Huawei Restrictions Would Be Lifted With US-China Trade Deal, Panelists Say

The panel discussion covered a wide range of U.S.-China topics, with Derek Scissors, a resident scholar with the American Enterprise Institute, speaking in favor of the U.S. decoupling from China and dismissing the impact it would have on U.S. exporters, which Scissors said should not factor into U.S. national security interests. Robert Atkinson, president of the Information Technology and Innovation Foundation, strongly disagreed, saying a U.S. market presence in China weakens Chinese firms and helps exports, leading to a more competitive and stronger U.S. Cheng Li, director of the Brookings Institution John L. Thornton China Center, said decoupling is “already underway” and spoke about the efforts the country has made to mitigate its impacts.

Ultimately, each panelist suggested a U.S.-China deal would eventually get done. Atkinson said the decision belongs to China, which could reach an agreement with the U.S. before the end of 2019 “if the Chinese want to be reasonable.” Li said there would only be a deal because the alternative -- “even more vicious competition, conflict and a war” -- is enough incentive to push the two sides toward an agreement. Scissors said he heard directly from Chinese officials that China is “going to get a deal they want or they’ll stall until 2020.”

Each panelist said restrictions would be lifted off Huawei in any potential deal. The Commerce Department added the Chinese tech giant to the Bureau of Industry and Security’s Entity List in May, but has recently shown a willingness to loosen restrictions on the company to mitigate impacts on U.S. exporters (see 1907090068).

Both Atkinson and Scissors suggested the Huawei blacklisting was more political than practical. The Trump administration and Congress have cited fears that Huawei products can be used as state-monitored surveillance equipment, but Atkinson said that fear was addressed with import restrictions. “The Huawei ban had nothing to do -- nor should it have anything to do -- with national security,” he said. “Could we damage Huawei -- their national champion -- as leverage in a trade war? That's what that was about.” Atkinson said U.S. export controls against Huawei are “a total trade tactic” and China is never “going to accept a deal if the Huawei ban is still on.”

Scissors said the administration's “treatment of Huawei has been a circus” and that the president “doesn’t really care about technology competition.” He also said adding Huawei to the Entity List was a trade tactic that will be easily undone if a deal is reached. “We are much less linked to Huawei than some of the Europeans are and some of our other allies are,” Scissors said. “The president will just say it doesn't matter to us.”

Scissors advocated for decoupling, saying the success of large U.S. exporters, some of whom have large Chinese market shares, is not in the country’s national security interest and shouldn’t factor into U.S. decision making. “I don’t care that certain tech companies that are revenue dependent on China, which they are, are important to the current value of the Nasdaq,” Scissors said. “That, to me, does not rise to the level of national [security] interest.” He said decoupling from China involves sacrifices, and that the U.S. should not care that pulling out of Chinese markets hurts companies that are heavily invested in China, such as Boeing. “I don’t care if these companies lose revenue,” Scissors said. “I don’t care if the stock market falls.”

Atkinson said U.S. exporters are vital to national security interests. “I care about U.S. jobs and I care about U.S. competitiveness. And you cannot have either of those without healthy U.S. multinationals,” he said. “If our own interests are to sell to China, then we should do it.”

Scissors also rejected the notion that the U.S. should be seeking multilateral support to deal with China, saying the U.S. should first deal with a more pressing issue: its inability to act unilaterally. He said the Trump administration lacks a clear trade strategy. “We should decide the policies that we are going to apply and stick to them. And the president isn’t good at that,” Scissors said. “He’s good at making dramatic decisions and not sticking to them.” If the U.S. is able to establish clear, unilateral policies and work on them for “several years,” Scissors said, then the U.S. should focus on multilateral enforcement. “The problem is not that President Trump acts unilaterally,” Scissors said. “The problem is that he fails to act unilaterally with regards to sustained, cohesive action.”

But Scissors also expressed skepticism that allies will work with the U.S. to penalize China, specifically mentioning the European Union, South Korea, Taiwan, Singapore and the Philippines. “There isn't one costly enforcement action I would expect them to take on trade,” Scissors said. He also said the U.S. needs to prioritize trade deals with its allies instead of its adversaries. “Forget dealing with the Chinese, I don't want any deal with the Chinese. What is our commitment to dealing with our good trade partners?” Scissors said. “If you can’t pass USMCA [the U.S.-Mexico-Canada Agreement, or new NAFTA], you certainly can't pass anything harder.”