GP Insights # 387, 18 July 2020
On 14 July, the UK banned the Chinese telecom company Huawei from future investments in the mobile infrastructure in the country. Under Britain's new 5G roll-out plan, the country'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. Also, all existing equipment supplied by Huawei will be gradually removed from Britain's 5G infrastructure by 2027. This announcement overturns a previous decision in January 2020 to allow Huawei up to a 35 per cent share in the non-sensitive parts of Britain's 5G mobile networks, which was made amid the Trump administration's pressure to block Huawei in major telecoms markets.
Welcoming Britain's decision, the US Secretary of State, Mike Pompeo said that Britain joins a growing list of countries who are standing up for their national security by prohibiting the use of "untrusted, high-risk vendors."
What is the background?
First, the privacy of data leading the reasons for a ban. The immediate reason to ban Huawei is undoubtedly the rising insecurities over data protection and privacy. However, Britain's decision follows the larger rhetoric that the Western democratic countries have been setting, which is putting up a front against the technological and data monopoly by China. In recent months, the British government has faced not only pressure from its political quarters but also one of its strongest ally, the US. The concern that has driven this pressure has been that of the national security risk posed by Huawei's equipment that could possibly allow Beijing to spy on the Western countries. This particular concern joins the recent measures taken by countries like South Korea to Australia in slapping fines on TikTok for mishandling data of its users.
Second, this delays the UK's own path towards 5G. The decision to ban comes at two pivotal points in Britain's political and economic history. First, economically, Britain is uncovering its plan to roll out a 5G. And moving away from Huawei definitely makes it an uphill task for the existing fiber broadband operators to look for different infrastructure. Second, this economic decision is politically motivated as Prime Minister Boris Johnson has been responding to pressures from his own party. The government suffered the biggest defeat in March when 38 Conservative MPs voted against the government in favour of an amendment to end the use of Huawei. Johnson will have to look out for replacing existing Huawei equipment which would either mean looking at Europe or the US. The post-Brexit trade deal is in doldrums, thus making techno-economic negotiations all the more difficult for Britain.
Third, China's tough response to the ban. Huawei responded to Britain's ban by calling it "bad news for anyone in the UK with a mobile phone" but also threatened that this would "move Britain into the digital slow lane, push up bills and deepen the digital divide." It is important to note that the UK revenues are less than one per cent of Huawei's global revenue, but Western Europe also serves as the leading technological ground where the 5G infrastructure could be implemented. The ban is a strategic and political statement that marks a continuation in the tension between China and the West.
What does it mean?
First, after the UK's ban, it is likely that pressure will mount on Germany and France who are also pondering on its legislation against Huawei. It will be interesting to wait and see whether these countries adopt a similar strategy like Britain, look to the US for equipment or try and balance the rhetoric from the region.
Second, as a growing critic of China and increasingly becoming a mouthpiece of the US, Europe will need to consider how banning Huawei is going to prevent China's technological advances. The Western democracies, from medical supplies to household amenities, have been economically dependent on China. The question of data protection can be better handled with strong domestic legislation which will in turn nose tight the investing companies as well.