AR­REST DEEP­ENS CON­FLICT BE­TWEEN U.S. AND CHINA

Ex­ec­u­tive de­tained in Canada works for sub­ject of U.S. se­cu­rity con­cerns

The Denver Post - - FRONT PAGE - By Paul Wise­man and Frank Ba­jak

The dra­matic ar­rest of a Chi­nese telecom­mu­ni­ca­tions ex­ec­u­tive has driven home why it will be so dif­fi­cult for the Trump ad­min­is­tra­tion to re­solve its trade feud with China.

WASH­ING­TON» The dra­matic ar­rest of a Chi­nese telecom­mu­ni­ca­tions ex­ec­u­tive has driven home why it will be so hard for the Trump ad­min­is­tra­tion to re­solve its deep­en­ing con­flict with China.

In the short run, the ar­rest of Huawei’s chief fi­nan­cial of­fi­cer height­ened skep­ti­cism about the trade truce that Pres­i­dents Don­ald Trump and Xi Jin­ping reached last week­end at the Group of Twenty sum­mit in Buenos Aires, Ar­gentina. On Thurs­day, U.S. stock mar­kets tum­bled on fears that the 90day cease-fire won’t last be­fore re­gain­ing most of their losses by the close of trad­ing.

But the case of an ex­ec­u­tive for a Chi­nese com­pany that’s been a sub­ject of U.S. na­tional se­cu­rity con­cerns car­ries echoes well be­yond tar­iffs or mar­ket ac­cess. Wash­ing­ton and Bei­jing are locked in a clash over which of the world’s two-largest economies will com­mand eco­nomic and po­lit­i­cal dom­i­nance for decades to come.

“It’s a much broader is­sue than just a trade dis­pute,” said Amanda DeBusk, chair of the in­ter­na­tional trade prac­tice at Dechert LLP. “It pulls in: Who is go­ing to be the world leader essen­tially.”

Huawei, the world’s big­gest sup­plier of net­work gear used by phone and in­ter­net com­pa­nies, has long been seen as a front for spy­ing by the Chi­nese mil­i­tary or se­cu­rity ser­vices, whose cy­ber­spies are widely ac­knowl­edged as highly skilled. A U.S. Na­tional Se­cu­rity Agency cy­ber­se­cu­rity ad­viser, Rob Joyce, has ac­cused Bei­jing of vi­o­lat­ing a 2015 agree­ment with the U.S. to halt elec­tronic theft of in­tel­lec­tual prop­erty.

Other na­tions are in­creas­ingly be­ing forced to choose Chi­nese or U.S. sup­pli­ers for next-gen­er­a­tion”5G” wire­less tech­nol­ogy. Wash­ing­ton has been push­ing other coun­tries not to buy the equip­ment from Huawei, ar­gu­ing that the com­pany may be work­ing stealth­ily for Bei­jing’s spy­mas­ters.

The ar­rested Huawei ex­ec­u­tive, Meng Wanzhou, was de­tained by Cana­dian au­thor­i­ties in Van­cou­ver, Bri­tish Columbia, as she was chang­ing flights Satur­day — the day that Trump and Xi met at the G20 sum­mit in Ar­gentina and pro­duced a cease-fire in their trade war. The Globe and Mail news­pa­per, cit­ing law en­force­ment sources, re­ported that Meng is sus­pected of try­ing to evade U.S. sanc­tions on Iran. She faces pos­si­ble ex­tra­di­tion to the United States, ac­cord­ing to Cana­dian au­thor­i­ties.

The Bri­tish bank HSBC is co­op­er­at­ing with U.S. au­thor­i­ties in its in­ves­ti­ga­tion, peo­ple fa­mil­iar with the mat­ter said Thurs­day.

Bei­jing protested the ar­rest but sig­naled that it doesn’t want to dis­rupt progress to­ward set­tling its trade dis­pute with the Trump ad­min­is­tra­tion. Chi­nese Com­merce Min­istry spokesman Gao Feng said China is con­fi­dent it can reach a deal dur­ing the 90 days that Trump agreed to sus­pend a sched­uled in­crease in U.S. im­port taxes on $200 bil­lion worth of Chi­nese prod­ucts.

In the view of the United States and many out­side an­a­lysts, China has em-

barked on an ag­gres­sive drive to over­take Amer­ica’s dom­i­nance in tech­nol­ogy and global eco­nomic lead­er­ship. Ac­cord­ing to an­a­lysts, China has de­ployed preda­tory tac­tics, from forc­ing Amer­i­can and other for­eign com­pa­nies to hand over trade se­crets in ex­change for ac­cess to the Chi­nese mar­ket to en­gag­ing in cy­bertheft.

Wash­ing­ton also re­gards Bei­jing’s am­bi­tious longterm devel­op­ment plan — “Made in China 2025” — as a scheme to dom­i­nate such fields as ro­bot­ics and elec­tric ve­hi­cles by un­fairly sub­si­diz­ing Chi­nese com­pa­nies and dis­crim­i­nat­ing against for­eign com­peti­tors.

In ad­di­tion to Trump’s tar­iffs, the ad­min­is­tra­tion is tight­en­ing reg­u­la­tions on high-tech ex­ports to China. It’s also mak­ing it harder for Chi­nese firms to in­vest in U.S. com­pa­nies or to buy Amer­i­can tech­nol­ogy in such cut­ting-edge ar­eas as ro­bot­ics, ar­ti­fi­cial in­tel­li­gence and vir­tual re­al­ity.

Ear­lier this year, the U.S. nearly drove Huawei’s big­gest Chi­nese ri­val, ZTE Corp., out of busi­ness for sell­ing equip­ment to North Korea and Iran in vi­o­la­tion of U.S. sanc­tions. But Trump is­sued a re­prieve, pos­si­bly in part be­cause the U.S. tech com­pa­nies are ma­jor sup­pli­ers of the Chi­nese giant and would also have been scorched. ZTE got off with pay­ing a $1 bil­lion fine, chang­ing its board and man­age­ment and agree­ing to let Amer­i­can reg­u­la­tors mon­i­tor its op­er­a­tions.

The U.S. and Chi­nese tech in­dus­tries de­pend on each other so much for com­po­nents that “it’s very hard to de­cou­ple the two with­out pun­ish­ing U.S. com­pa­nies, with­out shoot­ing our­selves in the foot,” said Adam Se­gal, a cy­berspace an­a­lyst at the Coun­cil on For­eign Re­la­tions.

Bri­tish Tele­com said this week that it would stop us­ing Huawei equip­ment in its 5G net­work, the BBC re­ported, and U.S. law­mak­ers have lob­bied Canada’s prime min­is­ter to freeze out the Chi­nese sup­plier.

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