Chinese tech giant Huawei has been banned from participating in Australia's 5G networks. Will Beijing retaliate? Image: Facebook

In the emerging new technology “cold war” between the United States and China, Australia has perhaps the most at stake.

Taking sides against China risks offending Australia’s biggest trading partner, a relationship worth more than A$100 billion a year which has driven the success of the Australian economy for over two decades.

The flip-side, of ignoring US concerns about Chinese surveillance, would undermine a half century of commitment to the US alliance and membership in the so-called “fives eyes” intelligence-sharing group with the US, United Kingdom, Canada and New Zealand.

If China chooses tough retaliation against Australia, there would be a significant economic cost to pay, one that depending on the measures deployed could tip the economy into recession for the first time in over two decades.

Australia’s ban on Chinese telecoms giant Huawei, firstly from participating in a National Broadband Network (NBN) in 2013 and more recently last year against building its 5G infrastructure its own risks.

Those risks include diminished local competition, higher costs and the potential of Australia being saddled with an inferior 5G network just as a so-called “fourth industrial revolution” powered by the “Internet of things” is coming online.

Xu Zhijun, Huawei’s rotating CEO, introduces the company’s 5G pre-commercial system in Wuzhen. Photo: Xinhua

Despite these business and competitive risks, the Australian government has consistently followed the advice of its intelligence community and the lead of its traditional allies.

Foremost among them is the US, where the Justice Department’s indictment against Huawei warns of “the potential for Chinese intelligence and security services to use Chinese information technology firms as routine and systemic espionage platforms.”

Australian Prime Minister Scott Morrison apparently agrees. He said on announcing the Huawei 5G ban that local vendors would “likely be subject to extrajudicial decisions from a foreign government that conflict with Australian law” and “may risk failure by the carrier to adequately protect a 5G network from unauthorized access or interference.”

The Australian intelligence and security establishment clearly adheres to the US line on Huawei, that any infrastructure it builds could have a “back door” for Chinese intelligence agencies to siphon off government secrets and the intellectual property of Australian companies, particularly those in the defense sector.

The extreme scenario painted by intelligence hawks is of vital Australian infrastructure being frozen and controlled by foreign powers in the event of any conflict.

In the brave new world of 5G, which will connect the “Internet of things” to everyday objects enabling the sending and receiving of data, it is an apocalyptic vision of energy networks, dams, and traffic lights being commanded by an unseen foreign enemy.

This hawkish view of China and Huawei, however, has put the intelligence community at odds with Australia’s business community, which is generally less adversarial and suspicious of China’s intentions.

Chinese and Australian flags ripple together in the wind. Photo: Facebook

Many Australian businesspeople and consumers believe they are being forced to pay a price either for government paranoia, or an anti-Chinese foreign policy which in 2019 no longer fits with the broad national interest.

Huawei has not been the Australian government’s only Chinese target. Hong Kong’s CKI Group, already a major player in Australia’s energy sector, was banned last November from buying the gas pipeline assets of local company APA, with the government claiming the deal was counter to the national interest.

New foreign influence transparency legislation, which came into force in December, demands that people acting on behalf of foreign companies or governments in the political sphere will have to declare and register themselves.

The legislation was widely seen as being aimed at perceived Chinese influence in Australian politics and has met with angry rhetoric from Beijing but no concrete retaliatory measures. Huawei has built a big business in Australia, where it has over 800 employees and major contracts with government, telecoms and other private enterprises.

Much of the existing 4G networks operated by Australian telecom companies were built with Huawei technology. The ban on Huawei’s participation in Australia’s 5G development has already prompted one local player, TPG, to pull out of building its own 5G network.

Another competitor for building 5G networks in Australia, SingTel-controlled Optus, conceded that Huawei’s technology is ahead of competitors such as Ericsson and Nokia and is now “adjusting” its 5G plans and sourcing kit from other vendors.

“The ban is very disappointing,” TPG founder and executive chairman David Teoh said last week. “Huawei has good technology, the cost is very good but the law is the law, we can’t do much about it.

TPG founder and executive chairman David Teoh in a file photo. Photo: Facebook

“We spent some time looking at alternative vendors for 5G equipment and whether their equipment could connect with Huawei’s 4G kit, but its not allowed and if we looked at other vendors we will have to go back to the drawing board.”

While the Commonwealth government in Canberra has banned Huawei, the state government in Western Australia has contracted Huawei to deliver a mobile data system for the state’s public transport network, a deal worth more than A$200 million.

Although the WA government says there are no security implications over Huawei’s involvement in the project, it is now seeking assurances that the company can deliver on the contract in the face of a trade embargo in the US, from where it imports and exports components.

Although under global siege, Huawei is presenting an unflappable public face in Australia through the company’s accessible and credible local chairman John Lord, a retired admiral from the Royal Australian Navy.

Huawei’s local charm offensive includes sponsorship of the Canberra Raiders rugby league team and the Gold Coast Suns AFL club, as well as local soccer teams. A popular television and radio personality, Sophie Monk, has just signed on as an ambassador for the company.

Still, there have been negative headlines. The fact that Huawei executive Meng Wanzhou, arrested in Canada and criminally charged in the US for violating sanctions on Iran and stealing trade secrets, was on the board of Huawei in Australia from 2005 to 2011 has been highlighted in recent news reports.

Huawei faces accusations of spying for China’s Communist Party-led government, charges it has denied. Photo: iStock

A high-profile member of the local Huawei board, former Victorian Premier John Brumby, resigned last week with much made of the timing, disregarding his explanation that he had quit to take up a role as Vice Chancellor at La Trobe University in Melbourne.

John Lord, for his part, defends Huawei at every opportunity, saying that the company obeys the laws of every country in which it operates and denying any link with the Chinese government and intelligence services.

“We’re the most open company in our particular field in the world,” Lord said on national television last week. “We offer all our gear for testing. But there is quite a bit of anti-China going on at the moment and I think unfortunately Huawei has been swept up into a bit of that.”

What happens next is hard to predict, just as the vast majority of Australians will likely never know the real basis for the government’s decision to ban Huawei.

While the government insists it is protecting Australia, local businesses and consumers are effectively being asked to accept inferior telecoms infrastructure and higher costs as the price of that protection.

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