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The arrest in Vancouver earlier this week of Huawei CFO Meng Wanzhou will put Canada in the “penalty box” with China for months to come.

David Mulroney, former Canadian ambassador to China, told the West Block’s Mercedes Stephenson that while he expects the arrest will put a chill on Sino-Canadian relations, it likely will not cause irreversible damage to the prospects of pursuing a free trade deal.

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“The Chinese like to politicize their free trade negotiations and they like to portray them as something of a favour they confer on a country that is seen to be good and trustworthy in its behaviour to China, so they are going to make us feel this and we will be in the deep freeze for some time,” said Mulroney.

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“At the same time, China wouldn’t be interested in doing a free trade deal with us unless they had some interests here. Those interests are not going to go away.”

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He continued, adding, “I suspect we are going to be in the penalty box for a while.”

Meng is charged with conspiracy to defraud multiple financial institutions.

Crown prosecutors allege the Chinese technology company she works for used an unofficial subsidiary to skirt U.S. sanctions on Iran.

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Prime Minister Justin Trudeau has said he did receive advance notice of RCMP plans to arrest Meng. But he said the government had no involvement in the investigation.

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Mulroney says he expects that is the truth.

“Not only would he not be asked if it was okay, I don’t think he would want to answer that question and be accused of something. Particularly if it involved allegations of violating Iran sanctions, he would want to stay a long way away from that,” he said.

The arrest, made at the behest of U.S. authorities, means Meng is facing extradition to south of the border.

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And it came just after U.S. President Donald Trump and Chinese President Xi Jinping were meeting at the G20 in Argentina to hammer out a trade war ceasefire.

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While the repercussions for Sino-U.S. relations remain uncertain, Mulroney said the arrest could have a direct impact here in Canada when it comes to the ongoing review by national security agencies of the next generation 5G telecommunications technology — and whether Huawei should be allowed to bid on it.

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“It couldn’t come at a worst time,” he said. Tweet This

“It makes it very, very difficult for the prime minister, for the government to go forward in partnership with a company that has a cloud over its head like this. I don’t think that cloud dissipates and I would be surprised if it dissipates soon.”

Scott Jones, head of the Canadian Centre for Cyber Security, told reporters last week it will need to take into account “unique circumstances” in Canada when asked specifically whether commercial interests in the cheap Huawei technology should trump concerns it could be used to spy for the Chinese government.

Jones is among the officials whose departments and agencies are involved in the national security review.

But he refused to say when that work might be completed or whether he agreed with U.S. authorities that the Huawei technology poses an unacceptable risk.