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The Real Target of the Huawei Sanctions and the Trade War

The Real Target of the Huawei Sanctions and the Trade War

The Real Target of the Huawei Sanctions and the Trade War
February 01
20:46 2019

Washington — (Analysis) Meng Wanzhou, the Chief Financial Officer of Chinese telecommunications titan Huawei, appeared in Canadian court on Tuesday to fight her extradition to the United States. If she is extradited, she will face fresh charges issued by the U.S. Justice Department (DoJ) accusing Meng and Huawei of engaging in bank fraud and trade theft, as well as violating U.S. sanctions against Iran. The DoJ’s indictments come just two days before scheduled talks between the U.S. and China to negotiate an end to the Trump Administration’s multi-billion-dollar trade war. These new accusations, which Meng and Huawei flatly deny, will undoubtedly strain trade talks and U.S.-China relations.

Just a year ago, Huawei was scarcely an issue on Americans’ minds; Americans happily bought goods with the familiar “Made In China” mark. Huawei and China’s alleged wrongdoings were thrust forward into the public discourse when U.S. President Donald Trump announced a 30 percent tariff on solar panel imports (China being the U.S.’s biggest source of imported solar panels), launching what we now know as the U.S.-China trade war. What followed was intense scrutiny of all things Chinese, including products like Huawei phones and telecommunications hardware.

Since the beginning of his presidential campaign, Trump has railed against the U.S. trade deficit with China. He claimed China was “ripping off” the United States and tariffs were the only thing that would make China trade fairly. The deficit since the U.S. and China began trading is nearing $420 billion. This is no small number but, when compared with American student loan debt nearing $1.6 trillion and credit card debt over $1.05 trillion, the China trade deficit becomes less significant. Furthermore, most economists agree that trade deficits aren’t inherently good or bad. While Chinese companies saw an increase in sales, many don’t see the benefits U.S. consumers see in the form of lower prices.

Is Trump actually waging a trade war to protect American consumers from unfair trade practices? If Trump cared about struggling people in this country, he would not have backed the 2017 tax cut plan that eliminates the federal estate tax and the alternative minimum tax, which are only paid by the super rich. Is Trump a deficit hawk trying to limit waste and excess spending wherever possible, including trade? No, Trump reversed the course of the budget deficit since assuming office, taking it to six-year highs. Trump’s cabinet is one of the wealthiest in recent memory, filled with plutocrats hailing from Goldman Sachs, private equity firms, and good old inheritance wealth, leaving no doubt the interests of average Americans will go unrepresented.

So, what is it about China and Huawei that has the Trump administration endlessly obsessed if not an economic dispute? And why is this conflict unfolding now?

 

China’s peaceful rise

After Sino-Soviet relations collapsed over ideological and diplomatic disagreements in 1966, the strength of the world socialist movement had been split in half. Washington’s diplomats sought to drive a wedge even further between their two enemies through a series of diplomatic trips — first to China, then to the Soviet Union — in 1972. Henry Kissinger, President Richard Nixon’s secretary of state, explained the American strategy, dubbed “triangular diplomacy,” very plainly in his book, Diplomacy: “America’s bargaining position would be strongest when America was closer to both communist giants than either was to the other.”

In other words, Kissinger wanted the Soviet Union and China to fight over the U.S.’s diplomatic attention to be recognized as the capital of the world communist movement, delegitimizing and eventually destroying each other in the process. The inevitable outcome was that two sides of the triangle would ice out the third and cause it to lose power.

Unable to trade with its industrialized former ally, China was forced to confront its own underdevelopment. While the 1949 revolution abolished feudal exploitation, overthrew foreign control of China, slashed illiteracy, and nearly doubled life expectancy, the country was still mostly agrarian and poor. With the population growing so rapidly, Chinese leader Deng Xiaoping foresaw China’s inability to provide an adequate standard of living and introduced a reform policy to industrialize the country.

Deng explained his theory of socialism as follows:

If we don’t do everything possible to increase production, how can we expand the economy? How can we demonstrate the superiority of socialism and communism? We have been making revolution for several decades and have been building socialism for more than three. Nevertheless, by 1978 the average monthly salary for our workers was still only 45 yuan, and most of our rural areas were still mired in poverty. Can this be called the superiority of socialism? That is why I insisted that the focus of our work should be rapidly shifted to economic development.”

In short, while it was crucial to create a more egalitarian society — especially for women, poor people and ethnic minorities — equality was less meaningful if it meant sharing poverty equally. The reforms opened up China to foreign investment capital to take advantage of the international market economy, while being careful not to allow foreign capital to dictate the direction of the government. This became known as “socialism with Chinese characteristics.”

In order to reach this goal, Deng enacted a policy of technology transfers. When China opened up diplomatic relations with a country, it usually ushered in that relationship with a science and technology cooperation treaty — for example, the 1979 U.S.-China Science and Technology Cooperation Agreement.

Ronald Reagan | Zhao Ziyang

President Reagan and Chinese Premier Zhao Ziyang shake hands after signing agreements between the two countries in Bejing, China, April 30, 1984. Bob Daugherty | AP

These agreements gave foreign capital and corporations access to China’s vast market. In return, Chinese companies would not need to expend capital reinventing technologies that had already been invented. China has signed cooperation agreements with over one hundred countries through the China Association for Science and Technology, bringing rapid growth to China’s tech sector.

The opening up policy brought heavy industry to China, elevating China to the status of world superpower. In 2010, China surpassed Japan as the world’s second largest economy with a gross domestic product of $5 trillion. Since then, China’s GDP has more than doubled to $12 trillion, only $7 trillion behind the U.S.

In accordance with Deng’s vision, China’s growth helped bring about the largest poverty reduction campaign in human history. According to the World Bank, China has lifted over 800 million people out of poverty since 1978, reaching all of its Millennium Development Goals, and serves as a shining model for poverty reduction in developing countries. United Nations Development Program officials believe China will end rural poverty in 2020.

China is also becoming the world’s leading electric vehicle manufacturer. In the city of Shenzhen, China is creating the world’s first city with completely electric-powered transportation. Shenzhen already has more electric buses than any American city has diesel buses, and the model will soon be expanded across the country. China spends more on improving its infrastructure than the U.S. and Europe combined. Even Trump compared U.S. infrastructure to that of a third-world country, making his constant China-bashing difficult to understand.

 

The Belt and Road Initiative and the Made in China 2025 Plan

For the longest time, the U.S. treated China as a subordinate country. China was the butt of many jokes and treated like America’s personal factory. Ironically, Henry Kissinger’s diplomatic maneuvers succeeded in accelerating the dissolution of the Soviet Union but planted the seeds for an independent China in the process. China’s domestic achievements have proved to the world that it doesn’t need to submit to the U.S.’s neoliberal model to prosper.

To many developing nations, China’s rise represents the first possibility of a multipolar world since the fall of the Soviet Union. Likewise, in Washington, the realization that China poses a real threat to the U.S.-dominated unipolar world order has set in. Its response? An all-out attack on China’s Belt and Road Initiative and Made in China 2025 Plan, labeling China as a “revisionist power” under the guise of unfair trade practices and Chinese cyber crime.

Through decades of hard work, the Chinese people have made China the world’s manufacturing hub. Recognizing China’s unprecedented accomplishments in poverty reduction and sustainable development, the developing world has logically turned to China, not the U.S., to overcome their own challenges. Likewise, China is now strong enough to forge an independent path whereas it once faced the threat of U.S. reprisal if it pursued its own national interest against the interests of foreign capital.

Enter the Belt and Road Initiative (BRI). In 2013 Chinese President Xi Jinping announced the project, which has been described as one of the most ambitious engineering projects in human history. The project aims to build infrastructure such as bridges, highways, railways, and waterways across the world in order to increase economic cooperation, investment, and trade. BRI will involve 65 countries, 62 percent of the world’s population, and 30 percent of world GDP.

Pakistan China | Belt and Road

Work in progress at the site of Pakistan China Silk Road in Haripur, Pakistan. part of China’s “Belt and Road Initiative,” Dec. 22, 2017. Aqeel Ahmed | AP

Despite its being in a very early stage, Western media has already tried to portray BRI as China’s attempt to conquer the world or gain leverage over small countries it seeks to exploit. These accusations are impossible to disprove, as the project is nowhere close to being finished. What we can observe, however, is that the number of participants eager to join the project has steadily grown and investments continue to pour in. It is clear that China’s diplomatic approach has earned it respect and international legitimacy.

On the other hand, with military might as its major means to project influence, the U.S. empire has expanded primarily through military occupation and covert regime change. Since World War II, American expansionism has given us 20-30 million corpses through assaults on 37 different countries. Compare that to the People’s Liberation Army, which has deployed 60,000 soldiers to plant trees in an area roughly the size of Ireland. Take your pick. When the United States kills 30 Muslims for every American killed in combat, according to conservative estimates, it makes sense that the Arab League was enthusiastic about joining BRI but not the Iraq War.

Unfortunately for Washington, China’s military is too powerful for the U.S. military to invade the country or attempt a covert coup of the Chinese Communist Party. The trade war allows the United States to complicate China’s foreign policy objectives for seemingly legitimate reasons. Trump’s tariffs on steel and aluminum are intended to hurt Chinese steel and aluminum producers, companies crucial to China’s ability to construct infrastructure necessary to build the new Silk Roads.

Even more threatening to U.S. hegemony is the Made in China 2025 plan announced by Chinese Premier Li Keqiang in 2015. Made in China 2025 aims to promote the competitiveness of Chinese companies in the fields of advanced industries. The plan has the potential to challenge the American monopoly over core internet technologies, especially the upcoming 5G wireless network, which China is on track to complete before the U.S.. Through secret meetings, the U.S. successfully lobbied Australia and New Zealand to ban Huawei from their future 5G networks. Japan also agreed to ban Huawei and the U.S. is lobbying Italy, the U.K., and Germany to do the same.

The Made in China 2025 plan goes hand in hand with BRI. BRI participants expect to import state-of-the-art Chinese technology, as well as export their own indigenous technology, a sensible alternative to being forced to take in one of over 800 U.S. military bases in foreign countries. The fundamental goal of the trade war is preserving U.S. hegemony and monopoly on advanced industries and to force China to sign a new version of the Plaza Accord, an economic agreement which the U.S. pressured Japan to sign on and caused Japan’s “lost decade”. Doing so prevents developing nations from leaving the U.S.’s orbit. So much for the free market and competition.

 

It still sounds like Huawei is up to no good

With all of the headlines using the words “Huawei,” “spying,” and “stealing” in the same sentence, many believe Huawei must be up to something sinister, even if it’s not everything they’ve been charged with. However, since the U.S. House Intelligence Committee published a report in 2012 advocating a U.S. ban on Huawei and ZTE products, asserting they pose a threat to national security, the evidence to support the claim that Huawei products are Chinese spying devices simply isn’t there.

After the government designated the Chinese telecommunications companies as threats, the U.K. government conducted its own investigation into the matter. The U.K. Cabinet Office countered the U.S.’s claims, saying it had no concerns about Huawei and ZTE’s presence in the U.K. Only 10 days after the House Committee published its report, the classified investigation into Huawei and ZTE was leaked to Reuters and showed no evidence to back up the claims of the report. One of the whistleblowers even told Reuters, “we knew certain parts of government really wanted evidence of active spying. We would have found it if it were there.”

Only a month ago, the German Federal Office for Information Security (BSI) conducted an investigation into the Huawei spying claims, facing pressure from the U.S. to follow its lead in banning Huawei from the country. The president of the BSI, Arne Schönbohm, told German media that there was no evidence to demonstrate a security risk posed by Huawei. How did the U.S. security apparatus counter this investigation? By saying it doesn’t need to provide evidence that Huawei poses a security threat because the Chinese government can potentially demand information from Huawei at any time.

The most egregious aspect of the war on Huawei is that, amidst America’s repeated failures to produce a shred of evidence that Huawei is a front for Chinese espionage, there is documented proof that the U.S. government hacked into Huawei’s servers and monitored its communications. As far back as 2007, the National Security Agency hacked into Huawei’s servers to find connections between Huawei and the Chinese government, according to documents leaked by NSA whistleblower Edward Snowden.

China | Trade War

Commerce Secretary Wilbur Ross, center, announces an indictment of Huawei, on violations including bank and wire fraud, Jan. 28, 2019. Jacquelyn Martin | AP

You would think that if the world’s most powerful intelligence apparatus had access to Huawei’s internal communications, they would have found treasure troves of evidence proving an internal plot to spy on Americans, enough to ban Huawei from every corner of the Earth. But no, the 2007 NSA operation came up empty-handed.

Even more insulting is that it is more or less common knowledge in the United States, thanks to Edward Snowden’s NSA leaks, that the U.S. government collects virtually all digital communications made by Americans without a warrant,. So why isn’t Trump calling for an end to warrantless surveillance? While all of this may come as a surprise to some, with an understanding that the U.S. is trying to slander and stifle China’s growth in front of the international community to preserve its global dominance, it becomes clear that the U.S. doesn’t need evidence, it just needs to repeat falsehoods enough to get the world to believe it.

 

Evolving war propaganda

When the Russian-hacking hysteria reached its fever pitch, Russiagaters spent no time proving an individual or organization’s documented ties to Russia; they chose to debate whether one’s rhetoric was “strong on Russia” or “something a Russian-bot would say.” It did not matter whether the Russian-hacking accusations had any legitimacy because the intention was simply to associate all things Russian with hacking, malicious intent, and anti-American sentiment. Warhawks and deep-state agents used this well-cultivated xenophobia to pass off their empire-building in Syria and Eastern Europe as being “tough on Putin.”

In almost the exact same fashion, the U.S.-China trade war has created a political environment in which it has become acceptable for the government and its adoring fans in the media to say whatever they wanted about China, as long as it makes the audience uncomfortable about China. Virtually copying the Russiagate story, Trump accused China of hacking the U.S. election, only to tweet to the world that he was choosing to interfere in Venezuelan politics by declaring opposition member Juan Guaido president of Venezuela just two months later.

The level of Sinophobia in American society is the highest it has been since 1972, and the most terrifying part is that this type of Sinophobia is accepted by the U.S. government and the corporate media as political correctness rather than a racist bias that needs to be corrected and combated. Even today, long after the supposed end of Yellow Peril, Chinese people are still portrayed as sneaky, cunning spies, hackers, or technology thieves. Chinese products, from the 5G project to Huawei phones, are portrayed as vehicles of Chinese infiltration. An article in the Washington Post even claimed that metro cars made in China can spy on the American public.

The aforementioned demonization of China not only distorts the American public’s perception of China, but it also serves as extremely destructive war propaganda. The Sinophobic propaganda misleads the American public to believe the economic problems in the U.S. are not caused by an economic system structured to siphon wealth from the poor to the rich but by Chinese “economic aggression.” The White House portrayed China as “threatening the United States and the world” in its report serving as the declaration of the trade war. The U.S. Department of Defense similarly accused the Chinese manufacturing industry and the supply chain as a “national threat.”

It is clear that if you are siding against Huawei, you are siding with institutions that have never had the good of the people or the truth in mind. This narrative must be countered as it is being used prolong the ongoing trade war — a war on China and the future of the developing world — which severely undermines the interests of the American public, especially the American working class.

 

Update: some glad talk

Both the Chinese and U.S. delegations reported feeling positive about Thursday’s trade talks. China has agreed to buy an additional 5 million soybeans from the U.S. This development is certainly a good sign but it is important to remember that no deal came out of this meeting, only a single concession from China. What’s important is that the more sensitive issues of intellectual property and technology transfers are still unresolved, which include the issues pertaining to Huawei, 5G, and Meng Wanzhou.

U.S. tariffs on China are set to increase by 25 percent on March 1st. If this deadline is missed, it could set trade progress back even further than it is today. While President Trump is currently celebrating the progress on Twitter, keep in mind he considers unpredictability a part of his strategy.

In June, the Chinese Ministry of Commerce lamented over the Trump administration’s use of tariffs as a means of forcing trade negotiations forward, clearly flip-flopping his stance and complicating trade negotiations. Similarly, Trump praised the outcome of the Singapore U.S.-DPRK summit in June, promising full North Korean nuclear disarmament. Three months later, North Korea released a statement saying it would not unilaterally disarm because it did not trust that the United States and the Trump administration would follow through on its end of the deal. When negotiating with Trump, a lot can happen in a month.

In addition to the conflict between the two sides over technological issues, both sides would face an even larger disagreement when discussing the so-called “structural issues,” the role of subsidies and state-owned enterprises in the Chinese economy. As U.S. Vice President Mike Pence declared in his speech, the U.S. insists that China’s state-owned enterprises and subsidies are unfair threats to the U.S. and demands China to reform its economic structure, but from China’s perspective such a demand is not acceptable. Ideologically, the existence of state-owned enterprises is a crucial foundation of “Socialism with Chinese characteristics;” and politically, the economic structure of China is a non-negotiable part of Chinese sovereignty. The Chinese people would never accept having their own domestic development model dictated by foreign powers. Such a huge difference remains a very formidable challenge to the ongoing negotiation.

Top Photo | U.S. President Donald Trump, second right, and China’s President Xi Jinping, second left, attend their bilateral meeting at the G20 Summit in Buenos Aires, Argentina, Dec. 1, 2018. Pablo Martinez Monsivais | AP

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