China pushes Huawei, Washington pulls another way

Sometimes a single decision by a single government can illuminate an important trend on the world stage. And so it proved this past week, with the spotlight falling on China’s drive to displace the United States as world leader in technology and telecommunications, and on U.S. efforts to thwart Beijing’s ambition.

That clash was not the only reason the British government decided to bar the giant Chinese company Huawei from its forthcoming 5G network – a major extension of its earlier, more limited move to restrict the company’s role. Other political and economic calculations were also in play, not least Britain’s need to forge a new international identity and role now that it has left the European Union.

But what finally tipped the scales toward a tougher Huawei decision was pressure, private and public, from Washington. 

There are multiple points of contention between the U.S. and China in what some pundits are calling the potential start of a new cold war. Yet Britain’s Huawei decision was a dramatic reminder of the importance of the competition for technological primacy. It was also a sign of why this cold war, if it happens, will be different from the decadeslong rivalry with a decidedly more low-tech Soviet Union.

China plays catch-up

In most fields, the U.S. retains a clear lead in technology and innovation. With its universities, research institutions, and technology incubators – as well as market-shaping companies, from Apple and Microsoft to Amazon and Tesla – this seems unlikely to change in the immediate future.

But Huawei, founded in the late 1980s, has become a leading world player. By 2012, it had overtaken Sweden’s Ericsson as the top manufacturer of telecommunications equipment. Two years ago, it leapfrogged Apple to become the world’s second-largest smartphone maker. Just last month, it surpassed South Korea’s Samsung to claim the No. 1 spot. 

Though nominally a private company, Huawei has benefited from billions of dollars in state credits. Its 5G kit is regarded as being at least as good as that made by Ericsson or other Western firms. And with its government patronage, it has also been able to undercut competitors on price.

Huawei is one of dozens of increasingly successful Chinese technology companies. And it is playing a starring role in President Xi Jinping’s explicit strategy to position China at the cutting edge of future technological applications – not just in telecommunications but in areas like artificial intelligence, electric and self-driving cars, robots, and space travel.

In pressing Britain and other countries to exclude Huawei equipment from their 5G networks, Washington has raised genuine security concerns, warning that Chinese-built networks could hide “back doors” through which sensitive data could be passed on to Beijing. Under Chinese law, Huawei must share information with the country’s security services if asked to do so.

But with 21st-century economies so dependent on technology, it’s the potential geopolitical implications of Chinese advances that have been preoccupying Washington, especially since China already exerts enormous influence on international trade, investment, and development.

Belt and Road relationships

Britain has now joined a group of countries traditionally close to the U.S., including Australia, New Zealand, and Japan, that have decided to ban or phase out Huawei equipment. Canada has been holding off, apparently afraid that a negative decision could provoke Beijing into worsening the situation for two Canadians it has detained since Canada held a Huawei executive wanted by the U.S. authorities.

What’s less clear, looking ahead, is whether the U.S. will, or can, exert similar sway on other traditional allies as they make their Huawei decisions. In many countries, the decision is going in Huawei’s favor. These include states across Asia, the Arab world, Africa, and Latin America where China has won financial and political influence through its Belt and Road program of loans and investment in infrastructure projects.

Yet most closely watched in the months ahead will be what happens in the EU, the world’s largest trading bloc, which has long had close ties with the U.S. but where China has been building an increasingly important network of economic ties in recent years.

Washington will be hoping that, at the very least, EU countries strictly limit Huawei participation in 5G, especially since European firms like Ericsson and the Finnish company Nokia could provide alternative solutions. But a number of Eastern European countries, and Italy, have signed on to Belt and Road investment plans and may well be reluctant to exclude Huawei.

The key voice is likely to be Germany’s. It is not yet clear which way Europe’s largest economy will go: Chancellor Angela Merkel has seemed leery of having to choose sides as diplomatic and trade relations between the U.S. (Germany’s biggest trade partner) and China (its third biggest) have become more adversarial.

But as Washington and Beijing battle for global technological leadership, neither of them may leave much room for other countries to steer a noncommittal course.