5G is a major factor behind the US-China trade war, which served Trump’s ambition to remedy the US’s declining role as a world leader. However, the US is lagging behind in this battle. According to IPlytics, Chinese telecom companies dominate the top 5G patent ownership worldwide, with Huawei leading with a share of more than 15.39%. Huawei’s rapid development of the world’s biggest 5G mobile network supply alarms the US intelligence agency. Suppose Huawei expands its network all over the world, the Chinese government will have access to “gather intelligence, steal trade secrets, track down and punish its critics, and potentially bring down networks to incapacitate other nations in times of crisis,” according to a post on Center of American Progress.
The US government has been using different strategies to deter China’s expansion of its 5G network, such as convincing other countries to sign agreements to boycott Huawei’s 5G networks. However, this particular attempt has not been successful. Some of the United States’ closest partners, from NATO members to countries in the Middle East, are still using Huawei. Most countries in South America and Asia are already using or planning to use Huawei, while others have no ban in effect. The reason is that the United States cannot provide alternatives, as the 5G network market works under an oligarchy, where a small group of people have control over the market. Another strategy is sanctioning through cutting off Huawei’s access to advanced computer chips—a vital part needed to power 5G telecommunications gear. This disruption severely damages Huawei’s survival; however, it doesn’t take long for it to backfire on the US semiconductor industry. As one of their most important clients, China has been “driving semiconductor research and innovation” in the US. The country’s chip makers started to lobby the government on resuming the trade, forming a domestic counteracting force on US’s campaign against Huawei.
While the US is constantly frustrated by the failed efforts to deter Huawei’s development, China is adopting an increasingly ambitious approach to stimulate the growth of the 5G industry. The US claims that Huawei’s success benefits from the Chinese government’s market-distorting policies, which runs counter to China’s commitment to WTO principles of pursuing market-oriented policies while providing non-discrimination, national treatment, and reciprocity, and damages the health of world trade relationships. Such an accusation is not groundless—It is not a secret that the Chinese government has been prioritizing the development of 5G through technological and financial aid. In an announcement posted on the Chinese government’s website, the goals of widening the scope of 5G technology to encompass areas such as health care, public service, and commercial activities became mandated on a national level.
Huawei’s executive Meng Wanzhou’s arrest, however, became a turning point of this battle. Meng was arrested in December 2018 in Vancouver, Canada, based on a US request on charges of misleading HSBC to break US sanctions on Iran. This incident marks a new level of the US-China trade war since it has involved a third country—Canada. Shortly after Meng’s detention, China arrested two Canadians on espionage accusations, sparking a severe diplomatic crisis between Canada and China. In the following year, China stopped canola and meat exports from Canada, citing safety reasons. Canada fought back by delaying the decision to grant Huawei permission to build a 5G network in the country.
Finally, after three years of negotiation impasse, Meng was released after she reached a deal with US prosecutors regarding her charges on September 25, 2021, and hours later, the two Canadians were freed by China. Meng did not plead guilty, and the Canadian detainees were deemed innocent as well. Many optimists interpret this compromise as a thaw of the diplomatic tension among China, Canada, and the US. However, warning signs should be drawn from this incident.
Canada and other western countries have accused China of engaging in “hostage diplomacy,” showing a fundamental deterioration of the trade war. The weapon used by the two countries has escalated from trade policy to possible violation of humanitarian issues. This might be a serious problem for the US since, as an authoritarian regime, China does not have many concerns about suffering audience cost domestically, where the politicians suffer political loss due to the failure of addressing a foreign policy crisis. The Chinese government has long been skilled in political propaganda, which improves its image. Through a quick survey of Chinese social media sites, one can see an overwhelming voice of support of the Chinese government’s efforts to save Meng and condemnation against the US’s political prosecution against a Chinese citizen; few comments talked about the two Canadians who were in a similar situation as Meng. While in the US, the democratic system makes it hard to justify the engagement of “hostage diplomacy” and prevents the US government from using it as a counterattack in the first place without public scrutiny. Therefore, the question now is whether China will use “hostage diplomacy” as a regular approach to deal with diplomatic conflicts in the future.
As a matter of fact, China has already cast a shadow of fear into foreign companies since this incident. Margaret McCuaig-Johnson, a China expert at the University of Ottawa who worked as a Canadian government liaison official with China for years, recalled that during the time of Meng’s detention, “[there was] a list of 100 Canadians who can be picked up and interrogated anytime.” Now that “hostage diplomacy” has shown its efficacy through the release of Meng, worries about its spread to other authoritarian regimes is becoming a valid concern. Moreover, the fear of being targeted would undermine foreign investors’ confidence in joining the Chinese market, and China would end up suffering loss from its damaged reputation.
Launched in 2018, the US-China trade war has done more damage than good to both countries’ economies and diplomatic relationships. From rising tariffs to hostage diplomacy, the growing pile of evidence has confirmed the fear of the war’s increasingly destructive effect. The Biden administration signals no thaw in trade relations with China, leading to a prolonged period of chaos and potentially marking a prelude to more surprising events.
Edited by Leslie Carmelotes
Ruolan is in her last year at McGill University, majoring in Political Science and Economics. As a staff writer of Catalyst, she is particularly interested in the economic policies in Asia and the politics of authoritarian regimes.