Huawei and Europe

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CWA # 318, 8 August 2020
Huawei and Europe
Despite the UK ban, it is not over yet for China. For three reasons.

  Sourina Bej

As the British government announced the ban on the Chinese telecom company Huawei from its future 5G mobile infrastructure, a reset in China's relation with Europe begins.

The UK became the first European country to definitively harden its approach against China over the 5G roll-out plan. This means the UK's mobile network operators will now not be able to buy any new Huawei equipment for their 5G infrastructure after the end of this year. The UK decision comes after persuasive lobbying and the sanctions against China by the US, but the geopolitics over technology was long waiting to unfold in Europe. 

A series of responses and developments followed from China, the US, the EU and countries like France and Germany that is altering the strategy of 'cautious engagement' followed by the region towards China. Welcoming the UK's decision, the US Secretary of State Mike Pompeo sent a larger message to Europe (who is still mulling its plans over Huawei) by saying that the UK joins a growing list of countries who are standing up for their national security by prohibiting the use of "untrusted, high-risk vendors." Norbert Röttgen, a leading Conservative member of the German parliament, stressed that "where modern technology is involved, economic and security issues cannot be treated separately." The US and Europe have been apprehensive of the "smoking gun" that is the data security in Huawei's equipment and debated with the Chinese company for encrypted safety and data accountability. The ban comes in continuation of this apprehension and adds to a new front in the tensions brewing between China and the West. Even though the first decision comes from the UK, the whole European region shares the challenges in dealing with technological insecurity and thus making the ban a political and strategic event in the trajectory of the Europe-China relation. 

However, does banning Huawei marks the beginning of an end in the Chinese geo-technological sphere of influence in Europe? The ban definitely has dented China's 'giant tech-leap forward', but it is not over for China in Europe yet. Rather China's aggressive political posturing as against the US will now expand in Europe. 

First, business is numbered but not completely ended for Huawei in Europe. 
After the ban, a Huawei official interpreted London's decision to be separate from the decision-making in the other EU member states. It instead urged global carriers to stick with Huawei to stay ahead in the 5G race. The race for 5G has heated up as Europe found its own niche as carriers and also as the biggest market for the technology. Huawei, with its cheap equipment, is seen competing in a market that is already dominated by Nokia, Vodafone, Ericsson and Deutsche Telekom. 

Till today, Huawei has been making headway with partnering with the existing European companies and slowly dominating the non-core sectors. The usage of Huawei in the non-core sectors is important for the data security but not as invincible as the European companies dominating the core sectors that determine the crucial part of the data security in the technology business. Hence in banning Huawei what the UK has done is restricted Huawei in its non-core sectors and only in 5G spectrum. 

The rest of the European countries have, in turn, tightened the exports rather than banning it. France has instructed its carriers not to buy Huawei's 5G gear or be faced with revoking of license once it expires. Deutsche Telekom (DT), one of Germany's leading carriers in the European market, said it has a multi-vendor strategy, which includes purchasing a combined 25 per cent of its technology from European and Chinese vendors. This indicates that the shares of Huawei are relative to the European companies. Thus, banning Huawei will definitely make the 5G gears expensive for the European carriers, but its economic revenues in Europe will not be deeply affected. The removal of Huawei from 5G in the UK only stops the business in one spectrum in one country but might not be the case in the rest of Europe where a small-scale economic partnership with legal tinkering could continue. 

In addition, Huawei's UK investment plans have seen its own course. Beyond the political headwinds, a month before the UK ban was announced, Huawei received an approval to break ground on one billion-pound research and development site near Cambridge. A read into the fine print of the ban entails that the telecom companies the ban will officially be effective after 2027 and till then, the companies will have to prepare to reduce the dependency on Huawei. The dependency on Huawei was already low, to begin with, and has only gradually increased in the past years.  

Simultaneously while the EU charts its own on 5G, it has been cautious to balance pressure and security between the US and China. In its new recommendation, the European Commission cautioned against "high-risk non-EU suppliers" after the decision by the UK. By not naming Huawei, the EU made its stand clear and also opened a leeway for the individual countries to decide. Along with London, Belgium and the Netherlands announced a ban but from 'core' parts in 2019. Ireland, Spain, Sweden, Denmark, Romania, Poland and rest of the East NATO European countries have agreed to work with Huawei since 4G. Germany, unlike Britain, has been able to resist the domestic pressure, especially the foreign affairs committee and the green party to part economic ways with Huawei completely. 

After the UK, if Europe leads with similar 5G technological decoupling and expands it to another economic decoupling, tough posturing from China will trail. 
 

Second, a reset in relation is in the making, as China gives a strongly worded response.
A policy response from China to counter the ban is yet to follow, but strong responses as a volley of threats and counter-threats have been exchanged between the two countries. Taking lessons from the past trade war between the US and China, relations with the UK will only be the beginning to the long list of resets from the region. 

Following the ban, China said the UK "will pay the price if it pursues a hostile policy" and also hinted that it might block 3 million Hong Kong citizens from taking Johnson's offer of a path to British citizenship. China also rattled the BREXIT feathers when it said "unlimited prospects" for the UK-China cooperation could have been opened after BREXIT including "financial services, science and tech, education and healthcare" that now stands jolted. As a country who watches the UK closely, it is not unknown to Beijing of the tough post BREXIT trade negotiations that are challenging Britain. The banning of Huawei now has been extended to reset other political relations between the two countries. China's policy in Hong Kong followed the UK's suspension of an extradition treaty with Hong Kong. This was followed by TikTok's suspension of plans to build a global headquarter in the UK and the beginning of yet another geo-technological tension as Trump started the campaign petition to ban the entertainment app.  

A series of tit from Europe will follow a series of tat from China. It may not be as provocative as the US-China dispute, but the apprehension over data security will put Europe and Australia with the US as a collective political western front pushing against China. 

China's Ministry of Commerce is mulling export controls that could prevent Nokia and Ericsson from sending products it makes in China to other countries. Both Nokia and Ericsson have manufacturing plants and thousands of employees in China. Tipped off about the potential restrictions a few weeks ago, Nokia commissioned a review of its supply chain and made contingency plans to shift global production. In the past few months, both Nokia and Ericsson could be seen making swift moves either to South Korea or Vietnam. 

Economically China needs both the US and Europe to maintain the demand and the supply chains, and China is yet to respond with any list after the US placed Huawei on a trade blacklist in May 2019. That should not shy away from the fact that if China imposes export controls, it is going to make the European product expensive for any to afford easily and will only be used exclusively by a certain class of people thereby losing its utility in the 5G race of making affordable and sustainable technologies. 

Third, Huawei as the primer, tensions have expanded over human rights and individualism. 
The EU hasn't banned Huawei but took a softer stance in January by releasing 5G cybersecurity recommendations that member states could voluntarily adopt to restrict Huawei's presence in each country. It is expected to soon publish a report detailing how its 27 member states have adopted them. But this soft stance is hardening slowly. Restricting exports to Hong Kong followed by suspension of extradition treaty to the region, seeking accountability over the treatment of the Uighur Muslims have been continuous issues that have been brewing between Europe and China. Europe, in fact, is shifting from its earlier stance to selectively engage China to a more guarded posture of balancing and now pushing back the Chinese influence. The official EU document from 2019 calls China a "systemic rival." Ever since the international call for enquiry of the genesis of the pandemic started, China has personalised most criticisms and graded it as West's unilateral pressures. Hence as Germany suspended its extradition treaty, the Chinese embassy strongly responded, calling it a policy of interference in the internal matters of China. With more political, legal and human rights issues getting enveloped into the geo-economic tensions over the ban of Huawei, it is only a matter of time before China comes with a strong policy response against Europe before another European country mulls a similar ban on the technology.  

Sourina Bej is a Project Associate with the Conflict Resolution and Peace Research programe at NIAS.

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