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US vs China: Huawei offers case study on free trade

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15.02.2019

President Donald Trump is reportedly close to issuing an executive order that would ban Chinese companies like Huawei Technologies Co. from building 5G wireless networks in the US The significance of such an order goes beyond its obvious implications for American telecommunications companies. The prospect of closing technology-related markets to competitors from China raises a fundamental problem that is going to plague policymakers for the foreseeable future: How can they draw the line between economic protectionism and legitimate national security interests? In a world of data and data theft, will every technology-related industry become an exception to free-trade rules?

On the one hand, from the perspective of liberal trade economics, barring Huawei from US markets is classical protectionism. It is a bedrock principle of free trade that foreign competitors should be allowed into domestic markets. Competition promotes efficiency. Protectionism kills it. It is possible to argue that Chinese companies, whether partly state-owned or outright state-controlled, get illegitimate subsidies from the government, artificially lowering their costs and breaking the rules of fair trade. But the way to address those subsidies, according to free-trade law and ideology, isn’t to ban foreign competition altogether. It is to use the tools of trade law to pressure the foreign country to stop the subsidies.

On the other........

© The Financial Express