Claude Laferrière Headshot

Who's the Better Bedmate: China or the U.S.?

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Last month, a liberal leadership and expected contender Marc Garneau suggested a free trade agreement with China. Is it such a good idea from the perspective of Canada-USA relations already tense on a few issues?

Let's remember the Keystone XL pipeline project and the ongoing dispute between BC and Alberta, the announced acquisition of a Canadian major player in the oil businesses, namely the acquisition of Nexen by Chinese CNOOC, the illegal disclosure of software intellectual property over defense technology. There is also the Pratt & Whitney Corp. case that led the company to pay a huge fine to the U.S. Treasury but moreover, the startling reaction of the conservative government.

Tensions began with the strong reservations of U.S. President Barak Obama over the Canadian version of the Keystone XL Project. From an American perspective, it was not a definitive "no," but strong reservations over the northern part route through the State of Nebraska . However, President Obama approved the Oklahoma-Gulf of Mexico pathway on March 22. Potential multiple lawsuits from environmental groups brought the northern part to a stand-still. President Obama promised that he would render a decision in 2013.. Prime Minister Harper immediately replied by threatening to sell his controversial oil to China.

With Jeffrey Immelt, CEO of GE, as his main economic adviser, President Obama has a clear and known agenda for the future of electric cars. Therefore, his interest in the controversial oil seems quite limited, meaning non-existent. However environmental protection, climate changes and clean energy are top priorities.

At first glance, President Obama and Prime Minister Harper cannot be more opposed to one another.

But when came the issue of export controls in military technology, namely the business of exporting know-how precisely defense software, it got real serious despite numerous Canadian apologies.. The Pratt & Whitney Canada case came over the last months. It's about technology of course, but also jobs, investments and the ongoing tense US-China relations, namely negligence over intellectual property and know-how, between the free world and China.

Let's get into some details.

Pratt & Whitney Canada, a subsidiary of United Technologies Corporation (UTC) the Connecticut-based defense contractor, pleaded guilty on June 29 to violating Arms Export Control Act, namely the embargo on China, in connection with the illegal exports of military software for the Z-10 attack helicopter. Pratt & Whitney Canada and UCT agreed on a global settlement with the U.S. Justice and State Department to pay a $75 million fine to the U.S. Treasury, after a five-year FBI investigation. The charges are mainly false statements to the U.S. government and failure to disclose in a timely manner exports of defense articles toChina.

The Harper government's very laconic reaction was surprising. A spokesperson declared that "Canadian businesses must fully conform to Canadian laws on exports controls". The truth is that a Canadian subsidiary of a U.S. corporation must conform to U.S. exports controls, especially when U.S. military technology and know-how are at stakes.

To most legal academics and lawyers, I assume, this is corporate law 101. U.S. laws follow the trail of American know-how and products. On the Canadian side, there was an opposite understanding, but in good faith. Unfortunately, it was another situation of discontent between the long time friends.

The perception is that Canada-U.S. relations are piling up with potential court cases and chilling diplomacy. Ignoring or bullying our closest friend and ally to improve our trade with China knowing their political environment and economic system seems quite risky. Does it worth failing our friendship with the U.S.?

In brief Harper and Garneau, why such realignment with China, where so many human rights issues are still unresolved, a country that does not hesitate to execute small drug dealers and where are tortured and vanished political opponents?