Donald Trump extends executive order aimed at Huawei to guard US telecoms supply chain

Jodi Xu Klein

The United States on Wednesday extended a ban on domestic telecommunications companies from using certain equipment and moved a federal employees’ fund away from investing in Chinese stocks, in an ongoing effort to decouple the country’s economy and technology from China.

President Donald Trump has added another year to an executive order signed last May that prohibited US companies from using telecoms equipment made by firms deemed a national security threat – a ban that includes Chinese giants Huawei Technologies and ZTE.

Meanwhile, the Federal Retirement Thrift Investment Board (FRTIB), the entity that manages the US federal employees’ retirement fund, announced that it halted the transition of the I Fund benchmark to the MSCI All Country World ex US Investible Market Index, which includes stocks of Chinese companies.

The moves come as the tension between the world’s two largest economies grows. China and the US have been engaged in a prolonged trade war that has slapped tariffs on hundreds of billions of goods on each other’s imports.

Just as the two countries reached a phase one trade agreement in January that put the disputes on hold, the coronavirus began to sweep across the globe and has since infected nearly 1.4 million and killed more than 83,000 Americans.

The pandemic has exposed the US’ reliance on China for medicines, medical technology as well as other products, which has made decoupling from China more of a priority. The US government has been increasingly urging American companies to move manufacturing out of China and back to the US.

In a New York Times opinion piece this week, the US trade representative, Robert Lighthizer, wrote that the era of offshoring US jobs was over. “The pandemic, and Trump’s trade policy, are accelerating a trend to bring manufacturing back to America,” Lighthizer wrote.

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The original executive order, which gave the president the authority to regulate commerce in response to a national emergency, did not name China or Chinese companies specifically.

However, soon after the order was signed last May, the Department of Commerce added China’s leading 5G provider Huawei and 70 affiliates to an “Entity List”, essentially barring the Chinese company from doing business in the US.

The US government claimed that Huawei’s equipment posed a security risk because the company might be obliged to give up information to Beijing, an accusation Huawei has repeatedly denied.

Trump’s order said foreign rivals were taking advantage of the US by exploiting vulnerabilities in the communications technology sector.

“This executive order declares a national emergency with respect to the threats against information and communications technology and services in the United States and delegates authority to the secretary of commerce to prohibit transactions posing an unacceptable risk to the national security of the United States or the security and safety of United States persons,” the White House said in a statement.

Since Trump signed the order, the US has been trying to catch up on 5G, the next-generation mobile technology that promises wireless connectivity 100 times faster than existing standards and could enable the development of autonomous driving, smart cities and virtual reality.

Whoever gets ahead in this race could dominate the global technology in the future.

While China has its 5G champion in Huawei, Finland has Nokia and Sweden has Ericsson. The US, however, has no hardware maker ready to come to market with comparable scale and depth.

Last week, global tech companies joined forces to urge US lawmakers to fund 5G development using open radio access to minimise the world’s reliance on China.

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On the separate front, US lawmakers have been advocating since last summer for the Thrift Savings Plan (TSP) – the retirement assets of federal government employees, including members of the US armed forces – to avoid investing in opaque Chinese firms.

In recent weeks, Trump directed his administration to take swift action to prevent the fund from moving forward with allocating its assets to the benchmark in the MSCI that includes Chinese stocks.

Republican Senator Marco Rubio of Florida commented that while he applauded the action, “it should never have taken the FRTIB this long to reverse their misguided, deeply flawed decision to invest federal retirement savings in opaque Chinese firms engaged in human rights abuses and a wide range of military-related activities”.

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