Handling the Huawei threat safely means ditching ‘free market’ foolishness

The feds for the first time have accused a large corporation of violating racketeering laws usually used to go after the Mafia. Chinese telecom giant Huawei, they charge, is not a normal business that has broken the law; it’s an organized criminal enterprise.

They’re right, and unprecedented misbehavior calls for an unprecedented response. The Chinese threat is so critical, in fact, that we need to be flexible about some of our free-market articles of faith to counter it.

Fortunately, someone in the administration understands the threat.

Huawei is the world’s largest provider of telecommunications equipment, with over $122 billion in sales last year. The indictment unsealed Thursday alleges the company’s success comes, to a large degree, from theft: Cisco and T-Mobile are just two of the US companies whose stolen intellectual property served as Huawei’s virtually cost-free R&D program.

US officials also confirmed what China watchers have warned for years: Huawei products let the company spy on users of its cellular networks.

Cellular-equipment makers have to incorporate “back doors” that allow law enforcement to take a look when granted warrants. Manufacturers aren’t supposed to have this access themselves — but Huawei does, US officials told The Wall Street Journal.

The administration started declassifying some of the details late last year, as officials sought to persuade allies to keep Huawei out of their burgeoning 5G networks. Britain didn’t listen. But Germany’s legislature will vote on the subject soon, and the Journal reports a German Foreign Office memo said America had provided “smoking gun” evidence of Huawei’s espionage capabilities.

Add in another indictment this week — a grand jury charged the Chinese military was responsible for the 2017 Equifax breach — and it’s crystal clear that China is waging a cyberwar on the United States targeting our economy and national security.

Surely it’s time for the United States to develop a 5G alternative, even if it means doing so in a novel way. Which is why Attorney General William Barr last week proposed a surprising — but savvy — solution. Barr originally planned a career as a CIA China specialist and has a graduate degree in Sinology. He also knows telecoms, having spent 15 years at GTE and Verizon.

In a speech on China, he noted the myriad ways in which the Communists violate market fairness, including “strong-arm sales tactics in target markets,” corporate subsidies in the hundreds of billions and espionage. He put the annual cost to the US economy at about $600 billion, and that doesn’t account for the national-security implications.

The most urgent threat comes from 5G. “From a national-security standpoint, if the industrial Internet becomes dependent on Chinese technology, China would have the ability to shut countries off from technology and equipment upon which their consumers and industry depend.” Huawei already has 40 percent of the 5G market. “The time is very short, and we and our allies have to act quickly.”

His solution? Invest in Huawei’s leading Western competitors: Finland’s Nokia and/or Sweden’s Ericsson. Barr suggests “American ownership of a controlling stake, either directly or through a consortium of private American and allied companies.”

It’s an inspired idea. I visited Nokia’s headquarters outside Helsinki last year and saw how it’s working to counter the Chinese threat. Company reps emphasized the importance of a secure 5G, whose network is more spread out into individual nodes than 4G’s.

“In some cases, it’s hard to maintain the same security as for centralized data networks,” one told me. Nokia designs for security. “We have a robust process to ensure our components are not being tampered with.”

So why aren’t Western countries choosing Western producers? Money, of course.

Huawei, with its government subsidies and access to one of the world’s cheapest labor forces, is always going to be cheaper than American or Scandinavian technology.

But our security is worth more than mere dollars. Never mind China’s human-rights abuses and repeated bungling of deadly epidemics. The Communist government requires companies to give it access to their data by law. And it’s worked hand-in-hand with Huawei to advance its war against the West. Thursday’s unsealed indictment also details how Huawei helped Iran set up a surveillance state.

To beat China at its own game, we’re going to have to modify our rules. The attorney general has come up with a smart way to do it.

Twitter: @KJTorrance

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