Huawei saga is prelude to new tech cold war

When US President Donald Trump signed a sweeping executive order to designate Huawei as a national security threat to America, he deepened the increasingly bitter trade conflict with China that threatens to irreversibly transform the two countries into mortal enemies. This single stroke of Trump’s pen may have been one of the most consequential executive orders of his presidency and could have untold repercussions for America and the world for years to come.

Unlike previous moves against China, such as the arrest of Huawei executive Meng Wanzhou and the ZTE Saga, this latest attempt to choke Huawei, which is a national icon in China, will be perceived by the Chinese as an all-out war against them and crush any remaining illusions they may have about the possibility of an amicable resolution to the conflict. Trump’s comment in an interview with Fox News that any deal with China cannot be 50/50 was another blunder. Trump and the American government are dangerously ignorant of China’s culture.

The president’s comment is bound to open fresh wounds and further provoke the Chinese. It is because the Chinese still retain vivid memories of the humiliating and unequal treaties imposed on them by Western powers in the 19th and 20th centuries. Trump’s actions and remarks further reinforced the view among the Chinese that America is out to stop their rise. China wants to be treated as an equal by America, so any deal that disadvantages China will be a non-starter. A deal to end the trade war seems increasingly unlikely as the days pass.

And the fact that the president’s policy received bipartisan support in Congress from Republicans and Democrats shows that anti-Chinese sentiment has spiralled out of control and translated into actual policy actions.

China has become the new bogeyman for the American political establishment to blame for all the problems facing the US.

China has become the new bogeyman for the American political establishment to blame for all the problems facing the US

However, for Sino-American ties to regrettably develop to this stage has been long in the pipeline, beginning with the entry of China into the World Trade Organization in 2001. The entry of hundreds of millions of Chinese workers has upended the world trading system and the American workforce is not prepared to deal with the challenges posed to them by the Chinese.

Many manufacturing jobs in the Rust Belt of America that provided livelihoods for many Americans for decades were lost as companies decided to outsource jobs to lower-cost countries like China and Mexico. And America under the wise leadership of president Bill Clinton had accumulated a huge budget surplus, which should have been put to good use through investments in infrastructure and education, which would have prepared America for the challenges of the 21st century. Instead, America became entangled in a mess in the Middle East after 9/11 under president George W Bush and squandered trillions of dollars.

China used this period to grow and develop its economy, which fuelled its rise.

While there are legitimate questions about some of the practices of the Chinese in terms of how they have conducted business, there is no doubt that the failure of American politicians to tackle structural reforms to revitalize their economy and prepare their people to face the challenges posed by the entry of China into the WTO in 2001 further exacerbated the consequences faced by low-wage American workers whose jobs have been outsourced overseas. America’s political elites have failed to prepare their workforce to jump on the economic bandwagon propelled by the rise of China and India.

Let’s be clear on this, even if the American government gets a trade deal with all the terms and conditions it wants, the challenges faced by America will not disappear and while highly educated Americans in places like Silicon Valley are well placed to take advantage of the rise, millions of Americans in Rust Belt states are poised to lose out and the haemorrhaging of jobs will continue despite a bid by Trump to stop it. The power of the presidency can only go to a certain extent against the power of economics.

Trump may think the Huawei ban will bring China to its knees and force it to beg for a deal, but he is wrong and we can expect Beijing to redouble its efforts to roll out a homegrown smartphone operating system alternative to Google Android. While China for years has had its own version of Twitter, Google and Facebook, there are still interlinks with American companies and as a result, China’s progress translates into increased business for the Americans, too. Both sides win and there is an interdependent economic relationship. And businesses and people across the world benefit by using Chinese and American technologies together.

However, cutting out Huawei forces China to build from scratch a system that is totally independent of American technology. The Chinese and American economies will over time decouple from one another as the process of creating a digital iron curtain that separates the world into two distinct, mutually exclusive technological spheres gains momentum. Sooner or later, countries around the world may be forced to choose between the American Android system or a China alternative.

It is the beginning of a new cold war and the technological sphere is just one of the combat theaters.

China’s government will pump in the funds needed to re-develop its industry and the Chinese may fail as they don’t have the expertise of the Americans. But with time, the Chinese will be able to develop a comparable system to the one created by the Americans. And the US doesn’t have the political will or ability to subsidize its own industry. Even if the US has the funds, it will be politically unpalatable due to the traditionally strong aversion of Americans toward government involvement with business sectors.

America may have the upper hand in technology, but Huawei is leading in the 5G race, so US supremacy may not continue forever. I will end by quoting Tim Culpan’s Bloomberg article: “The winner won’t be the side with the best fighters, but the one with the greater ability to endure the pain of prolonged losses.”