US-China tensions are a threat to global trading system

Targeting of Huawei and other Chinese companies driven by politics

People pass in front of a Huawei newest flagship store in Shanghai, China, 16 July 2020. EPA/ALEX PLAVEVSKI

People pass in front of a Huawei newest flagship store in Shanghai, China, 16 July 2020. EPA/ALEX PLAVEVSKI

 

Over recent months, tensions between the US and China have grown, and Huawei has found itself being targeted as the Trump Administration attempts to dictate the terms of the global rollout of 5G. Now the Trump administration is also making threats against another Chinese-owned company, the social media platform TikTok.

Targeting of Huawei has been most notable in the UK, where the government has come under intense pressure to prevent Huawei playing a key role in the development of high-quality 5G connectivity - an approach set to be replicated in other markets and potentially here in Ireland. However, suspicion of Huawei is based entirely on poor US-China relations, rather than the safety and security of Huawei technology.

That criticism of Huawei has more to do with political posturing than facts is underlined by a 2019 paper from the Bruegel Institute. The paper, authored by Uri Dadush and Marta Domínguez-Jiménez refers to the bilateral trade imbalance between the US and China and their geopolitical rivalry, and found that: “This is exemplified by measures taken to isolate Huawei, China’s most successful firm operating in the technology sector”.

Over a 20-year period, Huawei has worked with partner enterprises in Europe to build a relationship based on confidence and trust. Speaking in Brussels last year, Dr Ciarán Martin, CEO of the UK’s National Cyber Security Centre referred to 15 years of dealings with Huawei and underlined the point that any difficulties the UK’s faces relate to issues about the standard of cyber security generally, and not any specific vendor. He said “… they are not indicators of hostile activity by China”.

Here in Ireland, the Government has published its National Cyber Security Strategy 2019-2024. Cyber security concerns are, and should be, an important part of government strategy – and Huawei is committed to implementing the highest standard of network security, and will remain, fully compliant with Government strategy, as must every vendor.

The respected journalist Martin Wolf, writing in the Financial Times, wrote recently that the rivalry between the US and China, and the resulting threat to global trade, ominously recalls events of the past.

In his book On China, Henry Kissinger, writing in 2011, asks: “Does history repeat itself?” He writes that many commentators, including some in China, have revisited the example of the twentieth-century Anglo-German rivalry as an augury of what may await the United States and China in the twenty-first century. Kissinger was the key through which Nixon opened the closed box of Sino-US relations and knows more about that relationship than most.

At the most superficial level China is now, as Germany was in the past, a resurgent continental power. The United States is in a similar position as Britain was then, described by Kissinger as “primarily a naval power with deep political and economic ties to the Continent” (in this case Asia). Kissinger said that “such a system has historically evolved into a balance of power based on equilibrating threats”– before asking if a system of strategic trust can replace a system of strategic threats.

As the Coronavirus pandemic has shown, we can move from a condition of freedom to a condition of restriction and danger very quickly. That is why normal political and diplomatic skills, put to work through established international organisations, are so important to world stability and prosperity.

For much of the last 70 years,what has kept the world peaceful and prosperous for most of its inhabitants has been the evolution of multilateralism, and organisations such as the UN, the EU, Association of Southeast Asian Nations (ASEAN), Organization for Security and Co-operation in Europe (OSCE) and the Council of Europe. These have been channels for negotiations and shared approaches to problem-solving. Using this process, the political leaders can, through good personal relations, iron out sticky issues that cannot be resolved at a lower level.

The development of the World Trade Organisation, to ensure that trade flows smoothly, predictably, and as freely as possible, has built an inter-dependence that, in normal circumstances, prevents any state from beggaring its neighbour. As we approach the campaigning period for the US Presidential election in November, political rhetoric must not be allowed to derail the stability that such international organisations have delivered.

In this context the ongoing, very public spat between President Trump and China, aimed at named Chinese companies, does not augur well for the future. It will almost certainly result in negative trading consequences for most open economies and impact global value chains.

In his memoirs, Kind of Blue, the long-serving British MP and Minister, Kenneth Clarke, might surprise readers by reminding them that Margaret Thatcher was a strong advocate of the European Single Market. This is a rules-based approach to sharing an economic market. Rules-based agreements are the only way that economic prosperity can be advanced and shared, whether one’s politics are right or left of centre.

That any government, or inter-governmental organisation, could, at will, target a company, or business, outside of agreed trading rules is not only unacceptable, it is downright dangerous. It has been alleged by the Trump Administration that it is possible under Chinese law for the government there to direct any Chinese company, such as Huawei, to carry out its instructions. There is no evidence that this has ever happened, and in the case of Huawei, it most certainly has not. This is a case of the kettle calling the pot black. It is the Trump Administration that is using this very unacceptable practice in directing American companies not to trade with Huawei.

To use that term coined by Henry Kissinger, in everybody’s interest it is time to replace a system of strategic threats with a system of strategic trust.

David J Kenny is Deputy CEO, Huawei Ireland

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