Huawei: The brand of controversy

 “Putting Huawei or other untrustworthy vendors in any part of the 5G telecommunications network is a risk.”

Robert Strayer, Deputy Assistant Secretary, US State Dept.

Huawei is a Chinese multinational networking and telecommunications equipment and services company that is headquartered in Shenzhen, China. The primary focus of the company, when it was founded in 1987, was on manufacturing phone switches.

However, over the years, it has expanded its business and is now among the leading technology firms in the world. Despite its success, the company is surrounded by many controversies.

After Huawei and all its equipment were banned in the USA, including other countries such as Britain and Japan because of security concerns regarding Huawei’s telecom equipment, US Senator warned India against Huawei. Further, Indian companies have been told not to share or supply any US product or equipment to Huawei; otherwise, a punitive action would be taken against them.

US Government vs. Huawei

In May 2019, US President Donald Trump, issued an executive order stating concern about national security and banned Huawei (and all its equipment) in the United States. He considered that a threat to the security of the nation and also declared a national emergency on this matter.

On the same day, Huawei was placed on the Entity list (a trade blacklist) of Commerce Department, leading to most of the US firms backing off from doing business with the company. The reason for this ban is the allegations made by the Government officials that Huawei will help the Chinese Government spy on other countries or even attack the US.

According to FBI Director Christopher Wray, it is also capable of maliciously modifying or steal information and conduct undetected espionage. In 2014, Huawei was banned from bidding on the USA contracts.

A bill was signed by the Trump administration that would bar its use by the US Government. Further, Pentagon has also banned Huawei from being sold at US military bases.

Recently, Huawei also accused the US Government of detaining its staff unlawfully, launching cyber-attacks to infiltrate its internal information, and forcefully enticing the staff to turn against it. After this, Google also suspended all the business with Huawei requiring hardware, software, and technical services.

Background of the issue:

Controversies have continuously surrounded Huawei, and there are several reasons associated with it. Various countries, including the United States, have claimed that the company is a threat to their national security. Cyber espionage, which could be committed by Huawei, is the main concern for these countries.

According to the US intelligence agencies, the company can be used by the Chinese Government for spying through its 5G infrastructure that could contain backdoors providing easy access to the Chinese Government to the inner workings.

It has also been accused of Intellectual Property theft in the past year and has been found guilty of stealing intellectual property from T-Mobile. Apart from this, it has been accused of US trade sanctions on Iran, and thus, Chief Financial Officer of Huawei was arrested in Canada at the request of the US in December last year, though the company has rejected the charges.

Only the USA has not expressed its concerns over this matter, but also similar reactions were received by countries such as Canada, the United Kingdom, Germany, and Australia. These counties also expressed their concern regarding Huawei’s 5G deployment. Japan also took a strict and immediate action by banning the company and ZTE from official Government contracts.

How does this issue fit into the larger global trade war?

The trade war between the USA and China because of Chinese telecom-gear maker Huawei is ongoing. The USA claimed that China’s policies are unfair and encourage Intellectual Property theft and corporate espionage. To combat all this, Trump has waged a trade war ratcheting up tariffs to 25% on some imported Chinese goods.

The ban on Huawei and the trade war may also affect the 5G as it might slow the development of the final 5G standard. The reason is the involvement of Huawei and other companies in full standard for 5G.

The Trump administration has also put forth some investment restrictions for China by expanding power to block Chinese investments in US technology companies. The motive behind this is to prevent Chinese companies from stealing American ideas and knowledge.

As the US cannot afford to lose its dominance in the tech sector, the question that arises is whether this trade war will succeed in keeping China behind. It can be said that the actions taken by Trump administration against Chinese technology can be seen as the first shots in a long war.

Significance of the current warning:

The USA warned India over using Huawei 5G equipment in the world’s second-biggest telecoms market as New Delhi struggles to balance its delicate relations with Washington and Beijing.

The pressure given by the USA is taken sensitively by India as it allows the Chinese company to participate in the rollout of high-speed data networks. Vodafone, one of the most prominent telecom groups, also uses Huawei’s equipment in its networks. Also, on the other hand, the company sees India as a crucial growth market.

It has been reported that the company has offered to sign a “no back door policy” with New Delhi, which states a promise that it made to the customers and Governments to reassure them over network security.

According to Neil Shah, an analyst at Counterpoint Research, Huawei has a superior technology at a low cost, so while the USA is putting on the pressure, it will be difficult for Indian operators using Huawei to switch. He also added that India is quite dependent on China’s imports. Thus, in India, there has been confusion among telecom operators regarding Huawei as what would happen when they switch to the 5G network.

International Trade laws involved:

  1. General Agreement of Tariffs and Trade (GATT) – It is a multinational treaty among several nations that regulates international trade. Its primary purpose is to reduce tariffs to a substantial amount along with abolishing other trade barriers.
  2. World Trade Organisation (WTO) Rules – The rules of WTO include services and aspects of Intellectual Property along with goods. Its agreements are purely multilateral. WTO is an organisation which is aimed at liberalising trade between countries.
  3. US Export Control and Economic Sanctions Regulations – US Export Control and Economic Sanctions regulations protect national security, domestic interests, and foreign policy.
  4. Export Administration Regulation (EAR)–The EAR governs the export and re-export of items for reasons of national security, non-proliferation, foreign policy, and short supply.

Conclusion: Way forward

Chinese companies are not known to give up so easily. Huawei is all set to build up its operating system. Apart from all this, Huawei not only trades with US companies for software but also trades for hardware parts for phones, Wifi modems, etc.

There are also speculations that this harsh punishment from the US Government might later come in to hurt them. For example, Nemont, a US wireless provider, has been affected due to this ban on Huawei and some other US companies. However, even with the dark clouds above Huawei, they could still weather the storm. Not precisely with their smartphone business but on something new entirely.

This article is brought to you in collaboration with Anshika Gubrele from Bharati Vidyapeeth New Law College, Pune.

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