Huawei, Google, National Security and Government Control

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The Trump Administration believes Huawei is controlled by China and poses a security risk.  President Trump declared a national emergency and passed an executive order to restrict companies in the U.S. from doing business with Huawei.

Since the run-up to the 2016 elections Trump has been threatening China and in spite of talks and meetings including Trump declaring President Xi the “King of China”, trade tensions are at their worst. The NYSE roller coasters on a daily basis, waiting for a tweet from the President to indicate movement in either direction.

Google Drops Huawei

Today, Google announced that because of this ban, it would restrict is use of Android on Huawei.  New designs of Huawei smartphones are set to lose access to some Google apps. Google said it was “complying with the order and reviewing the implications”.

Besides claiming the number two spot in terms of smartphone sales worldwide, Huawei is among the leading suppliers for telecommunication equipment and a driving force in the adoption of 5G.

So are US tech companies now being “controlled” by the US Government?

The ban means Huawei can no longer license Google’s proprietary Android operating system and other services that it offers. Instead, Huawei is now only able to use a public version of Google’s operating system through the Android Open Source Project. This means future Huawei phones will not have the Google services that users have come to expect on Android devices.

Many techies are looking forward to the day when Google gets some competition, and Huawei says it has been preparing for this day it will roll out its own operating system and ecosystem.

G20 Meeting

There is a strong possibility that Trump will meet Chinese President Xi Jinping at the G20 economic summit in Japan next month.  But at present he is involved in so many international spats, that his calendar will be full with meetings with world leaders. (He needs to talk to the Russians, the Europeans, and the Middle East crew).

Meantime, Trump messes with Huawei and both sides increase tariffs.  Last week the United States increased the rate to 25% on $200 billion of Chinese goods.

Larry Kudlow, President Donald Trump’s top economic adviser confirmed that no new talks with Chinese negotiators have been scheduled, but he said US Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin have been invited to return to China for more discussions.

A “sticking point,” Kudlow said, is the desire from the US side to see China commit to changes more forcefully — such as by codifying them into Chinese law, not simply stating their intention to commit.

Executive Order Banning Huawei

Then, to wrap up a week of chaos, President Donald Trump issued an executive order that effectively bars US companies from using any telecoms equipment manufactured by China’s Huawei. The order declares a “national emergency” in relation to threats against US telecommunications and authorised the US commerce secretary to “prohibit transactions posing an unacceptable risk” to national security.

According to the Financial Times, the US government took specific action against Huawei by putting the Chinese telecoms company and its dozens of affiliates on the so-called Entity List, under a law previously used to impose sanctions against nations like Iran and Russia, meaning that American companies will have to obtain a licence from the US government to sell technology to Huawei.

The executive order didn’t list criteria for what constitutes being considered a foreign adversary, and what firms would fall under that category. Specific guidelines and regulations are expected to be released over the next 150 days.

The order, which applies only to future transactions, left many questions unanswered, including how the department will define foreign adversaries and establish criteria to ban companies from selling equipment to the United States.

It is all about 5G

Of course it is all about 5G and the fact that Huawei is way ahead of any other telecoms company in the development of better, faster cellular service. The network promises not only faster cellular service, but also the connection of billions of “internet of things” devices — such as autonomous cars, security cameras and industrial equipment — to a new internet architecture.

Pentagon and American Intelligence officials issue dire warnings about Chinese control and the fact that during a crisis the Chinese authorities could order Huawei to shut down the networks, disrupting American infrastructure as diverse as gas pipelines and mobile phone networks.

In spite of this, Huawei has said they would rather shut down the company than obey Chinese government orders to intercept or divert internet traffic.

But the bottom line of this absurd conflict is President’s Trump’s competitive obsession that the United States needs to win the 5G competition in spite of the fact that at present no American firms make the core switches that will direct 5G internet traffic.

Chinese officials have said the United States has moved beyond caution to paranoia.

Not Really about Security

Much of this is about the huge trade Deficit between US and China. Last year, the US spent far more importing goods ($539 billion) from China than it made exporting goods to China ($120.3 billion).

The ban could also help with the Trump administration’s campaign to get European allies to block Huawei. So far, most major allies have resisted the Trump administration’s push, except Australia, which banned Huawei last summer, in spite of China being its largest trading partner.

This executive order and national emergency aren’t really about security; they are inextricably tied to this political moment and an intensifying trade war between the US and China. Remember, during the 2016 Campaign when Trump accused China of ‘raping’ US? Well it is Election Season again, running up to 2020 and Trump is reviving some old songs from his playbook and putting his executive muscle behind them.

What is a Matter of National Security?

Donald Trump is using “National Security” as a weapon in his trade wars. This same reason was used against Canada and Mexico with regards to steel and aluminium tariffs.  US tariffs imposed last year on national security grounds — 25% on steel and 10% on aluminium — became a major stumbling block to ratifying a new North American trade pact negotiated last year by the two countries and Mexico.

A couple of noteworthy decisions have been published that may have long-term implications for the Trump administration’s trade policies.

When the deal was agreed upon last week, the National Security miraculously ceased to exist.

Will the same happen when Trump eventually reaches a deal with China – will Huawei suddenly not be a national security issue anymore?