Wanzhou Meng’s Arrest

Wanzhou Meng is the Chief Financial Officer of Huawei Technologies, Inc, a rapidly growing technology company in China.  (See links)  She has been arrested in Canada and is awaiting deportation to the US.  I believe the Canadian court will rule in favor of deportation.

How big an impact can the arrest of one person have a major impact on trade relations and the world economy?   It can be huge.  I believe there is an analogous situation.  The small country of Tunisia likely understands why her arrest is such a big deal.

Almost exactly eight years ago, one simple street peddler named Mohamed Bouazizi  provided the spark to ignite Arab Spring.  After being shaken down for a bribe by local police, and having his cart confiscated, he returned to the plaza and lit himself on fire.   In 2012, the leaders of Tunisia, Egypt, Libya and Yemen were all forced out through civil war.  Civil uprisings occurred in Bahrain and Syria.   Other protests occurred through the Arab world, including Algeria, Iraq, Jordan, Kuwait, Morocco, Oman, and Sudan.  The rebellion in Tunisia lit the way, showing that repressive regimes could be overthrown.  What happened in Tunisia was aired throughout the Arab world in real time.

Wanzhou Meng is the new Mohamed Bouazizi.  She is a symbol to both Xi  government and his vision of China’s role in technology.  She is a symbol also to the  people of China and the idea that Donald Trump (and the US) are bullies, getting their way through threats.  This creates a new unity within China against any trade agreement.   It isn’t something our Trade Representative, Robert Lighthizer is prepared to deal.  That said, I don’t really know how one deals with the psychological impact of Meng’s arrest.

From his biographical statement, it seems the last time he was a trade representative of the US was in 1983-1985.   He knows the legal aspects of trade and commerce, and that China frequently violates international agreements.  Wikipedia stated his background as follows:

In 1983, during the administration of President Ronald Reagan, Lighthizer was nominated and confirmed to serve as Deputy U.S. Trade Representative under William Brock.  During his tenure, Lighthizer negotiated over two dozen bilateral international agreements, including agreements on steel, automobiles, and agricultural products.  As Deputy USTR, Lighthizer also served as Vice Chairman of the Board of the Overseas Private Investment Corporation.  In 1985, Lighthizer joined the law firm Skadden, Arps, Slate, Meagher & Flom LLP (Skadden) as a partner.[6] He practiced international trade law at Skadden for over 30 years, representing American workers and businesses ranging from manufacturing to financial services, agriculture, and technology. While at Skadden, Lighthizer worked to expand markets to U.S. exports and defended U.S. industries from unfair trading practices.

He has correctly stated that the extradition and prosecution of Wanzou Meng are a matter for the Department of Justice, separate from the US Trade Administration.

When tensions run high, as they are now,  the best thing to do is to lay low.  Lighthizer  seemed to go on the attack.  His public statement that Meng’s arrest and trade negotiations are two completely separated, while true, will never be accepted by the Chinese.   He also stated that the deadline of March 1, 2019 is a hard deadline for tariffs to go to 25%.  It’s obvious that China will retaliate in kind.

It just seemed he was more ready to prepare for battle than the bargaining table.  I suspect it’s the way Trump likes it.   The hawks on trade policy are Peter Navarro and John Bolton.  For every Make American Great Again hawk, there is an equal Make China Great Again hawk on the other side fighting against US aggressive tactics.   Tariffs wars are like military arms race,  Only the sides can retaliate extremely rapidly.

Details of the charges against Meng have recently been revealed.  The US claims that a spinoff company, Skycom, was used to sell electronic products to Iran in violation of the Iran trade embargo, as established by the Obama administration and their allies, including Russia and China.   Huawei misrepresented the relationship between Skycom and Huawei as two separate companies.   International law apparently allows the Department of Justice to issue warrants of arrest against Corporate officers if they have proof of their involvement in fraud resulting in harm to US companies.   In Meng’s case,  DOJ’s  proof is likely her signature on financial documents.

This story is just beginning.

Stay tuned,

Dave

Links:

Note:   Meng Wanzhou also goes by Sabrina Meng or Cathy Meng.   Her last name is Meng.  Her father  Ren Zhengfei is the founder and president of Huawei.  It is a real rags to riches story.  Meng is the surname of  Wanzhou mother.

US Trade rep warns 90 day pause in US-China trade war is a ‘hard deadline’

South China Post:  Huawei and trade negotiations are completely separate

Office of Trade Representative and Robert Lighthizer

Wikipedia Arab Spring

Bloomberg:  Wanzou Meng arrest

Huawei (Wikipedia)

Ren Zhengfei

2018 myth of the year

Politifact selects a lie of the year.    They don’t have a similar award for myths.  They should.

A political myth is perpetrated usually with great concoction of bits of truths mixed in with a lot of lies or exaggerations.  John Kennedy got it right in 1962 when he said:

“The greatest enemy of truth is very often not the lie – deliberate, contrived and dishonest, but the myth – persistent, persuasive and unrealistic.  Too often we hold fast to the cliches of our forebears.  We subject all facts to a prefabricated set of interpretations.  We enjoy the comfort of opinion without the discomfort of thought.”

I am concerned with the mix of news and opinions presented primarily on cable news.  Fox News is a clear example of this.

“You’re entitled to your own opinions. You’re not entitled to your own facts.”

Let’s consider a few examples:   Trump sent the military to halt the impending invasion of a caravan of immigrants, filled with would be criminals.

Basically,  this was just a mid-term election stunt.   Unfortunately, a very unnecessary one.  But it was done to because immigration was a hot button issue, and Trump wanted to stand out, as the toughest guy on halting illegal immigration.

But the myth of the year, I believe is Trump’s  simple statement:

“Trade wars are good, and easy to win”

Trade wars makes every economist who understands the mechanisms of capitalism cringe.   Tariffs imposed on China result almost immediately in China imposing tariffs on the US.   No one is ahead in negotiations.  The government gains because they receive the tariff income, but industries which import from China must pay higher costs.   Higher steel prices strongly impacts the oil industry and their capital investments.  I believe Trump has  killed any chance of the  Keystone XL pipeline, Phase 4 of every being constructed given the sharp drop in oil prices and the increase in steel prices.   Trump bragged at his ability to talk down oil prices, by getting Saudi Arabia to increase production.   The Saudi’s increase production as Trump pushed through new sanctions against Iran, and importers of Iranian oil.   Of course, Trump then reversed course and granted waivers to many countries, so Iranian oil could keep flowing to the world market, creating a temporary oil glut.

The Department of Energy will let oil companies drill almost anywhere they want, but the economics of many projects are gone.  This includes the decades of controversy of drilling in northern Alaska and extensive oil shale developments.

Mr. Tariff man, you’ve made a mess of things!

Stay tuned

Dave

 

 

 

 

 

Never let a good crisis go to waste

“You never want a serious crisis to go to waste. … This crisis provides the opportunity for us to do things that you could not before.”

This quote comes from Mayor  Rahm Emmanuel.  It has been used completely out of context since he said it in an interview in 2008. What he meant was a crisis gets the public attention to a problem, and puts pressure on government to come up with solutions.

The raging forest fires in California should have been the crisis to tell us that the impacts of climate change are real and resulting in deaths around the world.    Trump’s comments on Californian’s forgot to rake their leaves was laughable.  It’s also sad, because human lives are at stake.  I am not saying that climate change caused the forest fires, but that global warming results in hotter and longer summers in California, resulting in very dry brush.  This makes many large and populated areas more vulnerable to rapidly spreading fires,

So let us add:  “Never let a crisis be pointed to you or your organization.”   With the second important proviso,   “Be creative.”    Trump meant to say that the state of California was responsible.   They didn’t maintain their forests well.   This became laughable again, when Trump insisted that Finland rakes their leaves.   The President of Finland was confused.    Learn to pivot and deflect, at the same time as appearing to answer questions.  Avoid like the plague the follow up question.  The buck stops somewhere else.

As news of Trump’s involvement in a potential Trump Tower in Moscow has leaked out,  an additional proviso comes to mind.  “If creativity fails, try lying.”     Trump claims that the Trump Tower project in Moscow was public knowledge in 2016, which I am hoping that this qualifies as the “Lie of the Year”  for Politifact annual contest.  Another tactic, is to change the subject to a completely different crisis that is not your fault.    Trump has tweeted that the FBI is wasting their time investigating the Russian interference (aka, “Witch hunt” and “hoax”)  when they should go after Hillary Clinton,  James Comey,  Loretta Lynch, Clinton Foundation,  Uranium One, etc,  or really anything connected to  Democratic campaign.      Like science fiction,  the public can never get enough of big  scandal stories, even the manufactured narratives.

So, while Emmanuel just wanted to say how a crisis helps in solving real problems,  he had not envision the new era of creating scandals out of  practically nothing, for purely political reasons.  The best defense is a good offense.   Be inventive and retaliate with another scandal, blown out of proportion.     Example: Hillary’s email scandal was real and 10X worse than the Russian collusion, which we know is a hoax.    Another example — the caravan story  and the imminent  invasion of half of Guatemala’s  criminal population,  along with Middle East terrorists.  This was only good up to the mid-term election.

Remember there is strength in numbers.  You can lie without statistics, but it just sounds more impressive with statistics.   Even false statistics.

So,  to re-iterate:

  1.  You never want a serious crisis to go to waste. … This crisis provides the opportunity for us to do things that you could not before.
  2.  Never let a crisis be pointed to you or your organization.   Learn to deflect and pivot.  The buck stops somewhere else.
  3.  Be creative.  If creativity fails, try lying.
  4.  The best defense is a good offense.  Be inventive and retaliate with another scandal, blown out of proportion.
  5.  There is strength in numbers.  You can lie without statistics, but it just sounds more impressive with statistics.  Even false ones.

Poor Mayor Emmanuel who looked on the positive side of a crisis.

Stay tuned,

Dave

Links:

https://en.wikipedia.org/wiki/The_best_defense_is_a_good_offense

https://en.wikiquote.org/wiki/Rahm_Emanuel