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The Fateful Arrest That Could Poison America’s Relationship With China

Amid controversy over a maybe yes/maybe no ceasefire in Donald Trump’s trade war with China, the United States engineered the arrest by Canada of a top Chinese executive for allegedly busting U.S. sanctions on Iran. The detention sparked outrage in Beijing, which threatened Canada with “grave consequences” if Meng Wanzhou is not released.

Huawei Technologies Co. is one of China’s international behemoths, a telecom firm that now sells more smartphones than Apple. The arrest of Meng, the founder’s daughter and Huawei’s chief financial officer, was not for committing a genuine crime against Americans, but rather for allegedly lying over Huawei’s connection to another firm that did business in Iran. The Trump administration is determined to dragoon other nations into its anti-Tehran crusade.

Washington’s use of its economic clout to coerce the rest of the world reflects extraordinary hubris. Americans would be outraged if another nation did the same to us.

In recent years, the United States has imposed sanctions on numerous nations, including Cuba, Iran, Iraq, Libya, Myanmar, Russia, Venezuela, and Yugoslavia. Increasingly Washington insists that the rest of the world follow America’s lead or else. It seemed radical when the 1996 Helms-Burton Act targeted foreign firms trading with Cuba. Since then, secondary sanctions have become commonplace, the economic weapon of choice against Sudan (since lifted), North Korea, Syria, and Iran. Against that latter nation, Washington currently is using U.S.-dominated financial markets in an attempt to enforce essentially a total embargo.

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Obviously, the purpose of secondary penalties is to magnify the impact of a boycott. In some cases, such as Iraq and North Korea, Washington has won UN Security Council support for multilateral penalties. In many instances, however, foreign governments dismiss what they see as shortsighted, counterproductive penalties—yet we press ahead anyway.

For instance, only in the U.S. do ethnic Cubans possess disproportionate political clout, based on Florida’s importance in determining the outcome of presidential elections. Hence, six decades after imposing its embargo, Washington continues, alone, to isolate Cuba economically. Given the politics, the U.S. may still be doing so 60 years from now.

When international support is lacking, Washington threatens foreign businesses to expand its bans. Even the slightest error can lead to huge fines if companies do business in the U.S. Firms forced to choose between markets in America and much smaller, isolated states overwhelmingly pick the former, which requires complying with American restrictions. That turns a secondary boycott by the U.S. into a global squeeze, if not a full boycott.

Commercial restrictions have become all too common, perhaps because they are easy to apply and seem to offer a costless remedy to difficult foreign policy problems. Alas, they seldom achieve their alleged ends. Governments of target states almost never comply and only rarely offer to negotiate. Even then, positive inducements are required to clinch a deal. Foreign governments typically are too concerned about power and prestige to capitulate to threatening foreigners.

Another reason sanctions fail is that they hurt the wrong people—average folks most vulnerable to economic decline. For instance, one estimate, likely exaggerated, was that a half million Iraqi babies died from the ban on Iraq’s oil sales; in contrast, dictator Saddam Hussein and his family didn’t suffer. In fact, elites often profit from the increase in the state’s economic role. Two decades ago, Yugoslav opposition leaders complained to me that the oppressive Milosevic government had manipulated sanctions; years later Cuban opposition leaders told me that communist officials had used the U.S. embargo as an excuse.

In response, the U.S. and other nations have increasingly tried “smart sanctions,” targeting perpetrators and malefactors, especially government officials. However, while this approach is ethically more justifiable, evidence of its success remains sparse. No dictator has yet given in because he wanted to vacation in the West or been overthrown because his backers worried about the security of their Western investments.

Nevertheless, Washington continues to promiscuously impose sanctions. Today, Iran is the target du jour. The president appears lost under the sway of Saudi Arabia, which is a more disruptive, brutal, and destabilizing power than Tehran. He sacrificed a working denuclearization agreement for the fantasy of Iran’s complete surrender.

America is virtually alone in reapplying sanctions against Iran. Washington’s demands for renewed talks are impossibly high, essentially requiring Tehran to subordinate its foreign policy to Saudi Arabia as well as the U.S., something Washington would never agree to if the circumstances were reversed.

As is evident from Meng’s arrest, imposing Washington’s will on the rest of the world creates resentment and resistance. Even U.S. allies have tired of the blundering behemoth taking shortsighted measures and creating long-term damage, with nary a thought about the interests of anyone else.

After the president killed the Iran deal, European governments began exploring strategies to protect their businesses from U.S. controls. The purpose was to preserve the deal with Iran by continuing to deliver economic benefits to the Iranian people. Today, several European countries are working on both an alternative to the SWIFT global financial messaging network and a “special purpose” financial entity to process payments for commercial transactions involving Iran. The Europeans have also considered employing state banks and firms, daring Washington to sanction allied governments.

China and Russia are interested in these endeavors. Neither wants to cede control over their policies to the U.S. nor open their countries’ firms to ruinous penalties. They are likely to cooperate with whatever the Europeans develop.

The Huawei case adds another dimension. Even if administration policy toward Iran was not so misguided, it should not become the tail that wags the dog. China matters far more than Iran, a weak middling power that does not threaten America or even Israel. In contrast, Beijing is the one potential peer competitor to the United States. Our bilateral relationship with them is the most important one on earth.

American relations with China already are frayed, given the trade war and other differences, especially over North Korea and control of East Asian waters. The administration’s grievances against Beijing include the possibility of Huawei being used by the Chinese government to effectively conduct surveillance and intelligence. Washington has substantial leverage but must set priorities. Meng’s arrest effectively raises the importance of complying with Washington’s Iran sanctions. That inevitably will crowd out other potentially more important issues.

Moreover, the Huawei arrest is likely to stiffen spines in Zhongnanhai. Chinese officials want to deescalate the trade dispute and avoid penalties against Huawei, but nationalistic, politically sensitive leaders don’t like to be pushed around. The failure of President Trump to raise the issue when he met with China’s President Xi Jinping is seen as a loss of face. The hardline Global Times called the arrest “despicable hooliganism” and “a declaration of war” against China. Chinese analyst Deng Yuwen warned that “if the U.S. makes an example of Huawei, the conservative nationalist forces in China and also the military will be very unhappy, and that will make it even more difficult to make compromises with the United States.”

Indeed, China’s leadership faces aroused public opinion, which tends to unite on issues of national pride. The regime fears and often accommodates public sentiments. The state-run China Daily editorialized: “The U.S. is trying to do whatever it can to contain Huawei’s expansion in the world simply because the company is the point man for China’s competitive technology companies.” Some Chinese have expressed fear for investments in the U.S. while others have urged an economic boycott.

The regime might look for subtle means to retaliate. Indeed, one can imagine charges emerging in Beijing against U.S. technology firms and their executives. Chinese officials are unlikely to let a concern for justice get in the way of embarrassing the United States. Some American business executives are now expressing unease over traveling to China.

Washington’s hubris is threatening America’s foreign relationships and international authority. Meng’s arrest is a stark declaration by the Trump administration that it expects to dictate to every other nation, no matter how powerful. China and other countries are ever less willing to comply. A backlash is certain. When it comes, it’s likely to do far more than undermine American efforts to isolate Iran.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire.

20 Comments (Open | Close)

20 Comments To "The Fateful Arrest That Could Poison America’s Relationship With China"

#1 Comment By Whine Merchant On December 10, 2018 @ 10:41 pm

This diatribe confuses the concept of ‘sanctions’ – especially the US bully tactics regarding other countries, with a “let’s not offend One Belt – One Road” grovel to Xi Jinping.
This is like News Corp [Faux] wanting to support Meng’s arrest as a Trump MAGA-move in the US while out of the US Murdoch condemns it because he wants to be best mates with Xi.

He is correct in some business people fearful of travelling to China. To Beijing, all Han, even those not born in China, owe primary allegiance to China and can be arrested for treason if they disadvantage a Chinese company [even if a direct competitor to their own business].

#2 Comment By Fazal Majid On December 10, 2018 @ 11:44 pm

Xi wants to make China self-reliant on electronics by 2025 as a matter of national sovereignty, so they don’t see a reprise of a huge company like ZTE being almost bankrupted because it is dependent on US-made or designed chips subject to US controls.

This requires massive investments in fabs, but also customers for those fabs. Huawei is a leading contender as one of the very few companies in the world that designs its own mobile chips (the others being Qualcomm, Apple, Samsung and Mediatek, also Chinese).

In this context Meng’s arrest is seen as arm-twisting her father, but it’s not as if he can comply with the US’ desire to stymie Made in China 2025—Xi can arrest Ren Zhengfei’s entire family if he wants to.

It’s important to note there has never been any actual evidence of espionage by Huawei. While in its early days they did play fast and loose with intellectual property, it did not become the world’s dominant telecoms equipment manufacturer by making knock-offs, but by massively outspending its complacent peers in R&D. British Telecom’s CTO warns its lead in 5G telephony may be unassailable. Thus it is hard to overstate how provocative this arrest is for the Chinese government.

#3 Comment By New Boss = Old Boss On December 11, 2018 @ 12:47 am

“For instance, only in the U.S. do ethnic Cubans possess disproportionate political clout, based on Florida’s importance in determining the outcome of presidential elections. Hence, six decades after imposing its embargo, Washington continues, alone, to isolate Cuba economically.”

The most egregious example has got to be Iran though. The “disproportionate clout” of Cubans is nothing compared to the “disproportionate clout” of the Israel and Saudi lobbies. Sometimes it seems like the whole US government has been mobilized to support the Israel /Saudi-driven embargo of Iran, including the President and individual cabinet members. Put it this way, it isn’t the “America First” we voted for.

“The regime might look for subtle means to retaliate. Indeed, one can imagine charges emerging in Beijing against U.S. technology firms and their executives. “

This just happened. Yesterday a Chinese court delivered a stunning win to Qualcomm against Apple, whose stock promptly fell 2 percent. It is thought to have been motivated by the Huawei arrest, not the merits. Expect more decisions like that.

One problem in dealing with a government like China’s is that they control the whole chessboard on their side. The leadership can compel behavior from any citizen, business, or office of the sprawling, ubiquitous control system that is the Communist government.

#4 Comment By Acies On December 11, 2018 @ 1:40 am

Huawei is merely collateral damage in the neoconservative battle to isolate Iran. As usual, Trump’s reductive foreign policy ultimately revolves around showing favor to Israel. Crushing Iran/Kowtowing to Israel > striking a favorable trade deal with China, a major trading partner as well as our largest economic and military rival. The press refuses to see it, Bandow at least is peering in the right direction. The US does operate with incredible hubris when it shanghai’s (sorry) other countries into fighting our unpopular sanctions battles.

The only darkly amusing thing is that there were plenty of reasons to arrest the Huawei CFO that had nothing to do with Iran trade…namely Huawei’s status as the tech hardware spy branch of the People’s Liberation Army. But there were smarter and less insulting ways for the US to go about confronting the Chinese for that.

Administrations come and go. Neocons persist.

#5 Comment By JR On December 11, 2018 @ 1:45 am

“By busting Meng Wanzhou, Trump is signaling that he expects to dictate to every nation, no matter how powerful.”
This seems overrating Trump’s influence. Bolton admitted being aware, but not knowing for sure whether Trump was aware. Kind of back stabbing NSA. Also with the US two factions GOP en DEM engaged in a near civil war this arrest may well be part of the overall DEM/deep state strategy of hemming in Trump on foreign policy. So looks to me of anything this arrest exposes the internal divide of the US.

#6 Comment By Ray On December 11, 2018 @ 1:50 am

In Asia, many nations both admire and fear Chinese for their super patience and ability to revenge quietly and deadly. Is it amazing to see how China promptly use Qualcomm’s lawsuit in order to ban many Apple products? More to come in the next several years. Unwise knee-jerk American hawks!

#7 Comment By Oleg Gark On December 11, 2018 @ 7:29 am

No daylight strikes again.

#8 Comment By Dan Green On December 11, 2018 @ 8:22 am

As a student of Realism, what is going on between the US, and both China and Russia, is nothing new.

#9 Comment By Jack On December 11, 2018 @ 11:05 am

Although not the focus of this article, the U.S. has dropped Canada into a hot mess on this issue and it threatens to weaken Canada’s relations with both the U.S. and China.

Canada is the weaker player in this affair and China may be preparing to make an example of Canada as a means of putting the U.S. on notice.

The U.S. has abused its privileges under its extradition treaty with Canada in this matter.

Canada would be well advised to consider abrogating the extradition treaty altogether if the U.S. cannot exercise its privileges under the treaty responsibly.

#10 Comment By Howard On December 11, 2018 @ 12:24 pm

“The regime fears and often accommodates public sentiments.” I lost track — which regime are you talking about? Doesn’t EVERY regime do that? Some even call that democracy, or else say that democracy is a means to that end. Regardless, those that consistently fail to accommodate public sentiments pretty quickly end up on the scrap heap of history.

#11 Comment By charles cosimano On December 11, 2018 @ 3:47 pm

And it is a good message send. It’s time.to tell China we don’t care what it likes.

#12 Comment By Sam Bufalini On December 11, 2018 @ 4:10 pm

Meanwhile, Canada is caught in the middle because it has stood by its extradition treaty with the United States. And it’s likely Canada will be the one to pay the price, one it can ill afford. [1]

#13 Comment By Fran Macadam On December 11, 2018 @ 6:57 pm

China’s arrested a former Canadian diplomat. That’s a good chess move – Canada is much weaker and more vulnerable than the U.S., and this sows division on the Canadian side, exacerbating the tensions already there. Watching Trudeau explain that he knew of Meng’s arrest ahead of time, but took no action because “Canadian law is independent” reveals him to be once again exactly as Trump characterized him: “Weak and a liar.” Not independent from the wishes of the United States.

#14 Comment By stumpy On December 12, 2018 @ 1:59 am

“And it is a good message send. It’s time.to tell China we don’t care what it likes.”

That’s for pussies.

Real men tell Israel they don’t care what it likes. But, seeing as it’s all about evading Iran sanctions, the Huawei arrest turns out to be just the latest example of Trump running errands for Israel instead of doing his job. “America First” my ass.

#15 Comment By liberal On December 12, 2018 @ 8:23 am

charles cosimano wrote,

And it is a good message send. It’s time.to tell China we don’t care what it likes.

I might agree with that sentiment in some contexts, but the context here is the neocon agenda against Iran.

#16 Comment By Max Charles On December 12, 2018 @ 11:50 am

The Chinese government is a malevolent entity that has a keen interest in America losing control of its borders. This process is already occurring in Canada. In both cases, the natural resources of the North American continent are coveted by China.

See this previously posted statement:

It’s time for Americans to take a hard look at the hostile Chinese-influenced state that is emerging on their northern border, replacing a peaceful neighbor. The Chinese government has all the money it needs to buy influence in the U.S. as well and it clearly does so, but you have to look north to Canada to see the process occurring in overdrive. The strengthening of Chinese influence in Canada has only accelerated since their mega-stooge Justin Trudeau became Prime Minister in 2015.

China has every interest in destabilizing N. America in order to grab its resources and if it can get Canada and/or the U.S. to lose control of its borders, it will certainly do so. Since Trudeau came to office, enforcement of immigration law has become a joke at best with failed refugee claimants from Haiti and the Middle East crossing the border from the U.S. at will and being turned loose right away as long as they promise to attend a hearing in a few months time. Having a chaotic state full of people who identify mainly with other countries suits China’s interests in every way but the Chinese government also needs to get as many of its own people as possible onto Canadian soil. Even though Canada has not needed an new immigration for at least 30 years, the Chinese government can and does pay the right people to keep the immigration pipeline open. Why wouldn’t they pay politicians to promote unnecessary immigration? Why wouldn’t they pay journalists to demonize any politician who dares to oppose unnecessary immigration? Why wouldn’t they pay union leaders to look the other way as the labour market gets flooded? Why wouldn’t they do all of this in the U.S and buy influence in the universities while they’re at it?

The Canadian Security Intelligence Service (CSIS) constantly warns of politicians accepting favours from the Chinese government. Are we supposed to think that these politicians would not do China’s bidding on immigration matters? Are we supposed to think that the same thing does not happen in the U.S.?

#17 Comment By KS On December 12, 2018 @ 11:50 am

To try to bust this lady for sanctions that no one else in the world agrees on is a mindless provocation. If you want to bust huawei for ip theft bust them for that.

More rank american stupidity.

#18 Comment By divadab On December 12, 2018 @ 1:11 pm

@Fran – “Watching Trudeau explain that he knew of Meng’s arrest ahead of time, but took no action because “Canadian law is independent” reveals him to be once again exactly as Trump characterized him: “Weak and a liar.” Not independent from the wishes of the United States.”

Not so. The request to arrest Ms. Meng was made lawfully under the US-Canada extradition treaty and the matter is being handled by the Canadian Courts according to law and treaty. Ms. Meng is now out on bail pending an extradition hearing, where she will have the benefit of an impartial hearing before a judge.

Yes Canada has been put in a difficult spot by the USA’s overreach. But they are governed by the law and will follow it.

#19 Comment By Andrew Nichols On December 12, 2018 @ 9:59 pm

The craven action by Canada in making this political arrest for something that isnt a crime in Canada is terrifying. If noone in civilised nations stands up to Washingtons diktats it will encourage them to do even more extreme stuff in pursuit of its imperial geopolitics. We are returning to the world of 1913. Trudeau is a pathetic weak character.

#20 Comment By N. Joseph Potts On December 14, 2018 @ 5:45 pm

I wonder if ex-President Bush can visit a(ny) country in the EU without fear of being arrested for war crimes.