TECH AND POLITICS
The Huawei Ban is a Self-Defeating Tactic
How Trump’s sanctions against Huawei undermine American interests
By acting in accordance with “after me, the deluge” principle, Trump blacklisted Huawei, thereby forcing China to facilitate the development of indigenous innovation and self-sufficiency in critical technologies, thus undermining one of America’s most important sources of power — economic and technological interdependence.
Recently, as a result of the escalated tensions between the US and China and due to the inability to resolve trade tensions, US President Donald Trump has included Chinese tech giant Huawei into a list of companies that are barred from doing business with the US.
The implications for Huawei are disastrous in the short run. Head of Huawei has already estimated potential losses amounting to $30 billion in the next two years.
Huawei, without access to Google’s Android operating system and, most importantly, Play Store and other Google services, will face vast challenges. And it is not lack of OS that would debilitate Huawei — today, it is not that difficult to create it — but without apps, smartphones are useless. Even giants like Samsung, Microsoft, Amazon have failed to sustain their operating systems because app developers were unwilling to build apps for new ecosystems. Huawei is no exception.
Restrictions on the acquisition of US-made chips and other advanced tech products will stymie Huawei’s efforts to become the world’s primary 5G equipment producer.
However, even though the crackdown on Huawei will likely be effective leverage in the trade talks with China, in the long run, it will trigger China’s decoupling from the US by fostering the development of core technologies at home.
Washington, along with its European and Asian allies, aims to curb Beijing’s “Made in China 2025” plan, since it violates WTO’s trade norms by illegally subsidizing domestic producers and appropriating intellectual property.
However, Trump’s attacks on Chinese tech companies further motivates Beijing to pursue policies that would make its economy more independent from the US.
In the past, before Trump’s trade wars, China’s biggest tech companies, including BAT (Baidu, Alibaba, Tencent) and Huawei, were against Beijing’s plans to disengage from global supply chains by facilitating domestic production of core technologies, instead preferring to purchase them from American and European companies while diverting resources to the development of lucrative consumer-oriented projects.
In fact, Huawei founder Ren Zhengfei has repeatedly dismissed the movement towards self-sufficiency.
The idea that one needs to do everything themselves is a mentality only for peasants — Ren Zhengfei
Barring Huawei, however, has spurred domestic innovation in China. Huawei is currently working on the creation of an alternative to Android — and there are chances that it might become, like iOS, the primary challenge to Google’s dominance in this field. The company also works to replace other US components.
Apart from Google, which will not only get an additional competitor on the market previously dominated by American corporations and experience a decline in the revenue because more than one-fifth of the smartphone market will not have Google’s services, hundreds of other US manufacturers will be facing losses. It is no surprise then that chipmakers are lobbying to ease the Huawei ban. Moreover, the Huawei ban can ultimately lead to compromising US national security, as Google claims.
Trump’s ban undermines one of America’s most important source of power — economic and technological interdependence
Undoubtedly, even before sanctions, China had been seeking self-reliance, as it wants to attain self-sufficiency in crucial components, especially microprocessors, which are vital for AI, 5G, quantum, and cloud computing and other hi-tech fields.
However, as Lorand Laskai has put it on Foreign Affairs,
… the United States may find that it has done more for self-reliance by banning ZTE and Huawei than the Chinese government has managed in a decade of official policy. Now that they are walking in lockstep, government and industry can move much faster.
Trump’s actions have finally aligned the tech industry with the government by encouraging them to become self-reliant. Washington could have preserved the rift between Beijing and tech companies if it hadn’t imposed punitive measures on Huawei and ZTE, thereby ensuring China’s dependence on American technologies and derailing “Made in China 2025” plan.
Donald Trump’s policies are increasingly focused on short-term gains, whilst potential long-term losses are disregarded — after all, temporary wins will help him get reelected in 2020, and he is not concerned about what will happen to America afterwards. This is happening with Iran sanctions, which ultimately result in other states losing faith in the reliability of the dollar-backed financial system and developing their alternatives, thereby engendering the US dollar’s supremacy. His tax cuts as well gave a temporary boost to the economy while increasing the US budget deficit in the long run.
Sanctions on Huawei will certainly provide him with powerful leverage in the trade talks with China. But such a misguided approach damages the interests of the USA in the long run.
