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Don’t Let a China Trade Deal Kill the U.S. Campaign Against Huawei

Stock MarketsMar 14, 2019 07:10PM ET
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© Reuters. Don’t Let a China Trade Deal Kill the U.S. Campaign Against Huawei

(Bloomberg Opinion) -- The U.S.-led campaign against Huawei Technologies Co., China’s telecom giant, has attracted a lot of attention for the indictment of the company’s chief financial officer, Meng Wanzhou. On Thursday, Huawei’s lawyers pleaded not guilty in a New York federal court to 13 counts of fraud involving an elaborate scheme to violate U.S. sanctions against Iran.

That case is no doubt important, not only because of the possibility that Meng, the daughter of Huawei’s founder, could face incarceration. It is also a major irritant in U.S.-China trade talks.

That said, the case is a sideshow. Of greater consequence is a renewed U.S. campaign to pressure and persuade America’s allies to keep Huawei technology and equipment out of the next generation of wireless networks, known as 5G. The stakes in this campaign are much bigger than U.S. market share or the effectiveness of Iran sanctions. If Huawei’s chips and routers find their way into this new network, everything from digital privacy to intellectual property could be at risk.

U.S. intelligence agencies, along with those of many of its allies, have concluded that Huawei’s equipment provides China’s military with a backdoor into the telecom systems that use it. “Huawei is a spy agency for the Communist Party of China, thinly veiled as a technology company,” says Senator Ted Cruz in a March 14 letter to Secretary of State Mike Pompeo and Director of National Intelligence Dan Coats.

The U.S. intelligence community has been sounding this alarm for years. Only recently, however, have these worries begun to inform policy. Pompeo himself has been the public face of it, warning last month on a tour of Eastern Europe that it would be “difficult” for the U.S. to partner with countries that use Huawei equipment. Meanwhile, I am told, senior military and intelligence officials have been delivering more explicit warnings to U.S. allies in private. The message is particularly effective with Eastern European countries that see a U.S. military presence as a trip wire against Russian aggression.

It’s still early days, but so far the anti-Huawei campaign is not going well. Last month, the United Arab Emirates announced that it would be using Huawei equipment. India, too, has rebuffed U.S. concerns and is reportedly looking for a way to grant some contracts to Huawei.

India and the U.A.E. are important U.S. allies, but for national security they are in a different category from the five English-speaking nations that share intercepts and surveillance data in an arrangement known as the “Five Eyes” security alliance. These countries — Australia, Canada, New Zealand, the U.S. and the U.K. — have partnered since the aftermath of World War II to share this kind of signal intelligence against common adversaries, such as the former Soviet Union and China. The prospect of a Chinese backdoor into the wireless networks of any of these countries is what stirred Cruz to write his letter.

The danger is real. Cruz’s letter points to reports from last month that the U.K.’s National Cyber Security Centre has determined that security risks associated with Huawei equipment could be mitigated, paving the way for the country to approve some Huawei technology in its 5G network. Canada and New Zealand have yet to make a determination. Western Australia’s transportation authority, meanwhile, is pursuing a deal that would use Huawei technology in the radio networks of its rail system.

In all of these cases, there is still time for the Five Eyes allies to make the right decision. But the U.S. campaign is facing an uphill fight. To start, the Chinese have pressured other countries to drop what they say are discriminatory policies against Huawei. And because Huawei is heavily subsidized, it can often outbid its competitors. The Chinese have also aggressively pressured international standards-setting bodies to adopt specifications for equipment that would force countries to choose Huawei over its competitors.

The U.S. campaign has also suffered from some confusion of its own. Last month, on the eve of the Mobile World Congress in Barcelona, President Donald Trump tweeted that he wanted the U.S. to win markets for its technology “through competition, not by blocking out currently more advanced technologies.” That tweet earned kudos from Huawei’s rotating chairman, Guo Ping.

U.S. officials tell me that Treasury Secretary Steven Mnuchin opposes the aggressive campaign to ban Huawei. One senior national security official says there is a possibility that the U.S.-China trade negotiations could result in a deal that would relieve the U.S. pressure against Huawei. And while Mnuchin has said there are no discussions with Huawei in regard to the indictment of Meng, “forced technology issues are part of trade discussions.”

For now, America’s Five Eyes partners and other allies will have to wait to see whether the campaign against Huawei survives a U.S.-China trade agreement. In the meantime, Trump should listen to his spies and his generals. No trade deal is worth letting China become the world leader in eavesdropping.

Don’t Let a China Trade Deal Kill the U.S. Campaign Against Huawei

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