Ottawa is inching toward a decision on the involvement by China’s Huawei Technologies Co. Ltd. in Canada’s next-generation telecommunications networks. It’s a decision that will mark a turning point in Canada’s economic fortunes.

Huawei is the world leader in next-generation, or 5G, networks, which will form the backbone of the 21st-century economy.

In one of the toughest decisions any Canadian government has made, Ottawa will either ban Huawei from Canada’s emerging 5G networks, or it will allow Huawei to continue with the 5G advances it has been making in Canada for more than a decade.

Banning Huawei from 5G in Canada runs counter to Canada’s accelerating strength as a technological power. It would also be disruptive to the Canadian telecommunications system. The giant telecoms Bell Canada and Telus Corp. are Huawei’s biggest Canadian customers. Telus has said that a ban on Huawei would be an enormous setback.

Worse, a ban on Huawei would make Canada a laggard in the global race to achieve leadership in 5G, on which many other world-changing technologies depend. More on that later.

But giving Huawei the green light in Canada brings its own set of problems. The national-security experts who have counselled against Huawei’s involvement in Canada’s 5G networks worry that the company’s networking gear gives Beijing potential access to sensitive state information. The U.S. intelligence community has repeatedly accused Huawei of spying on the U.S.

Canada also risks further damage to an already fragile relationship between Canada and the U.S.

In its decade-long campaign to contain Huawei’s ambitions, which pre-dates the Trump administration, the U.S. continues to strong-arm Canada and its other allies to avoid using Huawei technology.

Australia and New Zealand have acquiesced to U.S. pressure, banning Huawei from their emerging 5G networks. And Europe has given its nodding approval to America’s anti-Huawei actions. It has a vested interest in doing so, given that among Huawei’s few top-tier competitors are Finland’s Nokia Corp. and Sweden’s L.M. Ericsson. Both firms trail Huawei in 5G proficiency and in cost, but are trying to close the gap.

This week, U.S. President Donald Trump reversed himself in granting a 90-day reprieve to U.S. firms he ordered on May 15 to cut off supplies of semiconductors to Huawei.

But a still-possible restriction on U.S. supplies to Huawei would cripple China’s largest company, which Trump is using as a bargaining chip to resolve acrimonious negotiations on a U.S.-China trade pact.

Saying yes to Huawei in Canada’s 5G networks could appear to suggest that Canada is sanguine about China’s imprisonment on specious charges of two Canadian citizens early this year. China took that egregious step in apparent retaliation for the U.S.-engineered arrest in Vancouver in December of Meng Wanzhou. Meng, 47, is chief financial officer of Huawei and heir apparent to her father, Huawei founder and CEO Ren Zhengfei.

It is difficult to see a favourable outcome for Huawei in Canada without the release of those two Canadian nationals.

Because of 5G’s transformational impact, the stakes are high in a decision Ottawa has said it will make before the October election.

The fifth generation of networking, 5G, promises to be almost 100 times more powerful than current technology, as measured in network speed (faster access to Internet pages), capacity (increased bandwidth) and functionality. It will also lay the foundation for other advanced technologies, ranging from driverless cars to smart cities.

Huawei has long been attracted to Canada as one of the world’s biggest hubs of artificial intelligence research (AI), largely concentrated in the GTA-Kitchener corridor, now one of the world’s top 10 high-tech centres. Canada is also a player in smart cities and the development of driverless, or autonomous, vehicles.

Huawei’s 11-year commitment to Canada also draws on the 114-year legacy of Nortel Networks Corp., which designed the fibre-optics pipelines that are the backbone of the global Internet.

Having survived the telecom meltdown of 2000 that destroyed Nortel, Huawei has since grown to become the world’s largest supplier of networking gear to global telecoms. It also eclipsed Apple Inc. last year as the second-largest vendor of smartphones, and aims to overtake market leader Samsung Electronics Co. of South Korea.

Trump’s abrupt reversal this week on Huawei came after Silicon Valley let him know that America’s semiconductor makers would suffer mightily from lost revenues in their business with Huawei.

A sustained embargo on Huawei would “have a negative impact on the 5G technology evolution around the world,” Cui Kai, a telecom analyst at the IDC consulting firm, told Bloomberg last week.

Loading... Loading... Loading... Loading... Loading... Loading...

That in turn would stall advances in AI, an urban renaissance tied to safer and more energy efficient cities, safer transportation with autonomous vehicles, and the so-called Internet of Things, by which all electronic devices and appliances are connected and can be controlled remotely.

As it happens, Huawei has never been implicated in spying. The Huawei spectre is not proven but, as they say, existential. The U.S. is adamant that Huawei poses a 5G threat, the U.K. is of mixed opinion, and Germany has refused to ban Huawei equipment, saying it hasn’t seen convincing proof of a threat.

More to the point, given the paucity of 5G architects, a rapid development of global 5G simply isn’t possible without Huawei.

For Beijing, with its ambitions to become a global tech powerhouse, Canada is one of the few major advanced economies that can quickly become a showcase for Huawei’s best-in-class 5G prowess. Even a pro-Huawei Germany, as a member of a European Union that has expressed reservations about Huawei, would have to apply more restrictions on Huawei than Canada.

And for Canada, that 5G proficiency would boost Canada’s proficiency in AI, its nascent work in driverless vehicles, and its world-class strength in telecommunications.

Conditions would apply, of course. They would be similar to those China itself imposes on outside companies active in that country.

On national-security grounds, Huawei would be kept out of the network “core” of Canadian telecoms, as is current practice. That needn’t be a permanent restriction, and could be lifted as Huawei demonstrates unfailingly good citizenship.

All new patented technology Huawei develops with almost a dozen Canadian universities would be jointly owned by Huawei and its Canadian partners.

Ottawa or a consortium of Canadian telcos and pension funds would acquire a 51 per cent stake in Huawei Canada. That way, Canada would be better assured on national security concerns. The prospects of such a deal are not as unlikely as they might appear. Huawei Canada would be a profitable investment. And majority Canadian ownership would provide significant assurance on both national-security concerns and substantial Canadian ownership of breakthrough technology jointly developed by Huawei Canada and its Canadian partners.

China suffers from a severe shortage of semiconductors, which it imports in greater quantity than oil. Huawei’s budding internal chip-making arm, HiSilicon, could build a sister facility in Canada to provide Huawei with self-sufficiency in chips, and give Canada its first-ever major semiconductor maker.

A careful embrace of Huawei is a once-in-a-lifetime chance to advance Canada’s technological strength. The benefits from such a partnership are obvious, while the downside factors are nebulous.

Realistically, the U.S. cannot contain China, nor is America best served in trying to do so. And Canada cannot afford to allow its industrial strategy to be yoked to that of a country whose interests are not always aligned with ours. That’s just common sense.

Read more about: