Is the Problem with Huawei that the U.S. Can’t Keep Up?
1 January 2019
EIRNS — Since last Spring, rumors originating with the Wall Street Journal (May 2, 2018) and Reuters (12/27/2018) have circulated, that President Trump is considering issuing an executive order that would ban U.S. purchases of products manufactured by Chinese telecommunications giant Huawei and the smaller ZTE Corporation. In December, the Canadian government carried out a U.S. Justice Department request, issued without Trump’s knowledge, to arrest Meng Wanzhou, CFO of Huawei and the daughter of its founder. No information on the nature of the charges has been released. Rumors cite violations of U.S. sanctions against Iran as a possible charge, but many reports refer to Huawei’s equipment being used by the Chinese government for eavesdropping and disruption of communications.
The arguments for such reporting in the media can be summarized as, "We do it, so they probably do, too." In fact, the only known evidence of cyber-crime associated with Huawei is the evidence of crimes committed against it by the NSA, released by whistle-blower Ed Snowden. (See Jan. 2 Briefing for a 2014 Speigel Online report on the successful NSA hacking of Huawei that began in 2009.)
The significance of this report is that the geopolitical forces behind the NSA fear the increasingly rapid modernization and growth of China as the world’s leader in high-technology development, as reflected in Vice President Tom Pence’s attack on its Made in China 2025 campaign. Despite the U.S. discouragement of purchases of Huawei equipment, the outright banning of such purchases by the U.S. Government as of August of last year, and the boycott of Huawei purchases by the large U.S. telecommunications firms, Huawei is the largest producer of telecommunications equipment in the world; the second-largest seller of mobile phones, behind Samsung and ahead of Apple; the third—largest investor in research and development, behind Alphabet (Google’s parent company) and Amazon; and ahead of its other telecommunications competitors Samsung, Intel, Microsoft, Apple, Cisco, Nokia, and Ericsson.
Media reports speculate that the mooted executive order would not name Huawei or ZTE, but would cite the Emergency Economic Powers Act and be interpreted by the Department of Commerce to justify action against those two firms.
The case against these firms consists of rumor and innuendo, not evidence. According to Reuters, FCC Chairman Ajit Pai reported that "backdoors" included with network equipment "can provide an avenue for hostile governments," but said nothing about Chinese firms actually using such "backdoors."
Marketplace.org backed its claim that the U.S. had determined Huawei to be a "national security threat," by quoting an unnamed 2012 report by an unnamed U.S. government agency, saying, "China has the means, opportunity, and the motive to use telecommunications companies for malicious purposes." An unnamed congressman cited "numerous allegations" by unnamed sources of what were described as "unexpected behavior" from Huawei equipment.
Several media outlets caution that Huawei founder, Ren Zhengfei, was a Peoples Liberation Army officer, as if this were a reason to distrust his company.
The real or alleged threats against Huawei and other Chinese suppliers have raised global concerns. Huawei is far in advance of its competitors (led by Ericsson of Norway and Nokia of Finland) in developing 5G, the next-generation upgrade in mobile telecommunications network, which is expected to boost transmission rates by one or two orders of magnitude. Huawei is projecting deliveries at least nine months ahead of any competitors at less than half the price. Outside the United States, Huawei phone and equipment sales are significant in almost every country. Due to its domination of telecommunications technology, no nations other than Australia and New Zealand, not even the United Kingdom or the United States, have yet agreed to banish Huawei products from their territory. Even Ericsson and Nokia are concerned that cutting off Chinese growth in this area will interfere with their own access to the huge Chinese market. Nokia has more than twice as many employees in China as in Finland, and Ericsson depends on its Asian production facilities.
In the United States, which has no significant effort to develop 5G underway, and little domestic production of telecommunications equipment, rural mobile networks that are not well serviced by the telecomm giants, rely on the higher quality, less expensive Huawei and ZTE equipment. Reuters reports that William Levy, vice president for sales of Huawei Tech, USA, is on the board of the Rural Wireless Association (RWA) consisting of carriers with fewer than 100,000 subscribers. RWA estimates that 25% of its members use Huawei or ZTE equipment that would cost up to $1 billion to replace, were it banned from use in the U.S.
All in all, it would appear that Huawei and other Chinese leaders in telecomm development might prove more useful as partners than as adversaries of the United States. If the geopoliticians succeed in cutting off these imports, what options remain? [SE_]