U.S. President Donald Trump, left, and Xi Jinping, China’s president, shake hands during a news conference at the Great Hall of the People in Beijing, China, on Thursday, Nov. 9, 2017. Donald Trump and Vladimir Putin will meet in Helsinki, Finland, on July 16 for their first bilateral summit as the leaders seek to reverse a downward spiral in relations that has been exacerbated by findings that Russia meddled in U.S. elections. Our editors select a set of archive images of U.S. President Donald Trump ahead of the summit meeting. Photographer: Qilai Shen/Bloomberg

Huawei Case Will Split Nations Between U.S. and China

(Bloomberg Opinion) -- The Huawei Technologies Co. case now in the Canadian courts, while a legal matter, illustrates one of the biggest fears of many countries, especially in the Asia-Pacific region: facing a binary choice as a result of the increasing tensions between China and the U.S. 

The case centers on the arrest of Meng Wanzhou, Huawei’s chief financial officer and the daughter of the company’s founder. At the request of the U.S., Canadian officials detained her in Vancouver where she is now fighting an extradition order to America, which plans to pursue charges alleging that the company violated U.S. sanctions against Iran.

China has warned Canada of serious consequences, adding that Canada “will bear the full responsibility” should Meng be prosecuted. China brought the Canadian ambassador to the Foreign Ministry in Beijing to demand the immediate release of Meng. The authorities also summoned the U.S. ambassador to urge that prosecutors drop the case.

On the other side, members of the U.S. Congress have stepped up their calls on Canada to distance itself from the Chinese company. Marco Rubio, a long-serving member of the Senate Foreign Relations Committee, said that he would seek legislation to stop Huawei from operating in the U.S. because of national-security concerns. Mark Warner, another influential senator, warned that Huawei constituted a “threat to our national security.” And all this follows multiple warnings to Canada regarding its interactions with Huawei, including in June and October of this year.

No matter how it proceeds from here, the Huawei case risks confronting Canada with a potentially damaging conflict with at least one, and possibly both of its significant economic partners.

As partial and as imperfect an example as this is, the case also highlights an escalating fear that a growing number of other countries have, or should have — that of being torn between the competing gravitational pulls involving the conflicting national security considerations of China and the U.S. It is a throwback to the Cold War in which countries were confronted with the choice of aligning with either the Soviet Union or the U.S.

Back then, attempts at nonalignment ended up not offering much of a pushback against the competing influence of the U.S. and the Soviets. Today, weakened international institutions and the struggle to reach any serious consensus at multilateral summits — the G-20 and the Asia-Pacific Economic Cooperation are recent examples — also offer little pushback. Indeed, the multilateral structure is both too weak and insufficiently reformed and modernized to deal well with a host of current and future challenges.

With the multi-decade advance of economic and financial globalization, the tug of war between China and the U.S. involves a broader range of issues relating not just to trade and investment flows, but also basic technological choices that have important national-security implications.

Both China and the U.S. have taken decisive leads over the rest of the world in technological innovation, particularly in artificial intelligence, machine learning and big data. But rather than be on a convergence path, the two models seem increasingly divergent, particularly when it comes to the relationship between governments and big-tech companies. No wonder someone as knowledgeable as Eric Schmidt, the former chairman of Google parent Alphabet Inc., warned a few months ago of the likelihood of two poles in a highly bifurcated technological world.

During the Gorbachev-Reagan rapprochement of the 1980s, an African leader was asked about the difference for his country between détente and the Cold-War tensions. He responded that for his and other African nations it was analogous to the grass under the feet of two large elephants. It didn’t matter much whether the elephants were dancing or fighting; the countries risked being trampled in either case.

Countries in Asia-Pacific have been living through a golden period in which they were able to be friends with both China and the U.S., thereby providing them with a considerable range of economic, financial and cultural opportunities. The fear now is that they may soon end up being forced to opt for friendship with one or the other, and quite possibly being neither happy nor comfortable no matter what choice they make.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. His books include “The Only Game in Town” and “When Markets Collide.”

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