U.S. claims jurisdiction over Chinese biz exec

Meng Wenzhou, chief financial officer of Huawei, a giant Chinese telecommunications company, was arrested while passing through Vancouver on charges related to U.S. economic sanctions against Iran.

Meng Wenzhou

She is the daughter of Ren Zhengfei, the company’s founder.

She reportedly is accused of concealing the fact that a company called Skycom, which does business with Iran, is a subsidiary of Huawei, and thereby causing Huawei clients to unknowingly violate U.S. sanctions against Iran.

In other words, a foreign business executive has been arrested on foreign soil for breaking U.S. domestic law.  This is a power grab that the U.S. would not tolerate if a foreign government did it to a U.S. executive.

It is a slap in the face at China as a time when Presidents Trump and Xi were trying to resolve trade disputes.  It could raise hostilities between China and the U.S. to a new level.

I can think of four possible explanations for the U.S. action, all of them bad—

1. President Trump arranged this deliberately as a way of putting pressure on President Xi.
2. President Trump knew about the charges, but didn’t think they would affect trade negotiations.
3. American officials proceeded without notifying President Trump because they didn’t understand the significance of their actions.
4. American officials proceeding without notifying President Trump because they saw Huawei as a security threat or wanted to undermine the Trump-Xi negotiations.

Huawei sells telecommunications equipment and networks.  It reportedly has more than 180,000 employees and does business in more than 100 countries.  It is reportedly the world’s second largest manufacturer of smartphones.

Many Western countries and companies in recent months have stopped doing business with Huawei and ZTE, another Chinese telecom company, because they fear their equipment could be used for cyber-espionage by the Chinese government.  I think that is a reasonable fear.  The arrest of Ms. Meng is not reasonable.

LINKS

The War on Huawei by Jeffrey Sachs for Project Syndicate.

How Huawei’s CFO ended up in a jail in Canada by Julia Horowitz for CNN Business.

What’s going on with Huawei? by BBC News.

Meng’s arrest could plunge US, China into high-tech Cold War by Gordon Watts for Asia Times.

Huawei’s amazing global rise shrouded in controversy by Gordon Watts for Asia Times.

How Meng Wanzhou’s Arrest Might Backfire by Tyler Cowen for Bloomberg Opinion.

The nuclear temptation

The Obama administration is preparing a new generation of tactical weapons that supposedly would give the U.S. the power to fight and win a war against Russia or China.

The weapon is called the B61 Model 12.  It is a precision-guided atomic missile, with a computer that can guide it to its target and a “dial-a-yield” feature that would control the size of the explosion.  It could be launched from bombers that also drop conventional bombs, creating uncertainty in the targeted enemy.

The argument for such weapons is that, being precise, they would be more effective militarily and result in loss of less innocent life.   The argument against is that, for this very reason, there is a greater danger they would be used.

The U.S. government and its allies are increasing their forces along the borders of both Russia and China, but it is unlikely that they were be a match for larger Russian and Chinese forces fighting in their own neighborhood.  But deployment of tactical nuclear weapons would not necessarily change that equation, because the Russian and Chinese military have their own weapons.

Both Russia and the USA are currently undergoing modernizations of their nuclear forces.  Modernization is estimated to cost the U.S. more than $30 billion a year—$1 trillion over 30 years.

Modernization does not, in and of itself, increase the threat of nuclear war.  If there are to be nuclear weapons at all, the machinery needs to be updated and replaced to avert the danger of an accidental explosion or accidental launch.

The development of battlefield-capable weapons, however, does increase the scope and likelihood of war.  But the greater mistake is a military buildup along the borders of Russia and China—two powerful nations that are not threatening the United States, but may be provoked into doing so.

Why U.S. business kowtows to China

In the USA, government serves the needs of business.  In China, business serves the strategic aims of government.

No foreign corporation is allowed to operate in China without conceding something of long-term benefit to China.  That can be manufacturing operations in China, transfer of technological knowledge or a Chinese stake in the company’s ownership.  It goes without saying that the CEOs do not criticize Chinese foreign policy.

Cartoon by Xu Jun for Economic Observer

Barry C. Lynn, writing in the November issue of Harper’s, said that some American corporate executives have even submitted to Communist-style self-criticism sessions, in which they volunteer confessions of misdeeds without being accused.

As China becomes more powerful, and the United States becomes more dependent on the Chinese for finance and for critical manufactured items, the leverage of Beijing over the United States becomes greater.  Lynn explained the reasons:

First is the fact that so many U.S. companies now depend on China for the products they sell.  For Walmart, it’s barbecue grills and shoes.  For Apple, it’s assembly work.  For Pfizer, it’s chemicals.

And while foreign companies have talked a lot about reducing their reliance on China, they nevertheless keep upping the ante, year after year.  Just last April, General Motors announced plans to pour another $16 billion into China.   In September, Dell pledged a whopping $125 billion over the next five years, with an ominous promise to “closely integrate Dell China strategies with [Chinese] national policies.”

A second reason corporations are so willing to accede to Chinese diktats is the allure of Chinese markets.  For General Motors, China already accounts for roughly a third of the cars it sells.  For Qualcomm, China accounts for roughly half its business.  For Rio Tinto, China accounts for considerably more than half its output of iron ore.

Chinese sales of Apple’s iPhones topped U.S. sales in 2015 — and when global markets were tanking in late August, Tim Cook helped arrest a rout in the company’s stock by publicly assuring investors that the Cupertino giant had “continued to experience strong growth for our business in China through July and August.”

Source: Harper’s Magazine.

Chinese investors own the AMC Theater chain of movie theaters in the United States, and also are major investors in American-made movies.  China also is the world’s largest market for Hollywood movies.

The result: Chinese are never the foreign villains in American movies—Russians, Arabs, Colombians, North Koreans, anybody but Chinese.

Barack Obama, a master of geopolitics?

Many of my Democratic friends think of Barack Obama as a well-meaning but naive and weak reformer.  I think of President Obama as a shrewd and strong defender of the status quo.

Alfred McCoy wrote a good article for TomDispatch arguing that this is just as true of his foreign policy as his domestic policy.

The greatest threat to American world power is the rise of China.  While the USA is dissipating its power through failed military interventions. China is extending its power by economic policies that add to its economic strength.

Obama hopes to counter China by leveraging American economic power through the Trans-Pacific Partnership and Trans-Atlantic Trade and Investment Partnership, which will create a global trade bloc from which China and also Russia will be locked out.

The question is how long this will be feasible.  China’s economic power is growing.  American economic power is a legacy from the past.

President Obama has been using America’s status as the planet’s number one consumer nation to create a new version of dollar diplomacy.

His strategy is aimed at drawing China’s Eurasian trading partners back into Washington’s orbit.

While Beijing has been moving to bring parts of Africa, Asia, and Europe into a unified “world island” with China at its epicenter, Obama has countered with a bold geopolitics that would trisect that vast land mass by redirecting its trade towards the United States.

During the post-9/11 decade when Washington was spilling its blood and treasure onto desert sands, Beijing was investing its trillions of dollars of surplus from trade with the U.S. in plans for the economic integration of the vast Eurasian land mass.

In the process, it has already built or is building an elaborate infrastructure of high-speed, high-volume railroads and oil and natural gas pipelines across the vast breadth of what Sir Halford Mackinder once dubbed the “world island.”  [snip]