Saturday, 29 December 2018

The Chaos Theory of International Trade, or How Canada Arrested a Chinese Executive on a US Warrant in Order to Protect Israel from Iran

I heard it from every economics professor I ever had, at both Oregon and Stanford, and everything I saw and read thereafter backed it up. International trade always, always benefits both trading nations. Another thing I often heard from those same professors was the old maxim: “When goods don’t pass international borders, soldiers will.” Though I’ve been known to call business war without bullets, it’s actually a wonderful bulwark against war. Trade is the path of coexistence, cooperation. Peace feeds on prosperity.

 Phil Knight. Shoe Dog: A Memoir by the Creator of Nike (p. 374). Scribner. Kindle Edition. 

A Few Facts

Huawei holds 4% of the cellphone market in Israel. In the UK, which is a member of the Five Eyes intelligence alliance, Huawei has 14% of the market.  Huawei Canada is a major contributor to Canadian business and research.  These facts matter. 

Why Conspiracy Theories Exist

Reading about the arrest of Huawei’s CFO Sabrina Meng Wanzhou, who is also the daughter of the company’s founder, at the Vancouver airport, I had the same question everyone was asking:  why?  Attempts to answer the question have spawned a number of conspiracy theories.  Conspiracy theories flourish when the information available in the public domain never quite makes sense or at least never comes close to explaining who did what, how, with what motives and intended outcomes.  The explanations for why and how never satisfy the parameters of what has happened, and we live in suspense,  forced to speculated about behind-the-scenes, cloak-and-dagger black ops in search of explicable motives for unexplained or inexplicable events.   

Just Because It's a Conspiracy Theory . . .

Once established, conspiracy theories take on a life of their own.  They thrive and spread and become better known than the mundane facts because they tell a better, more dramatic and coherent story.  All this being said, to cannibalize a better known expression:  just because it’s a conspiracy theory doesn’t mean that it isn't true.

Chaos Theory Is the Opposite of a Conspiracy Theory

The opposite of a conspiracy theory is “chaos theory”—the theory that explains how very small causes can precipitate very large effects.  Science tells us that if we want to know the answers to big questions like  “how did we get here?” or “where did that hurricane come from?”  the answer requires “chaos theory.”  No one caused it; a lot of small things happened and as a result that big thing happened.  The butterfly in Brazil may have intended something but she did not intend to set off a tornado in Texas.  Unlike conspiracy theories, chaos theory is no fun at all. Reviewing the explanations, analysis, speculation and theories emerging from Sabrina Meng Wanzhou’s detainment in Vancouver, chaos may be the only answer.

What We've Been Told

Based on media reports, some time in 2014 (and/or earlier) Sabrina Meng Wanzhou did a presentation in front of HSBC executives in New York (HSBC is the Hong Kong and Shanghai Banking Corporation) in which she is alleged to have misrepresented the ownership of a company called Skycom which was doing business in Iran in contravention of US and United Nations sanctions.  The physical evidence against her as an individual is, allegedly, a powerpoint presentation and a paper trail showing that Skycom is owned by a Huawei shell company. As a result, a warrant for her arrest was issued (22 August 2018) by the Eastern District Court of New York.  After various people had been informed, including Prime Minister Justin Trudeau and John Bolton, National Security Advisor to the White House, the RCMP exercised the American warrant and detained Sabrina Meng Wanzhou as she was changing planes at Vancouver airport en route from Hong Kong to Mexico.  She was jailed on December 1 pending a bail hearing.   She was released on bail on December 5.  Friends and family posted the 10-million-dollar bail, and she remains under house arrest in Vancouver, pending an extradition hearing in which American authorities must present evidence that her extradition is justified, meaning that there is compelling evidence that she has committed a crime which would be recognized as a crime according to Canadian as well as American law, and that the motives of her extradition are justified.

Mr. Chaos and the Conspiracy Theories

Not surprisingly, the immediate conspiracy theories make Mr. Chaos himself, President Donald Trump, the central antagonist.  Theory number one is that Meng’s arrest was a Trump gambit to gain leverage in trade talks with China, attempting to bully and cower China by showing how far he is willing to go playing hardball.  Theory number two is the exact opposite.  Meng’s arrest on December 1, the same day Trump was having one-on-one trade talks with China’s President Xi, was a deliberate attempt by an anti-Trump Washington faction to embarrass and undermine the American President.


The "Let's Put Canada in Its Place" Conspiracy

Conspiracy theory number three is distinctly Canadian.  On June 1, 2018, the USA imposed a 25% tariff on Canadian steel on the grounds that Canadian steel imports were “a threat to US national security.”  Suddenly all the rhetoric about Canada and the USA being the greatest of trading partners, the best of friends and the closest of allies evaporated, and we were just another potential enemy.  Nonetheless the USA still didn’t want us to go around acting like a sovereign nation.  As part of the recent trade deal replacing NAFTA, the US-Canada-Mexico trade agreement, the American’s insisted on what is known as the “China clause” requiring three-months notice before Canada could sign a trade agreement with  “non-market countries.”  (The list of “non-market countries” includes China, Vietnam, North Korea and 11 others.)  In other words, if Canada approaches a trade agreement with China, we will be putting at risk our trade with the USA to whom we export nearly 70% of our goods and services, accounting for 20% of our Gross Domestic Product.  Having Meng arrested in Canada had the effect, which would be desirable from an American perspective, of blocking friendly relations and future trade between China and Canada. 


The Paradox of China's Getting Tough with Canada

Ostensibly as a consequence of the Meng  detention, two Canadians—Michael Kovrig and Michael Spavor—were arrested in China.  As I try to imagine the strategic value of these arrests from a Chinese perspective, my conclusion is that they must be a gesture for domestic consumption in China.  In other words, Chinese politicians needed to show their Chinese compatriots that they are doing something about Meng’s arrest.  However, I would surmise that these Chinese politicians are more than sophisticated enough to realize that Canada, in contradiction to its own best interests, has been trapped in the middle of this affair by the American warrant.  The Chinese leadership have made Canada the target of their ire rather than focussing on the USA.  The rational conclusion is that Canada just doesn’t matter enough to either China or the USA.  Both countries are at ease making Canada a patsy and the detained Canadians collateral damage, but the real game—where the big money and power are at stake—is China-US trade.  Paradoxically, the more China puts pressure on Canada to release Meng, the more it will be in Canada’s interest to extradite her to the USA, thereby forcing the Chinese to address their true antagonist the USA, leaving Canada out of the US-China trade war. 


The Chinese Global Domination Conspiracy

In casual conversation with my fellow Canadians, this is the conspiracy theory that is least understood, but is the most readily and stubbornly accepted.  Arresting Meng has nothing to do with protecting Israel.  From this point of view the claim that she was arrested for contravening trade sanctions with Iran becomes a bogus pretext, smoke and mirrors.  From this point of view even the allegations that Meng committed bank fraud by failing to reveal a Huawei/Skycom/ Iran connection, are a pretext, accusations that are not intended to pursue justice and discourage crime, but simply to undermine a large and successful Chinese technology company.  If this is the case, the crime being perpetrated against Meng seems much more significant than the crime she is being accused of.


What exactly is this conspiracy theory?  Huawei is in the process of developing 5G technology in Canada and around the world which will provide the next generation of wifi and internet applications.    Huawei is believed to have close ties to the Chinese government and the MSS (Ministry of State Security).  Huawei's presence in and even control of cyberspace in other nations will give them the potential to access state secrets and the possibility of disrupting any industry connected to the internet (aka The Internet of Things).


As evidence of this conspiracy my fellow Canadians point out that three--USA, Australia, New Zealand--of the five members of the Five Eyes have "banned" Huawei's 5G technology.  The USA's decision to go with an American company for its 5G technology is hardly surprising.  We might wonder why Australia and New Zealand have decided not to go with Huawei.  The counter to this conspiracy theory is that so far two Five Eyes members--Canada and the UK--have not banned Huawei, but we can imagine that they are both under enormous American pressure to do so. 


The Chinese counter to this conspiracy theory is that if Huawei's 5G technology is a a gateway to global domination, then any of its three major competitors in 5G development--Verizon, IBM, AT&T--also threaten global domination.  The USA's use of its secret services and intelligence networks in conjunction with private contractors and businesses to promote American economic interests has a long and publicly acknowledged history.  "What's good for General Bullmoose is good for the USA" may once have been considered somewhat ironic, but history has shown that the slogan can be taken literally as representative of American attitudes and practices.



Once again, the great paradoxical, Chineses miscalculation is that the arrest of two Canadians in retaliation for the Meng arrest is the strongest evidence that the choice of Chinese 5G technology might prove dangerous for foreign nations.





The "Business as Usual" Conspiracy


In 1953 the CIA orchestrated the overthrow of Iran's democratically elected President, Mohammad Mosaddegh, in order to support BP and prevent the nationalization of the Iranian oil fields.  The USA installed and maintained the Shah of Iran as dictator, for the benefit of Anglo-American oil companies, until he was overthrown in 1979.  In 1954, the CIA arranged a coup in Guatemala, overthrowing the democratically elected President, Jacobo Arbenz, thereby preserving the monopoly of the United Fruit Company.  In 1973 a US-backed military coup overthrew the government of Salvador Allende and installed Augusto Pinochet as dictator thereby protecting the assets of the Anaconda Copper Company and Kennecott Utah Copper from Allende's plans to nationalize the copper industry.  These covert operations may strike you as distant in time (which is why we now know about them) but they establish a pattern of collusion between American business and American intelligence and secret services that has grown stronger not weaker over the years.  Of all the things we have heard about Edward Snowden over the years, the one I find most striking that usually goes by without comment was that he was working for a private company, Booz Allen Hamilton, when he copied and leaked classified NSA (National Security Agency) files. Snowden's previous employers were Dell technologies and the CIA. 


The warrant for Meng's extradition issued by the Eastern District Court of New York was a collaboration among the US Attorney, the secret service and American business interests on the grounds of national security.  "National security" in the USA means "for the perseverance and profit of American businesses."  From this perspective Meng's arrest was just "business as usual" as the various American agencies collaborated in undermining a Chinese company.



The Chaos Theory of International Trade

While none of these conspiracy theories tells the whole story, each has some degree of truth, which is why I think that chaos rather than conspiracy offers the better answer to the question "why?".  One particular butterfly has been flapping his wings vociferously enough to cause turbulence in Canada and around the world.  His name is Richard P. Donoghue.  He is a US Attorney for the Eastern District of New York.  His name is on the letter released to the public asking that Meng not be given bail, and presumably, he is the attorney who signed the original warrant for her arrest.  Remarkably little attention has been paid to who exactly Richard P. Donoghue is.


Richard Donoghue, until recently (I.e. 4 January 2018), was an employee of CA Technologies.  Does it matter that the man who caused Meng's arrest and detention was, until less than a year ago, the Chief Litigator of CA Technologies, a competitor of Huawei in the Internet of Things?  Logically, this is at least a question that should be asked.  Why isn't the Canadian media asking this question? 


Did someone from CA Technologies suggest, last January, that it would be useful if one of their litigators became a US Attorney?  I'm going to guess that Donoghue took a pay cut to become a US Attorney.  Does he maintain contact with colleagues in CA Technologies?  Have any of his buddies from CA suggested that it would be really helpful if "someone" went after Huawei?  Is Donoghue receiving any kind of compensation from CA?  Did Donoghue receive financial compensation from CA in 2018--after he became US Attorney and before he issued the warrant for Meng's arrest in August?  Does Donoghue have close friends and family employed by or receiving benefit from CA Technologies which would put him in a conflict of interest in demanding the arrest of Huawei's CFO?

Let's be clear:  I have no inside knowledge of Richard Donoghue's motivations, but his situation and the circumstances are obviously something that the Canadian media should be investigating in the first instance and the Canadian judiciary considering Meng's extradition and continued detention must thoroughly consider.  If the request for Meng's extradition is just a ploy to undermine a business competitor, then the detention of Huawei's CFO for years of extradition hearings will accomplish that goal and a travesty will have been perpetrated on and by the Canadian judiciary.

I consider the Donoghue warrant more chaos than conspiracy, because I cannot imagine that Richard P. is a singular agent in this case or that he sat down and said to himself, "I think today I will embarrass Canada, cause a trade war between the USA and China, provoke the arrests of innocent bystanders in China, destabilize the global economy, and broach the possibility of a war which could drag every country in the world into the conflict."  Oh, I know this has to sound farfetched, but Meng's arrest and all of its potential ramifications could not have happened or be happening without Donoghue.  These days whenever I think about Richard P. Donoghue and the mess he's unleashed, I can't help thinking, at the same time, about a 19-year-old named Gavrilo Princip.






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