Sharpening the knives for Huawei

2 weeks ago
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Among China hawks in the United States, it seems that the greatest national security threat is posed by the Chinese telecommunications giant Huawei, eclipsing even that of the People’s Liberation Army. That threat has prompted the Trump administration to tighten the screws on Huawei, first restricting its access to the U.S. market, then pressing allies to do the same, then cutting off the company’s access to U.S. suppliers, and then again urging allied governments to force their businesses to follow the U.S. lead.

Last week, U.S. officials announced the “5G national security trifecta,” a series of inter-related measures that could truly hobble Huawei if Washington’s partners follow suit. Japan appears ready to do so. The steps are a reminder that its network of like-minded countries is Washington’s most important security asset and the U.S. undermines that network at its peril.

Since taking office, President Donald Trump has increasingly restricted Huawei’s access to U.S. markets and supplies, banning its use within the U.S. and putting it on lists of companies to which the export of U.S. goods deemed important to national security is restricted.

Special concerns surrounding telecommunications infrastructure prompted the creation in April of “Team Telecom,” a multi-agency working group that advises the U.S. Federal Communications Commission (FCC) on the security implications of applications by foreign-controlled entities to become involved in delivering telecommunications services in the U.S. This is part of a broader U.S. government strategy to secure its infrastructure: On May 1, an executive order was issued that essentially banned the use of any bulk electric power system equipment manufactured by a company that could be controlled by a foreign adversary and which poses an undue risk to the U.S. bulk-power system, economy or national security.

The Trump team makes no bones about its concerns about Huawei. The president bluntly stated last year that he didn’t want to do business with the company “because it is a national security threat.” Earlier this year at the Munich Security Conference, Secretary of Defense Mike Esper called Huawei “China’s poster child for its nefarious industrial strategy,” one that is “fueled by theft and coercion and the exploitation of free-market, private companies and universities.”

Esper went on to warn that “reliance on Chinese 5G vendors could render our partners’ critical systems vulnerable to disruption, manipulation and espionage. It could also jeopardize our intelligence and communication-sharing capabilities, and by extension it could jeopardize our alliances.” Secretary of State Mike Pompeo bluntly put those allies on notice that “we will never permit American international security information to go across a network that we don’t have trust and confidence in,” essentially threatening intelligence sharing and cooperation if those governments allowed Huawei to join their national 5G telecommunications grid.

In a briefing last week, Assistant Secretary for International Security and Nonproliferation Christopher Ford offered a little more precision on the nature of the Huawei threat. First, he argued it “engages, clearly, in illegal activity, including intellectual property theft from U.S. companies and the evasion of U.S. sanctions, in support of the world’s biggest state sponsor of terror and a notorious proliferator.”

Second, he charged that Huawei technology enables the Beijing government’s human rights abuses and makes those technologies available for export to other repressive regimes. Third, he claimed that as a Chinese company, Huawei “is structurally subject to manipulation and to control by the (Chinese Communist Party), essentially at any time,” and can be used “and has no choice but to serve as a tool of strategic influence and political manipulation.”

U.S. national security officials crowed last week about the “5G trifecta,” which includes: a rule that essentially bans any company anywhere that uses U.S. intellectual property from doing business with Huawei; the decision by TSMC, the leading customized semiconductor manufacturer, to invest $ 12 billion to build in Arizona one of the world’s most advanced chip fabrication plants; and continuing implementation of the “5G Clean Path Initiative,” announced last month, which ensures that all 5G mobile data entering any U.S. diplomatic system only transits “trusted” equipment.

Expect more such measures, and not just export controls. In August, a provision will go into effect that bans federal agencies from doing business with an entity that uses any equipment, system or service that uses Huawei or ZTE equipment or services, essentially banning all government contractors from using either company.

Huawei and China deny all accusations, but that has had no impact on policy that Huawei calls an existential threat to the company: Chairman Guo Ping notes that “survival is the keyword for us now.” That may be exaggerated: While Huawei missed its original revenue target for 2019 by $ 12 billion, it still reported revenues of $ 123 billion for 2019. The company has been stocking up on inventory — ironically, last year, purchases from U.S. suppliers increased 70 percent, reaching $ 18.7 billion — and pushing its own research and development efforts to undercut the impact of a complete cutoff from foreign suppliers.

Today, China is at least a generation behind the most advanced producers of high-technology products, but that gap will close if the U.S. forces Chinese companies to make all their own components. Erosion of that comparative advantage is worrying, but it should be irrelevant if the real issue is security. Today, hackers are a fact of life and back doors aren’t needed when front doors — regular software or firmware updates — are wide open. As a U.S. official explained last week, “it boils down to who do you trust.”

For Japan, the answer is simple: It trusts the U.S., and Tokyo has aligned itself closely with Washington. In 2018, Tokyo decided to ban Huawei and ZTE from bidding on government contracts, a decision that private sector companies adopted as well, declaring that they would not purchase 5G equipment from them either, despite conducting trials with the two vendors. Tokyo also announced last week that it would provide tax incentives to spur domestic production of 5G technologies.

It was also reported last week that Tokyo and Washington will launch a new bilateral dialogue on economic security that will focus on 5G, controls on inward investment by foreign companies and dual-use technology exports. The new dialogue is supposed to be chaired by the head of the new economic division in the National Security Council, and underscores the commitment to tighter coordination by the two governments on economic security concerns.

That is as it should be, but the conversation must be a real dialogue with both sides not only airing their concerns, but sharing information and respecting the inevitable divergences. A thoughtful and creative discussion about the risks and the opportunities created by the connections of the 5G world should be the cornerstone of the Japan-U.S. alliance. It must go well beyond the Huawei threat and increasingly strident U.S. demands for allies and partners to follow its lead.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions.”

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The Japan Times

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