China is pulling back on demands that national security issues be included in trade talks, suggesting that the status of Chinese telecom company Huawei, which the U.S. has called a national security threat and placed on a blacklist, won’t be a factor in the talks.
Gary Hufbauer, a nonresident senior fellow at the Peterson Institute, said there was a general consensus at a recent Beijing forum hosted by the China Development Reform Foundation he attended that the Huawei issue had caused the talks with the U.S. to run aground. The foundation hosts officials from Beijing as well as economists and trade policy experts at events.
“I think the Chinese have come to the conclusion that there will be no agreement on the national security but that possibly items that go in the trade bucket can be bit-by-bit resolved,” Hufbauer said. “I think the Chinese have decided that Huawei in the national security bucket and isn’t going to be quickly resolved.”
The Wall Street Journal reported Thursday that China was proposing that the next talks with the U.S. be conducted on two tracks, with the trade issues separated from matters of security. The stance would likely separate Huawei from the trade talks, which are scheduled to start next week in Washington, D.C.
“The Chinese have finally gotten the message that the more national security is involved, the more hawkish the U.S. is. If progress is possible on tariffs, as it now seems, they are willing to put Huawei aside,” said Derek Scissors, resident scholar at the American Enterprise Institute. “If the talks founder again, of course, the Chinese will return to complaining bitterly about Huawei.”
Huawei was banned from bidding on U.S. government contracts in 2014 over concerns it was involved in espionage for the U.S. government. In January, the Justice Department unveiled 23 indictments against the company and its top officer, including wire and bank fraud. The Trump administration blacklisted the company in May.
Separating Huawei from the trade talks was the longtime position of the U.S. “This is a criminal justice matter. It is totally separate from anything I work on or anything that trade policy people in the administration work on,” U.S. Trade Representative Robert Lighthizer told CBS in December, when asked about Huawei.
The same month, Treasury Secretary Steven Mnuchin said that Huawei would not be part of then-upcoming trade negotiations. “We’ve been very clear and China understands that these are separate tracks,’’ Mnuchin told Bloomberg.
China did not see it that way, and demanded that the White House lift its ban on technology sales to the telecommunications company, according to a June Wall Street Journal report. The Trump administration shifted on the issue the following month, but officials said they were only acknowledging that Huawei would be included in the discussions. They denied that a deal regarding Huawei was in consideration.
“The president’s view, which is what matters, is that they will be part of the general talks regarding trade. I think that is quite evident from what happened in Osaka,” White House economic adviser Larry Kudlow told Bloomberg in July. He said the administration remained wary about the company and its links to Beijing, calling it a “difficult” issue. “We will not open licenses for any national security areas, be they chips or whatever.”
Progress on the trade talks subsequently ground to a halt over the summer. There was a widespread sense at the Beijing forum that the push to include Huawei was a mistake that threw the talks off-track, said Hufbauer. The Chinese have decided that Trump has little room to maneuver on Huawei, given the criticism he would face if he did cut it a break.
The Trump administration agreed in August to allow some U.S. companies another 90 days to continue doing business with Huawei, arguing the specific deals didn’t impact national security concerns. Liberals subsequently warned he was weakening on the issue. “If he gives Huawei a similar break, removing it from the entity list as part of a trade deal, the company could consolidate its leading position in the 5G market,” warned liberal donor George Soros in a Tuesday op-ed.
Dimitar Gueorguiev, political science professor at Syracuse University and author of China’s Governance Puzzle, said that if China was pulling back on Huawei, it wasn’t much of a concession by them.
“If differentiating the Huawai issue into trade and security strands makes it politically more palatable for the Trump administration to make a limited deal that lifts the ban on nonsecurity related Huawai transactions, it is hard to see what the Chinese side stands to gain from not playing along,” he told the Washington Examiner.
