U.K. Plays Down Concerns Over Huawei and Tax Spats With U.S.

(Bloomberg) --

U.K. officials tried to ease concerns over Britain’s future relationship with the U.S., after the two countries clashed over a possible new digital tax and future dealings with Chinese firm Huawei Technologies Co.

Prime Minister Boris Johnson’s government is this week poised to allow Huawei to take a role in developing its fifth generation wireless broadband networks, despite calls from U.S. President Donald Trump to ban the Chinese firm on security grounds. Separately, Trump is threatening punitive tariffs against the U.K. if it goes ahead with a digital services tax due to start in April that he regards as discriminating against American businesses.

Britain is set to exit the European Union on Jan. 31, and plans to start negotiating a new trade deal with the EU in parallel with the U.S. On Sunday, Brexit Secretary Stephen Barclay said he was confident the U.K. and U.S. would get a deal done despite the tensions over Huawei and the new digital tax.

“The key issue in terms of the U.S. trade deal is the clear intent of the Trump administration to have a trade deal with the U.K.,” Barclay told BBC’s Andrew Marr show. “They’ve been very clear in terms of how they prioritize that -- that they want to have that deal. So yeah, there’s issues in terms of 5G, but that is a U.K. decision.”

Trump and Johnson discussed the issue of Huawei on Friday in a phone call following weeks of lobbying from the U.S. to try to persuade the U.K. to exclude the Chinese company from 5G networks over concerns the technology could facilitate spying in future. Huawei has always denied that it poses any security risk.

On Sunday, Home Secretary Priti Patel also said the U.K. would remain part of the Five Eyes intelligence-sharing network -- comprising Australia, the U.S., U.K., New Zealand and Canada -- regardless of its decision on Huawei.

“We work very closely across our Five Eyes partners, our American friends and allies who are part of that as well and we share a lot of information and we all share our own views, mostly facts, data and intelligence and that cooperation and that way of working will continue,” she told Sky’s Sophy Ridge show.

On Saturday, U.S. Treasury Secretary Steve Mnuchin said he was focused on getting a trade deal between the U.S. and U.K. this year. Earlier in the day he met with U.K. Chancellor Sajid Javid in London to discuss the tax.

Javid has said the U.K. still plans to go ahead with a tax on digital services in April and withdraw its national tax once a global solution has been found. One option could be for the U.K. to postpone the tax as France did when faced with similar threats. Though asked on Sunday if that would happen, Barclay said it was a matter for the chancellor.

©2020 Bloomberg L.P.

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