TWN Info Service on WTO and Trade Issues (May19/12)
23 May 2019
Third World Network

US intensifies trade war with China on ICT front
Published in SUNS #8909 dated 17 May 2019

New Delhi, 16 May (D. Ravi Kanth) – The United States has intensified its trade war with China, with the Trump administration, in an executive order, banning US telecommunications enterprises from installing foreign-made equipment that could pose a threat to national security.

In a move potentially aimed at Chinese telecommunication companies Huawei Technologies Co and ZTE Corp, President Trump issued an executive order on Wednesday (15 May) called “Securing the Information and Communications Technology and Services Supply Chain” for protecting “the information and communications technology and services of our Nation.”

According to a statement issued by the White House, “the President has made it clear that this Administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States. ”

Without naming or listing any countries or companies that would be severely affected by Washington’s latest unilateral measures, President Trump tasked his Commerce Department to “prohibit transactions posing an unacceptable risk to the national security of the United States or the security and safety of United States persons.”

“In addition to the executive order on Wednesday, the Commerce Department s aid it would add Huawei to a list of entities engaged in activities that are contrary to US interests, thereby restricting sales or transfers of American technology to Huawei by requiring a government license – a potential body blow to the company, which relies on some US tech companies for chips,” says The Wall Street Journal in a news report on 15 May.

[Though the wording of the order (according to reports in the New York Time s and other US media) enabled the administration to claim it was “agnostic”, it was clearly aimed against China’s Huawei, ZTE and other Chinese technologies. The executive order invokes the International Emergency Economic Powers Act and declares a national emergency to empower the government to block the purchase of technology linked to foreign adversaries. A post at the IELP blog by Simon Lester notes that the ban may be violative of several GATT 1994 provisions, but the US, in such a dispute, might invoke GATT Art. XXI (security exception).

[Separate from President Trump’s executive order, the US Commerce Department announced on Wednesday that it had placed Huawei and its 70 affiliates on a list of firms deemed a risk to national security. The listing will prevent it from buying American parts and technologies without seeking United States government approval. SUNS]

Over the past several months, the US has pressurized various Western governments to ban Huawei, which supplies the world’s cheapest 5G gear for the advanced mobile internet services, on grounds of national security.

Washington threatened governments not to use Huawei because of the intelligence risk it posed for secure telecommunications, and has warned foreign governments that if they used Huawei, the US might not share intelligence information with them.

The US, however, failed to provide any material evidence until now to support its claim about the dangers posed by Huawei’s 5G network services.

The US has succeeded in forcing Australia, New Zealand, and Japan among others in banning Huawei from providing the 5G network, which is ahead of its rivals in technology and costs.

As compared to Korea’s Samsung, Sweden’s Ericsson, and Finland’s Nokia, Huawei is acknowledged as a leader in 5G services.

Huawei is also the largest filer of patents last year, according to the World Intellectual Property Organization.

The US suffered a setback when the UK government, which is part of the Five Eye intelligence sharing group, chose to go for the Huawei’s 5G network.

The other three members, Australia, New Zealand and Canada, which had detained a senior Huawei official last December, have banned Huawei.

Several governments in the European Union, including Germany, have subtly indicated that they could use Huawei’s 5G network because the US could not prove the security threat stemming from the Chinese company.

In the ensuing battle for the most advanced technologies of the 21st century, including on the artificial intelligence front, the entire US establishment – both parties in the Congress, the think tanks, and even the media – is united against China, which is on the cusp of emerging as the leader of advanced telecommunications technologies.

For example, the US House Speaker Nancy Pelosi, Senator Chuck Schumer of the Democratic Party and Senators from Trump’s Republican Party praised the latest executive order on “Securing the Information and Communications Technology and Services Supply Chain.”

“Chinese telecom companies like Huawei effectively serve as an intelligence-gathering arm of the Chinese Communist Party, and the [US] administration is right to restrict the use of their products,” said Senator Tom Cotton, a Republican hawk on China who has pushed for more restrictions, according to the WSJ news report.

“It is essentially a battle over who is going to be the hegemon and who is going to lead the fourth industrial revolution,” Rob Davies, South Africa’s trade minister, said on 13 May, during the informal trade ministerial meeting of developing countries hosted by India (see SUNS #8906 dated 14 May 2019).

President Trump, who likened the imposition of the increase in tariffs from 10% to 25% on Chinese goods to a “little squabble” with China in one of his tweets on Wednesday, has clearly widened the battlefront to the technology arena.

President Trump and his administration seem to have assessed that China is not going to back down from the escalating trade war regardless of the proposed meeting with President Xi Jinping at the G20 leaders’ summit next month in Osaka, Japan.

China has already raised the issue of “discriminatory market access prohibition on 5G equipment” at the World Trade Organization last month, slamming Australia for its blanket ban on Huawei.

“In China’s view,” a Chinese official told the Council for Trade in Goods (CTG) meeting on 12 April, “as a next-generation communication technology, 5G is a global industry.”

The Chinese official said “cybersecurity is a global challenge that all countries are facing. Cybersecurity and 5G security solutions depend on international agreed standards and certification mechanisms, and require international cooperation.”

“Only through the cooperation among equipment vendors, network service providers and policy and law makers, could the challenges of global cyber security be properly addressed,” China said.

“Country-specific and discriminatory restriction measures cannot address the concerns on cybersecurity, nor make anyone safe, but only disrupt the global industrial chain, and make the country itself isolated from the application of better technology,” the Chinese official argued.

Commenting on Australia’s ban on Huawei, the Chinese official said “China has no way to reach the reason of the measures implemented by Australia.”

China said it “believes the restriction measures on 5G cybersecurity should be implemented consistent with the WTO rules”, adding that such restrictions must be “transparent and open” and implemented in a “manner that is least restrictive to trade” and based on “international standards and in a non-discriminatory manner.”

By imposing restrictions based on security considerations, Australia, which is one of the sponsors along with Japan and Singapore of the electronic commerce plurilateral negotiations at the WTO, has undermined its credibility for pursuing the e-commerce talks, said a trade envoy, who asked not to be quoted.

[Reports on financial web-logs and other media reports also note that Huawei and other Chinese technologies because of their low costs have already made heavy in-roads into Africa, and this will create difficulties for telecom enterprises of the US and other nations that have banned Huawei in their connectivity in these regions. SUNS]