Trump prepares to bar Huawei, ZTE purchases

The executive order will be reportedly issued as early as January 2019

Photo: EPA

US pressure on Chinese telecommunications equipment providers was increased once again yesterday after Reuters reported that President Donald Trump is considering an executive order to declare a national emergency, which would bar US companies from using network gear made by two of the world’s biggest telecoms equipment suppliers - Huawei Technologies and ZTE Corp. The planned order follows a passage of a defence policy bill in August that was never issued, but reportedly barred the US government itself from using Huawei and ZTE equipment.

The executive order, which has been reportedly under consideration for more than eight months, could be issued as early as January and would direct the Commerce Department to block US companies from buying equipment from foreign telecommunications makers that pose significant national security risks, three sources from the telecoms industry and the administration told Reuters. It would specifically invoke the International Emergency Economic Powers Act, a law that gives the US President the authority to regulate commerce in response to a national emergency that threatens his country.

And even though the order is unlikely to name Huawei or ZTE directly, a source said it is expected that Commerce Department officials would interpret it as authorisation to limit the spread of equipment made by the two Chinese companies, which would mark the latest step by the Trump administration to cut Huawei and ZTE out of the US market. The main reason behind those efforts is Washington's belief that the two tech giants work at the behest of the Chinese government and that their equipment is used to spy on American citizens and officials. Beijing, however, regards such allegations as an attempt by the West to restrain the growth of Chinese hi-tech companies.

Yet, the executive order, which is a provocative move though as US and China officials plan fresh trade talks in the new year, is likely to hurt US the most. While the big US wireless companies have cut ties with Huawei in particular, small rural carriers in the US have relied on Huawei and ZTE switches and other equipment because they tend to be less expensive. The company is so central to small carriers that William Levy, vice-president for sales of Huawei Tech USA, is on the board of directors of the Rural Wireless Association.

“I think the Chinese government should consider a reciprocal approach [banning the sale of technology equipment by US firms in China] as only that would serve as a deterrent to the Trump administration,” said Fang Xingdong, the founder of ChinaLabs, a Beijing-based technology think tank, adding that this would inflict a “heavy loss” on the US side.

Analysts, however play down the significance of the potential US action against the Chinese tech giants, saying it would be largely symbolic and not substantive at this stage.

“The reported executive order from Trump is unlikely to hurt Huawei and ZTE’s businesses in the US as they have no significant businesses there to talk about,” said Jia Mo, a Shanghai-based analyst with industry research firm Canalys. “The bigger concern is Washington’s [overall] stance on the two companies, which may affect Huawei’s business in other countries, especially France and Germany.”

The US is not the first country currently trying to bar Huawei and ZTE's purchases off its market. Last month, New Zealand barred China’s Huawei on national-security grounds from supplying equipment for next-generation mobile networks, such as 5G. In August, Australia also banned the company from supplying 5G equipment, citing a security threat to its infrastructure.

Canadian officials are facing mounting pressure to ban Huawei equipment from next-generation wireless networks over fears it contains hidden backdoors the Chinese government could exploit for espionage, the Ottawa Citizen reported last week.

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