ERIC Ericsson

By Drew Hinshaw 

America's global campaign to prevent Huawei Technologies from building the next generation of superfast internet has faltered on the continent where Washington finds some of its closest allies: Europe.

For months until the coronavirus pandemic, America's top officials crisscrossed the continent, arguing that the Chinese company is an espionage threat, subservient to its authoritarian government. For Europe to transmit data on networks using Huawei 5G equipment would offer Beijing an easy way to spy on the sensitive information that will soon power automated factories, advanced hospitals, self-driving cars and more, said U.S. officials.

The risks are considered so high that senior officials like Secretary of State Mike Pompeo warned that the U.S. may roll back its decades-old security and intelligence partnerships with allies in the North Atlantic Treaty Organization who don't heed their warning.

Huawei rejects the accusations and Chinese diplomacy has fought back, with ambassadors threatening to curtail imports from countries that ban the tech company. Chinese diplomats have spoken about cutting back on German cars, or seafood fished from Denmark's Faeroe Islands.

It all boils down to what European governments value more: America's security umbrella or access to China's $12 trillion economy.

So far, Europe has mostly chosen China, declining to follow the U.S.'s hard-line position. Large powers and close allies like the U.K. and Germany have balked, telling the Trump administration that their own internal cybersecurity agencies can monitor Huawei equipment and keep it secure. Telecommunications companies in small countries, like Hungary, have already started rolling out 5G with Huawei as a partner, shrugging off threats that the U.S. will curtail defense cooperation if they proceed.

The U.S. threats have been counterproductive, says James Sullivan, head of cyber research at the Royal United Services Institute for Defence and Security Studies in London. "It's become a sort of zero-sum game, and far too all-or-nothing," he says. "The 5G ship has sailed, nations have made their decision. It comes down to how do you do risk management?"

Charges and denials

The contest over who builds the next layer of internet infrastructure in Europe is a key battle in a broader conflict between the U.S. and China, as Washington tries to maintain its technological and security advantages over Beijing. The U.S. has sought to contain China's advancing high-tech sector by restricting exports of specialized products like microchips to China, while blocking some tech firms from sharing sensitive kinds of advanced research with Chinese companies.

American officials expect 5G internet will prove to be some of the most critical infrastructure for the next major technological breakthroughs. The network is expected to allow for advances like automated factories, remote monitoring of medical patients and huge leaps in artificial intelligence. Washington wants that information channeled along networks owned by companies from allied, democratic states.

The U.S. Justice Department has charged Huawei with racketeering and stealing source code and other intellectual property from its rivals. The department hasn't shied away from issuing strong ultimatums to U.S. allies, whose trade and military secrets, it warns, would be easier to steal over 5G networks.

"The concern still remains that if countries choose to go the Huawei route, it could well jeopardize all the information sharing, intelligence sharing that we've been talking about," U.S. Defense Secretary Mark Esper said in February. "And that would undermine the alliance."

The U.S. hasn't declassified any evidence concerning Huawei. The company has repeatedly said it doesn't conduct espionage on behalf of the Chinese state and that the U.S. is using cybersecurity concerns as a pretense to contain a rival company. Huawei has often been able to undercut competitors on pricing, thanks in part to tens of billions of dollars in state financing.

"In the name of national security, the U.S. uses its power to suppress and sanction Huawei," said China's ambassador to Hungary, Duan Jielong, in a recent speech. "It's trying to force China to swallow bitter fruit that would harm its sovereignty and security, and China must fight back."

Huawei didn't respond to requests for comment for this article.

The Russia factor

To be sure, European governments may still roll back Huawei participation in their countries' networks, some analysts say. And a couple of European Union countries that border Russia already have backed Washington. Last year, Poland jailed a Huawei executive on espionage charges, accusing him of crimes that the Polish government says are too sensitive to detail publicly. Warsaw has offered the U.S. assurances it will allow only a "trusted partner" to construct 5G equipment. Estonia has made a similar pledge.

But those commitments have been largely motivated not by fears of China, but of Russia, as governments look to curry favor with the U.S., the only military power they view as capable of effectively deterring Moscow.

Elsewhere on the continent, access to China's economy has usually won out over American security concerns. Telecoms have pressured their governments, arguing that Huawei's equipment is significantly cheaper than that of its rivals Ericsson or Nokia, and years ahead technologically. The coronavirus crisis has driven down telecom profits, creating added pressure to go with the cheapest supplier.

Small countries have sought to leapfrog larger economies by rushing to roll out 5G, using Huawei equipment. And broadly, leaders are wary of choosing sides in a costly U.S.-China rivalry.

"The more the Trump administration asks for open-ended, 100% statements saying 'We wont use Huawei,' the less it is likely to get it, quite simply because this implies choosing sides," says François Godement, senior adviser for Asia at the Institut Montaigne, a nonprofit think tank in Paris that proposes public-policy solutions to French agencies and businesses. "Deep down, I don't think the U.S. can make Europeans move on the basis of the threats....People very often shrug their shoulders and say, 'We don't know what they'll do, and they don't know what they'll do, anyway.' "

Mr. Hinshaw is a Wall Street Journal reporter based in Warsaw. He can be reached at drew.hinshaw@wsj.com.

(END) Dow Jones Newswires

April 09, 2020 15:44 ET (19:44 GMT)

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