Top negotiators from the US and China will meet yet again in Beijing on Thursday and Friday, in the latest attempt by the world’s two largest economies to hammer out a trade deal.Since early 2018, the two governments have been locked in an escalating trade war, which has seen tariffs slapped on hundreds of billions of dollars of American and Chinese goods.
Hopes of an imminent — and long-awaited — trade agreement were bolstered recently with reports of a possible April summit between US President Donald Trump and China’s Xi Jinping. But regardless of the success of the talks, the two countries are likely to remain unreconciledon certain key political and economic fronts. Chinese tech giant Huawei — which on Friday will announce its annual results — is the clearest illustration of that.
Over the past 12 months, the Trump administration has been exerting pressure on countries around the world to not use Huawei equipment in the development of next-generation 5G networks, maintaining that products produced by the Chinese company present a security risk.In a bid to push back against Washington, this month Huawei filed a lawsuit against the US government, alleging unconstitutional discrimination.
The lawsuit serves as a reminder of the reasons the trade war was launched: The apparent disparity between the access and legal rights granted to Chinese companies operating in the West, compared to the tough trading conditions US companies face in China — where some firms are required to enter into joint ventures with domestic partners in certain key sectors.
Moreover, in China, US companies have little legal recourse against government policy.”There’s been many cases where you see foreign courts in multiple countries all agreeing with the Western company,” said Robert Atkinson, president of the Information Technology and Innovation Foundation. Often, when that same case arrives in a Chinese court, the foreign company loses.”That just appears to be political bias,” Atkinson added.
Point of pride
From a tiny company founded by a former Chinese soldier in 1988, Huawei has become one of the world’s top technology providers and a leader in equipment for super-fast 5G networks.In China, the firm is a symbol of the country’s economic rise and a point of pride as its technology becomes equal to, or surpasses Western rivals.But for Washington, the tech giant is a private company in name only.
In August, the Trump administration passed the National Defense Authorization Act, which forbids US government agencies from using technology made by Huawei or its smaller Chinese rival ZTE over concerns that the company has close ties to the Chinese government, and the use of its technology could leave agencies open to Chinese surveillance. Huawei has repeatedly denied that any of its products pose a national security risk.
Months later, in December, Beijing was outraged after Huawei chief financial officer Meng Wanzhou was detained in Canada — facing extradition to the US on charges of breaching sanctions on Iran.In 2019, Huawei began pushing back. Founder Ren Zhengfei came forward to assure customers of his company’s independence.”We chose to have our voice heard at this moment because the US government considers us a threat to national security … Why is Huawei being singled out?” asked Ren.The lawsuit, announced in early March, is the latest step intaking the fight back to the US.
But Atkinson pointed out that US companies have been regularly barred in China on national security grounds and left with little legal recourse — unlike Huawei.Zhang Lin, an independent Chinese economist and columnist, saidhe’d never heard of a US company taking the Chinese government to court.”It’s hard for a (Chinese) company to bring such an administrative lawsuit, even harder for a foreign company. It could be blocked in the first place when it tries to open a case,” he said.
‘Rule of law’
When asked at the press conference announcing the lawsuit about the potential disparity between the two country’s systems, Song Liuping, Huawei’s chief legal officer, said China was “governed under the rule of law.” “There are specific courts offering trials across China’s society and government. I think if other multinational corporations, or even Chinese companies, face unlawful actions from the government, they can stand up for their rights,” he said. “Just like how we are standing up for our rights in the United States.
“But Beijing hasn’t been shy in the past about sidelining American companies from securing contracts with Chinese government agencies, in a way that the US government has seen as protectionist.In 2014, Reuters reported that numerous foreign technology brands had been removed from an “approved state purchase lists,” effectively barring Chinese government agencies from using their products and services.
This isn’t the only reported example of foreign technology being blocked by Beijing. In 2014, Microsoft operating system Windows 8 was banned from all government computers in China. No explanation was given.Both situations were similar to the one facing Huawei. In neither case is there a public record of any lawsuit being filed against the Chinese government.
One of the regular complaints from foreign businesses in China, according to the American Chamber of Commerce in Beijing, is the inconsistent interpretation of regulations by Chinese authorities and the unclear enforcement of laws.Shortly after imposing his first tariffs on Chinese goods, Trump said such “unfair” barriers must come down.”Action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States,” Trump said on his official Twitter account in June 2018.
There has, however, been some progress in the opening up of China’s economy to American and global interests.China’s finance industry, for example, was finally opened to international companies in November 2017, though many other sectors still have strict restrictions on the size of foreign investment. “If you just look at the market access that Chinese law firms have to the US and compare that with the market access — or lack thereof — that US law firms have in China, this is definitely an area that we’ve been advocating for repeatedly,” said Alan Beebe, president of the American Chamber of Commerce in Beijing.
The uneven playing field between US and Chinese firms remains one of the biggest hurdles in ongoing trade negotiations, along with the trade deficit and alleged forced technology transfer.But Atkinson said that, even in the best-case scenario, any trade deal was unlikely to resolve the broad differences between the US and China, their political systems and their economies.”I don’t think you’re ever going to level it … the distorted playing field is just so entrenched, in all that China does. It would be a long, long time before it would be completely level,” he said.