In The Huawei Case, Canada Is Caught Between A Rock And A Hard Place

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Joined: Fri Dec 29, 2017 10:47 am

Sun Dec 16, 2018 11:50 pm

The recent announcement that China had arrested a second Canadian signaled a worrying escalation in tensions between the two countries. It all started on 1st Dec 2018 when Canadian authorities, allegedly fulfilling a US extradition request, arrested Huawei CFO Meng Wanzhou. At the time of her arrest she had arrived at Canada's Vancouver International Airport from Hong Kong, and was transferring planes so she could go to Mexico. She is reportedly wanted in America to answer to charges accusing her of knowingly trading with Iran, in contravention of current US sanctions against the Islamic republic.
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In the aftermath of this high profile arrest, Canadians have been at pains to explain why they did it. Prime Minister Justin Trudeau stressed that Canada's judiciary is independent and the federal government was not in any way involved in the arrest. He explained that the country was merely playing its role in fulfilling the terms of an extradition treaty it has with the US. He also cautioned against reading political motives into the arrest, claiming it was a purely judicial matter.
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The Chinese don't see it this way. They clearly got ambushed by Meng's arrest. Many Chinese citizens also expressed surprise, because they know Canada as a largely friendly country, despite being part of the West that is generally hostile towards China. The Chinese foreign ministry warned Canada of consequences if Meng was not released. Although she was released on a $10 million dollar bail, the Chinese still protested, claiming she wasn't supposed to be arrested in the first place.

China's claims that her arrest was politically motivated were bolstered by none other than US president Donald Trump. In a statement to journalists, Trump suggested he could ask the Department of Justice to release her if they reach a favorable trade agreement with China. This statement severely embarrassed the Canadians, who all along had been insisting the arrest was not political. It also gave credence to allegations that Meng's arrest was a kidnapping for ransom.
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The Huawei Case comes at a time when the US and China are engaged in a tit-for-tat trade war. The US for years has been accusing China of unfair practices such as currency devaluation and protectionism. During his presidential campaign, Donald Trump promised to confront China on such practices, and his administration has been increasing tariffs on Chinese imports. The Chinese, while stressing their right to retaliate to any tariffs imposed on them, have accused the US of being a sore loser in the game of World Trade.

Though not entirely connected to the trade war, it seems Trump has plans to use Meng's arrest to exert some concessions from the Chinese. America accuses Huawei, China's largest private company, of violating US sanctions on Iran by trading with and sharing sensitive technology with the Persian country. The specific charge against Meng alleges she personally lied to US financial institutions by telling them Huawei had no direct connection to Skycom, while knowing it was an affiliate of the company. Skycom is the company Huawei is accused of forming to trade with Iran, hence bypass trade sanctions.

Other than the political interference, America is also being accused of using intimidation to prop up its technology sector. China has in the recent past invested heavily in research and development, which has benefited both the public and private sectors. It's instructive to note that barely 5 years ago, the most popular smartphones were foreign brands like Apple and Samsung. Currently, the top spots are firmly held by Chinese brands such as Huawei, Oppo, Vivo, ZTE and Xiaomi. The situation is being replicated in other parts of the world, where Chinese brands are aggressively taking ever larger market shares. In developing nations, Chinese smartphones are preferred because they're more affordable, with each update getting better quality-wise.
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The Chinese haven't just concentrated on entry level smartphones though. Huawei, ZTE and Xiaomi have been releasing new models that compete favorably against established western brands like Apple. This commitment to R&D, affordable prices and aggressive marketing have established Huawei as the leader in networking equipment, as well as the world's second largest smartphone maker by number of phones shipped. The company has been blazing the trail in the development of 5G technology, with trials at an advanced stage. The fact that even established western telecom companies like Britain's BT give Huawei networking contracts means the company has proved itself capable of not only matching but beating other companies like Sweden's Ericsson.

With each success Huawei celebrates though, the hurdles increase. The US has in the recent past increased its scrutiny of the company, citing security concerns. The Americans have expressed concern that Huawei phones and networking equipment could be used to spy by or on behalf of the Chinese government. These fears cannot be entirely dismissed, as the company's founder, Ren Zhengfei, is a former officer of the People's Liberation Army (PLA). Huawei has also been blocked from bidding for networking projects in America. Some congressmen have proposed stiffer penalties, like banning the company's phones altogether. Perhaps taking cue from the Americans, Canada, Britain, Australia and Japan have announced their own intentions to either stifle or ban Huawei altogether from playing a role in their countries' telecom sectors.

Huawei on the other hand has accused America of harassment and using underhand tactics to stifle competition. The rumors that Huawei is an arm of the Chinese government simply because the founder is a former officer of the PLA have never been backed by concrete evidence. Besides, there are many people in the west who have served in the army and gone on to start tech companies. That should not be a crime. Many analysts have also pointed out that the US government is guiltier than China of the crimes it accuses the Chinese of committing. Edward Snowden and Wikileaks provided a lot of data showing the US government's extensive spying efforts, including the NSA's ability to gain backdoor access to the servers of global tech giants like Google and Facebook. So it appears hypocritical for the Americans to punish Huawei based on rumors for crimes that they have been proven to be committing.
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Another aspect of America's bullying is visible from the nature of the sanctions imposed on Iran. The sanctions have never been endorsed by the UN, which means they're a unilateral effort by America. By arresting Meng, Canada claimed to be following the rule of law, but did they go against international law? If America has issues with Iran and decides to impose sanctions, why do other countries have to follow suit, even if they don't have any problem with Iran? Besides, going after an individual executive of an international firm has been described as a very hostile and aggressive move, instead of the more acceptable fining of the entire company.

So how is this going to play out? In as much as Canada claimed to be following the law, they can't deny this has morphed into a political mess. Whether they want to admit it or not, the Canadians have been enjoined in a war that hurts them somewhat, whichever side they pick. The Chinese have claimed the two Canadians arrested in the aftermath of Meng's detention are not connected to the case, but it's clear this is designed to pile pressure on the Canada. It's unclear whether China will arrest more Canadians, or even escalate the situation into a trade dispute. The Chinese foreign ministry has stated that Canada is responsible for how far the dispute goes, since they started it by arresting Huawei's CFO. This simply means if Meng is released, the entire misunderstanding could be swept under the rug. The Canadians cannot do this without antagonizing the US, which makes their dilemma even bigger.
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China has also reportedly started warning its citizens against buying Apple products, though this hasn't been verified. If true, it means the tit-for-tat games could severely hurt Apple, which counts China as its largest overseas market. American investors traveling or living in China are also getting nervous, as they don't know whether China could start arresting them like they did with the Canadians.

It will be interesting to see whether the impasse will be resolved through diplomacy or other forceful means. As things stand, it appears the second cold war is already underway.