Reasons for detention of Canadian Citizens by China - Seeker's Thoughts

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Thursday, 3 January 2019

Reasons for detention of Canadian Citizens by China


Introduction- In the multipolar world there remains a struggle to stay strong and powerful. The world is no longer dominated by two powerful nations US, and USSR. Today the power struggle remains between multiple countries like US and China are also locking horns against one another. In December 2018, China detained Canadian citizen, and international community hinted that the decision was taken due to US- China trade war, which was supposed to be on halt up to January 2019.



The reason for the Conflict

America and China are two among the powerful countries in the world. Both of them have massive economic, political and military capacities that allow them to project power and influence around the world. 

The US has been the leading world  power on the other hand China is nowhere considered less powerful nation either. China embarked on three decades of unprecedented economic growth and modernization as well.

America imposed Aluminum and Steel tariffs in early March, 2018 in order to protect its own industries. Some other tariffs imposed by  the U.S were in the field of aerospace, information and communication technology, and machinery.

After all tariffs imposed by  the USA, China placed import duty on a wide range of US product. including scrap aluminum ,wine and apples.

The US again imposed tariffs on about 1,300 Chinese products .

 Later China came out with more tariffs this time taking aim at Boeing planes. America was entertaining the idea of another 100$ billion in tariffs. In between both the countries thought to put the trade dispute on halt.



The Pause  at the G20 meeting in Buenos Aires, In November 2018

The U.S. and Chinese Presidents, Donald Trump and Xi Jinping, agreed to a 90-day truce. The two countries will try to find an amicable solution to the various problems plaguing bilateral trade relations, such as disputes over intellectual property rights and Chinese state support for domestic industries, through talks over the next three months. Meanwhile, the U.S. will refrain from raising the tariff on Chinese goods worth $200 billion from the current rate of 10% to 25% on January 1, 2019, as planned. In return, according to the White House, China will purchase agricultural and other goods from the U.S. in order to reduce the trade imbalance between the two countries. If talks fail, however, increased tariff rates are scheduled to come into force immediately.

Tensions started again

However, the spat goes back to the detention on December 1 of a top Chinese telecom executive in Vancouver, who has since been released on bail, in response to a U.S. request.

America wanted custody of Meng Wanzhou, the chief financial officer of Huawei and the daughter of the company’s founder. Her arrest was part of the U.S. Justice Department’s ongoing criminal probe into the company’s sale of telecommunications equipment to Iran, a potential breach of sanctions against Tehran.

But the arrest is also seen in the context of the caution in much of the West against Huawei’s potentially winning bids as 5G communication networks are adopted, on grounds of a security threat. The military background of the Huawei founder has only raised speculation about the firm’s connection to the Chinese defence and intelligence services.  U.S. has invoked a rare national security provision under domestic law to impose punitive tariffs on global steel and aluminium imports. A similar investigation is under way specifically to determine the risk to domestic security from alleged Chinese intellectual property abuses. In addition, Beijing’s “Made in China 2025” industrial policy has aroused deep suspicion in the U.S. about the persistence of state subsidies to prop up indigenous firms. It is therefore speculated that Washington has its lens trained on Huawei, which has emerged as the world’s largest telecommunications equipment maker, surpassing Sweden’s Ericsson.



What is a trade war?

A situation in which countries try to damages each other's trade typically by the imposition of tariffs or quota restrictions. Going through history- one of the most famous examples of US protectionism came during the great depression after world war 1. Domestic US businesses faced increased international competition, as well as declining prices due to overproduction. When the stock market crashed in 1929, domestic businesses largely supported the protectionist measure and in 1930, President Hoover signed the Smoot Hawley tariff act.



Impacts of the Conflict

Trade war had never been productive for nations in human history. The world is already at stake where constant crisis of Iraq, Syria, Afghanistan and another region of African nations keeps on shaking the economic growth. Open borders have helped in poverty alleviation since globalization.



Uncertainty 



Both countries should come to one platform and negotiate. Imposing tariffs by both the countries can create economic chaos worldwide.

It would impact every nation as world bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis.

The ongoing trade war remains a lose-lose situation for the warring parties. The only winner will be special interest groups and consumer in countries that do not engage in the tit - for- tat tariff war,but their winning will come at the cost of global growth. 

This is right decision to pause the conflict, yet there is factor of uncertainty. It is high time countries worldwide come together to promote the cause of free trade.