The US House Intelligence Committee released a report blocking Huawei and ZTE's access to the US market sales and M&A. Coincidently, Softbank, Japan, acquired Sprint almost at the same time, without even a word of challenge from the Congress.
US President Barack Obama issued an order on September 30, 2012, blocking Sany's wind farm investment in Oregon, on the national security reasons, after CFIUS turned down the project earlier this year. The reason was its site being too close to the navy base. However, after moving the site 1.5 miles away, the navy had already given a green light, and there are German and Danish wind farms around.
Why China only?
Obviously, the two cases can not find adequate explanation in the reasons given. There should be underlying fundamentals behind. From the US perspective, Japan, Germany, Denmark are its alliance countries, while China is the “potential strategic rival of America”, as advocated repeatedly in the US. The US government has a profound strategic distrust of China, regarding China as a threat, either to its national security, or to its economic interests.
According to Anglo-Saxon legal system, a man is innocent until adequate evidence proves him guilty, as vividly illustrated by the O.J. Simpson case. However, the legal system changed on the Huawei case due to a pre-set distrust and concerns. No firm evidence could prove that Huawei and ZTE had threatened the US national security, nor had they anything to do with cyber espionage. The only reason given goes like that:” Neither Huawei nor ZTE was willing to provide sufficient evidence to ameliorate the committee's concerns”, or “provide specific information about its relationship with the China Communist Party Committee”. The Intelligence Committee just followed a reverse course. It should be the Intelligence Committee, not Huawei and ZTE, to “provide sufficient or specific information to prove” the threat and the relationship. If this logic holds, the US court should have easily found O.J. Simpson guilty only because he had failed to “provide sufficient evidence proving his independence from his former wife’s death’.
Huawei is already the world second largest telecom equipment and solution provider, with operations spread over in 150 countries and regions the world over, including 14 facilities in the US, with total revenue of $32.4 billion. The US is not Huawei’s leading market, accounting for only 4% ($1.3 billion) in 2011. If only Huawei has a threat to national security, it should have happened hundreds of times in dozens of countries, including in the US already. If the threat is China at large, a large part of the telecom equipment supplied by Cisco, Ericsson, Alcatel-Lucent, Samsung will also be in question, because lots of them are made in China.
The report made it crystal clear that it had “concerns” before the investigation. If Huawei and ZTE could not overturn the concerns, they should be blocked. Huawei and Sany cases just mirror well how strong the stragetic distrust on China by the US congress and Obama Administration is. Ironically, the US government has reiterated again and again during each of the past Sino-US S & ED the “advancement of strategic reassurance”. The Intelligence Committee report has made this pledge worthless.
According to this logic, China should also place a pre-set strategic distrust on the US. Cisco and Microsoft will probably all have to leave China, because none of them could prove their routers or software safe for China, as China “ has no technical ability to identify such threats” and thus has to block them on many ifs, buts and maybes. China should also block selected US investment projects just on national security concerns. Hence, the unreasonable block on Huawei will most probably result in a cost paid by Cisco and other American IT giants in China market. It will definitely not stop Huawei's growth. Huawei will most probably become world largest telecom equipment and solution provider, and thus prevail over American companies in the world markets. The cost of the US strategic distrust on China will ultimately hurt the Americans.
Telecom and software technology of the day is a global product. Huawei’s products, as those of many other telecom leaders of the world, are actually a mix of various inputs and parts from different corners of the world. Huawei’s products have American elements and Cisco’s products have Chinese elements as well. The fast progress of cloud computing has lead to software products shared by the world. The US government should change to a constructive approach. Instead of blocking Huawei as a whole, they could inspect Huawei’s products. Huawei, on its part, should choose to go public listing to make itself thoroughly transparent. As to fighting cyber espionage, the effective way is a joint effort by Sino-US governments. Huawei should not be the scapegoat.
The COSCO case should provide a good lesson. 20 years ago, COSCO's application for renting the Long Beach dock was rejected by the US government, on the excuse of national security, as COSCO was a state-owned company. Time elapses. COSCO has created over 600 jobs and generated considerable tax revenues for America. Ever since 2002, COSCO has initiated a direct containership call at Port of Boston, creating 6000 working hours for local jobless dock workers. The US Senate passed a resolution of appreciation to COSCO in 2010. The atmosphere has changed tremendously. Similarly, Huawei has created over 1000 jobs, high-tech jobs, and has contributed to the innovation and technology advance in the US, so vital for American manufacturing resurgence. Why not a second thought?
He Weiwen is co-director, China—US/EU Study Center, China Association of International Trade.