Will the U.S. Stance on Chinese Telecom Equipment Change?

09/10/2020

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Jerker Hellström | Economic Center for International Political Economy

With two months left until election day in the U.S., the two presidential candidates’ statements on China have come to the forefront. President Donald Trump is manifesting a clear ambition to characterize himself as stronger on China than his Democratic opponent, who he has labelled “Beijing Biden”. Nevertheless, the China policy of a Joe Biden/Kamala Harris presidency would probably differ little, apart from in tone, from that of the Trump administration.

China’s emergence in the debate is a unique aspect of the 2020 presidential run. While foreign policy tends to play a minor role in U.S. elections, both camps now view it as ‘very important,’ according to a recent survey by Pew Research. Both Trump and Biden voters only hold one issue higher, namely Supreme Court appointments.

At the core of the China policy debate lies the issue of Chinese high-tech enterprises, in particular Huawei and other telecom equipment vendors. A common misperception is that Trump began the war against Huawei’s global expansion.

The first U.S. measures to exclude Huawei were in fact taken during Biden’s term as Vice President.

Australia’s security review dates to 2012

Most commentators seem to believe that the international debate about banning Huawei as a supplier of telecom infrastructure officially started on August 23, 2018. The Australian government under PM Malcolm Turnbull (on his last day in office, no less) warned that “the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorized access or interference.”

However, the Turnbull government did not impose the first official ban. Already in March 2012, Australia’s Julia Gillard-led government decided to exclude Huawei from supplying communication equipment to the National Broadband Network. Bearing in mind the concerns in many countries over the risk of repercussions from the Chinese government for bans against its high-tech champions, this was a notable decision. China was Australia’s top trading partner in 2012, accounting for 20 per cent of its total trade in 2012 and as much as its trade with Japan and the United States combined.

First strike in Europe: the U.K., May 2018

The first European country to officially ban a Chinese supplier of telecom equipment was the United Kingdom. A fact often overlooked is that the U.K.’s National Cyber Security Centre (NCSC) on May 1, 2018, banned China’s ZTE from supplying not only 4G (and eventually 5G) equipment, but from supplying any telecom infrastructure equipment.

In its assessment, the NCSC said that the “national security risks arising from the use of ZTE equipment or services within the context of the existing U.K. telecommunications infrastructure cannot be mitigated.” Nevertheless, it was not until nearly two years later, on January 28, 2020, that Prime Minister Boris Jonson decided to designate Huawei a high-risk vendor, banning the company from supplying both fixed and mobile equipment. In terms of mobile equipment, Huawei would only be allowed a 35 per cent share in the 5G radio access network until the second notice on July 14 which required a complete phase-out.

Unlike the public decisions made by authorities in Australia and the U.K., the French government has unofficially banned Huawei and ZTE based on Article R226-3 of the penal code, which came into force in January 2002. This article provides the legal basis for the French National Cybersecurity Agency (ANSSI) to ban (i.e. not grant) authorization for any available supplier of equipment to the Mobile Core networks and Radio Access Networks (RAN). It subsequently resulted in unofficial bans of the two Chinese firms as suppliers of Mobile Core network equipment nationwide, as well as of 3G/4G Radio Access Network equipment in the greater Paris area. While most of the preparatory work was done during President Nicolas Sarkozy’s term (2007-2012), it was under President François Hollande’s tenure (2012-2017) that the de facto bans were administered and implemented.

Bans under President Obama

Whereas the Trump administration has shaped America’s current 5G-related foreign policy, many observers tend to overstate its contribution to its domestic telecom policy. Trump was not the first U.S. president to exclude Huawei and ZTE from supplying telecommunication equipment to the leading carriers. Since the outset of the 4G era, which began with its commercial launch in 2011, the main nationwide U.S. carriers (e.g. Verizon, AT&T and T-Mobile) do not rely on Chinese suppliers. Prior to recent changes, only some rural carriers – that only serve a tiny share of the U.S. subscriber base – have been able to source equipment from Chinese suppliers. By barring rural carriers who use Huawei and ZTE equipment from Federal subsidies (i.e. the Universal Service Fund) in November 2019, the Trump administration has however effectively shut off that minuscule market segment as well. Moreover, the two Chinese suppliers were designated as national security threats in 2020.

Many tend to associate the Trump administration’s public (and legally binding) stance on Chinese suppliers in the U.S. domestic context with the National Defense Authorization Act (NDAA) of 2018, which specifically names the Chinese companies. However, the Trump administration merely amended existing prohibitions enacted by President Obama, who barred Huawei from bidding on U.S. government contracts back in 2014.

While the NDAA prohibits federal agencies and their contractors from using Huawei equipment, it does not directly prohibit commercial carriers such as Verizon or the USF-dependent rural carriers from doing so. What possibly comes closest to public and legally binding policy action is the Executive Order of May 15, 2019, which laid the grounds for action on USF funding by the Federal Communications Commission (FCC). The Executive Order was also instrumental for numerous subsequent steps, such as the Commerce Department’s entity listing that served U.S. foreign policy objectives.

Will the 5G war end if Biden wins?

So where do we trace the origin of U.S. domestic policies concerning Huawei and ZTE? It can be traced to the House Intelligence Committee’s “Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE,” released on October 8, 2012. The report concluded that “Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems.”

This report came at a crucial time: It was released during Obama’s first presidential term, just a few weeks before his re-election, and as 4G networks were about to be rolled out in the U.S. The timing also follows a recommendation issued on March 26, 2012 by ASIO – Australia’s national security agency – which advised its government to ban Chinese vendors from the country’s National Broadband Network.

Many European leaders who are betting on VP Biden to win in November 2019 and restore the “global order” in more ways than one. However, this chronology shows that the U.S. stance on Chinese telecom equipment is unlikely to change, regardless of who is sworn into the Oval Office in January 2021. Berlin is currently stalling its 5G decision, betting that the next U.S. administration could end the trade wars – and lift the current sanctions on Chinese 5G vendors. Overall, the Merkel government seems to be uniquely confident in Huawei’s future ability to supply and maintain 5G networks, and Germany has chosen a path that is in striking contrast to those of France and the U.K.

In conclusion, the U.S. telecom security concerns did not emerge due to President Trump. Unless Biden plans to contradict the policies drafted under President Obama, the U.S. stance on the company is not likely to change materially if there is a change in the U.S. Presidential office.

And if we look wider and globally, the one to cast the first stone was Australia under PM Julia Gillard. Should the 5G tech war need a figurehead, it would wear Gillard’s scarlet page rather than Trump’s trademark yellow comb-over.

Jerker Hellström is the Director of the Swedish Center for China Studies.

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