The warnings come amid growing pressure from the US, which has told its allies any collaboration with the Chinese tech firm could compromise intelligence sharing agreements.
The National Cyber Security Centre (NCSC), which is part of GCHQ, is currently preparing its annual report into the safety of Huawei equipment.
While the findings of the report are yet to be published, the NCSC has previously indicated it has not seen any evidence of spying by the Chinese firm.
One US official told the Financial Times a significant risk of 5G is that it is based on software, meaning the network can be altered even after the equipment has undergone testing.
“One analogy that we can often use is, one minute you’re holding a 5G coffee cup that is transmitting back telemetric data on what the temperature is what the actual liquid is inside. And then the next moment that object can turn into something radically different,” the source said.
“While a huge opportunity, it is also deeply concerning to us from the perspective of national security.”
The official cast doubts over the UK’s programme for testing Huawei equipment, which is carried out at a dedicated NCSC facility in Banbury known as ‘The Cell’.
“The mandate that the UK and their Huawei oversight centre has is a purely technical mandate about looking at a piece of equipment that is sitting in front of you,” the person said.
“Ours is a much broader question about how trust is changing in the way in which 5G networks will work in the future. Right now, back doors exist by definition, that’s how the manufacturer runs the network.”
The NCSC declined to comment on the report. Earlier this year the spy organisation’s boss, Ciaran Martin, said the UK has “arguably the toughest and most rigorous oversight regime in the world for Huawei”.
“Huawei’s presence is subject to detailed, formal oversight, led by the NCSC,” he said at a cyber security conference in Brussels.
“We also have strict controls for how Huawei is deployed. It is not in any sensitive networks – including those of the government.”
The Trump administration has launched a campaign urging its allies not to use the Chinese firm’s equipment. Secretary of State Mike Pompeo has previously warned that countries using Huawei technology in their 5G networks risk damaging their relationship with the US.
The Chinese firm has denied all allegations of spying and accused the US of operating a coordinated smear campaign. Earlier this month the company sued the US government, claiming a law limiting its US business was unconstitutional.
Since 2016, dozens of American officials have come home from Cuba and China with unexplained brain trauma. Evidence shows it may be the work of another government using a weapon that leaves no trace
In 2016 and ’17, 25 Americans, including CIA agents, who worked in the U.S. Embassy in Cuba suffered serious brain injuries causing impaired vision and memory loss among other persistent symptoms. Now, we’ve learned that at least 15 American officials in China suffered unexplained brain trauma soon after. The FBI is now investigating whether these Americans were attacked by a mysterious weapon that leaves no trace. Over many months we have been collecting evidence of what appears to be a hostile foreign government’s plan to target americans serving abroad and their families.
Mark Lenzi: For me it was November of 2017, when I started to feel lightheaded a lot. I was getting more headaches, my wife was getting headaches too.
Mark Lenzi is a State Department security officer who worked in the U.S. Consulate in Guangzhou, China. He says that he and his wife began to suffer after hearing strange sounds in their apartment.
Mark Lenzi: Picture holding a marble. Then, picture if you had like a six foot in diameter funnel, metal funnel. The sound that marble would make as it goes around and it progressively gets faster as it gets, goes down towards the hole at the end. It’s a sound like I’ve never heard before.
Scott Pelley: Was this subtle? Like, “Did I hear that?”
Mark Lenzi: No. It was, it was actually somewhat loud. I heard it about three or four times. Always in the same spot. Always over my son’s crib and always right before we would go to bed.
“This was a directed, standoff attack against my apartment.”
Lenzi wears prescribed glasses because sensitivity to light is among his persistent symptoms.
Mark Lenzi: The symptoms were progressively getting worse with me. My headaches were getting worse. The most concerning symptom for me was memory loss, especially short-term memory loss.
Mark Lenzi believes he was targeted because of his work. He uses top secret equipment to analyze electronic threats to diplomatic missions.
Mark Lenzi: There is no shadow of a doubt in my mind that this was a directed attack against my neighbor and I.
His neighbor was Catherine Werner, who lived one floor up. She’s a U.S. Commerce Department trade officer who promoted American business from the Guangzhou Consulate.
Catherine Werner: I woke up in the middle of the night. I could feel this sound in my head. Um, it was intense pressure on both of my temples. At the same time, I heard this low humming sound, and it was oscillating. And I remember looking around for where this sound was coming from, because it was painful.
Scott Pelley: When did you first notice that you weren’t feeling well?
Catherine Werner: October of 2017, I started to get hives all over my body. Really bad hives. I woke up with headaches every day. Um, I started to feel tired. The simplest things would just make me very, very tired.
Scott Pelley: Were these symptoms growing worse over time?
Catherine Werner: They were. Yes. My symptoms would get so bad that I would throw up, or I would wake up with nosebleeds.
She says even her dogs were throwing up blood. Werner assumed her illness was connected to China’s toxic smog. She didn’t know it at the time but her symptoms were the same that American officials in Havana had suffered since 2016. The U.S. Embassy there is all but closed as a result.
Catherine Werner: We hadn’t heard about what happened in Cuba. I mean, there were headlines in the news about hearing loss and um, attacks to our diplomats, but we didn’t know the details.
Catherine Werner became so ill, her mother traveled from the U.S. to live with her.
Catherine Werner: She spent almost three months with me. During that time she also got very ill. Um, and she and I shared the same symptoms.
Scott Pelley: What sort of symptoms did your mother have?
Catherine Werner: Headaches and um, ringing in our ears. Um, we also started to both um, have difficulty recalling words.
After reporting her experiences, Werner was medically evacuated to the U.S. for treatment. U.S. agencies are investigating, but Mark Lenzi has a theory.
Mark Lenzi: This was a directed standoff attack against my apartment.
Scott Pelley: It was a weapon?
Mark Lenzi: Oh, of course it was a weapon.
Scott Pelley: An energy weapon–
Mark Lenzi: Absolutely.
Scott Pelley: What sort of energy is this that we’re talking about?
Mark Lenzi: I believe it’s RF, radio frequency energy, in the microwave range.
A clue that supports that theory was revealed by the National Security Agency in 2014. This NSA statement describes such a weapon as a “high-powered microwave system weapon that may have the ability to weaken, intimidate, or kill an enemy over time without leaving evidence.” The statement goes on to say “…this weapon is designed to bathe a target’s living quarters in microwaves.” The NSA disclosed this in a worker’s compensation case filed by former NSA employee Mike Beck.
Scott Pelley: When you look back across your career is there any incident that leads you to believe that it could be responsible for your Parkinson’s disease?
Mike Beck: Yes.
In the 1990’s Beck and an NSA co-worker were on assignment overseas. Years later, he says they developed Parkinson’s Disease at the same time.
Mike Beck: In 1996 a colleague of mine, Chuck Gubete, and I traveled to a hostile country and worked there for about a week. And um, I can’t say where the hostile country– the identity of it.
Scott Pelley: Because it’s still classified?
Mike Beck: Yes.
But it was not Cuba or China.
Scott Pelley: You believe that you and Chuck Gubete were attacked with this microwave weapon?
Mike Beck: Yes. I had a pretty good working knowledge of the hostile country’s intelligence services, what they do to people, what they have done, what their modus operandi is.
Mike Beck says more intelligence has come in recently which he shared in a classified briefing with congressional investigators.
Scott Pelley: Mike, you can’t discuss any of these details because they’re all classified. But in your opinion, does the new information that you briefed the House and Senate Intelligence Committee staff on in any way relate to what happened in Cuba and China?
Mike Beck: It’s relevant to the Cuba and China cases.
No one has officially confirmed that what Beck says happened to him is related to at least 40 Americans injured in China and Cuba. While Beck suffers from Parkinson’s the recent patients are being treated for the same kind of symptoms that doctors would expect from a concussion. Dr. Teena Shetty is Mark Lenzi’s neurologist.
Dr. Teena Shetty: So Mark initially came to me reporting symptoms of headache, memory loss, sleep difficulties, emotionality, and irritability.
Scott Pelley: And what did you make of that in the early days?
Dr. Teena Shetty: I was very surprised. He did not have any history of any trauma or blow to his head, but he reported a constellation of neurologic symptoms which are characteristic of mild traumatic brain injury, without any history of associated head trauma.
Exactly how their brains were injured is the subject of a study at the University of Pennsylvania Center for Brain Injury and Repair. Dr. Shetty is not part of that study, but her patient, Mark Lenzi, is.
Dr. Teena Shetty: The presumption is that something happened which caused a functional brain injury of widespread brain networks because he has symptoms to reflect a multitude of brain networks.
What Dr. Shetty describes mirrors the findings published so far by the University of Pennsylvania study.
Robyn Garfield:They have said that our symptoms are exactly what they saw in Cuba, and that we have the full suite of findings that they had there.
Robyn and Britta Garfield are among the 40 patients enrolled in the University of Pennsylvania study. Like Catherine Werner, Robyn Garfield is a trade officer with the Commerce Department. He was posted with his wife and two young children in Shanghai.
Robyn Garfield: I don’t know when the sound started. Um, I do know that it was for months on end.
Britta Garfield: I was sitting next to Robyn and something I felt like hit me from the left side. Um, and at first it felt like an electric shock um, and then it paralyzed me, so I was not able to move or speak.
Scott Pelley: It hit you so hard you felt like you were in danger in the room?
Britta Garfield: Yes.
They say the children suffered blurred vision and loss of balance.
Scott Pelley: Your daughter was literally falling down?
Robyn Garfield: Yes. She fell down multiple times that day.
Britta Garfield: We went on a walk and she just fell on her face. It was very abnormal. She never does that. And then a second time she completely lost her balance and just fell to the side.
Last spring the secretary of state, Mike Pompeo, confirmed the case of Catherine Werner. U-Penn found her brain injuries matched the Cuba victims.
Mike Pompeop on May 23, 2018: We had an incident in Guangzhou that the medical indications are very similar and entirely consistent with the medical indications that have taken place to Americans working in Cuba.
But for reasons that are unclear, the State Department is raising doubt about the other 14 China cases. The State Department’s medical office sent Mark Lenzi this note that says, “We have reached the decision that your symptoms and findings do not correlate with the Havana cohort.”
Mark Lenzi: They tried to deny it. They tried to cover it up. They tried to minimize it.
Scott Pelley: Why would the State Department minimize this?
Mark Lenzi: Because it’s China, because we have such a large trade relationship with them. You can push around Cuba. Their trade, you know, relations are minimal. With China, that’s a different beast. Right?
State Department doctors told Robyn Garfield his illness stems from a baseball injury 17 years ago, which does not explain his wife and children.
Robyn Garfield: It is a very complicated geopolitical relationship between the U.S. and China. So that, to me, feels like why this determination’s being made.
Scott Pelley: What does it mean for your benefits today that the State Department is refusing to call this an attack?
Robyn Garfield: It has significant impact on our, our life. Our finances. My career as well, likely. I have not been afforded time for my rehabilitation. Being classified as a preexisting injury means that I don’t have access to paid leave. It also means that after one year my medical bills will not be covered currently.
The China patients have the attention of at least one member of the Senate Foreign Relations Committee. Jeanne Shaheen wrote Secretary Pompeo, “The group from China is increasingly feeling isolated and left behind by… the State Department.”
Regulation aims to reassure international businesses and nudge towards a US trade deal, but the FT’s Lucy Hornby says it may not completely answer foreign investors’ concerns. It makes it illegal for officials to meddle in overseas companies’ operations
Official cites past security-related events as example
Auctioning of 5G licenses in Germany starts next week
Huawei Technologies Co. isn’t a trustworthy partner to build Germany’s fifth-generation mobile networks, a representative of the country’s BND intelligence service told a committee of lawmakers.
Past “security-relevant incidents” involving the company are part of the reason, the representative told the committee in Berlin on Wednesday. An official from the Foreign Ministry, speaking at the same meeting, said it would be hard to work with a company that cooperates with its national secret service. The parliamentary press service reported the comments in a statement but didn’t name the officials.
“It’s above all a matter of trustworthiness and of the impact on our relationship with our allies,” the Foreign Ministry official told the committee, adding that Germany is in contact with partner nations on the issue.
German intelligence officials have been pushing the government to stop Huawei from playing a part in the building of 5G infrastructure in the country, people familiar with the matter told Bloomberg News this month. The officials are concerned that Huawei could help China steal German corporate secrets, the people said.
Huawei has repeatedly denied wrongdoing and long maintained it doesn’t provide back doors for the Chinese government, pointing out that no one has provided evidence to support such concerns.
An outright ban on Huawei is seen as legally impossible, but German officials are looking at tools that would have the same effect. The U.S. has been pressuring its allies in Europe to ban Chinese equipment in the ultrafast networks being rolled out over spying concerns.
Germany’s Bundesnetzagentur regulator said last week that it wants to limit equipment supply to “trustworthy” vendors that comply with national safety regulations as well as secrecy and privacy rules. Germany plans to start an auction of 5G airwaves on March 19, though legal challenges to its design by multiple carriers risk delaying the process.
When Portugal was facing difficult times, the EU imposed tough austerity measures, while China pumped billions into the country. Now Portugal’s prime minister is speaking out against a tougher EU course against China.
China’s President Xi and Portuguese President Rebelo de Sousa shake hands in Lisbon in December 2018
Over the past several years, Portugal’s Prime Minister Antonio Costa has emerged as one of the staunchest supporters of Chinese investment in Europe. Recently, Romania — which currently holds the rotating presidency of the Council of the European Union — announced that the EU would in future monitor more closely non-European, particularly Chinese, investments in key European industries.
Costa, nevertheless, defended China’s investment policy, telling the British newspaper Financial Timesthat his country’s “experience with Chinese investment is very positive.” The Chinese “show total respect for our laws and market rules,” he added.
Chinese companies have pumped billions of euros into Portugal since the country found itself in a debt crisis, beginning in 2010. They have purchased a number of Portuguese firms, including the previously state-owned power grid operator REN, the nation’s largest insurance company, private hospitals as well as banks. Critics describe it as a “sellout.”
The Chinese also control several small electricity suppliers in Portugal. Most recently, they also wanted to acquire the largest electricity provider, EDP. The takeover attempt hasn’t yet succeeded — probably because of concerns expressed by the United States. EDP also has operations in the US.Watch video03:10
China gaining political and economic influence in Portugal
A Trojan horse?
Due to China’s growing economic engagement in Portugal, there is growing concern as to whether Lisbon still remains on the side of the EU when it comes to presenting a united front against Beijing. “Antonio Costa is not the Trojan horse of the Chinese in the EU. He is their war horse,” said João Duque, professor at the ISEG business school in Lisbon.
In recent years, Costa has repeatedly positioned himself as a friend and sympathizer of China. Underlining the close bilateral friendship, Chinese President Xi Jinping recently embarked on a state visit to Portugal. Relations between the two countries, which have existed for 500 years, have never been better.
During the debt crisis, Beijing came to Lisbon’s rescue. China, for instance, bought Portuguese government bonds, which nobody else wanted to buy at the time.
There was also help from the European side, but Portugal had to comply with the conditions imposed by the “Troika,” which included the triumvirate of the European Commission, European Central Bank and International Monetary Fund.
“The troika has literally pushed Portugal into the Chinese arms,” complained Portuguese MEP Ana Gomes. At the time, Gomes said, she and many of her colleagues repeatedly warned of the consequences, but the EU kept referring to the freedom of markets. “Now it’s paying the price for its mistake,” Gomes noted dryly.
Chinese banks, here the Haitong Bank in the center of Lisbon, are now part of the city landscape
Paying the price
Like Prime Minister Costa, Gomes is a member of the Socialist Party. Nevertheless, the MEP does not agree with the premier’s course. China, she said, is a country that disregards human rights and pursues political goals with its European investments. Many Chinese companies are state-owned, she pointed out. Demanding that these Chinese firms are kept out of key industry sectors in Europe is not protectionism, the MEP argued.
“I must therefore vehemently oppose PM Costa when he publicly defends Beijing, even though the EU has so far been unable to act against China.”
Ilídio Serodio of the Portuguese-Chinese Chamber of Commerce in Lisbon also admits that Chinese companies want to expand their influence worldwide. They have secured great influence in Europe through their investments in small EU nations such as Portugal and Greece, Serodio said, adding that it has also brought economic advantages to these countries. “Portugal can only benefit from having a good relationship with China,” said the businessman, although he also sees problems in strategic areas.
Beijing has been trying for years to gain a foothold in the Portuguese Azores islands, where it has even bought a port next to an American air force base. “The Chinese want their own base in the Atlantic, but this is unlikely to happen,” said Serodio.
The US, meanwhile, is presenting more resistance than Portugal itself — similar to the dispute over the participation of the Chinese firm Huawei in the building of the 5G telecom network.
“There is no doubt that the Chinese will continue to invest in small EU countries in a bid to increase their influence,” Serodio said. Portugal’s PM Costa is aware of this, the expert noted, adding that the premier doesn’t see it as a danger, at least for the time being. “Our head of government is very optimistic,” Serodio stressed.Watch video02:32
Concerns over ‘pace’ of Chinese innovation
Professor Duque, however, disagrees. During the debt crisis, China not only bought up massive amounts of Portuguese national debt but also secured a powerful position by taking over companies, he said. “That’s why Portugal can’t take any position against China’s expansion policy.”
Duque also blames the EU for the development. “First the EU forced the country into an unprecedented sellout, now it is complaining about the consequences.”
Duque fears the consequences could turn even worse. If the global economy continues to cool down and Portugal gets into difficulties again, China could once again assume the role of savior and secure even more influence for itself, he pointed out. “Perhaps the public intervention of the Portuguese prime minister is the advance payment for the financial injections that will be necessary again later,” the economist said.
The EU has every reason to take a critical look at the close relations between Portugal and China, even if it ultimately has to blame itself for the love affair between Lisbon and Beijing, he underlined.
On Monday, China ordered its domestic airlines to suspend the commercial operation of nearly 100 of the jets in question. Ethiopian Airlines followed China’s announcement by grounding all of its Boeing 737 Max 8 aircraft as well, according to a spokesperson.
The crash, that took place just outside Ethiopia’s capital Addis Ababa, comes just months after another deadly accident involving the same model in Indonesia when a Lion Air flight crashed after take-off from Jakarta in October, killing all 189 people on board.
Noting the “similarities” between the two accidents, China’s Civil Aviation Administration said domestic airlines have until 6pm local time (10:00 GMT) to ground all 737 MAX 8 aircraft.
It said operation of the model will only resume after “confirming the relevant measures to effectively ensure flight safety,” the administration said in a statement.
“Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity,” it said, adding the order was in line with its principle of zero-tolerance on safety hazards. The 737 MAX 8 is sometimes referred to as the 737-8.
Chinese airlines have 96 737 MAX jets in service, the state company regulator said on Weibo. The aviation authority will contact the US Federal Aviation Administration and Boeing for consultation, it said.
Chinese aviation data firm Variflight said at least 29 international and domestic flights on Monday were cancelled and that airlines swapped out the plane on 256 other flights that had been scheduled to use it.
Caijing, a Chinese state-run news outlet that covers finance and economics, said many flights scheduled to use 737 MAX planes would instead use the 737-800 models.
Cayman Airways said it had grounded both of its new 737 MAX 8 jets until it got more information.
On Monday, Ethiopian Airlines’ spokesperson Asrat Begashaw said although it was not yet known what caused the crash, the airline decided to ground its remaining four 737 Max 8 planes until further notice as “an extra safety precaution”.
Ethiopian Airlines was using five new 737 Max 8 planes and was awaiting delivery of 25 more.
Later on Monday, Indonesia decided to ground all Boeing 737 MAX 8 planes, according to its transportation Ministry.
South Korea was also conducting an emergency safety inspection on two Boeing 737 MAX 8 aircraft, according to its transport ministry.
India‘s aviation watchdog DGCA is likely to speak to Boeing and local airlines Jet Airways and SpiceJet about the use of the aircraft, NDTV reported citing a senior official.
Boeing representatives did not immediately respond. The company tweeted that it was “deeply saddened to learn of the passing of the passengers and crew” on the Ethiopian Airlines plane.
“A Boeing technical team will be travelling to the crash site to provide technical assistance under the direction of the Ethiopia Accident Investigation Bureau and U.S. National Transportation Safety Board,” a statement on Boeing’s website read.
Fastest growing market
The company has delivered 76 Boeing 737 MAX aircraft to Chinese airlines, which have ordered another 104, according to data from the aircraft maker’s website updated in January.
Al Jazeera’s Adrian Brown, reporting from Beijing, said: “China became the first country to ground this aircraft.”
“Part of the 737 MAX is actually completed here in China,” he said. “China is where the seats are fitted, the final cosmetic work is carried out before the aircraft actually goes into the air.
“China is the world’s fastest growing aviation sector and by 2030, it’s estimated that it will become the world’s largest aviation market.”
Meanwhile, a US official, speaking on condition of anonymity because of the sensitivity of the matter, said there were no plans to follow suit given the 737 MAX had a stellar safety record in the United States and there was a lack of information about the cause of the Ethiopian crash.
While a few will blame the total and utter collapse in China exports in February on the lunar new year’s early date this year, the scale of the miss is simply stunning.
For a few brief seconds, everything was awesome as Bloomberg’s initial headline proclaimed a big RISE in exports, but they quickly corrected – causing heart attacks across every tape-reading algo in the world…
Exports plunged 20.7 percent in February while imports fell 5.2 percent, leaving a trade surplus of $4.12 billion, the customs administration said Friday.
Economists forecast both exports and imports would shrink, although not as much as the fall. The Lunar New Year break fell about 10 days earlier than last year, likely boosting January’s shipments and weighing on February’s.
But Chinese imports from the US crashed the most on record…
In addition to the shutdown that happens each year, February was an uncertain period for Chinese exporters, with negotiations through the month on whether the U.S. would raise tariffs from March 1.
Analysts were quick to defend the crash as an outlier…
“There is big progress in the trade talks compared with a few months ago. But the trade tension itself brings uncertainties to companies, who could slow or delay their investment, or even move some of their production overseas” UBS AG economist Tao Wang said in a conference call on Thursday. A potential economic slowdown in the U.S. and Europe, together with their monetary policies, will also add to the external challenges for China, she said.
And the rest of the world better hope so too… because if this correlation holds up – all hell is about to break loose back in the ‘decoupled’ USA…
US equity futures dropped on the headlines…
And Chinese stocks were already suffering their biggest drop of the year…
As a reminder, this collapse is occurring after the PBOC announced it had flooded the economy with a gargantuan 4.64 trillion yuan in various new forms of debt which comprise China’s Total Social Financing in January, including notably, the “shadow” credit which Beijing had been aggressively cracking down on: an aggressive credit expansion which many took as a tacit confirmation that China was losing the fight with deleveraging.
So if 4.64 trillion didn’t help… and RRR cuts… and promises of tax cuts… just what is the US and Chinese equity market pricing in?
De acordo com o ‘Financial Times’, a Itália deverá juntar-se a Portugal na mega-iniciativa internacional Belt and Road, uma vez que, ao que tudo indica, apoiará formalmente o projecto chinês tornado público em 2013. O subsecretário do ministério italiano do Desenvolvimento Económico, Michele Geraci, revelou que Roma assinará um memorando de entendimento de apoio à iniciativa.
Itália segue rumo de Portugal e prepara-se para assinar memorando
A iniciativa pretende conectar o sudeste Asiático, Ásia Central, África e Europa, numa rede infra-estrutural, logística e portuária complementar, interligada e multi-facetada, capaz de agilizar tráfegos de cargas e tornar mais fluído o fluxo comercial entre o Ocidente e o Oriente. O Presidente chinês, Xi Jinping visitará a Itália em Março, devendo assinar, aí, o documento.
«As negociações ainda não terminaram, mas é possível que sejam concluídas a tempo para a visita de Xi Jinping», disse Geraci, citado pelo Financial Times. «Queremos ter a certeza de que os produtos feitos em Itália podem ter mais sucesso em termos de volume de exportação para a China, que é o mercado que mais cresce no mundo», comentou Geraci.
Xi Jinping’s signature foreign policy aims to build China’s soft power through infrastructure development overseas. The FT’s global China editor James Kynge explains the significance of getting Italy’s backing
Huawei is suing the U.S. over a law that bans government agencies from buying the Chinese technology giant’s equipment, claiming the legislation is unconstitutional, as the company goes on the front foot following months of political pressure.
The lawsuit, which was filed on Thursday local time, focuses on a provision in a law known as the National Defense Authorization Act. Section 889 of that legislation prohibits executive government agencies from procuring telecommunications hardware made by Huawei and another Chinese firm, ZTE. Both companies are explicitly named in the act.
But lawyers for the world’s largest network equipment maker by revenue, argued that the provision in the NDAA is against the U.S. Constitution.
Huawei argues that the provision in the NDAA in which it is explicitly named is really a “bill of attainder” — wherein a legislative act pronounces a specific individual or group guilty of some offense and punishes them without due process. That’s forbidden by the U.S. Constitution. The company’s lawyers also argued that Section 889 is unlawful because it violates Huawei’s right to due process, meaning the firm cannot hear the evidence against it and fight that in court.
Huawei’s legal team is essentially arguing that, by including the provision in the legislation and banning the company’s sales to federal agencies in law, Congress is unconstitutionally acting as a judiciary.
The federal district court where the lawsuit is filed will make a decision on whether Huawei’s lawsuit will hold. Either side — Huawei or the U.S. government — can appeal that decision. A court has the power to invalidate a part of legislation without ripping apart the entire law. So, in theory, Huawei could get Section 889 thrown out.
Huawei will be hoping that by getting Section 889 of the NDAA scrapped, it could open the door for conversations with the U.S. government.
Glen Nager, lead counsel for Huawei and partner at Jones Day, claimed Thursday to CNBC that the American law is “hurting Huawei’s customers in the United States.”
Lluis Gene | AFP | Getty ImagesVisitors pass in front of the Huawei’s stand on the first day of the Mobile World Congress in Barcelonaon on February 27, 2017 in Barcelona.
“It’s damaging Huawei’s reputation and it’s limiting the ability of Huawei to provide its innovative products, including 5G, to consumers in the United States,” he added. “Huawei hopes that it can engage in a constructive conversation with the president and his administration over how to bring these innovative technologies and Huawei competition to the United States while providing full assurance of security for the United States of America.”
Huawei has long argued that its absence from the U.S. market will hamper competition in the next generation of mobile networking technology — a claim that experts have contested.
The technology firm is also fighting fires on other fronts. Huawei Chief Financial Officer Meng Wanzhou, the daughter of founder Ren Zhengfei, was arrested in Canada in December and was accused of breaking U.S. sanctions against Iran. She faces extradition to the U.S. But the CFO’s lawyers are now suing Canadian authorities, alleging they arrested, detained and searched her in violation of her constitutional rights.
Huawei’s lawsuit against the U.S. bears some similarities to a case in 2018 involving Russian cybersecurity firm Kaspersky Lab. In September 2017, the U.S. Department of Homeland Security ordered government agencies to stop using Kaspersky software, alleging it could be used for espionage by Russia. The ban was later ratified in law.
Kaspersky filed two lawsuits against the government with one claiming the move amounted to a bill of attainder. The two lawsuits were thrown out by a judge in May and Kaspersky also lost an appeal later in the year.
China expects that issuing Portuguese public debt in yuan to be carried out in a “satisfactory” way and that it will be “mutually beneficial cooperation,” according to the Chinese ambassador to Portugal.
Cai Run told Portuguese news agency Lusa that for Portugal the debt issue will be “another source of financing” and for China it will mean “popularity” and one way for the country “to be welcomed by the international community.”
Speaking about the 40th anniversary of the establishment of diplomatic relations between Portugal and the People’s Republic of China and the visit of the Portuguese President to Beijing in April 2019, Cai Run stressed that if the Portuguese debt issue in the Chinese market is carried out soon Portugal “will be the first country in the euro zone to issue government debt in yuan.”
Portugal and China, through Caixa Geral de Depósitos (CGD) and the Bank of China, in October 2018 signed an agreement to issue Portuguese public debt in yuan, one of 17 bilateral agreements signed during the visit of Chinese President Xi Jinping, to Portugal.
Since 2017 Portugal has had authorisation from the People’s Bank of China to issue debt in the Chinese market.
Cai Run said that “financial cooperation is important” as part of bilateral “Sino-Portuguese cooperation,” highlighting Chinese investments made in the last few years in banking sector.
The ambassador recalled that Chinese investment in Portugal has exceeded 9 billion euros “since the end of 2011, and beginning of 2012,” and there has been “a stable increase in Portuguese investment in China at the same time.”
Portugal is now the fifth largest Chinese investment destination abroad and is, for China, a partner for investments in other European countries and in the other Portuguese-speaking countries, he said.
Qilai Shen | Bloomberg | Getty ImagesRen Zhengfei, founder and chief executive officer of Huawei Technologies, left, speaks during an interview at the company’s headquarters in Shenzhen, China, in January.
Huawei would have no choice but to hand over network data to the Chinese government if Beijing asked for it, because of espionage and national security laws in the country, experts told CNBC.
Major governments including the United States, Japan and Australiahave blocked the Chinese telecommunications equipment maker from providing hardware for next-generation mobile networks known as 5G. The U.S. has said Huawei equipment could provide backdoors for the Chinese government into American networks — a claim the company has repeatedly denied.
Australia did not cite specific countries or companies, but last year it gave guidance to domestic carriers saying that “the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorized access or interference.”
“There is no way Huawei can resist any order from the (People’s Republic of China) Government or the Chinese Communist Party to do its bidding in any context, commercial or otherwise.”-Jerome Cohen, NYU professor, adjunct senior fellow at Council on Foreign Relations
The Australian government is highlighting a concern on the top of minds of several governments — China’s wide-ranging internet laws, which require tech firms to help Beijing with vaguely-defined “intelligence work,” meaning companies could be forced to hand over network data whether they want to or not.
Two pieces of legislation are of particular concern to governments — the 2017 National Intelligence Law and the 2014 Counter-Espionage Law. Article 7 of the first law states that “any organization or citizen shall support, assist and cooperate with the state intelligence work in accordance with the law,” adding that the the state “protects” any individual and organization that aids it.
And it appears that organizations and individuals don’t have a choice when it comes to helping the government. The 2014 Counter-Espionage law says that “when the state security organ investigates and understands the situation of espionage and collects relevant evidence, the relevant organizations and individuals shall provide it truthfully and may not refuse.”
Huawei: We ‘will not build backdoors’
The company strenuously contends that it will not hand over customer data, and Huawei told CNBC that it has never been asked to do so.
Huawei’s billionaire founder Ren Zhengfei and other senior executives “have stated unambiguously that Huawei will not build backdoors or hand over customer data. It doesn’t get much clearer than that,” a Huawei spokesperson said. “We have never been required to do so, they have stated. We are not going to speculate on future possible scenarios beyond repeating the reassurances of Huawei’s most senior management.”
In an interview last month with CBS News, Huawei’s Ren said the company would never help China spy on the United States — even if required by law.
“We never participate in espionage, and we do not allow any of our employees to do any act like that. And we absolutely never install backdoors. Even if we were required by Chinese law, we would firmly reject that,” Ren told the American television network.
Sources within China contacted by CNBC declined to comment. But experts from outside the country suggested it would be near-impossible for Huawei to reject a request for data from Beijing.
“There is no way Huawei can resist any order from the [People’s Republic of China] Government or the Chinese Communist Party to do its bidding in any context, commercial or otherwise. Huawei would have to turn over all requested data and perform whatever other surveillance activities are required,” Jerome Cohen, a New York University law professor and Council on Foreign Relations adjunct senior fellow, told CNBC by email.
“Not only is this mandated by existing legislation but, more important, also by political reality and the organizational structure and operation of the Party-State’s economy. The Party is embedded in Huawei and controls it,” said Cohen, who as a practicing attorney represented corporate clients in China and elsewhere in Asia.
The relationship between Huawei and the government has been questioned because of Ren’s past as a former soldier in the People’s Liberation Army and a current Communist Party member. In a question and answer session with international media in January, Ren said that his relationship with China’s ruling party would not stop him from refusing any request from them for user data.
“I don’t see close connection between my personal political belief and our business actions we are going to take as a business entity,” Ren said.
In the same session, Ren said that he “would rather shut Huawei down than do anything that would damage the interests of our customers in order to seek our own gains.”
“The idea of fighting a request of this nature in the courts is not realistic. In truth the law only confirms what has long been true — that one must submit to the Party if called upon.”-Martin Thorley, University of Nottingham
The problem for Huawei is that there does not appear to be legal recourse if Beijing comes knocking.
“The idea of fighting a request of this nature in the courts is not realistic. In truth the law only confirms what has long been true — that one must submit to the Party if called upon. Added to this, a company of Huawei’s size, working in what is considered a sensitive sector, simply cannot succeed in China without extensive links to the Party,” Martin Thorley, an expert on international engagement with China at U.K.-based University of Nottingham, told CNBC by email.
“For anyone at Huawei to oppose a serious request from the Party would require bravery bordering on recklessness — what do you do when your adversary is the police, the media, the judiciary and the government?” he added.
China: Don’t ‘take anything out of context’
China’s government addressed the National Intelligence Law during a press conference on Monday.
“According to China’s National Intelligence Law, organizations and citizens have the obligation to support, assist and cooperate with national intelligence work. At the same time it also explicitly stipulates that intelligence work should be conducted according to law and in a way that respects and protects human rights and the lawful rights of individuals and organizations,” government spokesperson Zhang Yesui said, urging people to “not take anything out of context.”
“Some U.S. government officials have been playing up the so-called security risk associated with products of certain Chinese companies and linking it with Chinese national intelligence law. This kind of behavior is interference into economic activities by political means and it is against WTO rules.”-Zhang Yesui, China government spokesperson
Zhang was responding to reporters’ questions ahead of China’s National People’s Congress, a big annual event where Beijing formally announces major policy elements such as economic growth targets. The comments were made in Mandarin and translated into English by an official translator.
“Some U.S. government officials have been playing up the so-called security risk associated with products of certain Chinese companies and linking it with Chinese national intelligence law,” Zhang said. “This kind of behavior is interference into economic activities by political means and it is against WTO (World Trade Organization) rules. And it disrupts international market order that is built on fair competition. This is a typical double standards (sic). It is neither fair nor ethical.”
Many of China’s largest tech companies have flourished over the last decade within the country in the absence of foreign competition. China has for years blocked some of America’s largest internet giants — on claims that those U.S. companies pose national security risks.
China 5G dominance
The battle between the U.S. and Huawei is bigger than worries over national security risks, according to geopolitical analysts. It’s about who has control of the critical infrastructure that runs 5G. The new network will not only support super-fast mobile internet but it will be the backbone behind other technology like driverless cars.
“Huawei has indeed said that it would refuse any Chinese government request to facilitate espionage. But such a statement simply cannot be taken at face value.”-Nigel Inkster, senior adviser, International Institute for Strategic Studies
“Huawei involvement in the core backbone 5G infrastructure of developed western liberal democracies is a strategic game-changer because 5G is a game-changer,” Nigel Inkster, a senior adviser to the International Institute for Strategic Studies, told CNBC by email.
Inkster, a former senior British intelligence official, explained that China has “embarked on an ambitious strategy to reshape the planet in line with its interests” through its massive Belt and Road Initiative. Its “national telecoms champions” are a big part of that.
Because of that drive from China, Inkster said that Huawei is part of this “all-of-nation project.”
“Huawei has indeed said that it would refuse any Chinese government request to facilitate espionage. But such a statement simply cannot be taken at face value,” Inkster told CNBC.
“Huawei is a product and instrument of the Chinese state and has been co-opted to achievement of the state’s strategic objectives,” he said. “The proposition that it is just a telecommunications company has worn beyond thin.”
China’s imminent, and historic conversion from a current account surplus to deficit nation is not the only “tectonic shift” taking place in the world’s most populous nation. According to the latest census data from its National Bureau of Services, China’s employed population has shrunk for the first time ever on record, and at the end of 2018, the number of people employed fell to 776 million, a drop of 540,000 from 2017.
Meanwhile, in yet another sign that China’s population is aging rapidly, the broader working-age population, or people between the ages of 16 and 59, also shrank for the seventh consecutive year, down a total of 2.8% from 2011 to 2018 according to Caixing. Last year’s China’s total working-age population stood at 897 million, down 5 million from 902 million in 2017, according to the NBS.
Li Xiru, director of the Population and Employment Department at NBS, warned last month that the employed population would further drop in the coming years.
While China is already beset with a myriad of economic and asset price bubbles, most notably a massive corporate debt load and a still gargantuan shadow banking system both of which it has to balance against an unprecedented housing bubble to avoid a collapse in the financial system sparking a “working class insurrection“, the country’s shrinking work force creates even more headaches for officials as it pushes up labor costs, sparking inflationary pressures and placing more strains on an economy already struggling against external headwinds.
As China Daily reported recently, the shortage of workforce means labor cost will continue to increase and industrial transfer and technology will substitute workers. And since university graduates – who expect far higher wages – account for nearly half of the labor force entering the market, the market is unable to provide traditional industries with the required number of workforce and the past high-input economic development mode is unsustainable.
The futures is even bleaker: the working-age population is expected to see a sharp drop from 830 million in 2030 to 700 million in 2050 at a declining speed of 7.6 million every year, said Li Zhong, a spokesman for the Ministry of Human Resources and Social Security, in July. Meanwhile, with decreasing supply of labor force, the salary of all industries grew at a rate of 11.3 percent in 2011, 10.5 percent in 2012, and 9.7 percent in 2013, said Zeng, adding that as a result many foreign enterprises left China and shifted to Southeast China due to rising labor cost.
Adding to the warnings, back in 2015, the World bank cautioned that China’s working age population will fall more than 10% by 2040 in spite of a recent relaxation of its one child policy, heightening the risk of the world’s most populous country “getting old before getting rich”.
A further decline of 10% would equate to a net loss of 90 million Chinese workers, a number greater than the population of Germany, and is consistent with demographic pressures across East Asia. The working populations of South Korea, Thailand and Japan are also expected to fall by 10 per cent or more over the next 25 years.
“East Asia has undergone the most dramatic demographic transition we have ever seen,” said Axel van Trotsenburg, World Bank regional vice-president. “All developing countries in the region risk getting old before getting rich.”
As of 2010, almost 40% of all people on the planet aged 65 or older — some 211 million individuals — lived in East Asia, and the World Bank estimates that a least a dozen East Asian countries will see the percentage of their populations aged 65 or higher double to 14 per cent in a quarter century or less. In France and the US, the same transformation took 115 and 69 years respectively
“As [countries] get richer, fertility falls,” said Philip O’Keefe, lead author of the World Bank report. “Given China’s current fertility [rates], you may get a temporary uptick in people who wanted to have a second child having one, but we don’t see a big long-term impact there.”
O’Keefe cited surveys showing that only a quarter of Chinese people eligible to have a second child would in fact do so, however according to recent data, despite China’s relaxation of the infamous “one-child policy”, local birth rates have remained stagnant and in fact, in 2018 China’s birth rate dropped to a new record low.
Commenting on China’s demographic collapse, Wang Feng, a sociology professor at the University of California, Irving, said: “Decades of social and economic transformations have prepared an entirely new generation in China, for whom marriage and childbearing no longer have the importance they once did for their parents’ generation.”
The World Bank urged East Asian governments to embrace immigration as one tactic to counter falling population pressures, noting that more than 20% of Australians and New Zealanders — and 40% of Singaporeans — were immigrants, although Europeans may offer some counterpoints against opening up one territory to a flood of foreigners…
“Demography is a powerful force in development but it is not destiny,” Mr O’Keefe said. “Through their policy choices, governments can help societies adapt to rapid ageing.”
Of course, besides demographics, China’s transformation into the next Japan has major, and potentially dire, consequences for the local economy. As we reported back in October via Econimica, the 0-to-24 year old Chinese population swelled by over 300 million from 1950 to it’s ultimate peak in 1991. Since that peak, the total population of young in China has fallen by 176 million, or a 30% decline in the number of children across China. Moving forward, the UN has expressed hopes the formal elimination of the one child policy would simply slow the rate of decline in the population…but by no means will China’s fast declining childbearing population (those aged 15-44) nor disproportionately young male population potentially be offset by a slightly less negative birth rate. Contrast that with the quantity of debt being forcibly injected into a nation that faces a massive imminent population decline.
To put that debt into perspective, the chart below shows that total debt and annual GDP each divided by the 0 to 24 year old Chinese population. As of 2018, every child and young adult in China under the age of 25 is presently responsible for over $100 thousand dollars in debt while the annual economic activity (GDP) created by all this debt continues to lag ever faster.
And the coming decade only worsens as the young population continues its unabated fall and debt creation (absent concomitant economic growth) continues soaring… building more capacity all for a population that is set to collapse.
China’s predicament and reaction to it are not particularly unique…but given China’s size, the ultimate global impact of China’s slow motion train wreck will be unprecedented… particularly as their 15 to 64 year old population is now in indefinite decline. Chart below shows annual change in Chinese 15 to 64 year old population, in both millions (green columns) and percentage (blue line).
Simply said, without a dramatic rebound in China’s birth rate, massive overcapacity (thanks to over a decade of government mandated malinvestment) versus an ever swifter declining base of consumption does not add up to a burgeoning middle class or a happy ending.
Of course, it’s not just China: for context, here is a chart showing US federal debt per capita of the 0 to 24 year old US population…
… confirming that the next generation, whether in China or the US, is set for a painful collision course with debt bubble dynamics
At the weekend, Mr Trump said both sides had made “substantial progress” in trade talks following a summit in Washington last week.
The rise in import duties on Chinese goods from 10% to 25% was due to come into effect on 1 March.
Instead, Mr Trump said the US is now planning a summit with Chinese Premier Xi Jinping at the US President’s Mar-a-Lago resort in Florida.
US shares rose on the decision to delay tariffs, with the Dow Jones Industrial Average closing 0.23% higher at 26,091.9.
The S&P 500 and the Nasdaq also finished trading in positive territory.
As he prepared to meet North Korean leader Kim Jong-un in Vietnam, Mr Trump also tweeted that a China trade deal was in “advanced stages”.
Mr Trump’s decision to delay tariff increases on $200bn (£153bn) worth of Chinese goods was seen as a sign that the two sides were moving ahead in settling their damaging trade war.
Last week, Mr Trump noted progress in the latest round of negotiations in Washington, including an agreement on currency manipulation, though no details were disclosed.
Sources told CNBC on Friday that China had committed to buying up to $1.2 trillion in US goods, but there had been no progress on the intellectual property issues.
Gregory Daco, chief US economist at Oxford Economics, said: “We had anticipated such a delay and believe a handshake agreement in which China will promise to import more agricultural products, work towards a stable currency and reinforce intellectual property rights protection will be achieved in the coming weeks.
“However, we don’t foresee a significant rollback of existing tariffs, and see underlying tensions regarding China’s strategic ambitions, its industrial policy, technological transfers and ‘verification and enforcement’ mechanisms remaining in place.”
What has happened in the trade war so far?
Mr Trump initiated the trade war over complaints of unfair Chinese trading practices.
That included accusing China of stealing intellectual property from American firms, forcing them to transfer technology to China.
The US has imposed tariffs on $250bn worth of Chinese goods, and China has retaliated by imposing duties on $110bn of US products.
Mr Trump has also threatened further tariffs on an additional $267bn worth of Chinese products – which would see virtually all of Chinese imports into the US become subject to duties.
The United States is planning to delay a menu of additional Chinese tariffs that were scheduled to begin on March 1, President Donald Trump announced on Sunday, as both sides hash out a definitive end to a wide ranging trade dispute.
In a series of posts on Twitter, Trump cited “substantial progress” in bilateral talks between the world’s two largest economies.
The United States is planning to delay a menu of additional Chinese tariffs that were scheduled to begin on March 1, President Donald Trump announced on Sunday, as the world’s two largest economies hash out a definitive end to a wide ranging trade dispute.
In a series of posts on Twitter, Trump cited “substantial progress” in bilateral talks between the U.S. and China. As a result, the president said he would suspend the new levies that would have taken place as early as Friday, but did not articulate a new deadline.
Last week, sources familiar with the situation told CNBC that the United States and China are discussing a late March meeting between Trump and Chinese President Xi Jinping in Florida, news that Trump confirmed on Sunday. The summit is scheduled to take place at Trump’s Mar-a-Lago golf club in Palm Beach, Florida.
Ahead of that confab, China has committed to buying up to $1.2 trillion in U.S. goods, though as late as last week, the two sides were said to be far apart on issues concerning the forced transfer of intellectual property.
Speaking at the White House hours after his tweets, Trump said there could be “very big news over the next week or two” if trade talks go well.
“China has been terrific. We want to make a deal that’s great for both countries and that’s really what we’re going to be doing,” the president told U.S. governors at the event.
The U.S.-China trade war has upended markets, and cast a shadow over prospects for global growth. In recent trading sessions, investors have been slowly pricing in the prospect that the fight would be resolved. On Sunday, Dow futures indicated a modestly higher opening on Wall Street Monday.
The US-China trade war is set to escalate further on March 1, when tariffs on $200bn of Chinese goods jump from 10% to 25%. The FT examines the superpowers’ relative strengths in politics, economics and the stock markets to determine who has the upper hand.
Australia, New Zealand, and the US have already banned Huawei from supplying equipment for their future fifth generation mobile broadband networks, while Canada is reviewing whether the company’s products present a serious security threat.
Most of the UK’s mobile companies – Vodafone, EE and Three – have been working with Huawei on developing their 5G networks.
They are awaiting on a government review, due in March or April, that will decide whether they can use Huawei technology.
As first reported by the Financial Times, the conclusion by the National Cyber Security Centre – part of the intelligence agency GCHQ – will feed into the review.
The decision has not yet been made public, but the security agency said in a statement it had “a unique oversight and understanding of Huawei engineering and cyber security”.
BBC business correspondent Rob Young said the National Cyber Security Centre’s conclusion “will carry weight”, but said the review could still rule against Huawei.
In an interview, Huawei’s cyber security chief John Suffolk told the BBC: “We are probably the most open and transparent organisation in the world. We are probably the most poked and prodded organisation too.”
The former UK chief information officer added: “We don’t say ‘believe us’ we say ‘come and check for yourself’, come and do your own testing and come and do your own verification.
“The more people looking, the more people touching, they can provide their own assurance without listening to what Huawei has to say.”
Rory Cellan-Jones, technology correspondent
If anybody knows just how Huawei works and the threat it might pose to the UK’s security, it is the National Cyber Security Centre.
This arm of GCHQ has been in charge of an annual examination of the Chinese telecoms giant’s equipment, and expressed concerns in its most recent report – not about secret backdoors, but sloppy cyber-security practices.
The NCSC has also been giving advice to UK mobile operators as they order the equipment for the rollout of their 5G networks later this year.
They feel they have been given the same cautious nod the agency appears to have given the government’s Supply Chain Review: keep Huawei out of the core of your 5G networks, but you are OK to use its equipment at phone masts as part of the mix of suppliers.
Australia and New Zealand have taken a very different view by taking a far harder line against Huawei.
That isn’t because they know something about the Chinese firm which the NCSC has missed.
Their decisions were probably based on an assessment of the political as well as security risk of ignoring the urging from the US to shut Huawei out.
And whatever the NCSC’s advice, similar factors will determine the UK government’s final decision.
A spokesperson for the Department of Culture, Media and Sport, which is leading the review into the future of the telecoms industry, said its analysis was “ongoing”.
“No decisions have been taken and any suggestion to the contrary is inaccurate,” they said in a statement.
Asked whether the findings changed her country’s stance towards Huawei, the prime minister of New Zealand – which is a member of the Five Eyes intelligence sharing network that includes the UK – said her government would conduct its own assessment.
Jacinda Ardern told reporters: “It is fair to say Five Eyes, of course, share information, but we make our own independent decisions.”
Last year, BT confirmed that it was removing Huawei’s equipment from the EE core network that it owns.
The network provides a communication system being developed for the UK’s emergency services.
(Reuters) Activist investor Elliott said on Thursday it had proposed a “superior” alternative to shareholders in utility EDP-Energias de Portugal (EDP.LS) than a bid from China Three Gorges, including raising 7.6 billion euros from asset sales.
FILE PHOTO: The logo of Portuguese utility company EDP – Energias de Portugal is seen at the company’s offices in Oviedo, Spain, May 14, 2018. REUTERS/Eloy Alonso/File Photo
State-owned CTG, which is already EDP’s largest shareholder with a 23 percent stake, launched a 9 billion euro ($10.13 billion) bid for Portugal’s biggest company in May last year.
EDP’s board has rejected the 3.26 euros a share offer as too low.
Elliott said it had written to EDP’s board stating that “CTG’s bid in its current form is not in the best interests of EDP stakeholders and would ultimately leave EDP weaker.”
Elliott also said it represented a shareholding in EDP of 2.9 percent, making it one of the utility’s top ten shareholders.
“Over the course of several months we have devoted considerable time and resources to better understanding the challenges and opportunities facing EDP,” Elliott said.
“Our extensive research convinced us that EDP is an attractive company with substantial unrealised potential.”
EDP declined to comment.
Shares in EDP were 1.45 percent higher at 3.227 euros a share in early trade.
CTG’s bid proposal needs regulatory approval in a number of countries, including Brazil, the United States, Portugal and the European Union.
The White House wants to highlight its commitment to telecom security ahead of a key wireless industry conference.
President Donald Trump is expected to sign an executive order, banning Chinese telecom equipment from U.S. wireless networks before a major industry conference at the end of February, three sources told POLITICO.
The administration plans to release the directive, part of its broader effort to protect the U.S. from cyber threats, before MWC Barcelona, formerly known as Mobile World Congress, which takes place Feb. 25 to Feb. 28.
The current plan is for Trump to sign the long-delayed executive order next week, according to a source close to the administration, who requested anonymity to candidly discuss internal deliberations.
“There’s a big push to get it out before MWC,” said an industry source familiar with the matter, who also requested anonymity to speak candidly.
By preempting MWC, the world’s largest conference for the wireless industry, the White House hopes to send a signal that future contracts for cutting-edge technology must prioritize cybersecurity. That could further roil the Trump administration’s already tense relationship with Beijing, especially if the U.S. push erodes Chinese firms’ significant European market share.
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The Chinese telecom giants Huawei and ZTE have been in the Trump administration’s crosshairs as part of a broader focus on Chinese national security threats that has paralleled the ongoing trade war. Trump officials have repeatedly slammed Beijing for its theft of intellectual property and its more traditional cyber espionage.
In December, the Justice Department indicted two Chinese operatives for a decadelong campaign of digital intrusions into U.S. businesses and government agencies. And in January, DOJ unsealed a suite of charges against Huawei and its chief financial officer, who faces extradition to the U.S. for violating sanctions on Iran.
Many countries are eager to deploy next-generation 5G wireless networks to power the rapidly proliferating internet of things, and Chinese firms such as Huawei and ZTE are aggressively pushing to build these networks — at a lower cost than virtually all of their competitors.
With these 5G build outs looming, senior officials want “to move the needle” with their security messaging, said the source close to the administration.
“Contracts are going out now,” this person told POLITICO. “Extra stigma could change the situation out in the countries on this major decision.”
“We’re going to be asking people to do things, but the U.S. legal and regulatory environment hasn’t really closed the circle yet on this issue,” said Paul Triolo, who leads the consulting firm the Eurasia Group’s global technology practice. “So there’s a lot of pressure now to get this EO out there.”
The White House declined to comment for this story, but National Security Council spokesman Garrett Marquis said the U.S. was “working across government and with our allies and like-minded partners to mitigate risk in the deployment of 5G and other communications infrastructure.”
MWC is expected to feature several telecom security meetings, and a second industry source said the U.S. is sending an interagency delegation of at least 20 officials and staffers. Attendees will include FCC Chairman Ajit Pai; Rob Strayer, the State Department’s top cyber official; Strayer’s boss Manisha Singh, the acting undersecretary of state for economic growth, energy and the environment; and Brian Bulatao, Trump’s nominee to be under secretary of state for management.
Trump’s telecom directive, which will invoke the International Emergency Economic Powers Act, has been finished for months. As POLITICO first reportedlast August, it was originally paired with a second order formalizing an interagency team that reviews foreign entities’ telecom investment requests. At the time, sources said that Trump would also sign a memorandum explaining how agencies should implement both directives. It is unclear if that will still happen.
Concerns about foreign firms helping U.S. adversaries infiltrate sensitive computer systems, whether wittingly or unwittingly, have gained prominence in recent years. After alleged Russian government hackers interfered in the 2016 election, officials increased their scrutiny of the Russian cybersecurity firm Kaspersky Lab, and DHS eventually banned its antivirus products from government systems.
DHS has recently taken a lead role in helping to protect the sprawling and often opaque global web of manufacturers and resellers — also known as the “supply chain” — that delivers equipment and software to the U.S. The department created a task force that will, among other things, develop criteria for security assessments, assemble an approved-manufacturers list and advise companies about supply chain threats.
In addition, the latest defense policy bill bans agencies from buying and using Huawei and ZTE equipment.
Meanwhile, State Department officials are warning their foreign counterparts about 5G security as often as possible.
“We’re raising it at the highest diplomatic levels,” Rob Strayer of the State Department said Wednesday during an event at the Center for Strategic and International Studies. “We’re making sure that the most senior policymakers in governments are aware of the momentousness of this decision and what is at stake in the decision they’re about to make.”
But the U.S. still hasn’t developed an alternative, Huawei-free vision for the massive, complicated and high-stakes global 5G buildout.
Trump administration officials are still “trying to understand the full range of options,” John Costello, director of strategy, policy and plans at the Cybersecurity and Infrastructure Security Agency, said at the CSIS event.
The message to Europe about 5G, according to the second industry source, has been, “Go slow. There’s no need to rush into this. We need to figure out how to do this now.”
Right now, the source said, U.S. telecom companies have “no clear guidance on how to proceed” with a 5G buildout that excludes Huawei, which controls 28 percent of the global telecom equipment market.
If Trump signs the telecom directive before MWC, the U.S. will be able to attend the conference armed with fresh evidence of its commitment to the issue.
The administration’s desire to make a strong impression at MWC is so great that, at one point, Secretary of State Mike Pompeo planned to attend the event, according to the second industry source. This person said that former House Speaker Newt Gingrich, one of Trump’s closest outside advisers, “called Pompeo and said, ‘What the hell are we doing on 5G?’” (Gingrich did not respond to a request for comment, and the State Department declined to discuss its delegation.)
“The geopolitics of 5G have come home to roost,” said Triolo, “and Barcelona is now the epicenter of the whole thing.”