Focus should remain on talks in trade war despite Meng arrest

  • The seizure of the Huawei executive for allegedly breaching US sanctions against Iran could not have come at a worse time, and it is essential the truce between Washington and Beijing holds
PUBLISHED : Friday, 07 December, 2018, 8:19pm
UPDATED : Wednesday, 12 December, 2018, 8:51pm

While the presidents of China and the United States were at a dinner in Buenos Aires that resulted in a 90-day truce in their trade war, Canadian police in Vancouver were arresting one of China’s corporate elite on behalf of the US. It is said that Donald Trump was not necessarily aware of it at the time. How he came not to be looped into advance notice given to the White House is unclear. But the question is now academic.

The news that Sabrina Meng Wanzhou, chief financial officer and daughter of the founder of the Huawei telecoms group, has been detained ahead of an extradition bid has rocked the fragile truce. Nor does it matter whether the arrest, linked to alleged breaches of US sanctions against Iran, is really unrelated to the US-China trade war. It escalated trade and technology tensions almost as soon as they had been partially defused by high-level negotiations.

The timing, close to the Xi Jinping-Trump summit, could not have been worse. It has therefore been seen as political in its implications, if not its motivation. Beijing’s strong reaction reflects this, with foreign ministry spokesman Geng Shuang demanding Meng’s immediate release, adding that “to detain someone without clear reason is a violation of human rights”. China’s embassy in Ottawa said Meng had not been violating any American or Canadian law. Her arrest does appear provocative. Iran sanctions-busting usually results in fines, not the arrest of executives. Warnings to Western technology executives in China to be wary of retaliation are understandable.

As an aggressive telecoms and network equipment maker suspected of having ties to the Chinese state, Huawei is subject to national security concerns in the West. China’s involvement in cyber-espionage and intellectual property theft does nothing to allay them. The US, Australia and New Zealand have all blocked use of Huawei’s equipment and infrastructure for new 5G networks. Washington is pushing Britain and Canada to bar Huawei from their networks.

Beijing separates Huawei CFO’s arrest from US trade talks

The arrest has complicated the landscape for 90 days of negotiations to repair bilateral relations after years of fractious engagement between the world’s two biggest economies. The impact on confidence in the global economy emerged immediately in the form of market jitters. The upbeat post-summit mood among Chinese officials had already begun to sour amid confusion over timetables and what trade concessions have been agreed.

The blunder of Meng’s arrest, or at least its timing, ought to prompt negotiators on both sides to focus on what they can still agree on and put the truce back on track. And Trump should weigh the cost of detaining Meng as Xi comes under increasing pressure to demand her release.