Why you should care
Because the arrest alone caused stocks to plummet by hundreds of points this week.
John McLaughlin is the former deputy director of the CIA. He writes a regular column on OZY called “Global Eye: Foreign Affairs Through an Intelligence Lens,” and teaches at the Johns Hopkins University’s School of Advanced International Studies (SAIS).
On Friday, a Canadian court heard the charges against Meng Wanzhou, chief financial officer of Chinese telecom giant Huawei, who was detained last week at the request of American authorities. She is being accused of violating U.S. sanctions against Iran through a Huawei subsidiary called Skycom and could reportedly face up to three decades in U.S. prison.
But Chinese officials are crying foul, saying Meng — whose father is a major figure in President Xi Jinping’s inner circle — is innocent. Meanwhile, some wonder if the charges against her are being used as high-stakes leverage by the Trump administration amid ongoing trade talks between the United States and China. We asked John McLaughlin, a former deputy director of the CIA who has briefed four presidents, from Ronald Reagan to George W. Bush, to shed some light on the foreign policy implications of the situation.
Why did the U.S. ask Canada to do this now, when these charges have been known for years?
McLaughlin: I’m giving the government a lot of credit here, but it could have just taken the Justice Department this long to develop a case in a way they think could stand up in court. But the timing of it is just bizarre. In a normal administration — and I worked in a bunch of normal ones — what happens is you have the national security advisor convene around a table in the White House Situation Room representatives from every major agency to discuss the pros and cons of a step like this. Instead, what we have here looks like three parts of the U.S. government operating without talking to each other: the Justice Department, the White House and the trade negotiators.
But don’t we have concerns about Huawei?
Absolutely. There is ample evidence that, like most major Chinese companies, it is closely aligned with the military and security services and working to assist their intelligence collection and influence missions while pursuing — very successfully — legitimate business objectives. And there is also no doubt that China’s trade practices are unfair and in need of reform. But while these issues justify pushing back on national security grounds, they are not persuasive reasons to arrest a prominent foreign national. That requires evidence of criminal behavior.
So what criminal behavior could be involved?
Well, many sanctions violations do not have criminal penalties. More likely, they result in fines and denial of trade, as with another Chinese telecom company, ZTE. One possibility is that she is being charged under a provision that requires foreign companies selling to Iran to have less than 10 percent U.S. components in their products. Or perhaps there is some espionage violation that will be charged. We’ll have to wait and see.
How will the Chinese react?
They are demanding she be released, as expected. But mainly, they will be confused. I think their understanding is that they have trade issues and national security issues with us but expect them to remain on separate tracks. All the more confusing will be the U.S. claim that Trump did not know about this — even though the arrest occurred literally as Trump and Chinese President Xi were sitting together at a working dinner in Argentina. China will simply not believe this and will see it as deliberately designed to increase pressure on them. In truth, if Trump did not know while talking with Xi, it is stunningly bad White House staff work that shows a near-total lack of situational awareness. The timing and methods could not be worse.
Is it likely to affect the trade talks, which have 90 days to reach an agreement under the accord struck by Xi and Trump?
Administration officials such as economic advisor Larry Kudlow are saying the talks will not be seriously affected. And in fact, some key Chinese officials have implied that they are trying to keep this controversy from spilling over. But President Xi has not yet spoken, and we don’t yet know what impact this will have in China. Meng is a senior official in what Beijing regards as the crowning jewel of its tech industry. Huawei’s leadership is part of Xi’s inner circle. Meng is senior enough and well connected enough to be very roughly analogous to a senior White House or State Department official — due largely to the way that China integrates such companies into national security policy.
What might the Chinese do and how will this likely end?
There is nervousness in the U.S. financial community about the Chinese possibly retaliating. NPR’s correspondent in Shanghai has seen an internal memo from a major U.S. chipmaker warning employees not to travel to China right now. Anti-U.S. outrage is boiling in the Chinese media, and this can easily trigger nationalist demonstrations that put great pressure on the government. Perhaps our Justice Department has some yet-to-be-revealed airtight case against Meng that will be widely persuasive. In the absence of such a case, I will not be surprised if the U.S. ends up looking for a face-saving way out of this that involves sending Meng back to China, possibly with Beijing accepting some financial penalties for whatever behavior is cited. All of that could yet put the U.S. on its back foot in the trade negotiations. It’s hard to avoid the impression that this was poorly handled and will not end well for either side. The U.S. may have reinforced anti-Iran sanctions but at the price of lasting bitterness in China, which will likely think Washington was either duplicitous or incompetent in handling Meng’s case.