As December began, the United States and China agreed to a trade war truce, and news that Canada had arrested Meng Wanzhou, an executive at top Chinese tech company Huawei, for possible extradition to the United States followed shortly thereafter. With tech companies in the crosshairs of U.S. pressure, Meng's arrest and China's seeming retaliation by detaining two Canadians pile complications on the next phase of U.S.-China trade talks.
On the heels of Canada's high-profile arrest of Huawei's chief financial officer, Meng Wanzhou, China now has confirmed that it has detained not one but two Canadians.
The first of those arrested, Michael Kovrig, is an adviser to the International Crisis Group, but he is technically on leave from the Canadian foreign service. The second, Michael Spavor, is a consultant known for trying to facilitate business connections with North Korea and for setting up the connection between former U.S. professional basketball player Dennis Rodman and North Korean leader Kim Jong Un. China's relatively tight domestic restrictions and blurred boundaries in terms of state and commercial secrets allow Beijing to use its domestic legal system to indirectly respond to Meng's arrest.
Meanwhile, Meng is out on bail awaiting possible extradition to the United States. With the U.S.-China trade war at an uneasy truce, U.S. President Donald Trump has suggested, however vaguely, that he would intervene in Meng's case if he deemed it necessary. With this trade truce in place, China's detention of the two Canadians was an opportunity for Beijing to retaliate for Meng's arrest against a lower-stakes target, Canada.
Why It Matters
China's detention of the two Canadians should not be seen as a bargaining chip but as more of a tit-for-tat response under the auspices of Chinese domestic law. There are strong parallels here to 2014, when Canada detained Chinese national Su Bin in Vancouver for allegedly stealing U.S. military secrets. China responded by detaining a Canadian couple, Kevin and Julia Garratt, on allegations of espionage. Operating as religiously affiliated aid workers, the Garratts had lived in China on and off for 30 years and moved to Dandong in 2007. China released Julia Garratt in February 2015, while Kevin was charged with espionage and remained in prison for another 19 months. Eventually, however, Su's extradition to the United States and sentencing in 2016 rapidly gave way to Kevin Garratt's release and to a Canada-China agreement to begin exploratory talks toward a free trade agreement and a bilateral extradition treaty long hoped-for by China. From China's standpoint, the detentions of Kovrig and Spavor are not likely to give way to Meng's release or to any shifts in U.S. behavior. Instead, the situation piles on political complications for Canada, which has long tried to avoid ending up in the firing line of U.S.-China trade and broader strategic competition.
But even as it cooperates with the United States on Meng's detention, Canada will carefully weigh how to balance its relations with the United States and China. Canada is considering how far it should follow the U.S. lead in limiting Chinese investment and economic ties over national security concerns. In May 2018, Canada blocked a Chinese takeover of construction company Aecon Group by China Communications Construction Co. Ltd. on national security grounds. But it is currently reviewing whether it will follow the example of its allies and put restrictions on Huawei's involvement in Canadian 5G networks.
And while the United States is Canada's largest trading partner, the rising protectionist trend in Washington means putting a higher priority on increasing linkages with partners such as China. Both China and Canada have been prioritizing the move toward a free trade agreement — a path neither country is likely to jeopardize. One roadblock could be the new United States-Mexico-Canada-Agreement (USMCA), which includes a so-called anti-China clause that requires Canada to report to the United States if it begins trade talks with a nonmarket country — that is, China. This could open the door to renegotiations of the already contentious NAFTA-replacement agreement.