The Case for Regulating Huawei

Abstract

Huawei’s growth overseas has paralleled that of China Inc (Li and Farrell, 2020). Through favorable policies such as the Belt and Road Initiative, China has paved the way for Chinese multinationals to capture global markets, acquire and exploit new technologies, and have privileged access to local resources. In turn, Huawei has played an important role in the development of China Inc., its technological capabilities and global diplomatic relations. But Huawei plays by a different set of rules: it has been accused of unfair and illegal practices, and for breaking international norms. This perspective explores the need for regulatory oversight of Huawei.

Huawei is a ‘global champion’ in the telecom industry, an emerging-market multinational corporation from the People’s Republic of China, and a darling of the Chinese Communist Party (CCP). The technological lead that Huawei has over other competitors in the telecommunication business has resulted in fear of espionage and cybersecurity-related concerns. As a central piece in the U.S.–China trade war, the struggle of Huawei and China with the United States is greatly affected by the nature of the political economy of China’s domestic environment of state capitalism, by the deeply interdependent global system of political economy, and by the political economy of strategic interaction between China and the United States.

We recently completed two fully edited book volumes on Huawei, with over 50 authors hailing from the East and the West (Alon et al., 2020a, 2020b). While the books provide a comprehensive and balanced, but critical, view of Huawei as a company, our conclusion is that Huawei should be regulated. Several reasons ground our conviction.

Huawei is not a company independent from the government. While Huawei is technically a Chinese private ICT (information and communications technology) company, the founder’s military past and former work network along with the initial role as supplier to the military telecommunications has constantly raised doubts about the actual role of the CCP.

China has aided Huawei for many years, most visibly through multi-billion-dollar loans to support overseas investment, contracting and sales activities. Recently, the government level of support has reached new heights as evidenced by the harsh tone of official Chinese media coverage of those that malign Huawei, the government’s vigorous public defence of Huawei, and its threats and sanctions against countries and companies that make anti-Huawei moves.

Huawei’s support is part of a greater initiative of the government to build technological capabilities, linked to other global initiatives, such as the Belt and Road Initiative (BRI), aimed at building infrastructure connectivity through continental Eurasia and maritime Asia, the Middle East and Africa. The digital infrastructure building is a quintessential part of China’s BRI.

The ‘Made in China 2025’ blueprint as well as Beijing’s ‘Next Generation Artificial Intelligence Development Plan’ aims to transform China into a global leader in artificial intelligence by 2030, posing a threat to America’s dominance. The intersection of geopolitics and quest technology leadership has brought the United States and China perilously close to the brink of a Technology Cold War, and a new era of techno-nationalism.

Huawei is capable of covering the world with digital infrastructure powered by China, and as a result, amass data globally. Further, the leadership in 5G infrastructure provided by Huawei can empower the speed and amount of data collection.

Huawei’s increasing presence as a new source of investment and technological support in the Global South exemplifies China’s effort to extend the country’s control over transnational network infrastructures and to reconstruct an alternative model of globalization towards a multipolar political economic order in the digital economic era.

Huawei’s 5G technology is fast expanding and warmly accepted across a large part of the developing world. Most of these countries are run by non-full liberal regimes. Governments cite Huawei’s censorship capability as a major attribute to contracting Huawei’s 5G service. By lending a hand to authoritarian regimes, Huawei is supporting and perpetuating this system of governance.

Huawei brings two non-Western world powers, China and Russia, closer at a time when these two countries are diverging from global standards of democracy and freedom. Huawei chose Russia as the first country for international expansion in 1997, when Russia was facing an economic crisis. Huawei has 11 offices, R&D and learning centres throughout the country, and is among the top three suppliers of smartphones. China’s economic might married with Russia’s military one can wreck great havoc in case of a worldwide conflict. Both countries are also on the UN Security Council as permanent members.

Although Huawei has been a patent leader in global telecommunication technologies in recent years, the company has been accused by Cisco for stealing trade secrets and playing unfairly. Allegedly, the company stole operating system code and other data needed to make routers and produce them more cheaply for American and other international clients. The founder’s daughter was arrested in Canada for selling to Iran against U.S. sanctions. A recent Forbes article linked Huawei with the surveillance state in persecution of the Uighur Muslim minority (Doffman, 2019).

Following these concerns, the United States imposed a ban and added Huawei to the blacklist, which forces all American firms to suspend any business with Huawei without official permission. The most damaging reactions resulting from this ban is the cooperation between Google that supplies Huawei with its operating system Android, followed by Qualcomm’s, Intel’s and ARM’s boycott. Since Huawei holds one of the largest market shares in the telecommunication business globally, this action has also hurt American-affiliated suppliers.

Clearly, Huawei is one of the key components of China’s geopolitical playbook for global dominance. Countries under the U.S. sphere of influence, and those rivalling nations, such as India, have selectively restricted the development of Huawei. Others, like Russia, have welcomed the investment, technological contribution and goodwill that came with its arrival. Is Huawei’s rise stoppable or desirable? How the United States and the rest of the world should deal with it effectively is still an outstanding question and a topic of future debates.