US President Donald Trump has signed an executive order that paves the way for the ban, aimed at US telecommunications companies, to buy the products of Huawei, a giant of the Chinese telecom infrastructure, which has long been targeted by the US administration. Trump declared a state of national emergency because of threats looming over American technology. The executive order prohibits US companies from entering into transactions with companies from opposing countries, authorizes US Commerce Secretary, Wilbur Ross, in consultation with other White House officials, to block those transactions involving information or communication technologies, that “represent an unacceptable risk to national security in the United States“.
The order was followed by the Commerce Department’s decision to include the name of Huawei Technologies and its subsidiaries on the ‘black’ list of the Bureau of Industry and Security (BIS), as they are engaged in activities contrary to the interests of security United States national. This means that it will be more difficult for the Chinese telecommunications giant to be able to do business with American companies. Trump’s decision makes US-China relations even worse, deteriorated by the recent escalation of trade war.
The Chinese telecommunications giant responded by stating that the authorities’ decision is a “bold violation of Huawei’s rights“. Also, according to the company, the restrictions imposed by Washington will not help the United States to gain security and become stronger, rather it will force the country to use lower quality alternative products at a higher price and later than other countries in the construction of 5G networks. Huawei has argued that the decision of the US authorities affects the interests of US companies and consumers.
Despite this, the company expressed its willingness to maintain an open dialogue with the US authorities to guarantee the safety standards of its products. Notifying that “unjustified restrictions will violate Huawei’s rights and raise further legal issues“.
Huawei has recently faced a global audit, with a number of states claiming that the company is linked to the Chinese government and has been spying on its behalf. Although both Huawei and the Chinese government have firmly rejected these claims, Australia, Japan, New Zealand and the United States have banned Huawei from participating in government contracts in 2018.
The European Commission this morning reacted to the American decision by claiming that “it is putting into practice a series of political and legislative measures to guarantee the integrity of the 5G networks“, but “it is up to the Member States to assess the risks associated with each proposal by ensuring safety national and European, “said a Commission spokeswoman, Nathalie Vandystadt.
China commented today warning the US against possible further hostile actions on the trade front, “We urge the US to stop these unfair actions … to avoid further damage to economic and trade relations between China and the US,” he explained. spokesman of the Ministry of Commerce Gao Feng.
What seems useful to know is who will lose out, beyond the profound motivations of this decision that further exacerbates the war of duties between China and the United States, for this we interviewed Ross Feingold, specialist consultant in Asia, who has been working for years in particular precisely on China.
Trump returned to the attack against Huawei. Does this executive order come under the trade war against China?
The Executive Order did not name any countries, so, the Trump Administration is sending a worldwide message that the tolerance previously shown by the US for bad actors in commercial transactions no longer exists. However, many will assume that the Executive Order is linked to the ongoing trade negotiations with China and that the timing of the Executive Order is meant to be negotiating leverage. Such a view risks missing the broader security and political environment that now exists between the US and China. There are other factors beyond market access to China for US companies in unrelated industries or the amount of US products China purchases. Even if, for example, the US – China trade imbalance was far smaller, the issues of concern to the Trump Administration that led to the Executive Order would still exist, and these issues cannot be resolved in a trade agreement. Although the Trump Administration has shown a greater willingness than its predecessors to utilize legal and regulatory powers to achieve better outcomes where trade and national security intersect, it is not a new US approach. By way of example, to punish financial institutions that engaged in transactions with Iran and North Korea, the US has in the past ten years assesses enormous monetary penalties on banks from allied European countries, and those penalties were assessed regardless of the overall relationship the US had with those countries at the time (and in some cases, the overall relationship was otherwise positive). Given the current situation in US-China relations, with many issues of concern, removing the trade dispute won’t resolve other issues.
It seems that this provision does not immediately enter into progress, does this mean that it could be modified or even withdrawn based on what will happen in the China-US trade agreements?
The implementation of the Executive Order is not immediate so as to allow the Department of Commerce to issue implementing regulations after consultation with other agencies such as the Departments of State, Treasury, Defense, and the Federal Communications Commission. This might also allow industry some time to provide feedback, though, it seems for now that the policy is going to be strictly implemented. The outcome of the US-China trade negotiations is unlikely to have a significant impact on the issues covered by the Executive Order.
Does this provision demonstrate, as some observers claim, the fear and weakness of Trump and therefore of the USA in front of the Chinese force in terms of technology and artificial intelligence?
The US ecosystem in the technology industry and artificial intelligence, from funding to research and development to bringing product to market to investor exit through a public listing or sale remains strong. Although Chinese companies continue to improve their capabilities, they still lag in many important areas such as design and manufacture of the most advanced semiconductors. This situation remains unchanged notwithstanding that much hardware production takes place in China and other parts of Asia. Most importantly for industry participants, the US remains far ahead of China in rule of law and intellectual property protection. The key persons who propose such policies are from the national security agencies and are looking primarily at national security risk issues, which includes past behavior by Chinese companies and China’s government, and risks that exist to US information and infrastructure security if these companies continue to operate in the US as they have up to now. Thus, it is premature to judge the Executive Order as being based on fears about China overtaking the US or that it is based on purely commercial considerations to help US companies have less competition.
Do you think China needs US technology to maintain its level of technological prowess?
Despite the rapid progress of China’s research and development capabilities, it still requires access to foreign (not only US) technology to address the many areas where China still lags behind. Thus for example Chinese companies invest in technology companies in Israel and Germany. Whether advanced semiconductor chip design or manufacturing processes, driverless vehicles, or hardware and software security, at present China has significant limitations. The many recent cases of Chinese citizens prosecuted in the US for corporate espionage, often involving information technology products, shows that there are areas where China’s capabilities lag behind the US and that some will attempt to use theft rather than invest in their own research or pay the costs to license existing technologies.
What are the economic consequences of this anti-Huawei executive order for American companies?
American companies will be forced to carefully assess their supply chains to ensure that they do not violate the new regulations. This will take time and cost money, and increases legal and political risk should violations occur. Where it becomes necessary to locate alternative suppliers, the cost and time commitment will be significant, especially as the products involve must meet complex technical specifications. This will also present opportunities for American companies to offer products in place of Chinese companies. We should expect to hear US politicians advocating “Buy American” though only time will tell if American companies can sufficiently replace Chinese ones.
And what will the consequences be for consumers?
Consumers might face higher costs to the extent non-Chines products either cost more and / or the supply chain must spend money to “qualify” new suppliers. There might also be time delay in bringing new products and services to market, which will be frustrating for consumers. For now, higher costs and longer waits appear inevitable. The good news for consumers might be that they have less to worry about with regard to the security of their data; however, the reality is US companies and equipment are not immune to data breaches regardless of where the products come from .
What economic damage and industrial strength will Huawei cause the executive order of Trump? What damage will the company have?
Huawei’s rapid expansion worldwide has made it a formidable competitor to US and European companies for networking equipment and other communications infrastructure, and more recently, in the handset business where its phones increasingly compete with Apple and Android phones made by companies such as Apple and Samsung. However, what concerns the US more than Huawei being a competitor to US companies, is where due to lack of other cost effective options Huawei equipment now is used for critical communications infrastructure. Given concerns about Huawei’s relationship with the Chinese government, this situation is unacceptable to the US government. The policymakers in the US are not only thinking about how Huawei equipment is used today, but how it would be used in the future as technology continues to evolve and more of infrastructure (electricity grid, processes that support smart cities) or individuals lives are connected to the Internet. The potential damage is enormous, if an equipment provider with a dominant position in supplying critical infrastructure networking equipment decides to act with, or is forced to act, with a hostile government. Given the potential for military conflict between the US and China, or other types of conflict such as a trade dispute, it is understandable that the US government has decided it can no longer can accept these risks. It is possible for Chinese companies to address US concerns, as ZTE attempted to do in 2018 when it reached a settlement with the US government. Whether Huawei or other Chinese companies can successfully do so remains to be seen though in the near term, it is unlikely they can find quick or easy solutions.
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