US defense officials are pressuring allies not to use Huawei-made 5G equipment. Photo: AFP

While the Joe Biden campaign has criticized US President Donald Trump’s China policy as “erratic and impulsive,” in many respects Trump has taken many positions that are in line with prior US administrations.  

For example, Huawei has been the focus of highly publicized aggressive action by the US government for many years. The question is whether the Trump administration has pushed the envelope too far in certain instances.

One step taken by the Federal Communications Commission against Huawei and its Chinese telecommunications-equipment rival ZTE this year may have escaped notice by many in the US.

In June the FCC designated Huawei and ZTE as national-security threats, which meant that domestic telecom operators could no longer use the FCC’s Universal Service Fund to purchase equipment or services from the two Chinese firms. US carriers reportedly will need to spend $1.8 billion to replace existing Huawei and ZTE network equipment.

Death penalty for Huawei?

In a further extraordinarily aggressive move, in September, Huawei was slapped with a strict ban on the direct or indirect purchase of semiconductor chips and other products containing US technology.  

The chip ban threatens to have a severe impact on Huawei’s smartphone business, and some observers initially speculated that it could threaten the company’s very existence. Huawei has countered by stockpiling supplies to survive in the short term and working out a deal with Samsung to supply chips manufactured without the use of any US technology.  

Also read: Trump’s China policies may have hurt legitimate US interests

There is no question that telecommunications networks trigger serious national-security issues given the critical importance of the digital economy, so action to preserve the integrity of national networks is a legitimate exercise of government authority, but there are a range of measures than can be adopted to address these concerns. The Trump administration always tends to default to the most draconian response.  

Moreover, the administration’s decision to ban Huawei from acquiring semiconductor chips that include any US technology would appear to be intended to constrain Huawei’s growth all around the world and to handicap its development of fifth-generation (5G) technology.  

Critics argue that such a move is not designed to advance US national-security interests but rather to promote the commercial interests of domestic technology players. That is not clearly a legitimate exercise of government authority in an open society but rather an exercise of pure political power to gain geopolitical advantage.

Moreover, much of Europe and many other countries around the world do not share the same concerns about the purported national-security implications of installing Huawei equipment into their national telecommunications networks (although the tide is shifting in this regard).  

Huawei, which is a private company and so does not release full financials, reported revenue growth of nearly 20% and increased profits of 25% for 2019, notwithstanding the years-long campaign of the US to persuade allies not to buy from Huawei.  

Making it personal

Meng Wanzhou may not be a household name in the US, but she is in China. She is the chief financial officer of Huawei and the daughter of Huawei founder Ren Zhenfei. She is considered by many to be “corporate royalty” in China. Even Trump reportedly referred to her as the “Ivanka Trump of China.”  

She is now viewed by many Chinese as a martyr in the ongoing business, diplomatic and legal battles between the two countries. If the US and China are to find an off-ramp to de-escalate current tensions, Meng likely will have to be part of the package deal in some shape or form.

Acting at the request of the US Justice Department, Canadian officials arrested her in Vancouver International Airport after she landed from Hong Kong and as she waited for her connecting flight to Mexico. Although she had a residency visa for Canada and owned homes there, on this trip she was merely passing through with no intention of remaining in the country. 

The US indictment charged her and Huawei with various counts of bank fraud, wire fraud, violation of US sanctions against Iran, and related conspiracy charges, as well as obstruction of justice. Now, almost two years after she was taken into custody, she remains under house arrest as she fights extradition to the US to face criminal prosecution.

Ironically, she was arrested on December 1, 2018, just as Trump was preparing to sit down for his private dinner with Chinese President Xi Jinping at the Group of Twenty meeting in Buenos Aires.  

The commonly held view in China is that Trump either orchestrated or authorized the arrest of Meng, possibly to gain leverage in the negotiations with Xi. However, multiple current and former US government officials have confirmed that, because of lack of coordination and general dysfunction within his administration, Trump was out of the loop and was not even aware that Meng was being arrested as he sat down with Xi.

Beijing has vigorously denounced the arrest of Meng, and Chinese officials have repeatedly claimed that her arrest was part of a political conspiracy to block the growth of Huawei and other Chinese tech giants abroad.  

The tripartite Sino-Canadian-US relations were further strained when, only nine days after Meng’s arrest, two Canadian nationals, Michael Kovrig, a former diplomat, and Michael Spavor, a businessman, were detained in China and later charged with “spying on national secrets” and providing intelligence for “outside entities.”  

Canadian officials described their arrests as “arbitrary,” but China denied that the arrests were in retaliation for or otherwise connected to Meng’s detention in Canada.

The proverbial bull in the China shop

Trump may not have directed or even been aware in real time of Meng Wanzhou’s arrest, but true to form, disregarding all norms, he weighed in publicly and repeatedly on her arrest in ways that may turn out to be prejudicial to the US prosecutors’ case and perhaps even to the efforts of Canadian authorities to extradite her to the US.

In court submissions in the extradition proceedings, counsel for Meng assert that she in essence is being held as a “bargaining chip” in a high-stakes game of geopolitical poker between the US and China.  

Counsel specifically cited a series of public remarks by Trump where, less than two weeks after Meng’s arrest, he stated that he “would certainly intervene” if he thought it was necessary in order to conclude “the largest trade deal ever made.” In subsequent months Trump indicated that he was planning to discuss the Huawei case with the Chinese side and with US prosecutors.

Trump’s willingness to intervene in the Huawei case is in line with his apparent interventions in other high-profile cases. In the application to the court, lawyers for Meng also cited to the president’s statements and actions in connection with the Roger Stone and Michael Flynn cases.  

Michael Gottlieb, a partner in the DC office of the professional-services firm of Willkie Farr & Gallagher and former special assistant to the president and associate White House counsel to Barack Obama, also submitted an affidavit describing long-standing policies and norms relating to contacts between the White House and domestic law-enforcement officials regarding active criminal investigations and prosecutions.

Such policies are designed to avoid even the appearance of political interference in criminal matters. Gottlieb asserted that Trump’s statements shattered “long-held policies and norms, enshrined in over 50 years of administration policy.”

These arguments are undercut to some extent by the fact that the investigations of Huawei started during the Obama era and were conducted independently by the Department of Justice without coordination with the other China initiatives of the Trump White House.  

In fact, it is probably safe to say that Trump would have strenuously objected to the arrest of Meng just as he was sitting down with President Xi to press his case for better trade terms, as that would be seen as a slap in the face of his Chinese counterpart.  

But it is also very plausible that once she was arrested, Trump did see her as a bargaining chip, as suggested by his public comments to that effect.  

The Canadian ambassador to China at the time, John McCallum, found Trump’s statements to be offensive to the Canadian sense of fair play and decency, and publicly stated that he thought Trump’s comments could be sufficient to block Meng’s extradition to the US. He went on to say that it would “not be a happy outcome” if the Canadian judge ordered her extradition.  

For his candor, McCallum was asked by Prime Minister Justin Trudeau to resign, marking the first time in Canada’s history that an ambassador had in effect been fired. Just one more example of collateral damage in the era of Trump.

Why was Meng targeted?

Many Chinese view the arrest of Meng as a personal affront to the Chinese nation, and question why she was targeted personally. According to experts on white-collar criminal law, the penalties for corporate criminal conduct typically consists of fines and other remedial actions and only rarely in the threat of imprisonment for senior management.  

For example, no bankers went to jail in the aftermath of the subprime mortgage scandal, which plunged the global economy into the Great Recession.  

Closer to home in this case, global banking giant HSBC (one of the key relationship banks for Huawei and which conducted an internal probe of its business with Huawei, which was integral to the bringing of charges against Meng and Huawei) had committed its own serious violations of US sanctions law in respect of transactions related to Iran and other restricted countries.  

In addition, Huawei’s Chinese rival ZTE was also charged with knowing violations of sanctions by engaging in sales of embargoed technology to Iran and North Korea and then covering it up.  

In both cases, massive fines in excess of US$1 billion were imposed, senior managers were fired, and independent outside compliance professionals were put in place to monitor operations, but no one went to jail.  

According to US prosecutors, Meng was charged “based on her own personal conduct and not because of actions or misconduct by other Huawei employees.” For many people in China, however, her arrest smacks of a personal vendetta designed to gain leverage over Huawei, all part of a concerted effort to constrain the company’s global growth.  

Trump’s repeated suggestions that he could interfere in the prosecution as part of the broader negotiations with China only served to feed those perceptions and potentially weakens the case against her.

So once again, Trump is the proverbial bull in the China shop, and it may ultimately prove to be counterproductive on multiple levels.

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Robert Lewis

Robert Lewis is a lawyer licensed in California. He has worked in leading US, UK and Chinese law firms in China for nearly 30 years. He is a co-founder of the China Going Global think-tank, and is the author of the book The Rules of the Game of Global M&A: Why So Many Chinese Outbound Deals Fail. He is fluent in spoken Mandarin and written Chinese.