Is politicization ever really a good thing? Time and time again, the politicization of any given entity, object, product, or sector has proven to cause more harm than good and this applies to the technology industry more than ever before.
United States-China tech war
The US-China trade war, as mapped out in the first quarter of 2018, had two parts. The first one being the US trade deficit which was supposed to bring down the deficit with China. And the second one is their fight to dominate the ICT industry.
In July that year, US President Donald Trump imposed tariffs on China which he had been threatening to do for a long time. His reasons were that China was supposedly unfair in its trade practices.
This conflict could also be re-classified into two other parts: the trade war and the ‘tech’ war. For the purposes of this publication, we will focus primarily on the tech war.
This alleged war is unprecedented and the two economic powerhouses have been going back and forth for many years now, each trying to harm the other. This is particularly complex in the case of tech because both countries are heavily involved in one another’s supply chains. There is a never-ending entanglement of economic interest and the need for dominance over the other.
However, this tech war is not only set to harm the two countries involved but others too because they are two of the most prominent economies in the world. The stakes are very high and they are only bound to get higher because of the global pandemic and the economic issues caused by it.
In May 2019, Trump inked an executive order which would potentially lead to an end of any technology transfers between the US and China on the grounds of national security concerns. While this only made the trade imbalance worse, many members of the US Congress and Trump campaigners still agreed to, and believed in, this.
In November that year, the US released some more regulatory guidelines for its telecom networks procedure to ‘protect’ them from national security threats which were allegedly posed by China.
The US Commerce Department released a notice which introduced these new procedures with regards to identifying, assessing, and addressing transactions of this nature. This gave US companies the opportunity and power to diminish the importation and use of technology from foreign countries within their domestic infrastructure and ICT supply chains.
This document did not specifically disclose that Huawei or ZTE equipment was targeted but since they were already on the US entity blacklist and were unanimously voted by the US Federal Communications Commissions as alleged national security threats, it is no doubt that this move had been targeted towards them.
On 5th August this year, the US government launched the Clean Network Agreement. According to the government’s website, the statement noted that the program is “Trump Administration’s comprehensive approach to guarding citizens’ privacy and companies’ most sensitive information from aggressive intrusions by malign actors, such as the Chinese Communist Party (CCP).”
It added, “These programs are rooted in international accepted digital trust standards and built upon the 5G Clean Path initiative, announced on 29 April 2020, to secure data traveling on 5G networks into US diplomatic facilities overseas and within the United States.” This highly politicized move received a great deal of criticism.
For instance, the Internet Society published a statement expressing their disappointment in the government’s decision on 7th August 2020, which read: “We are very disappointed. The United States, the country that funded the early development of the Internet, is now considering policies that would fracture it into pieces. This is part of a larger disturbing trend where governments directly interfere with the Internet, attempting to score short-term political points without regard to the long-term damage that could result. Today’s announcement of the U.S. Clean Network program challenges this architecture at its very core.”
US vs. Huawei
The US’s issues with Huawei have become one of the industry’s most talked-about topics. Huawei, the vendor that essentially won the 5G race, launched the industry’s first 5G commercial chip and 5G commercial CPE which was compliant with 3GPP Release 15.
The tech behemoth released its 5G kit before any American vendor. This raised a great deal of concern within the US.
5G has become one of the most heavily-debated topics this year. From health concerns to alleged cyber-espionage from Chinese vendors, 5G has been politicized to a great extent since its inception. The next-generation technology offers super-fast speeds, more reliable connection, high throughput, and ultra-low latency; all of which are set to unlock and support an entirely new landscape of services we could have never thought possible.
However, despite the aforementioned advantages, namely the juxtaposition of Huawei’s 5G launch and their politicization with the US, this was made to work in Trump’s favor.
Over the past few years, Huawei has been under fire due to several allegations made by the US government, causing a ripple effect across the rest of the world. The US has been placing a great deal of pressure on its allies not to deploy Huawei’s 5G infrastructure for their rollouts.
One of the most recent issues in this tech war between Trump and the vendor is the UK’s Huawei 5G ban. The move will appease the Trump administration but it will be a logistical nightmare which would also cause greater geopolitical tensions between the UK and China.
Unfortunately for Huawei, the US government has been relentless in its efforts to diminish its stronghold on the West’s telecom market. It is safe to say that the vendor has been caught up in a trade war that is bigger than itself: the trade war between the world’s two biggest economic powerhouses, the US, and China.
The US has cited that the core issue with Huawei has been the fact that the company may have been working closely with the Chinese government which led them to accuse the tech giant of cyber-espionage. In reality, there is no solid evidence to back this claim.
Trump issued a trade ban on the company which essentially caused it to lose its access to the US market. Shortly after, the US placed Huawei on the entity list which would ban it from liaising or working with US-based companies. This posed a huge problem for the vendor as it would have a severe effect on its supply chain.
Despite all this, the company rose from the ashes and persevered by doing what it does best: relentlessly innovating and diversifying its supply chain.
The UK government has reconsidered its decision to work with Huawei and purchase its 5G equipment.
Previously, the UK decided to use Huawei’s 5G equipment to a limited extent. Following this decision, UK Prime Minister Boris Johnson still faced a great deal of domestic political pressure.
Huawei’s spokesperson in the UK, Ed Brewster, stated that the decision was disappointing adding that the company’s future in the UK has “become politicized”, stating that “this is about US trade policy, not security.” Indeed, there should be no place for geopolitics in a ‘free-market’ economy especially in this case because it encourages anti-competitive behavior.
The UK recently approved the end of the country’s relations with the tech giant which would essentially cost operators who have relied on their equipment a great deal for an average of around 20 years.
Oliver Dowden, Britain’s digital minister, announced the move in parliament after Boris Johnson chaired meetings with his Cabinet and the National Security Council. He stated that “Given the uncertainty this creates around Huawei’s supply chain, the UK can no longer be confident it will be able to guarantee the security of future Huawei 5G equipment… From the end of this year, telecom providers must not buy any 5G equipment from Huawei.”
The revised decision by the UK government would not only be a logistical nightmare, but it will also delay its deployment by years and will incur extra costs (in billions) for network providers.
Considering the amount of Huawei equipment that is already deployed in the UK, this poses a huge problem. BT has said that it would be “impossible” to remove all of Huawei’s kit within 10 years.
The consensus is that no new 5G equipment from Huawei can be installed after 2021 and that all the existing 5G equipment from the tech giant be removed by 2027.
It has been speculated that Huawei may well be one of the UK’s largest sources of investment from China. In addition to this, Huawei is most renowned for its relentless R&D efforts and investment. Huawei’s R&D budget exceeds $20 billion this year.
With regards to the UK’s long-awaited 5G rollout, the supply ban would mean that it will be delayed by a whole year. Dowden also noted that the actual cumulative cost of the moves, including earlier restrictions announced against the tech giant, could reach up to £2bn which could even delay the UK’s 5G rollout by two or three years.
“Given the way there has been a decrease in the vendors supplying this technology, if you want 5G any time soon and you want good performance at a good price point then the equipment that Huawei offers is very attractive,” said Richard Foggie, of The Knowledge Transfer Network.
To echo Foggie’s sentiment, Huawei offers the most attractive product in the 5G space in terms of cost and reliability. This would mean that the UK will have to spend a great deal more than initially anticipated when they decide to work with other vendors. These extra costs will be incurred by UK customers which could lead to even bigger domestic political and social issues.
Removing Huawei’s 5G kits is not going to be easy. The UK has over 200 towns and cities that already rely on Huawei’s 5G equipment. This means that logistically speaking, removing it all will be a difficult process, especially because they will need to find new equipment to immediately replace them.
Commenting on the issue, director of telecom security at Positive Technologies, Michael Downs, stated, “Long-term, the decision to exclude Huawei cannot be solved with a solution as idealistically simple as just swapping it for an alternative vendor immediately. This whole process- including testing- will have to be started all over again.”
More recently, the US made another move to tighten its restrictions on the Chinese tech giant. In an effort to stop Huawei from buying US-made computer chips, they also added 38 new names linked to Huawei to the entity list.
According to US Secretary of State, Mike Pompeo, “Huawei has continuously tried to evade” the restrictions which were previously imposed on them in May.
“As we have restricted its access to US technology, Huawei and its affiliates have worked through third parties to harness US technology in a manner that undermines US national security and foreign policy interests. This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so,” said US Commerce Secretary, Wilbur Ross.
In a meeting back in May, Huawei compared the firm to a plane “riddled with bullet holes” due to the restrictions the US placed on them from 2019 onwards, forcing it to remake its supply chain.
US vs. TikTok and WeChat
Trump issued executive orders to ban any US transactions with Chinese companies, TikTok and WeChat. He cited that the two companies posed a national security threat and that, due to this, the US had to take “aggressive action”.
The executive orders stated the prohibition of “any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States”, effective as of September.
ByteDance, TikTok’s parent company, has to sell its US operations to either Microsoft or another US firm by September 15th. If they do not meet this deadline, they will most likely face an outright ban in the US. After much speculation, it was revealed that the alleged of value of TikTok could be over $50 billion.
Due to a Chinese law which was issued in 2017, which cited that companies were obliged to support and cooperate with China’s national intelligence if called upon. In reference to this, Trump wrote in a letter to House speaker Nancy Pelosi: “The spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States.”
TikTok issued a statement which read: “We are shocked by the recent executive order, which was issued without any due process. For nearly a year, we have sought to engage with the US government in good faith to provide a constructive solution to the concerns that have been expressed. What we encountered instead was that the administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.”
Adding that, “It sets a dangerous precedent for the concept of free expression and open markets. We will pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly – if not by the Administration, then by the US courts.”
In addition to this, another one of Trump’s China-owned tech giants, WeChat, is widely used across the world for chatting, making payments and as an interface for other apps. It is important to also note that while Trump moves to limit the power of or outrightly ban the social messaging app, Western messaging apps are actually banned in China. However, people in the US have still been able to conduct their business transactions, communicate with others and advertise on WeChat.
Tencent, parent company of WeChat, has also invested a great deal into US companies such as Reddit and Tesla. In fact, Tencent’s market value fell by around 9% in Hong Kong after the executive order was issued.
This move, of which details are not fully established yet, shows that US-China tensions are getting worse and inherently causing the tech cold war between the two nations to escalate even more.
There are no winners
In a conflict of this unprecedented nature, even more so due to the COVID-19 outbreak, the future of this trade war seems bleak. However, the US’s relentless campaigns to block Chinese tech companies from not only dealing with them but European countries too, will not end very well for both parties.
While the future of this is very ambiguous, what we can know for sure is if this escalates much further, political instability between the two economic powerhouses will inevitably worsen. This could have dire consequences, both economically and politically, as well as supply chain disruptions that could stem from this.
According to the aforementioned statement released by the Internet Society in August 2020:
“Having a government dictate how networks interconnect according to political considerations rather than technical considerations, runs contrary to the very idea of the Internet. Such interventions will significantly impact the agility, resiliency, and flexibility of the Internet. If this approach were to spread further, the ability of the Internet to bring the broader benefits of collaboration, global reach, and economic growth will be significantly threatened. Policies like these only increase the global momentum towards a “Splinternet” — a fractured network, rather than the Internet we have built over the last four decades and need now more than ever,” the statement concluded.
Undermining the free market in terms of international trade based on political issues is a terrible mistake. The trade war between the two countries only seems to point towards losses on both sides.