Israel Caught in U.S. China Trade War

By Henry Srebrnik, [Fredericton, NB] Daily Gleaner

In recent years, the United States has raised concerns over Chinese espionage and theft of intellectual property.

The trade war between the United States and China has also forced American allies, including Israel, to think carefully about their relationship with China. 

The United States and Israel are close allies on issues ranging from Iran to cyber security to the war on terror, but they have at times been at odds regarding trade with Beijing. 

In the late 1990s, Washington criticized Israel over selling sensitive weapons technologies to China. when Israel had agreed to supply China with an advanced airborne early warning and control system for one billion dollars. 

After the Clinton administration threatened to withhold multi-billion- dollar aid packages, Israel cancelled the deal. 

In 2005, Israel planned to upgrade China’s Harpy drone system. In response, the United States temporarily suspended Israel from the F-35 Joint Strike Fighter program. 

China had purchased an undisclosed number of Harpy drones in 1994 and in 2003 contracted with Israel Aircraft Industries to upgrade the systems. Washington objected despite the fact that the Harpy did not include any U.S.-produced subsystems.

As a result, Israel passed its 2007 Export Control Law, increasing U.S. oversight over defence and dual-use technology bound for China and elsewhere.

This has not stopped China and Israel from doing business altogether. Tech giants such as Alibaba, Baidu, and Huawei are involved in investments in Israeli start-ups and enterprise firms, to bring them, their technology, and their products to serve a Chinese market hungry for Israeli solutions.

Chinese telecommunications giant Huawei, under fire for sharing data with the Chinese government, acquired two small Israeli start-ups, HexaTier Technologies and Toga Networks, in 2016. Their technology bolstered Huawei’s capability to monitor network traffic, a prime U.S. concern surrounding Huawei.

Israel has since taken steps to halt Huawei from building 5G network infrastructure in the country. Israel has vowed to follow the lead of the “Five Eyes” (the United States, United Kingdom, Canada, Australia and New Zealand) when it comes to the Chinese tech giant.

However. China’s state-run companies have won tenders for massive infrastructure deals in recent years. These companies are involved in port construction at Haifa (a port of call for the U.S. Navy’s Sixth Fleet) and Ashdod; and construction and maintenance of the Tel Aviv light rail system, a project worth $4.14 billion. 

The construction of the three rail lines, which will serve as the main public transportation system of the Gush Dan region, which houses about 45 per cent of the country's total population, is the largest and most complex transportation project ever accomplished in Israel.

Beijing sees these infrastructure projects as part of its transcontinental Belt and Road Initiative.

The real concern for Israel might be China’s construction of the light rail system. If Israel doesn’t take precautions, then the Chinese government could gain unrestricted access to closed circuit surveillance feeds, Wi-Fi networks, radio signals and other communications networks.

Until recently, Israel lacked the bureaucracy to mitigate the risks associated with Chinese investment. What Israel does now will serve as a roadmap for other U.S. allies navigating the rising tensions between Beijing and Washington.