Over two weeks after the ban on Huawei was imposed by the United States on suspicions of facilitating espionage on behalf of China, the newly appointed Minister of Electronics and IT, Ravi Shankar Prasad acknowledged that there are ‘complex security concerns’ around the deployment of Huawei’s technology in India. His statement comes soon after the TRAI’s statement emphasizing the need to indigenize telecom infrastructure in the aftermath of the US ban on Huawei.
The Chinese tech giant has been at the centre of controversy even before May 16, when President Trump signed an Executive Order entitled ‘Securing the Information and Communications Technology and Services Supply Chain’, declaring a national cybersecurity emergency, placing Huawei on the ‘Entity List’ of the US Department of Commerce under Supplement 4 to Part 744 of its Export Administration Regulations. This implies that any US persons and corporate entities that continue to do business with Huawei would face heavy penalties that could potentially include criminal sanctions. Owing to the design of export control laws in the United States, the enforcement of the ban in the United States has extraterritorial effects. According to a Reuters report, US Secretary of State Mike Pompeo warned allies of potential difficulties in sustained cooperation and data sharing with the United States if they continued to use Huawei equipment despite the ban.
Huawei in the United States
Criminal charges pending against Huawei in US courts include serious allegations of corporate espionage, bank fraud, theft of trade secrets and most importantly, conspiracy to violate the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq) (IEEPA) by export of telecommunications services provided by a US citizen to Iran without permission from the Office of Foreign Assets Control (OFAC). It was on the grounds of violation of the IEEPA that the US successfully urged Canada to detain Huawei’s CFO, Meng Wanzhou, who is now awaiting potential extradition to the United States for prosecution for the crimes alleged against Huawei.
Some in the US national security community have even argued that this could potentially be an abuse of the President’s emergency powers under the IEEPA, the legislation that enables the US to‘financially asphyxiate targeted countries, entities or individuals’ that pose ‘any unusual and extraordinary threat’ to US national security interests. Others, based on Trump’s statement that saw Huawei being potentially included in a future trade deal with China, take the view that the ban is no more than a leveraging tool to get concessions from the Chinese Government. Yet more view it as a measure designed purely to protect US telecom industries from Chinese competition in the 5G race, to prevent the US from losing its edge in communications technologies.
A major reason for the rapid rise of Huawei on the global tech scene has been its competitive prices and convenient payment plans. Thanks to the ban, rival companies like Cicso, Ericsson, Nokia and Samsung do indeed, stand to gain significant advantages and grab bigger market shares, but their prices so far have not been able to compete with those offered by their Chinese counterparts.
Despite this ‘emergency’, a week after President Trump signed an Executive Order, the restrictions were eased by the US Department of Commerce to give American companies a 90 days window to adapt to the new restrictions. In the time that has passed, several tech companies have severed business ties with Huawei. Google was the first to respond, cutting off Huawei’s access to its Android platform, restricting existing users’ access to future security patches and updates. Microsoft, Intel, Qualcomm, Xilinx, Broadcomm, Panasonic and British Chip manufacturer ARM soon followed suit, causing serious disruptions in the global ICT supply chain, especially in its smartphone manufacturing. However, the smart phone business is only a small part of Huawei’s overall products range. It is noteworthy that as on date, Huawei controls 28% of the global marketshare in telecom equipment. In the first quarter of 2019, Huawei surpassed Apple to become the world’s second largest manufacturer of smartphones. Much to the worry of American telcos, some forecasts indicate that China is expected to represent 40% of all global 5G connections by 2025.
Several reports indicate that Huawei had long been preparing for impending restrictions from the US Government. Reportedly, it is developing its own OS ‘Ark’ and has challenged the National Defence Authorization Act 2018, which bans US Government agencies from procuring products manufactured by Huawei or ZTE.
Although Huawei’s founder and CEO, Ren Zhengfei has opposed retaliation by the Chinese Government against Apple or other American tech companies, it remains to be seen how China will respond in the ongoing trade tensions with the US. Some changes to set up a mechanism that allows for higher degree of protection to its own national security interests have already been introduced in Chinese cyber security law in response. China has also threatened the creation of a ‘sweeping blacklist of US firms’ in retaliation. Reports indicate that the export of rare earth minerals to China by the US could be the next frontier in these ‘hostilities’.
In addition, the Chinese Defense Minister Wei Fenghe came out to explicitly state that Huawei was not part of its military, several Chinese officials have refuted US claims alleging that the decision to blacklist Huawei was unsupported by any evidence. Unsurprisingly though, Russia has rolled out the red carpet for Huawei, where it signed a deal to develop 5G infrastructure for Russian telecom provider MTS.
However, the most important piece of Chinese legislation for India to consider is the Chinese intelligence law passed in 2017 that makes it obligatory upon Chinese companies and other entities to share onshore and offshore data with the Government as and when called upon in the interest of national security.
Huawei in India
Some have argued that India would need to conclusively prove allegations of assisting the Chinese government in carrying out cyber espionage before taking any concrete steps to ban Huawei, otherwise India risks undermining its strategic autonomy and playing into the hands of the US. However, the argument seems focused exclusively on the rapid introduction and operationalization of 5G in India and ignores India’s previous run-ins with Huawei’s technology.
Telecom companies through the Cellular Operators Association of India have sought clarification from the Department of Telecommunications (DoT) on its stance qua usage of Huawei-manufactured equipment by telecom operators. Such a clarification is much needed, considering that Huawei has been kept on a see-saw since September 2018, when the US first started attempting to persuade allies to wall out Huawei in the 5G race. In India, Huawei was first excluded, then extended an invitation which was later rescinded. Huawei India’s CEO Jay Chen recently made a statement demanding a ‘level playing field’ for Huawei in the 5G trials, reiterating the request of the Chinese Government from December of last year.
Presently, telecom operators including Airtel and Vodafone use Huawei equipment in many of their circles in India. While the TRAI has highlighted the need for indigenizing of telecom infrastructure, the truth of the matter is that as on date, almost 60% of the Government’s telecom equipment, including especially that of BSNL is supplied by the Chinese companies ZTE and Huawei. This is despite the fact that BSNL’s allegations against Huawei of hacking into its networks were investigated in 2014. This makes the argument that requires conclusive proof of malicious activity difficult to sustain, if the security of the existing infrastructure has already been compromised in the past.
Huawei itself has urged the DoT for an expedited decision on its inclusion in the 5G trials, reportedly after having answered all queries posed to it by the DoT. The DoT appears divided on the issue – with one section that views it as an issue of not just technology, but also one of security with geopoilitcal ramifications, and the other seemingly inclined towards Huawei’s inclusion to maintain the competition and mitigate risks of relying on supplies from European vendors alone.
The New Berlin Wall and India’s Posturing
At the moment, India seems to have been caught in the middle of what has been dubbed as the New Cold War in tech–faced with prohibitively high prices on the one side, and a risk of Chinese cyber espionage on the other. On this point, some take the view that ‘what is cheap now may not be good in the long run’. National security choices require nations to make difficult trade-offs between economic and strategic goals and considerations, and the contours of the new ‘Great Powers’ relations are radically different to the one that ended with the fall of the Berlin Wall. The New York Times viewed the ban as one that is “about much more than crippling one Chinese tech giant”, and is forcing “nations to make an agonizing choice: Which side of the new Berlin Wall do they want to live on?”
In the collision of tech and trade, foreign policy choices of Governments are now closely intertwined with the commercial interests and health of the domestic telecom and tech industries. Although it is reassuring that India’s telecom minister seems intent on taking ‘a serious look’ at the technological advantage versus security concerns calculus before deciding on Huawei’s inclusion in the upcoming 5G trials, remedial and mitigation measures like reviving MTNL and BSNL services are measures for the long run. However, what makes India the desired location for ‘proxy wars’ in tech is the treasure trove of data that lies beneath the massive subscriber base of over 1.19 billion individuals to telecom services. As for the health of domestic markets, if anything, Indian telecom giants like Reliance Jio that uses 4G equipment manufactured by Samsung, could potentially stand to gain from the move, if Huawei were to be excluded from the Indian market and the 5G trials. It remains to be seen whether such a protectionist measure, following the footsteps of the US, would be introduced by the new Government that has re-risen to power on the promise of strengthening national security. A legitimate concern is the threat of retaliatory pressure tactics from the US if India does fail to do so.
It is notable that India has taken some measures to avoid offending the United States’ declared policies, while the decision on Huawei remains pending. A week after the ban, India stopped importing oil from Iran as well as Venezuela to comply with US sanctions after the US ended exemptions for eight countries including India. More recently, the US revoked India’s preferential trade status under the GSP (Generalised System of Preferences) trade program, alleging that India has not “assured the US that it will provide equitable and reasonable access to its markets”. The US-China trade war presents a similar spectrum of choices to India – while the Ministry of Commerce is mulling over the imposition of ‘retaliatory tariffs’, others take the position that India should cut interest rates to take advantage of the trade war to gain a stronger foothold in both markets.
Against the backdrop of this new political economy of the cybersecurity industry, a new kind of non-alignment seems to be emerging, creating an unmistakable split in traditional alliances between NATO members. Only two of the ‘Five Eyes Alliance’ of intelligence sharing other than the United States – Australia and New Zealand responded quickly by banning Huawei in their respective national jurisdictions. Some European counties, specifically – the UK and Germany, while also remaining mindful of the risks posed by Chinese covert activity through its tech industry that has undeniably acquired a global influence, are seemingly intent on not abandoning Huawei in the design of their 5G infrastructure. Canada too, while juggling the pending extradition of Huawei’s CFO to the US, appears determined to make an independent decision on the 5G question. At the moment, India’s policies seem to just as non-aligned as those of Germany or the United Kingdom – aimed at maintaining the free flow of investments and information while steadily moving towards indigenization of ICT and expansion of markets instead of encouraging protectionism to curb competition.
Until such time that India can completely indigenize the equipment, or alter its telecom equipment procurement policies across the board to exclude obvious threats to the integrity of our cybersecurity infrastructure, India’s choice seems to be a limited to a cybersecurity policy along the lines of the Nehruvian-era doctrine of non-alignment, perhaps with only slight tilt— this time, toward the United States? It would appear that the time is ripe for NaMo 2.0 to revisit the doctrine as NAM 2.0, in a manner that allows India to preserve the security alliance with one side, and an economic partnership to avoid disruptions and price escalations in our ICT supply chain on the other. In other words, the need of the hour is ‘to effectively manage our global opportunities to maximize our choices’ while preserving strategic autonomy.