04 Mar 2019
Topics Technology

Huawei, the Chinese telecommunications giant that has installed more than 23 percent of 5G technology in Europe, has been under scrutiny in the US and European Union (EU).

There are concerns that close ties with the Chinese government present national security threats to the US and EU.

But who could have imagined that EU member-countries – most of which are allies of the US-led NATO – could spurn Washington’s demand that they ban Huawei because of critical security issues? And that security concerns actually reflect deeper and longer-term US-EU differences towards an authoritarian but economically powerful and technologically innovative China?

Straggling a decade behind China and the US in developing 5G technology, the EU is keen to have Huawei’s investment in 5G.

The US is currently trying to restrict the use of Huawei’s technology on the grounds that it is being used for espionage.

Washington alleges that it was developed alongside the Chinese military. If EU countries fail to ban Huawei, the US will stop sharing information and cooperating with them.

The US has come up against the refusal of Germany, Britain and Italy to exclude Huawei from building their respective 5G networks. They want proof of espionage.

Britain claims it has the world’s toughest oversight of Huawei and that the risks are manageable.

Huawei and EU-US differences on China

The US-EU gap on Huawei reflects wider disagreements on how to confront China’s economic and military rise.

Washington’s National Security Strategy document (NSS 2017) brands China as an economic and political arch-foe, seeking to dislodge the US from its global primacy.

NSS 2017 also warns that China is gaining a strategic foothold in Europe by expanding its unfair trade practices and investing in key industries, infrastructure and sensitive technologies.

Washington has pointed out that no Chinese company is independent of the Chinese state, which can order companies to gather intelligence.

Adding to that is Trump’s allegation that the EU is as bad as China: they treat the US “very unfairly" -- “It is terrible what they do to us”.

In contrast, the EU has since long had excellent economic ties with China, despite differences on political and human rights issues.

China is the largest trading partner of both the EU and the US.

The EU gets about one-third of China’s investments abroad; China’s largest share of foreign investment goes to the US.

But, China is simultaneously the main political and military challenger to the world’s lone superpower.

In contrast, the EU and China do not threaten each other.

The EU even “recognises the need for and helps to define an increased role for China in the international system”.

Such a favourable European stance on China can only raise Washington’s hackles, regardless of who the US president is.

The predominance of trade and investment in the EU –China relationship (despite the EU’s much vaunted advocacy of human rights and democracy) can be explained partly by a decade of declining investment and slow growth in the EU, partly by the fact that Brussels and EU member-states have welcomed China’s investments.

West Europe gets the most Chinese investment

About 90 percent of Chinese investment in Europe is made in the rich West European countries; a mere 10 percent goes to Eastern Europe.

Most Belt and Road Initiative projects are in the hands of Chinese lenders and companies.

Britain, Germany, France and Sweden have received the largest investments.

In the first half of 2018, China invested $3.6 billion in Sweden — compared to $1.6 billion, $1.5 billion and $1.4 billion for the UK, Germany and France respectively.

During the same period, Chinese mergers and acquisitions (M&A) reached $22bn in Europe and $2.5bn in North America.

Completed Chinese investment in the US was $2bn. In Europe, it was $12bn.

The controversy over Huawei’s activities in western countries also reflect wider geopolitical and commercial tensions between the US and China, as Chinese and American companies compete over technological innovation.

Especially at a time when China is challenging America’s dominance in scientific research, the awkward question is whether it is more technologically innovative than the US.

The US has highlighted security concerns, but is security a priority for EU countries? The EU actually lacks a common security and defence policy.

In 2016, the EU's 28 member-states allotted €200 billion of public expenditure for 'defence'.

This is equivalent to 1.3 per cent of GDP. This amount, in turn, is much less than spending on social protection (which is equivalent to 19.1 per cent of GDP in 2016), health (7.1 per cent ) or education (4.7 per cent), but higher than public spending on recreation, culture and religion (1.0 per cent), environmental protection (0.7 per cent ) housing and community amenities (0.6 per cent).

The EU is concerned about China’s unfair trading practices.

In mid-February 2019, the European Parliament backed coordination of the scrutiny of foreign (notably Chinese) investments, to protect strategic technologies and infrastructure in Europe.

Under the plan, the European Commission will investigate foreign investments in critical sectors and give its opinion on whether they undermine European interests.

However, individual EU countries, not the Commission, will decide whether to block foreign investments under the new law, which will take effect in October 2020.

Such an arrangement could still present China with opportunities to foment divisions between the EU and US – and between EU countries themselves.

Having threatened action against countries allowing Huawei to invest, the US claims that European governments are listening to its message that the Chinese company exposes telecoms networks to security risks.

But Europeans want facts, not fears, to decide the future of telecoms network security in Europe.They are against a blanket ban that could delay next-generation 5G connections by several years.

In any case, each country will craft its own response. And the US does not expect EU countries to speak with a single voice.

Persuading the EU’s member-states to dump Huawei is unlikely to be clear sailing for the US.

Will the troubled waters flowing around Huawei adversely affect the ties between the US and EU?

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Photo by Kamil Kot on Unsplash

Topics Technology