Michelle Caruso-Cabrera is a CNBC contributor and served for eight years as the network’s chief international correspondent.
The arrest in Canada last week of Meng Wanzhou, the chief financial officer of the world’s largest wireless equipment company, headquartered in China, is the clearest sign yet that the war over who will control global communications in the future has spilled dramatically into the open.
It would be easy to mistake Meng — now free on bail, under house arrest and round-the-clock surveillance in Vancouver — as a bargaining chip in the fight between China and the United States over tariffs and trade practices. President Trump himself suggested as much earlier this week, when he said he might intervene on her behalf if the United States received favorable treatment in trade talks from Beijing in return.
In fact, Meng’s arrest has little to do with trade and goes far beyond the fraud charges levied against her. The arrest masks a much larger fight about whose values will drive the vital telecommunications of the next 30 years: the United States and the West, or an autocratic Chinese Communist Party.
That broader conflict is playing out where so much of our lives now take place: somewhere in the miniaturized guts of cellphones. China has been using its commercial leverage to spread its own wireless equipment around the world to extend its influence and control. And Beijing isn’t coy about its ambitions: They are codified in its Made in China 2025 policy, announced in 2015 and restated since.
The battleground is “5G” — the next generation in wireless communications. 5G isn’t just a faster version of 4G; it is qualitatively different. Currently, wireless phone calls are routed through cell towers. With 5G, that link will be nearly direct, cellphone to cellphone. As a result, 5G will have many positive applications. It is crucial for the advancement of technologies such as autonomous cars that will need to communicate with each other as they move down the highway. But it also creates the potential for much more precise levels of surveillance by governments and potential bad actors.
Huawei, founded by Ren Zhengfei, Meng’s father and a former member of the Chinese military, just this year outstripped Apple in smartphone sales. Backed by Beijing, it has for some time been aggressively selling 5G products around the world, alarming the U.S. national-security establishment.
When a country floods a market with low or below-cost goods, economists refer to it as “dumping,” which is prohibited by international trade law.
National-security experts are concerned that China, through Huawei and the smaller company ZTE, is engaging in a high-tech version of “standards dumping.” They are selling 5G equipment at low prices, spreading their 5G standards and handsets around the world. The United States is concerned that Huawei is embedding technology in its equipment to help Chinese intelligence agencies keep track of users and their communications. One expert in the field refers to the strategy as a “Digital Iron Curtain” descending across countries willing to accept Chinese technology,
Many of Washington’s allies are just as concerned. Australia, New Zealand and Japan have banned Huawei equipment from their telecom networks. BT (formerly British Telecom) has announced it will strip Huawei products from its networks; Canada also is mulling a ban.
The Justice Department accused Meng and Huawei of hiding their ownership of a subsidiary company to circumvent export-control laws and sell their products to Iran, a violation of U.S. sanctions. Our stark differences in core values — specifically the rule of law — are highlighted by Meng’s treatment in Canada versus the treatment of two Canadians apparently detained by the Chinese in retaliation for her arrest. Meng was given several days of hearings in a public courtroom, jammed with reporters, her lawyers and some of her supporters. And she was able to make bail. Where are the two Canadians? We don’t yet know.
Even as China agreed this week to buy more U.S. soybeans, reduce tariffs on imported cars and allow more foreign investment, the graver issue of state control will continue to divide the United States and the West from China.
President Xi Jinping has been very clear about his ambitions to make China the dominant player in the technologies of the future, asserting his country’s global power and preserving the power of the Communist Party. Those ambitions are on a collision course with the U.S.-led international order.