Opinions
2020.10.27 17:43 GMT+8

Will U.S. succeed in luring developing nations to ditch Chinese telecom equipment?

Updated 2020.10.27 17:43 GMT+8

A screen that reads "5G Clean Path" with a map of the United States is visible behind Secretary of State Mike Pompeo as he speaks at a news conference in Washington, D.C., the U.S., April 29, 2020. /AP

Editor's Note: Ken Moak taught economic theory, public policy and globalization at the university level for 33 years. He co-authored a book "China's Economic Rise and Its Global Impact" in 2015. The article reflects the author's opinions, and not necessarily the views of CGTN.

The U.S. is broadening and intensifying its technology war against China. Having had little success in pressuring ally countries, except the UK, Japan, Australia and India, in ditching Huawei and ZTE equipment, Uncle Sam is "luring" developing countries in Africa, the Middle East, Latin America and Asia away from the Chinese companies with loans.

The new "technology Cold War" strategy has strong bipartisan support in the U.S. Congress and is to be armed with a $60 billion war chest. The fund is to be financed through the U.S. International Development Finance Corporation (IDFC) and administered through the Agency for International Development (USAID) and Federal Communications Commission (FCC), organizations normally assigned to provide foreign aids to less developed countries.

Only time will tell whether the antic will succeed in realizing its goal. However, early indications would suggest Uncle Sam may be fighting an uphill battle.

Finland's Nokia, Sweden's Ericsson and South Korea's Samsung, the intended beneficiaries don't seem overly excited about their new business prospects, saying that the heightened U.S. technology war against China will make little if any difference in their businesses.

The lack of enthusiasm on the part of the three non-Chinese companies speaks volumes, suggesting America's latest stance is as flawed as previously existing ones.

It was low prices, better product quality and more advanced technology that Huawei and other Chinese technology firms were able to dominate the African, Middle Eastern, Latin American, Eastern European and Asian markets, taking up over 50 percent of the regions' market share.

Replacing Huawei equipment with those of Nokia, Ericsson or Samsung would be costly and time consuming, as the UK telecom companies discovered. Dismantling of and replacing Huawei equipment will cost over 1 billion pounds, set 5G rollout back for at least two years and take five to seven years to complete the process.

The allegations of the Chinese government using Huawei and other Chinese made equipment to spy are without any shred of evidence. On the contrary, the world has been using Chinese telecom equipment and smartphones for decades without any national security threat issues. Nokia, Ericsson and Samsung also develop and produce telecom equipment or parts in China.  

With regard to Chinese financing as a "debt trap," the accusation is probably more accurate to describe the U.S. than China.

A Huawei retail shop promoting it 5G network in Beijing, October 11, 2020. /AP

As Columbia University economist Joseph Stiglitz observed, it was the U.S. Department of the Treasury that ordered the World Bank and IMF to ban borrowing nations from deficit financing to reverse economic woes, culminating in exacerbating the economies and debt burdens. Chad, an underdeveloped African country, for example, had to get another loan from the IMF just to pay off the existing ones.

However, no one made the same claim about Chinese loans, except America and its allies. The Hambantota Port was a "white elephant" before a Chinese company stepped in to make it viable seaport. The former Ranil Wickremesinghe government gave the China Merchants Port Holdings Company a 99-year lease for $1.1 billion. The money was applied to offset loans from China, but the company increased the port's business prospects, generating revenues for Sri Lanka to repay Chinese and other foreign loans. Instead of being an example of "debt traps" as the U.S. insisted, Sir Lanka is "laughing all the way to the bank."

If experiences from existing U.S. technology policies on China are a guide, the Asian nation might have nothing to worry about. Barring U.S. and other countries' companies to sell their technologies to and blacklisting Huawei, for example, had the opposite impact.

In 2019, the company's revenues increased 18 percent over 2018. In the first nine months of this year, the company's revenue increased by almost 10 percent over that of 2019. It replaced Samsung as the number one smartphone producer in the world so far this year and supplied almost 40 percent of the world's telecom equipment.

Thanks to the Trump administration and the Congress' anti-China crowd, China could leapfrog its technological advancement. The Chinese government is earmarking 1.4 trillion U.S. dollars on 5G and other technologies development over the next five years. With that kind of money and the country's huge reservoir of scientists, engineers and mathematicians, China could become a technology powerhouse rivaling, if not surpassing, the U.S. and self-sufficient in semiconductors production.

Simply put, the U.S.'s new technology war strategy against China could backfire because it has nothing to do with national security or "debt traps," but a cynical attempt to prevent China from becoming a technology hub, particularly in the areas of 5G rollout, artificial intelligence, quantum computing, etc. These technologies could decide the outcomes of future economic and military conflicts.

As to why the U.S. strategy would fail, it is because developing countries are probably aware that taking the U.S. loans to replace Chinese products would be harmful to their national interests. Non-Chinese equipment is decidedly more expensive and less advanced, thus reducing money for socio-economic development. The fact that the USAID is spearheading the initiative would suggest that America would tie food and other foreign aids to telecom technology, withholding aids unless the recipient countries abandon Chinese equipment.

It is very unlikely that developing countries will be lured into the U.S. trap because that could turn them into an American "vassal state."

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