Huawei tit-for-tat: the US may have a better case against Meng than China does against two Canadians

There are legal, political and technological facets to the Huawei incident that bear further examination. Meng Wanzhou, the chief financial officer of the Chinese electronics company, was arrested in Canada in December on fraud charges involving United States sanctions on Iran.

From a legal perspective, it must be noted that the case is not that Huawei allegedly used a subsidiary to skirt US sanctions on selling US technology to Iran. If that were the case, the argument of Columbia University professor Jeffrey D. Sachs – that Meng is being treated unfairly because the CEOs and CFOs of many companies guilty of similar offences have never been arrested – would hold water.

 But, according to Julian Ku, writing for the Lawfare blog, Meng is likely to be charged with violating the US bank fraud statute. She is alleged to have tricked HSBC into processing Huawei’s transactions, when she denied that the telecom giant was connected to Skycom Tech , a Hong Kong company trying to sell US technology to Iran. She is alleged to have put the bank in legal jeopardy because financial institutions operating in the US are subject to US sanctions on Iran. Thus, the case involves an offence allegedly committed by her, not the company.

On the other hand, China’s detention of Canadians Michael Spavor and Michael Kovrig in particular raises concerns for all foreign researchers who visit China regularly and meet colleagues to discuss China’s policies and links with the world. Are we now breaking Chinese law when, without formal approval, we meet our Chinese colleagues who study regional politics?

According to the Foreign Ministry, China is handling the cases according to law. Kovrig is allowed only one consular visit a month and has no lawyer. In keeping with standard detention practice in China, he is also being interrogated three times a day, and not allowed to turn the lights off at night. In comparison, Meng has hired a Canadian lawyer and is out on bail in her own home in Vancouver. Now, which of the two countries is following the rule of law? How has Canada violated Meng’s human rights, as China claims?

From a political perspective, Meng’s arrest was poorly timed. Although the arrest warrant was issued in August and the Trump administration is not necessarily able to intervene in the Justice Department’s cases, the US would have been wiser to hold off arresting Meng until after the resolution of the trade war with China. Huawei is seen in China as a privately created national champion, and is the pride of a country that hungers for global recognition for its brands. So it is inevitable that Chinese civilians are going to see Meng’s arrest as politically motivated.

This PowerPoint presentation proves Huawei’s Meng is guilty, says US

Even if the arrest has enhanced US leverage in the trade war, Donald Trump still needs Xi Jinping to agree to very difficult reforms to China’s development strategy if the US and China are to resolve their differences. But the arrest could make Chinese concessions more difficult; a nationalist like Xi would not want to appear to be caving in to US pressure. Moreover, Trump’s statement that he would intervene in the Meng case if it would facilitate a trade deal makes the arrest look more political than it may really be, adding fuel to the wrath of the Chinese.

Finally, the arrest of the CFO of a pre-eminent Chinese tech company should make clear that the trade war is really a battle for global dominance in technology. Early this year, a US National Security Council report called for a containment strategy for 5G, or fifth-generation mobile technology. The Five Eyes intelligence alliance – the US, Britain, Australia, New Zealand and Canada – has mounted a campaign against Huawei, amid security concerns.

The Huawei fail: China should hit back at the US, not Canada

But can the US win this war? Closing off China’s access to hi-tech products from the West will increase support for “self-reliance” in China’s tech sector. Xi has revived this Maoist slogan after another Chinese tech firm, ZTE, had a component supply crisis. In the face of a hi-tech containment strategy, the state will ramp up investment in indigenous tech.

Meanwhile, the US has relied heavily on foreign-born scientists and entrepreneurs for its own technological development. But the environment in the US has soured for mainland Chinese who stayed in the US after their master's degree or PhD courses. Trump, meeting top US CEOs, said almost every student from China “is a spy”. And US intelligence called China’s “Thousand Talents” recruitment programme a plan to steal US technology.

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One recruit of this programme has been accused of stealing technology secrets, and two others face US judicial cases. However, thousands of other participants in the plan are being tarred with the same brush in the US. In this climate, many scientists who would prefer to stay in the US feel they are being pushed out.

As of June 30, 2019, David Zweig will be Professor Emeritus of Social Science at HKUST and director of Transnational China Consulting Limited