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Sunday, May 10, 2020, 15:41
US vs. Huawei: Protecting domestic industries and crippling foreign competitors
By Leonard K Cheng
Sunday, May 10, 2020, 15:41 By Leonard K Cheng

The high profile aggressive international lobbying campaign launched by the United States this year and last against Huawei Technologies has couched in terms of personal privacy and state secrets, and even recast as a fight between autocracy and democracy. A rising tech company is thus painted as nothing less than a threat to the Western civilization.  

Huawei, it must be pointed out, is currently the world’s No. 1 telecom equipment and No. 2 mobile phone supplier, having overtaken Apple in the mobile phone market despite successive disruptions and sabotages triggered by US authorities.   

Ostensibly, the US heavy-handed hostile actions against Huawei stem from security concerns. In 2012, its House Intelligence Committee explicitly warned that using Huawei’s (and ZTE’s) equipment in the US telecom system could undermine the country’s national security. This warning was followed by a series of actions targeting the Chinese firms and these measures have since escalated into an all-out attack by the US administration.  

Evidence suggests that the US was not only out to protect its domestic industries, but also went much further in attacking Huawei in third countries with a clear intent to cripple the Chinese telecom equipment giant

In attacking Huawei, the US has pulled no punches, landing one body blow after another. It is a “take-no-prisoner” attitude. 

The US Congress has also got into the act, mounting a ferocious assault on Huawei. In June 2019 US Senator Marco Rubio initiated legislation that would prevent Huawei from seeking damages in US patent courts. In other words, it sought to deny the Chinese company the legal protection it would otherwise legitimately enjoy in the US.  

This move is unprecedented, as this legislative body aided and abetted the White House by putting the skids under the Chinese tech-giant, depriving it of the very legal recourse that is part of America’s democratic system of governance.  

In March 2020, after the Trump Administration’s campaign against Huawei failed to cripple the company, some US lawmakers began work on ways to bar Huawei from accessing US financial services. Nothing, it seems, is off limits; everything is on the table. 

The assaults on Huawei do not stop at American shores. It has been incorporated into its foreign policy agenda. As early as 2018 or before, the US government has repeatedly urged its allies to bar Huawei from their 5G systems. Among its bullying tactics is the constant threat to withhold US-gathered intelligence from its allies; it enticed Britain with the promise of a speedy and favorable post-Brexit trade deal. By hook or by crook, the US is hell-bent on bringing Huawei to its knees.  

Unfortunately for the US, most of its major allies including Britain, France and Germany, are not buying in. While most US allies have kept a straight face at the US posturing, the Hungarian Foreign Minister Peter Szijjarto had enough of the double talk and asked US Secretary of State Mike Pompeo, in his face, to stop practicing hypocrisy.  

The only significant US catch was Australia, a member of the “Five Eyes” intelligence club directed by the US, which decided to ban Huawei in August 2018, this despite Australia being a major beneficiary of Chinese economic prosperity. New Zealand, another Five Eyes member, promised to ban Huawei in February 2019 but backtracked later.  

While the World Trade Organization’s (WTO) “national security clause” (Article XXI subsumed from GATT) allows members to protect their domestic industries for the purpose of addressing real national security concerns, they are expected not to use it as a pretext for protectionism.  

When GATT adopted the national security clause, the original signatories likely did not envisage a signatory would attack any foreign firm in third markets, nor would they condone threats made to other signatories to force them to stop doing business with the target foreign firm. Imagine its shock on seeing a major signatory resorting to ethically questionable tactics against firms from another signatory country with which it is not at war.  

Cisco Systems, the biggest maker of network routers, is not a dedicated telecom equipment supplier like Huawei. Nonetheless, it is a competitor of the Chinese firm because it extends its core competence into the telecom infrastructure business by providing some solutions that are essential to 5G (without supplying basic 5G components such as base stations and antennas). Thus, banning Huawei from the US markets is clearly beneficial to Cisco and other US competitors such as Aruba and Dell EMC.  

In February 2019, Cisco released a report indicating that North America will account for a larger global market share of 5G services than Asia and Europe, and the company’s CEO Chuck Robbins suggested a month later that the US Government should not worry about Huawei dominating the 5G race. He was quoted as saying that the future infrastructure around the world will continue to be built on a combination of communication suppliers from Europe, China, US, etc.   

That is to say, Huawei’s US competitors do not feel that they are in any danger of being wiped out, though banning Huawei from the US markets will definitely help them keep the existing markets subject to competition from non-Chinese firms.  

In this sense, the US administration’s application of the national security clause has the effect of protecting domestic industries when they are not in danger. As such, it is veiled protectionism under the pretext of national security. The US, let us not forget, is no stranger to this subterfuge, having deployed it in the case of US tariffs on aluminum, iron and steel. 

Whatever has happened to the much-vaunted American sense of fair play? Evidence suggests that the US was not only out to protect its domestic industries, but also went much further in attacking Huawei in third countries with a clear intent to cripple the Chinese telecom equipment giant. Why?  

Would it have done so if Huawei were merely a third-rate tech company? Or is it because the US sees the company and others like it potentially threatening its unchallenged hegemony? Is America only comfortable with a China that is weak and backward? You be the judge.   

*The author is President and Chair Professor of Economics, Lingnan University, Hong Kong. The views do not necessarily reflect those of China Daily. 

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