Huawei and 5G in the Tech Cold War: China vs the United States
Although the White House publicly stated they oppose a government-lead deployment of a national 5G network, they reportedly considered it for over a year. The gravity of this idea —a federal takeover— sheds light on the current situation: China appears to be ahead of Silicon Valley on this technology. 5G is “a type of wireless networking infrastructure designed for fast connectivity of self-driving cars, virtual reality, the internet-of-things, and other technologies that are emerging after the smartphone-centric 4G era we’re currently in.” This means that whichever country leads 5G will dominate the technology sector and benefit from the economic and national security advantages that come with it. The strongest supplier of 5G technology is Huawei, a Chinese telecommunications company which has been doused in controversy since its beginning, and one that should be an important part of trade talks between the United States (U.S.) and China.
In the 1990s, the company made its first big deal with the People’s Liberation Army. Next, India intelligence agencies placed Huawei on a watchlist in 2001 for allegedly supplying the Taliban. When Huawei attempted to buy part of the U.S. company 3COM in 2007, the United States Congress blocked the deal due to security concerns. This was followed by the launch of an FBI investigation regarding possible violations of U.S. trade sanctions in Iran. In 2009, British spy chiefs “reportedly briefed ministers that Huawei hardware bought by BT Mobile could be hijacked by China to cripple the UK's communications infrastructure.” In security briefings by British company Vodafone, backdoors and other flaws were found in Huawei’s equipment. Huawei tried to buy the Sprint network and build a national wireless network for emergency services in the U.S., but both requests were denied by the United States government. A United States investigation surrounding Huawei and ZTE concluded in 2012 that neither company “cooperated fully with the investigation” and “the risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests.” At about the same time, Australia blocked Huawei from its National Broadband Network and a Huawei CFO was linked to Skycom, a firm that offered HP equipment to Iran despite U.S. sanctions. Information leaked by Edward Snowden revealed that the U.S. National Security Agency hacked Huawei in order to spy on them through Operation Shotgiant, which was allegedly successful. In 2018, bans on certain Huawei products were implemented in several countries, including Australia, New Zealand, and Japan. Chief financial officer and the CEO’s daughter, Meng Wanzhou, was arrested by Canadian officials with plans for extradition to the United States and a court date set for September.
On the other hand, Huawei does not concede that they are a security concern or that they are undermining the United States. In an open letter to the Obama Administration, the company claimed that “the allegation of [Chinese] military ties rests on nothing but the fact that Huawei’s founder and CEO, Mr. Ren Zhengfei, once served in the People’s Liberation Army.” Additionally, Mr. Zhengfei stated in 2015, “of course we support the Chinese Communist Party and love our country. But we don’t compromise the interest of other countries. We comply with the laws of every country we operate in.” In an attempt to further show the company’s commitment to fight corruption, he cited their “confess for leniency” program: employees that came forward with violations before a certain deadline would receive leniency, while cases uncovered afterwards would be turned over to Chinese authorities. Furthermore, Huawei openly encouraged the United States to come forward with any evidence of its accusations.
This year is full of new developments. More countries banned certain Huawei products, major Silicon Valley companies cut ties, and the United States formally charged the company with thirteen crimes. These charges include violating United States sanctions on Iran but “prosecutors convinced a federal judge that releasing too much [evidence] would pose a risk to national security and other governmental concerns.” Clearly, this is bigger than just one company. The Wall Street Journal described these charges as just “the latest to accuse the Chinese government or Chinese companies of stealing intellectual property from U.S. firms through a combination of cyberattacks, traditional espionage and other means.”
Continuing down this path toward a “digital iron curtain” will negatively impact both China and the United States by limiting their access to necessary technological components, but the trade war is rapidly escalating. President Trump issued an executive order which restricted U.S. tech purchases, raised tariffs from 10 percent to 25 percent on $200 billion worth of goods, and the government added Huawei to a blacklist. President Trump stepped back by stating that American companies can once again sell to Huawei since “the companies were not exactly happy that they couldn’t sell because they had nothing to do with whatever it was potentially happening with respect to Huawei,” but it is unclear whether the U.S. will be able to purchase components from Huawei in the coming years.
These tech tensions are shaping up to be a ‘technological cold war’ and the potential to alleviate the issues through trade talks seems rough. A Chinese government advisor said that the United States requested “enormous [amounts], even hundreds” of legislative modifications and an advisor to the Chinese State Cabinet explained that “China and the U.S. have fundamentally contradictory attitudes as to what would be a good deal.” Additionally, President Trump seems to think that China is desperate after experiencing what he claims was “the worst year they’ve had in 27 years.” However, as analyst Michael Ivanovitch notes, “nobody seemed to notice that the Chinese were laughing all the way to the bank with $137.1 billion of surpluses on their U.S. trades.” Although a trade deal could potentially benefit both countries and may be the only feasible solution, China does not think it is worth meeting the lengthy list of demands by the United States.
On the other hand, editor-in-chief of the Chinese newspaper Global Times, Hu Xijin, mentioned that he expects in-person talks to come soon. Reuters reflected that the “Global Times is not an official mouthpiece for the Communist Party, though its views are believed to at times represent those of its leaders.” Despite conflicting expectations, perhaps the U.S. and China will be able to collaborate and end the turmoil that “upended” the markets.
The Huawei allegations prove that 5G stands at the forefront of international relations and a tech cold war between the U.S. and China is imminent if trade negotiations regarding 5G fail. Instead of considering aggressive government intervention with the private tech sector, such as nationalizing a 5G network, the United States should focus on strengthening diplomatic relations with China to make a deal that both countries can benefit from. Both sides need to be prepared to meet in the middle in order to prevent a much bigger conflict.