Dozens of people packed into a Vancouver courtroom on Monday for a bail hearing for Huawei heiress Meng Wanzhou, who has been in Canadian custody since her much-publicized arrest over a week ago, at the request of U.S. authorities.
Her release hinges on whether or not Meng, the chief financial officer of the telecom giant, is a flight risk. The hearing will resume on Tuesday.
But what’s actually at stake in this legal battle extends far beyond the courthouse walls, into the geopolitical jousting between two superpowers, with Canada stuck in the middle.
The trade war between China and the U.S. is the context for what is essentially a game of chicken between the two biggest, arguably most powerful economies in the world. People are watching the back-and-forth between Washington and Beijing nervously and it’s taken a toll on stock markets. A trade agreement between the two countries who, together, represent nearly half of the world’s economic output, would be beneficial for both sides.
What they’re actually fighting for is the top spot globally in the coming century, according to the Sprott School of Business’ Ian Lee. “They’re in very serious competition to determine who is going to lead the world for the next fifty to a hundred years,” he says. Lee is an associate professor of business strategy and public policy and he says there’s a race between these two giants on everything from trade to commercial dominance to talent and ideas. Taking the lead in technology is a key part of that. Enter Huawei.
The Bill Gates of China
Huawei’s CFO Meng Wanzhou, is the daughter of Ren Zhengfei, the billionaire who started the multinational company with a few thousand dollars in 1987. “He’s like the Bill Gates of China,” says Lee. Huawei is the biggest supplier of telecom products in the world and, by revenue, it’s the seventh largest tech company.
Lee has taught in China every year for the last twenty years and he says his students have described Huawei as “their pride and joy, their crown jewel,” and “a company that has enormous prestige as the supreme Chinese success story.”
Why the arrest?
Meng was arrested by Canadian authorities on December 1, during a layover in Vancouver on her way to Mexico. She faces a U.S. extradition request on charges she conspired to defraud banks so they cleared millions of dollars in transactions to Iran, which violates American sanctions.
According to at least three experts VICE spoke with, Huawei isn’t alone in doing business with Iran. They estimate “hundreds” of companies are in the same boat, but haven’t faced the same kind of repercussions.
Gordon Houlden is the director of the China Institute at the University of Alberta. He says the case against Huawei is very specific because America’s “unilateral sanctions specifically target companies that utilize U.S. technology or U.S. goods in trade with Iran.”
Huawei accused of spying
U.S. authorities have, for years, investigated whether Huawei is involved in espionage for the Chinese government. “To put it crudely and bluntly as possible, they think Huawei is part of the spying machinery of the Chinese government and therefore, they argue it cannot be trusted,” says Lee.
To make things even more complicated, Prime Minister Justin Trudeau was reportedly given a heads-up about the arrest, while U.S. President Donald Trump, was not. Though Canadian authorities carried out the arrest, on America’s behalf, Canada is bearing the brunt of the blame on the international public stage. China has hauled in both Canada and the United States’ ambassadors in Beijing, demanding answers over the “lawless” arrest of Meng.
Beijing has been careful to keep trade talks with the U.S. separate from its anger about Meng’s arrest. The goal is not to derail important trade talks between the two countries. But Lee says the two things are absolutely connected, and that means China can be vocal about its displeasure with Canada, not the U.S. Chinese officials have warned that Canada will pay a “heavy price” if Meng isn’t released. The proceedings have put all Canadian trade talks with China on hold, for now.
Canada caught in the middle
All of this puts Canada in a sticky situation. Back to that game of political chicken. Canada’s economy is dependant and intertwined with both economic giants. The U.S. is Canada’s biggest trade partner. And like so many other places in the world, Canadian retailers are brimming with Chinese-made products. Not only that but Huawei technology is imbedded in the fabric of Canada’s telecommunications infrastructure. Lee describes the things that Huawei produces as an integral part of the “backbone” of the network in this country that allows us to make phone calls and do things online.
Estimates suggest it would cost our major telecom providers about a billion dollars to take out and replace Huawei equipment currently rooted in the country’s telecom landscape. According to Houlden, companies like Bell, Telus and Rogers chose Huawei because its “equipment is of high quality, but often of lower cost than U.S. competitors.” He cites data costs in Canada, which are some of the highest in the world. They’d be even higher without the Huawei factor. All of this leaves Canada in a political and economic tough spot.
Cover image: People hold a sign at a B.C. courthouse prior to the bail hearing for Wanzhou Meng, Huawei's chief financial officer, on Monday, December 10, 2018. Jonathan Hayward/The Canadian Press