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EU Poised to Send Warning to China on 5G

Nikos Chrysoloras and Natalia Drozdiak

(Bloomberg) -- The European Union is poised to say potential 5G suppliers will be evaluated based on their home country’s laws, a stance that could exclude Chinese businesses from some lucrative contracts for the advanced telecommunications networks.

“Factors, such as the legal and policy framework to which suppliers may be subject to in third countries, should be considered,” according to a draft of a joint statement obtained by Bloomberg and planned for release next month. The document is due to be approved on an informal basis this week by government envoys with formal sign off by ministers due in December, and the wording is subject to changes.

The EU statement outlines the bloc’s position following a risk assessment that described a nightmare scenario where hackers or hostile states could take control of everything from electricity grids to police communications. It warned against reliance on suppliers from countries with non-democratic systems of government.

U.S. and European officials have repeatedly flagged concerns about partnering with Chinese equipment makers, such as Huawei Technologies Co., for 5G networks. Chinese companies are obliged to assist the country’s national intelligence organization in their investigations, though Chinese officials and Huawei have said there are exceptions to those rules and the company wouldn’t necessarily be forced to do so.

U.S. Secretary of State Mike Pompeo tweeted on Tuesday that the EU’s risk assessment report highlights how nations should install 5G equipment and software only from companies that won’t threaten their security, privacy, intellectual property, or human rights.

Key parts of the next-generation infrastructure “such as components critical for national security, will only be sourced from trustworthy parties,” according to the draft statement of EU governments. The 5G build out should be “firmly grounded in the core values of the EU, such as human rights and fundamental freedoms, rule of law, protection of privacy, personal data and intellectual property, in the commitment to transparency.”

A spokesman for the EU’s Council declined to comment on the content of the draft communique.

German Stance

European countries have the ultimate say whether or not to ban a supplier from their national networks for security reasons. German Chancellor Angela Merkel has decided to let Huawei supply some gear as long as the company fulfills certain security standards, despite intense pressure from her own party for an outright ban.

The draft also stresses “the need to diversify suppliers in order to avoid or limit the creation of a major dependency on a single supplier” as well as “the importance of European technological sovereignty and promoting globally the EU approach to cyber security.”

Besides Huawei, Europe’s Nokia Oyj and Ericsson AB supply 5G equipment.

(Updates with U.S. Secretary of State’s tweet in fifth paragraph.)

To contact the reporters on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net;Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, ;Giles Turner at gturner35@bloomberg.net, Amy Thomson, Richard Bravo

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