International Journal of Commerce and Economics

International Journal of Commerce and Economics

Online ISSN: 2664-7540; Print ISSN: 2664-7532
Received: 05-02-2019; Accepted: 07-03-2019
www.commercejournal.in
Volume 1; Issue 2; April 2019; Page No. 22-25

Huawei ban in the US: Projected consequences for international trade

Md Sajjad Hosain
Business School, Sichuan University, No 24, South Section 1, Yihuan Road, Chengdu, Sichuan Province, PRC, China

Abstract
On May 19, 2019, the US President Donald Trump made an executive decision of blacklisting the Chinese tech giant Huawei in
US market. The paper aims to discuss the tentative alternative consequences of banning Huawei in US market. As a very recent
incident, there is no literature available on this topic. The paper has used the published sources and attempt to predict the
consequences of this decision. The author expects that this paper will be helpful in conducting further study in the areas of
international trade and political economy.

Keywords: huawei, us, china, ban, mobile set, consequences

1. Introduction administration is now easing up. On Monday, 20 May, 2019,

Amid tension of trade dispute between the US and China, the the US Commerce Department restored the Shenzhen-based
US President Donald Trump signed an executive order to tech giant's ability to maintain its network, which means the
blacklist Huawei in the US market. It means that the US company can buy equipment and complete software updates
suppliers, partners and buyers of Huawei products and to support those who use Huawei smart phones, according to
technologies need to take permission from the US Trade a 90-day temporary general license issued by federal officials
Department in order to conduct business with Huawei. (www.cnet.com).
Furthermore, Google would no longer allow Huawei's smart
phones to use popular smart phone applications like Gmail 2. Response from Huawei
and Google Maps. Google was not the only company that had Huawei made an immediate response after the ban. The
cut ties with Huawei. American chipmakers such as Intel, founder Ren Zhengei told Chinese state media that a clash
Qualcomm and Broadcom told their employees that they with the US was inevitable, and that it was only a matter of
would stop supplying Huawei (Bloomberg, 2019) [2]. In time before Huawei threatened US interests. He said that the
addition, German chipmaker Infineon had also stopped individuals and families sacrificed a lot for the sake of an
shipments to Huawei (Nikkei Asian Review, 2019) [11]. ideal, to stand at the world and the conflict with the US was
The Trump administration last week announced restrictions inevitable sooner or later (South China Morning Post, 2019)
[13]
that seemed aimed at Huawei. An executive order signed by . Ren said the 90-day reprieve from the US government
the president declared a "national emergency" and blocked US meant little, because the company was prepared for the
companies from doing business with foreign tech companies possibility that it might lose access to American companies.
that pose "an unacceptable risk to the national security of the He further stated that the current practice of US politicians
United States." The Commerce Department said it would add underestimates their (Huawei) strength (BBC, 2019) [1].
Huawei and its subsidiaries to a list of companies generally In March 2019, Richard Yu, CEO of Huawei's consumer
prohibited from buying US technology. Trump's crack down products division, told a German newspaper that Huawei had
on Huawei, which has the support of the Chinese government, prepared its own operating system in case it lost access to
comes amid escalating trade tensions with the country and Android. He branded it as “Plan B". However, he told that the
growing concerns that the Chinese government could company still prefers to work with the ecosystems of Google
potentially use Huawei devices to spy on the US and its allies. and Microsoft. The company has stockpiled enough chips to
According to the Commerce officials in the US, Huawei was keep its phone business running for months (Bloomberg,
added to the blacklist after concluding that the company was 2019) [2].
engaged in activities "contrary to the US national security or Although, Huawei is a private company enlisted in Shenzhen,
foreign policy interests." Huawei officials have denied those China, it has close interaction with the Chinese central
claims. government. Moreover, it is the largest mobile manufacturer
After the Trump administration last week barred American in China employing thousands of staffs not only in China
companies from doing business with Huawei, the world's itself, but also around the globe where it is being operated.
second-largest supplier of smart phones, shares of Google and Therefore, it can be logically believed that the Chinese
other technology companies dropped on Wall Street. government will also take some counter measures against this
However, just a day after blacklisting Chinese technology firm ban that will be discussed at the following sections of the
Huawei from buying American-made products, the Trump paper.

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3. The story behind Huawei ban estimated 10% of the ‘5G-essential’ industrial property rights
3.1 Huawei, 5G and the security debate in the west in radio access solutions where Huawei has the most patents,
The acceleration of the national security dispute around followed by ZTE. Chinese influence in the global standards
Huawei has caught a number of 5G enthusiasts off guard. The organizations (ITU, 3G Partnership Project) has also grown in
United States, Australia, New Zealand, Japan, Germany and terms of the key positions held by Chinese representatives
the Czech Republic, among the nations that have imposed (Sharma, 2018) [12].
restrictions on the use of Huawei 5G solutions over national The growth of the global market power of Chinese technology
security concerns and the many European countries are companies is largely a product of focused government
thinking whether to follow such decision. To Sum up, such industrial policy and accompanying funding instruments (Lee,
worries are rooted in the ties between Chinese 2018) [9]. Similar to its technological advantage, Huawei’s
communications technology companies and its intelligence affordable pricing is more likely an outcome of China’s
services, reinforced by China’s political and legal domestic policy than its fundamental technological superiority
environment requiring cooperation with intelligence agencies. over competitors (MOFCOM, 2018) [10]. Preferential treatment
Perceived or real, fears persist that adopting Huawei, 5G of domestic providers means that the latter control 75 percent
technology will introduce a significant dependence on of the Chinese market, giving them unbeatable economies of
equipment that can potentially be controlled by the Chinese scale (MOFCOM, 2018) [10].
intelligence services and the military in peacetime and in However, there is a debate on the both sides (the US and
crisis. Chinese) whether the decision is related to the US national
Chinese technology companies have become significant security or more like to prevent the Chinese domination in
players in the global market because of their clinch of world technology market. The logics behind such debate
innovation and the notable improvement in quality and particularly from the Chinese counterpart are twofold. For
affordable cost of their products. However, the legal and instance, the decision was made amid the trade tension
political influence of the Chinese state over its technology between the two countries when two countries are blaming
industry and ties between the government and the companies each other for not concluding a unified trade agreement. In
leave the Western countries uneasy. China has made no secret fact, there was no unified agreement has reached between the
of its adversarial perception of the west and has been actively two giant economies. The last meeting the delegates sat was
seeking a stronger global influence. As already noted on the on May 10, 2019 without reaching a decision. President
precious section, the US administration and officials always Trump accused China to overrule the agreement and
doubted Huawei for spying through the electronic devices that immediately after two weeks he made this ban decision.
it deals in. Secondly, according to Huawei and the Chinese counterpart,
this decision has been made to keep the Chinese tech giant out
3.2 Is it just Huawei of the US market which is rapidly growing even in the US
While Huawei stands in the limelight due to its advanced 5G because of its competitive price advantage.
capacity, the issue is not just about Huawei. Many states are Therefore, it is difficult to comment on the motive of such
likewise concerned about other Chinese communications and decision but it would obviously have some counter effects
video surveillance technology manufacturers, primarily ZTE, which will be discussed on later sections.
but also Hytera Communications Corporation, Hangzhou
Hikvision, and Dahua Technology, all of whose technology 4. The tentative consequences
has been banned from use in government networks under US The paper proposes that there will be alternative consequences
law (Kaska et al., 2019) [8]. if this ban on Huawei persists for long. The after effects will
not be very enjoyable both for the US firms and the general
3.3 Is really a security concern or a political economic mobile phone set users all over the world. The tentative after
decision affects with the alternative have been discussed below:
The rise of Huawei is an example of the Chinese national
policy of technological superiority: the past few years have 4.1 Alternative-1: The ban will be relaxed or lifted
seen the company grow into the largest telecoms equipment If the Huawei ban decision has been made not genuinely on
manufacturer in the world. In 2018, it passed Apple as the security issue but as a trade game to push China, there is an
second largest producer of smart phones after Samsung (The obvious chance to lift such ban or at least to relax it. The logic
Guardian, 2018) [15]. It is currently the only company that can for such argument is that as a result of this ban, The Chinese
produce at scale and cost of all the elements of a 5G network, government will be encouraged to ban all the western
whereas its nearby competitors Nokia and Ericsson not yet technological companies in China such as iPhone, Lenovo,
able to offer a viable alternative (CKGSB, 2019) [4]. Huawei’s Dell, HP etc. (Already Google is forbidden in China). This
ambition is to dominate the market for 5G wireless will severely affect the sales and revenues of those firms as
communications (Frank & Sharon, 2018) [6] and has China is one of the biggest consumer markets for tech
established cooperation with telecommunications companies products. In fact, the response is already becoming to be
in a number of countries in Europe and worldwide. expressed in Chinese media (Techthelead, 2019) [14]. As it is
Huawei and other Chinese telecommunications companies very logical, there are counter actions for all the actions taken
have obtained a visible and active role in the development of which is particularly true in bilateral trade. The result will be
global 5G standards and have acquired a significant the pressure on the Trump administration to ease or
proportion of core patents for 5G. China currently holds an completely lift the ban on Huawei.

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4.2 Alternative-2: The ban will continue blaming each other, rather discussing it in a cooperative and
If however, the ban on Huawei will continue for a long time, sacrificing manner.
there would different consequences. Huawei will be
encouraged to develop its own operating system and use it on References
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