SIM Report: North America, Issue 7

US & China: Washington intensifies Huawei boycott campaign amid worsening bilateral ties

The US government’s attempts to persuade third countries to ban Chinese telecoms giant Huawei from their 5G networks are intensifying and gaining more momentum. On 14 July, the UK government announced that mobile providers will be banned from buying new Huawei equipment after 2020, and that they must remove all of the company’s 5G kit from their networks by 2027. Most notably, the announcement came just six months after London had decided to allow Huawei’s continued participation in its 5G network, albeit with limits on its market share and restrictions on its use in sensitive parts of the UK network. While British officials said that the decision was based on a new technical assessment from its National Cyber Security Centre, US President Donald Trump also sought to take credit, saying he had ‘convinced many countries’ to ban Huawei.

The US campaign, officially driven by concern over espionage risks posed by Huawei equipment, has had most success among Washington’s closest international allies. Australia and Japan have effectively banned Huawei from involvement in their 5G networks, while major telecoms providers in New Zealand and Canada have so far shunned Huawei equipment, albeit without an official ban. Multiple US allies in Europe, including France and Germany, have resisted a ban but are likely to face increasing pressure from Washington following the UK’s decision. In Latin America – another priority region for Washington given shared historical and geographic ties – the US has offered to help fund Brazilian telecoms companies’ procurement of non-Huawei 5G equipment, while similar pressure is likely to be exerted on proximate countries and longstanding diplomatic allies alike, including Mexico, Honduras and Colombia.

Washington’s campaign comes in the context of worsening Sino-US relations, already marred by distrust and mutual suspicion, amid the novel coronavirus (COVID-19) pandemic. Trump has repeatedly blamed China for covering up the initial outbreak, and suggested that Beijing ‘intentionally’ allowed it to spread to other countries. Chinese authorities, on the other hand, have claimed without evidence that the virus may have originated in the US, despite the initial outbreak occurring in China and most virologists and infectious disease experts saying it very likely evolved naturally. The deadly pandemic has aggravated existing grievances between the world’s two largest economies, including over trade, intellectual property (IP), human rights, and the evolving political status of Hong Kong, among a host of other issues. Canada’s detention of Huawei’s chief financial officer (CFO), Meng Wanzhou, on US extradition charges in December 2018 brought the US’s northern neighbour into the dispute, leading to China’s arrest of two Canadians and tense relations between Ottawa and Beijing.

The dispute over Huawei has multiple commercial implications. Most directly, it creates an uncertain and challenging operating environment for telecoms companies seeking to build their 5G networks, who must navigate the Sino-US rivalry and their host government’s response to it. It will also likely lead to the delayed roll out of 5G technology in countries shunning Huawei. More broadly, the dispute illustrates the potentially disruptive impact of Sino-US tensions on businesses globally, forcing corporates everywhere, particularly in advanced technology sectors, to consider how operations and planned investments may be affected by imminent and longer-term geopolitical developments. To achieve commercial success in this uncertain environment, corporates will need a firm grasp of both geopolitics and evolving international attitudes to trade to mitigate the multiple risks these pose to their business.

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