14 | OCT | 2019
Huawei ban: heightened geoeconomic competition between the U.S. and China
A 3-D printed Android logo is seen in front of a displayed Huawei logo - Illustration: Dado Ruvic/REUTERS

Huawei ban: heightened geoeconomic competition between the U.S. and China

24/05/2019
13:18
Gabriel Moyssen
Mexico City
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Just as the Internet was born in a military environment, the current dispute around telecom giant Huawei barely hides the heightened competition between the United States and China for geoeconomic supremacy

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Just as the Internet was born in a military environment, meant to facilitate and protect communications in the Pentagon, triggering a technology revolution, the current dispute around telecom giant Huawei barely hides the heightened competition between the United States and China for geoeconomic supremacy.
 

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It is worth mentioning that until this moment the Chinese response to U.S. protectionist moves has been moderate; after all, Beijing sees itself as a developing country and the champion of free trade with the ambitious Belt and Road Initiative, linking markets from Vladivostok to Lisbon before an increasingly isolated and bellicose Washington.

However, the traditional Confucian patience and long-term planning could be reaching its limit, after the U.S. announced that is also considering cutting off the flow of technology to five Chinese companies leaders in video surveillance, citing as justification the alleged mistreatment of Muslim Uighurs in the western province of Xinjiang.

The firms, including Hangzhou Hikvision Digital Technology Co., Megvii, and Zhejiang Dahua Technology Co., which have developed facial-recognition capabilities using artificial intelligence (AI) in the USD $32 billion Chinese surveillance hardware market, “could be employed in espionage,” unidentified sources told American news outlets.

In parallel, Chinese President Xi Jinping called the Asian nation to embark on a new Long March and “start all over again,” in his first domestic tour since the escalation of the trade war two weeks ago.

Speaking in Jiangxi province, where Mao Zedong’s defeated Red Army started its famous Long March in 1934 to evade nationalist troops during the civil war, covering more than 9,000 kilometers of rugged terrain over 370 days, Xi was accompanied on Tuesday by China’s top trade negotiator, Vice-Premier Liu He, who in the last round of talks remarked that Beijing cannot make concessions on “significant principle issues.”

For his part, China’s Ambassador to the U.S. said that the Trump administration repeatedly “changed its mind overnight” and sunk deals that could have ended the conflict.

Ambassador Cui Tiankai slammed as “politically motivated” the White House’s decision to ban the transfer or sale of U.S. technology to Huawei, as well as the sale of its products to U.S networks, stressing that “such actions will really undermine people’s confidence in the normal function of the market.”

Nevertheless, “our door is still open,” he added.

Last-ditch talks?
While no new talks have been scheduled, the G20 summit on June 28-29 in Osaka, Japan, appears as the possible scenario of a new cold war or as the meeting where multilateralism and free trade were saved.
 

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Although Washington has removed the tariffs imposed on Mexican and Canadian steel and aluminum exports in order to ratify the new North American commercial agreement, President Donald Trump said that at the end of the six-month suspension of a 25% tariff on European and Japanese automobiles invoked under “national security” provisions, he will be looking for both Brussels and Tokyo to reduce their car exports to the U.S., possibly through quotas or some other restraints.

In the Chinese case, the U.S. attempts to retain its global hegemony are more crudely exposed on multiple fronts that go from protectionism and the sale of weapons to Taiwan to the “freedom of navigation operations,” provocatively carried out by the U.S. Navy in areas of the South China Sea considered by Beijing as part of its territory.

These attempts are not new or an invention of the current occupant of the White House. The U.S. National Security Strategy establishes that China is a strategic competitor and must be contained since its seeking to “challenge American power influence and interests” and erode “American security and prosperity.”

Telecom industry experts consulted by EL UNIVERSAL in English in Mexico City said that the “embargo” against Huawei has long been coming due to the boom experienced by the company and its encryption capabilities.

They highlighted, for instance, the detention of Meng Wanzhou, daughter of the founder of Huawei and its chief financial officer, last December in Vancouver, Canada.

Meng is under house arrest and faces extradition to the U.S. over possible “violation of sanctions against Iran.”

This is not about cell phones, it is about which networks producers will survive in the next phase of 5G, AI, cloud services, the Internet of Things, biotechnology, industrial automation, and aerospace. There are already few mobile network producers; the remaining companies have bought former giants such as Siemens, Alcatel, Lucent, and Bell Labs,” said one of the experts.

The question now is what will be the Chinese response. Among the more radical, the U.S. high-tech professional and author Cris Kanthan stressed in his blog World Affairs that “there are numerous ways China can cripple Apple. Shutting down Apple’s factories [in China] even for a few days will crush Apple’s stocks and the entire U.S. stock market.”

Virtually all of Apple’s products are assembled in China. A lot of the iPhone parts are also now designed and made in China, while the U.S. company gets 20% of its revenue—amounting to USD $50 billion—and 25% of its profits from Chinese consumers.

Kanthan also underscored that China controls nearly 90% of all mining and processing of rare earth minerals such as europium, neodymium, and thulium needed to manufacture electronics, jets, electric cars and even fertilizers.

Emphasizing the interdependence of both economies, he added that U.S. corporations make about USD $400 billion in revenue every year through subsidiaries in China.

GM manufactures more cars in China than in the U.S.; Boeing has sold 1000 planes to China in the last five years; Starbucks has 3,500 stores in China and is opening up two new stores every day (...) and American Express, JP Morgan, Goldman Sachs, etc., all operate out of China and make a lot of money.

Thus, China can find some excuse to shut down some of many of them to cause severe pain in the U.S. economy,” Kanthan wrote.

Editing by Sofía Danis
More by Gabriel Moyssen

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