5G and Huawei’s impact on trade tensions

Zine-Eddine Aklil // 26 February 2020

With increased security risks concerning Huawei’s ties with the Chinese state and the firm’s planned rollout of 5G across Europe, the European Commission appears to be at a crossroads. They could decide to restrict Huawei’s operations and access to the European Economic Area and its members. However, this might limit the potential of 5G technology. In turn this could impact the digital economy and society, mostly because of Huawei’s leading role in 5G innovation and the variety of their technological instruments.

Alternatively, they could decide to loosen the rules put in place to prevent surveillance by foreign actors. However, this could put at risk the very sovereignty of the states concerned.

Both of these scenarios are quite radical in nature, but they depict just how critical the upcoming decisions regarding the implementation of 5G in Europe will be.

Following the ban implemented by Trump’s administration in May 2019, Huawei has taken a proactive stance to push back against the United States’ effort to limit their capabilities. They have sued the U.S. Federal Communications Commission for what they call unlawful restrictions based on ‘inconclusive evidence’ of national security concerns, and US mobile carrier Verizon for intellectual property theft.

These actions are the latest in a line of continuous and aggressive measures taken by the Chinese firm which aim to regain international legitimacy in the eyes of world leaders after a period of heavy scepticism. The US in turn has implied that China is the most important threat to Western democracy today. They have also threatened to cut security ties with the UK for approving a restricted role for the Chinese enterprise to operate within the country. In addition, they continue to lobby European states to push back against Huawei and not follow in the UK’s footsteps.

The Trump administration is also exploring alternative solutions to approaching the Huawei dilemma at an international level. US Attorney General William Barr suggested that the US could consider buying a controlling stake in already established multinational telecommunications companies such as Erikson or Nokia in order to create a stronger international competitor to Huawei.

In the UK, Conservative critics of the recent Huawei decision will seek the needed number of rebels for a successful backbench revolt on the legislation. Since many of them have been very vocal about the importance of maintaining a strong relationship with the US, this may have an impact on how quickly and efficiently Boris Johnson’s government will be able to complete post-Brexit trade talks with the US.

Throughout this political proxy war waged between China and the US, the consensus by Western leaders remains unchanged: due diligence must be taken regarding the implementation of 5G. But are these cybersecurity risks overblown? US security agencies have remained firm on the notion that Huawei could be used to create a ‘backdoor’ in foreign mobile and data networks. However, the UK’s National Security Council (NSC) remains unconvinced. According to the NSC’s Technical Director Ian Levy, the threat can be managed. Levy said: “UK operators that use [Huawei technology] have unparalleled information to help them manage the risk.”

Huawei has constantly reiterated that they are a private organisation that holds no ties to any government, and proceedings aiming to prove the opposite are yet to be based on anything more than circumstantial evidence.

Aside from what cyberwarfare doomsayers might claim, there should be more concern over how much autonomy Ofcom and other government-approved regulators across Europe are given. While it may be argued that these organisations need control in order to regulate competition, potential breaches of privacy constitute a bigger security risk to citizens across Member States.

All in all, EU jurisprudence will be crucial to avoid the consequences that may accompany Chinese espionage. But without any proof of interference, Member States and the wider EU community cannot discriminate and must continue to respect the Union’s values of equality and rule of law, even though trade with its largest partner might suffer as a result.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).