Chinese technology and telecommunication company Huawei is a rising giant in the global marketplace. However, China is increasingly characterized as a central threat to U.S. interests at home and abroad, and it touts state-backed Huawei as its crown jewel. Unsurprisingly, the company has been named as a serious and imminent threat by the United States’ national security community. As the U.S. and its allies build 5G networks, fears that Huawei will implant spyware into its products are salient.
These fears have merit if Huawei is the architect of the networks. China poses the greatest threat to the liberal world order which has governed international politics since the end of WWI, not to mention that China is a threat to American diplomatic and economic hegemony. Allowing U.S. commercial or national security information to travel through networks over which the Chinese Communist Party has authority is inherently risky. U.S. security officials confirmed the existence of “back doors” through which Huawei can access information in its networks, according to WSJ reporting. These back doors are at least a decade old. However, the United States cannot just ban Huawei products and hope that the “Huawei question” will be resolved on its own. The future is 5G. If Huawei is not going to build that future, then the U.S. needs to offer support for companies that can compete with it.
The stakes are multifold. The relative decline of U.S. economic strength and failure of trade deals like the Trans-Pacific Partnership Agreement have bolstered Chinese power relative to the United States, especially in the global East. This economic power allows China to set the ground rules for trade and establish the yuan as a major global currency. Growing economic power comes with growing political power. China eschews western democratic ideals, commits civil and human rights abuses against its people, and upholds repressive institutions by censoring the internet and harming journalists. Even Chinese nationals are outraged by Huawei’s ties to Party authoritarianism. They protest Huawei’s oppressive labor practices that were brought to light during the case of jailed employee Li Hongyuan. Hongyuan was jailed by the Chinese government and denied severance pay from Huawei without legitimate charges. This is just one instance of the Chinese government and Huawei cooperating to repress Chinese citizens. China is discovering that its young people have more liberal values than older generations. Censorship and oppression are not deferentially accepted by Chinese youth. Increasingly draconian initiatives like the massive quarantine being implemented in the wake of the coronavirus outbreak and the savvy measures used to surveil and subjugate minority groups are extending the limits of authoritarianism. The U.S. security apparatus is afraid that Huawei and the Chinese government will cooperate to these authoritarian ends.
Meanwhile, 5G networks are the future foundation of global communication and high-speed computing. If Huawei lays that foundation, the underlying systems will be at risk of Chinese espionage, interference, sabotage, theft, or even destruction. The tech manufacturer received billions of dollars in government-assistance to fund its meteoric rise. These billions came in the form of subsidies, tax breaks, and even uncontested land auctions.
Huawei officials deny the allegations that the company is beholden to the Chinese government, despite the state-assistance that it has received. Chief Executive Ken Hu said that Huawei’s “global business is testament to the fact that Huawei is not a vehicle for any government or any agency of putting surveillance on another country.” Yet, the Chinese Communist Party will undoubtedly expect a return on its investment. When John Suffolk, Huawei’s global cybersecurity and privacy officer, was asked how he felt about Huawei technology being used to monitor the repressed Uighur minority, he responded, “I don’t think it’s for us to make such judgments. The question is whether it’s legal in the country where we operate.” Despite Huawei’s claims of independence, experts say that the company would have no choice but to comply with Party demands if pressed, based upon existing Chinese law and the reality of the Chinese political economy. Huawei has also admitted to stealing American intellectual property in the past, and the company has confessed to such theft even after initial denials. Huawei’s appetite for stealing IP is only a shadow of what it would mean for global proprietary information to travel across Huawei networks at an even larger scale.
5G networks promise better quality of service, low latency, and increased data capacity. The U.S. is rightly worried about growing Chinese dominance, especially as Huawei ramps up its 5G network production. 5G networks are expected to work up to 100 times as fast as 4G networks, and sales of 5G products will likely reach 170 million units in 2021, compared to 12 million units in 2019. Huawei is the leader in the global telecom equipment and software market, making $75 billion in 2016. If the U.S. cannot find a way for it or its allies to match China’s development pace with its own cheap networks, then Chinese technology will forge a path to overwhelm U.S. markets.
U.S. allies’ interests do not necessarily align with U.S. interests. Despite pressure from the Trump administration, Boris Johnson’s Parliament will allow Huawei to build 5G networks in the U.K.. This is part of a larger effort to revamp the British economy following Brexit. U.S. Secretary of State Pompeo, however, said, “We will never permit American national security information to go across a network that we don’t have trust and confidence in.” He says that Huawei technology will be at the margins of British networks. Britain’s decision was a major failure for the U.S. national security apparatus and Trump administration, which have fully denounced the company. The U.S. had informed the U.K. that network backdoors existed before the U.K. made its decision. As the U.S.’s closest national security ally, the move seems significant. However, their “special relationship” remains unharmed. Perhaps the United States is not willing to put its pressure campaign against Huawei to the ultimate test by penalizing Britain for its failure to comply with U.S. directives.
EU countries like Germany and Austria will not decide on the “Huawei-question” until later this year, but they will likely act in concert with each other. Germany’s three largest network developers already use Huawei technology, so the real decision would not be whether to allow Huawei access, but whether or not to roll it back. What they choose will have ramifications on the already strained U.S.-EU relationship. German automakers have partnered with Huawei on some initiatives and depend on Chinese consumers to increase their revenues. Germany’s economic pivot toward the East could trigger a deeper political relationship as well. A deeper economic relationship could be mutually advantageous to German and Chinese businesses and consumers. Still, a reliance on Beijing could spell danger if Germany imports more than what it bargained for, such as tech embedded with spyware or facial recognition software that encroaches on civil liberties. Manufacturers that are forced to choose between the United States and China face a staggering political and economic decision.
The pressure campaign to halt the spread of Huawei’s technologies to the U.S. and its allies is necessary but not sufficient. American companies must compete against it too. White House economic adviser Larry Kudlow has suggested that the U.S. do just that. His ideal vision sees all 5G networks installed by American companies like Dell, Microsoft, and AT&T or by firms from allied countries, like Finnish Nokia or Swedish Ericsson. Firms are excited by this prospect, hopeful for U.S. subsidies that would make them competitive against Huawei. Officials have also suggested a private equity takeover of Nokia or Ericsson either by American interests or the U.S. government itself. Attorney General William Barr said of the potential plan, “Putting our large market and financial muscle behind one or both of these firms would make it a more formidable competitor and eliminate concerns over its staying power.” Such a solution could provide the competition to Huawei that the U.S. government needs to endorse.
China is ahead on 5G. If the United States wants to protect itself as an international exemplar, preserve democracy and liberty as global ideals, and contain the spread of Chinese authoritarianism, it must work with American companies and allies to challenge Huawei. On February 13, the U.S. Department of Justice brought racketeering and conspiracy charges against Huawei, alleging a successful effort by Huawei to misappropriate technology from six U.S. companies. Two days earlier, a federal judge for the Southern District of New York ruled that T-Mobile’s $26 billion merger with Sprint does not break antitrust laws. A major goal of that merger is to build American 5G networks. While skeptical politicians may be fearful of monopolies, the U.S. could be well served by its own tech powerhouse to compete against Huawei. Talk and pressure from Washington can only go so far: innovation and investment must follow.
Image via Flickr (Karlis Dambrans)