Wednesday, 12 December, 2018

Why Huawei arrest deepens conflict between U.S. and China

A Huawei logo is seen at a Huawei store at a shopping mall in Beijing Wednesday A Huawei logo is seen at a Huawei store at a shopping mall in Beijing Wednesday
Jodi Jackson | 07 December, 2018, 08:15

Sabrina Meng Wanzhou, CFO of Chinese tech firm Huawei is now facing extradition to the United States after being a‌rr‌es‌ted‌ in Canada at the request of the USA government.

A Chinese statement said Meng did not break any USA or Canadian laws and that Beijing expected Canada to "immediately correct the mistake" and release her from custody.

He also said the US government has been "concerned" about Huawei potentially stealing American intellectual property - an issue that's been a centerpiece of the U.S-China trade disputes.

However, the arrest drew a swift response from China, which said it "firmly opposes and strongly protests" the move, adding it had urged Canada and the USA to "immediately correct the wrongdoing".

Meng's bail hearing has been scheduled for Friday.

It said that Canada, at the request of the USA, had arrested a Chinese citizen "not violating any American or Canadian law".

Sources told Reuters in April that U.S. authorities have been probing Huawei, one of the world's largest makers of telecommunications network equipment, since at least 2016 for allegedly shipping US-origin products to Iran and other countries in violation of USA export and sanctions laws.

Huawei said in a statement Wednesday it has not been provided many details about Meng's arrest.

China's foreign ministry urged Canada and the U.S. to "clarify" the reason for Meng's detention.

One congressman said companies that had used Huawei equipment reported "numerous allegations" of unexpected behavior, including routers that were sending large data packs to China.

A month later, Washington and Beijing reached a deal that would strike ZTE from the sanctions list - just days after China reportedly offered to ramp up purchases of American goods to reduce the trade imbalance with the US.

However, according to a recent report by The South China Morning Post, on October 29, Meng had told Huawei employees in an internal talk on compliance that there are scenarios where the company can weigh the costs and accept the risks of not meeting the requirements of the law.

Huawei is one of the largest tech companies in the world, but it has been under pressure in nations like the U.S., U.K., and Australia for allegedly doing the bidding of the Chinese government.

It's still unclear how Meng's case will play out, but it could undermine talks between the United States and China aimed at defusing their damaging trade war.

Wanzhou's arrest threatens the delicate 90-day truce in the U.S.

Meng's arrest and detention have only amplified the already-tense state of U.S.

In a statement, Huawei said it has no knowledge of any wrongdoing by Meng.

Huawei said it complies with all laws and rules where it operates, including export controls and sanctions of the United Nations, the US and European Union.

Last year, Federal Bureau of Investigation agents in Miami arrested Volkswagen executive Oliver Schmidt, who was charged with conspiracy to defraud the U.S.

"This is what you call playing hard ball", said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong.

Canada's top cyber official said the country is prepared for possible retaliation from Beijing for the arrest of Huawei's CFO.

Trump's tariff hikes on Chinese imports stemmed from complaints Beijing steals or pressures foreign companies to hand over technology. "U.S. President Donald Trump should rein in the hostile activities of some Americans who may imperil Sino-U.S. relations". ZTE, China's second-largest telecoms equipment maker, agreed to pay $1.4 billion in total fines to the United States after Washington slapped a ban in April on purchases of essential American components for seven years to punish the company for Iran sanctions violations.

The New York Times meanwhile said that the company had been subpoenaed by the Commerce and Treasury Departments over alleged violations of Iran and North Korea sanctions.

Gordon Houlden, director of the China Institute at the University of Alberta, said Canada and the US have an extradition treaty and Canada has obligations that not even the prime minister can change.

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