Huawei 5G, Teck Oil decisions loom for Trudeau after new NAFTA

Justin Trudeau returns to a fragmented parliament Monday facing sharp domestic divisions with the clock ticking on two of the tougher decisions of his political career.

The prime minister must determine whether China’s Huawei Technologies Co. should be allowed to develop Canada’s fifth-generation wireless networks. He also needs to approve or reject a massive new oil project, even as he strives to reduce the nation’s greenhouse gas emissions. Getting sign-off on the new North American free trade agreement, which he’ll tackle right away, should be easy by comparison.

Trudeau’s approval rating got a bump from his handling of the Jan. 8 jet crash in Iran that killed 57 Canadians. He’ll need that goodwill as he starts his second mandate in a much more precarious position than his first. Canada’s economy slowed sharply at the end of last year, so smoothing relations with commodity hungry China will be crucial. As will getting the nation’s energy sector back on its feet after a $30 billion exodus of foreign capital.

With three potential dance partners in the legislature, there’s little chance Trudeau’s Liberals will fail to ratify the new Nafta. Sealing the deal will solidify Canada’s most important trading relationship, which was upended by the election of Donald Trump—a disruption that’s reshaped how Canada deals with global challenges.

“We’re living in a world without U.S. protection,” said Stephanie Carvin, a professor at Carleton University in Ottawa and former government intelligence analyst. “I’m not sure that we’ve prepared for that.”

China’s Wrath

Trudeau’s mettle is being tested by a bitter feud with China over Huawei, whose chief financial officer is fighting extradition to the U.S. on accusations she tricked banks into violating Iran sanctions.

Beijing bristled at Canada’s detention of Meng Wanzhou at the end of 2018 while on a layover in Vancouver. China swiftly locked up two Canadians it accuses of spying and halted nearly C$5 billion ($3.8 billion) worth of agricultural imports, plunging Sino-Canadian relations into their darkest period in half a century.

Trudeau, who has sought Trump’s help in the dispute to no avail, poured cold water on suggestions he halt Meng’s extradition as part of a prisoner exchange for the Canadians. “We are a country of the rule of law and we will abide by the rule of law,” the prime minister told reporters in Winnipeg, Manitoba.

China is also lobbying hard for Canada to allow Huawei access to 5G. Trudeau’s new public safety minister didn’t offer any hints on the timing of a decision at last week’s cabinet retreat, but Bill Blair now says “there are a number of other significant economic and even geopolitical considerations being considered” alongside security issues.

The government may be waiting to see what its allies do. While the White House is pushing for an outright ban, Boris Johnson’s government is weighing a mixed strategy that would keep the state-championed Chinese firm out of sensitive core elements of U.K. networks. “If Britain chooses to go with the regulatory approach, it will make it easier for Canada to do so,” Carvin said.

Having campaigned last fall on lowering mobile-phone bills in Canada, it’ll be hard for Trudeau to order companies like BCE Inc. and Telus Corp. to rip out millions of dollars worth of existing Huawei equipment, she added.

While dealing with China will occupy the bulk of Canada’s foreign policy agenda, it’s also been playing an activist role in Venezuela’s political crisis. Trudeau will host Juan Guaido in Ottawa Monday as the opposition leader tries to rekindle international support for his push to oust President Nicolas Maduro.

Western Woes

Domestically, the prime minister needs to reassure voters on Canada’s prairies that he hasn’t abandoned them. Key to that will be deciding on the C$20 billion Frontier oil-sands mine proposed by Teck Resources Ltd. in northern Alberta.

In his first mandate, Trudeau introduced a nationwide carbon tax and overhauled the regulatory process for major energy projects. Those moves won plaudits from environmentalists but met stiff opposition from provincial premiers. During the campaign, Trudeau doubled down and committed Canada to net-zero emissions by 2050.

October’s vote saw the Liberals fail to elect a single lawmaker in Alberta or Saskatchewan. “The mood has only gotten uglier and more hopeless in those western provinces,” said Shachi Kurl, executive director of the Angus Reid Institute polling firm.

A Brexit-inspired separatist movement has even sprung up. While few think it could ever succeed, Trudeau overhauled his front bench to address western alienation—promoting Chrystia Freeland to deputy prime minister with a mandate to mend federal-provincial fences.

As much as Trudeau is trying to position Canada as a global leader on climate change, he also nationalized a pipeline, buying the Trans Mountain line from Kinder Morgan Inc. in 2018 for C$4.5 billion. A controversial expansion of the conduit cleared a major legal hurdle at Canada’s top court this month and construction is set to pick up this year.

Increasing the flow of oil out of Alberta would be a vital boost for struggling producers, who are again facing a steep discount for their heavy crude. Teck’s mine got a tentative green light in July. The Liberals have to make a final call by the end of February, but approval from the company isn’t guaranteed given the project was conceived in a different price environment.

“Politically, this is being put forward as the Trudeau government making a decision about whether or not 7,000 people are going to have jobs in Alberta” instantly, said Andrew Leach, an economist at the University of Alberta in Edmonton. “Teck has not said anything of the sort.”

In confronting his domestic challenges, Trudeau might find himself seeking support from an unlikely place: the official opposition bench.

“The Conservatives are obvious allies in getting Nafta through,” said Brian Topp, a former adviser to New Democratic Party leaders. “They’re also obvious allies to the government as it thinks about how to respond to the commodities crash on the prairies.”