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

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