Huawei

The Much Ado About Huawei Continues

By Elsa Kania
Wednesday, December 19, 2018, 1:02 PM

Lately, Huawei has been a recurrent flashpoint in U.S.-China relations. The arrest in Canada of Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, over allegations of bank fraud and sanctions violations has provoked intense controversy since early December. While she has since been released on bail, this case is likely to remain a point of friction ahead of the hearing, scheduled for February, on her potential extradition to the United States. At stake are questions at the intersection of the law, security and technological competition; and answers are unfolding in a complex geopolitical landscape, as U.S.-China talks on trade continue with no clear resolution in sight. From a U.S. perspective, Huawei often epitomizes three core issues in U.S.-China relations: Chinese companies’ often flagrant disregard for U.S. laws; the threat of vulnerabilities in supply chains and critical infrastructure; and the competitive challenge of China’s emergence as a technological powerhouse, including in artificial intelligence (AI) and 5G. As the United States deals with the delicate matter of Meng’s extradition, it will important to handle appropriately the broader policy challenges that this controversy has thrown into stark relief. Going forward, U.S. policy toward China must be nuanced and targeted in undertaking appropriate countermeasures in response to these distinct policy concerns.

At best, the United States has an opportunity to handle this case in a way that reinforces vital norms and important precedents on the rule of law. It is entirely appropriate to hold Huawei accountable for illegal and fraudulent activities through a routine investigation and justified prosecution with full due process and transparency. The strident criticisms in People’s Daily, claiming (link in Chinese) that Meng’s arrest “tramples” her “basic human rights” and warning that Canada will face “serious consequences,” are absurd. Such criticism becomes appalling considering that the Chinese government has detained two Canadians (and recently a third), likely in retaliation for Meng’s arrest. While the circumstances of these detentions remain unclear, the fact that China’s Ministry of State Security—responsible for political security, intelligence and counterintelligence; rather than regular law enforcement authorities—is investigating Canadians (link in Chinese) Michael Korvig and Michael Spavor for “endangering China’s state security” (危害中国国家安全) indicates that the motive for their arrests is likely political. There are reasons for grave concern that these extrajudicial detentions and disappearances could involve coercive interrogations. Although Beijing has attempted to equate these detentions with Meng’s arrest, arguing that their cases are being handled “in accordance with the law,” that false equivalency is tragically laughable, considering the Chinese government’s routine, flagrant violation and exploitation of its own laws, from torture to forced confessions and a conviction rate that has often exceeded 99.9 percent. The United States must continue to condemn these detentions and Beijing’s exploitation of law as an instrument of Communist Party and state power. The Trump administration must also undertake much clearer messaging about the legal grounds for this case against Huawei to counter Beijing’s attempts to discredit it.

Unsurprisingly, the Chinese government is seeking to shape the global narrative on these issues and to delegitimize U.S. actions against Huawei. The perception that Meng and Huawei are being unfairly targeted by the U.S. government as a result of its trade war reinforce Beijing’s preferred discourse and propaganda in ways that could undermine U.S. policies. As such, it is deeply unfortunate that President Trump’s own remarks, albeit in response to a leading question, indicated that there is a possibility that Meng’s arrest could be utilized as leverage in U.S.-China trade talks. (This tactic is reportedly being considered by some administration officials.) In response to these remarks, Canada has rightly warned the U.S. administration against using the extradition process “for ends other than the pursuit of justice.” Hopefully, Trump’s comment—specifically, that “I would certainly intervene if I thought it was necessary”—while deeply problematic, is not representative of the U.S. government’s actual approach to this matter of law enforcement. If the United States allows this case to become politicized, it would establish a dangerous precedent that might provide a useful pretext for Beijing to target or retaliate against American companies and their executives in the future.

These latest developments are difficult to disentangle from the recent history of global security concerns over Huawei. Over the course of 2018, the United States has banned Huawei from use by the U.S. government and contractors through the National Defense Authorization Act; Australia and New Zealand have both barred Huawei from involvement in the construction of their 5G networks; and Japan has also blocked Huawei from official government contracts. Critics of these decisions have argued that no “smoking gun” has been produced thus far to justify these actions. Certainly, the recurrent warnings from the directors of U.S. intelligence agencies—and the concerns and coordination with their counterparts from “Five Eyes” nations—should not be lightly dismissed. Nonetheless, it is fair to say that greater transparency would be very welcome in these policy debates, and Huawei’s deputy and rotating chairman, Ken Hu, has called upon the U.S. and others concerned to provide “proof or evidence” in support of these issues. In the meantime, there is evidence readily available from open sources that Huawei can be clearly linked to the hack of the African Union (AU) headquarters, as Danielle Cave has revealed. Considering that Huawei was the AU’s main provider of information and communications technology, this incident demonstrates at best great negligence and at worst outright complicity. In addition, a report from the United Kingdom has assessed that “shortcomings” in Huawei equipment and engineering processes have posed new risks to the security of U.K. telecom networks.

Unfortunately, U.S. policy debates over security concerns regarding Huawei have been characterized at times by a tendency toward fear and alarmism that are not conducive to a balanced evaluation of the likely risks. For instance, U.S. Sen. Chuck Grassley of Iowa has declared, “I can’t pronounce their name, but it starts with an H and ends with a W-E-I. Whenever they’re involved, it scares the devil out of me.” Sen. Marco Rubio of Florida has warned that Huawei could be a “Trojan horse,” and he hopes to leverage Meng’s arrest to rally support to reintroduce legislation that would ban Huawei from doing business in the United States. Certainly, these new charges of fraud reflect poorly on a company for which there are a range of reasons for concern. However, if debates about Huawei are seen as unduly politicized or as targeting the company to advance U.S. economic interests, then legitimate concerns about Huawei’s activity may be dismissed and disparaged by critics as groundless scaremongering. 

The Risk Calculus

The case against Huawei’s involvement in the construction of a nation’s 5G networks can and should be argued on the basis of security first and foremost, not fears of a network’s potential success. To be sure, the nature of 5G may pose unique security concerns given the complexity of these networks, which can enable greater connectivity for smart devices and infrastructure, blurring traditional distinctions between core functions and the edges of networks. Indeed, the greater capability and advantages that 5G will enable as a result of its speed, low latency and high bandwidth could correspond with new security issues and greater vulnerabilities. Hypothetically, Huawei’s role in constructing 5G networks could be exploited for intelligence purposes by the Chinese government, with or without the company's complicity. These risks are not just about Huawei but, rather, are inherent to the system and constraints within the company operates: under the authority of the Chinese Communist Party (CCP).

Xi Jinping has declared that “the Party leads everything,” including, of course, tech companies that are recognized as integral to the country’s development. Huawei is not unique (link in Chinese) in that its leadership includes a Party Secretary and a Party Committee whose roles and authorities are not transparent. In addition to potential extralegal mechanisms of control, Huawei is also subject to Chinese law, including the National Intelligence Law (国家情报法), which happens to require (link in Chinese) that any individual or enterprise “shall support, assist, and cooperate with national intelligence work, and guard the secrecy of any national intelligence work of which they are aware.” Despite Huawei’s denials of the relevance of this legal provision to its overseas business activities, this law does raise, at the very least, questions of its interpretation and applicability to overseas activities that are at best highly ambiguous. Whereas the United States is comparatively transparent about the legal parameters that govern its approach to intelligence, China remains less so.

Moreover, Huawei may be a private company, but the Chinese government’s forceful response to its CFO’s arrest demonstrates the tech giant’s unique status, pursuant to China’s national agenda to lead in 5G. It is often difficult to disentangle Huawei’s commercial activities from the Chinese government’s geopolitical objectives. (Perhaps it is not coincidental that among Meng Wanzhou’s many passports is one that the Chinese government provides for public affairs purposes, which is typically issued only to employees of the government and state-owned enterprises.) Huawei has received strong state support, which has appears to have provided a considerable advantage at various stages of its development, including through allowing the company to undercut its competitors on price. Huawei has also been pivotal to a number of state priorities and initiatives, such as the Digital Silk Road (数字丝绸之路), under the aegis of Xi Jinping’s signature “One Belt, One Road” initiative. Of course, there is also the matter of Huawei’s historical relationships, and likely ongoing collaboration, with the Chinese military and intelligence. Huawei founder Ren Zhengfei started his career in the Chinese military, reportedly serving as director of the People’s Liberation Army (PLA) Information Engineering University—which trains PLA technical specialists in cyber attack and defense—and the company has apparently maintained deep ties to the Chinese military since. Huawei’s former chairwoman, Sun Yafang, once worked for the Ministry of State Security (link in Chinese), China’s premier intelligence agency, later leveraging those connections to support the company.

Beyond the “much adoabout Huawei, the calculation and management of risk surrounding 5G comes down to a question of trust. As the United States begins to see China as a great-power rival, revisionist power and even potential adversary, the risks are too high that a Chinese company's presence in critical infrastructure could be exploited or sabotaged, whether in a crisis or conflict scenario or for espionage purposes during peacetime. Unfortunately, China has demonstrated its intention to exploit U.S. cyber vulnerabilities. And there are limited options for adequate verification in this “tech security dilemma.” For similar reasons, China has severely limited the access of U.S. tech companies to its market, demonstrating a preference for “secure and controllable” (安全, 可控) indigenous technologies. As the recent policies constraining the use of Huawei technology indicate, the United States and Five Eyes nations are responding to comparable concerns over potential vulnerabilities. Perhaps such a “decoupling” or “disentangling” of technological ecosystems is inevitable and prudent, but it will also be costly, given the synergies and efficiencies that have come with global collaboration in complex technologies. For that reason, these debates on how best to evaluate and balance security concerns, especially in the case of Huawei, must be carefully grounded in evidence and analysis, not fear or speculation. 

The Competitive Challenge

Huawei has also emerged as a formidable contender in the global rivalry to advance the development and deployment of 5G technology, which is recognized as critical to future economic competitiveness. In this regard, American anxieties over Huawei can relate to concerns that the United States may lose its traditional leadership in 5G, but these questions of economic interest and competitiveness should be clearly differentiated from issues of fraud and security. If Huawei is seen as a victim of its own success, unfairly targeted by the U.S. government, then this public perception might undermine efforts to ensure that the company is held accountable for its violations of U.S. law and could complicate cooperative responses to the valid security concerns. For instance, China Daily, overseen by the CCP’s Central Propaganda Department, has argued that the United States “is trying to do whatever it can to contain Huawei's expansion in the world simply because the company is the point man for China's competitive technology companies.” Even a number of American commentators have repeated this narrative that the company is being “shamefully persecute[d]” because of its success. In a recent speech, Huawei’s rotating chairman similarly condemned pushback against the company as the result of “ideology and geopolitics,” rather than “legitimate concerns.” At a time when the U.S. government is seeking to compel China to adhere to norms of free trade and fair competition, it is counterproductive to create an unnecessary opening for such discourse and propaganda. Meanwhile, the pushback against Huawei may only redouble China’s commitment to indigenous innovation, which continues to be advanced through strong state support. 

Looking forward, the United States is right to recognize that China presents a clear competitive challenge to U.S. leadership in 5G and in other key emerging technologies, from artificial intelligence to quantum technology. However, responses to these challenges should center upon investing in our own infrastructure and competitiveness, undertaking policies that extend well beyond focusing on Huawei. In this regard, it is encouraging—and to be commended—that the White House is starting to explore options to advance 5G at home. Indeed, this September, the White House convened a 5G summit, seeking to ensure that it will be “America first, 5G first.” The Trump administration also plans to develop a spectrum strategy to facilitate the development and deployment of 5G technologies in the United States. Hopefully, these initiatives will be far more enduring in their impact than the latest controversy over Huawei. Meanwhile, U.S. responses to these fraud and security concerns should be carefully calibrated and coordinated within a broader framework of China policy, a framework that aims to reinforce vital norms and ensure accountability, especially on issues of trade and technology. Ultimately, U.S. long-term strategy should remain focused on the opportunities for American innovation in collaboration with our allies and partners.