadline to accept or decline cannabis shops looms, more than a third of the 414 municipalities in the province have yet to decide.

As of Friday afternoon, councils representing some 170 cities, towns, townships and regions across the province had not exercised their option to bar brick-and-mortar pot shops from their precincts.

And while some may simply choose to abstain from voting — tacitly accepting the stores under Queen’s Park rules — many still have their fingers in the air, industry experts say.

“A lot of municipalities have opted for the wait-and-see approach,” says Alanna Sokic, a cannabis specialist at the Toronto consulting firm Global Public Affairs.

“Cannabis was only legalized in October of last year,” Sokic notes. “There’s still a lot of unanswered questions and I think that’s what we’re certainly seeing.”

Nick Pateras, vice-president of strategy at the cannabis resource and information company Lift & Co., says some communities may be waiting for the communities directly around them to decide.

“There’s probably a bit of ‘you go first,’ ” Pateras says. “As well, I think generally that the market continues to evolve every single day … and (they’re) going to maybe leave it to the last minute so they can act with as much information at hand as possible.”

King Township Mayor Steve Pellegrini — who was vocal in his opposition to the shops in his municipality — says the pot-store procrastination is due to a number of factors.

“There are new councils and a lot of them are doing community outreach to get feedback,” says Pellegrini, whose 905 community was one of the first to decline the stores.

Pellegrini also says many councils may be waiting to see how many of their counterparts opt out, hoping for a bigger slice of the $40-million implementation fund the province is providing. That fund is to help municipalities who accept the stores deal with potential law enforcement, education and public health costs.

Meanwhile, 62 communities as of Friday had decided to refuse the stores’ entry, a number Sokic says is not surprising.

“A lot of municipalities have expressed concern about the lack of municipal control when it comes to cannabis retail locations,” she says. “And that creates a lot of uncertainty as they go about their bylaw and planning initiatives.”

While these municipalities will forgo their full share of the transition fund, they will be free to accept the stores at a later date.

“They’re very likely waiting to see how it plays out in other communities,” Sokic says.

Many of the municipalities saying no — like Mississauga, Markham, Richmond Hill, Pickering and Oakville — are located in the 905 regions surrounding Toronto. Indeed, this GTA region — which has been granted six of the 25 cannabis stores licences — has been the most reluctant in the province to accept the shops. Under provincial rules, regional governments can’t opt out.

(Toronto proper has five of the first stores, as does the eastern part of the province. Western Ontario will host seven stores, while there will be two in northern Ontario.)

In the GTA region Burlington, Oshawa, Ajax and Clarington have opted in while another four communities will hold votes on Jan. 21, Sokic says.

“If you look at the west region, all of the municipalities save for Windsor, which has yet to vote, have opted in,” Sokic says. Toronto, eastern Ontario and the North have largely bought in as well, she says.

The patchwork of 905 ins and outs will make it difficult for merchants and shoppers down the road, says Sokic. “It’s a minefield.”

Pateras says the spotty acceptance of stores in the 905 and other places could impede a strong retail-store market down the road.

“It will definitely result in a slower rollout than a lot of us were anticipating and hoping for,” he says.

“But hopefully the opt-out rate is low enough that even if your specific city or town doesn’t have a store, you can drive 20 minutes or 30 minutes to the next municipality over.”

Sokic says the opt-out decisions made by some 905 communities may have been due to more socially conservative values than other parts of the province. “I think it’s just waiting for them to acclimatize to this new Canadian reality,” she says.

Pateras speculates that many 905 communities have neither the general urban acceptance of cannabis, nor the financial incentives to host stores that exists in smaller rural towns.

“They kind of straddle the line between being an area like downtown Toronto, where cannabis is fairly pervasive … and a more rural area, which would be looking to collect the tax revenue and establish jobs,” Pateras says.

Pellegrini attributes the 905 reluctance in part to the desire of many of its sprawling municipalities to build vibrant downtown centres.

“We’re all trying to build attractive, livable downtown cores,” he says, adding cannabis stores might detract from these efforts. This “is just really not something that we are looking for, for our image of our unique, quaint community.”

But Pateras says the 905 patchwork resembles the store distribution patterns that have emerged in U.S. states that have legalized recreational cannabis use. “Over 60 per cent of Colorado’s counties, for example, still do not permit cannabis business at all,” he says. “In California, 70 per cent of counties and cities have opted out of licensing cannabis businesses … there’s generally a slow rollout.”

Pateras also says many municipalities that have opted out are leaving themselves open to continued black market sales.

“Obviously if you don’t have a legal place of access, you’re allowing for illegal sales to continue to occur.”

Joseph Hall is a Toronto-based reporter and feature writer. Reach him on email: gjhall@thestar.ca

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Top court clears path for national securities regulator but political battle looms

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Securities industry experts are applauding a Supreme Court of Canada ruling clearing the path for a national securities regulator.

But they say there’s still a long way to go before it actually happens — and Quebec is already promising to go it alone.

Canada is the only G20 country without a national securities regulator.
Canada is the only G20 country without a national securities regulator.  (Randy Risling / Toronto Star File Photo)

In a unanimous ruling released Friday, the Supreme Court said the federal government and the provinces have the power to set up a national regulator, overturning a Quebec court ruling.

The court also said draft federal legislation for a new regulator is constitutional.

However, the court also said it is up to the provinces and territories whether being a part of a national regulatory system is in their best interests.

Canadian businesses have been pushing for a national regulator for decades, saying it would make financial markets more efficient, and lower the cost of doing business in this country.

But while the legal path might be cleared, the political one is much bumpier, warned Stephen Foerster, professor of finance at the Ivey School of Business at Western University.

“This has really always been about politics,” said Foerster, noting that governments of varying political stripes have been pushing the issue for decades, often half-heartedly.

Even if they might agree with a national regulator in theory, cold, hard political calculations might dictate other actions, Foerster said,

“Do they want to be seen as picking a fight with other provinces and their finance ministers?” Foerster asked. It’s also not an issue that resounds particularly easily with the ordinary person in the street, even though people’s investments — including their RRSPs and Canada Pension Plan — are at stake.

“It might not be a headline grabber, but it’s still important,” said Foerster, a view echoed by Anita Anand, the J.R. Kimber Chair in Investor Protection and Corporate Governance at the U of T faculty of law.

“This is not just something for the world of finance. This is something that matters to every single Canadian who has any kind of investment,” said Anand.

Even though she supports Friday’s ruling as a step toward a national regulator, Anand says she’d prefer to see the draft federal legislation include an investor advisory panel, as currently exists in Ontario.

“An investor advisory panel is a very important part of investor protection,” Anand said.

In provinces and territories that choose to take part in a national regulatory system, companies wouldn’t have to comply with multiple sets of often-similar regulatory paperwork and legal requirements.

“This will create greater market efficiency,” said Anand.

“It can be cumbersome to have different sets of regulations,” said Foerster, pointing out that Canada is the only G20 country without a national securities regulator.

Having to deal with duplicate regulations is expensive, meaning companies should eventually see a reduction in the cost of doing business.

Still, that might not be the case for Quebec-based companies, given provincial finance minister Eric Girard’s vehement opposition to the idea of a national regulator.

“We understand the decision rendered by the Supreme Court of Canada, but we intend to keep our autonomy and our expertise in Quebec. The financial sector is highly strategic, and we will keep all of our autonomy,” said Girard in a written statement.

That kind of tough talk might play well at home, but it could hurt Quebec’s economy in the long run, warned Foerster.

It might not hurt existing companies too much, but would make the province a less appealing place to do business.

“It wouldn’t affect existing companies in Quebec as much as it would affect new companies looking at whether to set up there,” Foerster said.

Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer

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