By Charles F. Moreira –
On 24 October, Huawei Technologies, one of China’s telecommunications equipment giants pledged to increase its transparency to counter security concerns and proposed to establish a cyber security evaluation centre in Australia.
Huawei Australia chairman John Lord said the centre would test the security credentials of technologies being implemented into critical infrastructure projects. worldwide and that all equipment (including competitors’) implemented into major or critical Australian networks can be subjected to the same thorough security assessment.
“Huawei is willing to offer complete and unrestricted access to our software source code and equipment in such an environment, and all other vendors should be subject to the same high standard of transparency,” Lord said.
This comes in the wake of a US House of Representatives Intelligence Committee report released on 8 October, alleging that Huawei and China’s other telecoms equipment giant ZTE, pose possible threats to U.S. national security, but the committee provide no hard evidence to support its allegations.
Also earlier in March, 2012, Australia blocked Huawei from bidding on contacts in the US$38 billion Australian National broadband Network, due to security concerns.
While the House report isn’t law, however it recommends that US government computer systems and private companies should exclude any equipment from Huawei and ZTE, and also that the U.S. Committee on Foreign Investments should block acquisitions, takeovers, or mergers involving these two companies, which effectively hampers their ability to penetrate the U.S. market.
According to Reuters, people familiar with the House of Representative’s 18-month review said that intelligence agencies and other departments conducted the largely classified inquiry, delving into reports of suspicious activity and asked detailed questions of nearly 1,000 telecoms equipment buyers for evidence of spying but found none.
“There’s nothing in the report, unless you count innuendo, supposition and guilt by association, to suggest either company has engaged in cyber-espionage, is malevolently interfering with America’s telecommunication supply chain or presents a threat to American free enterprise,” said a recent column in the San Francisco Chronicle.
However, people leading the review concluded early this year that Huawei’s communications network equipment was risky for other reasons, such as the presence of “vulnerabilities” which hackers could exploit.
Meanwhile, Felix Lindner, a leading network equipment security expert had spent months studying the software code in Huawei equipment and while he found a series of vulnerabilities in its routers, he believes that they are due to sloppy coding and poor procedures, rather than any deliberate attempt at espionage.
Someone else suggested that the threat is not in the equipment but is in Huawei’s technical staff involved in the installation and maintenance of the telecommunications system who will have access to intellectual property on competing equipment.
Double standards
The day after the report, Japan’s large telecommunications group Softbank acquired a 70% stake in Sprint-Nextel, the third-largest US telecommunications network, while T-Mobile, the fourth-largest, owned by Germany’s Deutsche Telekom had recently announced plans to buy the next largest, MetroPCS.
However, that’s not all. Earlier this year U.S. president Barack Obama forced Ralls, a branch of the Chinese firm Sany, to give up on a wind power project near a U.S. naval facility. Sany is suing the president.
Also, currently under scrutiny are China National Offshore Oil Corporation’s acquisition of Nexen of Canada and China-based auto parts maker the Wanxiang Group’s purchase of U.S. electric car battery manufacturer A123 Systems, which had recently filed for Chapter 11 bankruptcy protection and is seeking a U.S.$50 million loan from Wanxiang to settle its debt to its current lender, Johnson Controls.
The US also prohibited Huawei from participating in the construction of its National Emergency Communications Network and stopped it from buying part of the assets of American computer company 3Leaf Systems.
Even earlier in 2010, the U.S. government put strong pressure on Sprint-Nextel to not award a large network structure upgrade contract to Huawei. Instead, the contract was later divided among Sweden’s Ericsson, France’s Alcatel-Lucent and South Korea’s and Samsung.
Earlier still in 2008, the U.S. cited “national security concerns” to prevent Huawei’s collaboration with equity company Bain Capital to acquire 3Com, while similar measures prevented Huawei from acquiring Motorola’s wireless network division.
King of the hill
Huawei’s sales revenue was U.S.$ 16.07 billion in the first half of 2012, overtaking Ericsson to become the world’s largest telecommunications equipment maker, while ZTE has been the fifth largest for years.
Huawei currently serves 45 of the world’s top 50 telecoms operators, including Vodafone, Motorola, France Telecom and T-Mobile, while ZTE services 500 telecom carriers worldwide.
Altogether, Chinese investment in North America is now close to U.S.$12 billion, 65% of which is is by state-owned enterprises. China’s global outward investment is forecast to reach U.S.$1 trillion by 2020 but will the rules be fair and consistent. Will they protect national security or domestic rivals?
Can’t trust them?
It’s a question of trust, according to Robert A. Rogowsky, professor of trade and development, Monterey Institute for International Studies and adjunct professor at Georgetown University.
“Americans welcome, indeed compete aggressively for, Chinese investment. But permitting any firm into the technical infrastructure that is a foundation for national security requires a substantial amount of trust. The solution requires a 3-way effort among Washington, Beijing and the private firms that want to service or supply the secure infrastructure in either country,” said Rogowsky.
Huawei Australia’s Lord regards the U.S. House of Representative report as “protectionism,” not security and the response to all the negative rhetoric was for the company to increase its transparency in Australia, hence the security evaluation centre.
Mark Fabbi, a vice-president at research firm Gartner thinks otherwise. “Huawei has been extremely successful and disruptive around the world, but the one market it hasn’t been able to penetrate is the U.S., and that’s mainly because of politics and lobbyists pushing really, really hard to put up barriers,” he was quoted by The Washington Post.
The Post had obtained from an anonymous source familiar with Cisco’s sales strategy, a seven-page September 2011 presentation distributed by Cisco entitled “Huawei’s & National Security,” which was allegedly used to lure clients away from Huawei.
However, Cisco denied the allegation in a letter to the Post on 17 October. “The suggestion that Cisco engaged in a lobbying campaign with the House Intelligence Committee against Huawei on national security issues, and that the marketing document was distributed or its contents used for lobbying on Capitol Hill, is false,” Cisco wrote.
“In response to a request we received from the Committee, we provided committee staffers with publicly available information about the private intellectual property litigation between Cisco and Huawei that occurred in 2003 and 2004. This was the extent of Cisco’s involvement,” it added.
Meanwhile, an investment analysis by the China Business Journal found that 73 of the 535 representatives of the US Congress have investments in Cisco, the U.S.’s largest telecommunications company which regards Huawei as its top competitor.
New Cold War?
Ignored by all the above allegations and reasons is the continued geo-strategic political, military and economic rivalry between the big powers despite the end of the Cold War between the capitalist Western and communist Eastern blocs in late 1989 and early 1990.
Protectionism is not the reason, as is evident from the favourable treatment by the U.S. government of French, German, Swedish, Japanese and South Korean telecommunications and technology companies.
After all, the U.S. government had much earlier allowed Alcatel to buy up Lucent Technologies, a company with roots going back the Alexander Graham Bell who invented the telephone, and in the process acquired its prestigious Bell Labs as well.
The U.S. had helped its former World War II enemies Germany and Japan, as well as its allies Taiwan and South Korea, with financial and technological assistance to rebuild their economies after the war and also provided them with favourable access to its markets to prevent them from either becoming communist or aligning with the Eastern bloc, especially since all of them were geographically situated on the frontline of the Cold War, and today they remain allies and some still host U.S. military bases.
On the other hand, while the Soviet Union collapsed and broke up, and the republics all become capitalist, still geo-strategic rivalry continues to exist between the U.S. and Russia, for example Russia’s defence of the Assad government in Syria versus U.S. support for the rebels. The U.S. and Russia mainly face off against each other in Eastern Europe, the Middle East and Africa, and while Russia as a formidable rival to the U.S. militarily, it isn’t economically or commercially.
While communist in name, in practice China is capitalist and has given up support for armed insurgents worldwide. While it’s modernising and enlarging its armed forces, it’s also a major rival of the U.S. and Europe technologically, economically and commercially, and is the U.S.’s largest creditor holding some two trillion worth of dollar-denominated assets, mostly U.S. Treasury Bonds.
China faces the U.S. in the Asia Pacific, a region of great economic and geo-strategic interest to the latter, while China still has ongoing territorial disputes with U.S. allies in the region such as the Philippines, South Korea and Malaysia, and still has regards Taiwan as its territory.
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| U.S. military presence – source BBC |
The U.S. currently has 17 military bases in Japan, 12 in South Korea, two in Guam and one in Singapore, plus military personnel present in the Philippines, Thailand and Australia, and the Obama administration is continuing with its strategic pivot to Asia-Pacific and now trying to cultivate renewed relationships with countries in a bid to further expand the number of U.S. military bases throughout the region, including to reopen previously abandoned bases, and most of this is to contain China.
China also been pro-actively building trade and financial relations with countries in Latin America and Africa, including providing them with generous loans.
The U.S. has also accused Russian and Chinese hackers of launching cyber attacks against sensitive U.S. facilities, though nothing has been proven so far.
Basically, the Cold War never really ended but continues in a different form, hence the U.S., Canada and Australia continuing to treat China and Russia with suspicion.
“China’s rise is a great boon to the US military/security complex, which governs America in which there is a pretence of ‘freedom and democracy’.” wrote Paul Craig Roberts in March. “China is the profitable replacement for the ‘Soviet threat.’ As the days go by, the presstitute (press-prostitute) media will create in the feeble minds of Americans ‘The ChinaThreat’.”
Roberts was Assistant Secretary for the Treasury for Economic Policy under the Reagan Administration and associate-editor of the Wall Street Journal. He also was columnist for Business Week, Scripps Howard News Service and Creators Syndicate.
