Why is Canada arresting a Huawei executive?

A bizarre series of events last week led to Huawei's Chief Financial Officer, Meng Wanzhou, being arrested while transferring flights in Vancouver, Canada. It appears the US wants her extradited to the country for 'conspiracy to defraud banks' over dealings with Iran, which were performed in secret via a subsidiary. 

You might know Huawei as a company that makes phones, but its business is predominantly focused on networking equipment. We're talking about the type of hardware that sits in datacenters, quietly humming away powering vast networks and cellphone infrastructure.

What it seems this arrest is actually about, with that in mind, is an escalating fight over control of the next-generation internet. The United States controlled the internet somewhat by default, because it was largely invented there and the country wired all of the pieces together over time for the world.

With 5G on the horizon, this may begin to change. Many of the networks around the world are already deployed using Huawei technology, but 5G escalates this to a new level because the company is one of a handful that has invested billions in being at the leading edge: it's poised to help China control large parts of the internet if unchecked. 

The US doesn't like that idea very much, for many reasons, including that the idea of a country famous for unchecked surveillance being at the core of internet traffic is problematic.

Behind the scenes, the US has already been pushing back against this. Huawei is run by Ren Zhengfei (the father of the arrested CFO), who formerly was an engineer in the People’s Liberation Army, which made global intelligence agencies nervous. Some countries, like the US and Australia, have banned Huawei from participating in 5G altogether, with others like New Zealand mulling doing the same.

All of this serves to paint a larger picture: the US is sloppily trying to exert that it's being tough on Chinese companies that break the rules, and is angering China by randomly arresting company executives while they're traveling (and when they aren't even within its jurisdiction).

Meng is still in jail as of writing, with judges attempting to make a final decision on Tuesday about whether or not to release her, and if she would willingly stay without fleeing until an extradition request is made.

If anything is to come of this it's that trade discussions between the US and China are not going to get any easier, and this development has made it unclear whether or not it's safe for Chinese or US executives to travel to either country for business right now, given the risks. 

Tab Dump

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