The Huawei Fiasco: How the US-China Trade War might be Killing Technology?

The United States of America and China, are two of the most dominant and prevalent superpowers, which would play a major role in shaping the future of this world. So, when a trade war takes place between the two countries, interesting things ought to happen. The seemingly unexpected collapse of the trade negotiations between the US and China hints at continual Sino-US tariffs to be the new standard. But the after-effect doesn’t seem to be limited to the aforementioned scenario. The ongoing Huawei fiasco seems to be just one of the large scale consequences of the tainted relationships between the Trump administration and the Chinese government. And mind you, the impact won’t be limited to the technological ecosystem alone.

Huawei is China’s biggest phone manufacturer and the second largest phone manufacturer in the world after Samsung. But it seems to be involved in the vicious circle of dealing with frenemies. Google which was responsible for serving them with a fork of their OS, i.e. Android (the fork named EMUI), ARM which was responsible for providing the architecture used in the KIRIN high silicon chips (which are the proprietary chips used in Huawei and Honor phones), and other major companies like Qualcomm, Intel, Broadcom, and Microsoft, have all decided to cut ties with the Chinese conglomerate. All these companies, which were previously, in some way or the other responsible for supplying essential components to Huawei for a variety of their products, have to now comply with all of the latest regulations set forth by the U.S. government. Essentially, what has happened is that Huawei, along with some other companies like ZTE have been placed in the ‘Entities list’ by the U.S.’s Commerce Department. Huawei is in deep, deep loads of trouble, and we still don’t have a clear picture as to why it has got there.

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A backdrop: Where it all began

Huawei was a venture undertaken by Ren Zhengfei, a People’s Liberation Army technologist, who founded the company in 1987. And from the very beginning, it has been known to be involved in some fishy business. The first instance of the same can be traced back to the company being placed on a watch list by Indian intelligence agencies, for allegedly supplying the Taliban with military telecommunications equipment. However, the charges were later lifted due to lack of any sort of evidence. The company has also been accused by various firms like Cisco, for stealing source code from its routers.

However, things really started to heat up in the year 2007, when a move by Huawei to buy a stake in a US-based company was blocked by the Bush government, due to concerns over national security. Meanwhile secretly, the FBI also started an investigation against Huawei’s founder for potential violations of U.S. trade sanctions in Iran in 2007, which was the very thing that would act as the main ground for fixing allegations against them in 2019. Similar investigations were also carried out by all the members of the ‘Five Eyes’, comprising of Australia, Canada, New Zealand, the United Kingdom, and the United States. British companies like Vodafone and BT Mobile even began removing Huawei equipment from their network and devices, as they found suspicious software and hardware backdoors in the same. Further, they have been charged with corporate espionage by Motorola. They have even been banned by Australia from playing any role in building their 5G network. However, the final nail in the coffin was delivered in the fall of 2017, when U.S. decided to review China’s intellectual property policies, which marked the official beginning of the trade war between the U.S. and China, and both the countries have been quite aggressive since then, especially the U.S. under President Donald Trump. All the major companies had to drop Huawei from their 5G programs, which seems to be the root of all the trouble. It’s important to note, that both the countries want the rolling out of 5G in their respective countries before the other does. It’s important for them as it would enable them to set and lead standards, that would ultimately be implemented worldwide, thus giving them a chance to establish a monopoly, over what is deemed to be the next big step towards the future. China wants to further strengthen its stranglehold over the mobile and telecommunication equipment sector, with companies like Huawei and ZTE leading the way.

So, it can be said that the US blacklisting Huawei, may not be over security concerns at all. It might just be a move by the United States to slow down the 5G rollout in China, and also to reach a trade agreement at the same time, as had been made clear by Donald Trump in a recent press conference.

Can Huawei opt for any legal measures to fight the ban?

Huawei can definitely contest the order in court, both American and International. However, the resulting legal fight won’t be between the U.S. and the Chinese conglomerate, but rather between the U.S. and China, and it could test the limits of both the countries. Mind you, Huawei has already challenged the ban as being unconstitutional. According to ‘The Verge’, Huawei is arguing that the government ban is “a bill of attainder.”Under the constitution, Congress is forbidden from passing laws that target specific people, and Huawei says the ban qualifies. However, the problem with this argument is that similar reasoning was given by ‘Kaspersky Labs’, a Russian software giant, who faced a federal ban over concerns over cybersecurity. But the court upheld the government’s decision. In general, courts have been quite liberal in granting government, the power to deal with concerns over national security, rendering Huawei’s legal prospects uncertain.

What’s Next?

The U.S. ban seems to be a total strategic and diplomatic act as such. Ironically, Huawei doesn’t even sell its phones in the U.S. and is solely dependent on them for their parts and equipment. Thus, it’s hard to see this action as a measure to protect national security interests. Instead, it seems like Huawei’s ban is more of a fluke, to intimidate China, and win over the fight over 5G and the broader trade war. They haven’t banned other Chinese companies like Xiaomi and Lenovo, have they? They won’t because they can’t move forward that aggressively without evidence, and China ought to pushback. China is in fact, reported to be creating its own ‘Entities List’. The move purely tends to freeze Huawei and more importantly, China’s technological growth by drying out essential supplies from the U.S., and although China is no saint (China has a history of patent thefts and reverse engineering frauds), such actions by the U.S. ought to further worsen the ‘technological cold war’ that is developing between the two countries. Further consequences can include economic slowdowns for both the countries, worsened relationships with each other and other countries for either of the nations, etc. Other nations dependent on the said countries for various resources might also suffer. So ultimately, there seems to be no party which is winning here. It would, in fact, be better for both the countries to reach a conscience on their differences and work together for the promotion and propagation of 5G technologies in their respective countries, and further, across the world. Trade negotiations need to be sped up and an agreement which is favorable to both the parties, ought to be achieved. Remember, even India can’t stay immune to the global long term impacts of a trade war of such magnitude. So, it’s necessary that India takes a neutral stance and acts as a mediator to resolve the dispute and show its prevalence and character to the world.

What’s in there for India?

India is supposed to be a future superpower. However, it’s economy is nowhere close to as developed as that of the U.S. or China right now. So, as the trade war heats up, it would be essential for India to watch each and every step it takes, towards ensuring sustainable development for itself and at the same time, for maintaining its relationship with the two superpowers. With the Modi government back in charge, India is supposed to have more uniformity in its economic reforms, and bring in more stability over the next five years, a period which most probably will be turbulent with respect to International Relations for nations all across the world. The trade war could definitely be beneficial for the country if investments that would have otherwise gone to China or U.S., come to India. However, it is highly probable that there might be a negative impact on world trade, world consumption and the growth of global GDP due to the tensions between the two superpowers, and India too, might not be immune to the same, as has been made clear by Mr. Noel Quinn, chief executive, HSBC. Amongst all this gloom, it would be upon India to make the best use of the opportunities they are served with. And they have stepped foot in the right direction. India, besides China, is Huawei’s second-biggest market. And with countries like Australia, U.S., and Canada banning Huawei’s participation from their 5G programme, and nations like U.K. and other European and Middle-Eastern countries being hesitant to use Huawei equipment in their further operations and 5G rollout, India serves as a big opportunity for Huawei, to re-establish some of their lost ground in the tech world, and recover its losses and more importantly, its damaged reputation. Ironically, with U.S. companies like Apple facing existential crisis dilemmas, due to repeated threats from China for a tit for tat action, Apple too has decided to shift its iPhone 10 production line (manufactured by Foxconn Technologies for Apple) from China to India. Similar investment flow is expected from many of the Chinese companies too, towards India. Thus, for India, a significant shift is awaited in the manufacturing sector, especially if it is properly positioned for the same.

Conclusion

The trade war is showing no signs of a slowdown right now. Both the U.S. and China may emerge losers in the said scenario, but for India, there exists a golden opportunity to be a future leader, with 5G rollout and implementation being the first step towards achieving the same. As for Huawei, the ban just seems unfair and unnecessary, and would definitely hinder technological growth and advancement across the world. The Huawei ban thus seems to be a petty negotiation bid from the U.S. to force China to agree to its terms, and both the nations have plenty to lose over the same.

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Shivansh Tiwari

BA LLB
Symbiosis Law School, NOIDA
email: shivansh.law@gmail.com