USA: Why Trump Caved to China and Huawei – By Vijay Prashad | Globetrotter

– By Vijay Prashad | Globetrotter

Everything about the trade war between the United States and China is bewildering. The world’s two largest economies entered a titanic struggle with harsh words and high tariffs, sending shudders through the global economy. Hundreds of billions of dollars worth of goods on either side stood before tariff walls that seemed unbreachable. Truces would come out of nowhere – as at the 2018 Group of Twenty summit in Buenos Aires – but then they would be set aside by US President Donald Trump in a stream of tweets at odd hours.

In May, Trump went after Huawei, one of the world’s largest technology firms. The attack this time was not on economic grounds. Trump accused Huawei of being an espionage arm of the Chinese government. Companies in the United States that supplied Huawei with software and chips would no longer be permitted to do so.           

Trump’s diplomats went on the road to strong-arm US allies into no longer using Huawei technology in their countries. Finally, Meng Wanzhou, Huawei’s chief financial officer, was charged with bank and wire fraud in relation to US sanctions against Iran. Meng Wanzhou, now under house arrest in Canada at Washington’s behest and awaiting extradition, is the daughter of Huawei’s founder, Ren Zhengfei.

Huawei

Like many Chinese firms, Huawei began in 1987 with a modest aim – to manufacture phone switches for telecommunications firms. Then, gradually, Huawei emerged as the largest telecommunications equipment manufacturer, overtaking the Swedish multinational Ericsson, and the second-largest manufacturer of smartphones, just behind the South Korean multinational Samsung. It is now one of the world’s largest technology firms, with annual revenue in excess of US$200 billion.

The sudden loss of 1,200 US suppliers struck Huawei hard. A quarter of the components of Huawei’s systems come from these suppliers. These US firms lost $11 billion per year, but Huawei lost immediate access to key parts. Ren Zhengfei seemed unfazed, saying that Trump’s attack on his company only strengthened its resolve to source its parts from Chinese manufacturers. Failure to get access to Google’s Android operating system led Huawei to adopt a Chinese operating system called Hongmeng. The Kunpeng 920 chip could substitute for imported chips.

In 2015, Chinese President Xi Jinping had launched a program called “Made in China 2025”, which urges Chinese companies to use Chinese materials as much as possible.Trump’s ban on sales to Huawei merely accelerated the company’s drive to buy from within China. Fears of more such bans and tariff wars have led even the most moderate corporate leaders – such as both Ren Zhengfei and Jack Ma – to adopt a language of technology independence.

Then, as if from nowhere, Trump withdrew his assault on Huawei. At this year’s G20 summit at Osaka, Trump said US companies could sell to Huawei. Trump had earlier withdrawn his ban on the sale of goods to another Chinese company, ZTE. That example showed that he would not wait long to give up his fight against Huawei.

Struggle Over 5G

The next generation of high-speed wireless technology, 5G, is currently being dominated by Huawei, with Sweden’s Ericsson and Norway’s Nokia far behind. No US company is near these three in the production of fifth-generation technology.

In April, the US government’s Defense Innovation Board released a report that noted: “The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector. [Fifth-generation technology] has the potential to revolutionize other industries as well, as technologies like autonomous vehicles will gain huge benefits from the faster, larger data transfer. [It] will also enhance the Internet of Things by increasing the amount and speed of data flowing between multiple devices, and may even replace the fiber-optic backbone relied upon by so many households.

“The country that owns 5G will own many of these innovations and set the standards for the rest of the world. For the reasons that follow, that country is currently not likely to be the United States.”

Since US companies are unable to manufacture the equipment currently made by Huawei and others, only 11.6% of the US population is covered by 5G. There is no indication that AT&T and Verizon will be able to manufacture fast enough the kind of transmitters needed for the new technological system.

The erosion of US companies in the telecommunications industry can be directly attributed to the deregulation of industry by the Telecommunications Act of 1996. Many companies fought to gain market share, with different mobile standards and carrier plans with different configurations that made it hard for consumers to switch companies. This fragmented market meant that no firm made the necessary investments toward the next generation. It has meant that US companies are at a grave disadvantage when it comes to the next generation of technology.

The rapid advance of Huawei, and the European companies, threatens both US technology firms in particular and the US economy in general. Over the past few decades, these US technology firms have become the main investors in the US economy and are the engines of its growth. If these firms falter before companies like Huawei, then the US economy will begin to splutter on fumes.

Trump’s war against Huawei is not as irrational as it seems. His administration – like others before it – has used as much political pressure as possible to constrain the growth of technology in China. Accusations of theft of intellectual property and of close ties between the firms and the Chinese military are meant to deter customers for Chinese products. These accusations have certainly dented Huawei’s brand, but they are unlikely to destroy Huawei’s ability to expand around the world.

Huawei claims that two-thirds of 5G networks outside China use its products.

Even the United Kingdom – a firm US ally – decided in secret to allow Huawei to help build the UK’s 5G network. When defense secretary Gavin Williamson allegedly leaked news that the UK’s National Security Council made this decision, he was fired from the cabinet. Huawei’s technological advances are greater than the chatter about security threats and intellectual property thefts. All four of the major mobile networks in the UK already use Huawei equipment.

It is very likely that Trump’s administration will withdraw its request that Canada extradite Meng Wanzhou. In December, Trump said that if he thinks it is good for the United States, then he will intervene with the US Justice Department to no longer pursue the extradition. This statement – made to Reuters – suggests that Trump is not committed to using family pressure against Huawei. It suggests that Trump now realizes that he can try to twist Ren Zhengfei’s arm as tightly as possible, but that Huawei and China are unlikely to blink. China has the upper hand.

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Comments

  • Trevor  On July 11, 2019 at 11:51 pm

    Chinese man own almost every tall building you see in GT.

    Canadians tell me that Chinese man own almost every condo tower in Vancouver, Toronto and Montreal.

    Chinese man also buying up prime real estate to build factories, construct condo towers and business towers across America.

  • Clyde Duncan  On July 12, 2019 at 11:35 pm

    Trump’s Iran Strategy Is Helping China

    Forcing India out of Iran will give China yet more power in the region.

    Vali Nasr | The Atlantic

    The Trump administration tends to view Iran in isolation or as a Middle Eastern problem — a regional nemesis with nuclear ambitions that threatens Israel and America’s Arab allies. This is a mistake.

    IRAN sits at the critical cross section of the Middle East, Central and South Asia, and the vital trade routes cutting across the Asian continent. At the moment, although Donald Trump does not seem to see it, the administration’s Iran policy is reverberating across the globe and helping China in particular, in part by hurting the U.S.’s staunch ally, India.

    IRAN is a foreign-policy priority for the administration. Trump withdrew from the 2015 nuclear deal among Iran, the U.S., and five other world powers, and now wants Iran to come to the table for fresh negotiations in pursuit of a stricter agreement.

    Trump’s advisers may also be aiming for regime change in Tehran. Their instrument of choice is maximum economic pressure — ever-tightening sanctions that will cut Iran off from the world economy. But Iran has so far refused to budge; it has responded by escalating tensions in the Persian Gulf and threatening to resume full-scale nuclear activity.

    Containing China is another foreign-policy priority. Trump has launched a frontal assault on Chinese trade. But to realize his loftier goal of denying China superpower status, Trump will have to look beyond tariffs to contending with China’s expanding influence across Asia and Africa.

    The Trump administration’s Iran strategy is getting in the way of its plans for China. China has always viewed Iran as an economic prize; America has now made it easier for Beijing to lay claim to it.

    Chinese trade and investment in energy and infrastructure are poised to fill the void left by European withdrawal. Slowly, Chinese economic influence will grow, perhaps enough to buoy Iran’s economy as it struggles under Trump’s pressure. Benefits of this burgeoning relationship will run both ways.

    Also, in China’s favor is how the Trump administration has tried to use India against Iran.

    In April, the Trump administration told India that it would no longer have an exemption to U.S. sanctions on Iran. It cannot buy Iranian oil, and has to abandon its significant investment in the Iranian port of Chabahar on the Gulf of Oman, which allows India to circumvent Pakistan to trade with Afghanistan and Central Asia.

    To Delhi, that means losing precious turf in the Great Game for influence in Asia — which can’t be good for the United States. India alone can act as a counterweight to China on the continent, thanks to its large population, economic potential, and dominant perch over the Indian Ocean and the interconnected waterways that stretch from the Straits of Malacca in the east to the Horn of Africa in the West.

    India is situated in the midst of China’s ambitious New Silk Road — the so-called Belt and Road initiative that will bring much of Asia and Africa into China’s economic orbit.

    For India, competition with China starts in West Asia. India has always viewed China’s ties to Pakistan with concern, ties that have deepened over the past decade with China’s pledge to Pakistan of $60 billion in infrastructure development and trade.

    India matched China’s investment in the Pakistani port of Gwadar on the Makran coast of the Arabian Sea with its own investment in the Iranian port of Chabahar, some 85 miles to the west. India has committed billions to developing the port at Chabahar, as well as industrial developments around it; the railways and roads that connect it to Afghanistan and Central Asia.

    Forcing India out of Iran will give China yet more power in the region. With India out of Chabahar, Gwadar will become the only access route to the Arabian Sea and Indian Ocean trade for Afghanistan and Central Asia. Expect China to make its position even more absolute by flaunting U.S. sanctions and moving into Chabahar, integrating it with Gwadar.

    China is already developing a naval facility in Pakistan between the two ports. It will not be long before Chinese naval vessels join its oil tankers and container ships as frequent visitors to the Gulf of Oman and the Arabian Sea.

    In the long run, it is China, not Iran, that poses the most serious challenge to the U.S. in Asia and globally. Washington has to put its Iran policy in the context of its larger strategic objectives, and that requires bolstering, not hindering, India’s ability to serve as a counterweight to China.

  • Clyde Duncan  On July 12, 2019 at 11:40 pm

    Donald Trump views India like he sees the taxi driver in New York.

    Now, Trump is giving China a free-hand in Iran.

    That is a mistake.

  • Clyde Duncan  On July 13, 2019 at 9:11 pm

    India poised to launch its Chandrayaan-2 on Sunday, 14 July 2019

    Meanwhile, check out this Apollo Mission documentary:

  • wally n  On July 16, 2019 at 2:48 pm

    “Huawei’s Yearslong Rise Is Littered With Accusations of Theft and Dubious Ethics
    Chinese giant says it respects intellectual property rights, but competitors and some of its own former employees allege company goes to great lengths to steal trade secrets”????
    These chinese are crooks, their entrance and presence into these countries was probably paved with bribery, I would not be surprised if the communist leaders would now have total knowledge of the “secrets” of these stupid countries.
    They will rue the day………

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