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Combating the Chinese-Telecom Threat

The Editors

The Trump administration took two major actions this week against Chinese telecom companies. First, the president signed an executive order declaring a national emergency over threats to American information technology and giving himself the power to block transactions with telecom companies that are “subject to the jurisdiction of a foreign adversary” — a phrase left undefined but which has been widely interpreted to target Chinese companies Huawei and ZTE. Then, the Commerce Department added Huawei to its “entity list,” barring it from buying American technology without the approval of the U.S. government. These are bold, and justified, assertions of executive power.

Huawei and its Chinese counterpart ZTE have a large and growing worldwide presence manufacturing both consumer technology — phones, laptops — and networking equipment. Huawei is the world’s leading manufacturer of base-station equipment for 5G networks. Everything from driverless cars to consumer technology to critical infrastructure will soon depend on such technology, making telecom networks something of a strategic asset.

Allowing these companies to operate undisturbed in the U.S. would pose serious national-security risks. In 2012, the House Intelligence Committee delivered a sobering, bipartisan report finding that Huawei and ZTE create an opportunity “for further economic and foreign espionage” by China, a country “already known to be a major perpetrator of cyber espionage.” The committee came away “unsatisfied” with the level of cooperation from both Huawei and ZTE, neither of which provided information about their interactions with Chinese authorities, their operations in the U.S., or their internal Communist Party committees. It also found evidence suggesting that Huawei works with a cyber-warfare division of the People’s Liberation Army.

Much of the debate over Huawei has focused on whether it builds secret “backdoors” into its equipment that would facilitate spying. Even absent smoking-gun evidence of such vulnerabilities, though, there are several reasons to doubt that Huawei is operating on the up and up. A Huawei employee working in Poland was recently charged with espionage. Huawei has long operated front companies to circumvent sanctions in Iran. Its founder, Ren Zhengfei, was a delegate at a National Congress of the Communist Party in 1982 and has ties to Chinese intelligence. Under Chinese law, firms can be required to turn over sensitive user data to the government, and there is no reason to doubt that Huawei would comply.

Unfortunately, Huawei and ZTE have already gained a foothold in the global marketplace. Huawei has signed memoranda of understanding with companies in several EU nations to build their 5G networks; ZTE products are thoroughly integrated into global supply chains. The administration’s measures will hurt these companies, but we should continue to make it clear to European allies that their partnering with Huawei will make it more difficult for us to partner with them (especially the U.K., whose reluctance to ban Huawei has put it at odds with other Five Eyes countries). We should also create a favorable business climate for Huawei’s competitors, whether they be domestic or foreign (Nokia and Ericsson are the two leading competitors in the 5G arena).

Perhaps most important, the administration should resist any temptation to use this ban as a bargaining chip in the ongoing trade negotiations with China. This is a matter of national security, not economic advantage, and the future risk of Chinese espionage cannot be negotiated away.

But the Trump administration has taken necessary, correct actions against these companies. They pose a threat to the U.S. not because they steal technology from American companies (which they do) or because they receive “national champion” treatment from the Chinese government (which they do). They pose a threat to the U.S. because of their ties to the PRC, whose ambitions of espionage and cyber-warfare are no secret. Huawei and ZTE cannot be disentangled from China’s geostrategic aims. This move looks out for our own.

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