Competition between countries to acquire and sell cutting-edge technologies could become an intractable part of the economic rivalry pitting China against the United States.
-Analysis-
LIMA — Competition between countries to acquire and sell cutting-edge technologies could become an intractable feature of the economic rivalry pitting China against the United States. One crucial part of that conflict would be over the fifth generation of communication technologies — known as 5G, which allows information transfers 10 times faster than the current 4G.
We already have examples of how the Superpower rivalry could unfold in Latin America. The most notable case recently (for the size of the market concerned) was the tender put out for Brazil's 5G network. The process had to be postponed due to disagreements between the U.S. and Brazilian governments around a possible role here of the Chinese firm Huawei.
The U.S. says Chinese technology firms are obliged by law to share information with their country's intelligence services, which implies a security risk for others in the operating market (in Germany's case, the U.S. threatened to stop sharing intelligence information with that country if it allowed Huawei to bid and take part in its 5G tenders).
An excuse to exclude
While the security concerns are not unfounded, the fear was that they would become an excuse to impose protectionist policies (which the last president, Donald Trump, threatened more clearly, saying the U.S. could not allow itself to fall behind in this powerful sector of the future). The British government said that to allay security concerns, Huawei merely had to be excluded from certain sensitive areas of 5G, rather than the entire process.
Brazil's tenders indicate that in contrast with the Trump administration, the Biden administration is more amenable to such arguments. In the Brazilian tenders, for example, the cost of excluding Huawei would have been prohibitive, as Huawei provided bidding firms with more than half their wireless networks.
The transaction formula was to have a separate web, excluding Huawei, for Brazilian government agencies. It wasn't a formal or official exclusion, relying rather on corporate governance conditions, which stock market-listed firms must meet if they wished to bid (and Huawei does not).
A recent tender for Brazil's 5G network once again highlighted economic rivalry between the U.S. and China.
Will China accept a "hostile" formula?
While it may be early to hail this as the winning formula, the Brazilian government's transactional condition has so far prompted no objections from either China or the U.S. However, the same may not happen with Ecuador. According to Britain's Financial Times, the U.S. government may help it pay off debts to China in return for excluding Chinese firms from its telecommunications networks.
This is such an obviously political agreement that the head of the paying entity, the U.S. International Development Finance Corporation, Adam Boehler, even called it an innovative model for excluding China from countries like Ecuador.
But would China accept such a "hostile" formula, in contrast with the Brazilian model, where Huawei was ultimately deprived of a relatively small piece of a big business?
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