We lead MDM with the news of the effect of the US administration’s decision to cut off supply of US technology causing ZTE to halt production and triggering analysts to wonder if ZTE can survive the ban. The core issue behind the ban was actions taken by ZTE that conflicted with the US embargoes on Iran and North Korea. This week, of course, President Trump decided to pull out of the Iranian deal on nuclear inspection and he is, sadly, in conflict with the rest of the world.
That means that US companies will come under pressure to cut supplies to firms that are supplying to Iran, yet those companies may be based in countries that have continued to support the Iranian deal. Companies will have difficult decisions to make about who to supply or risk punitive sanctions, like those imposed on ZTE. The implications of those decisions could have a significant impact on buyers and sellers.
I don’t pretend to have enough knowledge of the Iranian situation to know whether the Iranian deal is a good one or not, but it is clear that most of the world thinks it is the best deal that is available or achievable. Politics has famously been described by Bismarck as the ‘art of the possible’. We will find out if the deal that the US walked away from is really the best available.
It’s hard from my point of view to see how the world is better off if a company such as ZTE is damaged beyond repair. Global capitalism is remarkably good at dealing with the death of companies – in fact the culling of inefficient or incompetent companies, or those with outdated business models, is a key part of why it works. However, ZTE doesn’t seem to be that kind of company and it’s hard to see how anybody is better off if it is put out of business.
One of the key ideas behind the action and the current climate behind the potential trade war between China and the US seems to be the idea that global economics is a ‘zero sum game’, that is to say that if somebody wins, it must mean that someone else loses. Sometimes that is true, but in most cases of international trade, win/win is the real result. It’s hard to believe that Intel and Qualcomm will be better off if they can’t supply ZTE. It’s hard to see that those that might have bought ZTE equipment will be better off.
Of course, the damage to such a major Chinese company will also anger the Chinese government and may lead to a significant escalation in the trade dispute between itself and the US. Again, it’s hard to see either economy being better off as a whole if this happens.
All of this seems to be the consequence of a very negative and pessimistic view of the world and its development. The reality I see around the world is that it has getting better and better in many ways, with vast numbers of people coming out of poverty and huge improvements in human health. In a positive world, it has always seemed better to me to work together to make the pie bigger rather than spending huge time and energy arguing over who has the biggest slice!
Bob
