The recent arrest of Huawei chief financial officer Meng Wanzhou in Canada points to a widening of the trade war between the US and China. She faces possible extradition to the US for helping Huawei evade equipment sanctions on Iran through a shell company.
Some are calling her arrest the latest set piece in a new “cold war,” one that threatens to pull in allies of both major powers into its vortex.
Yet this escalation is curious given that President Donald Trump and his counterpart Xi Jinping had announced a 90-day tariff truce at the G20 summit in Argentina a few weeks ago.
Moreover, emerging details of the case suggest a New York district court had issued warrants for Wanzhou’s arrest as early as August. So, was Trump’s attempt at conciliation in Argentina merely a ruse?
The frenzied media commentary following the arrest has focused on America’s desperation to maintain its technological edge in the face of “Made in China 2025”: an initiative by Jinping that desires Chinese self-sufficiency in cutting-edge technologies, namely artificial intelligence and robotics.
Additionally, if China is to detour around the middle-income trap, it must steadily yet rapidly migrate from a manufacturing-oriented export economy to a knowledge-based one that creates high value-added technological products and services.
Meanwhile, Washington under Trump has shown a fetish for “hostage diplomacy” that rationalizes legally dubious actions as paying China back in the same currency.
The White House recently arm-twisted another Chinese smartphone maker, ZTE Corporation, to pay up a huge fine if it wanted to continue operating in the American market. Perhaps the administration’s brain-trust believes going for the jugular is the best way to contain China’s growing clout.
In fact, you can hear any number of White House spokespersons slamming China on an almost daily basis for “stealing” American technology through forced transfers, while singling out Huawei as a key beneficiary.
In the same breath, they also warn that Chinese telecoms providers are hand-in-glove with a government that wants to spy on us all and allegedly “Sinicize” the Internet.
Such instability in the global mobile devices market has no winners. Any potential for supply chain interruptions will surely spark panic selling in stock markets
Yet there is no tangible evidence, at least none Washington can provide, that implicates Huawei in any government program to develop “back-doors” in its telecom solutions that would pose a “national security risk” to any foreign government.
Nevertheless, this imaginary hyphenation has prompted US allies New Zealand, Australia and Japan to ban Huawei’s involvement in erecting their next-generation 5G mobile networks.
They did so with the explicit knowledge that Huawei is currently the only one-stop solution provider for this technological leap in terms of scalability and cost. Tellingly, the majority of the European Union has not followed suit.
Aa quick glance at the list of most popular mobile device makers features five Chinese companies in the top 10. This is clearly a problem for Trump and his “America First” mantra, as it suggests the country is fast losing ground in many industries where it was once untouchable.
Trump is seemingly unconcerned about the fallout from this arrest, given that Huawei is a grand symbol of national pride in China. Beijing has even “threatened” both Washington and Ottawa with undisclosed consequences if Wanzhou is not released post-haste.
It is not hard to imagine these consequences. American business executives living in or travelling to China will now be peering over their shoulders every few minutes, wondering when they too will be jailed or their operations shuttered as payback by Chinese authorities.
Such instability in the global mobile devices market has no winners. Any potential for supply chain interruptions will surely spark panic selling in stock markets and consequently slash the market values of both the Chinese companies and their many American parts providers.
Trump hence seeks a pyrrhic victory that will only hurt American companies.
To me, Washington using trade as a blunt tool of statecraft to counter China is not all the surprising. What I find significantly more newsworthy is the signaling effect Trump’s actions have on the rest of the world.
Casting aside the politics of Wanzhou’s arrest, targeting Huawei as an enemy agent and pushing allies to ban the company without ironclad proof sounds like a case of very sour grapes.
It appears the US has given up on the idea of ever regaining its pole position in the tech industry, and now wants to be that crab in the jar that pulls down any other trying to claw its way out
Contrast this with the space race of the mid-20th century, when America did not fold to initial Soviet dominance and instead pooled all its industrial and technological might into eclipsing Moscow by putting a man on the moon.
That pioneering spirit of excellence-at-all-costs seems to have gone missing in Trump’s America.
Also, while there is some truth to China fire-walling its “sensitive” industries like banking, energy and telecom from foreign competition, and using the lure of cheap skilled labor to gain technology transfer concessions from foreign companies, we have to remember that commerce is a two-way street.
No American company has been operating in China out of the goodness of its heart. They forecast and reaped vast material benefits to their bottom-lines.
Likewise, the US ran up a significant trade deficit with China because Corporate America gleefully raked in record profit margins by outsourcing blue-collar jobs to China, and then selling those goods back home and to international markets.
Naturally, as a result, the white-collared crowd grew richer while those on daily wages lost out. And when mixed with America’s inability to cover those losses through constant technological innovation, the economy floundered and with it, the domestic job market.
Perhaps Trump is extraordinary in the way he can shake up international relations, pivoting from good to bad cop and back again instantaneously. It makes you wonder if he would choose differently had he risen up the ranks of public office like past American presidents. Maybe the world would be better off if he had.
The writer is an Ipoh-based independent journalist
Published in Daily Times, December 13th 2018.