Why Trump's Huawei Ban Is Unlikely To Persist

moon of alabama

The Washington Post World page summarizes a piece about consequences of Trump's ban on the Chinese telecom equipment manufacturer Huawei:

A key chip designer and British telecom companies suspended some dealings with the Chinese tech giant over security concerns.

However, nothing in the actual piece talks about security concerns. (I point this out because I perceive a trend towards such misleading summaries and headlines which contradict what the actual reporting says.)

The British processor company ARM, which licenses its design to Huawei, cites U.S. export controls as the reason to stop cooperation with Huawei:

The conflict is putting companies and governments around the world in a tough spot, forcing them to choose between alienating the United States or China.Arm Holdings issued its statement after the BBC reported the firm had told staff to suspend dealings with Huawei.
An Arm spokesman said some of the company’s intellectual property is designed in the United States and is therefore “subject to U.S. export controls.”

Additionally two British telecom providers quote U.S. restrictions as reason for no longer buying Huawei smartphones:

BT Group’s EE division, which is preparing to launch 5G service in six British cities later this month, said Wednesday it would no longer offer a new Huawei smartphone as part of that service. Vodafone also said it would drop a Huawei smartphone from its lineup. Both companies appeared to tie that decision to Google‘s move to withhold licenses for its Android operating software from future Huawei phones.

These companies do not have security concerns over Huawei. But the casual reader, who does not dive down into the actual piece, is left with a false impression that such concerns are valid and shared.

That the Trump administration says it has security reasons for its Huawei ban does not mean that the claim is true. Huawei equipment is as good or bad as any other telecommunication equipment, be it from Cisco or Apple. The National Security Agency and other secret services will try to infiltrate all types of such equipment.

After the sudden ban on U.S. entities to export to Huawei, chipmakers like Qualcomm temporarily stopped their relations with Huawei. Google said that it would no longer allow access to the Google Play store for new Huawei smartphones. That will diminish their utility for many users.

The public reaction in China to this move was quite negative. There were many calls for counter boycotts of Apple's i-phones on social media and a general anti-American sentiment.

The founder and CEO of Huawei, Ren Zhengfei, tried to counter that. He gave a two hour interview (vid, 3 min excerpt with subtitles) directed at the Chinese public. Ren sounds very conciliatory and relaxed. The Global Times and the South China Morning Post only have short excerpts of what he said. They empathize that Huawei is well prepared and can master the challenge:

Ren said that Huawei will not easily give up on US chips but has a backup. The company is able to make American-quality semiconductors but does not mean it will not buy them, he said.Huawei is nevertheless “very grateful” to American companies, who have contributed a lot to Huawei. Many of Huawei’s consultants are from American companies such as IBM, Ren said.
Asked how long the crisis will last for Huawei, Ren said the question should be directed at Trump instead.

But Ren said much more than that. Yiqin Fu, a PhD candidate at Stanford University, translated other parts of the interview which are more interesting then the English media reports:

Yiqin Fu @yiqinfu - 11:43 utc- 22 May 2019Remarkable that Huawei's CEO never appealed to patriotism in his two-hour interview with the Chinese press yesterday. Instead, he said 1) nationalism is bad for the country; 2) China's future hinges on reform and opening up, and 3) China should honor its promises at the WTO.
Re innovation, Huawei's CEO said that China wouldn't be able to innovate given the state of its education. "China is used to throwing money at things. This strategy works for roads and bridges but won't work for chips. How much scholarship is there in our doctoral theses?"
Huawei CEO: China should incentivize foreign talent to migrate -- Israel and the U.S. became innovation hubs because they were able to attract migrants from the Soviet Union and Eastern Europe. China will waste lots of time trying to innovate with closed doors.
Ren's tone stands in stark contrast to that of state media and official responses from Chinese ministries re Huawei. He even explicitly said, "Huawei products are only commodities. The only basis for using them is if you like them. Politics has nothing to do with it."
Also interesting that Chinese and English-language media focused on entirely different things when reporting the two-hour interview. Chinese intellectuals mostly seized on Ren's comment re innovation and nationalism, while the English-language press ran with headlines like these: Huawei CEO says U.S. ‘underestimates’ the company’s strength

U.S. media often portrait China as tight dictatorship where no one can speak his mind. But these public statements by Ren are nearly all in contradiction to China's current official policies.

In an earlier piece on Trump's trade war with China we pointed out that the U.S. can not win this game because Trump's policy lacks international support:

Few other countries will join Trump's anti-China campaign. It will further isolate the United States. That is quite an achievement for the MAGA man.

A new Bloomberg opinion piece agrees with that view:

Any effort to exert economic pressure on China, or to pursue selective de-integration with Beijing, would be most effective if coupled with a concerted effort to deepen integration with America’s democratic allies. Many of them also have growing concerns about Chinese economic coercion. Yet by launching trade skirmishes not just with China but with allies in Europe and the Asia-Pacific, the Trump administration has created discord where unity is urgently needed. And by reportedly failing to coordinate this ban with close allies beforehand, the administration risks heightening widespread European anger about American unilateralism under Trump.

There is also the question of whether Trump will stick with his current hard line. That question is the also the most important for the Europeans. 

Why should they break with China when Trump is likely to reverse his decision? He says he still wants to make a deal.

The consequence of the the 737 MAX accidents give China a tool to exert pressure of its own. The credibility of the U.S. regulator FAA is damaged as it was the last one to ground the planes. It is China that will decide when those planes are allowed back into its air. What if it does not do that. What if it buys less planes:

No other country has greater demand for aircraft: In the 20 years through 2037, Boeing estimates Chinese purchases at 7,690 new planes worth $1.2 trillion.

Airbus will be happy to sell all those planes. Unless of course Trump makes a deal and lets Huawei off the hook.

That will be -for now- most likely be the end of the story.

Posted by b on May 23, 2019 at 09:46 AM | Permalink

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