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[Zabougornov]

https://www.the-american-interest.com/2020/08/31/huawei-is-just-the-first-battle/?_ga=2.172529379.1115725854.1636555201-339939436.1636555201
Huawei Is Just The First Battle
Diane Francis

A global Manhattan Project to create an ethical future is certainly a tall order, but the status quo is not an option.

Huawei Technologies Co. is not a corporation but a weapon, subsidized by Beijing to install 4G and 5G telecommunications systems around the world. Its platforms deliver dramatically more bandwidth in order to deliver more data, faster. These networks will be the digital spine in a hyper-automated world filled with trillions of devices. In the race to the digital future, Huawei has left rivals behind. An estimated two-thirds of the world’s nations are in the process of adopting some or all of its networking technologies.

This, along with its $1-trillion Belt and Road Initiative, is an existential threat to the economies and democracies of the world. Huawei’s rise is not a mercantilist strategy but a martial one. Its 5G operating system is closed to competitors (like China’s military dictatorship is closed to political opposition), and is a top-down architecture designed to provide a plug-and-play framework tailor-made for autocrats to surveil, propagandize, and control societies. Huawei and the Belt and Road are the 21st Century’s Trojan Horses.

In 2017, the American government finally took action and targeted Huawei, along with China itself, for transgressions ranging from unfair trade practices to subsidies, data theft, and intellectual property theft. The counter-attack has escalated and, more recently, Washington has barred Huawei from its marketplace, forced the sale of Chinese apps like TikTok, pressured others to do the same, and blocked Chinese access to U.S. technology. Faced with such onslaughts, Beijing and Huawei argue that such measures are unfair and motivated strictly by economic competition.

America’s pushback is welcome, but global intervention is needed. Unfortunately, the United Nations and the World Trade Organization have been ineffective in bridling China, given its heavy influence there. And the Chinese have also attempted to politicize the international standards organizations that govern the Internet itself to award itself advantages. Without success—so far.

The tussle between the superpowers is front and center, but the collateral damage continues, involving corporations as well as nation-states. For instance, Huawei was founded by a former military officer, Ren Zhengfei, and one of its first targets was to acquire the advanced technology developed by Nortel, a Canadian company that had 20 years ago become a world pioneer in 4G and 5G networks. (The story of how this company’s technology disappeared into Huawei was described in a Bloomberg investigative piece in 2020.) In 2018, Zhengfei’s daughter Meng Wanzhou is Huawei’s chief financial officer and deputy chairwoman and was charged by American officials with fraud and sanctions violations. That December, she was arrested on an American extradition warrant by Canadian officials while changing planes in Vancouver and has been under house arrest as a series of extradition hearings are held in Canadian courts.

But China retaliated immediately after the arrest by jailing two Canadian businessmen. They are hostages and for nearly two years have not been charged or given access to families or lawyers. China demanded that Canada ignore its extradition obligation and, because it has not, has also retaliated harshly by abrogating billions in agriculture contracts. This is war. Zhengfei’s Huawei is an instrument of the Chinese government and hostages were taken in anticipation of a prisoner swap for his daughter.

Caught in the crossfire, the world’s nations must collaborate in order to provide an alternative to Huawei and Beijing. Discussions are underway, initiated by an anti-China push-back from the Quad nations—the United States, Japan, India, and Australia—to counteract China’s drive toward data dictatorship. There is also talk of collaboration with the Five Eyes security coalition, which includes the United States, the UK, Australia, Canada, Australia, and New Zealand—as well as the European Union. Ideally, a coalition of technologically advanced, democratic nations and businesses could create an alternative open, transparent 5G operation system for the world that will shut out China’s closed model.

Without an alternative, most countries will be bullied, co-opted, or stranded. Rajeev Chandrasekar, a tech entrepreneur and Member of Parliament in India, was involved with Nortel before it was attacked by Huawei. “This is not just about technology, but about trade and economics. The biggest driver for economies in the future is technology. This is a challenge to all free people and open economies of the world,” he said at a recent Hudson Institute conference entitled the Geo Tech Wars. Since the People’s Republic of China’s military escalation in India’s Galwan Valley, the Government of India has taken bold actions, recently booting out Huawei and shutting down TikTok and 28 other Chinese apps. He believes that only a new construct between free nations’ governments and private sectors will impede China’s “Grand Strategy”.

Another conference participant, Australia security advisor John Lee, emphasized the need for a global digital economic co-operation system to hold patents, control laws, police data, and equipment imports and exports—and to impose rules and regulations that would ensure secure cross-border data and information transmissions.

He added that China has not “won” the Tech War yet. “There is time,” he said. “China is still a net importer of technology and know-how. They can be [impeded if] denied access to capital, markets, and technology. But the issue of technology leakage from Europe needs to be addressed and the U.S. is on that path now. The Quad and Five Eyes are natural coalitions to advance this. The Five Eyes is now starting to discuss geo-technology and geo-economic issues with the Quad, the G10, the G7, and South Korea, and the European Union.”

Discussions, however, need to include business as well as governments, with the goal being the creation of a digital architecture that guarantees universal access to users and vendors to foster innovation among suppliers to produce products and software. By contrast, China’s technology template—a closed system in all countries controlled by a state-owned enterprise—is stultifying and will lead to tyranny.

A global Manhattan Project to create an ethical future is certainly a tall order, but the status quo is not an option. Work must begin among the world’s free nations and their industries to design and build a framework for the future that is rules-based, accountable, and open to competition and innovation.
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A la guerre comme a la guerre или вторая редакция Забугорнова

[Zabougornov]

https://www.foreignaffairs.com/articles/china/2021-11-09/huawei-strikes-back?utm_medium=promo_email&utm_source=lo_flows&utm_campaign=registered_user_welcome&utm_term=email_1&utm_content=20211113

Huawei Strikes Back
To Beat China on Tech, America Must Invest in the Developing World
By Jonathan E. Hillman
November 9, 2021


Huawei is hurting. Since the United States placed export restrictions on the company last year, the Chinese telecommunications giant has been cut off from key components of the semiconductor supply chain. U.S. diplomats have also persuaded a growing number of foreign leaders, many of them in advanced democracies, to keep Huawei out of their 5G networks. These punitive measures are taking a toll, and the company’s revenue has declined for four straight quarters.

But Huawei is also adapting. The world’s largest supplier of telecommunications gear is already pivoting from network equipment and phones to cloud computing, e-government services, and other products that are less dependent on advanced semiconductors. Meanwhile, Huawei is continuing to market its technology aggressively in the developing world, where it has been widely embraced. By deepening its presence in large emerging markets such as Brazil, Indonesia, and Nigeria, Huawei is positioning itself to rise again.

The company’s drive to wire the developing world has created new security challenges. Government servers in Ethiopia, surveillance cameras in Pakistan, and a data center in Papua New Guinea—all provided by Huawei—have leaked data or left it glaringly exposed. Because Huawei is required by law to cooperate with China’s intelligence operations if asked, and because it has long benefitted from state support, countries that depend on the company are vulnerable to pressure from Beijing. Chinese espionage and temporary network disruptions are more likely than catastrophic network damage, but severe attacks and attempts at cyber-coercion cannot be ruled out. Vital systems—communications, finance, transportation, energy, and health—are increasingly digital.
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If the United States and its allies are serious about competing with China economically, technologically, and strategically, they must intensify their digital outreach to the developing world. Since 2017, digital revenue has been growing more than twice as fast in developing countries as in developed ones, according to Ruchir Sharma, the chief global strategist for Morgan Stanley Investment. Sixteen of the top 30 countries with the greatest digital revenue as a share of GDP are now in the developing world, and given that half of humanity still has limited or no access to the Internet, the potential for more growth is vast. Huawei’s rise from copycat to global juggernaut has come with serial allegations of lying, cheating, and stealing (the company left a trail of litigation in its wake), but its success wasn’t just powered by seedy activity. Huawei’s strategy depended on serving fast-growing, low-income markets—riskier places where U.S. and European technology companies have often been reluctant to invest.

And in the developing world, cost often trumps security. To succeed, the United States and its allies must offer affordable alternatives to Chinese technology.
GOING SOUTH

Huawei’s push into overlooked markets began within China. When Ren Zhengfei founded the company in 1987, he gave new employees a brochure that instructed them to “go to the countryside,” where “a vast world and many achievements await.” Zhengfei soon applied the same approach overseas. As U.S. and European companies concentrated on larger, wealthier markets during the late 1990s and the early 2000s, Huawei focused on rural and less developed areas. Over time, the company acquired a knack for offering low-cost technology to low-income populations around the world, from cities and towns in Africa to rural parts of the United States.

Huawei also learned how to make friends in high places. It has courted government officials and won contracts in open bidding competitions as well as in closed markets such as Ethiopia, where the government welcomed in Huawei a decade ago but only recently began relaxing its monopoly over the telecommunications sector. In Serbia, recently leaked documents suggest that Huawei made shadowy payments to obtain contracts with a state-owned telecommunications company. These and other allegations, as well as security incidents, largely failed to slow Huawei’s advance.

The Chinese state has provided essential support. Between 1998 and 2019, Beijing gave Huawei as much as $75 billion in tax breaks, loans, credits, and other financing, according to a Wall Street Journal investigation. Chinese officials have also raised barriers to foreign telecommunications suppliers at home, protecting Huawei and other domestic providers, and lobbied foreign governments to help Huawei secure deals abroad.

Huawei learned how to make friends in high places.

For many years, as Huawei broke into foreign markets, the United States mostly ignored it and, in some cases, assisted it. In 2003, Afghanistan’s government signed a contract with Huawei and ZTE, another Chinese telecommunications giant, for a cellular network. The following year, the Asian Development Bank, in which Japan and the United States are the largest shareholders, provided a loan to Roshan, Afghanistan’s largest mobile provider. Roshan initially bought equipment from European makers Alcatel and Siemens, but after further review, the ADB approved replacing it with Huawei gear, which it noted had lower costs and more flexibility.

The U.S.-led invasion of Iraq was a gift to Huawei. In 2013, a Huawei employee reflected on the lucrative market the company built during the country’s U.S.-led occupation, recalling “the gloomy Hummers and tanks of the U.S. military patrolling the roads and streets” while the company held a party “celebrating the successful launch of new networks and the awarding of new contracts.” Among those contracts was a $275 million deal to build a nationwide wireless network.

Huawei even made inroads in the United States. A decade ago, wireless carriers in a dozen states, many of them serving small towns, began turning to Huawei for telecommunications equipment after its North American competitors went out of business. I visited one such town in 2019—Glasgow, in northeastern Montana. The U.S. government had recently halted the installation of Huawei equipment, which is now being replaced. But most residents I spoke with sounded less concerned about Chinese spying than about a large monthly bill, echoing the sentiments of their counterparts in developing countries.

Huawei can also be attractive to politicians looking for technology to solve pressing problems. To understand why, imagine that you are the mayor of major city in a developing country in Asia. You face a cascade of mutually reinforcing crises. The COVID-19 pandemic nearly broke your health system and caused economic havoc. Debt is dangerously high, limiting your ability to borrow and finance development projects. Crime threatens to scare off foreign investors. You are up for reelection in two years, and your political prospects are as uncertain as the city’s future.

The U.S.-led invasion of Iraq was a gift to the Chinese tech giant.

Huawei’s “safe city” sales pitch might sound like the answer to your prayers. The company offers temperature-sensing cameras to identify people with fevers, facial recognition software to find wanted criminals, and analytics to alert the police to unusual behavior. By measuring traffic flows and enforcing driving laws, Huawei promises that its technology will help improve congestion. These “smart city” systems emphasize public security and raise major privacy concerns, but they also promise transformational benefits. To sweeten the deal, China’s state banks might offer a loan that is repayable over two decades.

Huawei’s ability to package hard infrastructure with digital services and state financing has won the company contracts from dozens of governments for cloud infrastructure and e-government services. Its menu of options spans small, modular data centers the size of a shipping container to multilevel buildings packed with servers. The company offers document digitization, national identification systems, tax services, crisis communications, elections support, and more. It promises major economic benefits and offers financing, leading decision-makers to assume these systems will essentially pay for themselves.

Foreign leaders often trumpet these deals as strengthening their countries’ “digital sovereignty.” But in reality, they can create digital dependence. In June, for example, Senegal announced it was moving all government data, including that from state-owned enterprises such as the national electricity company, to a new national data center. China’s Export-Import Bank is providing financing, and Huawei is delivering the equipment and technical expertise. Deals like this one pave the way for future services and equipment upgrades, and the cost of switching to another vendor can be prohibitive. Senegal may be locked into Chinese technology for years to come.
THE NEW BATTLEFIELD

China’s push to become the world’s dominant provider of digital infrastructure comes with significant risks for developing countries. Yet security warnings will not win this competition. The United States can ban untrusted equipment from its domestic networks. It can lobby its allies to do the same. But in the rest of the world, it will have to offer compelling alternatives.

How the United States should compete will depend on the specific technology in question, but the country has several opportunities it can seize. Domestic investments in infrastructure and research and development can help scale technologies that shift the global playing field in its favor. For example, greater adoption of Open RAN, which allows operators to mix and match software and hardware, could help U.S. suppliers offer more affordable and competitive products in 5G. It may take several years for this approach to mature, but only about 15 percent of the world’s mobile users are expected to use 5G by 2025. The “race” is just getting started.

As the United States catches up in 5G, it can promote its technologies in other areas where U.S. companies already have the upper hand. For example, U.S. cloud providers are the most advanced in the world. But to succeed in low-income markets, these companies will need to package their services with hard infrastructure, training opportunities, and financing to reduce upfront costs.

The United States also has significant first-mover advantages in satellite communications. Several U.S. companies, including Elon Musk’s SpaceX and Amazon’s Project Kuiper, are building constellations of satellites in low-earth orbit to provide fast, reliable broadband globally. Some use intersatellite laser links, which can reduce the need for installing expensive ground infrastructure and frustrate authoritarian attempts to control the Internet. But making these services affordable to people in low-income markets will likely require some form of financial assistance, either through multilateral development banks or from a coalition of U.S. partners and allies.

The 5G “race” is just getting started.

This kind of cooperation is essential for making affordable alternatives more available, and several efforts are gaining momentum. As part of their trilateral infrastructure partnership, Australia, Japan, and the United States are cofinancing a subsea cable to the Pacific Island nation of Palau. The Quad, which adds India to the same group, recently announced a set of principles for technology governance and created a group to coordinate infrastructure activities. During its first-ever meeting in September, the U.S.-EU Trade and Technology Council created a working group that will help finance digital connectivity in developing countries. Ultimately, these efforts will succeed or fail based on their ability to set standards and mobilize resources toward actual projects.

Smart cities, which can include everything from artificial intelligence–powered surveillance cameras to trashcans that send alerts when they need to be emptied, offer especially significant opportunities for the United States to deliver tangible results. Encouragingly, during a recent summit with the Association of Southeast Asian Nations, the United States announced a smart cities business innovation fund as well as smart energy and transportation programs. It could build on these efforts by working with U.S. allies to offer a “Sustainable City” certification that emphasizes environmental stewardship, social responsibility, and data security. Cities could receive technical assistance to help them earn the certificate and financial incentives to help them meet milestones and reduce costs. Companies that are deemed sustainable could receive priority when competing for projects in participating cities. This approach would draw a favorable contrast to China’s safe city exports, which often lack transparency and safeguards and have experienced performance issues and data breaches.

These and other supporting steps will not be fast, easy, or cheap. The U.S. government faces its own coordination challenges, and although there is a growing consensus among U.S. allies and partners about the need to compete with China’s leadership in digital infrastructure, it will take time to get each country’s relevant agencies to work in concert. The world has immense technology needs that no single state or company can meet. But Huawei’s past and its decision to double down in the developing world should serve as warnings about the costs of complacency. Leading in next-generation technologies will require competing in next-generation markets.
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A la guerre comme a la guerre или вторая редакция Забугорнова