THE United States administration is making efforts to exclude China's giant telecoms maker Huawei from the US market. As this raises issues wider than those of a single company it is important to understand why this US policy is counterproductive - and the risk of damage to bystanders.

First the basic facts. Huawei is the world's second largest telecoms equipment manufacturer and growing more rapidly than major rivals. Next year Huawei will probably overtake Ericsson to become world number one. Such rapid growth clearly testifies to Huawei's attractiveness and usefulness to customers.

Despite this the US administration has taken repeated steps to keep Huawei off the US market. One recent case was Huawei being forced out of multi-billion dollar bidding to update US Sprint networks. This followed eight US senators writing to President Barack Obama expressing concern that if a Sprint deal was approved Huawei could gain access to US telecom infrastructure and "undermine national security." As the Wall Street Journal put it: "Some officials argue China's military could use Huawei or ZTE equipment to disrupt or intercept American communications."

Competitive rival

Let us call this argument by its right name - bullshit. Huawei's revenue comes 65 percent from outside China. Huawei's equipment is used in numerous countries some of which, such as Saudi Arabia, are close US political allies. In our imperfect world it is certain that equipment supplied by Huawei is therefore passed on to and inspected by the US security services.

If any security risk had been found it undoubtedly would have been given tremendous publicity as this would do great competitive damage not only to Huawei but to a huge range of China's companies. Who could trust buying products from a country which installed security risks in its equipment? Any evidence of security risks in Huawei would already be front page news round the world.

Given the alleged reason is nonsense the real one is that the US administration is seeking to keep Huawei out of the US market because the company's competitiveness means it would win on price. The Wall Street Journal noted on the Sprint contract Huawei was forced to withdraw from: "Huawei and ZTE lost out even though they submitted bids that were lower than those of their three competitors, Alcatel-Lucent SA, Telefon L.M. Ericsson of Sweden and South Korea's Samsung Electronics Co, said a person familiar with the matter." As Huawei could not be beaten in competition spurious "security" concerns had to be introduced.

But this is part of a general trend. When Steve Jobs recently died efforts were made to present the extremely successful Apple as typical of the present US corporate sector. Actually the reverse is true. Overall the competitiveness of the US company sector has been declining. To show this overall situation the table shows the percentage by country of the revenue of the world's 2,000 largest publicly quoted companies - the Forbes Global 2000.

The first striking trend is evidently that the share of China's companies and those from other countries outside the developed economic centers of the US, European Union and Japan rose from 13.4 percent to 26.5 percent of the total between 2004 and 2011.

There was a small fall in the position of EU companies from 31.0 percent to 29.9 percent. Japan's companies declined from 16.6 percent to 12.5 percent.

But the really big fall in share was by US companies - from 38.9 percent to 31.1 percent. US companies have been losing their overall competitive position particularly compared to China and other developing economies. This is why Huawei is not an isolated case but part of a general trend.

Such decline in the competitive position of US companies clearly calls for measures to boost them by US administrations. Higher R&D expenditure, improved infrastructure, increased investment are obvious measures which come to mind. Such measures have increased the competitive position of China's companies.

Worse US position

But protectionism will make the US position worse not better. By cutting out cheaper Chinese suppliers, such as Huawei, the US economy's cost base will be raised. This may not be decisive if only a single company is involved but as we have noted Huawei is part of a general trend. As China's companies increasingly move into more technologically upmarket sectors they will become the cheapest suppliers for equipment. The US needs to respond by generating the resources to move even further upmarket technologically itself. But protectionism will simply drive up US costs and make its domestic based companies less competitive.

India recently resolved such an issue in a favorable direction. Telecoms are one of India's most competitive sectors. But the Indian government, probably under external pressure, attempted to cut Huawei out of equipment bidding. The result was a revolt by India's telecoms operators, such as market leader Bharti Airtel, who pointed out they would be forced to significantly raise call charges if they could no longer buy Huawei equipment. The government backed down. The result - India has the lowest call charges in the world which it would lose if Huawei were excluded.

The sensible way forward is for US administrations to drop protectionism against Huawei and similar companies and instead set about positively reviving its own firms. In the end the US will have to do this - the economic forces of globalized cost cutting are too strong to resist and will batter down protectionism. But whether the US does this rapidly and efficiently, or slowly and bumpily, will help determine how smooth the ride is for many passengers in the global economy.