This article was first published on Guancha News, on June 18th, 2019
It may be possible, but it largely depends on a strategic reset of Chinese and American trade negotiations. There are three different aspects that must be considered.
1. A legal defence is imperative, but unlikely to succeed
The U.S. Department of Justice has brought 23 charges against Huawei and its subsidiaries, Vice Chairman, and Chief Financial Officer Meng Wanzhou. Of the charges, the East District Court of New York filed 13 and the West District Court of Washington filed 10. The U.S. accuses Huawei of four types of crimes: violation of sanctions, financial fraud, commercial espionage and obstruction of justice.
Meng Wanzhou filed a civil lawsuit against the Canadian government in a Vancouver Court on March 9th. In a civil lawsuit filed by the British Columbian Supreme Court, she claimed that the Canadian Border Services Agency, the Royal Canadian Mounted Police and the Canadian Government had violated the law in carrying out the United States’ extradition request. Meng stated that when entering Vancouver Airport on December 1st last year, the Canadian police did not arrest her immediately, but detained her in the name of examination and used the opportunity to “compel her to provide evidence and information”.
After the Canadian Ministry of Justice announced the formal launch of Meng’s extradition, Meng’s lawyer David Martin issued a statement saying: “We are disappointed that the Minister of Justice has decided to issue an Authority to Proceed in the face of the political nature of the U.S. charges and where the President of the United States has repeatedly stated that he would interfere in Ms. Meng’s case if he thought it would assist the U.S negotiations with China over a trade deal.” Under these circumstances, extradition was a flagrant violation of the basic principle of extradition for dual criminals. Martin further added that the charges against Meng were not crimes in Canada and that his client maintains her innocence.
In court, her legal represenatives intend to call into question the political motivations behind the extradition and whether the charges against her apply in both the United States and Canada. A major exception to Canada’s Extradition Law is extradition for political reasons. Though his trade negotiation team and judiciary have repeatedly stressed the proceedings are not related to trade negotiations, Meng’s lawyer intends to make full use of Trump’s personal comments.
Another prerequisite for extradition in the U.S.-Canada extradition treaty is that the alleged act must also constitute a crime if it occurs in Canada. But does this apply to the criminal charges against Huawei, Huawei (U.S.), Tiantong, and Meng Wanzhou (violations of Iranian sanctions, financial fraud and conspiracy crimes)?
Canada’s Iranian sanctions are different from those of the U.S.,
and thus the alleged violation of sanctions does not constitute a
crime in Canada
To begin with, the “lack of double criminality” mentioned in Meng’s statement refers to the fact that Canada’s Iranian sanctions are different from those of the U.S., and thus the alleged violation of sanctions does not constitute a crime in Canada.
However, according to documents from the prosecutor at Meng’s bail hearing in Vancouver, the U.S. prosecutor can argue that the basis for extradition is the crime of bank fraud. Article 1344 of Chapter 18 of the Federal Law of the United States stipulates that any attempt to defraud financial institutions, or to obtain funds from financial institutions through false or fraudulent pretexts, statements or promises, will be subject to criminal sanctions. Chapter 380 of Canada’s Criminal Law also contains similar clauses on the criminal liability for bank fraud.
Nonetheless, within the judicial systems of the United States and Canada, the rights of the accused as well as the process of obtaining evidence are clearly regulated, and the unfair enforcement of these procedures may negatively impact the implementation of justice.
In a document entitled “Privacy at Airports and Borders”, the Office of the Federal Privacy Commissioner of Canada states that border officers have “widespread powers to stop and search people, and examine their baggage and other possessions including devices such as laptops and smartphones”. These searches are carried out under the authority of Canada’s Customs Act and do not require a warrant.
The document also points out that privacy and other rights are “limited by state imperatives of national sovereignty, immigration control, taxation and public safety and security.” It will be open to debate in court whether or not the Canadian government had reason to detain Meng on these grounds, also considering she was merely passing through Vancouver airport.
Meng’s team may choose to adopt delaying tactics in the extradition hearing process. In an interview with the Vancouver Star, Keira Lee, a criminal lawyer in Vancouver, said that although Meng’s lawsuit against the Canadian government has precedent, even if the case is won, they would only get thousands of dollars in compensation at most. A possible motive behind this lawsuit, if not economic compensation, is the constitutional protection of rights, which has an impact on Canada’s extradition procedures, including whether or not the Canadian Attorney General approves the extradition request. Even if Meng were extradited to face a jury in a U.S. court, it would be helpful for this case to show that her rights had been violated in Canada.
In an article published in the Wall Street Journal on May 27th, 2019, Huawei’s Chief Legal Officer Song Liuping announced that the company had filed a lawsuit on March 7th against the Federal Court of the United States about the constitutionality of Article 889 of the Defense Authorization Act of FY2019. The court was asked to determine that the sales restriction clause against Huawei was unconstitutional and to stop its implementation permanently, on the grounds that the bill is an abuse of public power and violates due process.
The obvious purpose of the bill is to drive Huawei out of the U.S. market
The obvious purpose of the bill is to drive Huawei out of the U.S. market, or “Substituting Legislation For Trial”, something explicitly prohibited by the Constitution of the United States. It is hoped that U.S. courts will declare these restrictions on Huawei unconstitutional, and prohibit their enforcement, as they have done previously.
According to CNBC, however, Huawei has little chance of success. Similar lawsuits from Russian enterprises in the past have been rejected by the courts, regardless of legality.
Huawei’s case is similar to that of Kaspersky Laboratory, a Russian cyber security company. The United States believed that Kaspersky’s software might be a tool for gathering intelligence. Though Kaspersky denied the allegations, the United States Department of Homeland Security instructed federal agencies in September 2017 to remove Kaspersky’s products from government systems. Later, Congress enacted legislation to ban it completely.
Kaspersky filed two lawsuits against the U.S. government to prohibit unconstitutional infringement, but the lower court rejected the lawsuits and ruled that the Congressional Act was for the legitimate reason of protecting government networks from Russian intrusion. The Court of Appeal upheld the ruling,recognizing the prohibition of Kaspersky as a “prophylactic, not punitive” measure.
Huawei’s prosecution by the U.S. using the Defense Authorization Act is unconstitutional, as it is political persecution. But what of the other 23 charges? In response to these, political factors are not a good defense, because political persecution is not directly related to the core of the case. Were every defendant to use political persecution as a shield, there would be more criminals on American streets.
In the case of criminal prosecution, Huawei should instead focus on targeting the U.S. government’s one-sided “Huawei Threat Theory”. Improving the company’s image in this way could transform the jury’s prejudices towards Huawei for the better, which would benefit the case during trial.
2. Political reasons behind the sanctions:
Aggressive acts due to weakness
The foundation of Meng and Huawei’s legal actions against the Canadian and American governments is that they have been subjected to political persecution. According to Canada’s Extradition law, this is one of the factors judges must consider in hearings. Although the core issues Huawei faces in the United States are the Iranian embargo, financial fraud, and the theft of trade secrets, “political persecution” should be a good approach to receiving an acquittal.
Since Meng’s arrest, the Trudeau government has been emphasizing “judicial independence,” stating that the government has no right to interfere. Even after Trump personally told Reuters that “justice can be interfered in for the benefit of the United States and trade negotiations”, Canada maintained its stance, only reprimanding Trump for his remarks.
Now, however, Canada no longer remains neutral. In a recent interview with the Canadian Broadcasting Corporation’s Ottawa Morning Show, Canadian Foreign Minister Chrystia Freeland made it clear that as the incident had been highly politicized by the Chinese side, “Saying you’re a rule of law country doesn’t mean political decisions don’t get taken,” and “there will come a moment – as in all extradition cases, where the minister of justice will need to – could need to, depending on how things develop – could need to take a political decision about whether to approve the extradition.”
On Thursday, May 30th, Vice President Mike Pence went to Ottawa to meet with Canadian Prime Minister Justin Trudeau to discuss the diplomatic dispute between the United States, Canada and China over Huawei.
On May 28th, the Hong Kong English Nanhua Morning Post published a report that quoted someone familiar with the situation saying that Chinese President Xi Jinping had convened with the Central Politburo Committee on May 13th to discuss the latest proposal put forward by the United States. The conclusion was that U.S. terms were too harsh. China was frustrated at the United States for constantly putting forward new demands in the final stage of negotiations, some of which would have a direct impact on China’s political situation and social stability, such as the United States required Beijing to fully open the Internet and relax restrictions on foreign cloud computing companies storing data in China.
Schott, a member of the State Department’s Economic Policy Advisory Committee, believes that it is common practice for countries to put forward new requirements and conditions at the end of negotiations. This is justifiable, but it should be ensured that the final agreement does not cause significant domestic political problems. “That’s why the agreement between Mnuchin and Ross and China in 2018 was not approved by Trump. Similarly, I think the draft drawn up by the two sides in Beijing contains many provisions that explicitly require China to amend its laws, and so forth. I guess China wants a more general wording so that they have room to operate and do what they have to do under the new supervision/ enforcement provisions,” he said.
Former adviser to President Trump, Steve Bannon, attended a media event in Bergen, Norway, on May 9th, 2019. He said that in the China-U.S. trade war, Trump would not retreat for a second because trade disputes are fundamentally changing China’s economic structure.
In an interview in Kazakhstan, Central Asia, Bannon told Bloomberg: “He has to go all the way; it’s not a trade war, it’s an economic war they’ve been running against the West.” To CNBC, he remarked that there is “no chance President Donald Trump will back down in the U.S. trade war with China. China has been running an economic war against the industrial democracies for now 20 years”. Bloomberg further reports Bannon saying: “You cut off the access to the capital markets and you cut off the access to technology, they fold immediately.” In a Front Line TV interview about the trade war, Bannon also said bluntly that the ultimate American goal when forcing China to sign a deal was “regime change”.
Bannon also said bluntly that the ultimate American goal when forcing China to sign a deal was “regime change”
On May 29th, Mr. Short, Pence’s Chief of Staff said that the Huawei case could be included in trade negotiations on the premise that Huawei terminated its co-operation with Iran. When announcing the sanctions, Trump also made a statement saying Huawei could be part of negotiations. The Times called the Huawei sanctions the “New Berlin Wall.“ Trump and his team also tried to make other countries choose between supporting “western values” as opposed to an “authoritarian communist regime.”
Essentially, sanctioning Huawei is a frustrated attempt by Trump to force China back to the negotiation table, with an additional bargaining chip to achieve a targeted deal, at a time when Chinese countermeasures to his tax blackmail have made him desperate.
3. The best trade war outcome for China
I moved to Paris in 2010 and stayed until the end of 2018. During this period I was approached by Alstom through a headhunter, which resulted in ntense communications with the company and its CEO. General Electric’s successful acquisition of Alstom’s power generation business was, at the time, mainly attributed to Emmanuel Macron, then Minister of Economy and Finance, who needed to gain American favor for his presidential campaign. Over the course of several face-to-face exchanges with former President Sarkozy, it became clear to me how the personal interests of political and economic leaders so easily led to France’s high-tech economy being in the pocket of Wall Street. Now that the U.S. and Canada have made their political motivations behind the Huawei sanctions clear, the parallels become obvious and significant.
First and foremost, the outcome of the Huawei case depends on the outcome of the political discourse and trade negotiations between the Chinese and American governments. For reference, I would like to share the triggers and developement of the Volkswagen diesel emissions scandal that went largely unreported in Chinese media.
On March 17th, 2014, a Stuttgart court ruled that Porsche/Volkswagen won the lawsuit and that the 1.176 billion compensation claims of 19 hedge funds were rejected due to the untimely/misleading disclosure of information about Porsche/Volkswagen’s M&A.
Subsequently, the University of West Virginia and the International Institute of Clean Transport jointly announced that Volkswagen’s diesel vehicle emissions exceeded the standard. On March 9th, 2015, the Volkswagen (U.S.)
admitted to the United States Environmental Protection Agency (EPA) that diesel engine emissions were fraudulent and the two sides agreed to a settlement.
On March 26th, 2015, the Stuttgart State Court of Appeal ruled that 19 hedge fund appeals were void. Two of the hedge funds finally decided to appeal to federal court. On September 19th, 2015, the EPA disclosed the fraud of Volkswagen diesel engine emissions. On October 1st, 2015, Matthias Müller became the new global chairman of the Volkswagen Group, and Dr. Oliver Blume took over as chairman of Porsche. In early December 2015, Dr. Blume and his wife invited me and my family to dinner, where we had a chance to discuss these developments in person.
On October 25, 2016, U.S. Judge Charles Breyer approved the Volkswagen and U.S. Customer Compensation Program, which is expected to compensate U.S. customers up to 16.5 billion U.S. dollars. On December 23, 2016, the Federal Court rejected the appeal from hedge funds and upheld the Stuttgart State Court’s final judgment.
A day after Le Figaro published the details of the Volkswagen scandal in 2015, I was accompanied by the deputy editor-in-chief on a tour of the newspaper headquarters. While speaking to two editors responsible for the automotive industry, I joked that French company Renault and others must benefit from the scandal. Their response was that as all car manufacturers were fabricating their results, that would not be the case.
The effective and harmonious co-operation between political decision makers, legislators, justice and commerce in the U.S. is a huge advantage that no other country in the world has, except China. At the end of the day, Germany’s business giants, like Volkswagen and Siemens, are sanctioned accordingly.
Huawei’s success is largely due to it’s own efforts, but also to the Chinese macro environment, which has and will continue to guarantee the company’s long-term success worldwide, both commercially and when it comes to withstanding any imposed sanctions and legal action.
The Chinese Ministry of Commerce announced on May 31st that China would establish an unreliable entity list. The list would include foreign enterprises, organizations or individuals that do not abide by market rules, deviate from contracts, impose blockades or interruptions on Chinese enterprises for non-commercial purposes and seriously damage the legitimate rights and interests of Chinese enterprises.
The resulting outcry in Western media led the three major Wall Street stock indexes to fall. China had finally found an effective response to the trade war: proof of just how much the world’s most dynamic market relies on 1.4 billion Chinese citziens. In the long run, the trade war will strengthen China as American influence in China and cross-border jurisdiction over Chinese enterprises will decrease, and Chinese companies will no longer rely on the United States for military and political purposes.
The key question now is: what trade war outcome, in light of the current struggle against repression in the U.S. trade and high-tech sectors, should China be targeting?
China gained global recognition after the Korean War. It contributed to the Soviet Union, led by Stalin, supporting China in building a comprehensive and autonomous industrial system and manufacturing economy. When the United States attacked Huawei, it proved again that the Western world, with its private ownership and market economy, would not do the same for China. It is difficult to imagine that China will change the mind of the United States and persuade them to abandon their goal of a regime change, despite the fact that co-operating with China would help the U.S. maintain its global hegemony. It’s too difficult for many to believe that progress in China might make the United States stronger, even though it is what Wall Street wishes.
As the negative impact of China’s import tax increases on the U.S. economy become more and more evident, it is obvious that the claim of many American intellectuals – that they can sacrifice more of their own interests while sanctioning China – is completely illogical. American political decision makers, especially the sponsors behind leading members of Congress from both parties, have collectively voiced their concerns about the commercial cost of interfering in China’s political ambitions, and the inconsistency of their business logic.
On May 23, according to CNN, American business giants Walmart and Target announced that Trump’s tax increase on imports from China would have a negative impact on corporate profits and customer prices. Walmart CFO Peter Biggs emphasized in a conference call on last quarter’s earnings report that “we have mitigation strategies that have been in place for months. But increased tariffs will increase prices for customers”. It was the most direct warning to the real estate magnates in the White House and their enthusiastic supporters, by a member of America’s wealthiest family, the Waltons.
Trump’s failure to end the trade war with China and the intensification of sanctions against Huawei have also caused serious damage to American high-tech and agriculture. At a news conference on May 30th, Special Inspector Mueller gave a clear warning. He spoke on behalf of mainstream intelligence and the judicial elite of the United States, who regarded Russia as a main threat. It made it difficult for Trump to manage and control his risk of impeachment.
Wall Street giant Bloomberg also sent a message on June 1st calling on Congress to take action to limit the President’s authority to formulate trade policies. It has become impertative for the political survival of the President to make China accept a deal as soon as possible and to pacify Wall Street and maintain its trust and support.
Harvard University presented an honorary doctorate to German Chancellor Angela Merkel and invited her to give a speech to this year’s graduates and their families. It was seen by many as a statement on behalf of America’s mainstream intellectuals, who scorn the ignorance and intolerance of the President and the McCarthyesque fanatical intellectuals that surround him, as well as their countless lies to the American people (including that it is the Chinese that pay for import taxes).
The high-value-added manufacturing jobs that the United States needs to recover are actually in Japan and Western Europe, not in China. The U.S.’ war to curb China’s technology trade is therefore both politically questionable and economically unfounded, as it damages their own commercial interests and infringes on many other vested interests at the same time.
It is worth remembering that when Kim Il-Sung was encouraged in his intentions to unite the Korean Peninsula by the Soviet Union at that time, the reason for the support was the SovietUnion’s need to alleviate pressure in Western Europe. We must learn from history that acting in self-defense against the U.S. in a trade war should not be an end in itself. The trade war was an inevitable consequence of China’s growing global influence, and it should be treated as an opportunity to continue improving Chinese living standards.
The trade war was an inevitable consequence of China’s growing global influence, and it should be treated as an opportunity to continue improving Chinese living standards.
To this end, the ideal outcome China should be striving for in this trade war is to continue its partnerships with the United States and the West as far as possible. Only by working together can we continue to grow the global economy, maintain existing success and obtain further room to grow.
The Huawei 5G case was first brought to the attention of the U.S. by Japan and Australia. It is important to remember that a China-U.S. conflict is very much in the interest of some third parties. To succeed, China needs to redefine its strategy to create the most common ground possible when it comes to trade and technological interests between China and the United States.