Friday, December 21, 2018

Is Huawai CFO arrest an indicator of how the US intends to rule the world?

This version slightly modified from the original posted on Asia Times.

The arrest of Huawei chief financial officer Meng Wanzhou by the Canadian authorities at the request of the US was unprecedented. Meng was arrested at Vancouver International Airport on December 1 while on a layover en route to Mexico.
It is safe to say that no country other than the United States has such a long reach that it can get away with such a blatant breach of international protocol. From now on, anyone can be arrested anywhere in the world on orders from the US.
What are the possible reasons and explanations for this highly unusual arrest?
First of all, whose idea was this to begin with? Was it US President Donald Trump exercising his formidable talent to extract a better trade deal from China by arresting Meng? He did say that if he could get a better deal with China, he would let her go.
On the other hand, Trump did not seem to know that the arrest was in the works and was as surprised as the Chinese. Given the chaotic disarray plaguing the White House, for Trump to be in the dark would not be surprising. Perhaps the idea originated with national security adviser John Bolton.

Is this a Bolton ploy?

Bolton has always been an “America über alles” kind of a guy. When he was US ambassador to the United Nations, he made it eminently clear that he represented an America whose laws trumped the UN’s and not the reverse. To his way of thinking, the UN exists to serve American interests, not the other way around.
If he thought arresting Meng would slow Huawei down and give the US a strategic edge, he would do it, and the hell with the niceties of international law and order. He is fully capable of creating his own brand of global terrorism.
So what is the Trump/Bolton beef with Huawei? Supposedly, the accusation leveled against Meng was violating the sanctions against Iran by continuing to do business with that country.
However, during the administration of Barack Obama, the US, the UK, Russia, France and China along with Germany and the European Union struck a deal with Iran to roll back its nuclear program. Last January, Trump decided unilaterally to withdraw from the deal and reimpose sanctions on Iran, even as the other signatories to the deal continue to work with Tehran in an attempt to keep the agreement in place.
Therefore, even if Huawei does indeed continue to do business with Iran as a Chinese company, is it obliged to abide by the US sanctions, sanctions it is not party to?
Even if the US objects to Huawei’s business activities with Iran, does the US extraterritorial prerogative extend to arbitrary detention of senior executives of Huawei at the will of the White House?
Meng is the CFO and vice-chairwoman of Huawei and the daughter of Ren Zhengfei, founder and chairman of the company. In general, CFOs do not get involved with day-to-day business transactions. Is her arrest designed to put pressure on Chairman Ren?
Among the innuendos directed at the company, Huawei has also been accused of stealing US intellectual property. The basis of this accusation goes back to Huawei’s early days when US-based tech conglomerate Cisco Systems accused Huawei of infringements.
The disputes were settled out of the courts and Huawei has never been convicted of any intellectual-property theft.

Huawei has flourished despite US interference

Years later, Huawei offered to acquire what amounted to a garage sale of the remnants of a formerly high-flying networking company called 3Com. The US government turned down its bid.
The government would rather let the last remains of 3Com go down the drain than for Huawei to gain any potentially useful IP, and that was how 3Com disappeared.
In effect Huawei has been barred from participating in the US market to any significant extent. In recent years, the US government has been actively persuading allied countries that Huawei telecommunications equipment cannot be trusted because it could install back doors to facilitate cyber spying for China.
Then along comes a piece from IT Wire, an online publication based in Australia. This piece asked the rhetorical question: Where is the evidence that Huawei equipment is used for spying by Beijing? The answer seems to be: There is none.

Don’t do as Cisco does

The Australian piece goes on to observe: “For all the talk of spying by Huawei, one has yet to see any evidence of such activity. There have, however, been back doors disclosed in equipment from global networking vendor Cisco, one which the company buried therein. Yet there has never been any talk of banning Cisco equipment from the Internet.
“There has also been a verified account of the American NSA spy agency planting back doors in Cisco equipment when it was en route to certain customers.”
Looks like the Americans’ attribution of Huawei’s capacity for mischief is based on the knowledge of their own well-established practice with Cisco.
Despite Huawei being banned by the US government from the US market and under the US pressure on its allied countries not to buy from Huawei, the 30-year-old company has grown to become the world’s largest telecom-equipment firm.
This year’s sales are expected to exceed US$100 billion, commanding 28% of the world’s tech market, and Huawei is also the second-largest maker of mobile phones, next only to Samsung.
Someone like Republican US Senator Marco Rubio may well find Huawei bewildering. How can a mere Chinese company copy and steal its way to greatness, he may wonder.
The real answer is that throughout its existence, Huawei has invested heavily in research and development so as to offer its customers superior performance at a lower price than its rivals.
Weary of reputation assassination from the US, Huawei has recently and openly challenged anyone to present evidence of security leaks from Huawei equipment.
At present Huawei is racing to introduce its fifth-generation technologies for mobile phones around the world, many steps ahead of the telecom companies in the West. This is most likely the real reason behind the US efforts to suppress Huawei’s advances.
Winning the 5G race will be important to many applications based on mobile computing and artificial intelligence and the orders-of-magnitude increase in Internet speed will accelerate the introduction and proliferation of self-driving autos.
By treating Huawei as a pariah not allowed in the US and its allies, the American policy will divide the world into two parts.
In addition to China, most EU countries along with many others in the world find the value proposition from Huawei irresistible.
Others will continue to place their faith in America, pay more for their phones and get slower connections, but sleep well at nights knowing that only Uncle Sam’s operatives can or would spy on them.

Thursday, December 20, 2018

Scholars urge "constructive vigilance" on Chinese activities in the US

This first appeared in Asia Times.

At the end of November, a group of 32 well-known China scholars and watchers co-chaired by Larry Diamond of the Hoover Institution at Stanford University and Orville Schell, director of the Asia Society’s Center on US-China Relations, published a report titled “Chinese Influence & American Interests: Promoting Constructive Vigilance.” The report, more than 200 pages long, was duly noted in the mainstream media.
Friends alerted me that I was mentioned in one of the footnotes – not a particularly accurate or flattering description at that. Naturally, I was curious and anxious to review the report as soon as possible. Having read it, I conclude that it aligns more with the adversarial thinking regarding China of Donald Trump’s White House than not.
Even though all the members of the Working Group on Chinese Influence Activities in the United States that produced the report have impressive academic or professional credentials, the document only represents a point of view on China, and by no means the definitive view. If we were to change the cast of participants with others of equivalent or more eminent qualifications, I can guarantee that the final report would read very differently in tone and content.
For example, the substitution of a handful of the participants with such people as Kishore Mahbubani, former United Nations ambassador from Singapore; Stephen Roach, former chairman of Morgan Stanley Asia; Yukon Huang, former China country director for the World Bank; Nicholas Lardy, economist and author; and James Fallows, correspondent for The Atlantic Monthly, as replacements would have resulted in a report that read differently.

Leaving out Lord would make a big difference

If I were organizing the study group, replacing Winston Lord, former ambassador to China (1985-89), would have been an obvious choice. For a fleeting moment in history, Lord thought he was going to be credited with leading China to democracy and, fair to say, was sorely disenchanted by the events in Tiananmen Square on June 4, 1989. Any subsequent US ambassadors to China would have offered a less fanciful and more reality-based view of China and the United States.
In Orville Schell’s place as co-chairman, I would have nominated Kevin Rudd, former prime minister of Australia and current president of the Asia Society Policy Institute. As for the other co-chairman, Larry Diamond, he is well known for his binary view of governments: A democratic government is good and a non-democratic is not. It would be hard to imagine that he could be objective about China and it would be a challenge to find an appropriate replacement for his chair. Perhaps Graham Allison, who knows Thucydides but is also not knowledgeable about China, would do.
I find the vacillating aspects of this report troubling. It discusses Chinese activities across many parts of US society from national and local government to universities, research laboratories and think-tanks. Invariably, a recommendation of “constructive” vigilance, meaning to keep a wary eye on the Chinese, is the end result. In reaching that conclusion, the discussion is full of “on the one hand and on the other” sort of conflicted ambivalence.

Professor Shirk begs to differ

Professor Susan Shirk, chairwoman of the China Center at the University of California, San Diego and a member of the working group, said in her dissenting opinion: “The report discusses a very broad range of Chinese activities, only some of which constitute coercive, covert, or corrupt interference in American society and none of which actually undermines our democratic political institutions. Not distinguishing the legitimate from the illegitimate activities detracts from the credibility of the report.”
I could not have summarized it more succinctly than that.
Ironically, the report is actually quite a useful compendium of “who, what and when” developments in US-China bilateral relations since Richard Nixon’s visit to China in 1972. Unlike the infamous Cox congressional investigation report published at the end of Bill Clinton’s administration that accused China of having tens of thousands of storefronts just to spy on America, this Hoover report carefully listed names of many Chinese and Chinese-American organizations in the US and what they do. There’s no blanket accusation of nefarious activities, just the caution of “constructive vigilance.”
Just one sample quotation, however, would fairly illustrate the report’s slant. One of the appendices is a compilation and description of the “Chinese-language media landscape” in the US. The last section is a list of independent media, and here is what the report says: “The Epoch Times (大记元), the Hope Radio, and New Tang Dynasty TV … are either owned or operated by adherents to the Falun Gong sect, which is banned in China. Their reporting on China is uneven.” (Emphasis is mine.)
Anyone with passing familiarity of Falun Gong’s venomous anti-China propaganda in the US would find the understated description of “uneven” most amusing.

Influence of the financial crisis not noted

The consensus of this Hoover report – whose working group, bear in mind, mostly consisted of academics – seems to focus on the lack of reciprocity and tightening access in China since President Xi Jinping came to power. The report does not look beyond his rise and examine the impact of the 2008 financial crisis. That’s a serious omission.
Before the Wall Street debacle and for 30 years since Deng Xiaoping launched reforms, China looked up to the US as the older brother, laodage, and admired a society governed by rules and regulations. The crash precipitated by the collapse of Lehman Brothers shook China’s confidence in the US to the core.
Emissaries from China began to hint and suggest that Washington should share the burden of world leadership with Beijing. Barack Obama when he first entered the White House might have been inclined to listen but was soon overtaken by the idea that America is exceptional.
It is too bad that after the Sunnylands summit in Rancho Mirage, California, in 2013 Obama and Xi did not seize the opportunity to embark on a new path of collaboration and move the US and China closer. Both sides bear responsibility for passing up the opportunity.
That distinguished scholars can continue to see America as the flawless fortress on the hill and have the proverbial beam in their eyes is unfortunate. Rather than continuing to heap criticism on China, justified or not, we need well-reasoned voices to examine the matter with a fresh perspective.
How can figuring out how to get along peacefully with China possibly be harmful to America?

Tuesday, December 11, 2018

Lessons from recent Taiwan election

This was first posted in Asia Times.

Taiwan concluded its version of midterm elections about two weeks ago. The defeat of the ruling Democratic Progressive Party (DPP) was as one-sided as was the reverse outcome four years earlier when it beat the Kuomintang (KMT).

Among 22 seats at the mayoral level for counties and cities, the DPP lost seven after holding 13 seats in 2014, while the KMT gained nine, to end up with 15 seats, from six in 2014. The mayor of Taipei municipality remains a non-affiliated Independent.
In terms of total votes cast, the KMT got 6.1 million while the DPP garnered fewer than 4.9 million. Four years earlier, the DPP got 5.8 million votes while the KMT received nearly 5 million.

Prominent American observers of Taiwan such as Kharis Templeman at Stanford University and Richard Bush at the Brookings Institution were quick to claim that the results were not because of external factors linked to cross-Strait relations but were strictly because of domestic issues.

I beg to differ.

When Tsai Ing-wen ran for president in 2016, she ran on an uncompromising platform of independence for the island and Taiwan not being part of “one China.”

After she won the election, she tried to walk back from being out so far on a limb, but so long as she was unwilling to recognize the “1992 Consensus,” Beijing was not going to throw her a lifeline.

Her predecessor as president, the KMT’s Ma Ying-jeou, had quite willingly abided by the Consensus, meaning that both sides of the Strait believe there is “one China” but each side is free to make its own interpretation as to what that means.

With a one-China agreement under Ma, cross-Strait trade flourished and a healthy surplus accrued to Taiwan. Without that agreement under Tsai, mainland tourists stopped coming and trade slowed to a trickle.

Taiwan’s cream of the crop goes to Shanghai

A professor friend in Taiwan tells me that as many as 30% of the annual university graduates now leave an economically depressed Taiwan for the Greater Shanghai area to seek entry-level jobs and the start of their careers. The salaries are better and the future prospects more promising.

The best and most advanced Taiwanese companies have already established factories and service centers on the mainland, some have even completely moved off the island.

If the best and brightest talents have left Taiwan, for China or even the US, and if the most promising companies are focused elsewhere, then Taiwan is left with second-rate talent and enterprises, a mere shadow of its former “little tiger” self.

Tsai Ing-wen does understand what’s going on and has been making conciliatory gestures toward Beijing, but to recant and mouth the line, “I buy the one-China consensus,” is simply too much to ask for, and her hardcore support base would abandon her. She is indeed between a rock and a hard place.

Just as earlier president Lee Teng-hui tried to do in the late 1990s, Tsai is promoting the idea of Taiwanese companies expanding to the south and west, meaning the Philippines, Indonesia, Vietnam and Thailand.

But Taiwanese companies enjoy the advantages of common language and culture with the mainland, not to mention favorable policy; those advantages do not exist in other countries.

Just as it was under Lee, Taiwanese companies diversifying to other countries have not met with success.

So while American pundits like to hold up Taiwan as Asia’s shining beacon for democracy, the recent election result still boils down to one universal condition needed for democracy to succeed. “It’s the economy, stupid.”

Han Kuo-yu represents a new approach

No election result bears this simple truth more emphatically than the election of Han Kuo-yu as mayor of Kaohsiung, the second-largest city in Taiwan.

At the start of the election season, nobody gave Han a remote chance of winning, not even his own party, the KMT.

The DPP has been firmly entrenched in Kaohsiung for two decades. The KMT nominated a political nobody as a pro forma placeholder candidate and gave him no support. He literally was unemployed at the time he was picked to run.

But Han ran hard based on his promise to make Kaohsiung rich again and create jobs so that the young people don’t have to go to Taipei to look for employment.

Han won with 54% of the vote. He immediately declared that he looked forward to working with the mainland and regardless of Tsai’s position, he has no problem with the 1992 one-China consensus.

Other newly elected KMT mayors also declared that they were ready to follow Han’s lead and work directly with the mainland.

This election in Taiwan was an important lesson for Beijing as well. Past missile threats and rhetorical bluster only stiffen the Taiwanese people’s back.

The pro-independence Sunflower Movement born of resentment toward Beijing that disrupted the Ma Ying-jeou administration has been a non-factor in this election. Young people today are ignoring the Sunflower Movement as irrelevant. They are more concerned about their careers and making money.

Let the Han Kuo-yus of Taiwan show the people that working with the mainland is the win-win solution. The widespread recognition of the benefits of positive cross-Strait relations will bring both sides closer together until that day when de facto unification becomes a reality.