Recent headlines confirm that the Office of Management and Budget plans to issue an interim rule that would ban U.S. government agencies from doing business with Chinese companies. This issue goes beyond the Trump administration’s continued efforts to redefine America’s economic and trade relationship with China.
The issue is a national security one, despite Beijing’s defense of Chinese government-owned Huawei’s communications equipment, routers used by Internet Service Providers, cameras, subway trains, and other electronic equipment that reportedly can be used for espionage and to gain access to the personal and confidential data of Americans, businesses and the U.S. government officials. Some experts believe that Huawei equipment poses a serious national threat by giving Chinese hackers backdoor access to the U.S. networks or by simply leaving its software with hundreds of unpatched vulnerabilities. There are reports that the Chinese government has quietly added a grain-sized chip into its equipment for the purpose of spying.
Eliminating the risk Huawei poses, however, is easier said than done. For years, federal money has been spent on Huawei equipment—a policy that may cost $1 billion to undo.
Countless Huawei and ZTE components were installed into American communications networks with the help of the Universal Service Administrative Company (USAC), which grants federal money to expand and sustain infrastructure for libraries and schools, as well as poor and rural communities. Other federal and state broadband funds may have done the same.
To make these government-funded applications low cost, grant-seekers have applied for—and received—cheaper electronic equipment components that were produced by Chinese companies. The equipment is so widespread that the Rural Wireless Association estimates that 25 percent of its members use Huawei or ZTE products. In March of last year, the FCC announced that it was considering rules that would stop federal government grants being used to buy Huawei components. However, data from USAC shows that companies continue to request funding for equipment from the company.
If the FCC rule eventually comes into effect, it would represent the latest attempt to limit the company’s influence in America. In May, the Trump administration added Huawei to the Bureau of Industry and Security’s “Entity List” which mandates that the company seek a license before buying U.S. technology.
Legislative efforts to codify Huawei’s position on the list are underway, however the company’s technology is already embedded in America’s infrastructure. After years of using government grants to buy Huawei components, there would be an exorbitant cost to remove and replace the equipment.
Last year a rural wireless network in Kansas reported that it could cost up to $25 million to replace their Chinese technology. Moreover, it may cost up to $1 billion to completely remove Huawei and ZTE technology from rural networks across the country. This issue has brought concerns by both Republicans and Democrats.
Moreover, the company is so embedded in American telecommunications infrastructure that the Trump administration has been forced to grant Huawei a 90-day waiver from the rules on two consecutive occasions. Officials say the waivers give rural telecom providers more time to adjust to the restrictions.
It is feared that authorities in Beijing may use Huawei to wiretap individuals or steal data, posing an immeasurable political, social, and economic cost for the United States and its citizens. The company has adamantly denied that it would break US law at the behest of the Chinese government, however both Huawei and ZTE have previously breached American law by selling products to Iran. Huawei also has a lengthy history of allegedly stealing intellectual property from its competitors.
Even if Huawei claims to comply with U.S. privacy or IP regulations, there is no guarantee that the company hasn’t created hidden back doors to U.S. data. Earlier this year, authorities in the Netherlands opened investigations into whether Huawei had hidden back doors in the technology it provided to major telecoms. It’s uncertain whether Beijing may have exploited those flaws to spy on Dutch citizens.
In addition to the risk that Huawei’s components might be used to breach privacy or engage in espionage, their remains risks to critical U.S. infrastructure – nuclear plants, hydroelectric dams, transportation networks and emergency communications systems. In fact, last March, it was revealed that the company had been banned from providing 5G equipment in Australia because it could be used to shut down the country’s electrical grid.
After having allowed Huawei and ZTE to penetrate the American communications networks, it is now up to the government to undo the damage it facilitated. Despite the huge cost that this will incur, it will no doubt be the American taxpayer who foots the clean-up bill.
Oliver McPherson-Smith and Steve Pociask work on economic policy and research for the American Consumer Institute, a non-profit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.