OPINION

[Tyler Cowen] How Meng Wanzhou’s arrest might backfire

By Bloomberg
  • Published : Dec 12, 2018 - 17:18
  • Updated : Dec 12, 2018 - 17:18
I am concerned by Canada’s recent arrest and possible extradition of Huawei Chief Financial Officer Meng Wanzhou. Meng was traveling in Canada, switching planes using a Chinese passport, when she was taken into custody. If sent to the US, she would face charges of trying to defraud US financial institutions, each carrying a maximum sentence of 30 years. And because of potential flight risk, she is not an obvious candidate for bail. It is quite possible that her life as she knew it simply has ended.

My more general worry is that the Western world is overusing the power of its systems of legal and economic cooperation. It is threatening to pull that access when people or institutions do things it doesn’t like, and more domestic laws are taking on a global reach. Political scientists Henry Farrell and Abraham L. Newman have called this “weaponized interdependence.”

While guilt remains undetermined, evidence does indicate there were ostensibly reasonable grounds for Meng’s arrest, namely the possibility that she helped create a shell corporation to evade anti-Iran sanctions. But the procedural normality of the arrest is precisely what scares me. There are so many international laws, and so many are complex or poorly defined, and there are a couple hundred countries in the world. Arguably most multinational corporations are breaking some law in some manner or another, and thus their senior executives are liable to arrest. If I were a top US tech company executive, I would be reluctant to travel to China right now, for fear of retaliation.

In the longer run, bringing charges against Meng is likely to accelerate the division of the world into two competing systems of law, technology and commerce -- namely those of China and the US. That will encourage international relations to develop along the dimension of power -- what can you get away with? -- rather than law or orderly cooperation. The West’s dirty little secret is that the rule of law works well only when tempered with a high degree of discretion.

Of course, the way these mechanisms work, the US holds a disproportionate share of power. The US will arrest wrongdoers from other countries, but smaller, poorer and less powerful countries are unlikely to arrest well-known people from the US. That sounds like a good deal for Americans. But now there is a competing nation significant enough to challenge the system: China. By arresting Meng, the US is in essence telling China it might do better to break with the international order altogether, rather than subsisting on its fringes.

In lieu of arresting Meng, I would opt for sanctions against her company, and of course the US already has been working hard to take global business away from Huawei, partly for national security reasons. That punishment seems more appropriate than personalizing and emotionalizing the issue for the Chinese public and perhaps the Chinese leadership. It may be unfair that this matters, but in fact Meng is a sympathetic-looking victim, especially compared to President Donald Trump, who at some point may have to “own” the arrest.

At the margin, the legal reach and police power of the US can always be invoked to fight another crime or resolve another corruption problem. Don’t like how FIFA -- the international soccer federation -- is being run? Get the US in on the act. There are in fact laws that gave the US jurisdiction over bad FIFA practices (wire fraud, racketeering and money laundering), and the Department of Justice led a successful anti-corruption case starting in 2015.

That enforcement action seems to have gone fine, but where to stop? There a lot of wrongdoers who are connected, in one way or another, to the US financial system. But America has more credibility as the global policeman when it focuses on only the most pressing cases, such as when innocent victims are being killed.

The Brexit dilemma is a quite separate example of weaponized interdependence. Opponents of Brexit, myself included, argue that leaving the European Union will take away the UK’s seat at the table for setting the rules, without gaining the UK much sovereignty in return. Still, isn’t there something deeply wrong with a system where you can’t easily leave a multinational treaty? Under the guise of providing public goods within the EU, the very rules of the EU have imprisoned the countries in the region. Even the (non-EU) Swiss have had to give up a significant degree of their sovereignty, with possibly more to come.

If the Brexiteers refuse to play along with that semicoercive arrangement, and countenance a “hard Brexit,” it shouldn’t be entirely surprising. The European Union, like the United States, is exploiting the value of the legal and commercial network it has created.

The unraveling of elite overreach has been a major theme in the news for the last few years. It now extends to the legal pursuit of foreigners.


Tyler Cowen
Tyler Cowen is a Bloomberg Opinion columnist. -- Ed.

(Bloomberg)