Hypersonic race

Russia says it has conducted another successful test of a nuclear-capable hypersonic missile:

Moscow’s hypersonic glide vehicle, dubbed Avangard, has been in development for three decades and can travel at least five times the speed of sound, or about one mile per second.

The weapon, which the U.S. is currently unable to defend against, is designed to sit atop an intercontinental ballistic missile. Once launched, it uses aerodynamic forces to sail on top of the atmosphere.

Sources familiar with U.S. intelligence reports assess that the Russian hypersonic glide vehicles are equipped with onboard countermeasures that are able to defeat even the most advanced missile-defense systems. The weapons are also highly maneuverable and, therefore, unpredictable, which makes them difficult to track.

The US appears concerned:

The Defense Department is looking to step up its development of hypersonic weapons — missiles that travel more than five times faster than the speed of sound — DOD leaders said at the National Defense Industrial Association-sponsored “Hypersonics Senior Executive Series” here today.

“In the last year, China has tested more hypersonics weapons than we have in a decade,” said Michael Griffin, undersecretary of defense for research and engineering. “We’ve got to fix that.”

Russia also is involved in hypersonics, Griffin said. “Hypersonics is a game changer,” he added.

If Russia were to invade Estonia or China were to attack Taiwan tomorrow, Griffin said, it would be difficult to defend against their strike assets. “It’s not a space we want to stay in,” he told the audience.

Let’s you and them fight

As usual in geopolitics, there is more going on behind the scenes than some of the more breathless news reports would suggest:

The Russian forces currently in Syria will take action to restrain Hezbollah and Iranian activity there, according to understandings reached by Israel, the United States, Jordan and Saudi Arabia with Russian President Vladimir Putin, a Jordanian official confirmed to Israel Hayom.

The understandings are the product of behind-the-scenes diplomatic talks that were underway prior to U.S. President Donald Trump’s decision this week to withdraw American forces from Syria.

According to the terms of the understanding, Russia will continue to give Israel the freedom to strike Hezbollah and Iranian targets and weaponry that threaten the “balance of power” in Syria. According to the Jordanian official, it was these understandings between Trump and Putin that paved the way for the U.S. decision to pull its forces from Syria.

Other high-ranking Jordanian officials have confirmed that Jordan, Israel and Saudi Arabia are working together to contain the threat posed by Iran and Hezbollah’s presence in Syria. Several of them emphasized that U.S. officials had made it clear that U.S. intelligence agencies would increase cooperation with Israel, Jordan and Saudi Arabia, particularly on sharing intelligence, in a joint attempt to counter Iran’s attempt to create a contiguous Shi’ite corridor from Tehran to Beirut.

It looks like the Middle East is increasingly going to have to sort itself out, with a little help from nearby Russia. The consequences are hard to predict, but the US withdrawal from Syria almost certainly reduces the risk of conflict between the US and Russia, as well as between the US and its NATO ally Turkey, which threatened earlier this month to launch an offensive against the US-backed Kurdish forces in Syria.

Pulling out

Evacuation of Saigon

Sometimes you just have to go

M K Bhadrakumar of Asia Times praises the decision to pull US troops out of Syria:

To take the last argument first – what will be the impact on the Syrian situation? To be sure, ISIS is down, but not quite out. But then, ISIS is today only residual terrorism, after the huge defeat in Iraq.

At any rate, the brunt of the fight against the ISIS was borne by the Syrian government forces and their allies – remember Aleppo? Their grit to finish the job has never been in doubt and there is no reason to fear any let-up.

In fact, their interest lies in stabilizing the security situation in the quickest possible way so the political process leading to a post-conflict Syrian order can be speeded up.

Ironically, the departure of the US forces could help matters, since in many ways the US military presence only impeded the anti-ISIS fight in Syria. It is well known that terrorist groups took shelter in the US-led security zones in eastern Syria.

The Al-Tanf base and its 50-square-kilometer security perimeter was only the most glaring example. Again, the “no-fly zones” prevented Syrian and Russian jets from hunting down the ISIS cadres and de facto amounted to US air cover for terrorists.

It’s really very hard to understand what the US strategy was in Syria. Was there even a specific strategic goal? What was the desired end-state of this campaign?

Personally I suspect most Americans’ reaction to this news has been: Wait, we had troops in Syria? Yeah, the public was never consulted about this, at all. I am not the only person who finds it bizarre that an ostensibly democratic nation can be engaged in a major foreign military campaign for years on end without a scintilla of public approval, or even knowledge, let alone a formal declaration of war. Did you know the US has at least a dozen military bases in Syria? What is going to happen to those?

Regardless, this is excellent news for the US. Give non-intervention a chance!

US wants China to show it the money

Wang Jisi Peking University

From David Cowhig’s Translation Blog, this is a good interview with a Chinese academic regarding the increasingly contentious state of US-China relations. Wang Jisi is Dean of the School of International Studies at Peking University. While I don’t necessarily agree with all of his points, he has a very calm and measured perspective on things that I find refreshing:

Zhao Lingmin: Why does Trump want to launch a trade war against China? Is it to hurt China?

Wang Jisi: My understanding is that American entrepreneurs still do not want to withdraw from China. They think they can make a lot of money in China. After all, the Chinese market is big, and in the past 30 or 40 years, some very strong path dependencies have been created – how can such a big and complex supply chain simply move somewhere else? There are not many places to choose from. For the present, these enterprises are opportunistic. They say that they want to exert pressure on China on the US government. On the other hand, they say to China that if you give me preferential policies, I will not leave. I think there are still many American companies see things that way. They have a wait-and-see attitude.

Their feelings about China are complex. On the one hand, they are very dissatisfied with various restrictive policies. On the other hand, they also realize that China is not the only country with these restrictions. Many many developing countries have similar restrictions. If you move your company to Egypt, don’t you think that the Egyptian government will regulate you? When they think about it, China is still good a good place to be. They can make money here. Therefore, they think that they should exert pressure on the Chinese government to continue with reform and open up some more industrial sectors to foreign investment.

Therefore, the reason the United States launched a trade war against China was not to pull out of China or to completely “decouple” from China, but to change China’s behavior so that it can make more money. This conclusion I have drawn from decades of involvement in Sino-US economic and trade relations. Some people in the US government and others in some American companies, however, are also preparing for the worst: decoupling of many of the economic links between China and the United States. This is dangerous.

[…]

Zhao Lingmin: In addition to the trade imbalance, what other causes of US dissatisfaction in the US – China relationship?

Wang Jisi: The US military is unhappy. The military is a big interest group. A few year ago, it did not believe that China was strong enough to pose a threat to the United States, and that China did not mean to truly exclude the United States from the Asia-Pacific region. During the past two years, China has taken a very firm position on the South China Sea issue. The United States has begun to feel that that the Chinese military is much stronger than before. They feel that if the US does not exert pressure on China, it will not have a foothold in the Western Pacific. The military, including the military-industrial complex, are hardliners on China policy. Formerly, when terrorism was the top concern, there was a lot of military spending and a great many companies and others forming a huge chain of interests linked to the manufacture and sale of weapons. Now, by pointing to China, contradictions with China on military security issues can be used to argue for more military spending.

In addition, the Confucius Institutes in the United States have made Americans feel that China’s values are different from those of the United States. China’s promotion of Chinese values in the United States is very difficult for Americans to accept. The ideological contradictions between China and the United States are also reflected their attitudes towards Chinese students and scholars studying in the United States.

I wrote about Confucius Institutes here.

Zhao Lingmin: Some say that the pressure that the United States has put on China was to a great extent the cause of the firm line of Chinese foreign policy over the past several years.

Wang Jisi: I am not here to make political and moral judgments. If we are looking for the cause, it was the change in Chinese policy that led to adjustments in US policy towards China. In recent years, China’s strength has been increasing rapidly along with its international influence. China has increased its operations maintain protect China’s territorial sovereignty and maritime rights. China has put increased pressure on “Taiwan independence” and other splittist forces. China has strengthened the leadership of the Communist Party. The United States has become increasingly uncomfortable with China’s actions and has begun to react strongly. We can expect that these US reactions to Chinese actions will become ever more intense. The US may switch from the defensive to the the offensive.

The cause-and-effect relationship we see today also applies to 1949 and 1979. In those two years, changes in Chinese internal affairs led to big changes in Sino-US relations. Changes in US internal affairs have always had relatively little impact on Sino-US relations despite the many different presidents since then and many different political currents swept the US during those decades. The financial crisis broke out in 2008. That was major event for the United States. Did it cause a major change in Sino-US relations? Not at all.

I very much agree with my colleague Professor Tao Wenzhao that for over 200 years, the United States has never changed its strategic goals for its relationship with China:

  • Free flow of goods and capital, and
  • Free free flow of information and values.

Chinese have always had reservations or imposed boycotts to oppose two goals. We should criticize and have reason to criticize the United States but we should realize that China’s own actions have changed Sino-US relations and US perceptions of China.

China and the Chesapeake-Leopard affair

Huawei CFO Meng Wanzhou pizza

Pizza delivered to Vancouver home of Meng Wanzhou, who has been released on bail

More information is coming out about the arrest in Canada and possible extradition to the US of Huawei CFO Meng Wanzhou (Sabrina Meng) – aka the Huawei Affair. The New York Times filled in some of the details yesterday. In a nutshell, US counterintelligence and federal prosecutors have been exploring action against Huawei on national-security grounds as far back as 2010, but the authorities decided it would be easier to go after the telecom giant for financial crimes:

But criminally charging Huawei or its executives for espionage or other security crimes was not likely to be simple. Former federal prosecutors said doing so often risked exposing the sources of confidential information. As a result, they said, prosecutors often look to bring more conventional cases involving crimes such as bank fraud. Think of it as the Al Capone strategy: Prosecutors went after the notorious gangster by charging him with tax evasion. […]

This summer, the prosecutors decided to file criminal charges against Ms. Meng — fulfilling their yearslong goal of going after Huawei executives for allegedly acting as an extension of the Chinese government.

Prosecutors filed the charges, under seal, on Aug. 22, and a federal judge in Brooklyn signed a warrant for Ms. Meng’s arrest. The charges focused, at least in part, on her allegedly tricking at least four banks, including HSBC and Standard Chartered, into facilitating the company’s Iranian transactions.

While Ms. Meng’s main home is in Shenzhen, China, she regularly traveled to Canada; she and her husband own two houses in Vancouver. The authorities figured it was only a matter of time before she traveled there, and the United States and Canada have an extradition treaty.

On Dec. 1, Ms. Meng flew from Hong Kong to Vancouver International Airport, where she stopped for a 12-hour layover before flying to Mexico. As she got off the plane, the Canadian police arrested her.

US action against Huawei is long overdue. The problem is that “personalizing” this issue by targeting one of China’s most famous female executives (ranked #8 on the 2017 Forbes China list of the country’s Top 100 Businesswomen) – who now faces up to 20 years in prison in the US – is an example of shocking jurisdictional overreach that, if the nationalities were reversed, would be viewed by the American public and government as tantamount to an act of war.

Key unanswered question: Did Meng make her fraudulent presentation to HSBC in the US?

The Guardian draws an intriguing parallel between the US mindset here, and that of the US’s former colonial master more than two centuries ago:

Blame the British, as usual. In 1807, in the midst of a struggle with Napoleonic France, HMS Leopard, a Royal Navy ship of the line, attacked, boarded and captured an American frigate, USS Chesapeake, off Norfolk, Virginia. The British claimed their action was justified by the presence on the American ship of four English deserters, whom they arrested. But, for President Thomas Jefferson, it was an outrageous, illegal infringement of the sovereignty and independence of the infant republic, eventually leading to the 1812 war.

It’s fair to say the Americans never forgot lessons drawn from the Chesapeake humiliation – and have been faithfully following Britain’s script ever since. As its power grew, the US, too, assumed the right to extend its national writ beyond its shores. One modern example is the way the US justice department ruthlessly pursues foreign nationals, such as the Scottish hacker Gary McKinnon, who are deemed to have broken US law. McKinnon’s extradition was ultimately blocked in 2012 by Britain’s then home secretary, Theresa May, after a public outcry.

Here’s a bit more about the Chesapeake-Leopard affair:

The Royal Navy’s humiliating attack on the USS Chesapeake left many Americans clamoring for war, but there was little the ill-prepared United States could do to answer British aggression.

“Never since the Battle of Lexington have I seen this country in such a state of exasperation as at present, and even that did not produce such unanimity.”

–President Thomas Jefferson

As his Royal Navy vessel patrolled off the coast of Virginia, Londoner and former tailor Jenkin Ratford and four other crewmen decided to steal a boat and desert to the shores of Norfolk. Ratford later boasted of his escape to the “land of liberty” in Norfolk’s streets, where his contempt incurred the ire of British authorities. They vowed to make an example of the brazen Englishman, who joined the crew of an American frigate, the USS Chesapeake.

In June 1807, the Chesapeake set sail from Norfolk for the Mediterranean. Its decks scattered with cargo and its guns unwisely stowed, the vessel made an appealing target for the crew of a British vessel, the HMS Leopard, who intercepted it off the coast of Norfolk and aimed to take revenge.

When the British commander requested permission to search the ship for deserters, the American commodore James Barron refused to muster his crew for inspection. Moments later, the captain of the Leopard responded with a barrage of broadsides, killing three Americans and wounding eighteen. British officers then proceeded to board the crippled Chesapeake and seized what they had come for: a handful of suspected deserters, including Jenkin Ratford.

The humiliating exchange infuriated the American public. War fever raged up and down the coast of the United States. President Thomas Jefferson maintained that the country was more exasperated than at any time since the 1775 battle at Lexington Green that touched off the War of Independence, “and even that did not produce such unanimity.” With Republicans and Federalists—normally bitterly divided political factions—both clamoring for action, war between Britain and the U.S. seemed imminent.

In reality, however, there was little President Jefferson could do militarily to respond to the British transgression. America’s small navy was already deployed in the Mediterranean checking the Barbary pirates. America’s army had been long since been gutted by Republicans anxious to reduce government spending. As Jefferson bided his time and war fever subsided, he instead pursued economic coercion as an alternative to war. That economic pressure began a few months later with the passage of the Embargo Act.

The exchange between the Chesapeake and the Leopard had other consequences for its participants, however. Commodore Barron was later court martialed; found guilty of “neglecting on the probability of an engagement, to clear his ship for action,” he was suspended from the navy for five years without pay.

And on August 31, 1807, the Royal Navy got its revenge on the tailor who had deserted his vessel. Tried by court-martial for mutiny, desertion and contempt toward a British naval officer, and sentenced to death, Jenkin Ratford met his end—hanged from the fore yardarm of his former vessel, the HMS Halifax.

The Chesapeake-Leopard affair was one of the events that precipitated the War of 1812, in which the British burned down Washington DC. The Americans got their revenge more than a century later, when FDR stripped the British Empire of its life savings in exchange for desperately needed war supplies at the outset of World War II. History has a dark sense of humor.

Huawei insanity

The Huawei Affair just keeps escalating. I hope this doesn’t lead to a Sino-American war. It’s really not worth it.

A second Canadian has just disappeared into detention in China – by sheer coincidence, of course.

Meantime, the permanent bureaucracy shows the president who’s boss:

Despite President Trump’s statement that he might intervene in a criminal case against the chief financial officer of Huawei Technologies Co., such a move would break from longstanding tradition and advisers have warned him that his options are limited, according to people familiar with the matter.

When news broke last week of the arrest of Meng Wanzhou, threatening the president’s trade talks with China, he asked for options, according to one person, and advisers told him the arrest and potential prosecution of Ms. Meng was essentially out of his hands.

The arrest was a Justice Department matter, they said, and the White House should stay out of it for now, this person said. There are no immediate plans to intervene in the matter, officials added.

Trump can and absolutely should make the DoJ drop this case:

Former Justice Department officials said that while Mr. Trump’s intervention in the Meng case would be a departure from the norms against White House involvement in criminal cases, there is nothing in the Constitution that bars it. Such actions are more common – though still unusual – if the action is framed as a national-security matter.

While the circumstances were different, President Obama pushed the Justice Department to drop cases against several alleged Iran-sanctions violators while negotiating a plan for that country to curb its nuclear program.

David Goldman is probably right that certain elements of the national security state are trying to sandbag Trump.

Here’s an explainer on the legal niceties of the case. All well and good, but it blithely ignores the insanely provocative nature of this move, how it is *perceived* outside the US (backlash is bad), as well as the selective way in which the law is being applied:

The arrest of Huawei chief financial officer Meng Wanzhou is a dangerous move by US President Donald Trump’s administration in its intensifying conflict with China. If, as Mark Twain reputedly said, history often rhymes, our era increasingly recalls the period preceding 1914. As with Europe’s great powers back then, the United States, led by an administration intent on asserting America’s dominance over China, is pushing the world toward disaster.

The context of the arrest matters enormously. The US requested that Canada arrest Meng in the Vancouver airport en route to Mexico from Hong Kong, and then extradite her to the US. Such a move is almost a US declaration of war on China’s business community. Nearly unprecedented, it puts American businesspeople traveling abroad at much greater risk of such actions by other countries.

It may not be kidnapping but it certainly looks like kidnapping. From FT:

To put the incident’s shock value in an American context, it was as if a daughter of Steve Jobs, who was following him up the corporate ladder at Apple, had been detained in Moscow pending her possible extradition to Beijing.

The hypocrisy of this move against an extremely high-profile Chinese businesswoman is a little hard to take:

Meng is charged with violating US sanctions on Iran. [Ed: Not quite.] Yet consider her arrest in the context of the large number of companies, US and non-US, that have violated US sanctions against Iran and other countries. In 2011, for example, JPMorgan Chase paid US$88.3 million in fines for violating US sanctions against Cuba, Iran and Sudan. Yet chief executive officer Jamie Dimon wasn’t grabbed off a plane and whisked into custody.

And JPMorgan Chase was hardly alone in violating US sanctions. Since 2010, the following major financial institutions paid fines for violating US sanctions: Banco do Brasil, Bank of America, Bank of Guam, Bank of Moscow, Bank of Tokyo-Mitsubishi, Barclays, BNP Paribas, Clearstream Banking, Commerzbank, Compass, Crédit Agricole, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, JP Morgan Chase, National Bank of Abu Dhabi, National Bank of Pakistan, PayPal, RBS (ABN Amro), Société Générale, Toronto-Dominion Bank, Trans-Pacific National Bank (now known as Beacon Business Bank), Standard Chartered, and Wells Fargo.

None of the CEOs or CFOs of these sanction-busting banks was arrested and taken into custody for these violations. In all of these cases, the corporation – rather than an individual manager – was held accountable. Nor were they held accountable for the pervasive lawbreaking in the lead-up to or aftermath of the 2008 financial crisis, for which the banks paid a staggering $243 billion in fines, according to a recent tally.

A question of passports

Canadian passport

Christopher Balding (“Not China Naive Balding”) explains why it matters, a lot, whether the arrested Huawei CFO Wanzhou Meng entered Canada on a Canadian passport, as has been rumored:

@BaldingsWorld

Here is what people don’t know about the dual passport situation with regards to Chinese citizens. You may ask, why would the CFO of Huawei enter Canada under a Canadian passport? There are very clear reasons and I absolute no doubt about it guarantee every Chinese 1/n

citizen with two passports knows what I am about to tell you. The simplest answer is that if you enter another country using a non-Chinese passport it is a lot easier, typically you don’t need a visa. That may be part of it but that isn’t the primary reason. 2/n

The primary reason, and let me reiterate, every Chinese I have ever met with two passports knows this, when you enter a country, which ever country passport you enter the country is what nationality the accepting country recognizes. In other words, when she entered Canada 3/n

with a Canadian passport, if that is in fact what she did, she is recognized as a Canadian citizen. If she enters France/Japan/China with a Canadian passport, she is recognized as a Canadian citizen by international law. Why does that matter you ask? If you ever get 4/n

into trouble, the only country the host country allows you to get consular or other access to is your country of citizenship. Most “Chinese” with second passports enter China using Canadian/US/Australian passports even if they have Chinese passports for this exact reason. 5/n

When Chinese with second passports travel abroad, they use the second passport not just because of the visa ease issue, but because they prefer being represented by actual humane governments. So when she entered Canada on a Canadian passport, if she did, 6/n

She was telling you, and I absolutely guarantee she knew what I’m telling you, she would rather be represented by Canada than by China. She could get a visa no problem and enter with her Chinese passport. Let me put it another way, Chinese with means are making clear 7/n

And conscious choice who they want representing them if they get jammed up, and it is rarely China. In her case, that may not be the best choice. However, I absolutely guarantee you every Chinese with two passports knows this and chooses this way. Done

1:32 AM – 7 Dec 2018

And a BBC reporter comments:

@StephenMcDonell

to @BaldingsWorld

We did ask the #China Foreign Ministry yesterday if Meng Wanzhou had entered #Canada on a Chinese or Canadian passport but no response.

1:30 AM – 7 Dec 2018

Balding again:

@BaldingsWorld

High probability: Huawei CFO not arrested directly for Huawei activities but for running transactions through closely held separate independent Cayman SPV which she runs that channeled FX transactions and profits through NYC. If that is the case, she is screwed

3:19 AM – 7 Dec 2018

This is also interesting:

China has said it will immediately implement measures agreed under a trade war “truce” with the US.

The commerce ministry’s remarks came days after Donald Trump and his Chinese counterpart, Xi Jinping, agreed to give negotiators 90 days to resolve their trade spat.

Few details have been made public about what the two sides will negotiate, a lack of clarity that has unsettled stock markets.

“China will immediately implement the consensus both sides already reached on agricultural products, energy, autos and other specific items,” a commerce ministry spokesman, Gao Feng, said at a regular press briefing. […]

Gao’s briefing came hours after the trade detente risked being rattled by the arrest in Canada of a top executive from the Chinese telecom giant Huawei at the request of the US.

Hmmm. Clearly, there is a *lot* more going on here than meets the eye. As usual, it’s stupid to rush to judgment before the facts are revealed (a thing I am definitely guilty of).

The plot thickens!

Huawei CEO Meng Wanzhou

The internet is abuzz with more news and speculation related to the stunning arrest of Huawei CFO Wanzhou Meng:

• I previously noted that “This is about as dumb as the US trying to arrest Julian Assange, but with far nastier geopolitical implications.” For what it’s worth, here’s Wikileaks weighing in:

@wikileaks

Editorial comment: The U.S. extradition of Huawei CFO Meng Wanzhou from Canada, for actions performed in China, is the same extra-territorial invasion through lawfare, that the U.S. government is applying to the UK, by extraditing Assange from the UK, for publishing in the UK.

4:26 PM – 6 Dec 2018

• Comrade Balding, an academic formerly based in Shenzhen, has some very interesting thoughts, among them:

@BaldingsWorld

There’s more coming on Huawei. I just don’t know when it’s going public

8:58 AM – 6 Dec 2018

===

Fact: timing of Huawei arrest is a great big political F+*#?!U

Fact: everyone in China knew she broke the US laws. Obama admin knew Huawei broke the law. Trump admin knew Huawei broke the law.

It’s only political if you think she should get away with it

8:48 AM – 6 Dec 2018

===

FWIW, I’ve know for a few months that there is more coming down the road with Huawei. Have confirmation from multiple unrelated people

2:08 AM – 6 Dec 2018

• The Alibaba-owned South China Morning Post ran this piece Thursday on how Meng told Huawei employees “in an internal talk on compliance that there are scenarios where the company can weigh the costs and accept the risks of not adhering to the rules.” Is China planning to throw Meng under the bus?

• Reuters correspondent “SJ” writes:

@SijiaJ

What happened on December 1? Xi & Trump met, Huawei founders’ daughter got arrested, Danhua Capital founder committed suicide

10:11 PM – 5 Dec 2018

• Wait, who committed suicide? From SCMP reporter Zheping Huang:

@pingroma

Prominent Stanford physics professor and blockchain venture capitalist Zhang Shoucheng died at age 55 on Dec 1 in the US after fighting depression, according to a family statement. Story TK

“Danhua lists 113 U.S. companies in its portfolio, and most of those companies fall within emerging sectors and technologies (such as biotechnology and AI) that the Chinese government has identified as strategic priorities,” the USTR name-checked Zhang’s VC in its Nov. 20 report

10:48 PM – 5 Dec 2018

Odd timing on that. “The family of Stanford professor Zhang Shoucheng, a world-renowned physicist and venture capitalist, denied speculation on Chinese social media that his death was connected to tensions in US-China relations or the arrest of Huawei’s CFO in Canada on Saturday.” (SCMP)

• An intriguing piece of gossip:

@maggiexiao

Replying to @BaldingsWorld

Rumor says Meng entered Canada with a Canadian passport. China recently strengthened its no-dual citizenships policy . So that means she voluntarily gave up her Chinese citizenship. If true, does China still have the rights to claim her back?

6:24 PM – 5 Dec 2018

• David Goldman comments:

First, never before has the United States attempted the extraterritorial rendition of a foreign citizen – Meng is a Chinese national – in connection with sanctions violations. It has imposed travel and banking restrictions, but seeking an arrest warrant for this is entirely without precedent. […]

The question is: Who ordered the arrest, and why?

It is possible that President Trump knew about it and sanctioned the arrest, to be sure. But it is unlikely that the president would escalate the conflict with China with the arrest of a senior executive of China’s flagship high-tech manufacturer on the same day that he sought to de-escalate the trade war.

If Trump did not initiate the arrest, who did? There are two alternative possibilities.

The first is that the order came from administration officials who believe that the United States must provoke a confrontation with Beijing now, before China becomes too powerful to intimidate. Some parts of the permanent bureaucracy and the intelligence community believe that China’s economy is fragile and that an economic war would produce an economic crisis and political instability, perhaps even toppling Xi Jinping.

That view may seem fanciful, but it is argued seriously, for example by some former senior officials of the Trump administration.

The second possibility is that Trump’s enemies in the permanent bureaucracy simply want to prevent the president from negotiating a deal with China that would enhance his image and remove risks to economic growth.

Goldman notes that the only American politician to comment publicly on the matter has been Senator Marco Rubio, who earlier this year tried to torpedo Trump’s agreement with Xi regarding ZTE. He “celebrated the arrest” in an email to Axios. Hmm.

• Huawei is in deep trouble and not only in the US. From Reuters: “Japan plans to ban government purchases of equipment from China’s Huawei Technologies Co Ltd and ZTE Corp to beef up its defenses against intelligence leaks and cyber attacks, sources told Reuters.”

• …And: “Australia and New Zealand have already blocked Huawei from building 5G networks.”

• …And: “Britain’s BT Group said on Wednesday it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations and would not use the company in central parts of the next network.”

• I’ll close with Professor Balding again – somewhat off-topic, but it caught my eye:

I think what most people who haven’t spent a lot of time in China don’t get is how abnormal the business, economic, financial, and negotiation climate is. People see the shiny tall glass office buildings and the Ritz and they make the assumption they get it. That’s wrong 1/n

The stories that get out in public are wild. The stories that never make it into the public are at least 10x crazier. The IP theft and theft stories you hear about in public are low hanging fruit where someone falls out of favor in Beijing. I know first hand accounts of 2/n

Flat out 10 ten digit USD thefts. Companies who have valid contracts telling a foreign partner they’re ignoring a contract and they will have them abducted or jailed if they even think about trying to enforce a contract with again 10 digit USD values. You DC/NYC debutantes 3/n

simply do not understand what you are dealing with.The rules are different. You think fentanyl doesn’t get various levels of state protection? Get real. You think this IP theft and gangsterism isn’t quasi official policy? Get real. You need to be realistic about your counterparty

6:14 AM – 6 Dec 2018

Death of a nation

Social collapse intensifies as US life expectancy drops for the third year in a row:

Life expectancy in the United States declined again in 2017, the government said Thursday in a bleak series of reports that showed a nation still in the grip of escalating drug and suicide crises.

The data continued the longest sustained decline in expected life span at birth in a century, an appalling performance not seen in the United States since 1915 through 1918. That four-year period included World War I and a flu pandemic that killed 675,000 people in the United States and perhaps 50 million worldwide.

Public health and demographic experts reacted with alarm to the release of the Centers for Disease Control and Prevention’s annual statistics, which are considered a reliable barometer of a society’s health. In most developed nations, life expectancy has marched steadily upward for decades.

Life expectancy for men declined year-on-year, while that of women remained the same. Women enjoy 5 more years of life than men. Kirsten Gillibrand is right!

Overall, Americans could expect to live 78.6 years at birth in 2017, down a tenth of a year from the 2016 estimate, according to the CDC’s National Center for Health Statistics. Men could anticipate a life span of 76.1 years, down a tenth of a year from 2016. Life expectancy for women in 2017 was 81.1 years, unchanged from the previous year.

The growing drug epidemic has claimed more lives in one year than the total US combat deaths in World War I:

Drug overdoses set another annual record in 2017, cresting at 70,237 — up from 63,632 the year before, the government said in a companion report. The opioid epidemic continued to take a relentless toll, with 47,600 deaths in 2017 from drugs sold on the street such as fentanyl and heroin, as well as prescription narcotics. That was also a record number, driven largely by an increase in fentanyl deaths.

China is the main source of the illicit fentanyl in the US, raising an interesting parallel to the illegal opium trade which devastated Chinese society during the 19th and early 20th centuries.

US kidnaps daughter of Huawei founder

Wanzhou-Meng

Ok, I don’t think this is the trade war people signed up for:

Canada has arrested the chief financial officer of China’s Huawei Technologies who is facing extradition to the United States on suspicion she violated U.S. trade sanctions against Iran.

Wanzhou Meng, who is also the deputy chair of Huawei’s board and the daughter of company founder Ren Zhengfei, was arrested in Vancouver at the request of U.S. authorities.

“Wanzhou Meng was arrested in Vancouver on December 1. She is sought for extradition by the United States, and a bail hearing has been set for Friday,” Justice department spokesperson Ian McLeod said in a statement to The Globe and Mail. “As there is a publication ban in effect, we cannot provide any further detail at this time. The ban was sought by Ms. Meng.

A Canadian source with knowledge of the arrest said U.S. law enforcement authorities are alleging that Ms. Meng tried to evade the U.S. trade embargo against Iran but provided no further details.

She is being sought by federal prosecutors based in New York:

Huawei released a statement saying its CFO was arrested while changing planes in Vancouver and is facing charges in “the Eastern District of New York.”

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng. The company believes the Canadian and U.S. legal systems will ultimately reach a just conclusion,” the statement said.

How is this even remotely legit? Has Meng even been to the US? I don’t see how the US has jurisdiction here.

We’ll find out more soon, but at first glance this strikes me as extremely dubious, both legally and politically. This is about as dumb as the US trying to arrest Julian Assange, but with far nastier geopolitical implications.

UPDATE: China responds:

Remarks of the Spokesperson of the Chinese Embassy in Canada on the issue of a Chinese citizen arrested by the Canadian side

2018/12/06

At the request of the US side, the Canadian side arrested a Chinese citizen not violating any American or Canadian law. The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim. The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou. We will closely follow the development of the issue and take all measures to resolutely protect the legitimate rights and interests of Chinese citizens.

UPDATE: Bloomberg has a good rundown of the situation.

Analysts said it’s more likely the case proceeded separately from the trade talks as part of Trump’s efforts to step up prosecutions against Chinese companies that conduct economic espionage and violate sanctions. In October, the U.S. said Belgium extradited a Chinese intelligence official accused of stealing trade secrets from U.S. companies — an unprecedented development.

Either way, China is almost certain to view Meng’s arrest as a major escalation in the trade war that will foment fears of a wider Cold War between the world’s biggest economies. As part of trade talks, Trump has insisted that China stop providing government support to strategic sectors including artificial intelligence and robotics as part of its “Made in China 2025” policy.

This is misguided. Why would China stop providing government support for strategic sectors? Those sectors are key to China’s future competitiveness in manufacturing and technology. In effect, the US is badgering China to radically change its growth plans out of deference to its chief global rival. China will never do that, even if it agrees to do so on paper. The smart play for US would be to drop its free-trade fantasies and pursue its own industrial policy.