Trump Ponders Another Blow To Huawei, ZTE As Tensions With China Rise

Advertisement
Advertisement

United States President Donald Trump is pondering the idea of dealing another massive blow to Huawei and ZTE as tensions between Washington and Beijing continue to rise, a new report indicates. The White House is currently understood to be considering a new executive order that would prevent American companies from purchasing or licensing any kind of telecommunications technologies from the two Chinese firms, several insiders claim. Given the limitation of executive orders, the move would have to be formally justified with a national emergency, with President Trump being likely to cite national security threats as the main reason for banning the Chinese telecom tech from the U.S. market, as was the case with the tariffs he imposed on many Chinese goods and services over the course of this year.

The development isn't entirely new as the executive order in question has been the subject of White House talks for over eight months by this point, as per the same sources. The draft of the directive has yet to be finalized and isn't expected to directly name any particular company, though it will almost certainly be worded in a way that would essentially put an end to their stateside ambitions. As the U.S. and China are presently entering a new phase of their trade conflict, the ban of Huawei and ZTE's equipment could now arrive as early as next month. The powers vested in the President's office prevent the administration from issuing a direct ban but the end result of the move should be nearly identical as the White House can simply use such a directive to instruct the Department of Commerce to fulfill its policy agenda. As has been the case with other recent blows the U.S. government dealt to the two telecom juggernauts, the potential executive order is likely to be framed as an attempt at reducing the risk of Chinese spying. More specifically, the directive is reportedly based on the International Emergency Economic Powers Act of 1977, a piece of legislation the Trump administration already used extensively to justify the enforcement of its policies in the past. The ban has already been discussed with select executives from the American wireless industry, the new report suggests.

The final nail in the telecom coffin

Advertisement

Neither Huawei nor ZTE currently have a significant presence in the U.S. wireless market, at least partially because American companies are already fearful of government retribution should they partner with major players from the Far Eastern country. The last major firm that attempted doing so was AT&T, the second-largest network operator in the U.S. that agreed on a limited product distribution partnership with Huawei late last year but was pressured to drop it mere hours before the collaboration was planned to be announced at Consumer Electronics Show in Las Vegas this January. The company was reportedly threatened with having its lucrative federal contracts revoked if it goes through with the idea of deepening its relations with Huawei, the largest telecom firm in China by headcount.

The annual spending bill passed by Congress this summer contains a provision that prevents federal agencies from purchasing or licensing any kind of technologies manufactured or merely associated with ZTE or Huawei. The legislation specifically names the two companies and has already caused anger from Beijing which claims the U.S. is looking to skew the playing field in order to account for the fact its own firms simply cannot compete with Chinese telecom juggernauts. Washington previously dismissed the allegations, whereas China's opponents often ironically argue Beijing should open its own telecom market to foreign players like Nokia and Ericsson if nurturing a competitive economy based on free trade principles is something it's truly concerned about. Between the aforementioned federal ban and the newly reported executive order aimed at the private sector, the U.S. now appears to be on the verge of completely killing off any kind of stateside wireless ambitions Huawei and ZTE had.

An exercise in finger-pointing

Advertisement

And as the American and Chinese governments continue to point fingers at each other in regards to trade and technology, the Western intelligence community remains adamant that even if Huawei or ZTE never spied on their customers on behest of Beijing in the past, they could easily be compelled to do so in the future and hence cannot be trusted. ZTE has been labeled a liability primarily due to its ownership – despite being publicly traded, it's controlled by a state-owned company. Huawei is technically owned by its employees but has a rather opaque structure that revokes share rights after employment ends and has a complex voting system that makes it unclear who is actually pulling the strings. This lack of transparency and its close ties to Beijing that go all the way to its founder Ren Zhengfei — a former People's Liberation Army official — are some of the main reasons why the Shenzen-based conglomerate continues to face distrust in the U.S. That lack of credibility is now also hurting it in other markets as the U.S. is now ramping up its efforts to lobby against Chinese telecom tech with its allies; Australia already banned Huawei from its 5G project and South Korea, Japan, and Canada are reportedly close to doing the same.

Huawei's long history of issues with the U.S. government is hence likely to significantly limit its 5G ambitions, with Europe remaining the only major Western market that's still willing to accept its solutions, at least do a degree. Even the Old Continent isn't as receptive to its products as it once was seeing how telecom juggernaut Deutsche Telekom dropped its tech just earlier this month as part of its negotiations with American regulators probing the proposed merger of its subsidiary T-Mobile and SoftBank's Sprint. With its Chief Financial Officer (and founder's daughter) Meng Wanzhou currently also fighting extradition in Canada after the U.S. Justice Department accused her of fraud and a conspiracy to violate trade embargoes imposed on Iran, Huawei appears to be in for a rough 2019 regardless of how innovative it manages to be in the near future.