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China-US: differences over trade just a tip of the iceberg

The Huawei logo
The Huawei logo Reuters

Trade talks between China and the US start on Wednesday. Main topics is the increasing trade deficit between the US and China, as a result of which Washington and Beijing launched several rounds of tit-for-tat tariffs, costing both countries billions of dollars. At the frontline of this trade war is the worlds’ biggest telecom company: Huawei.

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Top US and Chinese trade officials returned to the bargaining table Wednesday, working to avoid a sharp escalation in the trade war between the world's two largest economies.

Chinese Vice Premier Liu He is leading Beijing's delegation to the talks, with just a month remaining in a 90-day truce declared in December.

The talks also occur against the backdrop of Washington's sweeping prosecution of Chinese telecoms giant Huawei, which has outraged Beijing and infused the negotiations with uncertainty.

Washington accused Huawei of violating sanctions against Iran before the 2015 Joint Comprehensive Plan of Action by exporting technology to Iran through subsidaries.

Apart from that, the US says that Huawei stole technology from telecom operator T-Mobile USA.

5G equipment

But none of the charges deal with deeper US concerns that Huawei's cheap equipment , including 5G equipment, may be used for snooping.

Huawei already claims it is "taking the lead" in certain aspects of 5G development.

“5G is the next mobile technology standard that will arrive, already this year,” says Bengt Nordtström, the CEO Northstream SA in Stockholm, a company that consults on mobile technology.

Nordström sees various reasons why Huawei seems to be at the frontline of the trade war with the United States: “They are by far the biggest telephone vendor in the world. Huawei is about twice as big as Cisco and more than four times bigger than Nokia and Ericsson respectively. They are a major player in the industry.”

Meanwhile, the US fears that Huawei equipment could be used to facilitate espionage by the Chinese government, and since that is “spreading gradually in the US,” US operators are prohibited from using Huawei equipment, or any other Chinese equipment for that matter.

'Five Eyes'

Currently, New Zealand and Australia are also battling Huawei, after Australia banned Huawei equipment. Both New Zealand and Australia are part of the “Five Eyes” global spying brotherhood that includes the US, the UK and Canada as well. Other US allies, including France and Germany discuss the use of Chinese telecom technology as well, says Nordström.

Another reason why Huawei is at the frontline between Beijing and Washington are allegations that Huawei affiliated companies exported advanced technology to Iran.

But in spite of the rhetoric coming out of Beijing and Washington, China does seem to have slowed down its business with Iran.

Dramatic fall

According to the report of Iran-watching website Bourse & Bazaar, called "When the Sun Sets in the East," “trade data from the General Customs Administration of the People’s Republic of China shows that China-Iran trade has fallen dramatically in the two months following the re-imposition of US secondary sanctions.”

The report found a dramatic fall of 70 percent in Chinese exports to Iran “from about USD 1.2 billion in October 2018 to just USD 400 million in December 2018.”

Chinese negotiators may use these figures as a bargaining chip in the ongoing negotiations, while trying to get US restrictions on Chinese telecom companies lifted.

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