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Trump's Huawei action has deep consequences

By Daryl Guppy | chinadaily.com.cn | Updated: 2019-05-25 08:30
A crew hangs a Huawei advertising banner on the side of the Las Vegas Convention Center as workers prepare for the 2018 CES in Las Vegas, Nevada on Jan 5, 2018. [Photo / Agencies]

We need to look beyond the outrage and indignation created by US President Donald Trump's executive order effectively banning US companies from doing business with Huawei. If we focus only on indignation about Huawei, then we allow "a leaf to obscure the view of Mount Tai", as the saying goes.

Important as Huawei is, there are much bigger issues at stake for China's trade and investment. The executive order follows the precedent set when Trump used vague security grounds to unilaterally impose tariffs on steel.

This was the first warning shot — and to their discredit, affected economies tried to tackle the consequences individually rather than by banding together and working within the established global rules-based order. This uncoordinated response laid waste to that order and set a direct path to the executive order that has hit Huawei hard.

But the consequences are wider than just Huawei, because it involves an international logistics chain being bullied and intimidated by a single country. No one, friend or foe, is immune to this rogue-like behavior.

Let's start at the beginning. The charges against Huawei have not been substantiated, and despite offers by Huawei for a full and open inspection the offer has not been taken up. Yet the "security threat" narrative continues.

The security and compliance concerns about Huawei are a fig leaf designed to distract from a much broader agenda. Huawei is the only serious competitor to Apple iPhone in terms of quality, features and price. Huawei takes a leadership position in 5G applications and AI development. The attempt to destroy Huawei is an attempt to destroy competition to US industry and products. It is a vicious form of protectionism that goes beyond simple tariffs.

It increasingly appears that part of "Make America Great Again" involves denying the right of China to continue to advance and improve living standards. This is also seen in statements that demand China abandons its Made in China programs. For what reason would they have to do this except hold back China's progress?

This executive order opens the door to de-facto unilateral sanctions. The refusal to supply Huawei today is an unofficial sanction and tomorrow it may be applied to another Chinese company, or a European competitor for an American product.

How easy it is to tweet, or draft an executive order, that applies de-facto sanctions to Chinese companies listed on NASDAQ and the NYSE. No need to attack them directly, because an executive order can sever their supply chains or prevent fund transfers through US co-respondent banks. The withdrawal of Beijing-based Kunlun from the US market following US government pressure is an early precursor of this danger.

Shall we apply this to electric cars? To solar panels? To washing machines, air conditioners and refrigerators? To Chinese investment in international business? To companies that are supplying raw materials to China — materials like iron ore, which are suddenly deemed strategic?

Despite not being a signatory to treaties like the United Nations Convention on the Law of the Sea, the United States is fond of scolding China about the need to observe the global rules-based order while reserving for itself the right to undermine, ignore and sabotage those very rules. It is a mistake to think the Huawei issue is just between the United States and China. These practices could be just as easily applied to Europe, South America, the UK and Australia.

The solution lies in resolute, coordinated and cooperative support for the existing structures of the global rules-based order, including WTO dispute resolution mechanisms. Business councils and business representatives, along with organizations like the Silk Road Chamber of International Commerce, must be strong supporters and advocates.

This is not just about Huawei or China. It is about the survival of a global rules-based trading environment from which all benefit.

Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp.

The views do not necessarily reflect those of China Daily.

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