Bigger Than Huawei: US Broadens Scrutiny of Chinese Tech
03 April 2019, 02:33
A flurry of seemingly disconnected actions by the U.S. government to curb the involvement of Chinese technology firms in the U.S. economy over the past year reflects the Trump administration’s intensifying concern that those firms could — now or in the future — abet espionage by Beijing’s intelligence services, VOA news reports.
The actions include tightening scrutiny of foreign investors in a broad range of industries, publicly warning allies about looming vulnerabilities, and blocking China-linked companies from buying American companies involves in key industries, like semiconductor design.
For now, experts say it has largely been a patchwork approach to protecting industries seen as critical to U.S. national security. But there is also evidence that, behind the scenes, policymakers are racing to develop a more coherent approach to balancing commerce with China and national security interests.
At the Department of Defense and the Department of Homeland Security, for example, efforts are underway to create secure supply chains for equipment either deemed essential to national security or that supports critical infrastructure within the U.S.
“I think they’ll get their act together, it’s just that it’s such a new problem that it hasn’t happened yet,” said James Lewis, the director of the Technology Policy Program at the Center for Strategic and International Studies in Washington.
At the moment, though, it can be difficult to discern a strategy or locus of control.
US regulator exercises new powers
Last year, Congress passed measures expanding the authority of a Treasury Department committee (CFIUS) that investigates foreign investments in American industries. The new measures expand the power of the Committee on Foreign Investment in the United States to scrutinize investment deals that would give foreign partners access to nonpublic technical information.
Last week, CFIUS decided that it would order the Chinese gaming firm Beijing Kunlun Tech Co. to divest its ownership stake in the popular gay dating app Grindr. The reason, according to reports, was concern that the information captured by the app could be used to blackmail U.S. officials and contractors.
In January, members of Congress began pressuring the District of Columbia to reconsider allowing a Chinese firm to manufacture new cars for its Metro system. Among the concerns they raised was the possibility that surveillance equipment or malicious software might be embedded within them.
Back in October, the Commerce Department announced that it would bar the Chinese government-owned Fujian Jinhua Integrated Circuit, which makes semiconductors, from purchasing key components from American firms, saying it “poses a significant risk” to national security.
Hanging over all of this is the federal government’s push to shut out Huawei, China’s giant telecommunications hardware exporter, from participating in the worldwide rollout of new high-speed 5G mobile communications technology.
At the same time, that U.S. officials press allies not to use Huawei’s equipment, the Department of Justice has filed lawsuits against the company alleging theft of trade secrets and bank fraud, resulting in the firm’s CFO being arrested in Canada.
Scattershot approach to growing problem
If the U.S. approach seems a bit scattershot, that’s because it is, said experts. While intelligence agencies have been warning about the potential danger of allowing Chinese technology firms to integrate themselves into U.S. infrastructure for more than a decade, it’s only in recent years that the issue has begun to feel urgent across the federal government.
“Three years ago, in the final years of the Obama administration, people were just beginning to realize this was a problem,” Lewis explained.
And in coming to that realization, he said, policymakers have also been forced to reckon with the fact that over the past two decades, the U.S. and Chinese economies have become so thoroughly interconnected that doing something about it is extremely difficult.
“There are technologies that the Chinese can’t make, that they can only get from the Americans,” Lewis said. “The Americans buy a lot of technology from China because they’re cheap, so we didn’t realize the scale of the problem, that all this stuff was so interwoven.”
The same concerns apply globally, particularly with regard to Huawei. The firm’s components are already installed all over the globe, making up the backbone of mobile networks in dozens of countries around the world, including many of the United States’ closest European allies.
The U.S. approach to Huawei, said some experts, is indicative of how little organization there is in the federal policy making process.
“There’s no logical place in the U.S. government for that sort of debate to go on. So you’ve seen a lot of thrashing around,” said Paul Triolo, practice head for Geo-Technology at the Eurasia Group and China Digital Economy Fellow at the New America Foundation.
“The U.S. policy on this has evolved quickly over the past year, but it’s been focused on the security side, not on the question, ‘What do we do now? What’s the alternative to this?’”
Huawei under pressure
Kevin Wolf, an attorney with Akin Gump in Washington who served as assistant secretary of commerce for Export Administration from 2010 through 2017, said that by his count there are at least seven different current, pending, or potential actions the U.S. government is considering against Huawei, and authority for implementing them is located in almost as many government entities.
The White House could issue an executive order barring Huawei from U.S. markets completely, or Congress could pass a law directing him to take similar action.
The Department of Commerce has at least two alternatives under consideration. It could impose crippling export restrictions that would deny Huawei access to key components, or limit the company’s ability to license key technology from U.S. firms.
Other potential actions are being complicated by the departments of Treasury and Defense, and by the Federal Communications Commission.
Each one could have dire economic consequences for both Huawei and U.S. firms that do business with the company.
“Nobody knows what’s going to happen,” said Wolf. “It’s all over the map. There’s no coherent authority, voice, or position, and there are lots and lots of different options, each one of which is effectively a nuclear option.”
Beyond enforcement actions against individual companies, serious efforts are being made within the government to clarify how the U.S. will handle technology imports while allaying concerns about potential intelligence breaches. The Pentagon last year launched an initiative grounded in a strategy called “Deliver Uncompromised,” which is meant to award defense contracts based on security assessments of individual contractors.
The Department of Homeland Security, in November, launched a public-private Information and Communications Technology Supply Chain Risk Management Task Force.
In announcing the formation of the task force, DHS Under Secretary Christopher Krebs said, “By bringing together some of the nation’s leading telecom companies and government agencies, we have a unique ability to confront today’s challenges by sharing information across government and industry in real-time and developing the ability to better plan for the risks of the future.”
But the ongoing efforts are not without complicating factors, the largest of which is that the U.S. and China are currently in tense negotiations right now to end a trade war that is costing both countries billions in lost revenue.
Security threats complicate trade talks
President Trump and members of his administration have, on multiple occasions, suggested that the future treatment of Huawei by the U.S. could be tied to the result of those talks — a connecting of trade talks and national security issues that troubles many experts.
“I’ve been doing this for 25 years. It’s never been done that way. It’s not how it’s supposed to work,” said Wolf. “You keep the two separate and the reason you do is so that you don’t devalue the very national security and law enforcement purpose of what you’re enforcing. If you start using it as a tool, then all you’ve done is politicize it.”
Once that happens, he said, any U.S. enforcement actions that affect trade will be viewed with suspicion.
“That’s credibility that’s impossible to get back with foreign governments, when they just assume that the reason you’re taking an enforcement action for foreign bribery or sanction violations or export control violations is to use as leverage for economic reasons,” he said. “It’s going to be a very long time before we get back faith in the system, given the combining of those two variables.”