Eye on US, Europe looks askance at Huawei

Following the United States, Australia, New Zealand and Japan, European nations that were previously on the fence are now moving against China telecom giant Huawei from developing or supplying their emerging 5G mobile networks.

Europe’s moves threaten to put more economic pressure on the embattled, globally-oriented Chinese tech giant, a top national security-related target of US President Donald Trump’s unresolved trade war with China.

France has reportedly started to block Huawei, the world’s second-biggest seller of smartphones, from parts of its mobile infrastructure. Britain’s telecom firm, BT Group, has recently done the same, according to reports.

Germany, Europe’s largest economy, is also thought to be mulling a response to Huawei, which the US government alleges conducts espionage for China’s ruling Communist Party, including by embedding bugging devices in its handsets.

Huawei has repeatedly denied all accusations of conducting espionage or working on behalf of the Chinese government.

That didn’t stop Canada’s recent arrest of Huawei’s chief financial officer, Meng Wanzhou, at the request of the US government on charges she violated US sanctions by doing business in Iran. China has responded by arresting two Canadian citizens for activities that supposedly “endanger China’s security.”

Concerns over Chinese spying reached Europe on January 11, when authorities in Poland arrested Huawei’s local sales director and charged him with alleged spying for the Chinese government. Authorities later identified the individual as Wang Weijing, a former Chinese diplomat in Poland.

Huawei subsequently announced that it had fired Wang, whose actions, the company said in a statement, “have no relation to the company” but who brought the firm’s reputation “into disrepute.”

Weeks earlier, Czech Republic Prime Minister, Andrej Babis instructed his staff to stop using Huawei smartphones, following a security alert issued by the country’s National Cyber and Security Information Agency.

It is not yet clear, though, if the alert and order will impact plans underway for Huawei to help roll out the Czech Republic’s pending 5G network. The Czech Republic’s president has attempted to downplay his government’s moves against Huawei, apparently to avoid economic reprisals from China.

“China is preparing retaliatory measures in the wake of this campaign against the company Huawei,” he stated, citing government intelligence, without elaborating.

China’s mouthpiece newspaper Global Times presaged a possible reprisal against Poland by branding it as a “US accomplice”, stating that “the Chinese government must help the company defend its legitimate rights and interests” across the world.

Washington is certainly pressing its case against Huawei in Europe. Last month, the Trump administration sent tech experts to a closed-door session with German lawmakers, where they presented information to urge Berlin from excluding Huawei from its 5G technology roll-out, according to a Politico Europe report.

It is unclear whether the meeting influenced the announcement last month by Germany’s Deutsche Telekom, one of the country’s three major telecom firms, that it would “reevaluate” using Huawei technology for its 5G network.

As Europe’s largest economy and one of the EU’s string-pullers, Germany’s stance will be a major factor in whether other European governments follow the US, Australia and Japan in restricting Huawei’s role in infrastructure development. So far, Berlin has remained relatively quiet over the issue.

EU officials, however, have been more forthright. In December, European Commission Vice President Andrus Ansip, responsible for the grouping’s digital affairs, expressed his concern about Huawei’s access to the region’s 5G networks.

“I think we have to be worried about these companies,” he said at a press conference, referring to Huawei and other Chinese tech firms.

“They have to cooperate with their intelligence services,” Ansip said. “This is about mandatory backdoors. I was always against having those mandatory backdoors…[It is] about chips they can put somewhere to get our secrets.”

Fast-shifting European opinions over the trustworthiness of China’s tech companies is problematic since many had eyed European markets as an alternative to America, where the US-China trade war is fast closing access to the US market.

Lei Jun, the chief executive officer of Xiaomi, another Beijing-based producer of smartphones, told the South China Morning Post recently that his firm considers Europe its “main focus for international expansion this year.”

Last March, he had said the company’s chief goal was to expand in the American market.

Business had been looking up for Chinese tech companies in Europe. Although Samsung, of South Korea, and Apple, of America, were the two largest sellers of smartphones in Europe in the first quarter of last year, Huawei came in a close third, with a 16% share of the region’s market, according to Canalys, a global technology market analyst firm.

Unlike Samsung and Apple, however, Huawei’s share of Europe’s market was fast growing, with a 39% market share increase year on year in that quarter. Xiaomi was in a distant fourth position, though its share of Europe’s market was also rising.

Huawei has paved its way in Europe through a well-funded public relations campaign. Last year, for instance, it sponsored music events in Greece and funded a “China Festival” in Germany. Its rival Vivo, another Chinese tech firm, sponsored last year’s football World Cup in Russia.

How European governments ultimately respond to the arrest of the Huawei official in Poland and increased lobbying against doing business with it by Washington is still uncertain.

On the one hand, their response will in part reflect shifting geopolitics. As seen in its trade war with China, Washington clearly sees the rise of Chinese tech firms as a major economic threat.

China, too, considers its tech giants as a symbol of its economic transformation and peaceful rise. Beijing has scored many soft diplomacy points through the growing visibility of Huawei and Xiaomi in Western markets.

Huawei has taken out prominent advertising placements in European media, including full-page spreads in influential publications like The Economist.

European governments, keen to keep America as a political and security ally but also determined to maintain growing Chinese trade and investment, would mostly prefer not to pick sides. But diplomatic pressure is mounting from Washington to get in step with Trump’s tough stand.

Comments in the media by some European politicians indicate choosing sides is especially difficult politically with Donald Trump in the White House; he remains unpopular among large swathes of the continent’s electorate. Trump has fueled that unpopularity by frequently threatening to temper America’s historic close relations with European states.

“In 2019, European governments will have to decide whether to side with the US in this new strategic stand-off or chart their own course,” Robin Niblett, director of Chatham House, a London-based think tank, wrote in an article last month.

“While Europeans are increasingly skeptical about the Chinese leadership’s goals and methods,” he added, “they do not share the Trump administration’s determination to stem China’s rise; and they do not want to find themselves trapped on one side of a new political-economic cold war.”

While concerns of Chinese espionage and eavesdropping certainly resonate, many European politicians recall recent cases of the US spying on their officials.

When the American whistleblower Edward Snowden leaked classified National Security Agency documents in 2013, he revealed that US agencies had been spying on several senior European politicians, notably German Chancellor Angela Merkel.

The main question for Europe, though, is whether America’s security concerns regarding Chinese tech firms, if founded, ought to take precedence over the economic risks of irking Beijing.

Almost all European states aim to roll-out quickly their 5G networks, lest they lose any economic advantage of high-speed telecoms and data delivery. But, at present, the only companies competent in the technology hail from China and America.

Experts predict China will beat America as the first nation to boast nationwide 5G technology capability, possibly later this year or in 2020.

At the same time, however, some in Europe are waking to the fact that the continent’s tech firms – as well its economies – are lagging far behind both America and China’s. The problem is often one of economy of scale, they say.

There are many voices in European politics, especially in France, who are calling for the region to promote the creation of so-called “European champions” through mergers of cross-nation firms that can compete globally.

The test case is a proposed Franco-German merger between Siemens and Alstom to develop a “champion” in the railway industry, which some reckon could contend with China’s state-owned CRRC, the world’s biggest train-maker.

But trust-busting is still taken seriously in Brussels, which rules on large company mergers, and the fusion will likely be vetoed by the European Commission in February because it would create a noncompetitive monopoly, critics of the deal argue.

If the merger is allowed to go through, however, it could tear up Europe’s somewhat outdated competition laws. This might give ground to a possible amalgamation of some of the continent’s tech firms, which currently lack the money and size to compete with the US or China.