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Analysis

Free Market Nightmare: Why US Pressing China’s Huawei?

Sunday 3 February 2019
Free Market Nightmare: Why US Pressing China’s Huawei?

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Alwaght- Trump’s election as the 45th president of the US introduced a big transformation to the global diplomacy and economy. As a businessman who has spent his life trading and bargaining, Trump has reduced the political logic on the international stage to commercial exchange. This means that the US relations with the world countries were based on profit logic.

Trump focused on West Asia and China. He lashed out at his predecessors for spending billions of dollars on West Asia and also for the trade deficit with China. To tip the trade balance in the US's favor, Trump resorted to protectionist policies and imposed heavy tariffs on the Chinese goods imported to the US. In the first step, he introduced tariffs on over $200 billion worth of Chinese goods.

As this pressure campaign continued over the past months, the Chinese tech companies, among them Huawei, were squeezed in the middle of Washington’s war of reckoning and trade against Beijing. The US charged Huawei for a number of crimes, including violating the US sanctions against Iran. The criminal charges led to arrest of the Huawei Chief Financial Officer Meng Wanzhou in Vancouver, Canada. Despite the fact that she was released on bail 10 days later, her detention heavily affected a political and commercial dispute of China with the US and Canada.

The strains on the multinational company by the US come while Huawei is the world’s second largest smartphone maker by volume. It is also one of the world’s biggest communications companies contributing many countries’ journey of upgrading to the fifth generation (5G) mobile networks. Huawei’s power is increasingly expanding and is conquering new markets in a fierce competition with other Western communications technology companies. Now the question is why the US is joining the fight against Huawei? How will the anti-Huawei measures by White House influence the trade war between the two global heavyweights?

The US drives against Huawei

1. Seeking to undermine tech giant in the competition with American companies

To understand the US fear of the Chinese communications company, we need to take a look at the sales figures of the company released in late 2018. In the fourth quarter of 2018, Huawei sold 52 million smartphones worldwide while the American giant Apple sold only 45 smartphones. These figures apparently set off the alarm bells to the American tech companies, on top of them Apple. As a result, the American administration, just contrary to the principles of free market, has stepped in the case to seriously weaken the rivals of the American companies in various areas of rivalry.

The current policy of the Trump administration against Huawei is the continuation of Washington’s policies against Apple’s biggest rival across the world.

In early 2018, the US cut off ZTE, another Chinese communications company from the US market for what it claimed the company’s flouting of sanctions against Iran and North Korea. At the present time, the US government seems to intend to block Huawei's access to the US market.

2. Implementing “America first” policy

Since his presidency, Trump raised the “America first” slogan which cherished a return to what he called lost American global grandeur. The policy, carrying in its nature the nationalism and a grave opposition to the globalization of the economy, very brazenly opposes the presence of other countries’ tech companies in the American economy under the pretext of endangering the its national security and economy. This view is observable in many American officials’ remarks. For example, the US Secretary of Commerce Wilbur Ross said that the Chinese companies for years breached the American exports regulations and undermined the sanctions. According to Ross, they mainly used the American financial system to facilitate their “illegal” commercial activities. “This will end”, he insisted.

FBI Director Christopher Wray said at a press conference last week that Huawei “relied on dishonest business practices that contradict the economic principles that have allowed American companies and the United States to thrive.” He added: “Firms like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat.”

Adopting such an approach, which focuses on the national security and the possibility of Huawei spying on American citizens, indicates that the Trump government is drawing a border around the US to reduce the foreign goods entry to the US for the final aim of preparing the ground for a kind of national economy where the emphasis is on purchase of American-made goods.

Distrust undermines prospects of accord

Detention of Huawei’s CFO in Canada under an operation contributed to by the American intelligence agents comes while President Donald Trump and his Chinese counterpart Xi Jinping at a meeting at the G20 summit agreed a truce to the trade war which so far led to imposition of billions of dollars in tariffs on each other’s goods. Huawei CFO's arrest triggered a strong response from the Chinese officials. Now further restrictions on the Chinese products can escalate the tensions both in economic and political ties.

Chinese Foreign Ministry on January 29 rejected the indictment against Huawei issued by US Department of Justice, calling it “unfair” and “immoral” and aimed to cripple the Chinese companies. A day after the foreign ministry’s statement, a trade delegation traveled to the US to discuss a settlement to the commercial war. After the end of the first round, China’s state-run news agency Xinhua reported the high-level negotiations made significant progress within two days.

The news of progress was also confirmed by the US trade negotiator Robert Lighthizer. But many economists still cast doubt on the two sides’ ability to strike a comprehensive deal.

On the other side, Trump warned that if Washington and Beijing fail to seal a deal by March 1, the date of a deadline, he will double the $200 billion worth of levies on the Chinese imports. He said he did not expect an extension to the set deadline. So, in such a condition, increased pressures on Huawei under the guise of fraud, stealing intelligence property, and violating Iran sanctions mean that Washington is dissatisfied with trade talks progress.

 

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