Dive Brief:
- The Canadian government has blocked China Communications Construction International's attempted purchase of publicly-traded construction company Aecon Group in the name of the Investment Canada Act, which requires foreign investments in Canada to be vetted for national security threats. CCCI had announced the CAD $1.4 billion (U.S. $1.1 billion) deal in October 2017.
- An unnamed government source told The Canadian Press that Aecon had worked on major infrastructure projects in Canada and that there was concern around a Chinese firm having access to potentially sensitive information. A Chinese foreign minister, according to Reuters, said that he hoped Canada could put prejudice aside and not allow politics to create a disadvantage for Chinese companies.
- Aecon said that, despite losing out on the benefits of being acquired by a global player like CCCI, it has secured major contracts in past months for a backlog of around CAD $4.6 billion and a full future pipeline of work. The company said it booked $900 million of work in the first quarter of 2018. After first quarter reports, Aecon finalized two additional major light-rail projects in which it is a partner – the $5 billion Montreal Light Rail Transit Project and the $2.5 billion Finch Light Rail project in Toronto.
Dive Insight:
South of the Canadian border, national security concerns have affected the U.S. construction market as well.
President Donald Trump cited national security as the reason for implementing tariffs on steel (25%) and aluminum (10%) on trade from several allies, including Canada, Mexico and the European Union. In March, these trade partners were granted temporary exemptions from the new duties, but on May 31, the White House announced that negotiations had fallen through and that the president was taking the unexpected step of making them permanent. The news sparked retaliatory statements, with all three entities announcing countermeasures that will likely see the U.S. paying more to export steel, aluminum and other goods.
Securing U.S. borders is a matter of national security, but the president could be using that to sidestep Congress and obtain funding from the military instead. The administration has continued to hit a funding dead end with federal lawmakers, and Trump tweeted in March that "building a great Border Wall, with drugs (poison) and enemy combatants pouring into our Country, is all about National Defense." Fast forward to May, and the Department of the Army is handling the bidding process for border wall projects, which used to be the territory of the Department of Homeland Security and U.S. Customs and Border Protection.
