China's threats over Huawei CFO's arrest rattle Canadian business

As China continues to threaten Canada with unnamed "consequences" if it doesn't release the chief financial officer of Chinese telecommunications giant Huawei, some in Canada's business community are openly worried about what's coming next.

"The options are essentially limitless and that's what's concerning about this," Brian Kingston, vice president of policy for the Business Council of Canada, told CBC News.

Meng Wanzhou, CFO of Chinese technology giant Huawei andalso the daughter of the firm's founder was arrested in Vancouver on Dec. 1.She is wanted for extradition to the U.S. on allegations of fraud, including using a shell company to skirt international American sanctions on Iran over five years.

Since the arrest, China has made it clear that they want Wanzhou released immediately, arguing that she is being treated inhumanely.

"For Canada, if they do not correctly handle this matter, there will be serious consequences. You asked, what kind of serious consequences would these be? I can tell you in one sentence: It is totally up to Canada," Chinese foreign ministry spokesman Lu Kang said Monday at a news conference in Beijing.

According to Jim Carr,Canada's minister of International Trade Diversification,as of today there are no indications from China of what those consequences might be.

David Mulroney, Canada's former ambassador to China, today told CBC's Ottawa Morningthat China appears poised to execute a strategy it calls "kill the chicken, scare the monkey."

Mulroney said the tactic comes into play when China is engaged with adversariesof unequal size. To get a larger player onside in this situation, the United States it makes an example of a smaller, more vulnerableplayer: Canada.

"The warning is that it will go any distance, it will take any measure to defend its national integrity ... 'Look what we are doing to a country like Canada,'" he said.

The former ambassador added, however, that China typically tries to threaten and intimidate other nationsto get what it wants without having to follow through on its threats.

New sanctions or regulatory requirements

One of the people hoping the warning is merelya scare tactic is Kingston, who has seen other countries fall afoul of China in the past, including Norway in 2010.

"Norway faced a ban on its exports after awarding the Nobel Peace Prize to [Chinese human rights activist] Liu Xiaobo," Kingston said.

"The Chinese claimed that Norwegian salmon had a virus which no longer made it acceptable in the Chinese market ... and Norwegian exports were significant to Chinaand they fell through the floor as result of this ban."

Kingston said that China and Norway were in the middle of trade talks when the dispute began; China subsequentlycalled off the talks.

"It creates a huge amount of uncertainty for Canadian businesses that operate in China," he said. "First of all there's concerns around your employees in that market, and secondly you have to suddenly worry about your product and whether you'll face a new sanction or regulatory requirement that simply wasn'tthere yesterday."

That sort of retaliation hasn't materialized so far. CBC News reached out to the Canola Council of Canada, the Lobster Council of Canada and the Pork Council of Canada, all of which said they have not been informed of any regulatory changes in China that would affect their exports.

That could change quickly if China continues to blame Canada for the arrest of Wanzhou an action Ottawa said it had to take to respect its extradition treaty with the United States.

Speaking in Toronto Monday, Foreign Affairs Minister Chrystia Freeland said it's important that high-level extradition arrests like these are ordered by officials, free from political interference.

"It's really important for Canadians to understand that this was not in any way a political decision," Freelandsaid. "There was no political interference, as the prime minister has said. Noneat all."

Convincing China

Freeland said the "action" was taken, as all extradition arrests are, "at an officials level in keeping with our international obligations."

While Canadians may be willing to accept the realities of Canada's extradition system, convincing the Chinese that Canada's hands were tied and they need to back off and take their fight to the U.S. is proving more difficult.

According to a senior government source with knowledge of the situation, Canadian officials are struggling to convince the Chinese that Canada's extradition treaty with the U.S. isn't something the Liberal government can interfere with at will.