US closes the barn door after Huawei has bolted

China’s flagship tech company Huawei is the first Chinese company to establish global dominance in a game-changing technology, namely 5G mobile broadband. Washington’s efforts to thwart Huawei’s rise simply are an after-the-fact charade by the US national security establishment to deflect blame for a catastrophic policy failure. With a wink and a nudge, the rest of the world will humor the United States, and continue to do business with the Chinese giant.

American intelligence officials warn that Huawei’s dominance of 5G broadband will give China the capacity to tap into Western communications. That probably is true, but it is the least of America’s problems. 5G communications make possible a whole generation of new technologies, including industrial controls. Download speeds an order or two of magnitude greater than existing mobile broadband are the foundation of the so-called Internet of Things.

Canada’s Ambassador to China John McCallum last week rebuked the United States, telling Chinese-language media in Ottawa that America’s case against Huawei’s CFO Meng Wanzhou was a political frame-up.

Referring to upcoming hearings on the American demand for extradition of the Chinese executive, McCallum said: “I think Ms Meng has quite a strong case.”

“One, political involvement by comments from [US President] Donald Trump in her case. Two, there’s an extraterritorial aspect to her case, and three, there’s the issue of Iran sanctions which are involved in her case, and Canada does not sign on to these Iran sanctions,” he explained. “So I think she has some strong arguments that she can make before a judge.”

There’s no precedent for this sort of public humiliation of the United States by one of its English-speaking allies. Predictably, Ambassador McCallum walked back his remarks, declaring Jan. 24 that he “misspoke.” That is the sort of bell, though, that is not easy to un-ring.

Germany, meanwhile, has offered to conduct an investigation as to whether Huawei represents a security threat, after rejecting US demands to keep Huawei out of the 5G rollout last October.

As an American ally, Germany is obliged to go through the motions of an inquiry in response to US demands, but the likelihood that Germany will accede to them is negligible. Huawei has a huge presence in Germany, and was a corporate sponsor of the recent convention of Germany’s governing Christian Democratic Party, according to the New York Times.

A senior official of one of America’s Central European allies told me that his country couldn’t accept American demands to exclude Huawei.

“We have tried to explain to our American friends that during the Obama Administration, nobody was interested in Central Europe except the Chinese, and Huawei built our entire mobile architecture. We can’t possibly get rid of them. Besides, they are doing business in our country as a legally-constituted corporation and we have no legal basis to exclude them,” he said.

The Polish government last month arrested a Huawei employee for alleged espionage.

In 2003, Huawei settled a suit by Cisco, after it was caught using Cisco code. Fifteen years later, the Shenzhen firm is spending $20 billion a year on R&D, about four times as much as either Ericsson or Nokia, its only important challengers in the telecommunications equipment market.

Huawei’s internal assessment holds that its technological lead in 5G mobile broadband is so wide that the competition has no effective chance of catching up. In late February, Huawei will introduce its Balong phone, with a chipset that can handle downloads ten times faster than the best 4G LTE speeds, while operating with 4G networks as well. Industry sources say that Huawei is putting Balong into mass production this year.

Huawei, moreover, sells equipment much cheaper than either Ericsson or Nokia, and its networks by most accounts are far more reliable. Its marketing strategy is more or less the same as Hewlett-Packard’s approach to printers: sell the basic equipment cheaply and make money on the printer cartridges.

Although America’s largest mobile carriers have boycotted Huawei equipment under pressure from the US government, the Chinese company does have some supporters in America.

Bloomberg reported recently:

“China’s largest tech company makes high-quality networking gear that it sells to rural telecommunications operators for 20 percent to 30 percent less than its competitors do, says Joseph Franell, chief executive officer and general manager of Eastern Oregon Telecom in Hermiston, a watermelon-growing hub of 18,000 people. Huawei’s equipment has helped some two dozen U.S. telecom companies provide landlines, mobile services and high-speed data to many of the poorest and most remote areas in the country.”

The most embarrassing inroad that Huawei has made in North America has gone virtually unreported by American media, namely the construction of a national broadband network in Mexico including 5G capability. The “shared network” (Red Compartida) was approved by Mexico’s government early last year and now is under construction. Huawei is the principle equipment provider, flanked by Nokia.

The shared network will offer broadband to all of Mexico’s telecom carriers. The head of one carrier, Mediatelecom, told the business magazine Expansión that Washington’s campaign against Huawei had no bearing on Mexico. “This has to do with the war between the United States and China, but I believe that in Mexico we have no legal or political reason to think that this would affect the shared network or any of its suppliers.” The shared network is intended to fill the needs of underserved areas in Mexico, and to extend mobile broadband to 92% of the Mexican population by 2025.

Why the United States stood by while China built a broadband system on its southern border is a troubling question. If the US can’t persuade Mexico to exclude Huawei next door, it will have trouble browbeating the Germans.

In 2014, I accompanied Mexico’s then ambassador to Hong Kong on a tour of Huawei’s new headquarters in Shenzhen. The company’s exhibition hall requires a three hour tour and showcases Huawei products. One enormous wall had a map of Guangzhou city with thousands of tiny lights. “That’s the location of every smartphone in the city. We cross-grid location with online purchases and Internet searches.”

At last the Mexican delegation and I came to the end of the tour and were seated in a small amphitheater. A Huawei executive came to the podium and projected a PowerPoint presentation on Mexico’s economy: It had the lowest penetration of broadband and the highest cost of any economy its size. With Huawei in charge, the executive said, Mexico could link the whole country by broadband, and Huawei would bring in e-commerce, e-finance, and all the new technologies that make China an economic powerhouse. Bring us in, he said, and we will make you grow like China.

The Mexicans sat there in astonishment. “How long have you been doing this?” the ambassador asked?

“Six or seven years, maybe,” said the speaker from Huawei.

“In Mexico, nothing ever changes,” said the Ambassador.

Evidently, something has changed. China isn’t just building the broadband network, but financing e-commerce entrepreneurs across Latin America to exploit the potential of broadband.

“As America recedes into the background, Chinese foreign direct investment in Latin America and the Caribbean has skyrocketed over the last ten years, according to a 2018 report by the Economic Commission for Latin America and the Caribbean. China dropped close to $90 billion in the region between 2005 and 2016. With a growing emphasis on telecommunications, Chinese investment in emerging technology is increasingly the primary fuel behind Latin America’s tech boom,” Daniela Guzman reported in Bloomberg News Jan. 8.

Chinese software companies have followed the hardware firms into Latin America, and may transform the economies of America’s traditional backyard. At least in economic terms, the Monroe Doctrine is inoperative.

America no longer manufacturers telecom equipment – Cisco got out of the business several years ago – and Huawei’s two Scandinavian competitors are too little, too late, and too expensive. There is little chance that Washington’s efforts to suppress Huawei will succeed. I read this as an after-the-fact response on the part of the US national security establishment to distract attention from their failure to act in time to make a difference.