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An employee walks past a display detailing Huawei’s history at the company’s training facility in Dongguan, China, on May 23. By targeting Huawei, the US has gone beyond the limits of a trade war. Photo: Bloomberg
Opinion
Opinion
by Yuqing Xing
Opinion
by Yuqing Xing

US ban on Huawei goes against the fair-use understanding of intellectual property protection

  • If an IP holder denies access to the technology by abusing its monopoly, it undermines confidence in the rights protection regime
  • America’s move will hurt consumers and is a blow to the global value chain
Yuqing Xing
Yuqing Xing
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The Trump administration has blacklisted China’s Huawei, the world’s largest telecoms equipment maker, on the grounds that it poses a risk to US national security. The decision prohibits the export of any American technology to the company. Such a ban will devastate Huawei.

A global economic superpower, the US has monopolised the core technologies of the world’s information and communications products. Without the operating systems designed by Apple, Google and Microsoft, for example, all computers and smartphones would just be a collection of electronic components and could not function as proper tools that are indispensable for our daily life today.

US companies unambiguously deserve the monopoly they command, which is a result of their huge investments in research and development in pursuit of innovation.

However, their monopoly rests on one condition. The protection of US companies’ intellectual property rights provided by other countries, including China, made it possible for these companies to earn handsome returns for their R&D investments. The intellectual property protection provided by foreign governments is actually a public good enjoyed by US companies.

There exists an implicit but widely accepted rule that, by protecting the intellectual property rights of US companies, Chinese companies would in turn be offered the right to use American technology through free and fair market transactions. The technology sanction on Huawei violates this rule.

At every given opportunity, the US has urged China to strengthen the protection of its intellectual property rights. If Chinese companies are deprived of the right to access US technology, why would they protect US intellectual property rights?

How China’s rise is helping to unite America behind Trump

The Trump administration suspects that Huawei’s products may open a “back door” to the US communication network, which would threaten its national security. Banning Huawei products from the US market may be reasonable. After all, it is similar to the Chinese government banning Google, Facebook and Twitter in China.

However, Huawei is an international company serving not just American consumers but many others around the world. The ban on Huawei in accessing US technology is unfair to both Huawei and its non-American consumers. It would be ridiculous to assume that Huawei’s products threaten US national security, no matter where and by whom they are used.

US President Donald Trump is using tariffs to fight the trade war with China. It is a fact that, on average, China’s tariffs on American goods are higher than the other way around, and that the Chinese government employs more non-tariff barriers to hinder US imports. Imposing punitive tariffs to level the playing field and achieve reciprocity may be justifiable.

But targeting Huawei goes beyond the limits of a trade war. It is destructive to global value chains, which are the basis of modern international trade and production. Taking advantage of America’s technology monopoly to choke Huawei’s supply chain is insane and abusive.

Trump often accuses China of subsidising Chinese companies to gain an edge in competing with US companies in the global market, in particular in the areas where American companies have a monopoly in the core technologies. “Made in China 2025”, China’s high-profile industrial strategy, has frequently been cited as an example of such support. Since the trade war escalated, Beijing has played down the plan.

Beijing’s ‘Made in China 2025’ plan isn’t dead, it’s out of control

There has always been a concern in China that US companies may suddenly stop providing China with the technologies it needs, thus crippling the Chinese economy. One objective of Made in China 2025 was to prepare for the risk of a hostile technology blockade.

In the past, many scholars and government officials regarded this kind of worry as a remnant of a cold-war mentality, believing the risk to be slim. The attack on Huawei, after a similar one on ZTE last year, suggests that the risk is not fantasy but real. This should convince the Chinese government to press on with its Made in China plan.

Abusing America’s technology monopoly is not the right strategy to fight the trade war, and it may well backfire.

Dr Yuqing Xing is a professor of economics and the director of Asian economic policy at the National Graduate Institute for Policy Studies in Tokyo

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