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Trade war

China pressures US allies in Huawei tug-of-war

Australian coal and New Zealand salmon face obstacles in 5G spat

Australia, which exports much of its natural resources to China, is feeling the weight of the spat over Huawei products.   © Reuters

WASHINGTON/SYDNEY -- China looks to be upping economic pressure on Australia and New Zealand in hopes of pulling them away from the U.S. campaign to freeze Huawei Technologies out of high-speed 5G networks across the world, leaving the neighboring countries on the hot seat between their security ally and biggest trade partner.

News broke Thursday that Australian coal is facing difficulty entering China at the country's northeastern ports such as Dalian. Both sides have since downplayed the situation: Australian Treasurer Josh Frydenberg said "we shouldn't jump to conclusions," while the Chinese foreign ministry said Friday that the imports were only facing tougher environmental and safety checks.

As part of an intelligence-sharing pact called the "Five Eyes," Australia was among the first countries to back the U.S. campaign against Huawei and to block the company from its 5G network. But China is its biggest trading partner, particularly for natural resources like coal and iron ore.

New Zealand, another Five Eyes member that counts China as its top trading partner, rejected a proposal to use Huawei equipment in 5G infrastructure last November. Its salmon shipments have now been confronting delays since late January.

"We have recently faced administrative issues with our salmon exports to China," said Andre Gargiulo, chief customer officer at seafood exporter Sanford, on Feb. 15.

While Australia and New Zealand share U.S. concerns over the risks of using Huawei equipment, their economic dependence on China puts them in a difficult position. It is not uncommon for China to use trade as a negotiating chip.

Many in Australia think China's disruption of the coal shipments is about Huawei. Jane Golley, an associate professor at Australian National University, says the country was punished for following America's lead with regard to the Chinese telecommunications equipment maker.

Behind-the-scenes pressure is creating fissures within the Five Eyes. British intelligence has concluded that security risks tied to Huawei products can be managed, while New Zealand Prime Minister Jacinda Ardern said Friday that her country is still formulating a decision regarding the telecommunications company.

The U.S. itself is also sending mixed messages. The Trump administration appears to be hinting that it could back down on Huawei if it can clinch a trade deal with China before a fast-approaching deadline.

"To keep your people safe isn't always cheap," Secretary of State Mike Pompeo said in a Thursday interview, while outlining the risks that could come with Huawei products. His comments were aimed at European and Asian countries hesitant to completely eliminate inexpensive Huawei products from their 5G infrastructure.

Yet President Donald Trump tweeted the same day that he wants "the United States to win through competition, not by blocking out currently more advanced technologies" -- a statement some believe could signal a shift on the Huawei freeze.

Several outlets have reported that Trump is considering signing an executive order banning American companies from using Chinese telecommunications equipment, but no such order had been issued as of Friday.

Some experts believe Huawei is a potential bargaining chip in trade talks with China. Top negotiators met in Washington this past week toward reaching a deal before March 1 -- Trump's deadline to raise tariffs on Chinese goods. The president said in December that he would "certainly intervene if I thought it was necessary" in the case of Huawei Chief Financial Officer Meng Wanzhou, who was arrested in Canada that month at the request of the U.S. Justice Department.

Meanwhile, Huawei founder Ren Zhengfei seems to be taking it all in stride. "Now we are rolling out 5G and soon we'll welcome 6G," he said in a Thursday interview with U.S. broadcast network CBS.

"5G was not known by common people" before the Trump administration began talking about it, said Ren, who is also Meng's father. "I'm actually thanking them for promoting us."

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