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Foreign Policy

HUAWEI Persecution Poses EU Dilemma

Jul 12, 2023

Since the Trump administration launched its trade and tech war on China, no evidence whatsoever has been revealed by state-led investigations into US allegations that Huawei poses a security threat to national or global communication networks. Nevertheless, the US government has preferred economic warfare, including sanctions, restrictions, tariffs and national security designations, over free markets. While the US has been caught red-handed tapping into telecommunications networks in EU countries, it has leveraged its growing influence over the EU to persecute Huawei in its attempt to regain proportional control over global telecommunication supply chains and networks and reimpose US and EU technical and commercial dominance. Rather than reinvigorating its debt loaded economy by reducing sanctions, tariffs and illegal secondary and third-party bans on technology exports, the Biden administration has doubled down on coercive commercial trade policy under the guise of national security, while simultaneously providing massive subsidies to telecommunications companies to on-shore in the US and hastened EU de-industrialisation.

The most recent violation of international economic and trade rules emanates from Thierry Breton, European Commissioner for Internal Markets, who has designated both Huawei and ZTE as high-risk vendors (HRV). In a strongly worded statement Huawei rejected the actions of Thierry Breton and comments made by EU Commission representatives. Huawei’s statement noted that the high-risk (HRV) designation was not based on a verified, transparent, objective and technical assessment of 5G networks. To date, only 10 of the 27 EU member countries, under pressure from both Washington and Brussels, have restricted or banned Huawei from their 5G networks, including Denmark, Sweden, Estonia, Latvia and Lithuania, plus the UK. These states are using their leverage within the EU to extend US sanctions on Huawei network and 5G equipment.

Huawei immediately argued that the ‘High-Risk Vendor’ designation goes against free trade principles and that that such restrictions could “pose serious economic and social risks,” stifling innovation and distorting the EU market. While Huawei understands the European Commission’s concern to protect cybersecurity publicly singling out an individual entity as ‘HRV’ without legal basis is against principles of free trade. It is of paramount importance to emphasize that the discriminatory ‘HRV’ assessment shall not be applied to any vendor without justified procedure and adequate hearing. As an economic operator in the EU, Huawei holds procedural and substantial rights and should be protected under the EU and Member States’ laws as well as their international commitments. Ambassador Fu Cong, Head of the Chinese Mission to the EU, echoed these sentiments, stating that the ban violates WTO rules and could seriously impact the business communities in both regions.

During Chinese Premier Li Qiang’s recent visit to the EU, the German government rejected the call from the European Commission to exclude Chinese companies like Huawei and ZTE from Germany’s telecommunications architecture. EU Commission President Ursula von de Leyen has been a leading voice for de-risking (decoupling) with China, but these arguments are emotional calls not based in economic realities. At a time when Germany and the EU have fallen into economic recession, with the UK and United States predicted to follow, the enormous cost of excluding Huawei and decommissioning installed Huawei hardware from national networks can only exacerbate the already fragile economies of EU member states.

Several telecom executives and government regulators in Germany and Austria are now questioning the EU’s conclusions regarding cybersecurity risks. The Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), expressed no security concerns regarding Chinese telecom firms noting that network operators are still free to use components from Huawei or ZTE for 5G network expansion. Research from Oxford Economics suggests that restricting a key supplier of 5G infrastructure across the European member states would increase total 5G investment costs by almost €3 billion per year over the next decade. Further research by Barclay’s estimates the cost of removing Huawei gear in the Deutsche Telekom network at around US$1.2 billion, with Telefonica and Vodafone having to spend at least US$750,000 each to remove their Chinese supplied equipment.

While the European Commission is trying to shut Chinese vendors out of European markets, China appears to be moving in the opposite direction. European network operators Nokia and Ericsson were recently awarded around 16 percent of a large China Mobile contract. This is double the previous market share held by European telecoms operators in China. The future of 5G development in Europe hangs in the balance, as does the EU's trade and political relations with China. It's a scenario that stakeholders around the world will be monitoring closely.

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