Trade correspondent L.C. reports:
Congress is weighing in on the Huawei situation, exerting pressure against the possible easing of US government restrictions on the company and against the President using it as a bargaining chip in trade talks with Beijing. In fact, some in Congress and beyond think the Administration erred in not destroying China’s ZTE and Huawei earlier when the opportunity presented itself. Both firms, though nominally private, are extensions of the Chinese Communist government’s security state.
Two bills were introduced in Congress this week that aim at curbing China’s dominance of 5G tech: the “Defending America’s 5G Future Act” co-sponsored by Sens. Tom Cotton (R-AR) and Chris Van Hollen (D-ME), and the “Promoting US International Leadership in 5G Act” co-sponsored by Reps. Michael McCaul (R-TX) and Henry Cuellar (D-TX).
Defending America’s 5G Future Act
Defending America’s 5G Future Act is the more important piece of legislation since it would curb the President’s flexibility in dealing with Huawei and China. But both are likely to be viewed by Beijing as hostile and raise tensions just as the Administration is working to revive the trade talks. Yet it is possible that the Cotton/Van Hollen bill could give the President leverage since it enables him to argue that he can’t ease the Huawei restrictions any more than he has or it would spur Congress to pass this legislation – which would reverse any easing the President might offer Beijing.
On the other hand, it could cause the talks to stall before they start since President Xi Jinping has made it clear that he believes the President promised him, at their late-June summit, that limits on Huawei would be eased. This presents a danger: President Trump has vowed to impose tariffs on the remaining $300+ billion in imports from China not yet hit with Section 301 tariffs if the trade talks don’t progress. No one wants those tariffs – even the President and most of his advisers. Yet the President’s hand may be forced if the talks collapse because he has no flexibility to offer what Xi demands on Huawei.
So this bill is important for US-China relations and beyond. It was introduced on July 16th in the House and Senate with strong bipartisan support. It would prohibit the Commerce Department from taking Huawei off the Bureau of Industry & Security’s “Entity List” of companies with restricted access to US technology without congressional approval. Huawei was put on the list in May, but President Trump signaled his willingness to relax restrictions on the company as part of a trade deal.
For the past three weeks there has been some confusion about Huawei’s status. It seems the White House won’t remove it from the Entity List, yet the company will – under a temporary general license that may be extended – be able to purchase some US technology products. It mainly buys semiconductors and electronic components.
Administration officials reportedly are having difficulty reaching agreement among themselves on Huawei’s status and on which products it will be allowed to buy under the eased restrictions. Any company on the Entity List can still make transactions with US companies, but they need a special license to do so, which Commerce denies in most cases. So having the general license and the suggestion that its purchases will be looked at favorably puts Huawei in a better position than most companies on the list, though which products will come under the license is yet to be determined.
And there will still be strong restrictions on Huawei’s sales in the US, at least to government purchasers.
US officials have said that transactions are likely to be approved if they don’t threaten US security. Purchases of US semiconductors and related tech could be seen as benign in this context. US micro-chip and other electronic components manufacturers are pressing the government to let them continue to sell to Huawei since it is one of their top customers. But that might alarm the bill’s sponsors.
The legislation has an array of powerful sponsors from both parties, along with co-authors Cotton and Van Hollen: Sens. Marco Rubio (R-FL), Mark Warner (D-VA), Richard Blumenthal (D-CT), and Mitt Romney (R-UT). A companion bill introduced in the House is sponsored by Reps. Mike Gallagher (R-WI), Jimmy Panetta (D-CA), Liz Cheney (R-WY), and Ruben Gallego (D-AZ). Many of these legislators are heavy-weights in the national security arena. Cotton, Rubio, and Cheney are leaders on defense issues and also are generally strong supporters of the President. However, they are among the members of Congress who have warned him in the past not to go soft on China.
The senators issued a press release with statements from the main sponsors:
- Cotton: “Huawei isn’t a normal business partner for American companies, it’s a front for the Chinese Communist Party. Our bill reinforces the president’s decision to place Huawei on a technology blacklist. American companies shouldn’t be in the business of selling our enemies the tools they’ll use to spy on Americans.”
- Van Hollen: “The best way to address the national security threat we face from China’s telecommunications companies is to draw a clear line in the sand and stop retreating every time Beijing pushes back. President Trump shouldn’t be able to trade away those legitimate security concerns.”
- Rubio: “Huawei, a malign Chinese state-directed telecommunications company that seeks to dominate the future of 5G networks, is an instrument of national power used by the regime in Beijing to undermine US companies and other international competitors, engage in espionage on foreign countries, and steal intellectual property and trade secrets.”
- Warner: Huawei’s placement on the Entity List “shouldn’t be used as a bargaining chip in a larger trade negotiation. This bipartisan bill will make sure that Congress has a chance to weigh in if the President attempts to make concessions on our national security.”
- Cheney: “The… Act codifies the President’s wise decision to blacklist Huawei, and sends a clear message that Huawei continues to be a vehicle the Chinese Communist Party is using to gain commercial and security advantages and threaten the US.”
Some analysts believe that China is more interested in getting the US to back off from restraining its technology than in getting the US tariffs removed – in other words, protecting Huawei is even more important to Beijing than getting the tariffs lifted. China is becoming less dependent on foreign trade even as its economy shows increasing weakness. It is also adjusting to the tariffs, inasmuch as many labor-intensive manufacturing facilities were moving out of China ever before the tariffs. China is finding alternate suppliers for many goods that it used to import from the US. But its growth does increasingly depend on improving productivity and developing indigenous technologies that it currently sources from abroad. For this it still needs to be integrated with global high-tech supply chains.
It therefore sees the US moves to rein in and undercut its national-champion companies as a serious threat. If it finds it can’t use bilateral talks with Washington to alleviate this threat, it may well discard the talks altogether. That would likely lead to imposition of the remaining US tariffs and the eventual decoupling of the US and Chinese economies.
It is not certain what path the Cotton/Van Hollen bill will follow. If it is brought to a vote, the bill likely will pass, given the heft of the sponsors and the eagerness of legislators in both parties to take a strong stand against China. On the other hand, if the White House feels it is making progress with Beijing, the sponsors may wish to give it room to do so, and so not pursue the legislation. But if the President makes an obvious move to ease up on Huawei and head for a soft deal with China based largely on vows to improve the trade imbalance, then the bill’s sponsors may well decide to push ahead to disrupt what they would see as a deal threatening national security. The President has already given Chinese President Xi Jinping a pass on Hong Kong‘s democratic uprising and the 1989 Tiananmen massacre.
Promoting US International Leadership in 5G Act of 2019
Separately, on July 15th, Reps. Michael McCaul (R-TX) and Henry Cuellar (D-TX) introduced the Promoting US International Leadership in 5G Act of 2019. It too is aimed at curbing China’s 5G dominance. The bill would have the US prioritize engagement at the international level aimed at setting standards for 5G networks and infrastructure that would undercut China’s influence and dominance. Up to now, the Chinese government has seen that the standards committees were stacked with representatives of Chinese industry and government. A fair amount of the technology that China is now mass producing was stolen from the US and other advanced sector countries.
McCaul explains the bill’s purpose: “We must do more than condemn China for its malign practices and aggression. We have to show up and compete. That’s what this bill will accomplish…. China’s majority control of the world’s 5G networks, interconnected devices and cloud storage is a risk we cannot accept.” The bill would boost the US’s global competitiveness in 5G technology by directing the Secretary of State to enhance US leadership of international standards-setting bodies for 5G tech and to cooperate with allies to identify and counter the risks of Chinese dominance. China is sure to see the McCaul’s legislation as unfriendly, especially since he is a strong supporter of Taiwan.
Hat tip to Wikimedia for its reproduction of Dutch painter Jan Victors’ painting, “Esau and the mess of potage,” one of many on that subject by European 17th and 18th century painters.
Leave a Reply