BY ELSA B. KANIA
The latest salvos in the Trump administration’s campaign against Huawei may prove, at best, to be a Pyrrhic victory—or, at worst, directly undermine U.S. interests and objectives. At the moment, it remains unclear how the recent executive order, which creates sweeping authorities to bar and exclude companies or technologies linked to a “foreign adversary” from the United States, and the additionof Huawei to the government blacklist known as the Entity List will be implemented in practice.
It is not too late for U.S. President Donald Trump to recalibrate toward the smarter approach needed for such a complex challenge. In the process, the U.S. government should also pursue more proactive policies that concentrate on ensuring future American competitiveness in 5G, the fifth generation of mobile networks.
The U.S. government is justified in a forceful response to mitigate real, urgent threats to U.S. critical infrastructure, and it is reasonable to constrain high-risk vendors and carriers from U.S. critical infrastructure. However, the framing of this measure in terms of “foreign adversaries” also represents a missed opportunity for the U.S. government to present stronger arguments that reflect the systemic concerns involved, which go far beyond Huawei.
There is no shortage of reasons to consider banning Huawei from U.S. networks, but how that determination is made—ideally with a level of credibility, objectivity, and transparency—matters greatly. In the process, coordination with countries that share similar concerns but may not see China as an outright “adversary”—as the executive order implicitly describes it—will be critical. So far, even close allies and partners in Europe have expressed some skepticism of U.S. concerns on Huawei, and greater consensus should be pursued on the basis of agreement on ‘red flags’ for risk. The U.S. approach to 5G security must continue to extend to encompass all aspects of its design, deployment, and management.
To that end, it is necessary to recalibrate the conversation on 5G security by shifting the focus away from Huawei to criteria and concerns that are underlying their infamy. Any Chinese company can be subject to exploitation in a system that lacks true rule of law to protect against arbitrary, often extrajudicial, exercise of state power and where laws and practices in intelligence indicate the intention to leverage enterprises to that end. Some further factors that are prominent in the case of Huawei, but not unique to the company, include a track record of bribery and corruption, a distinct shortfall in transparency, including about the actual nature of its ownership, and connection to incidents of espionage, not to mention a relatively lackluster track-record on cyber security. Regardless of nation of origin, any vendor with such problematic characteristics should encounter strong scrutiny.
At present, it’s important that the handling of the case of Huawei not be botched. The United States does not need Huawei, despite the firm’s claims to the contrary, but U.S. policy responses must take care to avoid undue collateral damage. Depending on implementation, this measure risks undermining the health of critical industry stakeholders in the United States, with global repercussions. Already, a number of companies that are major suppliers to Huawei or heavily exposed to the Chinese market have seen their stock prices drop sharply. The long-term damage could prove much graver without policy support to mitigate those likely losses. A decision to deny outright American companies the ability to do business with Huawei could prove quite costly if implemented without concern for the potential externalities, potentially resulting in losses in the neighborhood of $11 billion based on past purchases. The move toward a ban against Huawei will also worry and might alienate allies and partners in Europe, which are concerned about the fallout to their networks.
The perception—and perhaps reality—that this measure may be just a stratagem in trade talks could further undermine U.S. credibility. If the Trump administration scales back or reverses course entirely on the inclusion of Huawei on the Entity List—as it did in the case of ZTE back in 2017—then this downplays the gravity of Huawei’s very real threats and its misconduct, while bolstering the firm’s claim and the Chinese government’s propaganda that U.S. policy has been purely “political,” rather than based on real security concerns and evenhanded enforcement of U.S. laws. The Department of Commerce explained this designation as a response to Huawei’s alleged violations of U.S. sanctions on Iran. Moreover, Huawei’s history of linkages to the Chinese military and Ministry of State Security (MSS)—including allegedly being used as a cover and/or front for intelligence activities and reportedly receiving funding from MSS—clearly presents ample reasons for concern.
On the other hand, if these measures are intended to force a much broader decoupling, then it is a clumsy and perhaps costly attempt to catalyze a recalibration that is critical but should be undertaken with great care. The core tension at the heart of the U.S.-China rivalry today is the uneasy concurrence of deep economic interdependence with intensifying strategic and technological competition. A rebalancing and diversification could lessen the dependence of U.S. companies on Chinese vendors that could be compromised, thus mitigating risks to the security and resiliency of U.S. supply chains and overall industrial base.
In this regard, the critical question is not whether to pursue some degree of decoupling but how and to what extent. Although interdependence was once considered a check against conflict, the risks that such entanglements could be exploited, leveraged coercively, or outright weaponized have evidently exacerbated frictions in the U.S.-China relationship. But such a transition toward a perhaps more stable equilibrium will take time and require a careful weighing of viable alternatives.
Overall, the globalized and collaborative character of U.S. innovation ecosystems has benefited the United States and China alike, despite the exploitation and asymmetries in those benefits. In some respects, the Trump administration’s approach to China has seemingly demonstrated the right diagnosis but at times the wrong prescription. So too, while the leverage that these latest measures may provide could be praised as a savvy approach to negotiating with a regime that seems to respond only to power and forceful pushback, such tactical victories on trade—or in undermining a so-called national champion that has apparently benefited from unfair advantages—should not come at the expense of the sustainability of long-term U.S. strategy.
If the Trump administration intends the ban on Huawei through the Entity List to be tantamount to a “death penalty,” then these latest measures may also backfire. It is still unclear whether the listing, with which a growing number of American and European companies are already starting to comply, will become an outright restriction or if licenses will continue to be granted for some U.S. companies to continue selling to Huawei in the long term. (So far, a temporary general license has offered a limited reprieve through August, including to allow updates and patches for current networks.) Regardless, those who expect this to mean the end of Huawei may find themselves disappointed.
Despite its obvious vulnerabilities, Huawei’s capabilities—and the determination of the Chinese government to support it as a national champion—should not be underestimated.
Despite its obvious vulnerabilities, Huawei’s capabilities—and the determination of the Chinese government to support it as a national champion—should not be underestimated. Ren Zhengfei has declared, “We have sacrificed ourselves and our families…for the sake of a dream, that we will stand on top of the world. For the sake of this dream, conflict with the United States is sooner or later inevitable.” Huawei could confront grave damage but has been preparing for just such a contingency, pursuing its own alternative components through its subsidiary HiSilicon. There are reasons to doubt whether Huawei could adjust to a worst-case scenario. Nonetheless, the Chinese government’s active investments in chipmakers are starting to pay off, particularly in AI chips. Already, these latest pressures are catalyzing a redoubling of China’s initiatives to enable so-called self-relianceand advance indigenous innovation, particularly in emerging and disruptive technologies. An unintended consequence might be reinforcing Beijing’s determination to stay the course, while risking weakening U.S. companies that now risk losing business or facing retaliation.
Today, 5G is not a race in which Huawei has all but triumphed. Huawei’s initial statement in response to these measures declared, “Huawei is the unparalleled leader in 5G.” Although this claim may make for great marketing—and a persuasive narrative for countries concerned that excluding it would increase the cost and slow the pace of their 5G deployment—this assessment is misleading and not entirely accurate. Huawei is still one among a number of contenders, including Nokia, Samsung, Ericsson, and Qualcomm, among others. To be sure, Huawei does have some unique advantages in 5G, such as its apparent strength as a systems integrator, and the company constitutes a major contender across nearly all of the critical components for 5G. However, such advantages are not unassailable in an industry that is continuing to evolve as 5G takes shape.
Going forward, the United States must not only play defense but also promote positive alternatives. This is perhaps the graver threat that Huawei poses: undermining fair and healthy competition thorough its desire to dominate 5G in ways that may be damaging to the vitality the overall ecosystem. Huawei has often succeeded in capturing market share based on its ability to undercut competitors in terms of price, likely enabled by Chinese government subsidies and funding that remain opaque. Presently, Huawei commands a significant proportion of the current global telecommunications market, nearly 30 percent to date by some estimates. Concerningly, Huawei seems to ‘lock in’ the choice of its networks in ways that may undermine optionality and interoperability for nations that had opted for its 4G,.
The goal for future U.S. initiatives on 5G should be promoting healthy competition. The continued development and deployment of 5G will be better served by a greater diversity of options among vendors and rebalancing of supply chains. The United States should be more proactive in 5G through redoubling initiatives to advance innovation. To compete, the U.S. government should increase and sustain support for research and development, whether through support and funding or incentives, such as tax breaks, for companies to redouble investments and universities to increase long-term research. At the same time, America cannot lead in 5G alone, and U.S. policy should prioritize closer coordination with allies and partners on security and innovation alike. Otherwise, whatever steps are taken against Huawei, China may still lead—perhaps dominate—the future of 5G.
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