MNI POLICY: UK/EU May Show US Trade Flexibility Post-Huawei

By Ryan Hauser

     WASHINGTON - Washington may seek to use the UK's decision to partially

adopt Huawei's 5G technology as leverage to obtain additional concessions in

upcoming trade talks, Peter Harrell, a former deputy assistant secretary in the

U.S. State Department's Bureau of Economic and Business Affairs, told MNI.

     Despite calls by the U.S. administration for the UK not to use Huawei as it

builds a 5G network, it will not "blow up" its relationship with its close ally,

Harrell said.

     "After all the bluster, they can't totally let it slide," he said, speaking

before White House acting chief of staff Mick Mulvaney's recent trip to the UK

to discuss the Chinese company. Harrell did not specify what concessions the

U.S. side might seek in the trade talks, although drugs pricing and food safety

standards are likely to be among the toughest subjects.

     Both the UK and the EU, which has issued guidelines on the use of high-risk

suppliers such as Huawei, may find themselves seeking to placate the U.S. on the

issue as they pursue trade talks with Washington, said Jacob Kirkegaard, a

senior fellow at the Peterson Institute for International Economics. Possible

moves could include postponing retaliation against Boeing if Europe's Airbus

receives an unfavourable ruling from the World Trade Organization, or pledges to

increase defense spending, he said.

     "I suspect quite a few (countries) will go down that route," said

Kirkegaard, a former Danish Ministry of Defence staffer. Purchasing U.S. weapons

systems, such as the F-35 joint strike fighter, "might be another good-will

inducing decision by European NATO allies," he said last week.

     Adoption of Huawei Technology throughout Europe is "creating a fissure"

that can't be offset by gestures, said Daniel Kliman, a former Senior Advisor

for Asia at the U.S. Department of Defense, noting that links between the EU and

China were likely to grow despite Washington's concerns.

     The U.S. will also face further competition from Huawei in emerging

markets, former advisor Kliman said, "where price matters even more " and where

the US has "very little ability" to mitigate security risks or limit the Chinese

tech giant's market share. "We'll see the U.S. focus more and more on what it

can do in the developing world," because "it's the soft spot, even compared to

Europe," he said.

     Heightened U.S. opposition to the Chinese company could force China's

government to "double down" on its support for Huawei, accelerating Beijing's

efforts to free themselves from U.S. technology, he said.

--MNI Washington Bureau; +1 202 371 2121; email: ryan.hauser@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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