An extraordinary example of the difficulties in America’s economic relations with China is being played out in the technology field, particularly concerning cell phones.
Business Insider reports that the Senate is concerned about Beijing’s attempt to gain access to sensitive U.S. technologies and intellectual properties through telecommunications companies, academia and joint business ventures. The publication notes that,
“Chinese firms have come under greater scrutiny in the United States in recent years over fears they may be conduits for spying, something they have consistently denied.”
Writing for the Verge, James Vincent reports that the heads of six major American intelligence agencies are advising U.S. citizens to not use products or services provided by Chinese companies Huawei and ZTE.
The problem has a lengthy history. In May 2017, a federal jury found that Huwaei engaged in industrial espionage within U.S. borders, and ordered the company to provide $4.8 million in damages to T-Mobile.
In 2012 The House Intelligence Committee report highlighted the potential security threat posed by Chinese telecommunications companies with potential ties to the Chinese government or military.
“The Committee believes the telecommunications sector […] is […] a target of foreign intelligence services. The Committee’s formal investigation focused on Huawei and ZTE, the top two Chinese telecommunications equipment manufacturers...”
In 2014 the FBI noted that,
“It’s no secret that the Chinese government has blatantly sought to use cyber espionage to obtain economic advantage for its state-owned industries. Diplomatic efforts and public exposure have failed to curtail these activities. So we have taken the next step of securing an indictment of some of the most prolific hackers. […] These individuals are alleged to have used a variety of techniques, including e-mails that launched malicious software to steal proprietary and sensitive information from U.S. victims.”
The Wall Street Journal reported in January that AT&T “has walked away from a deal to sell smartphones made by Chinese electronics giant Huawei Technologies Co.”
In April, ZTE was hit with another charge by the U.S. Commerce Department, which announced that its,
“Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”). In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. Government. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).”
In January, Rep. Mike Conway (TX-11) introduced H.R. 4747, The Defending U.S. Government Communications Act. This bill prohibits the U.S. government from purchasing or leasing telecommunications equipment and/or services from Huawei, ZTE, or any subsidiaries/affiliates thereof. Rep. Conway emphasized that,
“Chinese commercial technology is a vehicle for the Chinese government to spy on United States federal agencies, posing a severe national security threat. […] Allowing Huawei, ZTE, and other related entities access to U.S. government communications would be inviting Chinese surveillance into all aspects of our lives. [...] This is an issue we’ve followed for years at the House Permanent Select Committee on Intelligence (HPSCI). The threat […] is now reemerging as the Chinese government is reattempting to embed themselves into U.S. technology. This is extremely dangerous because the Chinese government is trying to compromise the integrity of U.S. businesses and spy on our closely held national security secrets.”
Frank Vernuccio serves as editor-in-chief of the New York Analysis of Policy & Government.