The National Security Institute (NSI) at George Mason University’s Antonin Scalia Law School has published its latest NSI Law and Policy Paper, “Chinese Telecommunications Companies Huawei and ZTE: Countering a Hostile Foreign Threat,” by NSI Fellow Andy Keiser and NSI Senior Fellow Bryan Smith. The paper will be briefed to Congress at a public event this February at a date yet to be determined.
The paper describes the foundations of Huawei and ZTE, the concerning actions taken by these companies, and the responses taken by the United States and allied governments. It also evaluates the key issues at stake for U.S. national security and competitiveness and provides actionable recommendations to counter what the authors describe as “the serious national security threat from Huawei and ZTE”.
Both Huawei and ZTE have their origins in the Chinese state, remain integrated with the Chinese Communist Party, and are bound by Chinese law and policy to serve state security and economic interests. Most significantly, Huawei and ZTE compete with Western companies to develop 5G telecommunications, which will form the infrastructure that enables the promise of the Internet of Things and Smart Cities—i.e., a digital and connected world—heightening cybersecurity concerns for the U.S., allies and partners.
Both companies have a history of actions ranging from troublesome to illegal—involving bribery, corruption, and sanctions evasion, as well as a record of supplying technological tools being deployed by authoritarian regimes to suppress dissent.
The U.S. response has been characterized by the increasing imposition of restrictions, primarily through:
- The Commerce Department’s brief “denial order” and ultimate settlement with ZTE over its massive evasion of U.S. sanctions;
- The 2019 National Defense Authorization Act’s ban of their technology from federal government systems and contractors; and
- The Federal Communications Commission’s proposed rule in April 2018 that would exclude companies that buy from Huawei and ZTE from certain funding programs.
The paper notes that U.S. allies, including the “Five Eyes” intelligence partners, have at times preferred mitigation measures relying on pre-deployment technical testing to verify the integrity of legacy Chinese equipment and software. However, the prospect of a 5G-enabled Internet of Things, coupled with the increased vulnerability at the user edge of networks is causing them to re-think their approach.
The consideration of further restrictions on Chinese telecommunications companies brings into play a set of interrelated U.S. interests, namely the cybersecurity and espionage risk of including Huawei and ZTE technology in 5G networks; and the risk that China would retaliate against U.S. companies and link this to other issues of importance to the U.S.
Proponents of mitigation measures generally argue that restrictions will backfire with China developing its own supply chains and by inviting retaliation against U.S. companies; that technical testing brings sufficient security assurances; and that successful mitigation brings ancillary benefits such as a more diverse and innovative market as well as the prospect for an improved economic and security relationship with China.
Proponents of restrictions, such as in government procurement and 5G network bans, generally argue that Huawei and ZTE can’t be decoupled from the Chinese state; and that pre-deployment technical testing is insufficient and a rigorous verification program would be necessary but is ultimately unattainable.
The paper’s authors say Huawei and ZTE represent a serious, long-term national security threat to the U.S. that expands exponentially with the advent of 5G. They add that mitigation is insufficient and restrictions are necessary. Further, they say that a global response is needed and the U.S. must make every diplomatic effort to secure the support of key allies. Finally, the paper warns that policy-makers should anticipate and steadfastly resist Chinese retaliatory and linkage actions.
The NSI paper makes five recommendations for action:
The Office of Management and Budget should issue guidance for rigorous compliance monitoring and strict enforcement of the National Defense Authorization Act bans.
The State Department should lead a diplomatic campaign to incent allies to adopt protections and to condition ‘Five Eyes’ participation.
The Department of Commerce should initiate an investigation under Section 232 of the Trade Expansion Act of 1962.
The National Security Council and the National Economic Council should devise a strategy to counter any Chinese retaliation.
The Department of Justice should require Huawei and ZTE representatives to register as “foreign agents” under the Foreign Agent Registration Act.
The authors say that U.S.-led pressure on Huawei and ZTE, such as that outlined in the paper, could potentially force the Chinese government to change its behavior, which might ultimately build trust among U.S. and allied governments, and could potentially lead to renewed access by Chinese enterprises to some of the U.S. telecommunications market.