Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 6 - Evidence - Meeting of February 12, 2014
OTTAWA, Wednesday, February 12, 2014
The Standing Senate Committee on Foreign Affairs and International Trade met this day, at 4:15 p.m., to study security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: We are here to continue our study on security conditions and economic development in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
I'm very pleased to welcome by video conference from the University of Victoria, Mr. James Boutilier, Associate, Centre for Asia-Pacific Initiatives; and Mr. Peter Chalk, Senior Political Scientist, RAND Corporation.
I'll turn to Mr. Boutilier to start his intervention, followed by Mr. Chalk, after which we'll go to questions and answers.
Welcome, Mr. Boutilier; the floor is yours.
James A. Boutilier, Associate, Centre for Asia-Pacific Initiatives, University of Victoria, as an individual: First let me make three quick administrative points. My sincere apologies for the technical difficulties we encountered last week. Second, as you suggested, I'm speaking in my private capacity as a fellow for the Centre for Asia-Pacific Initiatives in Victoria. Third, I'll provide my testimony and field questions in English.
With your indulgence, let me trace seven or eight quick points to establish some context. The first is in many ways remarkably self-evident but needs to be underscored nonetheless, and that is the remarkable speed and magnitude of the global shift from the Atlantic into the Pacific. This is well known to all of you around your table, but to many it is less well appreciated. Central to that remarkably profound phenomenon is, of course, the rise of China, not only its remarkable economic growth but also its comparable military modernization.
What we have, I would suggest, is a remarkable association of powers — a powerful Japan, a powerful India and a powerful China. Of course, as a subtext, we have deep international strains between Japan and China and, to a lesser degree, between India and China. I would suggest that the rise of China has been one of the key contributors to this second great round of globalization. Central to that phenomenon is a pronounced maritime element. Many of the stresses and strains we see in the security environment occur at sea.
As a part of that discussion, I would suggest that a useful construct is to talk of the Indo-Pacific. These are two fundamentally different oceanic complexes, as you can appreciate, but they are inextricably linked by commercial flows, energy flows, and ambitions of the great naval powers.
What we have seen, of course, over the past half-decade, is the so-called American pivot to Asia — the disconnecting from military campaigning in Southwest Asia and what is now called American rebalance. The Americans, of course, were always in the region. What we've seen is a reanimation of their diplomatic, military and commercial links into the region — a necessary exercise in many ways to reassure their friends and relations throughout Asia in the face of the rise of China and a profound uncertainty as to China's endgame.
I would suggest to you that over the years, Ottawa has ignored compelling evidence with respect to the rise of Asia. Indeed, if we go back to 1995, 19 years ago, we see a paper presented to the cabinet alerting cabinet members as to the dramatic importance of Asia.
Since then, I would suggest to you, Ottawa has fallen asleep. There has been a profound Columbian world view that you go to Vancouver and fall off the edge of the Earth and that Asia is an all-too-difficult file. One could argue in Ottawa's support that the Afghanistan campaign was a dramatic and important distraction, but the realities have been ignored over the decades.
I would suggest, in conclusion, that Ottawa faces an enormous credibility deficit in Asia. We are seen as nice guys, but irrelevant. We arrive on Saturday and are gone on Sunday. The experience of Canadian diplomats and others in terms of trying to establish Canada's credibility is an illustration of that problem. We have not contributed to the region, and we cannot expect to be suitably recognized.
As I suggested to a senior officer in the Department of National Defence a year and a half ago, we have three choices: We're either in this game or we're not; and if we are, we need to put real human and material resources into engaging Asia; and we need to stay the course.
Thank you very much, Madam Chair.
The Chair: Thank you, Mr. Boutilier. We'll turn to Mr. Chalk now.
Peter Chalk, Senior Political Scientist, RAND Corporation: Good afternoon, respected senators. I will also make my statement in English, and my remarks will focus on the security environment in Southeast Asia.
At present, the current security environment in Southeast Asia is largely benign. There is practically no risk of a major interstate war breaking out in the region, and most governments in this part of the world enjoy a high degree of internal legitimacy that has been afforded by sustained economic growth. Moreover, even formerly highly repressive regimes are showing signs of democratic reform, notably Myanmar. There are, of course, some exceptions. Thailand is undergoing a political crisis at this point as a result of opposition to Yingluck Shinawatra and in Cambodia we've had protests against the Hun Sen government as a result of his unwillingness to increase minimum wages for employment. However, in both cases these demonstrations are more disruptive than genuinely representing a large-scale threat to civil stability, much less large-scale bloodletting on the streets.
Just as significantly, most of the sub-states' internal domestic insurgent and terrorist organizations have largely been vanquished. Indeed, just a few weeks ago a major step was made forward in ending one of the longest-standing conflicts in the region, thanks to an agreement for a comprehensive ceasefire and peace settlement between the Moro Islamic Liberation Front and the Aquino administration in the Philippines.
None of the groups we see in Southeast Asia enjoy any significant degree of external backing, and none are able to significantly increase their operational tempo on their own. Perhaps the most serious situation is presently in southern Thailand, where Malay Muslim separatists continue to exact a daily toll. Even here, fighting has been largely localized and at least at present shows no sign of spreading to other parts of the kingdom or the wider southeast Asian region.
The integration of Southeast Asia has taken on a life of its own with once suspicious states now working fairly close with one another. This perhaps has been most apparent with respect to energy infrastructure developments in Indo-China. Links between communist-led Laos and capitalist-oriented Thailand have grown substantially over the last several years and will further have gain as a result of the construction of a fourth bridge over the Mekong River. Cambodia receives virtually all of its electricity from Thailand, which, in turn, benefits from natural gas piped in from Myanmar.
On a wider level, all ten ASEAN member states have committed to the establishment of a full political, economic and security community by 2015. Although this will be by no means the Southeast Asian equivalent of the European Union, it is still indicative of just how far the association has come since first emerging as a five-member regional arrangement in 1967.
Compounding these positive facets is the lack of any meaningful external threat to Southeast Asia. Although China is certainly seeking to extend its influence within the region, it is doing so largely through soft diplomacy and the consolidation of economic ties. In 2011, Beijing's total foreign investment within the region stood at $2.57 billion. Thanks to the elimination of tariffs on most goods, two-way trade with ASEAN now stands at over $300 billion. China also actively supports the integration of Southeast Asia, seeing this as essential to ensuring a vibrant market for its exports, as well as a safe destination for its investment funds.
The one area where there has been some tension has to do with territorial claims in the South China Sea. This issue has complicated relations with the Philippines, and in particular Vietnam. Disagreements over the South China Sea were directly responsible for the failure of the ASEAN 10 foreign ministers to agree on the wording of a final communiqué following the conclusion of their annual summit in Cambodia in 2012. That was the first time that has happened in the organization's 46-year history.
ASEAN's earlier announcement that the disputed Spratly Islands and Paracel Islands will now be known as a Chinese administrative centre to be called Sansha City has done nothing to stabilize the situation and has further antagonized relations with both the Philippines and Vietnam. That said, the prospect of the South China Sea disputes triggering a major interstate conflict within the region appears unlikely at this time. To be sure, minor naval skirmishes are possible, but these by themselves will not lead to large-scale casualties. China realizes that maintaining freedom of navigation through the region is essential to its economic well-being. It has also stated a willingness to resolve the issue diplomatically on a unilateral basis between each of the claimants concerned.
Finally, given that the disputes only involve four ASEAN member states — Malaysia and Brunei also have claims — strictly speaking it is not a region-wide concern and, therefore, arguably does not constitute the source, at least at present, for a severe disruption of stability across Southeast Asia.
With that, I would like to conclude, and I'm ready to accept any questions.
The Chair: Just for clarification, Mr. Chalk, you're saying that all these skirmishes will cause some tensions and difficulties. The literature coming both from journalists and academics signals that they could be major issues because the parties perceive them to be major issues and it affects their stability and their politics. Why are you optimistic that they will not turn into full-scale difficulties?
Mr. Chalk: I am confident simply because all of the parties concerned with respect to these disputes understand that a major war in that part of the region would be highly disruptive to both the political and economic stability of all concerned. China certainly realizes this.
I think China is actually stressing much more of a political stance to ensuring its claims within the region. There is always a possibility that a naval skirmish could escalate, but I think that the chances of that actually triggering a major confrontation, at this point, is unlikely.
The Chair: Would you include North Korea in that equation? In other words, is that the unknown factor?
Mr. Chalk: For North Korea, the major issue has to do with its proliferation potential and the proliferation of weaponry outside of Korea, including, possibly, components that could be used for weapons of mass destruction. That's much more of an international security concern as opposed to a Southeast Asian concern.
[Translation]
Senator Fortin-Duplessis: Not so long ago, Southeast Asia was facing serious problems with piracy. I think that things have significantly improved since.
Do you feel that, in the short- and medium-term, we could see a resurgence of piracy in that part of the world?
[English]
Mr. Boutilier: Thank you very much for that question with respect to piracy in Southeast Asian waters. I agree that, more than a decade ago, the world's centre of gravity in terms of piratic attacks and sea robbery — and I make that distinction because piracy occurs on the high seas and there were many attacks on ships riding at anchor or alongside — was this area around the Straits of Malacca and the southern South China Sea, an area of intense piratic activity. Some would suggest that the dramatic economic downturn in the region in the late 1990s resulted in many fisher folk finding themselves hard pressed and turning to piratic activities.
If we move forward half a decade or so to 2004, we see a groundbreaking tripartite agreement between Singapore, Indonesia and Malaysia, the states that flank the critical Straits of Malacca, which connect the Indian and Pacific Oceans. That tripartite cooperation, which was buttressed by a further addition of overflights, with Thailand participating, seems to have as a resulted in a fairly dramatic decline in the number of piratic attacks. Indeed, the centre of gravity moved to the northwest Indian Ocean, in the area off of the Horn of Africa. An important subset is the remarkable round of piratic attacks in the Gulf of Guinea, on the West Coast of Africa.
More recently, in the past year to 18 months, there has been, I think, a slight statistical resurgence in piratic attacks, but they are of a different nature than those off of the Horn of Africa in the sense that the Southeast Asian pirates seem to be eager to capture the cargoes rather than holding ships for ransom for extended periods and trying to gain payment for not only the ships but also the crew themselves. In summary, piracy has not disappeared entirely, but it is down quite significantly from 10 years ago.
[Translation]
Senator Fortin-Duplessis: There are some zones of tension in the Asia-Pacific region and those zones are partly maritime. I am thinking, for example, about the two Koreas, and about China and Japan.
Of those tense situations in the Asia-Pacific region, which is in most danger of escalating? Would it be the two Koreas? Would it be China and Japan? My understanding is that the situation between China and Japan is still very difficult.
[English]
Mr. Chalk: In my opinion, the greatest sources of tension in the maritime realm, if you're looking at interstate relations, definitely occur within Northeast Asia. The territorial dispute between Japan and China over the Senkaku Islands remains a flashpoint and has escalated political and diplomatic conditions quite significantly, I would suggest far more so than the Chinese claims to territorial stakes in the South China Sea.
The Korean Peninsula must remain one of the international system's main flashpoints of concern. It's very difficult to understand the rationale of the North Korea regime, given its closed nature, and the possibility of irrational acts is always present. It will be interesting to see how North Korea reacts to the announcement by the United States that military drills will continue with South Korea and will commence on time. In the past, this has always triggered a very verbose response from North Korea, which has threatened to unleash nuclear havoc, both on South Korea and, to the extent that it sees it can, on the United States and its interests. Luckily, up to this point, that has been bluster and been used mainly as a form of political leverage to gain concessions from the West.
As I said, it is a very unpredictable regime. It is very difficult to know what the calculus of the North Korean national security community is, given its closed nature, and the possibility of a major conflict emerging on the Korean peninsula is still very pertinent.
I would contextualize that by saying that these are issues of more concern to Northeast Asia than to Southeast Asia, particularly in the maritime realm, although, obviously, a major conflict on the Korean Peninsula would definitely engulf Southeast Asia.
[Translation]
Senator Fortin-Duplessis: Do you share that view, Mr. Boutilier?
[English]
Mr. Boutilier: Mr. Chalk's comments are sage indeed. I think that the North Korean regime is extraordinarily difficult to read. Our human intelligence in North Korea is minimal to say the least. It is a penniless and repressive regime, a form of socialist monarchy, with the Kim dynasty in office. One of the key elements I would suggest is China's role, in the sense that China keeps the North Korean regime on life support in terms of food and energy, but China has a vested interest in maintaining the status quo on the Korean Peninsula, unsatisfactory and dangerous as that may be to us elsewhere. The Chinese have a significant Korean population, legal and illegal, living in Northeastern China, and the Chinese are in no hurry whatsoever to have South Korean and, by inference, American troops moving north to the Yalu, the border between North Korea and China currently.
We have seen, over the years, that Washington has urged China to influence Pyongyang, but the degree of influence is modest to say the least. I think Beijing is increasingly annoyed with the provocations that originated with Pyongyang but is in no hurry to topple the regime of the young Kim Jong-un.
Clearly, what is of particular concern is that there may be evidence that the North Korean regime, despite its penniless condition, is on the brink of miniaturizing weapons of mass destruction to the degree that they could be placed on intercontinental missiles, and this would be a development of the most serious nature indeed.
The North Korean regime may seem bizarre, but I remember once having breakfast with Walter Mondale, the American vice-president, who said the North Koreans could play a bad poker hand better than anyone in the world. In fact, operating from a position of profound weakness they have been able to extort remarkable concessions from the West. It's a long-running drama. I think we're no closer to resolving the tensions than we were before, but with every passing month or year the danger from a purely military perspective becomes that much greater. What is key is that Seoul, the South Korean capital, is within easy artillery or missile range of the North and thus held hostage in the face of continued provocations from the North Korean regime.
I believe Professor Chalk is right on the money in his analysis of the North Korean situation.
Senator Ataullahjan: Mr. Boutilier, you talk of the rise of the military China. China's spending on its armed forces is up 6 per cent. It has eclipsed the budgets of Britain, France and Germany. Like I said, the spending on its military is up 6 per cent from last year, this amongst the growing tensions with its neighbours such as Japan. Are any of the other countries in the Asia-Pacific region spending much on defence? What does this mean for Canadian interests, as well as U.S. interests?
Mr. Boutilier: Thank you for that question. Clearly you've been doing your homework, although I would suggest that were one to go back as far as 20 years, we would see that Chinese defence expenditure had not been in the 6 per cent or 7 per cent range but probably in the 10 per cent, 12 per cent or 14 per cent range year after year for more than two decades. Indeed, there are those who would suggest that very shortly China will exceed the combined expenditures of the top 10 defence nations other than the United States.
What have we seen? We've seen the dramatic growth and rise in sophistication of the Chinese navy. This is an almost unprecedented situation in the sense that traditionally the Chinese tended to look at the sea as a barrier and that threats originated from the interior of Eurasia. This is no longer Beijing's perception. They have come to appreciate the versatility and mobility of sea power. A recent Economist graph suggested that the number of vessels in the Chinese navy had now exceeded that in the United States navy.
I would suggest, of course, that while this is useful statistically, it is a cartoon in the sense that it fails to take into account the fact that, for example, Americans have 11 aircraft carriers and the Chinese have only just begun to get into the carrier business.
The question on the minds of many in Southeast Asia, and indeed across Asia — this is particularly true in capitals like New Delhi — is what is China's endgame? To what point are the Chinese building up their naval power?
Beijing would argue that all the big powers historically have exhibited their power at sea, whether it is Great Britain, the United States or, still earlier, Spain, Portugal, and so forth; that the Chinese are doing just what any other great power would do and that great powers equal great navies and vice versa; and that China's interests are increasingly maritime, whether it's the flows of commercial traffic or their foreign policy.
The concern, of course, is that we see that many of the tensions as suggested by Professor Chalk are unfolding at sea, whether it is the Senkaku/Diaoyutai tensions with Tokyo or whether it's the South China Sea. What the Chinese have done, I would suggest, is engage in what is often called "salami tactics," that you take over slice by slice, bit by bit, so that you acquire territory, even though they may appear to be inconsequential islets or cays, just below the level of outright provocation, on the assumption that no one will come to the rescue of Hanoi or Manila, for example, if various islets or atolls are taken.
What the Chinese have done, however, is act by proxy in the sense that they have tended to use fishing fleets or their coast guard or related maritime agencies rather than actually putting gray hulls into action.
If we look at it from a larger context, however, we see that India, in particular, is concerned about China's naval ambitions. Indians are becoming increasingly emphatic in their intention to be the premier power in the Indian Ocean and to build up their navy accordingly. What we see — and, parenthetically, there is a debate among analysts — is that we may be in the midst of a naval arms race; that it is no longer simply a question of defence modernization but an action-reaction mode in which the acquisitions of one country are being mirrored by the acquisitions of another. We see this, for example, between South Korea and Japan and we can see it also between China and India.
We see globally that arms sales are up in Asia compared with Europe. Only one country in Europe — Poland — is increasing its defence expenditure. Only two countries in Europe come anywhere close to the NATO minimum expenditure of 2 per cent: Greece, astonishingly enough, and Great Britain. The real area for arms sales and for growth is in Asia, where the economies have been relatively robust since the great downturn in 1998 in Asia, which was relatively short-lived.
We're seeing an area where all the nations are going up-market in terms of their maritime assets. Particularly worrisome is the proliferation of submarines, of which there are now probably more than 200 operational in the Indian Ocean and the Pacific Ocean.
We are in a situation where, as Professor Chalk has suggested, the grown-ups are well aware of the dangers, but the risks for miscalculation continue to multiply as more and more vessels interact and there is no real regulatory framework to control many of their encounters.
Senator Ataullahjan: The Asia-Pacific region is one of the most militarized areas of the world. Seven of the world's ten largest standing armies are in that region, and we have five of the world's declared nuclear nations in that region, too. What are the security challenges? Should we be worried?
Mr. Boutilier: Yes, I think we should be in the sense that I would suggest that probably the greatest global challenge in this decade and the decade to follow will be managing the relationship between Washington and Beijing. There is a profound level of strategic distrust between those two regimes.
What we see is that the Chinese are in classic, weaker navy style, attempting to deny access to the ocean approaches to Asia and, more specifically, to China itself. This flies in the face of the United States Navy's pronounced support of freedom of the seas, and there is a worrisome increase in the inventory that the Chinese have designed to in fact deny U.S. naval access to approaches to East Asia.
The Americans have, for example, invited China to the huge multinational RIMPAC 2014 exercise off Hawaii, and I think China will attend. Despite this effort to engage China, there are very real risks in the great power relationships. My experience is that while diplomatic and commercial ties between India and China continue to increase, there is probably only one word in the Indian security lexicon, and that is "China." This is their deep and abiding anxiety, particularly with outstanding disputes between China and India in the Himalayas and with mounting concern in New Delhi about Chinese maritime power moving into the Indian Ocean.
The Chinese, of course, would respond by saying that their interests in the Indian Ocean are growing commensurately and that it is entirely appropriate that they should move warships into that part of the world.
We have efforts to maintain high-level dialogue between Washington and Beijing, but it is in the face of a deeply entrenched sense of distrust between the two nation's capitals, as I suggested.
Senator Johnson: Mr. Chalk, a previous witness, Professor Shaun Narine, described Asia as governed by members who act out of raw self-interest. What do you think of this characterization, and do you agree with it?
Mr. Chalk: In the game of realpolitik, all states inherently act out of self-interest. It is the nature of the sovereignty that underscores the present international system.
With respect to Southeast Asia, this self-interest has not precluded cooperative mechanisms from being forged that allow collective action to deal with mutual problems. Therefore, unlike other parts of the world, we do see an emergence of a norm of institutional building and cooperative action, not only on a symbolic level, but more importantly on a practical level, to deal with real-life problems.
This definitely underscores the emergence of the ASEAN political, security and economic community that is due to come online in 2015. There is a real desire on the part of ASEAN to ensure that national self-interests do not get in the way of the emergence of a powerful regional trading bloc that can be utilized to offset growing Chinese influence into the region and that can also be utilized to forge closer economic ties with the West.
In terms of the characterization of "pure self-interest," I would not say that is unique to Southeast Asia any more than it is to any other part of the world. All states are inherently so. In an anarchic international system, states, by definition, would generally defer to national self-interest.
To reiterate my earlier point, in Southeast Asia there has been a growing appreciation that raw national self-interest could be detrimental if it comes to the detriment of the establishment of a more collective mechanism to deal with common problems.
Senator Johnson: Following up on that, we have seen much more cooperation among Asia-Pacific countries to counterbalance the regional aspirations of China, and you touched on this when our chair asked you a question earlier. With this objective have come strong calls to the United States to become even more engaged in regional security. So, at the same time, while these emerging countries are experiencing rapid social development and economic growth, this is happening.
Do you foresee the development of a liberal, democratic bloc among the emerging nations, together with the older established democracies in Asia-Pacific, to keep the regional ambitions of China in check, or do you think they remain too fragmented to form a common front?
Mr. Chalk: At least at this point, the prospects of a liberal democratic ethos, at least as we understand it in the West, emerging in Southeast Asia is slight. Definitely there is an appreciation of economic freedom. There is definitely an emphasis on the capitalist aspect of liberal democracy.
But the notion of full political and social rights as we understand it in the West is at the very early stage in Southeast Asia. There is still a fairly strong authoritarian slant running through the region, despite the emergence of new democracies such as Indonesia and, who knows, maybe even Myanmar.
But Singapore, Malaysia, Cambodia, Laos, Vietnam — all of these countries have a very strong authoritarian slant. They are trying to place alongside that a greater sense of economic freedom, because each of the governments understand that sustained economic growth, at least in the eyes of their own populations, is the key to ensuring their internal legitimacy, and that is where they will place their emphasis.
Senator Housakos: I will go back to the theme of national self-interest. I would like to return to the beginning of the presentation where both our guests in their testimony outlined, as have a number of others who have visited this committee, that Canada has developed a reputation of being fly-by-night or not entrenched enough in the Asia-Pacific region.
From my point of view, Canada has its own self-interests and our interests have always been commercial in nature. Over the last two decades, the focus on the part of the government has been to pursue our commercial interests, and we continue to have significant growth in trading our commodities in the Asia-Pacific part of the world. We have had considerable growth in that area. We had some growth in the manufacturing sector. Granted, we have had other sectors in the economy that have not been that successful; i.e., maybe the service industry, technology exchange and so on.
To get into some of the other aspects and areas in the regions where maybe Canada intentionally is not playing — and maybe Canada has intentionally decided not to put a lot of skin in the game, be they geopolitical, military or security interests — could it be that we might not be able to perform in those areas compared to other superpowers that have interests in the region and have invested a considerable amount of energy and resources?
Fundamentally, my question is: Does Canada have the capacity to punch high enough in some of those areas that I mentioned, besides our commercial interests? Even if we decided as a nation that we do have an interest and a capacity, what are those interests? Can you highlight those for us? Can you tell us why we would get more entrenched in the Asia-Pacific world; what is the net benefit for Canada, above and beyond our economic interest? Again, if you look at the last two decades, that economic interest has been solid and continues to grow in the areas that Canada has traditionally excelled in.
Mr. Boutilier: I am not sure if the question was directed to me by inference, but I have some quick comments.
First, Canada is about the size of the greater Chongqing municipality in China, which is 35 million. Canada is quite clearly a modest to middle power in terms of Asian calculus.
I would suggest that, yes, we have possibly done well in the region, but if we were to analyze our trade performance in the Asia-Pacific region, we would find that we are barely holding our own and are in fact probably slipping behind almost all Americans.
That is partly because the competition is fierce. Asia is not an easy part of the world in which to do business. As one diplomat colleague of mine said, "The problem with Canada is that the United States is all too easy." It is far easier to deal with Houston, Milwaukee or Detroit rather than to try to deal with cities in Asia. Indeed, the experience of major corporations is that a country like China is difficult. That is an understatement, to say the least.
What we have to do is target our limited capabilities. Where do we want to do business? Is it in Singapore, Malaysia, India or Japan? We have not put the time and energy into the region that we should have. Indeed, parenthetically, if we go back to the late 1980s, early 1990s, our presence in Asia was considerably greater. Over the years, for example, all the funding for major non-governmental organizations in Canada dealing with Asia has been terminated.
As a footnote to that, I met Madam Chair in 1995 for the first time at a Canadian consortium for Asia-Pacific cooperation meeting in Ottawa. All of that funding has disappeared. Our presence in ASEAN has disappeared. Our chairmanship of the South China Sea workshop with Indonesia terminated.
We have to decide where we are going to put our interests, target those and put real resources into it. We have, I must confess, increased our diplomatic footprint, particularly in China, at the expense of our presence elsewhere in the world, and not a moment too soon.
As I suggested, the markets are not easy to penetrate. We have to realize that in many cases our Asian competitors move at lightning speed compared with Canada, because we are hedged about with a whole series of other constraints in terms of First Nations' interests, the environment and so forth. This is being played out as we speak when it comes to the export of gas to Asia.
My concern is that when finally this is accomplished in the next decade, our Asian markets will have turned elsewhere. There are opportunities, but it requires real commitment and staying power to maintain inroads in Asia.
Senator Demers: Thank you very much for your answer. When Senator Housakos asked you a question, you answered my first question.
Permit me, chair, if I go a little bit ahead of myself here, because time really flies. We have right now the Olympics in Sochi, and there's a tremendous amount of concern, and hopefully, God, please, nothing will happen.
In 2018, the Olympics are going to South Korea. You people have a vision of what's going to happen. It's not like ten years; it's four years. They spent billions of dollars in Russia and welcomed people from everywhere, except because of the threats there are fewer people going. How do you see that situation?
Canada is a big country that sends some of the proudest and greatest athletes. I'm not sure the NHL will go but, the bottom line, how do you see that? Whoever would like to answer that question, please.
Mr. Chalk: I'll take this one, at least initially.
As you pointed out, the spectre of terrorism or some other catastrophic event occurring in Sochi has been taken seriously. We've had a lot of warnings from the United States about airplanes flying into Russia, the possibility of toothpaste being used to assemble weapons. We have an enormous security dragnet around Sochi.
The plain fact of the matter is that any international event of the sort of stature of the Olympic Games will always pose a potential risk in terms of terrorists. That is simply because of the publicity that an attack at one of these events will generate.
I would say that in South Korea, the possibility of a terrorist attack should be taken as seriously as it is in Sochi. Obviously, in Russia at this point, the real concern is threats emanating from the North Caucasus region, linked to Chechen rebels. But there is no reason why international or even regional terrorists would not seek to exploit the South Korean games in a similar manner. Geographic distance is no longer a protection against militant extremism.
I do not see any major interstate event occurring on the Korean Peninsula to coincide with those games. Despite the supposed irrationality, if you like, of the North Korean regime, I still think wise heads will prevail and there will be moves to prevent an escalating spiral that leads to a major interstate conflict. You cannot dismiss it, of course, but I don't think that will be related directly to the South Korean games in any way.
I think the bigger threat there is of sub-state organizations using the games as a media platform to articulate demands and to impose strategic objectives against self-defined enemies, whoever they may be. Of course, we're not necessarily just talking about al Qaeda here or al Qaeda-linked affiliates, but any form of terrorist organization could exploit this type of event. We do not know, here sitting in 2014, what causes may arise to perhaps bring about a new strain of terrorism that is of as much concern as the present emphasis on jihadist extremism.
Senator Demers: Professor Boutilier, would you have something to add to that?
Mr. Boutilier: Yes, senator. It's interesting to realize that South Korea is not quite twice the size of Nova Scotia, with 50 million people. When you look at the economic accomplishment in South Korea, it is truly astounding. If we go back to 1988, of course, we had the Seoul Olympics. The threat then was one that emanated from the North, an interstate threat rather than an international, non-state threat. Pyongyang threatened to open one of its major dams and flood parts of South Korea. As it turned out, this was a hollow threat and an invitation was extended to the North to participate.
I don't think that we have to worry about Chechen or Dagestani-style terrorism in 2018 in Seoul. The South Koreans, I'm fully confident, will run an extraordinarily professional Olympics. While there will be noises coming out of the North, I think in the final analysis an invitation will be extended once again to the North to participate, at least in a minimal way.
I think that, in terms of the integrity of the Canadian Olympic community visiting South Korea, we can probably be fairly confident that they will be indeed safe and well looked after.
Senator D. Smith: I have two questions. The first one is in response to Professor Boutilier saying something to the effect that India only had one name on their big concern list, and that was China. I agree with that.
As a sidebar to that, do you think it's fair for us to assume that whatever historic tensions continue between India and Pakistan, they are, at worst, status quo and not increasing? My own sense is, to the extent there are problems in Pakistan, it's not so much with the government but various extremist groups there, either within Pakistan or from neighbouring countries. What's your view on the stability of the situation between India and Pakistan?
Mr. Boutilier: Yes, your observations, I think, are sage and perceptive. My own feeling is that it will be very much a question of status quo in South Asia between Pakistan and India. Manmohan Singh has attempted to develop relations with Islamabad. I think achievements have been modest, to say the least. The Pakistanis, for their part, have a patron in the form of China, although China is not particularly active in Pakistan. The Pakistani concern is a lack of strategic depth. That's one of the reasons they're particularly concerned about the growth of any Indian interests in Afghanistan. They see Afghanistan — that is to say the Pakistanis — as providing them with some further strategic depth, which they simply do not enjoy.
It will be interesting to see what happens, of course, as allied troops begin to withdraw in significant numbers from Afghanistan. I have to confess I am not sanguine about the degree of political and military stability in Afghanistan in the years to come. I think that ISI, the Pakistani intelligence system, will be active in Afghanistan, attempting to determine the character of a regime that follows Karzai. In addition, Islamabad has an array of domestic problems involving jihadis, and their attempts to resolve these have not been particularly successful.
I think while the relationship between Islamabad and New Delhi remains strained and unsatisfactory, the stakes are simply too high on both sides and we will continue to muddle along, as the English would have said, in an unsatisfactory way, but one which is acceptable to both capitals.
Senator D. Smith: Regarding Bangladesh, if you go back to the period when East and West Pakistan split and Sheikh Mujibur Rahman led the revolt and they went independent — and I've spent time in Bangladesh — my impression is that as big a thing as any that caused that was when they were trying to force everyone to forget about Bengali and all learn Urdu. It was a formula for divorce. Bangladesh since then has been relatively stable, but in the last couple of years, there's more unrest, division, problems, explosions, uprisings and even a few riots. What are your thoughts on the stability status of Bangladesh in the near future?
Mr. Chalk: I will caveat my answer by saying that I'm by no means an expert on Bangladeshi politics, but I can make a few comments.
I think the security situation in Bangladesh has more to do with cross-border threats. Bangladesh has become a way station for the influx, importation and exportation of arms, drugs, personnel, illegal refugees passing from Southeast Asia through Myanmar into the Indian subcontinent. Bangladesh has been singularly unable to thwart those flows, largely as a result of porous borders, lack of capacity and entrenched corruption.
There is also a jihadi strain within Bangladesh that has been propagated, I would say, with the direct support or at least knowledge of the Pakistani ISI as part of their own attempt to export jihadism as part of a strategic foreign policy bent, which, as Dr. Boutilier suggested, is part and parcel of establishing strategic depth in the event a conventional war with India should break out.
On top of that, you've had a number of very unfortunate domestic issues that have sparked major unrest within Bangladesh. Most recently it was the factories that were plainly unsafe that collapsed and led to mass casualties. That prompted widespread protests within the streets against the government, which the government itself has proven pretty incapable of dealing with, or at least ameliorating public concerns.
I would characterize Bangladesh at this point as a car that has kind of broken down but continues to function, albeit at a much reduced capacity. I don't see an internal collapse occurring within Bangladesh, but I do see that the internal situation within the country will be exploited by outside parties for their own strategic interests, and I also think that non-state challenges, be they in the realm of political extremism or organized crime, will continue to undermine the domestic stability of that country that could have regional ramifications, both within the Indian subcontinent and also the northern part of Southeast Asia, going through Myanmar into Indo-China.
Senator D. Smith: I was wondering if our other witness wanted to comment on Bangladesh.
Mr. Boutilier: Bangladesh is something of a paradox in the sense it's an arena in which economic growth has been fairly significant in the past couple of years. As Professor Chalk suggests, what we see is a state — and this is not exclusive to Bangladesh — undermined by the corrosive effects of corruption, a near lethal competition between the two lady prime ministers who have alternated in office, a state subject to monumental strains by virtue of exploding demography, and a landscape simply incapable of sustaining that sort of population, and one which, among other things, is the subject of constant climatic attacks in terms of flooding.
The issue with respect to migration springing out of Myanmar or Burma is one that he has highlighted, and this is also a threat like domestic jihadism to the stability of the state. I would certainly underscore and endorse his commentary.
Senator Ataullahjan: As someone who has a great deal of interest in India, Pakistan and Afghanistan, we have to remember the Pakistanis have always said this is a war that was forced upon them with the Russians coming into Afghanistan, and we all know the history of that area. The great fear, as someone who has just returned from Pakistan, is this: What happens next year? Everyone is fearful. You've seen the Taliban put out a statement that they will come back to power in 2015. That area now, Afghanistan, has become the playground for China, India and Pakistan. They're all flexing their muscles over there.
Would either of you care to comment on that?
Mr. Chalk: I'll say a couple of words.
I think Dr. Boutilier has already hit most of the buttons on this one. Definitely, Pakistan has a strategic interest in ensuring a compliant regime in Kabul. To the extent possible, I think, with the withdrawal of the international coalition from Afghanistan later this year, we're going to see concerted strides by Pakistan to support the Taliban to play a leading role in any peace negotiations that take place, but with the eye of seeing a compliant regime emerging in Kabul, which will provide it with that much-needed strategic depth vis-à-vis India.
At the same time, India, as you've pointed out, is certainly seeking to extend its commercial interests into Afghanistan. Afghanistan itself is liable to play a very crucial role in the creation of a new Silk Road that connects Central Asia through Afghanistan into India and Pakistan. If that comes to fruition, that will be of enormous economic benefit to the region in commercial terms. The problem with this is that much of what is going to go on in Afghanistan will also have direct implications for Central Asia.
We are likely to see, post-2014, an exploding drug trade coming out of Afghanistan that will directly destabilize the economies of Tajikistan, possibly Uzbekistan, Kyrgyzstan and Kazakhstan, all of which act as a central conduit for the transportation of opium and hashish coming out of Afghanistan. The strategic environment around Afghanistan will falter, I would suggest. There is the possibility of extremist jihadists regaining a foothold in Afghanistan and exporting their campaigns of violence into Central Asia, although that threat has been overstated.
The bigger threat within Central Asia is that with the loss of U.S. support to these governments, largely because their relevance as a northern distribution network to Afghanistan will have disappeared they will be incapable of sustaining or putting a lid on internal discontent. There will be an uprising in extremist Islamic sentiment, but it will be focused internally rather than propagated externally from Afghanistan.
Actually, I am not too confident about the wider strategic stability in the Central Asian region post-2014. I only hope that history does not repeat itself and the United States does not completely wash itself of what is going on in that region for the sake of its pivot to the Asia-Pacific. In the long run, the potential threats that would emanate out of a forgotten central Asia would have widespread international ramifications, many of which would impact directly on the United States.
That's my basic view on the future strategic stability of the Central Asian region.
Mr. Boutilier: Perhaps I could add one or two quick comments.
One thing that concerns me — and you'll be well acquainted with that by virtue of your recent visit — is the high level of violence in urban settings in Pakistan and the number of deaths daily in Karachi or Peshawar as a result of political strife. This is a real challenge to the legitimacy of the government in Islamabad.
The Chinese are watching with increasingly jaundiced eyes what's happening in Afghanistan. Their anxiety, among others, and it's a gloss on what Professor Chalk just said, is what impact instability in Afghanistan or in the neighbouring "stans" will have on the Turkmen people of Xinjiang in Western China. This is seen as a threat to the larger stability of China. The Chinese have engaged in a full-blown campaign to shift Han-speaking into the Turkmen regions of Xinjiang. The interplay between the Muslim residents there and those in the "stans" and beyond is a source of deep anxiety. It's interesting and sobering to think that China's expenditure on internal security control exceeds its national defence budget.
Furthermore, I would suggest that we're looking at a situation where there will be ongoing tensions between Moscow and Beijing in terms of exercise influenced in the "stans," as the Russians attempt to recreate the zone of influence, which dates back to Soviet times, and the Chinese attempt to enhance their relations with the "stans" in terms of assured sources of energy and agricultural land, and so forth. While both Russia and China are members of the Shanghai Cooperation Organization, there's an inherent tension in the functions of that organization, particularly when it comes to the dynamics of areas like Uzbekistan, Kazakhstan, and so forth.
The Chair: There are many more questions, some of which I was going to pose. Mr. Boutilier will remember our time on those committees back in 1995.
I didn't acknowledge it at the start so as not to taint your evidence in any way in order to have you as a neutral witness. I thank you for reminding us of that. If there's anything that you wish to comment on, since we don't have time now, about Two Track initiatives that might be helpful in today's context as opposed to the 1990s, perhaps you could provide it to the clerk of the committee.
Mr. Chalk, I appreciate your evidence. As you can see, when we study the economic and security issues, they're intertwined. Your evidence has been extremely helpful.
On behalf of the committee, I would thank both witnesses for appearing by video conference today.
We have before us now, from the Canadian Security Intelligence Service, Mr. Michael Peirce, Assistant Director of Intelligence; from the Canada Border Services Agency, Mr. Brian Rumig, Director General of the International Region; and Ms. Lesley Soper, Acting Director General of Enforcement and Intelligence Programs. Welcome to the committee.
Mr. Peirce, please proceed with your opening remarks.
Michael Peirce, Assistant Director, Intelligence, Canadian Security Intelligence Service: Thank you, madam chair, honourable senators. Good evening. I'm pleased this evening to contribute to your study of the security conditions and economic developments in the Asia-Pacific region.
As indicated, my position is Assistant Director of Intelligence. The reference to intelligence might suggest something about being smart but, in fact, it's a little bit different than that. I am responsible for the assessment of the intelligence that's collected by CSIS and the dissemination of that intelligence in the form of advice.
I'd like to contextualize my comments this evening by briefly describing CSIS's mandate and our enabling legislation. Our legislation mandates that CSIS collect intelligence to investigate threats to the security of Canada. Threats are defined in the CSIS Act as terrorism and extremism, espionage and sabotage, and foreign interference. This investigative function is complemented by our advisory mandate. This is where my role as Assistant Director of Intelligence comes in. The information we collect is only useful to the extent that it is analyzed and shared with our government partners.
Accordingly, the CSIS Act requires that we advise the government of threats to the security of Canada. We fulfill this mandate in a number of ways, each in accordance with the detailed provisions of the act. One important tool for advising the government is the production of intelligence assessments. That's where we take the collected raw intelligence, assess it in context and provide that advice to the government. We also provide CSIS security intelligence reports, which is raw intelligence that we share with our government colleagues.
[Translation]
These assessments enhance the government's awareness and understanding of threats; inform policy decisions; support decision-makers responsible for administering and enforcing Canadian law; and identify emerging issues in the global threat landscape, including within the Asia-Pacific.
It is important to note that CSIS' regional threat assessments are not an academic exercise. Rather, there must be a nexus with Canadian security and an identifiable threat to our national security interests.
[English]
I cannot underline this enough because it is the frame for the comments that I'll make today. It has to tie, by my mandate, back to a threat to the security to Canada.
The Asia-Pacific region has experienced a period, as I'm sure you've just heard — of considerable economic, demographic and political change. Such change necessarily affects the security landscape. Identifying whether and how such changes affect Canada's national security is the core of our work.
As you might expect, our efforts focus on a number of specific priorities, including terrorism, the proliferation of weapons of mass destruction, espionage and foreign interference, and what are sometimes referred to as information security threats, more commonly referred to as cybersecurity.
While such threats can originate at home — and of course we investigate those — honourable senators will know that threats to the security of Canada also, more often than not, have a nexus to foreign governments, individuals and groups abroad. The Asia-Pacific region is no exception in that regard.
In response to the global threat landscape, CSIS maintains an international presence and a strong network of foreign partners.
On the issue of terrorism and extremism, the Asia-Pacific region is not currently the principal source of terrorist threats to Canada. Rather — and you will have seen this or can read it in our public report — groups operating in North Africa, the Middle East and the Afghanistan/Pakistan region are of much greater concern and continue to attract radicalized Canadians. That said, the Tamil Tigers, originating in Sri Lanka, is a listed terrorist entity in Canada. There have also been concerns voiced in relation to potential terrorist connections to migrant vessels, the last two having come in 2009-2010 — the Ocean Lady and the Sun Sea.
To the extent that activities there constitute a threat to the security of Canada, CSIS will investigate that threat-related information and share it with our partners, including my colleagues here from CBSA.
[Translation]
Certainly, extremist Islamist groups operating in the Philippines and Indonesia are also a continued cause for concern, but most immediately for the nations in the region.
[English]
While we see Islamic groups active in the area, by and large, their focus is regional. We maintain an interest in their activities, but it's a different interest than when their activities target Western interests.
With respect to proliferation of weapons of mass destruction, the obvious reference is North Korea's program, which is of obvious concern. The regime continues to actively pursue the development of its arsenal. It is unpredictable and, as a result, a destabilizing factor in the region.
We actively monitor the progress of foreign weapons of mass destruction programs, including the North Koreans, and the threat posed to our national and international security. As a leader in many high-tech areas as well, the government must also guard against attempts to procure weapons of mass destruction technology, within and through Canada, that might be exported to support the development of programs in other nations. CSIS investigates such activities and, again, advises our Government of Canada partners, including the CBSA, to help enforce Canadian laws. We don't have an enforcement mandate in the service. We provide intelligence and assessments.
Espionage and foreign interference continue unabated, with a number of foreign intelligence agencies gathering political, economic and military information, both in Canada and in relation to Canada operating clandestinely. Efforts by foreign powers to covertly access Canadian intellectual property and exploit Canadian industries, particularly those with advanced technologies and natural resources, and attempts to manipulate the diaspora communities in Canada have a very real and detrimental effect on our society and our economy.
I will take a second to comment on foreign investment in Canada, which warrants special comment. The state-owned enterprises investing in Canada are, by definition, essentially foreign-state controlled. When we are talking about strategic resources or sensitive technologies, that can sometimes — and I underline the word "sometimes" — pose a threat to Canadian interests. State-owned enterprises are also able to serve as a platform for foreign actors to clandestinely collect intelligence in Canada.
In relation to our regular reporting on the investment activities of state-owned enterprises, we also support assessments conducted under the Investment Canada Act and that look at the national security concerns of foreign investment. Let me be clear, though, that while CSIS provides assessments in that regard, it is cabinet that maintains the final decision-making authority in the area.
Let me lastly touch on espionage through a particular means. Espionage has grown rapidly in the last decade due, in part, to the ease with which it can be conducted through cyberattacks, which facilitate the preparation, launch and execution of espionage operations. Cyberattacks are efficient, relatively inexpensive to conduct, less risky and more easily deniable by a sponsoring state than traditional espionage activities. That is not to say that traditional espionage activities are withering, just that they are now augmented by cyberactivities. The service assesses that the cyber-threat will grow and continue to grow, becoming more complex in the coming years. We will continue to work diligently with our Canadian partners, particularly the Communications Security Establishment, to investigate and address this threat.
Madam Chair, Canada has strong ties and clear interests in the Asia-Pacific region. The region is one of immense promise, having undergone tremendous change over the last few decades. That said, with change comes some understandable challenges. I am pleased that your committee is investigating and examining how Canada can contribute, in a positive fashion, to the region.
Those are my remarks. Thank you.
The Chair: Thank you.
I don't know whether there are two presentations from the Canada Border Services Agency or whether you, Mr. Rumig, are going to make the presentation.
Brian Rumig, Director General, International Region, Canada Border Services Agency: I'll speak for both of us, Madam Chair.
The Chair: Thank you.
[Translation]
Mr. Rumig: Madam Chair, thank you for the opportunity to contribute to the committee's study on the security conditions and economic developments in the Asia-Pacific region.
[English]
The Canada Border Services Agency has a wide-ranging mandate to provide integrated border services that support the national security and public safety priorities of the government while at the same time facilitating the movement of legitimate travellers and goods. We manage the nation's borders, enforcing Canadian laws governing both trade and travel.
To ensure that the flow of legitimate cross-border trade and travel is as efficient as possible, the agency must engage beyond its domestic borders. This involves both engagement with foreign partners and multinational immigration and customs organizations and the forward deployment of CBSA personnel outside Canada.
The CBSA liaison officer network, and its predecessors, has been involved in the interdiction of improperly documented travellers for over 25 years. During this time, the LO network has increasingly become an integral part of effective border management.
While our focus has historically been on interdiction of irregular travellers, the LO network in 2014 supports the entire CBSA mandate and significantly contributes to the detection and interception of people, goods and cargoes that represent high and unknown risks to the security of this country.
The LOs work beyond our borders to identify and intercept these risks at the farthest remove from the physical border. The LOs also provide support and assistance to Canadians and permanent residents during international crises such as natural disasters, severe civil disturbances or armed conflicts.
These officers assist in countering human smuggling, irregular migration and illicit commercial endeavours through information sharing, the provision of training to transporters and government agencies, on-site inspection of airport and marine port facilities, and cooperation with like-minded partners and host-government authorities. These officers intervene in the cases of approximately 5,000 improperly documented travellers each year and, at the same time, facilitate through direct intervention approximately 3,000 legitimate travellers, the majority of whom are Canadians seeking to return home.
Within the Asia-Pacific region, this remains a significant focus for CBSA's international efforts, both as a source of irregular migration and contraband but also as venue for international cooperative efforts. For instance, in 2013, individuals from this region of the world represented 13 per cent of the overall refugee claims made in Canada. The People's Republic of China has a dual distinction here as being a primary source of both legal immigration and legal arrivals in Canada as well as the top source of irregular migration and refugee claims. The volume of travellers into Canada, both legitimate and illegitimate, from the PRC is unprecedented; we haven't seen this in many years.
The committee may recall the arrival — as my colleague, Mr. Peirce, indicated — of the maritime vessel Sun Sea to Canada's West Coast in August 2010. A total of 492 immigrants from Sri Lanka were detained upon arrival under Canadian immigration laws. The impact of such a mass arrival at a single port of entry was significant. While the event was handled successfully, it placed considerable demands on the government's resources and on the immigration system itself.
While refugee claims from Sri Lankan nationals have diminished in recent years, Sri Lankan human smugglers continue to exploit land, sea and air modes to bring migrants from all over the world, all of which continue to be a significant threat to the integrity of this border.
With respect to contraband trends, countries in the Asia-Pacific region have proven not to be a significant source of illicit narcotics throughout 2013. For instance, during that period, countries in this region accounted for only 3 per cent of the heroin seized by the CBSA. Similarly, none of the countries were significant sources of other illicit narcotics.
Nevertheless, the Asia-Pacific region accounted for an estimated 96 per cent of the quantity of precursor chemicals used in synthetic drugs and 63 per cent of amphetamine-type substances that were seized by the CBSA during this period. This is in large part due to the designation of the People's Republic of China being one of the largest sources and transition points of this type of commodity.
While countries in the Asia-Pacific region have not been a significant source of illicit drugs, emerging trends suggest that there is an increased risk that Canada is becoming a source and/or transit country for narcotics destined to a growing drug market in the Asia-Pacific region. This is something that countries within the region have very much engaged us on — us, the RCMP and Foreign Affairs — because they see this as an alarming trend, as do we.
Finally, the Asia-Pacific region also accounts for significant quantities of contraband tobacco seized by the CBSA. In both 2012 and 2013, the People's Republic of China accounted for the largest source of contraband cigarettes seized by the agency. During that two-year period, over 56,000 cartons of cigarettes coming from the PRC were seized, representing 66 per cent of the total seizures by the agency. South Korea was the second-largest source of contraband cigarettes during the same period, representing approximately 27 per cent of contraband cigarettes seized by the CBSA.
In conclusion, Madam Chair, the issue of illegal migration and contraband are complex issues, often driven by profit and organized criminal activity, with no real easy solutions. The CBSA, in needing to address these challenges, provides a multi-faceted approach based on international cooperation. As such, we continue to work closely with our partners at home, here in Canada and abroad to prevent high-risk and unlawful individuals and goods from entering Canada.
[Translation]
We would be pleased to take your questions.
[English]
The Chair: Mr. Rumig, there is just one question I want to ask for clarification. You talked about contraband and illegal immigration. Increasingly, there has been some worry about goods coming into Canada. Is it the port authorities that ensure that not only is it not contraband or illegal migrants but that nothing else is coming through in the sense of health issues in the form of diseases? Also, insects are often found. Increasingly there is the mobility problem. We want to have assurances that the goods are protected, clean, et cetera, when they come to our ports. Whose responsibility is that within the government?
Mr. Rumig: That does fall to the CBSA; it is part of our mandate. We have enforcement on immigration issues, enforcement on customs and also enforcement on the food, plants and animal issues that affect the security of this country.
The Chair: Since food, plants and animals are the growth area for trade into Asia-Pacific, and goods are increasingly coming this way, not everything is searched. Where are the technologies? I keep hearing there will be new technologies that will be able to scan and deliver all of this so that we shouldn't be as worried as we used to be — both ways. I am not sure where we are.
When we talk about cyberspace, we know that is added for the security issue. What about our security on health, food, et cetera? Where are we on technologies and equipment?
Mr. Rumig: I will turn to my colleague, who might be able to provide a better answer than I.
The Chair: If you have one later, we would appreciate you filing some material on that.
Lesley Soper, Acting Director General, Enforcement and Intelligence Programs, Canada Border Services Agency: The CBSA has made several investments over the last few years to keep up with the technologies to allow us to maintain our borders. If you look inside the Beyond the Border Action Plan, there is a renewal of some of that infrastructure in our ports. For example, we work directly with the U.S. on management of wood packaging transiting through Canada into the U.S. and vice versa.
There are a number of initiatives under way in our organization to manage the flows.
We take marine container examination quite seriously. We have major ports, including the Port of Vancouver, which is about to be reinvested in to augment its capacity. We would welcome the opportunity to share information with the committee on the current status of those initiatives.
The Chair: Thank you.
[Translation]
Senator Fortin-Duplessis: Mr. Rumig, year in and year out, Canada receives a lot of refugee claimants. You mentioned that a lot in your presentation.
A large proportion of those refugee claimants comes from Asia. Given that border services are on the front line in dealing with refugee claimants, can you provide us with more details on any trends in these refugee claims from Asia? What are you doing to stem that flow, to make sure that they cannot get through?
[English]
Mr. Rumig: As I indicated in my opening comments, without question the People's Republic of China continues to be one of the largest and most significant volumes of travellers, visitors, business enterprises and legal immigrants into this country. But simply because of the volume, they also represent one of the largest illegitimate source countries.
In terms of trends, China without question is something to which we are turning our attention. We are working not only with domestic partners but international partners, including authorities within the People's Republic of China, to look at how we can, as I indicated, stem the flow of illegal and illegitimate travellers into this country and augment and facilitate the legitimate travel from that part of the world.
Most of the countries within the Asia-Pacific region, as I think some of your witnesses have indicated previously, have a significant problem with illegal migration, illegal immigrants and refugees. That being said, they do not represent necessarily a source country for Canada, with the exception of the People's Republic of China.
For instance, most of the problems that are exhibited in Indonesia and Malaysia do not manifest themselves as a problem in Canada in terms of illegal migration. However, in terms of the trend itself, certainly it is the People's Republic of China. Year after year, the number of individuals trying to come to Canada through illegitimate means increases exponentially every year. We are turning our attention to these phenomena.
[Translation]
Senator Fortin-Duplessis: Mr. Peirce, last week, John Forster from the Communications Security Establishment, whom you may know, appeared before the Standing Senate Committee on National Security and Defence. He told them that cyberterrorism was keeping him awake at night.
Do you share that fear? Is it as dangerous, as substantial, as that? Does Canada have more to fear from threats of state cybercrime coming from countries in Asia or elsewhere in the world?
[English]
Mr. Peirce: In my job, I don't sleep well at night for a variety of reasons.
The cyber-threat is one of the most significant threats and is a growing threat. The cyberactors are able to carry it out, as I said in my opening comments, with relative efficiency, cost-effectiveness for them, deniability, and it makes it an enormous challenge. They can do it at high volume and actors act for different reasons.
Certainly we are seeing a variety of trends in relation to cyber. The most significant and obvious one is the growth of cyberactivity. The conduct of espionage by foreign states — that is, the exfiltration of information through cyber means — is probably the most substantial cyberactivity that we're seeing. We do see aggressive cyberactivity and preparations for aggressive cyberactivity that would be aimed at compromising or destroying network capacity.
You see that at multiple levels. You see that at the state level, so foreign states that are engaged in the activity; you see it at a group level and you can see it for different reasons at group levels. One is for organized crime purposes and another is for or in support of terrorist activity.
We do not tremendous volume of terrorist cyberactivity compared to foreign espionage activity. We do see considerable use of the cyberworld in support of terrorist activity, so there is a slight nuance there. We would anticipate that this will be a continuing area of growth, both in regard to facilitation through cyber but also through the evolution of cyberattacks themselves.
[Translation]
Senator Fortin-Duplessis: Have you identified people or groups who could become cybercriminals?
[English]
Mr. Peirce: At CSIS we don't investigate criminal activity per se, so our investigations are aimed at threats to national security. It would be more the RCMP and other police forces that would target the criminal activity.
Senator Dawson: Mr. Peirce, you didn't mention China. You were very diplomatic, even though your job is not diplomatic. When you talked about the question of foreign investments and the challenge for security, corporate spying, it has been figured that about 50 per cent of the profits of companies in China come from the state-owned corporations. It has also been common knowledge that some of them are influenced by family corruption, and a lot of corruption exists in China in those companies.
The biggest deal that was done was the CNOOC and Nexen, a $1-billion deal. Can we expect that all of a sudden, because they cross the Pacific Ocean, that they leave their —
[Translation]
Do they leave their ways in China or do they bring them with them?
[English]
Mr. Peirce: Yes, I carefully avoided reference to particular countries.
Undoubtedly though, when you're looking at state-owned enterprise activity, they bring with them the activities that occur in the host nation to start with. That means that corruption is a significant area of concern. As well, the political connections and the work that goes on for the state — they are state-owned enterprises after all — are key factors.
When we talk about China, for example, we see a country that is in existential need of control of access to resources. They will actively, through their state-owned enterprises, seek access to resources and will import with that many of the difficulties that go on.
At the same time as that is going on, they come to North America in many instances to conduct themselves according to North American norms in their business practices and are subject to our laws and regulations. It's not the same situation; the context is different when they come to operate in Canada.
Senator Dawson: I don't often quote and even less support comments by the Prime Minister, but I am quoting from what he said in December 2012 when the deal was announced.
When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.
He was talking about foreign ownership of companies that have changed; instead of being owned by foreign companies we're being owned by foreign governments.
How much of that comment would you attribute to economic nationalism and how much would be a certain level of nervousness based on your knowledge of their ambitions in North America?
Mr. Peirce: I will not attempt to speculate on what might be motivating the Prime Minister's views. Certainly we ensure that advice is given to government on the threats that are posed, both strategic threats and specific tactical threats in relation to investments by state-owned enterprises. Then it is for government decision makers to do with that advice what they will.
Senator Dawson: This is the Foreign Affairs Committee, so we're used to diplomatic answers; but thank you for your answer.
The Chair: We brought you for a specific purpose and we understand that you are answering the questions on that area. But good try, Senator Dawson.
[Translation]
Senator Verner: Mr. Peirce, you have already answered some of the questions I had about cyberattacks, as my colleagues asked them earlier. Nevertheless, beyond the diplomatic answers, there are facts.
We have seen headlines saying that there have been a lot of incidents of computer piracy and cyberattacks on Canadian interests that seem to have come from China.
Is the Asia-Pacific region really where the main source of cyberattacks of that kind presently lies?
[English]
Mr. Peirce: I think you're right to refer to the amount of reporting that we see.
[Translation]
The headlines say China is the main source.
[English]
I would say that we have nothing that would suggest otherwise.
[Translation]
Senator Verner: On a separate matter, how do our allies see us in terms of cybersecurity and in terms of our ability to fight it?
Do our allies feel that we are doing enough, that we are advanced enough, that we are proactive enough, that we are doing enough to fight this plague?
[English]
Mr. Peirce: If I understand the question correctly, and I apologize if some typing got in the way of my hearing it clearly, our efforts are a matter of ongoing evolution development because of the rapid growth of cyber. We are continuing to hone both our investigative capacity in the area as well as our organizational structure within government in terms of how we manage the cyber-threat. We will continue to do our very best to be ahead of the threat. There are techniques that we can use — and obviously I can't disclose them — to try to gather the intelligence necessary to stay ahead of the threat. The challenge is that the threat can morph and change very rapidly, so we have to be nimble in doing that.
Quite frankly, this is an area where we are resource challenged, and we have to determine our priorities in looking at those resource challenges.
[Translation]
Senator Verner: You answered part of my question. I was going to ask you what more we could do in the area and I understand that resources are the key to fighting the problem.
[English]
Mr. Peirce: Another feature is cooperation within the national security community and with the private sector as well. Certainly, we see that a considerable amount of cyberactivity targets the private sector. It's a delicate issue for the private sector. They don't necessarily want to advertise the fact that they've suffered attacks. At the same time, they recognize the benefit of cooperation. We work very hard to work with the private sector, along with our government colleagues.
Senator Robichaud: Can you describe a couple of cyber-threats and what they are?
Mr. Peirce: I'll give you an example of how cyber can be conducted. One of the classic ways to conduct a cyberattack is through what's called a phishing attack. You collect information about an individual. You may collect that information off the Internet. You may collect it through human source activity. You identify interests about that individual. You may identify their contacts. Then you send them an email with the addressee being one of their contacts. Embedded in the email is a link that is on a subject they're interested in. I happen to coach a lot of hockey because I have three small children, so I could get a link on hockey coaching. I click on the link, and that link sets loose a program that allows access to the contents of my computer and allows them to exfiltrate the information.
We can see that in any number of areas. You can see it in support of an investment by a state-owned enterprise, for instance, that could target the investee — the targeted company, the regulator, government departments and agencies involved in assessment and approval of the deal or policy-making in relation to the deal, and even target private law firms engaged in providing advice to the various parties.
The exfiltration of that information gives that state-owned enterprise a considerable advantage in managing all of the issues around the deal.
Senator Robichaud: I received a call the other day. They were asking if I had a computer. I said, "Why do you want to know?" Well, it seems there's a computer at my place that is downloading — and I don't understand too much about computers. I said, "Where is that computer?" They mentioned an address. I didn't understand that it was my address but I said, "You have the wrong number." Then last night, somebody shows up at my door and says, "Do you have a computer?"
Senator D. Smith: Were they from CSIS?
Senator Robichaud: No, not from CSIS, no — well, I don't know; he might be.
Mr. Peirce: A point of clarification: It was not from CSIS.
Senator Robichaud: Was it from CBSA?
Senator Demers: You don't need a computer; you need a psychiatrist.
Senator Robichaud: I wouldn't be the only one.
Mr. Peirce: All kinds of scams are run. Such scams may be run by individuals domestically running small-scale criminal activity. I got a phone call the other day saying that I won a cruise. I got an email the other day saying to help someone out in Nigeria; a little loan and it would all work well.
Senator Robichaud: I also won the lottery a few times.
Mr. Peirce: Precisely. I don't want to give too much direct advice on a particular issue, but it sounds like it's probably in that category of activity.
Senator Oh: Gentlemen, I commend you and your agency for the good work you have done in stopping human smuggling into Canada. I think that has been stopped now for a few years. Thanks for the great job you guys have been doing.
You will remember the incident of the terrorist bombing in Bali a few years ago. Now, more foreign companies are stepping up in the Pacific Rim. Could this kind of thing happen again?
Mr. Rumig: Are you directing that to CBSA?
Senator Oh: Any one of you.
Mr. Rumig: Thank you for the commentary about the success we've collectively been able to exhibit on illegal migration and human smuggling in particular. We take pride in being able to do that, but we also recognize that it's still a challenge for us, and we cannot divert our attention to it. I just want to make the point that it's still very much a threat.
In terms of the threat to Canadians and Canadian investment in foreign countries, in particular in the Asia-Pacific, it's self-evident to say that, yes, there's always that threat. It's not necessarily that Canadians or Canadian companies are being specifically targeted, but they will be in areas of the world that will be targeted by local terrorists, local criminal organizations, and they will fall victim to both terrorist attacks and criminal endeavours. I think it's fair to say that that is always going to be prevalent.
I don't know if my colleague from CSIS would want to comment on that or not.
Mr. Peirce: I think that analysis is exactly right. I commented in my opening remarks that most of the terrorist activity in the region is regionally targeted, but the issue is that if you're active in the region, then you may be swept up in regionally targeted activity.
We see the group Jemaah Islamiah, responsible for the Bali attack in 2002, as one of the few groups in the area that has continued to target Western interests — not necessarily Canadian interests but Western interests — and that further heightens the risk to Canadian interests because we can be swept up in that. But the more common risk is the risk that essentially Canadians or Canadian interests are collateral damage in a regional attack.
Senator Oh: My second question you can choose not to answer if it's too sensitive. For our friends down south residing in Moscow now, are those considered serious cyberespionage?
Mr. Peirce: I think I'll leave the question.
Senator Oh: That's fine. Thank you.
The Chair: I have three senators and five minutes, so I'm going to propose that you place your questions, the three senators, and then you'll answer as best you can from the panel.
Senator D. Smith: I have two, but I'll get them out quick.
At the outset you talked about how you try to cooperate with intelligence agencies of other countries for information with regard to illegal immigrants, and then there was reference to the Tamil boats. I'm curious. In the case of Sri Lanka, the government is totally dominated by the Sinhalese community, which is 75 or 80 per cent, whereas the Tamils are mainly in the north and 20 per cent or so, but most of the ones that are coming are Tamil.
Can you get information from the Sinhalese government on the Tamils, or are there any Tamil organizations you can ever dialogue with — legitimate, bona fide ones — about this stuff? That's question number one.
The second question is with regard to illegal immigration patterns. If you look at problems we've had in the past, I can tell you so many Chile and Jamaica stories, and Hungary and Czechoslovakia. You know those stories, and the Tamil ones as well. It's interesting that you say that the number from China is getting quite large, of course legal ones, but also illegal ones. Are there patterns there? Are they coming over as visitors and just disappearing or staying? Are they coming in from third countries? What are the patterns? There are usually patterns that develop in terms of how they get here.
Senator Johnson: A couple of my questions were asked.
CSIS's major priority areas are espionage and foreign interference, as well as information security threats. In general terms, can you comment on the extent to which certain nations in the Asia-Pacific conduct espionage and foreign interference on and off Canadian soil?
The Chair: Thank you, Senator Johnson.
Now I'll turn to the final senator, Senator Demers.
Senator Demers: Thank you.
I'm a Canadian. They say this is one of the safest countries in the world. A lot of us could drive to the United States in an hour and a half. They're one of the most hated countries in the world; no disrespect to the United States. Three of my kids are Americans, by the way.
We're so close. There must be a tremendous challenge. Are we as safe as we think we are? We feel so comfortable here, but so many things around us are happening.
The Chair: Mr. Peirce, I'll turn to you first to answer any of those questions that you might wish to, and then we'll turn to Mr. Rumig.
Mr. Peirce: The first question, I'm afraid I'm going to have to avoid commenting on specific sources.
Senator D. Smith: I thought I'd ask anyway. I suspected that would be the answer.
Mr. Peirce: Unfortunately, we have to maintain those relationships.
The patterns question I think I'll leave to my colleagues from CBSA.
I'm going to be, unfortunately, underwhelming in my responses here.
In terms of particular nations conducting espionage, certainly there are nations in the Pacific-Asia region conducting espionage, both in Canada and abroad, in relation to Canada, including cyberespionage. I would be loath, though, to name those nations, for two reasons. One, it's a very heavy label to put out there; and, two, it risks compromising our investigations into those activities to identify our knowledge of them.
The last question: Are we as safe as we think, as we ought to be? As I said early on in these proceedings, I don't sleep well at night for a variety of reasons. Part of it is just natural; I'm just not a good sleeper.
Senator Demers: If you handle this right, I'll have your son play for the Montreal Canadiens.
Mr. Peirce: Being a big Habs fan, this is a good moment for me. He's 16, so do you think we can get him there?
We have domestic threats that you've read about in the papers because they've been disrupted and arrests have been made. The threat in southern Ontario to the rail lines and the threat to the legislature out in British Columbia are just two of the recent arrests that have been made as a result of cooperation between the national security agencies. We work very hard in regard to the threats here.
We're certainly very concerned about individuals travelling abroad to engage in jihadist activity. A large number of people having travelled to Syria, for example, that is a concern by itself. It's the exporting of that activity. It's also a serious concern when they return to this country, both the capacity that they bring back upon return and their credibility that they bring back to their community upon return and their ability to radicalize others. I call it the rabbit problem; they just keep growing as a result of that cycle. There are those kinds of concerns.
Espionage continues to grow, and facilitated, in particular, by cyberactivity, but also by new drivers behind espionage, the economic espionage that we're seeing growing, and the unrest that we see across the world leading to ungoverned spaces or war-torn spaces, which give rise to increasing threats.
I'll finish with proliferation of weapons of mass destruction. We see the nuclear threat in Iran and North Korea, which is most pertinent to the discussion here, but also the use of chemical and biological weapons.
Mr. Rumig: I'd like to start with the last question asked concerning the safety of Canada. Given that the expert on intelligence is not sleeping well at night, I don't think I'm going to sleep well tonight.
I echo what Mr. Peirce has said, that, yes, this is a peaceful kingdom and we have lived very well and continue to live very well. But we don't rest on our laurels. None of us do. When there are spikes in reporting in the public domain, there are a lot of questions asked about the effectiveness of the security intelligence apparatus in this country. Rest assured that those spikes, in terms of intelligence and in terms of threat, they happen weekly. They just don't become public, and that's probably a good thing.
In terms of the Sri Lankan issue as to whether we have a cooperative nature with the Sri Lankan government, I will echo what Mr. Peirce has said. We have to be circumspect in what we are going to talk about given that we do have dialogue; we do have relations. CBSA has an officer in Colombo.
I'll just leave it at that, other than to say that in the Sri Lankan migrant trend, a lot of the Sri Lankans coming to Canada, at least illegally, are not coming from Sri Lanka but from other parts of Southeast Asia where they have been staged or living for a couple of years. We have good cooperation in terms of information sharing and interdiction activity with those countries. In terms of the threat itself, we have an ability to interdict that by information sharing and by capacity building, by being on the ground to stop mass arrivals and/or individuals coming through other means.
On the issue of patterns from the People's Republic of China, I believe my colleague Ms. Soper may have some comments on that.
Ms. Soper: I have some observations about the Chinese migration trend. The irregular migration flows from China are largely seen in Canada; that is, persons who have arrived in Canada through legal means, through visas or coming as students or workers and making refugee claims in Canada. It's a flow that is usually direct from China. Once in Canada, they decide to avail themselves of the refugee protection system, which is different from many other circumstances such as the flows from Sri Lanka, where we have more irregular arrivals, people we interdict in airports trying to embark for Canada or upon arrival in Canada with poor documentation or using fraudulent documents to arrive here.
The Chair: Thank you. We've run over time, but I know there were other questions. Senator Oh had some questions. I'd invite senators to give me those questions, because there are other questions I'd like to put forward — and I assure you they are within your professional context — so that we can fill out some of our comparisons. We've done studies in other areas and have had the benefit of your information. We would like to do some comparisons with our previous report. There will probably be a letter from the researcher identifying the questions. To the extent you can answer them, I would appreciate it.
On behalf of the committee, you can see that we needed more time. We may have to call you back if there are specific questions, but thank you for responding and for putting the information on the record.
(The committee adjourned.)