MULTINATIONALS: Security Clash Grows In US, Eases In UK
Bottom line: Washington’s raising of Beijing’s foreign technology restrictions to the WTO and London’s acceptance of Huawei equipment could add to pressure on all parties to soften their restrictive actions over use of foreign technology.
A pair of stories in the headlines today show a growing divergence in how China’s major trading partners are treating their cyber security clashes with Beijing. The larger of the 2 stories has Washington formally posing questions at the WTO over Beijing’s recent restrictions that limit the sale of foreign technology to Chinese banks. The other has seen Britian issue a report saying products from leading Chinese telecoms equipment maker Huawei pose no threat to the nation’s security, or at least that the threat is controllable.
These 2 news bits are mostly extensions of ongoing trends, and mark a diverging approach between the US and Europe in the handling of their trade relations with China. The US has taken a more confrontational and combative approach, while Europe seems to want to try to work with China to find mutually agreeable solutions to their disagreements.
Normally I’m a fan of the European approach that is more constructive and tries to find solutions through dialogue. But it’s worth noting that Europe’s use of that approach to settle a trade dispute in the solar panel sector has shown recent signs of falling apart due to efforts by Chinese manufactures to undermine the deal. (previous post) At the end of the day it comes down to a question of which approach is better, the carrot or the stick, and clearly Europe is using the former while the US is using the latter.
Let’s begin with the US story, which has seen Washington voice its concern in comments to the WTO about Beijing’s recent efforts to restrict foreign technology sales to China’s banking system. (English article) The move isn’t a formal complaint yet, but rather could force China to explain its recent actions.
China has demanded that foreign suppliers of such equipment provide sensitive information like source codes and third-party user data as a condition for doing business, a move that has been widely protested by the foreign firms. We’ll have to wait and see how Beijing responds, but I personally will be interested to see how it justifies its aggressive actions against companies whose products are quite well respected and widely used around the world.
Next let’s move to Britain, which has been far more friendly towards China in the growing tensions over risks posed by foreign technology. Washington has informally banned the use of Huawei equipment in US telecoms networks, even as Britain has welcomed the Chinese company despite reservations from some local politicians.
Now media are reporting that a British government committee set up to explore the issue has formally determined the risks posed by Huawei equipment “have been sufficiently mitigated.” (English article; Chinese article) I did find it somewhat unusual that the reports were carried widely in Chinese media, mostly stemming from a report from the official Xinhua news agency, while they received little or no attention in western media.
Of course it’s possible the western media weren’t aware of the development, which is of far more interest to China. I have no reason to believe the reports are inaccurate, and have said for a while that Huawei’s equipment probably doesn’t pose any unusual national security risk. I also hold the same view for equipment from major foreign multinationals like IBM (NYSE: IBM) and Cisco (Nasdasq: CSCO), whose reputations rely heavily on the security and reliability of their products.
These latest 2 developments could pressure both Beijing and Washington to soften their stances, and perhaps lead them to start rethinking some of their more extreme views. At the end of the day no one really benefits from these kinds of artificial trade obstacles. After all, the Edward Snowden scandal has already shown that Washington, and probably Beijing and other governments, are quite capable of spying on anyone anywhere regardless of whose telecoms network they are targeting.
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