In December 1st 2018, Meng Wanzhou was arrested in Vancouver International Airport. She was the Chief Financial Officer of Huawei, a Chinese multinational corporation specialized in telecommunications technology and consumer electronics. Last year, Huawei is now world’s second largest smartphone manufacturer, only behind Samsung. Its annual revenue has reached $108 billion, and it is now considered as one of the most important MNCs in the world.  Its name is means “Chinese achievement”. Located in Shenzhen, the “Silicon Valley of China”, Huawei is now one of the key leaders in research, innovation, and technology development. China is now widely perceived as a rising power. Graham Allison recently published the book ““Destined for War: Can America and China Escape Thucydides’s Trap?”, suggesting that a rising power challenges the established power, tensions escalate into physical collusion. And China is challenging the United States as the rising power. Many media outlets and literature suggest the same, as many are mesmerised by the impressive economic growth and technological development of China in recent year. China has also launched ambitious programs such as the Belt and Road Initiative, constructing infrastructure and economic ties in order to expand its sphere of influence. China has also invested heavily in African , providing packages of loans and infrastructure. Yet, some of China’s strategies has been widely criticized. Its “debt-trap diplomacy”, for example, is considered as a threat to sovereignty of poorer and weaker states.

The rise of MNCs are also subject to criticism for their geopolitical purposes. The rise and expansion of numerous powerful MNCs have followed the ambitious rise of Chinese on the global stage. This includes high-tech companies like Huawei. However, this is problematic for many Western states, because since China is a centralized “communist” state , the MNCs have extensive links with the Chinese Communist Party and the Chinese state. Therefore, there are numerous security concerns regarding cybersecurity. For example, its 5G technology could be used to unable unauthorized surveillance of consumers by the Chinese authorities. USA, UK, Japan and Australia banned this technology from their territory. Meng Wanzhou was even arrested because of security concerns. Yet, is the “cybersecurity” argument just an excuse for protectionism? From a mercantilist view, it can be interpreted as a move to protect Silicon Valley’s market share by “bullying” Huawei. Is the war of 5G technology the new containment? If we apply realism to this question, then the answer would be yes. 

Nonetheless, this has not stopped Huawei’s momentum as the rising tech titan. Huawei’s profits increased by 25% last year despite US efforts to curtail its business operations. Its 5G technology is very innovative, giving Huawei an important competitive advantage. Huawei is also expanding in developing countries. Huawei has built 70% of Africa’s 4G network. Its 5G technology is reaching markets as far as Paraguay, my home country (its inception was just last week). But most importantly, Huawei surpassed Apple in December last year in term of smartphone sales. This is symbolic because it means that R&D made in Shenzhen, supported by Beijing, is eclipsing Silicon Valley. Now, China is using MNCs like Huawei as instruments of rising hegemony. As Gilpin explained the instrumentalization of MNCs for American Hegemony, Huawei’s large market share could give China a strong position in the world. Huawei can also serve to spread Confucian values and Chinese worldview. High-tech industries could also be used as a tool for soft power: attraction as national power. Attractive, innovative technology made in China constructs the image of China as a global leader in science and technology. With its large market share, China would be able spread its rules and standards around the world. In addition, Chinese control of telecommunications networks give the Chinese state the capability to control consumers’ daily life (e.g. surveillance) . I believe that Huawei is an instrument in the construction of China’s global order as the alternative to current US-led liberal order.

On March 10, 2019, Ethiopian Airlines Flight 302 crashed six minutes after takeoff near Addis Ababa, killing 157 people. It was one of the deadliest aircraft accident in 2019. Similar accident happened last year in October, when Lion Air Flight 610 crashed after takeoff near Jakarta, Indonesia. In both cases, the aircraft models were from the Boeing 737 MAX lineup, manufactured by The Boeing Company. Investigations have concluded that since both accidents had numerous similarities, the failure of the automatic safety system is believed to be the cause of the crashes. After the accident, more than 50 countries ban the 737 MAX models. Boeing’s stock price plunged dramatically because of lost of confidence from investors. Numerous airlines, including Garuda and American Airlines, have cancelled orders. The loss of orders is estimated to be $57 billions.

Unsurprisingly, the winner of this case is Airbus SA, Boeing’s European rival. On Monday March 25, China announced the order of 300 A 320 model aircrafts during Xi Jinping’s visit in France. Vietnam Bamboo Airlines also ordered A 321 models, a new blow to Boeing. This is a political problem because the government is blamed for the oversight of this technological deficiency. Moreover, As the 737 accidents because international, it is a geopolitical game from a realist perspective. The the commercial aircraft market is dominated by just two companies: Boeing (USA) and Airbus (France, EU). After the defeat of the WWII, Japan was banned from aircraft manufacturing, and Fuji Industries, one of the main aircraft manufacturer during the war, turned to automobile production. Since then US companies (Boeing) has dominated  the industry, and Airbus emerged as its largest competitor following a series of mergers of European manufacturers. In recent years, Chinese, Brazilian and Indian firms are challenging this US-EU duopoly, but their technology is not advanced enough compared to Boeing and Airbus. However, this incident shows the weakening of technological competitive advantage of Boeing and USA. According to Robert Gilpin, economic actors and politics are interdependent. After the emergence of powerful american MNCs, public authorities realized that they could be used for the benefit of the national interest. Since then, US MNCs have become the cornerstone of US power.

The strength of Boeing reflected US power in many ways.  In aeronautics, Boeing has dominated the market. Since Boeing’s home country is the USA, its competitive advantages are also mainly American: R&D by educated Americans, collaboration for R&D with American universities and research institutes, government subsidies, and high standards of US regulations that enabled the development of sophisticated technology. Many airlines and governments around the world depended on American technology and regulations. In other words,  their aircrafts were assembled in Seattle, regulated by Washington, using scientific knowledge from Cambridge, Massachusetts. Boeing also produces military technology, and thus numerous military units around the world depend on its technology. This also means that Boeing plays an important role in controlling the supply of weapons, especially in areas of conflict like Saudi Arabia (Boeing technology is used in the war with Yemen). Boeing was therefore a symbol of US hegemony. Likewise, as explained by Gilpin, Boeing is a MNC that controlled a significant portion of the market share and maintained the strong position of USA in the world.

Nevertheless, the rising safety concerns regarding Boeing can be the physical manifestation of the decline of US hegemony. This is because, US technology and regulations are losing trust from companies and states in the US and abroad. The US Government’s response were subject to numerous criticisms because it basically stated that the 737 models were safe and therefore there were no deficiencies. According to several media outlets, Boeing has received $64 billion in subsidies. Boeing is also an important provider of military aircraft. It is believed that, for this reason, the government showed defensive attitude toward Boeing. In addition, the Federal Aviation Administration (FAA) did not deliver certification to the aircrafts because of high cost ($1.8 billion). Moreover, some skepticism toward Boeing’s technology arose after the failure of the anti-stall system. As a result, many companies turned to Airbus for their narrow-body models. Boeing is in crisis as it is losing its dominant position in the market share. US is losing its legitimacy as the global leader in aviation and technology. China’s manufacturers are getting a boost after Boeing fallout. It is also a chance for non-American firms such as Bombardier (Canada), Embraer (Brazil) and Mitsubishi (Japan) to boost their market share in order to fill in the supply-demand gap. Is this the end of US-led international order of aviation and technology? I believe that it is certainly a signal that US hegemony is in decline. I speculate that in the following decade, US power will continue to decline, and many incidents similar to this one will happen. It is the eclipse of omnipresent American dominance.

References:

Robert Gilpin (1975) “The American Strategy of Direct Investment,” chapters 5 and 6 from US Power and The Multinational Corporation.