US China trade talks and Huawei is­sue

The Pak Banker - - FRONT PAGE -

China has yes­ter­day warned Canada ei­ther to re­lease Huawei's chief fi­nan­cial of­fi­cer Meng Wanzhou or get ready for se­vere ac­tion. The Chi­nese for­eign min­istry sum­moned Cana­dian am­bas­sador and reg­is­tered a strong protest over the ar­rest of Meng Wanzhou. The ar­rest of Huawei's chief fi­nan­cial of­fi­cer has cre­ated stir in the mar­ket at a time when two great eco­nomic pow­ers try to bridge their dif­fer­ences over each oth­ers' trade con­cerns. The 90-day trade truce be­tween China and the United States reached over the week­end on the side­lines of the G20 meet in Ar­gentina is al­ready prov­ing to be frag­ile. Chi­nese telecom­mu­ni­ca­tions gi­ant Huawei's chief fi­nan­cial of­fi­cer Meng Wanzhou was ar­rested re­cently by Cana­dian author­i­ties, act­ing on an ex­tra­di­tion re­quest from the US Ms. Wanzhou is the daugh­ter of the com­pany's founder Ren Zhengfei, a for­mer mem­ber of the Chi­nese mil­i­tary. The ar­rest hap­pened around the time US Pres­i­dent Don­ald Trump and Chi­nese Pres­i­dent Xi Jin­ping met in Buenos Aires to defuse trade ten­sions be­tween their coun­tries, but news of the ar­rest broke only on Wed­nes­day. Huawei at this mo­ment has been ac­cused of breach­ing Amer­i­can sanc­tions against Iran, but US law­mak­ers have also been con­cerned about the Chi­nese gov­ern­ment us­ing the com­pany to carry out spy­ing op­er­a­tions on for­eign soil. Last year, it is worth not­ing, Chi­nese tele­com gi­ant ZTE reached a set­tle­ment with the US gov­ern­ment over charges of ex­port­ing banned items to Iran. Mar­kets across the world were neg­a­tively af­fected as trade ten­sions looked to flare up once again be­tween the world's two largest economies.

It is hard to de­ter­mine whether the present US ac­tion against the Huawei of­fi­cial is based on le­git­i­mate con­cerns about na­tional se­cu­rity or if the US has sim­ply at­tacked China on yet an­other front in the on­go­ing trade war. To be sure, other coun­tries, in­clud­ing Aus­tralia and the United King­dom, have also been quite wary about do­ing busi­ness with Huawei due to the al­leged gath­er­ing of in­tel­li­gence by the com­pany. In par­tic­u­lar, they fear that Huawei's in­volve­ment in build­ing their 5G net­work could lead to prob­lems linked to cy­ber-es­pi­onage. At the same time, rad­i­cal anti-Chi­nese politi­cians in the US have every rea­son to ex­ag­ger­ate na­tional se­cu­rity con­cerns sim­ply in or­der to jus­tify pro­tec­tion­ist sanc­tions against Chi­nese com­pa­nies. Huawei has clearly been seen by many as a se­ri­ous threat to the global dom­i­na­tion ex­erted by Amer­i­can tech­nol­ogy com­pa­nies. Ei­ther way, re­cent ac­tions are bound to have a neg­a­tive im­pact on US-China trade ties as the Chi­nese will not be too happy about the con­tin­u­ing as­sault on multi­na­tional com­pa­nies which have their roots in China.

US con­cerns about na­tional se­cu­rity are also closely re­lated to ac­cu­sa­tions against Huawei of vi­o­lat­ing in­tel­lec­tual prop­erty rights with the tacit ap­proval of the Chi­nese gov­ern­ment. The ar­rest might thus sug­gest that the US may not go soft on its de­mand for the pro­tec­tion of in­tel­lec­tual prop­erty rights dur­ing its talks with the Chi­nese author­i­ties in the next few months. With the rapid es­ca­la­tion in trade ten­sions over the year, it will take se­ri­ous ef­forts to bring a last­ing so­lu­tion that is ac­cept­able to both Amer­i­can and Chi­nese politi­cians.

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