This paper first appeared on 25 August 2020 here.
FoE question: Recent years have seen tit for tat exchanges over 5G security concerns and the rise of so-called ‘tech wars’ between China and its global competitors. What should China and the EU do to overcome differences and push innovation to the next level?
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5G ROLL-OUT IN THE EU: NATIONAL SECURITY, TECHNOLOGY AND PUBLIC PROCUREMENT
Weinian Hu, Research Fellow at the Centre for European Policy Studies (CEPS)
The characteristics of 5G wireless network architecture and functionalities warrant stringent scrutiny of individual suppliers on the grounds of national security. It is of little surprise that Huawei Technologies, a home-grown Chinese company and presently a leading 5G supplier worldwide, has been at the centre of this exercise as far as 5G roll-out in Europe. However, within the setting of EU-China relations, 5G is more than just a national security issue, it is also about technology and public procurement.
National security risks: Chinese laws and alleged malpractices
To some, the likelihood of security breach would be high if Huawei rolls out 5G in the European Union, because it is a supplier from China, a regime not established on the premise of democracy, the rule of law and human rights protection. In essence, the country serves as a “systemic rival promoting alternative models of governance”.
More specifically, Article 77 of China’s National Security Law obliges Chinese citizens and organisations to provide leads and evidence, or to assist the government in order to safeguard national security. Article 7 of China’s National Intelligence Law imposes similar obligations of collaboration.
Nor do the aforementioned provisions differentiate between state-to-state and state-to-individual monitoring. Whereas the EU has a strong record in protecting individuals’ privacy, including business activities, notably with its General Data Protection Regulation (GDPR).
Additionally, there are allegations that some Chinese companies, and quasi government-affiliated entities, engage in ‘state-sponsored cyber-enabled’ espionage activities targeting the high-tech sector in Europe to appropriate technologies for economic gains. All these allegations have heightened suspicions against Huawei’s involvement in 5G roll-out across the EU.
However, ditching Huawei on such security concerns alone may be ill-advised. Huawei’s partnership on digital transformation with hundreds of global leading multinationals in over 700 cities in the world testifies to the company’s credibility in many aspects. At the same time, the likelihood of a security breach is a risk that every telecom network must deal with. Remaining vigilant is, therefore, imperative as a matter of course.
Technology: Huawei is a world leader
Security risks aside, Huawei is an undeniable global leader of telecom technology, including 5G technology, with a high capacity for innovation, manufacturing and network infrastructure. The company also holds a predominant market share in 5G smartphones. It is also particularly adept at getting its patents adopted by 3GPP and the International Telecommunication Union, two of the major groups that establish international telecom protocols. This quality is essential for 5G roll-out since 5G networks may include legacy networks elements, for example security standards, based on previous generations of mobile and wireless communications technology such as 4G or 3G.
In terms of technology, in 2019 – for the third consecutive year – Huawei was the world’s number one corporate patent applicant under the World Intellectual Property Organisation’s Patent Cooperation Treaty (PCT).
Public procurement: lack of reciprocity in the market in China
Deliberations of 5G roll-out in the EU also reflects the grievances on public procurement shared among EU policymakers and some stakeholders vis-à-vis China. Public procurement markets in the EU are in principle open to Chinese companies, but reciprocity is not granted in reverse. For example, despite the narrative with respect to national security, Huawei has signed more than 46 commercial 5G contracts in Europe. Conversely, despite Ericsson’s active involvement in 5G, it is unclear whether qualified European telecom companies are all provided equal opportunities to tender for 5G roll-out in China.
Moreover, despite some efforts, China has yet to submit an ambitious offer in order to join the World Trade Organization (WTO) plurilateral Government Procurement Agreement (GPA), which was a commitment pledged at its WTO accession in 2001.
It is worth highlighting that, though not yet a GPA member, China offers public procurement contracts to foreign companies, but such openness is selective, contingent on whether the expertise matches Chinese authorities’ needs. Ericsson has been providing telecom services to China since the late 1970s. For 5G roll-out, in April 2020 Ericsson was awarded a 5G contract from China Mobile. The new contract will expand Ericsson’s 5G partnership with China Mobile to 17 provinces in China, with the deployment of Ericsson Radio System products and solutions.
A multi-faceted approach to tackle 5G roll-out in Europe
Since 5G roll-out is a multi-faceted issue, a multi-faceted approach is required in order to contain security risks, exploit Huawei’s advantages in technology and innovation, and establish a reciprocal relationship on public procurement between the EU and China. The specific bilateral dialogue mechanisms could serve this purpose.
On national security, the EU-China Cyber Taskforce, launched in 2012, can be engaged to discuss the obstacles and threats posed by 5G, and to exchange views on shared risks. Both sides should also observe the international norms of state behaviour, in order to further build up trust on cyber issues by, for example, providing timely responses to requests for information and assistance concerning malicious cyber activities.
The geography of innovation shows that the generation of scientific knowledge and innovation is both increasingly global and intensely local, concentrating in a few hotspots, such as Shenzhen-Hong Kong, Amsterdam-Rotterdam and Cologne.
The EU and China should take full advantage of the bilateral High-Level Dialogue on Innovation Cooperation. It provides a platform to identify joint research interests and to pool human and financial resources to fund large-scale complex scientific projects. Together, both parties can push the technology frontier.
On public procurement, China should honour its WTO commitment to negotiate in earnest an ambitious offer to accede the WTO GPA as soon as possible. Besides policy consultation, the EU-China Regulatory Dialogue on Public Procurement can serve to help enhance China’s technical capacity, especially when more markets at sub-national levels – in second and third-tiered cities and regions in China – are opened to foreign bidders for public procurement contracts.
Conclusion
In brief, the controversies surrounding the 5G roll-out in the EU attest to a variety of challenges encompassing national security, technology, as well as public procurement. The EU and China should engage the specific dialogue mechanisms to effectively contain security risks, forge and maximise their interests in technology and innovation, and to attain reciprocal treatment in public procurement from China at the benefit of EU businesses and consumers.