Much has been written on the proposed tariff increase President Trump announced last week, but substantial changes in trade policy are occurring across many areas of government policy. The most recent being the Trump Administration’s blocking of the merger between Singapore-based Broadcom and US company Qualcomm. Broadcom is Chinese-owned, and the specific reason for the blocked merger was not a secret – the Trump Administration publicly stated it was for national security reasons, to prevent US technology from being transferred into Chinese control.
It was the second such tech cancellation of the Trump Presidency and it was a clear signal that Chinese companies will not easily merge, or purchase, US corporate interests. Intellectual property will be protected … US technology will be protected … and national security will be the principal reason behind those decisions.
This has roused the free-traders on the right. Some have referred to the collective actions taken by the Trump Administration as bumbling into a “Trade War”. Others have reminded the pundit-class that this is the antithesis of conservative policy making – free trade, not protectionism, is the preferred Republican practice. Let the market determine these deals, they say.
But is this the beginnings of a trade war, or the actions of a President who believes in fair trade? Can free trade exist without such trades being fair to both sides, and is a trade war necessary to protect US national security and national interests? Preventing the sale or merger of US companies and their proprietary technology may result in retaliation, but does national security trump international mergers and acquisitions?
This is not a new question for US Presidents …
Top 7 Global Business Transactions Which Put US National Security at Risk:
- Loral Satellite technology – 1995. When thinking of former President Bill Clinton, and his wife and former candidate herself Hilary Clinton, the only words that can ever come to mind is corrupt. So, it was in 1995 – while investigating the illegal sale of stolen US nuclear warhead designs by a US scientist known as Wen Ho Lee – a Chinese national who had become a naturalized US citizen, the FBI stumbled upon the case of Loral Technology. The Chinese had illegally obtained control chips from Loral earlier in the year, and this was discovered during the Wen Ho Lee investigation. Indictments? Jail time? Nope, the Clinton Administration approved the sale of Loral Satellite technology to the Chinese later that year. Within a few short years, buried in the pages beneath the Lewinsky scandal and impeachment, Chinese money was discovered flowing into both Clinton’s 1996 campaign and Al Gore’s 2000 Presidential campaign. Gore at least gave the money back. Key Result: We failed to protect US interests.
- Uranium One sends US uranium to Russia – 2013. Well, they claim it hasn’t gone to Russia yet. Books can be written – and have – detailing the levels of technology transfer to our enemies which have occurred under Democratic administrations, but nothing takes the cake like a Clinton scandal. While the issue has been polarized through social media, the known facts are, by themselves, damnable. After receiving a $500,000 donation to the Clinton Foundation from the CEO of Uranium-One, the State Department and the Obama White House finally signed off on the sale of 20% of the mining company’s assets to Russian state-owned interests in the form of the ROSATOM corporation. It technically precludes the transfer of uranium out of the US, and only allows for 20% of the profits from the company’s ongoing business. Few believe that allowing Russian access to US uranium mines was a reasonable, nor wise, decision. Key Result: We failed to protect US interests.
- Obama blocks sale of German chip maker Aixtron – 2016. In one of the rare instances of protecting US interests, the Obama Administration blocked the sale of Aixtron, a German company with majority US shareholders and assets, which made computer chips with military applications. As the Treasury Department said at the time: “The national security risk posed by the transaction relates, among other things, to the military applications of the overall technical body of knowledge and experience of Aixtron, a producer and innovator of semiconductor manufacturing equipment and technology, and the contribution of Aixtron’s US business to that body of knowledge and experience.” In other words – it’s our stuff, and to allow the Chinese to get it would put us at risk. Key Result: We protected US National Security.
- George H.W. Bush unwinds sale of Seattle aircraft company MAMCO – 1990. This was a rare event and unprecedented, as the sale had already gone through. Once the Committee on Foreign Investment in the United States (CFIUS) made their ruling, the Chinese International Trust and Investment Corporation (CITIC) had already completed their purchase of MAMCO – a US airplane manufacturer. The Bush Administration ordered the divestiture of the company on national security grounds, and reversed the transaction. Key Result: We protected US National Security.
- Bush 43 prevents takeover of Dubai Ports World – 2005. At the height of the war on terror, there was grave concern over another attack occurring, and one of the major points of interest appeared to be US ports. Dubai Ports World was the winning bid to serve as the primary Port management company through the US and abroad. While the Bush Administration initially approved the purchase rights, political pressure began to mount as the deal became public. Eventually, Bush rescinded the approval and the deal fell through. Key Result: We protected US National Security.
- 3com purchase by Huawei – financed by Bain capital – 2008. Huawei – a Chinese company – is the 3rd largest smartphone maker in the world, behind Apple and Samsung. There attempts to buy US based 3com in 2008 was shot down by the Bush administration for fear of US tech falling into the hands of the Chinese military. Huawei also had a recent attempt to purchase AT&T fall through (2017). While the deal was not prevented by the US government, there was rumors of a great deal of political pressure being applied to AT&T behind the scenes to cancel the talks. Huawei apparently had an indirect impact on the Qualcomm deal the Trump Administration just blocked: Huawei is the leading competitor with Qualcomm to be the first into the market with 5G technology. If Qualcomm had been bought by Broadcom, it was believed this would have reduced R&D expenditure on 5G tech, leaving the US without a domestic supply and market dominance to the Chinese through Huawei. Key Result: We protected US National Security.
- Trump stops Broadcom-Qualcomm merger – 2018. A critical national security decision, as seen above, the Trump Administration signaled to China that US technology will no longer be so readily available in the market place – and virtually all US technology could have a “dual-use” military purpose. Key Result: We protected US National Security.
Combined with Trump’s tough trade rhetoric and increased tariffs, it is clear the Administration is taking a more confrontational course with our largest trading partner, and largest economic competitor – China. While free trade purists and China’s government spokesmen warn of a looming trade war, Trump properly protects US national security interests. It is also quite possible that the man many in the mainstream media make fun of as not a very smart or forward thinking could just be playing on a bigger chessboard than our journalists. Tough trade action is long over-due; stopping technology transfers is a fair warning regarding intellectual property … these could be the moves that brings about a trade deal which protects US companies, and forces China to the table on national security issues like North Korea.
The “Art of the Deal” never looked so good.
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