Unfortunately, this is a pretty safe bet. That's why I always recommend that if you are going to go to China to do business, you should go with the goal of making people over there extremely rich. This will give you some protection.
But yeah, if this is the game that the nations are going to play, then you don't want to be the poor schmuck sitting in a Chinese prison for 10 years just so they can make a point. It's probably time to start considering business models that allow you to operate at a distance from China. (Same with the smaller Chinese operators I guess? I mean, if I'm being fair. They should probably start considering models that don't require them to be in North America.)
If you're small, it's just a fact that this game is in danger of evolving beyond the capacity of your resources to play it.
Bottom line, whether you're Chinese or American, no one wants to start spending years on years in foreign prisons because they wanted to go to a foreign country to work for a few years. It's just not worth the risk.
> But yeah, if this is the game that the nations are going to play, then you don't want to be the poor schmuck sitting in a Chinese prison for 10 years just so they can make a point.
Facilitating deals with Iran to deliver US products in defiance of US sanctions seems like something the average schmuck hopefully isn't getting mixed up in. It's not quite the same as accidentally violating some random domestic business laws.
But on general grounds, why a Chinese company should comply with sanctions between US and Iran? And why a fourth country is arresting Chinese citizens violating US rules?
I am sure most of us break UAE laws on being with members of opposite gender without a chaperone and even post pictures of class reunions, etc. But I'm not expecting to be arrested for this while visiting, say, Sweden.
> why a Chinese company should comply with sanctions between US and Iran? And why a fourth country is arresting Chinese citizens violating US rules?
Huawei stole a Canadian company's technology [1], markets products in America [2], has issued dollar-denominated debt [3] and then went and violated sanctions in dollar-denominated transactions. This is a far cry from extraterritorial enforcement for either the U.S. or Canada.
So if some Western company would trade with Ukraine or Georgia in violation of Russian sanctions, should their representatives be arrested and extradited to Russia?
Also, after Russia-Ukraine conflict many Ukranian politicians are under a criminal investigation in Russia (and I guess Russian politicians are investigated in Ukraine). Should they be extradited too?
If they were doing business in Russia and buying Russian-made tech under an agreement that the tech not be sold to Russian-sanctioned countries, and then they sold the tech to those countries in violation of that agreement... That might be a valid comparison.
And if they were in a country that cooperated with Russia to extradite criminals, this exact thing might happen to them.
For a similar reason is why google had move all of their employees out of Russia a few years back.
Yes, if you violate another country’s laws, you are subject to arrest. Whether or not they can actually arrest you depends if you are in their jurisdiction or a jurisdiction that does extradition.
> So if some Western company would trade with Ukraine or Georgia in violation of Russian sanctions, should their representatives be arrested and extradited to Russia?
The US is still the sole global superpower, it is still (yes, despite Trump) largely charged with maintaining the world order that has existed since WW2. Russia is not a superpower, its reach is regional and it has few allies. You'll see a lot of varied answers in this thread, the only one that matters is this: the US can do things that Iceland (tiny nation) or Russia (large, regional power) cannot because it's far more powerful in most every regard. That's not meant to justify any arbitrary flexing of that power that the US does, it's an explanation for why the US can do it and Russia generally can't in the case of Georgia. It's an imposition of will, backed up by immense diplomatic, financial and military power. Few countries will comply with a Russian request to arrest an American executive, dozens of major countries will at least consider a US request like the one in this case.
Well, if one were to wake up one day and find that another nation had arisen, say, one that is world's large manufacturer and that a vast number of companies rely on and where a large number of powerful Westerners happen to wind-up at one point or another, well, however far-fetched this might seem, this situation might put a wrench in this idea of US hegemony.
I mean, I know it's 1999 but who knows what will happen in the years to come? /:s
In my post I never said there were going to be no consequences to US behavior. I never said anything attempting to justify US behavior. I never said the US would remain the sole superpower. I never said China wouldn't eventually rise to the same level of global power that the US now has, or even beyond that.
What I said non-the-less is true. It's unpopular to state it, to say why things are the way they are in actuality. Sometimes reality is unpopular.
> The US is still the sole global superpower, it is still (yes, despite Trump) largely charged with maintaining the world order that has existed since WW2.
No, the US is not "charged" with maintaining the "world order". The US just thinks that it is. And they're so bad at their self-imposed job that the only reason why they can get away with it is that they're a superpower.
Really. How valid is that? If an American tourist uses 20USD to pay for a meal in Montreal or Toronto (which happens a lot), what's the logic that this falls under US jurisdiction.
I mean, it's obviously valid because this incident happened (and many other events that show the same validity). The logic is that the US says any transactions involving USD fall under US jurisdiction, because it's their currency--that is, the USD only has any value at all because the US government says it's legal tender.
Because the USD is the international reserve currency for a lot of countries and the US largely is pretty stable, most countries are fine with cooperating in cases like this with notable exceptions.
FWIW that's changing under Trump (i.e. people are seeing the US as less stable), and the EU is making efforts to increase the use of the Euro as an international reserve currency.
Re next 2 points: If you want to justify violance you need stronger triggers. Those 2 just give the US right to ban the Huawei from country or using the USD.
This looks like US doing it because it can. But then US is not facing USSR whose going to die from self-inflicted wounds. China have the most capitalist companies (Apple/etc) defending it.
> if you want to justify violance you need stronger triggers
Violating sanctions is a criminal offense under U.S. and Canadian law. Huawei chose to do business in America and Canada. Its executive chose to travel to Canada.
This is a difficult story to mangle into a morality play.
No Canada is arresting on behalf of US. On the contrary, Huawei is building 5g infra for Canada.
> Violating sanctions is a criminal offense under U.S. and Canadian law.
Just because its legal does not mean there wont be an aggressive reaction[1]. China will probably respond with force. Huawei with market exit. Then there are other actors who would respond in there own way we would never know about. US probably going to take net-hurt from this.
Do you want to hurt US market/USD ? Because thats what use of your justifications will do.
[1] edit: By that I mean non-US actors have not agreed to react aggressively. Legal implies that only US persons have.
> Do you want to hurt US market/USD ? Because thats what use of your justifications will do.
That's not going to happen. China is also not going to over-react. They're going to under-react, because their economy and global political context is at a slightly precarious point. It's why the US has been able to apply such immense tariffs without China doing anything crazy so far: they still need the US more than the US needs China (which isn't the same thing as the US not needing China at all). It's also partially why China is relatively eager to find positive ground with the US on trade issues. For example the US is currently building a coalition to reform the WTO in a manner that is detrimental to China (it caused the recent surge in Chinese interest in settling the trade dispute). The US is running perpetual trade deficits with almost everyone (specifically of importance, the major economies), which leaves most everyone having more of an interest in going along with the US rather than China on trade modifications. To say nothing of the IP issues and market barriers in place in China.
China will find a modest way to stab the US over this, unless it's resolved relatively quickly. It won't be a big deal for China, arresting one executive is not something they'll care to shake the world over at all. This isn't Jack Ma we're talking about, which would demand a big response due to his prominence and popularity. This is a nation run tightly by a Communist party that at the highest levels (ie Xi) barely likes business executives to begin with, they merely tolerate them as useful tools to get from here to there in a process that China perceives itself as going through. Executives of that sort are pawns that can be thrown away or swapped out with little concern. Overall it may be nothing more than the US acquiring a small bargaining chip at a tiny cost, which it can then release to perceived good will when it does so. It's a relatively simple political move if that's the case.
Its not just US vs China. Its US vs Market. Its the hand of market that US need to watch out for. Everytime a powerful entity acts like a madman, it gets weaker. Soon or later it will receive 1000th cut which may be one too many.
You're exaggerating what this tiny incident means to the market. Historically this doesn't show up on the list at all, it's just barely a one day top 10 business story.
The market in this context effectively means the top 30 or 40 economies. They make up the extreme majority of all global GDP.
What practical alternative to the US as an essential ally in the coming global bifurcation with China and Russia do you perceive that: EU, Japan, South Korea, Australia, New Zealand, Canada, Mexico, UK, etc - have? Who else is there? There is nobody else to help offset the enormity of China's looming power. The US has, on many occasions since WW2, done radically worse than arrest a Huawei executive over sanctions on a foreign nation. Mr. Market barely blinked over Snowden and the global espionage revelations for example, which was a thousand times worse than this incident. It had enormous commerce implications. For the most part the world went on with its business; and here we are years later, the US espionage system continues unabated (actually it's stronger now) and mostly unchallenged. This arrest will barely matter at all to Mr. Market.
You have very restricted definition of market. Market != Stock Market. Slap of market does not mean you go down, it means the profits goes to your compititors. Rise of China is textbook example here. China made the bank, while everyone who did not have compititive labor regulations got slapped for it. Globalisation basically means States getting slapped for not being competitive.
There are whole categories of companies/products (OVH/ProtonMail/etc) due to NSA. So yes USA got slapped for it too just not as visible as Rise-of-China.
Why, yes, I'd rather we didn't do business with a country that has close to 1M people in forced reeducation camps. I am OK with not profiting from some things. A dystopian "social credit" police state, for example, is apparently very high on my list of places not to invest in, be associated with, or deal with at all.
Now thats a moral argument. In a realpolitikal world, X aggresses against Y because its in X's self interest, not because Y have been bad. Under this model, China _is_ suffering from aggressions just not from Apple/etc.
The US and China should behave morally. I disagree with the real politks strategy. I'm sure many countries want to behave that way, I'm glad there is still the rule of law in the US (even as our president tries to subvert it). The US doesn't always act morally, but often it does - our laws against us companies bribing people in other countries are a good thing even though it makes it harder for us companies to operate in other places.
I'm not naive enough to think that China will suddenly reform itself, end oppression against it's people and take complete advantage of its people's incredible energy, creativity and intelligence.
Well for one thing, Canadian (and many other) extradition treaties require the notion of dual criminality - the thing you're being extradited for has to also be a crime in Canada.
Second, Canada (and most democracies) does not extradite to countries where the Canadian courts are not satisfied you will get a fair trial, or where the person would face capital punishment. So all these comparisons of being extradited to Russia or China or any other dictatorship are not exactly valid. That kind of thing is not on the table.
In fact right now Canada has a major dispute with China because the Canadian government won't return even run of the mill Chinese criminals because they will likely be executed after a sham trial in China.
Somehow they got the US technology in order to sell it to Iran. I'm no legal expert, but there was probably an assumption during that transaction that they wouldn't be selling it to Iran, which they violated.
(which is exactly why this is different than them simply doing business with Iran in the first place)
No one at ZTE was criminally charged. Though the indictment could be sealed and we may not know until they travel to a country that complies with American arrest request.
Not that easy, as most international trade is denominated in USD, and nominally flows through the US, and makes it subject to US jurisdiction. Which is one reason there is a growing push for denominating trade in EUR or CNY instead.
USD transactions don't have to flow through the US, either nominally or in actuality.
This is obviously true in the case of cash transactions which consist of the physical transfer of small green pieces of paper in places outside the US.
It is also true of bank transactions, for example the vast Eurodollar market which has been in existence since the 1950s. If a non-US bank offers USD-denominated accounts and transfers funds from one of those accounts to another, this can and does happen entirely outside US jurisdiction.
Sweden doesn’t view that as a crime so they don’t have any interest in further oppression. Many western countries will arrest foreigners that attempt to use their country as a hiding place. There are extradition agreements that outline this - the long arm of the law.
A lot of the extraterritorial power of US jurisdiction is due to the fact that a lot of international commerce is denominated in USD. Matt Levine writes about this occasionally in his informative and amusing news letter "Money Matters" [1], for example [2]:
> The basic system of international trade is:
> 1. International trade is done using U.S. dollars.
> 2. Any trade done using U.S. dollars is subject to the jurisdiction of the U.S. government: Dollars flow through banks in the U.S., and if the U.S. government doesn’t want dollars to be used for some purpose—to fund genocide or terrorists or dictators or narcotraffickers—then it can reasonably effectively cut off dollar funding for those purposes, and punish banks, including foreign banks, that disobey it.
> 3. The U.S. is a good and responsible steward, and only cuts off dollar funding for bad purposes like genocide or terrorism or totalitarianism or drugs.
[...]
> If other countries lose confidence that the U.S.’s decisions about who can use dollars are predictable, stable, constrained by the rule of law and responsive to the concerns of other large economies, then those other countries might look elsewhere.
Or the beginning of [3]:
> There was also a sense of uneasiness with the U.S. using the power of the dollar to enforce its foreign policy: Because all dollar payments are nominally processed through the U.S., moving dollars anywhere in the world effectively puts you under U.S. jurisdiction, even if the dollars are financing purely non-U.S. transactions. Lots of Europeans — bankers but also politicians and businesspeople and regular citizens — didn’t have the same antipathy to, say, Cuba that the U.S. does; they found it unfair that European banks were prohibited from doing business in Cuba not by European regulations but by American ones.
You are going to say all that without pointing out that the US and Canada are fighting espionage, and China will look for an innocent business person in response and that's just totally ok with everyone here?
But yeah, if this is the game that the nations are going to play, then you don't want to be the poor schmuck sitting in a Chinese prison for 10 years just so they can make a point. It's probably time to start considering business models that allow you to operate at a distance from China. (Same with the smaller Chinese operators I guess? I mean, if I'm being fair. They should probably start considering models that don't require them to be in North America.)
If you're small, it's just a fact that this game is in danger of evolving beyond the capacity of your resources to play it.
Bottom line, whether you're Chinese or American, no one wants to start spending years on years in foreign prisons because they wanted to go to a foreign country to work for a few years. It's just not worth the risk.