Politics, economy and trade stall Huawei's expansion
- By Dan Steinbock
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E-mail Shanghai Daily, October 23, 2012
In the United States, a Congressional Committee believes Huawei is engaged in espionage. Reportedly, the White House disagrees. What's going on?
Huawei entered America on Valentine's Day in 2001. But it was not love at first sight. Despite repeated bids, Huawei efforts to win a major contract from the top-tier US carriers have been frustrated - not by the marketplace, which has been eager for deals, but the US government.
Recently, the case has entered a new stage in the United States. In mid-September, the House Intelligence Committee had hearings on two Chinese telecom equipment companies, Huawei and ZTE. A day before, Huawei USA released my independent report on "The Case for Huawei in America." Unlike almost all existing studies on Huawei, I interviewed Huawei's senior executives, as well as analysts and journalists focusing on the company.
I argued that the cyber security problem is global and industry-wide. After all, two-thirds of Huawei's components do not come from the company, but around the world.
At the time, the White House National Security Council spokeswomen Caitlin Hayden acknowledged that "we understand the potential for risks to our country introduced via the supply chain for telecommunications equipment and services."
Consequently, if there is a security case against Huawei, it should be verified and made in a public and transparent way.
In the absence of a security case against Huawei, its expansion in America is an opportunity for the US government, companies, innovation and consumers.
First, Huawei's expansion in the US brings jobs, capital, and tax revenues. In this regard, the company has a strong track-record. It generates high-quality jobs that both presidential candidates want in America.
Second, Huawei exerts a major competitive impact on price competition. When it arrived in Europe, industry margins declined significantly. A similar outcome would be likely in the US as well.
Third, Huawei is good news for innovation. The company already maintains more than half a dozen advanced R&D centers in the US.
Fourth, Huawei has created an end-to-end global cyber security assurance system, independent third-party testing institutes, and it has opened up its source code. As a global trendsetter, Huawei is concerned about cyber security. Its global chief cyber security officer is John Suffolk, who served as former CIO for the UK government, reporting to Prime Minister David Cameron.
The reasons for Huawei's barriers in Washington involve trade, economy and politics.
First, Huawei has the unfortunate role of bargaining chip in world trade talks.
Second, Huawei's global success makes its US rivals uneasy because they can no longer compete with Huawei's low-cost innovation. According to The Washington Post, senior staffers in Capitol Hill have been lobbied by an array of US technology firms to increase scrutiny of Huawei. Security has been used as pretext for entry barriers.
Third, the 2012 presidential election race has amplified the role of politics in the Huawei case. In Washington, the Congressional hearing was timed right after the anniversary of September 11, 2001.
In turn, the Congressional report was released right after the popular Sunday newsmagazine 60 Minutes which reported on Huawei and the Congressional investigation.
Spiced with assertive rhetoric, the House Intelligence Committee's report is heavy on bold accusations, but light on serious evidence. As before, the material that is presented as critical remains "classified."
Only days after the Congressional report, Reuters disclosed that the White House had ordered 18-month review of security risks posed by suppliers to US telecom companies. It found no clear evidence that Huawei Technologies had spied for China.
Today, four of every five major telecoms operators worldwide cooperate with Huawei. Half of the networks that are in use worldwide deploy its technologies.
Cyber security violations have a potential for great devastation. Both the United States and China suffer from cyber attacks.
However, what is needed is extensive multipolar cooperation by major cyber powers and G-20 economies. Actionable policy measures must be informed by solid facts, and serious allegations should be supported with serious evidence.
Dr Dan Steinbock is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China).
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