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Easing Huawei restrictions may help trade, but won’t stop the China tech battle

People walk past a Huawei retail store in Beijing, Sunday, June 30, 2019. Once again, Presidents Don
A Huawei retail store in Beijing. Once again, Presidents Trump and Xi Jinping have hit the reset button in trade talks.
(Andy Wong / AP)
Bloomberg

President Trump’s decision to restart sales of U.S. technology products to Huawei Technologies Co. may ease tensions with China, and even help end the trade war.

Yet as far as deals go, this is set to be one of Trump’s worst. It doesn’t stop the technology cold war underway and weakens the U.S. stance that Huawei isn’t just a political pawn. If anything, the president’s comments from the Group of 20 meeting over the weekend indicate that he’s just ready to be done with this trade war, even as threats to national security continue.

Trump wound up saying he would ease restrictions on Huawei while fielding questions at a news conference. White House National Economic Council Director Larry Kudlow subsequently told news media that Huawei will remain on the U.S. Entity List, which allows the Commerce Department to restrict sales, but that some temporary licenses will likely be granted.

Trump’s May 15 ban restricting U.S. companies from selling to Huawei kicked into overdrive a longstanding Chinese plan to rid itself of U.S. technology. The nation still needs American chips, and with even a limited resumption of access, China can plug some gaps while proceeding to develop its own rival technology. Huawei now has even more incentive to push ahead with its own chip development.

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The U.S. move also helps strengthen the Chinese company’s position that it’s being used as trade leverage. According to a transcript posted online, Trump said:

“U.S. companies can sell their equipment to Huawei. I’m talking about equipment where there is no great national emergency problem with it.”

And further:

“Huawei is a complicated situation. We agreed to leave that — we’re leaving Huawei toward the end. We’re going to see. We’ll see where we go with the trade agreement.”

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This is a direct acknowledgment that his administration banned sales of at least some items that had no security implications, and that the company is merely a political target. It’s also a long way from the “potentially catastrophic effects” of selling U.S. technology to Chinese companies that he outlined in his May executive order.

In just a few minutes, the president said what Huawei’s PR team in Shenzhen has spent months trying to tell the world. This kind of flip-flop highlights to Beijing just how unstable Washington’s security policy is right now.

Trump isn’t alone in conflating the trade war with technology. Senate Minority Leader Charles E. Schumer (D-N.Y.) noted that “Huawei is one of few potent levers we have to make China play fair on trade.”

No matter what happens in the realm of trade, a digital iron curtain – which separates the world into two distinct technological spheres of influence – will continue to be drawn. And no trade truce is going to end that long cold war.

Tim Culpan writes a column for Bloomberg.


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