By Prabir Purkayastha – The U.S. tech war on China continues, banning Chinese equipment from its network, and asking its Five Eyes partners and NATO allies to follow suit. It is a market and a technology denial regime that seeks to win back manufacturing that the U.S. and European countries have lost to China.
International trade assumed that goods and equipment could be sourced from any part of the world. The first breach in this scheme was the earlier round of U.S. sanctions on Huawei last year, that any company that used 25 percent or more of U.S. content had to play by the U.S. sanction rules. This meant U.S. software, or chips based on U.S. designs, could not be exported to Huawei. The latest round of U.S. sanctions in May this year stretched the reach of U.S. sanctions to cover any goods produced with U.S. equipment, extending its sovereignty well beyond its borders.
In the last three decades of trade globalization, the U.S. has increasingly outsourced manufacturing to other countries, but still retained control over the global economy through its control over global finance—banks, payment systems, insurance, investment funds. With the fresh slew of sanctions, another layer of U.S. control over the global economy has been revealed: its control over technology, both in terms of intellectual property and critical manufacturing equipment in chip making.
The new trade sanction that the U.S. has imposed is in violation of the World Trade Organization’s rules. It invokes national security, the nuclear option in the WTO, on matters that are clearly trade-related. Why the U.S. has gutted the WTO, refusing to agree to any new nominations to the dispute settlement tribunal, has now become clear. China cannot bring the illegal U.S. sanctions to the WTO for a dispute settlement, as the dispute settlement body itself has been made virtually defunct by the United States.
The battle over 5G and Huawei has become the ground on which the U.S.-China tech war is being fought. The 5G market (including installation and network equipment) is expected to reach $48 billion by 2027, but more importantly, it is expected to drive trillions of dollars of economic output over the installed 5G networks. Any company or country that controls the 5G technology will then have an advantage over others in this economic and technological space. more>