Empowering Huawei – Econlib

The June 15 issue of The Economist had the following heading and subheading:

The American assassination attempt on Huawei has had the opposite effect

The company becomes stronger – and less vulnerable

But even if the allusion to Nietzsche was ill-timed, the story itself contains some important insights:

The American attack continues. In May, for example, regulators revoked a special permit that allowed Intel and Qualcomm, two U.S. technology groups, to sell Huawei chips for laptops. Yet Huawei not only survived; it blooms again. In the first quarter of this year, net profit rose 564% year-on-year to 19.7 billion yuan ($2.7 billion). It has re-entered the handset sector. Sales of telecom equipment are rising again. And it has achieved this in large part by replacing foreign technology in its products with homegrown components and programs, making it far less vulnerable to American hostility in the future. Having failed to kill Huawei, Uncle Sam’s attacks have only made the company stronger.

Foreign Affairs also has an excellent piece on trade relations with China:

A China increasingly cut off from Western markets will have less to lose in a potential confrontation with the West – and therefore less motivation to de-escalate. As long as China is closely linked to the United States and Europe through trade in high-value goods that are not easily substitutable, the West will be much more effective in deterring the country from taking destabilizing actions. China and the United States are strategic competitors, not enemies; Nevertheless, when it comes to US-China trade relations, there is wisdom in the old adage: “Keep your friends close and your enemies closer.”

An advantage of globalization is that it makes countries much more interdependent. If your well-being depends on interactions with countries around the world, you may be less inclined to engage in hostile behavior that puts these supply chains at risk. Once cut off from the rest of the world, there is little reason to avoid reckless behavior, as we see in places like North Korea.