EU Foreign Ministers are expected to discuss China at their meeting in Romania, after the US Department of Justice has filed twelve criminal counts against Huawei and its CFO Meng Wanzhou in a week when US-China trade talks are set to resume.
The US indictment alleges that Huawei engaged in ’a fraudulent financial scheme that is detrimental to the security of the United States’. As the prosecution progresses, the case is likely to produce more public evidence on the inner workings of the company that will be watched closely in the US and Europe.
Why this matters for Europe
European countries are re-assessing their approach to Chinese technology companies, including Huawei. It now has its eye on dominating Europe’s 5G networks. Concerns expressed for significant time on the other side of the Atlantic, and in Japan and Australia, are now being echoed in Europe. Huawei has denied any risk of its technology being subverted to install backdoors for personal, commercial and sensitive information.
The Chinese Ambassador to the European Union warned member states that any attempts to slander or discriminate against the Chinese tech industry’s involvement in the implementation of mobile 5G networks would seriously inhibit global cooperation. The ambassador’s vocal defense(and threatening posture) regarding Chinese companies such as Huawei speaks to his understanding that several member states are wobbly on this issue.
Major telecoms providers in certain EU member states, such as Portugal’s Altice, have already firmed up partnerships with Huawei to develop 5G in their countries. Keep an eye out for these countries, as they are the most likely to vocally defend the company at the national and EU level.
Spillover on the trade war
The Wanzhou case has taken on a life of its own, meaning Trump is unlikely to leverage Huawei and its management as a bargaining chip in a larger deal with China. However, there are occasionally work-arounds when it comes major corporations that are a source of a country’s pride and economic wellbeing: President Trump and President Xi had a phone call that allowed fellow Chinese tech company ZTE to strike a deal with the United States. It’s a reminder that the big personalities at the head of these two countries have the final say on how this trade war unfolds.
In the meantime, the Huawei case will continue to strain the already-difficult Sino-US relations. Certainly in China the view is that the USA has deliberately timed Wanzhou’s arrest and pressing charges to coincide with critical moments in trade talks. Although this is likely to be coincidence, the Huawei case is a microcosm for wider US anger over what the Trump Administration sees as Chinese state-run firms and national champions not playing on a level field with US firms – especially if the alleged theft of intellectual property is added to the mix. Anybody concerned about the trade war must watch the Huawei case closely in the coming months.
- Expect more EU member states to stall or start doubting their decision to award Huawei the rights to roll out 5G networks in their countries. European telecoms leaders such as Ericsson and Nokia should seize this opportunity or risk otherwise being eclipsed by Huawei on price
- Any exclusion of Huawei by member states will crack open a wider conversation around the difficult trade-offs between security and price competiveness
- In the medium-to-long term, this should lead to a broader reset of EU-China relations and a necessary health check – beyond Huawei – of our cooperation with China