Will Britain's Huawei Deal Roil Trade Talks With US?

The British decision to deploy Huawei's 5G equipment, although with "limitations," is likely to roil imminent trade talks with the United States. While the U.K. is keen on clinching a major deal with the U.S. early to retrieve some ground before the Brexit isolation bites, the Huawei deal is likely to come under close scrutiny.

Many U.S. leaders have already expressed dismay at British Prime Minister Boris Johnson’s decision to allow Huawei to deploy its technology with some “limitations.” President Donald Trump has been locked in a high profile battle with Chinese companies in general and Huawei, in particular, and the U.K. deal could be seen as a major irritant, media reports suggest.

Washington accuses Huawei of colluding with the Chinese government for spying on U.S. interests across the world. President Trump has banned Huawei from the country. He has also warned allies against collaboration with Huawei and threatened to extend the ban to companies that do business with it. The Chinese company and Bejing deny the allegations.

Britain may have to convince the U.S. team about why it decided to allow in Huawei failing which the trade deal might take longer than it would be comfortable for both parties.

'Special' relationship

However, Huawei would look at the nod from the U.K. as a major boost in its ongoing talks with the European Union (EU). Considering that there is no love lost between the EU leaders and President Trump, Huawei could peddle the British model in Brussels.

Fresh from success in difficult trade talks with China, Canada, and Mexico, team Trump is set to turn its attention to transatlantic deals. The U.K. development will definitely rankle with the U.S. team especially in view of Washington's "special" relationship with London. The U.S. stand could be hardened by the international fallout of its apparent failure to convince a close ally on a matter of high stakes.

Why did Boris Johnson opt for a course with such ramifications? An opinion piece in the Wall Street Journal suggests the U.K. could be wary of Chinese pressure as it badly needed a trade deal with the Asian country. Costs could also have been a key driving factor as the U.K. tries to catch up with much of Europe on the technology plane. The role in building Britain's 5G network will allow Huawei to maintain its presence in a crucial market despite US efforts to stunt its growth, a CNN report said.

Whatever the motives behind the decision it would have implications far beyond the country's borders, setting a precedent that could be replicated in markets across Europe, affecting hundreds of millions of people, the report said.

The U.K. has said the Chinese company will be excluded from “security-critical” areas of Britain's networks. But the deal will allow Huawei to supply British mobile operators, including Vodafone, BT (BTGOF) and Three, with less sensitive products, the report says.

Kind of restrictions

“It certainly avoids the worst case where they’re told to get out,” the report quotes Berenberg analyst Usman Ghazi as saying . Ghazi said that Huawei's growth might be limited by the kind of restrictions the U.K. would impose. But the sale of 5G equipment that needed to be installed on rooftops and towers would still be lucrative.

Huawei will be competing in the European market with local players Ericsson of Sweden and Nokia of Finland, apart from South Korean Samsung, Cisco of the U.S., and the Chinese ZTE.

Apart from the Huawei issue, the talks between Washington and London could see some heat over a demand for the U.K. to relax its food safety standards to buy chlorinated chicken from the U.S. and access to Britain’s public health care. Moreover, discussions with the U.K. and EU over the tax on digital services are also likely to be difficult.