American hypocrisy of waging war on Huawei

Jeffrey D. Sachs says the US is not wrong to hold executives accountable for companies’ malfeasance, but it should begin at home. Starting with a Chinese CFO is not just a provocation to China, but also a threat to the global rule of law

The arrest of Huawei chief financial officer Sabrina Meng Wanzhou is a dangerous move by the Donald Trump administration in its intensifying conflict with China. History, as the saying attributed to Mark Twain goes, doesn’t repeat itself but it often rhymes. If so, our era increasingly echoes the period preceding 1914. As with Europe’s great powers back then, the United States, led by an administration intent on asserting American dominance over China, is pushing the world towards disaster.

The context of the arrest matters enormously. The US requested that Canada arrest Meng in the Vancouver airport en route to Mexico from Hong Kong, and then extradite her to the US. Such a move is almost a declaration of war on China’s business community. Nearly unprecedented, it puts American businesspeople travelling abroad at much greater risk of such actions by other countries.

America rarely arrests senior businesspeople, American or foreign, for alleged crimes committed by their companies. Corporate managers are usually arrested for their alleged personal misconduct (such as embezzlement, bribery or violence) rather than their company’s alleged malfeasance. Yes, corporate managers should be held to account for their company’s malfeasance, up to and including criminal charges; but to start with a leading Chinese businessperson, rather than dozens of culpable American CEOs and CFOs, is a stunning provocation to the Chinese government, business community and public.

Meng is charged with violating US sanctions on Iran. Yet consider her arrest in the context of the large number of companies, US and non-US, that have violated US sanctions against Iran and other countries. In 2011, for example, JPMorgan Chase paid US$88.3 million in fines for violating US sanctions against Cuba, Iran and Sudan. Yet Jamie Dimon wasn’t grabbed off a plane and whisked into custody.


And JPMorgan Chase was hardly alone in violating US sanctions. Since 2010, the following major financial institutions have paid fines for violating US sanctions: Banco do Brasil, Bank of America, Bank of Guam, Bank of Moscow, Bank of Tokyo-Mitsubishi, Barclays, BNP Paribas, Clearstream Banking, Commerzbank, Compass, Crédit Agricole, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, National Bank of Abu Dhabi, National Bank of Pakistan, PayPal, Royal Bank of Scotland, Société Générale, Toronto-Dominion Bank, Trans Pacific National Bank (now known as Beacon Business Bank), Standard Chartered and Wells Fargo.

None of the CEOs or CFOs of these sanction-busting banks was arrested and taken into custody for these violations. In all of these cases, the corporation – rather than an individual manager – was held accountable. Nor were the CEOs and CFOs held accountable for the pervasive lawbreaking in the lead-up to or aftermath of the 2008 financial crisis, for which the banks paid a staggering US$243 billion in fines, according to a recent tally. In the light of this record, Meng’s arrest is a shocking break with practice. Yes, hold CEOs and CFOs accountable, but start at home in order to avoid hypocrisy, self-interest disguised as high principle, and the risk of inciting a new global conflict.

Quite transparently, the US action against Meng is part of the Trump administration’s broader attempt to undermine China’s economy by imposing tariffs, closing Western markets to Chinese high-technology exports, and blocking Chinese purchases of Western technology companies. One can say, without exaggeration, that this is part of an economic war on China, and a reckless one at that.

Huawei is one of China’s most important technology companies, and therefore a prime target in the Trump administration’s campaign to slow or stop China’s advance into several high-tech sectors. America’s motivations in this economic war are partly commercial – to protect and favour laggard American companies – and partly geopolitical. They certainly have nothing to do with upholding the international rule of law.

The US is targeting Huawei especially because of the company’s success in marketing cutting-edge 5G technologies globally. The US claims Huawei poses a specific security risk through hidden surveillance capabilities in its hardware and software. Yet the US government has provided no evidence of this claim.

A recent diatribe against Huawei in the Financial Times is revealing in this regard. After conceding “you cannot have concrete proof of interference in [information and communications technology], unless you are lucky enough to find the needle in the haystack”, the author simply asserts that “you don’t take the risk of putting your security in the hands of a potential adversary”. In other words, while we can’t really pinpoint misbehaviour by Huawei, we should blacklist the company nonetheless.

When global trade rules get in the way of Trump’s gangster tactics, then the rules have to go, according to him. US Secretary of State Mike Pompeo admitted as much last week in Brussels. The Trump administration, he said, is “lawfully exiting or renegotiating outdated or harmful treaties, trade agreements, and other international arrangements that don’t serve our sovereign interests, or the interest of our allies”. Yet, even before it exits these agreements, the administration is trashing them through reckless and unilateral actions.

The unprecedented arrest of Meng is even more provocative because it is with regard to the US’ extraterritorial sanctions: that is, the US’ claim that it can order other countries to stop trading with third parties such as Cuba and Iran. The US would certainly not tolerate China or any other country telling US companies with whom they can or cannot trade.

Sanctions regarding non-national parties (such as US sanctions on a Chinese business) should not be enforced by one country alone, but according to agreements reached within the United Nations Security Council. In this regard, UN Security Council Resolution 2231 calls on all countries to drop sanctions against Iran as part of the 2015 Iran nuclear agreement.

Yet the US – and only the US – now rejects the Security Council’s role in such matters. The Trump administration, not Huawei or China, is the greatest threat to the international rule of law today, and therefore to global peace.

Jeffrey D. Sachs, professor of sustainable development and professor of health policy and management at Columbia University, is director of Columbia’s Centre for Sustainable Development and the UN Sustainable Development Solutions Network. Copyright: Project Syndicate