The recurring U.S. trade deficit with China has been a focal point for the current US administration, which has led to growing tension between the two countries. This tension which first manifested itself in increasing import taxes on Chinese goods has now reached a new high: the U.S. government has put Huawei on the so-called “Entity List,” imposing all U.S. business to immediately stop doing business with Huawei.
(source: U.S. Census Bureau
It is essential to understand that putting Huawei on this list is a way for the U.S. government to create “leverage” in the trade deficit conflict. Based on publicly available knowledge, Huawei is no more or less likely to embed spying technology than European or American technology vendors would. And if the real objective is to protect the privacy of our communications, the U.S. government could simply restrict the usage of Huawei technology in specific sectors, similar to what other countries have done. The reality is that this has nothing to do with national security, but everything to do with creating leverage for the trade deficit negotiations.
Most of the media coverage has focused on the geopolitical aspects of that ban, how life-threatening that move is to Huawei, as well as what it means for the ongoing 5G network deployments around the globe – that are highly dependent on Huawei. Yet, an aspect that hasn’t received much coverage revolves around how much U.S. companies – suppliers of Huawei – have at risk in that ban. The reality is that this ban doesn’t just prevent Huawei from selling in the USA, it actually prevents U.S. companies from doing any business with Huawei, hence putting at risk a lot of revenue for American companies.
As an example, CloudBees is a fast growing company with 550 employees in 19 countries. Our customers can be found on all continents. One of them, Huawei, accounts for more than $1m of recurring business in our books. What this means is that Huawei being put on the “Entity List” incurs a “$1m+ tax” on our business. Pure and simple.
While the intent is to create leverage on China, ultimately U.S. companies are the first ones being penalized through what is equivalent to an enormous tax being put on their businesses.
And the damage goes beyond the monetary impact of this tax: for the U.S. government to take such a radical decision and impose all U.S. companies to immediately stop doing business with a tactically-selected company goes against all notions of free trade and peace of doing business. It sends the signal that arbitrary decisions could happen anytime, to any business. While we have been used to seeing this happen in planned economies, we are not expecting to see it from the flagship of capitalism.
As such, we are asking the U.S. government to not make U.S. businesses hostages in the trade negotiations with China.
A native of Switzerland, Sacha graduated from EPFL in 1999. At EPFL, he started Cogito Informatique, an IT consulting business. In 2001, he joined Marc Fleury’s JBoss project as a core contributor, implementing JBoss’ original clustering features. He went on to become general manager for JBoss Europe, leading strategy and helping to recruit partners that fueled JBoss’ growth. In 2005, he became CTO, overseeing all of JBoss engineering. When Red Hat acquired JBoss in 2006, Sacha played a crucial role in integrating and productizing the JBoss software with Red Hat offerings. Sacha went on to become co-general manager of Red Hat’s middleware division. He left Red Hat in 2009 and founded CloudBees in March 2010. Follow Sacha on Twitter.