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As Britain steps out of EU, it trips on new entanglement

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Alberto Pezzali/AP
U.S. Treasury Secretary Steven Mnuchin arrives at Chatham House in London, Jan. 25, 2020, for high-level discussions on trade.

It鈥檚 looking a lot harder than fans of the new nationalist politics may have suspected to disassemble our intricately interconnected 21st -century world.

That鈥檚 the message emerging in recent days from what might be called a triangle of tension. Caught up in the tussle for global supremacy between superpowers China and the United States, Britain is already finding it a strain to navigate its own path outside the European Union.

The main issues of contention concern trade and technology. But they have arisen against the background of another powerful reminder of global connections: mounting concern in the U.S., Britain, and elsewhere over a virus that has spread from the city of Wuhan, in eastern China, thousands of miles away.

Why We Wrote This

Prime Minister Boris Johnson has said the economic price for leaving the world鈥檚 largest trading bloc on Jan. 31 will be temporary. But tensions with both the United States and China are putting that promise to the test.

The timing of the three-way economic tension is dramatic. Britain, on the heels of last month鈥檚 commanding election victory for Conservative Prime Minister Boris Johnson, is about to formalize what he has portrayed as an historic act of national self-assertion. On Friday, after nearly half a century, Britain will end its membership in the European Union.

The promise that Mr. Johnson has held out is that the economic price paid for leaving the world鈥檚 largest trading bloc 鈥 and Britain鈥檚 largest trading partner 鈥 will be only temporary. Freed from EU constraints, the argument goes, Britain will be able to seal expanded new relationships with its two other main trade partners, the United States and China.

New tensions

But there have already been early signs of how delicate and difficult such a transition may prove, despite Mr. Johnson鈥檚 warm personal relationship with U.S. President Donald Trump.

Indeed, new tensions are tainting the historically close transatlantic alliance as Britain and the United States each adapts to the growing economic clout of China, with which both countries have important trade and commercial ties.

Last week, the annual World Economic Forum of business leaders, politicians, and opinion-formers in the Swiss resort town of Davos witnessed uncommonly frank sparring between Washington and London.

One issue was Britain鈥檚 plan for a 2% tax on the U.K. sales of American tech firms such as Google, Facebook, and Apple, a move that U.S. Treasury Secretary Steven Mnuchin called 鈥渁rbitrary鈥; he warned such a tax might trigger a similar move against British auto exports.

But the main disagreement involved China, and Britain鈥檚 readiness to allow the Chinese company Huawei to play a part in rolling out its 5G telecommunications networks, despite concerted pressure from the U.S. to bar the firm on the grounds that it poses a security risk.

On the technology tax, Britain may yet beat a retreat. France, which the U.S. also threatened with retaliatory moves, has delayed a similar tax until at least the end of the year.

But the Huawei issue could prove tougher to finesse. And it is at the heart of the main geopolitical contest of the new century: the battle between the U.S. and China for political, economic, and, perhaps most of all, technological supremacy.

The two superpowers recently managed to seal a 鈥減hase one鈥 de-escalation of their trade war, reducing some tit-for-tat tariffs and holding off from imposing new ones. But Washington鈥檚 principal concerns regarding China鈥檚 economic and trade practices, such as state subsidies for major Chinese companies, remain unresolved. And on the tech front, no issue is of more immediate importance than Huawei.

Espionage or protectionism?

From China鈥檚 perspective, the call to exclude Huawei is simply protectionism 鈥 a bid to help U.S. and other Western companies challenge Huawei鈥檚 world-leading position as a firm that can build 5G infrastructure more quickly and cheaply than its competitors, such as Finland鈥檚 Nokia and the U.S. firm Cisco.

Washington says the fundamental issue is security. Huawei is a private company. But in a centrally controlled country like Communist Party-ruled China, the fear is that a Huawei role in 5G would offer a ready-made back door for the Chinese state to infiltrate and manipulate critical information and technology systems in Western countries.

This week, Mr. Johnson chose to defy intense U.S. pressure to exclude Huawei completely from 5G in Britain, though he attempted to steer a middle road. Huawei鈥檚 share in the new network will be capped at 35%. It will be excluded from the core infrastructure and limited to 鈥減eripheral鈥 aspects such as base stations and antennae.

That did not satisfy Sen. Tom Cotton, a Republican from Arkansas. 鈥淭his decision is deeply disappointing for American supporters of the Special Relationship鈥 between the U.K. and the U.S., he tweeted. 鈥淚 fear London has freed itself from Brussels only to cede sovereignty to Beijing.鈥

Stuck in the middle

That jibe points to the tricky path Mr. Johnson will have to tread between Washington and Beijing. He does not want to anger President Trump, on whom he is counting for support in achieving a U.K.-U.S. free trade deal. Yet he cannot risk damaging Britain鈥檚 increasingly important trade relationship with China; that would have been a real danger if he had sided with the U.S.

And Mr. Johnson still has to find a way to manage a complex web of international connections closer to home: those with the European Union.

Britain will formally withdraw from the EU this week, but the two sides have until the end of the year to agree on new terms of trade unless London asks for an extension. And negotiations on the nuts and bolts of what Brexit will mean in practice may provide an even weightier reminder of how interconnected the world has become.

The political imperatives of Brexit 鈥 to unshackle Britain from the constraints of the EU 鈥 would suggest a break from existing trade arrangements and from regulatory frameworks shared with the other member states.

But greater freedom from EU regulation will come at the price of less access to EU markets, Brussels has warned. That has alarmed many British businesses that rely on tariff-free trade with Europe or on European supply chains.

Mr. Johnson has a lot of balls to keep in the air.

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