Trump’s on-again, off-again war on #Huawei holds Europe hostage

| August 9, 2019

The US government’s haphazard approach to the Chinese tech company Huawei, as most recently evidenced by the implementation of a ban on US government agencies doing business with the firm, has already caused consternation among major American tech companies and given rise to calls for the United States to lift the Trump administration’s blacklisting of the firm. The outcome of these efforts are of critical importance for Europe, where Huawei claims nearly 25% of the mobile phone market and is integral to several national telecommunications networks.

While American tech companies may be optimistic that they will be able to get through this chaotic process without lasting harm to their supply chains, their European counterparts have learned that they cannot display the same level of confidence in American policymaking. Although Trump’s decisions are ostensibly only applicable to US firms, the nature of how America’s blacklisting system works means Huawei’s European clients and markets are effectively being held hostage to the back-and-forth happening in Washington – and the Trump administration has already shown its disregard for the interests of European economies and businesses.

On the blacklist

Huawei official fell afoul of US trade sanctions in May, when it and 68 of its affiliates were added to the “entity list” that forces any American company wishing to do business with them to apply for a special license. The fallout from the blacklisting saw sales of Huawei smartphones to overseas customers fall by fully 40%, but the customers buying Huawei products were not the only ones to suffer. Last year, Huawei bought $11 billion in goods, including both electrical hardware and technological software, from American companies. By threatening to severe their business ties with the Chinese communications giant, the Trump administration is essentially telling the tech industry that it is denying them one of their most important customers by fiat.

Mixed signals from Washington

Realising the pushback tech industry titans like Google and Microsoft were more than ready to supply, and of a disgruntled farming industry which has been hit hard by China’s retaliatory sanctions on agricultural products, President Trump seemed to backtrack at the G20 summit in Japan. After a meeting with Chinese Premier Xi Jinping, Trump announced US firms would soon be able to once again sell their goods to Huawei. However, that reversal was followed days later by more obfuscation, as a leaked email confirmed Huawei would remain on the entity list.

At this juncture, it seems that Trump may tolerate (private sector) commerce between American companies and Huawei, but exactly how much business remains unclear. The most likely scenario is that the ban will be lifted on 4G components, but that 5G ones will remain embargoed. A meeting with top tech CEOs and a subsequent statement from Commerce Secretary Wilbur Ross have promised to handle applications and reveal more details about the waivers in the coming weeks

European Union on unsure footing

Spectators have suggested that Trump’s inconsistent approach to the Huawei issue is an indication he views Huawei as more of a bargaining chip in his ongoing trade war than a genuine security threat. Regardless of his motivations, these contradictory moves and statements have serious consequences that reach far beyond Beijing and Washington. European operators are heavily dependent on Chinese telecommunications technology, with over half of Huawei’s 50 5G contracts belonging to European interests.

While Trump’s differentiation of 4G and 5G technologies may be seen as a security question in Washington, it is an issue of profound economic importance across Europe. If the United States moves against Huawei, transitioning to another provider would cost Europe’s wireless carriers a cumulative $62 billion and incur a 18-month delay in the introduction of 5G networks. . A tougher ban would critically impair Europe’s 5G transition in large part because rival carriers like Ericsson, Nokia, and Samsung simply do not have the capacity to take on the load.

Uncertainty bad for business – and for Europe’s economic independence

While Huawei may have been granted a reprieve from outright blacklisting, the threat to a critical component of the global telecommunications sector is bad news for Europe as a whole. Once again, the European Union and some of Europe’s largest companies have found themselves serving as pawns in one of Donald Trump’s trade spats.

While the Trump administration expresses concern over possible security risks from Huawei technologies, the European institutions are more than capable of making such determinations themselves and has already indicated they intend to do so imminently. The EU and its member states do not need pressure from Washington to defend themselves. It is worth noting as well that the same American agencies warning their European counterparts of the risks of Chinese espionage reportedly spied on Chancellor Angela Merkel for years.

By imperilling European telecommunications infrastructure, this dispute is yet another reminder that the European Commission and EU governments need to work in unison to assert Europe’s economic independence from the vagaries of US trade and sanctions policy. Otherwise, Donald Trump – and in all likelihood his successors – will continue to exploit Europe’s vulnerability for his own narrow interests.

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Category: A Frontpage, China, Politics, US

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