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Arresting Huawei’s “heiress” isn't going to help trade negotiations with China

She “is sought for extradition by the United States."

by David Gilbert
Dec 6 2018, 12:25pm

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China is demanding the return of the CFO of tech giant Huawei after it was revealed Thursday the executive was arrested in Canada last weekend at Washington’s request.

Wanzhou Meng was arrested Dec. 1 while transferring flights in Vancouver, according to the Canadian Justice Department. She “is sought for extradition by the United States, and a bail hearing has been set for Friday,” spokesman Ian McLeod said.

It's unclear what charges Meng will face in the U.S., but the Globe and Mail, which first reported the arrest, said she was detained “on suspicion she violated U.S. trade sanctions against Iran.” The Justice Department and the White House have not commented on the arrest.

Meng’s detention came as Donald Trump and Xi Jinping sat down for a critical dinner at the G20 summit in Argentina, to ease the escalating trade war between the two countries. It is unclear if Trump was aware of the arrest at the time.

Huawei is China’s most important technology company, and held up by the country as an example of how Chinese technology can succeed on a global stage. As such, the decision to detain one of its executives is a significant escalation by the White House.

This arrest places Huawei in the center of a geopolitical storm, and is likely to complicate ongoing trade negotiations between Washington and Beijing. Global stocks plunged Thursday following news of the arrest, amid fears that renewed tensions could threaten global economic growth.

Who is Wanzhou Meng?

Meng, who is also known as Sabrina Meng and Cathy Meng, is the deputy chair of Huawei’s board and the daughter of the company’s billionaire founder Ren Zhengfei.

Zhengfei was an officer in the People’s Liberation Army, reportedly working in the Information Technology unit. He started his company with just $5,000 in 1987 and is said to have received funding support from the government at critical stages of his business’ growth.

READ: The U.S. is pushing other countries to stop using Huawei — but it’s going to be a tough sell

He also has close links to the ruling party and was appointed to the 12th National Congress of the Communist Party of China in 1982 as a representative of private entrepreneurs.

What is China saying about the arrest?

“The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim,” a statement from the Chinese Embassy in Canada said. “The Chinese side has lodged stern representations with the U.S. and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou.”

Huawei says it is in the dark about the arrest, and has been “provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng.”

China’s Foreign Ministry spokesman Geng Shuang told reporters Thursday that neither the U.S. nor China had responded to its inquiries, reiterating the demand that Meng is released immediately.

What has Huawei done?

The Department of Justice has refused to comment on the situation, so it is unclear why Meng was arrested.

The Globe and Mail’s claims that the charges relate to the illegal sale of technology to Iran, in violation of U.S. sanctions, lines up with an April report from the Wall Street Journal that said Huawei had sold U.S.-origin technology to Tehran in violation of U.S. controls on tech exports.

Last year ZTE, another huge Chinese telecoms company, was fined almost $1 billion after it was found to have violated sanctions by selling technology including U.S. components to Iran and North Korea. In April the U.S. government banned it from buying American components before lifting the ban months later after striking a deal.

Huawei has long been a boogeyman for U.S. lawmakers

While this arrest appears to relate to sanctions violations, the company has long been in the crosshairs of U.S. lawmakers over security concerns.

A congressional report in 2012 concluded that Huawei — and ZTE — could become a tool for state-sponsored spying or sabotage.

Suspicions have been ratcheted up in recent years. Top officials from the CIA, NSA, FBI and the Defense Intelligence Agency told the Senate in February that Huawei’s smartphones posed a security threat to American customers.

The Pentagon in May ordered stores on American military bases to stop selling smartphones made by Huawei and ZTE.

More recently the U.S. has sought to push its allies into similar bans, urging them to ditch Huawei technology over security concerns.

Countries such as Australia and New Zealand have already begun to ban Huawei technology from their networks, and on Tuesday British Telecom announced it was removing Huawei equipment from its 4G network in the U.K.

Is Huawei spying for the Chinese government?

There has been no definitive evidence, but many experts and lawmakers are convinced the company is carrying out some form of subterfuge.

Last month civil society organization Freedom House published a report outlining how China is exporting its surveillance state to other countries, claiming that Huawei is helping them to do it.

“Companies like Huawei are now trying to build large parts of the IT infrastructure in Latin America, in Asia and even partnering with EU countries in the EU,” Michael Chertoff, secretary of Homeland Security under George W. Bush, said last month.

”This opens up the potential for exploiting information in these countries by having technological backdoors or other vulnerabilities which can then be used by the Chinese government to collect intelligence,” he added.

What happens next?

A bail hearing has been set for Friday. Meng has the right to challenge her extradition under Canadian law before she is turned over the U.S. under Article 8 of U.S.-Canada Extradition Treaty. “The person whose extradition is sought shall have the right to use all remedies and recourses provided by such law.”

According to Julian Ku, a professor at the Maurice A. Deane School of Law at Hofstra University, Meng has “various defenses to fight this prosecution in U.S. court: she could challenge U.S. jurisdiction since U.S. law should only apply to actions by U.S. persons or persons acting within the U.S.”

Ku added that the arrest, though legal, was “unusual” as “penalties against a company for sanctions violations are more common that criminal punishment of corporate executives.”

Cover image: The logo of Huawei is seen in a smartphone. (Alvin Chan/SOPA Images/LightRocket via Getty Images)