Looking at the broader Huawei issue

The ban on Huawei products is a result of the power war between China and the USA, while the rest of us are the direct losers, writes Paul Budde.

IT IS VERY SAD TO SEE that Huawei has become a victim of U.S.-China trade war politics and it will be very interesting to see how their court case against the U.S. Government will pan out. The company claims that the ban on its products is “unconstitutional”.

There is no indication that Huawei has been involved in any spying activity, nor does it appear to have any intention of doing so. Nor does it – or will it – allow its equipment to be used for such purposes. That would be completely against its own commercial interests.

Although this has now become clear, several sections of the media are still confused about the Huawei issue and they continue to talk about these spying activities.

As we know via the revelations from Snowden, any government can use any technology from any manufacturer for spying purposes. And the U.S. Government has perhaps the best capability of any nation to do that to its strategic advantage.

While Huawei might have violated sanctions against Iran, for which the company’s CFO Meng Wanhzou has been arrested in Canada for extradition to the USA, several American companies have been caught violating the same sanctions and they got off with a fine.

What makes this situation quite different is that in the background of all this, the power wars between the USA and China loom large.

China’s rise has been great for the world economy. It has created a very large national consumer market that is buying goods produced in other countries and this is great for exporting countries. It also requires a lot of raw materials and agricultural products from other countries. At the same time, it has become a very cheap producer of many consumer goods that are exported from China to eager consumers elsewhere.

But at the same time, China’s power has increased and it is now challenging other economies, namely the USA.

Arm wrestling and chest beating are now concentrating around the different political economic models between the two giants. Many of the large Chinese companies are directly or indirectly, partially or fully, controlled by state-based organisations and profit is only one element by which the success of these companies is measured.

This is in shrill contrast to the USA, where neoliberalism politics only favours profits. The U.S. has so far failed to get a better understanding of this system — in the end, the truth will need to be somewhere in the middle as just leaving everything to the market is clearly not working, either.

EU stops short of a ban on Huawei in its 5G strategy https://t.co/ZcEs1YqlrW pic.twitter.com/cV0iaeuZYj
— Bloomberg Economics (@economics) March 27, 2019

However, there is no doubt that China will have to lift its game within the international community. If China had updated its international policies as it became economically more powerful over recent decades, the situation would not have escalated to the level that we see today.

Through soft power, China is getting “brand China” in many different forms out in the world. They are helped here by state propaganda sources, government contracts, overseas government projects and so on. Other more open societies are rightly worried about the values China stands for, or perhaps the lack of international, human and environmental values.

Back in 2001, when China entered the World Trade Organisation (WTO), the country was treated as a developing economy and was given a range of exclusions from the WTO rules. I remember writing at that time that I thought this was unnecessary as “China could look after China”. And that was what it did.

China doesn’t have the same institutions in place to support the rule of law as those that exist in Western democracies. There is very little oversight around what is being done by the Chinese Government and hardly any transparency in its decision-making processes. At the same time, it is evident that it is extending its political power — for example, through its “One Belt, One Road” policy, especially in the more vulnerable developing world.

I was shocked to hear that China owns the strategic Australian Port of Darwin. The port is struggling to pay off its debts and this could lead to the port authorities having to hand over control to China. Similar situations occurred in Sri Lanka, Pakistan and some of the African countries and these are worrying developments.

Australia as a beggar nation: How the Country Liberal Party made the Port of Darwin a Geo-strategic requisite for China #auspol https://t.co/uV9OHzXkGv https://t.co/WeTUlGPinh pic.twitter.com/BQazDsqO4w
— Duchess Frida (@DuchessFrida) March 27, 2019

At the same time, there is clear evidence that at overseas universities where there are large numbers of Chinese students, for instance, the Chinese Government directly controls information through newsletters that it provides to these students.

Furthermore, under Chinese laws, its citizens and businesses, wherever they are based, are expected to provide their loyalty to China and, on paper at least, they can be ordered to operate primarily in the best interests of China.

The social code, as it gets implemented in China, is another policy that most people in western democracies would not like to see happening in their countries.

With increased economic power, what would stop China from implementing, through soft power, such policies in relation to those who want to do business with them? The fact that foreigners are arrested arbitrarily as a tit-for-tat response to arrests of Chinese people elsewhere is another very worrying signal from the political regime under which China operates.

So, the Huawei issue needs to be viewed within this context. Regrettably, this company has become the political victim and the question is whether the current boycott of the company is the right course of action for the Western world to take. So far, only Australia and New Zealand have followed the U.S. in banning Huawei products, perhaps Canada will follow but very few others are lining up.

In the end, the political problems – which are real – need to be dealt with on a political level. In such a situation you might think sanctions, but I don’t believe that singling out one company is the right thing to do.

Huawei is a leader in mobile innovation and efficiency. It is a great global competitor and it would be a loss for all of us if they were to be made the political scapegoat for Chinese Government policies. The first ones to miss out on innovations and competitive prices will be Australia and New Zealand — so much for being staunch followers of U.S. politicking.

Trump’s campaign to ban Huawei runs into global opposition https://t.co/1DB8wuqP0S pic.twitter.com/G5V3fB9DrL
— Bloomberg Graphics (@BBGVisualData) March 26, 2019

Paul Budde is managing director of Paul Budde Communication, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.