Monday, August 26, 2019

Nothing good will come of Huawei affair

Dec 12. 2018
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By The Nation

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The US has taken a daring risk by seeking the arrest of a prominent Chinese executive, and it will not pay the price alone

It is far from clear how Southeast Asia might be affected, but if superpowers China and the United States are going to slug it out over the arrest of Huawei executive Meng Wanzhou, it would be wise for the region to prepare for some wild swings. 

Meng’s arrest in Canada pending likely extradition to face charges in the US has been seen as fulfilling some national-security concerns in Washington. But, from the look of it, the move seems likely to complicate future trade talks with Beijing. And China’s neighbours in Asia are all too familiar with the pressure tactics it deploys to achieve political ends.

The US Justice Department is investigating Huawei – a company widely regarded as representing the zenith of Chinese technological innovation – for violating US sanctions against Iran imposed between 2009 and 2014. The sanctions had been removed under a 2015 nuclear deal before being re-imposed by Trump. Canadian police arrested Meng in Vancouver at the request of US authorities.

That the arrest came the same day Beijing and Washington agreed on a 90-day truce in their tariff dispute might have been coincidental. But Beijing surely sees it as part of America’s efforts to stymie China’s rise as a global telecommunications giant. The US has thus far said nothing along the lines of Meng’s arrest being purely a matter of law and separate from trade issues. Beijing is viewing it as punitive action against China, coming despite measures it claims to have taken to address Washington’s concerns. The US can thus forget about drawing any further concessions from Beijing, which makes Meng’s arrest highly unwise, at least from a political perspective.

Taking on a Chinese firm is unlikely to gain the US much leverage when it comes to trade negotiations. Beijing’s response has been somewhat measured so far, no doubt in the realisation that bolder action would also be counterproductive to its ambitions. While the foreign ministry strenuously objected to the arrest and threat of extradition and warned Canada of possible repercussions, China’s social media erupted in anger and demands for overt retaliation. American corporate executives working in China have cause to be nervous.

For now, there is only the matter of law, and the US government, ostensibly committed to playing by the rules, cannot negotiate the case. To do so would suggest that America’s concerns about its sanctions against Iran being violated can be deflected. Given the quirkiness of Donald Trump, of course, Meng’s arrest could well be politically motivated, a bargaining chip for his vaunted deal-making. But any such deal with China would send the entirely wrong signal to US allies, not least Canada. 

 China has to be made to understand that it cannot sell Huawei products in America without abiding by American law. If it truly believes the US is wrong to sanction Iran, the nobler course would be to boycott the US market and withdraw its products. The pith of the matter is that Huawei products feature components of American technology. This means that the company and Beijing are going to have to play by US rules. 

All of that aside, it is upsetting to see this latest example of a Western nation using legal manoeuvres to punish foreign companies whose behaviour it finds objectionable. In this case, US domestic law is reaching far beyond America’s borders.

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